The Restaurant Group: Weak profitability, long leases and high debts

The slowing UK economy revealed TRG’s underlying weaknesses

The Restaurant Group (which I’ll shorten to TRG) joined the model portfolio in early 2016, shortly after the company published some very upbeat 2015 results.

Revenues were up 8% while earnings and dividends per share were up 13%, continuing the company’s long track record of impressive results.

But then things started to go wrong in its core restaurant business (TRG also runs pubs and airport concessions, and these continued to perform well).

Initially, this was put down to operational issues, such as a lack of focus on value and service. But despite operational improvements over the next couple of years, like-for-like sales continued to fall. 

By mid-2018, management admitted that TRG’s problems were structural rather than cyclical.

Key problems included reduced footfall at restaurants in out-of-town retail parks (thanks to the shift to online shopping), increased competition from other branded restaurants, new food delivery aggregators (e.g. Just Eat) and increasing costs such as the minimum wage, rent and business rates.

Management’s solution was to acquire Wagamama, a high-growth pan-Asian restaurant chain. This would bring economies of scale and allow TRG to convert underperforming sites into Wagamamas. 

However, Wagamama does not solve TRG’s fundamental problems which are, in my opinion, a lack of competitive advantages, a tendency to sign long leases and (thanks to Wagamama) high debts.

For these and other reasons, I have decided to sell TRG this month.

Table of Contents

Investment results

  • Purchase price (adjusted): 257p on 11/04/2016
  • Initial position size: 3.9%
  • Sale price: 137p on 05/11/2019
  • Holding period: 3 years 7 months
  • Capital gain: – 46.9%
  • Dividend income: 15.7%
  • Annualised return: – 12.0%

Note: You can download the original pre-purchase review (PDF) which was published in the April 2016 issue of my monthly newsletter.

Obviously this is not a great result, so in the rest of this post-sale review, I’ll focus on TRG’s underlying weaknesses and how they became much more visible after I began lease-adjusting ROCE (returns on capital employed) a couple of months ago.

But first, here’s a quick review of this investment from beginning to end.

Up to 2015, The Restaurant Group had produced rapid and extremely steady growth

When TRG joined the model portfolio in early 2016, its track record was almost second to none. Revenues, earnings and dividends had increased almost every year over the previous decade, giving the company an average annual growth rate of 10%.

This growth had been driven primarily by an increase in the number of restaurants, food-focused pubs and airport concessions operated by the business, from a total of 284 in 2006 to more than 500 in 2015.

Overall TRG looked like a very strong business, with high profitability (average returns on capital of 19%), well-known brands, very little debt and no pension liabilities. The valuation multiples looked attractive too, with a 4.4% dividend yield to go along with its ten-year average dividend growth rate of 12%.

This is what impressively consistent growth looks like

Of course, it wasn’t all good news otherwise the dividend yield wouldn’t have been so high. 

The company’s 2015 results mentioned economic uncertainty from the Brexit referendum, an increase in competition from other branded restaurants and pubs, and a decrease in footfall at some of its out-of-town retail park sites thanks to the growing trend for online shopping. 

Another headwind was cost, with above-inflation increases to the National Minimum Wage and the introduction of the higher National Living Wage. These negative factors had already led to a like-for-like sales decline of 1.5% and a near-50% decline in TRG’s share price (before it joined the portfolio). 

Management’s opinion was that most of these factors were either short-term or could be dealt with by providing better service, improved menus, improved efficiency and reduced costs through technology.

At the time, my opinion was that people weren’t going to stop eating out, so any revenue or cost pressures would be reflected across most of the restaurant and pub industry. In fact, given TRG’s impressive track record, I thought these pressures might squeeze some of its competitors out of business which, in the long run, would be good for TRG.

But that isn’t how things turned out.

A surprisingly rapid decline, bordering on collapse

Less than a month after TRG joined the portfolio, management announced that they expected 2016 like-for-like sales to be down by 2.5%. This was due to ongoing challenges in revenues (from declining footfall at out-of-town retail parks) and expenses (from increasing rents, wages and other costs). 

