Thomas Cook Group goes bust.

[idpickering]

I seem to recall TCG being a popular HYP share in the past? It seems the inevitable has happened and they’ve demised. Condolences to holders out there, and the staff, and all the tourists stranded wherever you are.

Ian.

[idpickering]

And this from what was TCG;

Compulsory liquidation of Thomas Cook Group plc

Further to the announcement made on 20 September 2019, Thomas Cook Group plc ("the Company") continued to engage with a range of key stakeholders over the weekend in order to secure final terms on the recapitalisation and reorganisation of the Company.

Despite considerable efforts, those discussions have not resulted in agreement between the Company's stakeholders and proposed new money providers. The Company's board has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect.

https://www.investegate.co.uk/thomas-co ... 00112443N/

[Arborbridge]

Very sad news for everyone involved and for UK Plc. Thomas Cook for us oldies has been part of the background fabric for our whole lives, a great shame.


Would any HYPers care to kick off a discussion to the pointers which should have alerted us to get out, and when?
I sold out in 2013 at a loss and was never inclined to buy back, but I noticed that shorting was never an issue until recently and even then only 10% - so much for that. Cash flow collapsed last year and eps likewise.

Although we knew TCG had been struggling for years, it also looks as though the really bad stuff came home to roost in the past year.


Arb.

[Wizard]

Very sad news for everyone involved and for UK Plc. Thomas Cook for us oldies has been part of the background fabric for our whole lives, a great shame.


Would any HYPers care to kick off a discussion to the pointers which should have alerted us to get out, and when?
I sold out in 2013 at a loss and was never inclined to buy back, but I noticed that shorting was never an issue until recently and even then only 10% - so much for that. Cash flow collapsed last year and eps likewise.

Although we knew TCG had been struggling for years, it also looks as though the really bad stuff came home to roost in the past year.


Arb.

I think the description of TCG being in the background fabric of life is a very good one.

I have never held TCG and have not really followed them, however, presumably the starting points would be the cancellation of the dividend and the very low market capitalisation. Looking at it this morning I do not think it has been an HYP share for some time and as far as I can see the market cap has been in the hundreds of millions for at least three years.

[Arborbridge]

I think the description of TCG being in the background fabric of life is a very good one.

I have never held TCG and have not really followed them, however, presumably the starting points would be the cancellation of the dividend and the very low market capitalisation. Looking at it this morning I do not think it has been an HYP share for some time and as far as I can see the market cap has been in the hundreds of millions for at least three years.

I agree that no one here would have bought into TCG for a very long time, but I just wondered if we could gleaned any warning signs which are in common with other stocks which we do hold. I mention that in the light of recent ideas about monitoring shorts, cash flow etc.

My own feeling is that we will find things about TCG which are "obvious", but perhaps not helpful when applies to other holdings.

Gearing was high, though more or less stable but it seems everything really fell of a cliff in 2018, from which there was no return.

Arb.

[Wizard]

I think the description of TCG being in the background fabric of life is a very good one.

I have never held TCG and have not really followed them, however, presumably the starting points would be the cancellation of the dividend and the very low market capitalisation. Looking at it this morning I do not think it has been an HYP share for some time and as far as I can see the market cap has been in the hundreds of millions for at least three years.

I agree that no one here would have bought into TCG for a very long time, but I just wondered if we could gleaned any warning signs which are in common with other stocks which we do hold. I mention that in the light of recent ideas about monitoring shorts, cash flow etc.

My own feeling is that we will find things about TCG which are "obvious", but perhaps not helpful when applies to other holdings.

Gearing was high, though more or less stable but it seems everything really fell of a cliff in 2018, from which there was no return.

Arb.

I think an examination of Strategic Ignorance may come out of this. I have just seen Grant Shapps making what seem to me to be very sensible, but obvious, points about a business that did not react to changes in the market and was still burdened by an estate of travel shops on the high street when most business was being done online. Presumably Strategic Ignorance will say "leave it to the management", but they didn't and they won't in all cases.

