Sir Tom Hunter has declared his continuing faith in Matt Moulding, founder and chief executive of The Hut Group (THG), despite a year in which his West Coast Capital investment company's publicly-listed holdings have dragged down returns.
Sir Tom was an early investor in Manchester-based THG, the owner of a number of online beauty and nutrition brands such as Lookfantastic and Myprotein. The company was hailed as a future star of the UK tech industry when it listed in London with a value of £5.4 billion in 2020, but has since fallen on tougher times amid a string of profit warnings and concerns over its corporate governance.
From a high of 664.5p in October 2021, THG shares have rarely and barely reached 100p in the last 18 months of trading.
READ MORE: Sir Tom Hunter backs housing market and invests in hospitality firm
Sir Tom acknowledged that the share price has been in difficulty, but suggested this doesn't reflect the inherent value of the business.
"I got Matt Moulding to come up and speak at our Founders Conference at Gleneagles a couple of weeks ago there and you know, just listening to him, they have built from scratch the world’s biggest nutrition brand, they are in the top three beauty brands in the world, and they have built a world-class technology platform," he said. "The only people who don’t seem to value it is the London Stock Exchange.
“We are a big believer in Matt and the team at THG. When the share price dipped into the forty-odd pences [in 2022] we actually bought more shares. The last time we sold shares I think they were £7.47, so we will tuck these in a drawer and we will just keep holding them.”
Sir Tom was speaking as the company was preparing to file its latest accounts with Companies House covering the year to the end of March. These include balance sheet disclosures for West Coast Capital Assets - previously known as West Coast Capital Trading - and West Coast Capital Holdings, both of which are now controlled by a newer entity, West Coast Capital Group, which was incorporated in October 2022.
Speaking about the overall performance, Sir Tom said existing private equity investments were doing "OK" but it has been a different story for the group's publicly-listed holdings.
"Our PLC investments haven’t done so well," he said.
"When we sold TVSquared we got cash and we got shares. We haven’t sold any of those shares but because of accounting rules you have got to mark them to market and they were marked to market at the end of March, so that is a bit of a loss there but I don’t think of it as a loss. If I sold them today it would be a loss but I got them as part of a transaction and I haven’t sold any.”
READ MORE: Shares slide as suitors walk away from online retail specialist THG
Since the end of the financial year West Coast Capital Holdings has made a multi-million pound investment in Ellipses Pharma, the cancer drugs venture founded by biotech entrepreneur Sir Chris Evans, and has also provided a cash injection to Fintern, a consumer credit technology company based in London.
“We try to pick these new investments that can flourish in this environment," Sir Tom said.
"Our view is that we don’t really see interest rates coming down that much. We think we have got to get used to a norm of interest rates of perhaps somewhere between 4% and 5%.
“I do remind my son who joined us in the business a couple of years ago that when I first started selling shoes, interest rates were at 18%, and I didn’t worry about it. We’ve gotten used to all this cheap money and we have now got to get used to interest rates being more normal.”
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