At this point, the company launched a comprehensive review of its strategy and, somewhat surprisingly, the CFO left with immediate effect. This was surprising, to me at least, because CFO and CEO “resignations” usually occur after much more than a 2.5% like-for-like sales decline.

Clearly, there must have been more going wrong than just a minor sales decline.

Despite all this, management still expected to open around 30 new sites in 2016, reflecting their continued belief that TRG’s ultimate goal of 850+ UK sites was still achievable.

And then, in August 2016, the CEO left with immediate effect.

Investors found out why in the company’s 2016 interim results: Like-for-like sales were down 4%, 33 sites had been identified for sale or closure and the balance sheet value of another 29 sites was being written down (leading to a significant loss for the year).

The strategic review was ongoing, but eventually, it would evolve into a plan to:

  1. Re-establish the competitiveness of the restaurant brands
  2. Serve customers better and more efficiently
  3. Grow pubs and concessions
  4. Build a leaner, faster more focused organisation

The replacement CEO reiterated this turnaround plan in the 2016 annual results and again in both the 2017 interim and annual results.

By the end of 2017, results from the turnaround plan were minimal. The number of meals served had gone up, but revenues from the restaurant business were down, and good results from pubs and airport concessions were not enough to offset the decline.

Management continued to execute the turnaround plan throughout 2018 and like-for-like sales continued to fall. With ongoing cost pressures and a focus on value (i.e. lower prices), margins were squeezed and profits remained at less than half their 2015 highs.

Despite all the hard work, it looked like the turnaround plan was not working.

Management throw in the towel and acquire Wagamama

Shortly after the 2018 interim results, management effectively threw in the towel and announced that TRG was to acquire Wagamama, a fast-growing pan-Asian restaurant.

The price tag was £357 million, or £559 million including Wagamama’s debts, and the acquisition was funded primarily by shareholders via a rights issue (I chose to sell the allotted rights rather than take them up).

I say management “threw in the towel” because once the Wagamama acquisition had been announced, they stopped focusing on turning the existing restaurant business around. Instead, the turnaround plan was replaced with a plan to:

  1. Convert suitable existing restaurants into Wagamamas
  2. Close at least 50% of the company’s restaurants as their leases expired
  3. Grow Wagamama
  4. Grow pubs and concessions

Wagamama, with its healthier menus, better locations, existing links with delivery aggregators (e.g. Deliveroo) and generally “trendier” brand, must have looked like a get-out-of-jail-free card to TRG’s management.

However, the combination of TRG and Wagamama is not something I want to be invested in, and here’s why:

An alternative history: The Restaurant Group as a company with little or no competitive advantage

In the late 1990s, TRG (or City Centre Restaurants, as it was then) had most of its restaurants in high-footfall locations such as high streets and tourist centres. It had 45 Garfunkel’s restaurants (with about half in airports), a handful of other brands and was the UK’s leading Mexican restaurant operator.

The economic boom of the late 90s saw the casual dining market explode, with new restaurants opening up left, right and centre. When the bust of the early 2000s arrived, the combination of an oversupplied market and an economic downturn gave TRG two years of losses.

At this point, the company decided to focus on out-of-town retail and leisure parks.

In theory, these parks had significant barriers to entry. For example, a retail/leisure site might have five retail stores, two restaurants (one run by TRG), a cinema and a gym. Once these tenants are in place, the ability of additional restaurants to appear on site is very limited compared to a high street, so TRG would have a captive market of shoppers and cinema-goers.

This sounds good in theory, but my revised interpretation of this strategic switch is that TRG did not have a meaningful competitive advantage on the high street, so it moved to where there was less competition.

This strategy worked from around 2001 to 2015. During that time the company expanded enormously, putting restaurants in dozens of new retail parks and leisure parks that were springing up left, right and centre.