Maybe it just comes down to the benefits of diversification. As you yourself I think have been exploring Arb deciding to exit a share when the dividend is cut can save you from a failure, but can cost you a recovery. If we could tell which was which before hand with 100% accuracy we would not need to rely on diversification and would be very wealthy indeed.

But I recognise none of those thoughts are at all new or particularly insightful.

[NeilW]

TCG fell into my 'airlines are like football clubs' filter. (How do you become a millionaire as a football club owner? Start off as a billionaire)

Same with TUI

[tjh290633]

I invested in the then British Airways (BAY) when my ISA was started, but soon realised that airlines and other travel companies were not a good investment. I sold BAY soon after they stopped paying dividends, about 2003. My other related investment was Stagecoach (SGC) which was sold later that decade because of low yield.

Since then I have studiously avoided any travel related company. The writing was on the wall for travel agencies over 20 years ago, when the smaller ones were being swallowed up and the bigger ones started running their own airlines. I lost a first class local agent who offered a proper service, issuing airline tickets on the spot as opposed to being a retailer of packaged holidays. The internet has since changed all that.

TJH

[Alaric]

but I just wondered if we could gleaned any warning signs which are in common with other stocks which we do hold.

A pile of "goodwill" financed by a pile of debt is often a common feature. Such companies continue until no-one will lend them money any longer.

For a travel company, debt of itself was a warning sign if it doesn't own hotels or aeroplanes. I'm assuming the planes with "Thomas Cook" on the side were leased rather than owned.

[IanTHughes]

Thomas Cook Group (TCG) was only formed in February of 2007, created by the merger of Thomas Cook AG and MyTravel Group PLC (MT.S), when it became a constituent of the FTSE 250. Although it did initially pay a dividend, with a yield of over 4.5% I believe, it never established a credible progressive Dividend policy and of course the dividend was cancelled in 2011. The subsequent resurrection of a Final Dividend for the Financial Year End of September 2016 and 2017, cancelled in 2018, gave an insignificant yield from what was now a much smaller company. It finally dropped out of the FTSE 250 in December 2018.

As a result, I do not believe TCG was ever a candidate for an HYP Portfolio.

However, there may be other HYPers, with longer HYP memories than I, that do hold the shares (my commiserations), or maybe others that did once have a holding. If so, they would be better placed to explain why TCG was considered an HYP candidate.


Ian

[onthemove]

I held these as well as Debenhams, both outside an ISA

After DEB there was a teeny, tiny slim chance I might yet have made enough gains from other non-ISA shares to offset the capital loss by next April.

With TCG, now occurring in the same tax year, it'd take a miracle from here to end up with enough other gains to effect a net CGT gain by next April, even bedding and ISAing, etc.

So from a practical point, as someone who doesn't normally need to do a tax return...

• Can these losses be carried forwards to offset future capital gains?
• If they can, when April arrives, what will I need to do to effect that? I was able to report taxable dividends to HMRC of over £2000 for the previous tax year just by phoning them. Can that be done for capital losses, or would they need full details of the calculations on a tax return?

Thanks.

[Overall this non-ISA account is still quite +ve on returns; I've just been wrong footed a little from using up previous years capital gains allowance each year, which has now left me with very few unrealised gains left to offset these two losses. And combined with my shift towards tracker ETFs means I'm far less likely than before to have any particular outlier holding do well enough between now and April to change that. My net losses on _current_ non-ISA holdings looks quite terrible due to the winners being culled or bed & ISA'd for CGT allowance reasons.]

[Arborbridge]

Thomas Cook Group (TCG) was only formed in February of 2007, created by the merger of Thomas Cook AG and MyTravel Group PLC (MT.S), when it became a constituent of the FTSE 250. Although it did initially pay a dividend, with a yield of over 4.5% I believe, it never established a credible progressive Dividend policy and of course the dividend was cancelled in 2011. The subsequent resurrection of a Final Dividend for the Financial Year End of September 2016 and 2017, cancelled in 2018, gave an insignificant yield from what was now a much smaller company. It finally dropped out of the FTSE 250 in December 2018.

