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LONDON BRIEFING: Implied value THG technology platform "close to zero"

(Alliance News) - Shares in online retail platform THG will be in focus on Wednesday, after the ...

Alliance News 13 October, 2021 | 8:15AM
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(Alliance News) - Shares in online retail platform THG will be in focus on Wednesday, after the stock fell 35% on Tuesday.

Better known as The Hut Group, the company held its first capital markets day since it listed in September 2020.

The meeting was meant to reassure shareholders after a tough month for the firm's share price. But instead it spooked them. The drop started at around 3pm on Tuesday afternoon.

THG before the market open Wednesday noted the share price fall and said no material new information was disclosed at the event.

The company stressed that it has "consistently" delivered ahead of its targets since floating in September last year, including a "strong first half performance across all divisions".

"The group also has a very strong liquidity position as it enters its peak trading season," THG added, with GBP700.00 million available to it.

THG said it will provide a third-quarter trading update on October 26.

"The unprecedented decline in THG’s equity during yesterday's Capital Markets Day clearly indicated that the market took little comfort from the investor event, which contained less financial detail than hoped," commented Davy Research.

THG shares were up 7.4% early Tuesday at 306.20 pence. The stock has dropped by 50% so far in 2021. THG listed in September 2020 at 500p per share.

"At the current share price, the market-implied valuation of THG Ingenuity is close to zero," Davy added, referring to THG's e-commerce technology platform.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 0.5% at 7,097.38

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Hang Seng: Hong Kong market closed due to typhoon

Nikkei 225: closed down 0.3% at 28,140.28

DJIA: closed down 117.72 points, or 0.3%, at 34,378.34

S&P 500: closed down 10.54 points, or 0.2%, at 4,350.65

Nasdaq Composite: closed down 20.28 points, or 0.1%, at 14,465.93

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EUR: up at USD1.1552 (USD1.1544)

GBP: up at USD1.3611 (USD1.3595)

USD: up at JPY113.50 (JPY113.34)

Gold: firm at USD1,763.25 per ounce (USD1,763.12)

Oil (Brent): soft at USD83.39 a barrel (USD83.50)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Wednesday's Key Economic Events still to come

0700 EDT US MBA weekly mortgage applications survey

0830 EDT US consumer price index

1400 EDT US FOMC meeting minutes and economic forecast

1630 EDT US API weekly statistical bulletin

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UK economic growth disappointed expectations, with output growing less-than-expected in August and this was compounded by a downgrade for July. Gross domestic product grew 0.4% month-on-month in August to bring economic output 0.8% below pre-virus levels. This was slightly below consensus for 0.5% growth, according to FXStreet. Services output grew by 0.3% in August, while manufacturing grew 0.8% and manufacturing 0.5%. Construction dipped 0.2%. "The economy picked up in August as bars, restaurants and festivals benefited from the first full month without Covid-19 restrictions in England. This was offset by falls in health activity with fewer people visiting GPs and less testing and tracing," said Darren Morgan, director for Economic Statistics at the Office for National Statistics. Further, July's reading was revised down to a contraction of 0.1% from growth of 0.1%. "Later and slightly weaker data from number of industries now mean we estimate the economy fell a little overall in July," said Morgan.

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The UK and Italy have started discussions on a new export and investment partnership aimed at boosting trade between the two countries, the UK International Trade secretary announced. Italy is the world's eighth-largest economy and trade between Rome and London was worth GBP38 billion last year. Speaking alongside Italian minister of foreign affairs and international cooperation Luigi Di Maio in Sorrento, Italy, Anne-Marie Trevelyan said: "Enhancing our bilateral relationship with Italy is a win-win, which will boost export opportunities and investment promotion for our businesses. The two ministers met after a G20 meeting in Sorrento.

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The EU on Wednesday will present a "toolbox" of measures to mitigate an energy crunch that threatens to send Europeans' power bills soaring. The European Commission has been under pressure to act on the looming crisis, even though individual EU governments are more directly responsible for their energy sources and taxation. Some EU officials accuse Russia, source of most of the imported gas into the bloc, of "blackmail" by limiting supplies to try to force Germany to activate the newly completed Nord Stream 2 pipeline across the Baltic, bypassing Ukraine. Outgoing German Chancellor Angela Merkel, however, has questioned that, suggesting there had been insufficient long-term gas contracts from European countries. The issue will headline an EU leaders' summit next week.

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Germany's centre-left Social Democrats (SPD), the Greens and the pro-business Free Democrats (FDP) are to continue their talks on a possible government formation in a smaller circle on Wednesday, they announced. After exploratory talks on Monday and Tuesday, top party officials are to put down on paper what has been negotiated so far, while Finance Minister Olaf Scholz of the SPD - who could be the next chancellor - attends G20 talks in Washington.