Eventually, sites for new out-of-town parks became limited, so developers expanded existing parks. Where there was one restaurant, suddenly there would be two more.

TRG leased many of these new sites, sometimes having two or three of its restaurants in a single retail/leisure park, competing against each other. This kept headline growth going, but it also reduced profit margins and returns on capital.

By 2015 the out-of-town casual dining market had become saturated too, while wages, rents and other costs continued to go up. As in the 90s, TRG was unable to hold onto its profits in a saturated market, at the end of a boom, and with economic headwinds instead of tailwinds.

So my opinion of TRG is that it is a company with little or no competitive advantages.

It has spent at least the last 25 years looking for the next dining trend to ride, from high street casual dining to out-of-town leisure park restaurants, and from Mexican food to Wagamama’s pan-Asian cuisine.

This has worked well when it’s found the right trend to ride, but it means TRG’s future depends on management’s ability to spot the next big thing, where growth is high and competition is low. 

In other words, TRG’s future depends on a single decision (i.e. what trend to ride) every ten or twenty years. That makes it a massively risky business compared to a company that has been selling basically the same thing in more or less the same way for many decades.

As for Wagamama, perhaps is is the next big thing, but then again perhaps it isn’t. All I know is that Wagamama has more liabilities than assets, makes little or no profit and has £225 million of debt.

That may be okay if you’re looking to invest in the next big thing, but I want to invest primarily in companies that are already the “big thing” in their chosen niche.

Unfortunately then, this investment is set to make a loss. That means the only way to benefit from it is to learn the relevant lessons and apply them in future to make better investments and avoid similar situations.

Lesson 1: The three most important things in retail investing are leases, leases and leases

The biggest lesson from TRG is this:

If a business is heavily dependent on rented property then analysing lease obligations is critical because they’re essentially the same as debt obligations. 

Picture this scenario: A retailer leases a store on a five-year agreement, with rent set at £10,000 per quarter. The retailer now has the right to use that store and has an obligation to pay the landlord £10,000 every quarter. 

Another retailer leases a store on a five-year agreement but pays the landlord all the rent upfront. The landlord gives a discount for paying upfront, so the retailer pays £150,000 instead of £200,000. The retailer doesn’t have that much cash, so it borrows £150,000 from a bank. The bank charges interest, so the total amount to repay is £200,000. This is repaid through 20 quarterly payments of £10,000 over five years.

In both cases, the retailers have the right to use a store for five years. They also both have an obligation to pay £10,000 per quarter. The only difference is that the first retailer pays the landlord while the second retailer pays the bank.

In both cases, the rights and obligations are virtually the same, which is why lease obligations are effectively the same as debt obligations. And if that’s the case, then lease obligations should be taken into account as if they were a debt.

For example, let’s look at the return on capital employed, where capital employed is the sum of shareholder capital (shareholder equity) and debt capital (borrowings).

The right to use a rented property over several years is a capital asset which has been funded by an obligation to pay the landlord. This makes the lease obligation a form of capital funding, so the outstanding lease liability should be included in the calculation of capital employed along with the other sources of capital funds, i.e. shareholder equity and borrowings.

In other words, when we’re calculating returns on capital employed, we should lease-adjust capital employed. If we do that then the picture for TRG changes dramatically. 

The Restaurant Group’s returns on lease-adjusting capital employed were consistently terrible

In addition to average shareholder equity of £158 million and average borrowings of £58 million, TRG also had average lease liabilities of £580 million between 2006 and 2015. This turns its average capital employed of £216 million into an average lease-adjusted capital employed of £796 million. 

This reduces the company’s average net return on capital employed of 19% to an average net return on lease-adjusted capital employed (ROLACE) of 5%.

Having added ROLACE to my investment strategy and stock screen in October, I now expect my investments to have produced an average ROLACE of at least 10% over the last ten years. So by that standard, TRG’s 5% is a terrible rate of return.

