As the old saying has it, “hindsight is 20:20”, but there have been a number of recovery stories recently that we really should have spotted coming.
While it is true that there is a danger that a well-known brand – I’m looking at you, Yellow Pages owner hibu – will not come back from the brink, it is often worth looking at an established business when it is down in the doldrums.
Irate Woolworth shareholders: bear with me, here.
Take Thomas Cook (LON:TCG), for example. The company’s shares ended 2011 at 14.75p with the company talking to its bankers about a sub to get it over the winter period before the money from the summer bookings started rolling in.
The year had seen the company issue a profit warning and bin its dividend because of its debt mountain, but was it really in danger of going under?
The company has been around since 1841 and is one of two companies that dominate the UK package tour market. It had got into trouble through assembling a rag-bag collection of travel firms and not assimilating them very well, but all it took to turn it round was to sell off the extraneous bits and focus on the core business.
The shares are now worth 166p. The new chief executive officer, Harriet Green, who took over in July 2012, has received a £1.78mln cash bonus for her efforts this year and though some shareholders may demur, she is good value for that bonus.
Another familiar brand benefiting from a change at the top is newspaper group Trinity Mirror.
The Daily Mirror publisher’s previous chief executive, Sly Bailey, was handsomely paid for managing what was seen as an inevitable decline of the business; she got paid £1.66mln in 2010, including a £660,000 bonus after the company’s profits trebled to £123mln.
Her method for growing profits, though, was to ruthlessly cut back on costs, rather than on growing the business.
She announced her resignation in May 2012 having earned £1.2mln the previous year. She stepped down in June, heading off a potential shareholder revolt, having spent almost 10 years at the helm; during that period, the company slipped out of the FTSE 250 and saw its market capitalisation slide from more than £1bn to less than £100mln.
Under Simon Fox, the market value has recovered to above half a billion, on the back of an increased focus on the digital side of the business.
It looks like a case of second-time lucky for Fox at reviving a business knocked for six by the advent of the internet; he was dealt a bad hand at entertainment media retailer HMV, making a shrewd move into live music before being forced to sell that part of the business in a doomed attempt to keep the legacy business alive.
Another turnaround story that we might have seen coming is Thorntons (LON:THT), the chocolate and ice cream maker and retailer that looked for a while that it was about to disappear faster than the toffees at Christmas.
It is rarely a good idea in Britain to base a business on the vagaries of the weather, and the firm also found itself overly dependent on the UK high street.
The solution was to close down a number of underperforming shops and put a big effort into getting the stock into the supermarkets, where the margins may be lower but that’s where the customers are.
Once again, the change in strategy coincided with a change in the hand on the tiller; in this case, the saviour was Jonathan Hart, who took over as chief executive officer in January 2011 having previously spent five years as managing director of Caffè Nero.
The first year under his stewardship the shares fell from 95.22p to 49.5p, but since 2012 the only way has been up, with the shares now standing at 141p.