As a result, I do not believe TCG was ever a candidate for an HYP Portfolio.

However, there may be other HYPers, with longer HYP memories than I, that do hold the shares (my commiserations), or maybe others that did once have a holding. If so, they would be better placed to explain why TCG was considered an HYP candidate.


Ian

I bought it in 2009 at a yield of 5.49%. Quite what else I knew about it, I cannot say since I kept no notes. Presumably it was a half reasonable HYP candidate or it wouldn't have been bought - but whether it was reviewed favourably here or not, I do not know. I sold in 2013 and it remains one of my stand-out failures with an XIRR of -24%!

I see TUI shareholders have gained a little relief today.

Arb.

[IanTHughes]

Thomas Cook Group (TCG) was only formed in February of 2007, created by the merger of Thomas Cook AG and MyTravel Group PLC (MT.S), when it became a constituent of the FTSE 250. Although it did initially pay a dividend, with a yield of over 4.5% I believe, it never established a credible progressive Dividend policy and of course the dividend was cancelled in 2011. The subsequent resurrection of a Final Dividend for the Financial Year End of September 2016 and 2017, cancelled in 2018, gave an insignificant yield from what was now a much smaller company. It finally dropped out of the FTSE 250 in December 2018.

As a result, I do not believe TCG was ever a candidate for an HYP Portfolio.

However, there may be other HYPers, with longer HYP memories than I, that do hold the shares (my commiserations), or maybe others that did once have a holding. If so, they would be better placed to explain why TCG was considered an HYP candidate.

I bought it in 2009 at a yield of 5.49%. Quite what else I knew about it, I cannot say since I kept no notes. Presumably it was a half reasonable HYP candidate or it wouldn't have been bought - but whether it was reviewed favourably here or not, I do not know. I sold in 2013 and it remains one of my stand-out failures with an XIRR of -24%!

Well a yield of 5.49% was a decent enough yield but were you not concerned by the lack of history? You do not mention when in 2009 but unless it was after November, when the final results for Year Ending Sep 2009 would have been announced, you were looking at only one full year of dividend history to base your decision on. Mind you, the economy was coming out of the financial crisis, the market was rising, so maybe TCG did look a better idea than it subsequently became. I cannot say as I only started my HYP in 2012 when it was most certainly not an HYP candidate!

By the way, most of us have had a similar XIRR failure, so you are not alone!


Ian

[Arborbridge]

Well a yield of 5.49% was a decent enough yield but were you not concerned by the lack of history? You do not mention when in 2009 but unless it was after November, when the final results for Year Ending Sep 2009 would have been announced, you were looking at only one full year of dividend history to base your decision on. Mind you, the economy was coming out of the financial crisis, the market was rising, so maybe TCG did look a better idea than it subsequently became. I cannot say as I only started my HYP in 2012 when it was most certainly not an HYP candidate!

By the way, most of us have had a similar XIRR failure, so you are not alone!


Ian

I can't answer your first quesion. I have no idea what I knew about the history or even whether I took such matter seriously at that time. When I first started HYP it was a pretty rudimentary approach adopted so the choice was either because it was the next best company down the list in a new sector, or because it was given a favourable write up somewhere.
Later, I learnt to be more "sophisticated" but that didn't make much difference: I still collected enough disasters to build a second portfolio of HYP dogs had I kept them all.

They say we live and learn. Do we really? - well, perhaps just a little. But investing is still full of random knocks and lucky breaks, even with all the history, cash flows, shortings and smells you can tolerate, understand or have time for. Which reminds me of the financial editor of the Independent (when it was a proper newspaper). They used to run a series of Christmas tips, and the editor's baby girl used to make excellent choices, it is said, just by stabbing the financial pages with a pencil.

Arb.

[idpickering]

I can't answer your first quesion. I have no idea what I knew about the history or even whether I took such matter seriously at that time. When I first started HYP it was a pretty rudimentary approach adopted so the choice was either because it was the next best company down the list in a new sector, or because it was given a favourable write up somewhere.
Later, I learnt to be more "sophisticated" but that didn't make much difference: I still collected enough disasters to build a second portfolio of HYP dogs had I kept them all.