It suggests, which I now think is correct, that TRG had no pricing power and no meaningful competitive advantages. If I’d looked at lease-adjusted capital employed in 2016 then this enormous red flag would have stopped me from investing in TRG in the first place.

The main reason for TRG’s large lease obligations is their length; in 2018, 82% of its leases were longer than five years and 34% were longer than ten years. This is a problem because it reduces flexibility.

For example, if footfall, revenues and profits permanently decline in one of TRG’s restaurants because the retail park in which it’s situated adds another three restaurant units, TRG won’t be able to renegotiate its rent or close that site for perhaps five, ten or more years.

Even worse, if the lease is longer than five years then rent is typically subject to upwards-only increases which are at least in line with inflation. 

Lesson 2: A lack of information is usually a bad sign

Unlike TRG’s restaurant business, its pubs and airport concessions have been performing quite well. Total pub numbers have gone from 49 in 2013 to an expected 88 by the end of 2019, while total concessions have gone from 60 to an expected 81 over the same period.

And in recent years TRG’s pubs and concessions generated more profit than its restaurant business, so strategically they’re second only to Wagamama in terms of importance.

If TRG’s pubs and concessions had sufficiently attractive results, in terms of profitability, lease obligations, margins and so on, then there’s a chance I would have decided to hold on rather than sell.

However, I have no idea how much revenue or profit these businesses make, or what leases or other assets and liabilities they have, because TRG’s management doesn’t think this is something investors would be interested in.

Why that’s the case I have no idea, but TRG provides no “segmented” results in its annual reports at all. Investors were left to work out the details with nothing more to go on than the number of pubs and concessions.

To be frank, this is shockingly bad investor relations. The restaurant, pub and concession businesses are significantly different, so why aren’t their results shown separately?

How is an investor supposed to work out the strengths and weaknesses of the pub and concession businesses without this information?

In early 2016 I was comfortable buying TRG with such limited information, but I have learned a lot in the three and a half years since then.

One thing I’ve learned is that I want to have a far more detailed understanding of a company before investing in it, which means seeing the results broken down to a useful level.

TRG doesn’t provide a useful level of detail in its annual reports, and that lack of information makes me feel uncomfortable with the investment. And if I don’t feel comfortable with an investment, I don’t want to own it.

Plan, do, check, adjust

Obviously it’s disappointing to lose money on an investment, but the important thing is to focus on the big picture, apply the relevant lessons and keep moving forwards.

In this case, TRG has provided me with an important lesson about lease obligations and accounting transparency, and a reminder that companies relying on “big wins” (e.g. picking the next big dining trend to ride) are almost always more risky.

As usual, the proceeds from the sale of The Restaurant Group will be reinvested into a new holding next month, with an initial position size of around 4%.

Author: John Kingham

I cover both the theory and practice of investing in high-quality UK dividend stocks for long-term income and growth.

19 thoughts on “The Restaurant Group: Weak profitability, long leases and high debts”

  1. Good move John — Restaurants and Pubs are great places to eat and drink, not to invest in.

    In fact I think it is no longer as simple as that — the best places to eat seem most often to be those that are privately and family held as they seem to concentrate on their own businesses better, seem to offer better food quality. Many own their own buildings so are not bogged down with debt and their cooking staff are intrinsically linked to the quality of the food and the relationships with the cutomers.

    Zizzi’s was a case in point – the family ate there two weeks ago and it was less than impressive to put it kindly.

    Since selling Greene King, or it being bought, and selling Fullers I think my investment sphere has become smaller and simpler.

    Regards LR

    1. Hi LR

      I’m not much of a restaurant goer, other than (ironically) a local Frankie & Benny’s where we go for birthdays with our nine-year old. What I noticed there was that the menu changes in recent years seem to have mostly involved making each meal smaller in order to produce better profit whilst staying below the important £10 per plate price point.

      I’ve always liked the fake Italian restaurant decor and ambience, but the food is about on par with McDonalds, in my opinion.