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BROKER RATING CHANGES

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UBS CUTS INFORMA TO 'SELL' ('NEUTRAL') - TARGET 540 (535) PENCE

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RBC CUTS RHI MAGNESITA TO 'SECTOR PERFORM' ('OUTPERFORM') - TARGET 3,700 (4,750) PENCE

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JEFFERIES RAISES DARKTRACE PRICE TARGET TO 1030 (900) PENCE - 'BUY'

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COMPANIES - FTSE 100

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Barratt Developments backed its outlook after seeing ongoing strength in demand for homes. For the financial year to date, it has seen net private reservations per average week of 281, down slightly from 288 in the same period a year ago but up on 262 two years ago. "Whilst the net private reservation rate was 2.3% below that reported in the prior year period, this was a particularly active period reflecting both pent-up demand following the initial national lockdown, and increased Help to Buy reservation activity," the housebuilder explained. Despite global supply chain issues, Barratt said it has not experienced any significant disruption to its build programme. It continues to expect build cost inflation of between 4% and 5% for the full-year.

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Advertising and marketing firm WPP said its majority-owned subsidiary Finsbury Glover Hering is to merge with Sard Verbinnen & Co to create "the world's leading strategic communications firm". The transaction values the combined Finsbury Glover Hering-SVC group at an equity value of USD917 million, and SVC alone at USD303 million. WPP will be the majority shareholder of the combined group, holding a 57.4% stake. The deal is expected to complete in the fourth quarter of 2021 and the combined firm, headquartered in New York, will start operating under a new name in 2022.

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GlaxoSmithKline's consumer unit is drawing interest from private equity firms in what could lead to the biggest buyout of all time, Bloomberg reported Tuesday, citing people with knowledge of the matter. According to Bloomberg, Advent International, CVC Capital Partners and KKR & Co were among potential suitors evaluating the business. Further, Blackstone, Carlyle Group and Permira were also seen as likely suitors for the unit, which could be valued at GBP40 billion.

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COMPANIES - FTSE 250

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British Gas parent Centrica has decided to delay its November capital markets day to retain focus amid the "current unprecedented commodity price environment". A surge in natural gas prices since the start of the 2021 has put pressure on UK energy providers, with a number of smaller utility firms failing in recent weeks. Centrica said its performance since July has been in line with expectations, and it is "well hedged" for the winter and beyond. The balance sheet remains strong, it added. "In this current unprecedented commodity price environment we remain focused on looking after our residential and business customers, whilst working as part of wider industry efforts in the UK to support the customers of failed suppliers and drive the regulatory reforms which are urgently required to make sure this situation never recurs," said Chief Executive Chris O'Shea.

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COMPANIES - MAIN MARKET AND AIM

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Just Eat Takeaway.com reaffirmed its annual guidance on the back of a healthy rise in orders as customer demand for takeaway food fails to lessen. For the third quarter ended September 30, the food delivery firm processed 266 million orders, representing a 25% increase compared with the same period of 2020. Total gross transaction value grew 23% year-on-year to EUR6.8 billion for the period. The company reiterated full-year guidance of order growth, excluding its Grubhub business, above 45% year-on-year and a gross transaction value in a range of EUR28 billion to EUR30 billion. An adjusted earnings before interest, tax, depreciation and amortisation margin between minus 1% to minus 1.5% of GTV is expected. "With most of the world returning to pre-pandemic life, our growth in the third quarter of 2021 has remained strong. Just Eat Takeaway.com is well-positioned for autumn and winter, our traditional growth season," commented Chief Executive Jitse Groen.

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COMPANIES - GLOBAL

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Deutsche Bank faces paying EUR500 million in damages, the Financial Times reported, after Spain's Palladium Hotel Group said the German bank mis-sold it risky foreign exchange derivatives. The claim was filed last month to the High Court in London, the FT reported, with the hotel chain claiming Deutsche took advantage of its naivety to sell it derivatives that it did not understand. The newspaper said Deutsche will defend itself "vigorously" against Palladium's claim, which it said is "without foundation". Deutsche is conducting its own internal probe into the allegation. Palladium operates 50 hotels in Europe and the Americas, including the Ushuaia Ibiza Beach Hotel and Hard Rock Ibiza.

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Wednesday's Shareholder Meetings

Barratt Developments PLC - AGM

MobilityOne Ltd - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Darktrace PLC 416.20 -
Informa PLC 479.70 -
THG PLC Ordinary Share 172.70 -
RHI Magnesita NV Ordinary Shares 3,138.00 -
RHI Magnesita NV Ordinary Shares 36.90 -

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