Questions raised over The Hut Group boss’s landlord role
A year ago Matthew Moulding – undoubtedly one of the business names of 2020 – was perhaps best known for founding a controversial VAT-free online sales operation for Tesco, Asda, WH Smith, Dixons and Best Buy.
Until 2011, he based certain operations in the Channel Islands to take advantage of European tax rules that exempt imports below £18 from VAT, until the loophole was closed by the then chancellor, George Osborne, in his budget of that year.
Nine years on and Moulding is a self-made billionaire, having floated his company The Hut Group (THG) on the London Stock Exchange in September. His 25% stake is worth about £1.9bn. THG owns a range of online beauty and nutrition brands including Espa and Myprotein, and provides e-commerce technology to firms such as Unilever.
Its stock market debut was followed by news that Moulding had been handed one of the biggest payouts in UK corporate history – an £830m share award – while numerous profile articles feted him for donating his £750,000 salary to charity and creating scores of millionaires within THG, all set against his backstory of growing up in a house with an outside toilet near Burnley, Lancashire.
Life in that two-up-two-down appears light years away from now.
When Moulding, 48, and his wife, Jodie, bought their Cheshire home for £5m in 2014, the estate agent’s brochure showed it was not just the toilets that were situated inside. The home also boasted an indoor swimming pool, a private cinema and a “nightclub” room. But the building forms only a small part of the Moulding’s property empire.
As part of THG flotation, the company sold off many of its property assets to Moulding, leaving it to pay its founder, chief executive and chairman £19m in rent annually. THG, which releases a quarterly trading update on Tuesday, said Moulding had pledged all annual profits from his new property arm to charity, although it later said that, because of the debt on the portfolio, it would be “barely income generating” this year.
The company did not disclose what the property portfolio was worth, with the listing document outlining how THG is renting from him 15 warehouses and offices, including giant facilities in Warrington and another near Wrocław in Poland, as well as a string of office blocks in Northwich.
Also detailed in the list are two upmarket Manchester hotels – King Street Townhouse and Great John Street – as well as the Hale Country Club & Spa, for which THG pays Moulding’s company a combined annual rent of £2.35m. The venues are used to promote and use THG’s healthcare brands, with Hale’s gym rebadged as its sports nutrition line, Myprotein.
However, an analysis by the Guardian has found further recently acquired properties in Moulding’s portfolio that are being developed as part of THG’s hospitality business.
There are office buildings on Manchester’s Kennedy Street and Booth Street, where the grand architecture is a relic of the city’s central role in the Industrial Revolution, plus a residential address in Altrincham, Greater Manchester.
The company said the Manchester properties were “being converted into additional rooms and spa facilities” for the King Street Townhouse hotel, while the Altrincham home is located next to the Hale Country Club and was “being converted into accommodation to support the spa weekend offering”. THG said the Altrincham site would “potentially be leased [by the company from Moulding] in the future”.
All of which has raised questions among the British investment community, which has become increasingly keen over the past few years in taking a proactive look at the policy side of how public companies are run.
A note on THG’s corporate governance structures, which was published at the end of November by the shareholder advisory consultancy Pirc, said: “[THG] reorganised the business to make Mr Moulding landlord of the firm’s property empire, securing him with £19m in rent a year, but more importantly, dis-incentivising the company from negotiating down rental rises which is what so many counterparts have been forced to do during the Covid-19 pandemic.”
Sarah Wilson, the chief executive of corporate governance advisory firm Manifest, said: “Related party transactions are a potential hazard that creates risk. Directors should be clear about who they are working for and are accountable to. ‘Side-gigs’ create unnecessary complexity. In addition to getting an eye-watering bonus payout and private security guards, he’s getting property revenues without the shareholder oversight? This is a governance accident in the waiting.”
A spokesperson for THG said the leases between Moulding and the company were signed at “arm’s length” and that there was “no obligation for THG to renew or always use the Propco on future property projects”.
She added that the arrangements are not unique and “a number of other listed companies have used similar structures where founders/key executives own the freeholds of operating properties”.
Perhaps the best-known recent example of a powerful boss moonlighting as a major landlord to a firm he was running, was Adam Neumann, the founder of WeWork. For various reasons, that saga did not end well, with Neumann ousted from WeWork in 2019 after battles with investors over corporate governance and the company’s valuation.
THG said: “The sale of the Propco business to Mr Moulding was agreed on arm’s length terms with the independent non-execs’ and professional shareholders’ oversight. Mr Moulding paid the market value as independently valued by a global top tier accountancy practice appointed by THG on behalf of all shareholders.
“The transaction removed in excess of £200m of debt from THG’s balance sheet immediately which increases to in excess of £400m over the near term as THG completes its infrastructure roll-out programme globally.”
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