      And if I want McDonalds, I can get that or similar from nearby drive thrus, or home delivered via Just Eat or Deliveroo.

      As for Wagamama, perhaps ten years from now there will be ‘pan-Asian’ restaurants on every corner and we’ll all be sick of it. Or perhaps the next big thing will be traditional Russian food. It just doesn’t seem like a very predictable business to me.

  2. Thanks for the comprehensive write-up. I completely agree with the leases being debt like but had not thought to include their costs as part of total debt. Very helpful.

    Been to several retail parks where F&B are competing with Chiquitos, & both losing out to the more trendy Nandos (which also seems to be declining in quality).

    I live in North Wales where many of the pubs are based, the Burning & Price pub-chain. These are the most popular/populated pubs in the area ‘seem’ to be doing really well and the quality of food, service & drink is far higher than their competitors. I also benefit from the shareholder perk, 25% off vouchers, and this has somewhat offset my losses over the past few years.

    But I don’t factually know how profitable they are.I too have been looking for segmented data and would probably jump at the opportunity to buy into just the Burning & Price part of the business.

    Thanks again, AGJ

    1. Hi AGJ

      Thanks for the anecdotal info on the pub business, it does seem to be the most successful part of the company along with its airport concessions (which I’m a fan of in general and which offer the opportunity for lots of international expansion if you know what you’re doing).

      I will miss the 25% shareholder meal discount, but they were’t remotely enough to entice me to hold on. The lack of segmented results – or just more qualitative info on the various parts of the business – is unforgivable, so unless the company seriously turns itself around and provides much better information, I don’t expect to reinvest any time soon.

  3. Hi John,

    I think the restaurant market has changed significantly thanks to disruptors like supermarket and platform apps. This is why companies like The Restaurant Group is suffering.

    Supermarket such as Sainsbury et al are offering restaurant quality food which you can warm up and eat in the comfort of your own home at a considerably lower price. Unless the food is being prepared in a up market restaurant where people are less price sensitive supermarket like M&S and Waitrose will win hands down .

    Platform apps like Deliveroo and Just Eat allow private eateries to compete by providing access to a huge market making this makes it impossible for companies like restaurant group to compete and keep healthy margin.

    McDonalds, KFC and Burger King work because they sell cheap food but thanks to scale of economy, good capital allocation and great branding they generate enormous returns for their owners.

    1. Hi Reg, I agree with all of that. I can get a pizza from Tesco, hand made while I (or mostly the wife) wait, for about £3. Obviously this isn’t quite the same as going to a restaurant, but the price differential means that the restaurant has to be that much better to make up for it.

      And when I come out of the cinema I can sit in my car and use Just Eat to order a roast dinner (yes, there’s a roast dinner delivery service nearby), which will arrive shortly after we get back home. I think the Frankie & Benny’s staff need to start eating fire or doing back flips in the aisle to keep up with that (and I’m only half joking).

      1. Hi John,

        I think the key thing the demise of TRG shows is that a company needs to have a degree of pricing power or economy of scale to be profitable. For example WH Smith sells the most mundane items you can think of but the company retails in site where people have few other options as a result less price sensitive.

        TRG lacks the scale of economy or branding of McDonalds, KFC, Starbucks and is unable to compete with local restaurants which are owner operated giving it an intangible quality built over the years. Therefore what TRG should have done is focus on sites like service stops, train station or even concerts/sports events. In such location customers have few choices and would be less averse to buying a mediocre burger for double the price of what they would pay in McDonalds.

        Had TRG focused in such segment overtime they could have built a scale of economy for that specific sector giving it a wide moat and some consistency in earning.

        On another point the more I read the more it frightens me how little I knew before and more scaringly how bad management are in serving in the interest of a long term investor. As they fail to grasp the fundamental risks they face.

