THG considers spin-off of logistics arm Ingenuity this Tuesday

THG, a London-listed e-commerce group known for its health and nutrition brands, is reportedly considering a spin-off of its logistics arm, Ingenuity. This potential announcement could come as soon as Tuesday, as the company seeks to enhance its share price and transform into a cash-generative dividend stock. The board, led by Lord Allen of Kensington, has been exploring various strategies to improve investor sentiment following a tumultuous period since going public in 2020. The demerger of Ingenuity, which serves notable clients like Frasers Group and Homebase, would allow THG to retain significant free cash flow from its other operations. Analysts suggest that excluding Ingenuity, THG generated over £80 million in free cash flow last year, with projections indicating this could exceed £100 million soon. This financial maneuvering could pave the way for THG to issue its first dividend to shareholders, appealing to institutional investors. Additionally, THG is likely to announce plans to recategorize its shares on the premium segment of the London stock market, which would enhance liquidity and make the company more attractive to potential investors. The restructuring aims to simplify THG's identity as a wellness and beauty brand owner, distancing it from the capital-intensive tech sector. Ingenuity, which employs 4,000 staff and operates 12 distribution centers globally, may require substantial funding as a standalone entity. Given its cash consumption and the anticipated timeline for profitability, private shareholders may be better suited to manage the business during its transition period.