They say we live and learn. Do we really? - well, perhaps just a little. But investing is still full of random knocks and lucky breaks, even with all the history, cash flows, shortings and smells you can tolerate, understand or have time for. Which reminds me of the financial editor of the Independent (when it was a proper newspaper). They used to run a series of Christmas tips, and the editor's baby girl used to make excellent choices, it is said, just by stabbing the financial pages with a pencil.

Arb.

A great post Arb, which I humbly rec/thank you for. A great reminder that investing, or for us here, HYPing, doesn't come with any guarantees. I like to pacify myself by being well diversified, holding long term (hopefully), and accepting that I, nor anyone else, can predict the future of any share. I see that the likes of TUI etc have done well today, but for me, this is a sector best avoided. You don't have to have a finger in every pie.

Ian.

[Luniversal]

I seem to recall TCG being a popular HYP share in the past? It seems the inevitable has happened and they’ve demised. Condolences to holders out there, and the staff, and all the tourists stranded wherever you are.

Ian.

When I picked a Footsie folio in mid-2011, TUI Travel (TT.) as was- trading as Thomson- had been around for 25 years on the market. It certainly had Pyad's 'five years of rising dividends' under its belt: no lapses since the mid-1990s.

Thomas Cook also sold on a worthy yield but had only a short, if unmarred, payout history. So TUI it was. Income has jumped under full German ownership, although the business has been through a sticky patch with oil price rises, terrorist attacks on resorts and the like. Cook's troubles should be an ill wind. I see TUI is up 7% today, but still returns almost 8%.

[Gengulphus]

I think an examination of Strategic Ignorance may come out of this. I have just seen Grant Shapps making what seem to me to be very sensible, but obvious, points about a business that did not react to changes in the market and was still burdened by an estate of travel shops on the high street when most business was being done online. Presumably Strategic Ignorance will say "leave it to the management", but they didn't and they won't in all cases.

Sorry, but Strategic Ignorance does not say "leave it to the management". It says something completely different, namely to ignore all long-term predictions about a company and its business, including those one makes oneself. Saying that a concept "presumably" means one thing when it actually means something completely different does not help people discuss that concept sensibly - on the contrary, it positively hinders such discussion by creating confusion that then needs to be cleared up.

Thomas Cook last met the most basic requirement for a HYP share, namely having a high yield, around a decade ago. Looking at its 2009 annual report (which is still downloadable from its website, though I've no idea for how much longer that will remain the case), they were certainly aiming to expand their online operations at that time. Could the company have been predicted at that time to be doomed in about a decade's time because of being burdened with its high street travel shops with any real certainty? I doubt it - obviously that was a prediction people could have made, and doubtless some did, but so were all sorts of other possibilities. That is the sort of prediction that Strategic Ignorance says to ignore.

Shorter-term predictions certainly can be made with a fair degree of certainty - I haven't looked at the company in detail for many years now, but even a cursory look at recent annual reports says that its future prospects have been looking decidedly dodgy for quite a few years now. But Strategic Ignorance isn't about such shorter-term predictions - so anything Grant Shapps or anyone else has said in say the last three years simply isn't relevant to the question of whether Strategic Ignorance is a good idea or not.

Note I'm not trying to argue whether Strategic Ignorance is a good idea or not - just that if one wants to discuss that question sensibly or draw any sensible conclusions about it, it's essential to be clear about what Strategic Ignorance is. Too often, people seem to use it to mean "any and all features of HYP strategies that I personally dislike", which doesn't really give any solid ground for sensible discussion because that definition means completely different things to different people.

And incidentally, I'm also not trying to argue whether a "leave it to the management" attitude is a good one to have or not, just that regardless of the answer, that attitude is not Strategic Ignorance. Indeed, it can easily lead via "the management knows best" to the idea that one shouldn't ignore the management's long-term predictions about the company and its business - which is in direct contradiction to Strategic Ignorance!