  4. Dear John, thanks for the comprehensive review and learnings. Did you visit any of the restaurants before buying the shares? I remember visiting one of their restaurants in some out of town cinema location; the food was pretty poor and the service not much better – altogether a low rent experience. So this put me off buying any shares. The same happened with Debenhams – 3 years ago I got a tip to buy, but after visiting a couple of stores, it was clear to me that this was not a great shopping destination – and the shares have tanked since then. So I generally try to get some personal experience of the company before investing – this is a useful addition to more comprehensive stock selection criteria (important for me since I’m not great with numbers!)

    1. Hi Andreas, yes I have a Frankie & Benny’s near me and I’ve been there quite a few times with friends and family. Mostly we see it as somewhere to go with the kids, either after a movie or for a birthday; that sort of thing.

      I think the food is “good enough”, perhaps a bit small, but they’re trying to stick to £10 per plate, or thereabouts. I like the decor, the pizzas, the balloons, the fact that all the staff sing happy birthday if you ask them to, and it’s right next to the cinema. Most of all though, I like the speed of service and you can also order and pay with your phone now.

      So I think I (and my family) are actually their target market, but that doesn’t stop me using Netflix and Just Eat instead of Cineworld and Frankie & Benny’s with increasing regularity.

      As for anecdotal evidence (or scuttlebutt) more generally, I don’t really trust my personal judgement on that sort of “soft” info, so I prefer to stick primarily to the numbers. But each to their own and visiting stores, factories, AGMs etc. is definitely the right thing for some investors.

  5. Hi Reg (continued from earlier thread),

    “[WH Smith] retails in site where people have few other options as a result less price sensitive.”

    Actually that was the whole point of TRG moving to “out of town” retail / leisure parks. The competition was expected to be limited by the physical layout of the site. And it worked a treat for 15 years. However, eventually landlords started to run out of places to add new out of town sites, so they started to buy up adjacent land and expand existing sites. This brought in new competition, which exposed TRG’s lack of pricing power.

    WH Smith (which I own) is different. A convenience store can easily open up next to its high street stores and compete directly against it. Generally though, that’s a bad idea because WH Smith has a) excellent brand recognition, b) huge scale in the UK, c) lots of experience and data which helps it optimise its stores in what is an extremely price competitive market (convenience stores).

    Where TRG and WH Smith are similar is their airport concession businesses. These have limited competition once the contract is won. So for example, if TRG puts in a concession at an airport, there is literally only so much room for competitors. And transport concessions are a growth market, so that helps.

    “what TRG should have done is focus on sites like service stops, train station”

    Exactly, and that is what it’s doing, as per my comments on airport concessions above. TRG’s concessions now make more profit than its restaurants, so perhaps it will copy WH Smith and transition to having concessions as the core business. If they can get an international concessions business up and running then that could be a very fruitful route to growth.

    On management, I think it’s just very easy to sign 15-year leases as a way to lock in lower annual rents. If you’re an optimistic type (as many CEOs are) then you’ll expect the company to prosper over those 15 years. Unfortunately that expectation doesn’t always come to fruition and then the 15-year lease becomes a massive millstone around its neck.

    1. Hi John,

      Thanks for the detailed info I must confess I wasn’t aware of all the facts but I think “out of town” retail / leisure parks” expansion does not translate into a pricing power.

      They still had to compete with the likes of a supermarket cafe which always seems to have a store nearby in retail park, Greggs, McDonalds, Burger King, KFC. Pizza Hut and your friendly coffee chain branch. As you can see with so many competitors they could only compete on price which is a race to the bottom.

      However if management is shifting to those travelling concession then they are moving in the right direction. Unfortunately they have a few limitations to deal with:

      1) Debt
      2) Competition – getting a concession is only worthwhile at the right price and its unlikely they will succeed against fast food chain which have more resources and thanks to scale of economy fast food chain can afford the premium because their margins give them significant cushion.
      3) Food – In travel concession people are on the go so giving consistent food at a fast pace is a key feature again the Restaurant Group as a casual diner is not going to be able to attract the right type of customers in sufficient volume to make the numbers work.

