LONDON – Shares in online beauty retailer THG, formerly referred to as The Hut Group, were down greater than 16 percent on Tuesday after the corporate saw losses widen to 540 million kilos in fiscal 2022 resulting from inflationary pressures and write-downs.

The shares dipped to 0.81 kilos in late morning trading after rallying on Monday following THG’s confirmation that personal equity firm Apollo Global Management Inc. had made a preliminary bid. THG described Apollo’s bid to amass all the issued share capital of THG as “highly preliminary” and non-binding

Apollo must make a proposal by 5 p.m. on May 15, or walk away, in accordance with THG, which has struggled on many levels because it listed on the London Stock Exchange in September 2020.

THG owns online retailers including Cult Beauty and Lookfantastic, and types similar to Perricone MD and Espa. It published its 2022 results on Tuesday, showing that group revenue rose 2.7 percent to 2.24 billion kilos.

Losses for the financial 12 months widened to 540 million kilos from 138 million kilos.

THG said that losses increased for a wide range of reasons, including its efforts to limit customers’ exposure to commodity cost increases, and its 275.4 million pound write-down of the software it uses to operate third-party web sites.

It also listed a series of non-recurring costs within the period, including 32.4 million kilos spent on a strategic review; 18.5 million kilos on international deliveries, predominantly in Asia, and mainly linked to COVID restrictions, and 14.8 million kilos in administrative costs following an organization reorganization and related layoffs.  

Matthew Moulding, co-founder and chief executive officer of THG, said that while adjusted EBITDA, or earnings before taxes, depreciation and amortization, in 2022 “was not where we planned initially of the 12 months, this was largely the results of our strategy to reduce the impact of inflation upon our customer base.”

Moulding said the outlook for fiscal 2023 was “much improved” resulting from declining input costs, and said that THG’s Ingenuity division, which operates web sites for third parties, has been repositioned and reorganized.

“It’s now paying dividends, evidenced by recent announcements and a robust 2023 pipeline,” he said. Earlier this month, THG Ingenuity inked a 10-year partnership with the sweetness e-commerce retailer Maximo Group, which owns sites including allbeauty.com and fragrancedirect.co.uk.

THG Ingenuity said it is going to change into Maximo’s “key U.K. operational partner,” providing warehouse and fulfilment services from Q2 2023.

Following a three-year infrastructure investment program, Moulding said that THG has “the technology infrastructure and the worldwide fulfilment capability” to be sure that it’s “well positioned to capitalize on this path of growth.”

In fiscal 2023, THG said it’s expecting low to mid-single digit growth. The group added that “profitability and cashflow improvements” in the primary quarter point to “significant margin recovery through the 12 months.”

The corporate said it’s working toward recovering historical adjusted EBITDA margins of around 9 percent through the medium term. By comparison, adjusted EBITDA margin for fiscal 2022 was 2.9 percent.

Given its declining share price, structural and management woes, THG has been no stranger to unsolicited bids.

Apollo is one in every of many private equity firms to have made a run at the corporate.

Last April, Moulding said the board had received “indicative proposals from quite a few parties in recent weeks,” but they rejected all of them because they didn’t reflect the worth of THG.

Moulding didn’t elaborate on who the suitors were, what price they offered, and even how serious those offers were.

In response to British press reports on the time, the highest suitors were American private equity giants Leonard Green & Partners; Advent International, and Clayton, Dubilier & Rice. All of them declined to comment on the time.

Despite a blockbuster IPO, THG had a rocky start on the general public markets with investors questioning Moulding’s oversight of the corporate, and the worth of the Ingenuity platform, which licenses end-to-end e-commerce solutions to brand owners, provides various other digital services and undertakes beauty product development and manufacturing for third parties.

THG has since taken steps to rectify those issues, with Moulding stepping down as joint chairman and CEO, and giving up his golden shares in the corporate, which gave him special veto powers and the power to dam takeover attempts.

Shares in THG are currently trading well below the float price of 5 kilos.