      As a result I’m not sure how things will work out for them.

  6. I looked at TRG after having read your purchase article . I read the interim/fy reports, mostly concentrating on the cashflow side of things, do not recall the exactly what I thought but along the lines of, cheap-ish but not confidence inspiring, had it on a watchlist for some time and probably followed up on the initial look for a couple of results following.
    Not particularly keen on the sector (Pizza Express experience) but Costa, Starbucks or even McDonalds show it can be done. I thk more than a usual amount hinges on management, talent, motivation and culture (so that a degree of consistency is achieved over decades/ generations of management.

    My best impression of management is the clarity of their financial report and statements, glad you pointed out failure to segment results so we, for ourselves, can be the judge.
    We have discussed it before, Next plc managing expectations, criteria for buy back vs special dividends. Next also had a fascinating guide to future store profitability vs cost of capital interim 2018. Note, I do not hold Next plc at present, but use as an exemplar of good quality reporting.

    Would love to see some articles on plc’s I own, as your research is more clinical than mine, I appreciate another perspective, alas neither of us hold Centrica any longer.

    1. Hi Michael, I’m a fan of Next’s reporting clarity too (and a shareholder). Hope it doesn’t change anytime soon.

      As for articles, suggest some companies and I’ll see what I can do (although I can’t promise anything; I’ve been super-busy in recent months extracting lessons from recent blunders, starting the 2nd edition of my book, etc etc). But suggestions are always welcome anyway as it’s better than me randomly picking companies out of a hat.

      1. Your recent theme of ‘lessons from blunders’ is useful, although probably not as popular as ‘what I just bought’ articles, given that looking up investments online or other is usually motivated by a buy impulse.

        My own lesson from blunders are
        Not acknowledging cyclicality (enough).
        Not using any chart tools enough.
        Over-reliance on cashflow statements.
        Being inconsistently rational when investing.
        still not Aware enough of management culture, quality and continuity

        I think I am better now (after 20 years investing) at

        not Mistaking weakness for value.
        being Aware of co’s with a Dependence on small number of customers.
        not Believing ‘Jam Tomorrow’ management, constant turnaround situations.
        not Ignoring if the company growing over the longer term.
        being Simultaneously cynical but optimistic.
        being Aware of management culture, quality and continuity.

        btw I also did the same investment and worse, for a member of my family.

      2. Hi Michael, I agree, straight company review are what people are looking for more than “lessons learned” articles, but these last few month’s I’ve spent most of my time eating humble pie and learning lessons, so I haven’t had time to write about much else!

        Hopefully 2020 will be quieter and I’ll have more time to review more companies on the blog.

  7. As for my suggestions, when (if) you have time that is.
    I follow around 40+ companies, vast majority UK listed. Own or have owned most at some point. I prune and add regularly. Most i would like to own, but not at the current price
    Current strategy is to hold core amounts in a group of stocks. The baseline thinking is ‘I dont completely know, but I want to hold at least some of these’, of these core I may go overweight in a given stock, +50% or +100% though only temporarily, and only rarely liquidating entire holdings. These are generally £1bn mkcap+, often much more.
    Beyond the core I have other stocks, which may become core(ish). 1)Plc’s I am not 100% familiar with (researched but no personal history of), 2)plc’s that I have history with but are resuming growth (often value, turnaround taken root), and smaller plc.

    This 2nd group is where I would love to see your insight, the advanced turnarounds, Hikma, Genel, Photome, Park group (now appreciate group). Park group may be too small for your screen I suppose. The turnaround is not in evidence yet at Hostelworld (no holding yet) but am interested nonetheless.

    1. Okay, thanks. I have at least a couple of advanced turnarounds in my portfolio, so I might write about one of those or look for similar situations to review.

      Having been through a few turnarounds it’s definitely an interesting area and one which can produce excellent returns if you really understand what’s going on under the covers. But like you, I’d rather invest on the way out of a turnaround rather than on the way in…

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