Gengulphus

[Gengulphus]

Thomas Cook Group (TCG) was only formed in February of 2007, created by the merger of Thomas Cook AG and MyTravel Group PLC (MT.S), when it became a constituent of the FTSE 250. Although it did initially pay a dividend, with a yield of over 4.5% I believe, it never established a credible progressive Dividend policy and of course the dividend was cancelled in 2011. The subsequent resurrection of a Final Dividend for the Financial Year End of September 2016 and 2017, cancelled in 2018, gave an insignificant yield from what was now a much smaller company. It finally dropped out of the FTSE 250 in December 2018.

As a result, I do not believe TCG was ever a candidate for an HYP Portfolio.

However, there may be other HYPers, with longer HYP memories than I, that do hold the shares (my commiserations), or maybe others that did once have a holding. If so, they would be better placed to explain why TCG was considered an HYP candidate.

I haven't ever owned TCG shares, but I do remember considering them reasonably seriously at one stage - I don't remember exactly when, but it must have been around 2009-2010. They weren't a quick and easy rejection on grounds of simply not being a HYP share, though I don't remember exactly why I didn't buy - plausible possibilities include portfolio-specific reasons such as not having the cash spare at the time (there were quite a few competing candidate uses for it in the form of lots of right issues and open offers, some of which turned out considerably better than others...) or diversification limits (I may have been a bit overweight in Travel & Leisure at the time and not keen on increasing holdings in the sector), or a general distrust of something I saw about the company, etc. I don't remember the short history being a major sticking point, and I think the fact that the company was formed by a merger is the clue to that: companies formed by mergers do have histories prior to the merger. Indeed, they have more than one such history, so any problems are liable to be of the 'too much history' variety rather than 'too little history'...

Gengulphus

[Wizard]

I think an examination of Strategic Ignorance may come out of this. I have just seen Grant Shapps making what seem to me to be very sensible, but obvious, points about a business that did not react to changes in the market and was still burdened by an estate of travel shops on the high street when most business was being done online. Presumably Strategic Ignorance will say "leave it to the management", but they didn't and they won't in all cases.

Sorry, but Strategic Ignorance does not say "leave it to the management". It says something completely different, namely to ignore all long-term predictions about a company and its business, including those one makes oneself. Saying that a concept "presumably" means one thing when it actually means something completely different does not help people discuss that concept sensibly - on the contrary, it positively hinders such discussion by creating confusion that then needs to be cleared up.

Thomas Cook last met the most basic requirement for a HYP share, namely having a high yield, around a decade ago. Looking at its 2009 annual report (which is still downloadable from its website, though I've no idea for how much longer that will remain the case), they were certainly aiming to expand their online operations at that time. Could the company have been predicted at that time to be doomed in about a decade's time because of being burdened with its high street travel shops with any real certainty? I doubt it - obviously that was a prediction people could have made, and doubtless some did, but so were all sorts of other possibilities. That is the sort of prediction that Strategic Ignorance says to ignore.

Shorter-term predictions certainly can be made with a fair degree of certainty - I haven't looked at the company in detail for many years now, but even a cursory look at recent annual reports says that its future prospects have been looking decidedly dodgy for quite a few years now. But Strategic Ignorance isn't about such shorter-term predictions - so anything Grant Shapps or anyone else has said in say the last three years simply isn't relevant to the question of whether Strategic Ignorance is a good idea or not.

Note I'm not trying to argue whether Strategic Ignorance is a good idea or not - just that if one wants to discuss that question sensibly or draw any sensible conclusions about it, it's essential to be clear about what Strategic Ignorance is. Too often, people seem to use it to mean "any and all features of HYP strategies that I personally dislike", which doesn't really give any solid ground for sensible discussion because that definition means completely different things to different people.

And incidentally, I'm also not trying to argue whether a "leave it to the management" attitude is a good one to have or not, just that regardless of the answer, that attitude is not Strategic Ignorance. Indeed, it can easily lead via "the management knows best" to the idea that one shouldn't ignore the management's long-term predictions about the company and its business - which is in direct contradiction to Strategic Ignorance!

Gengulphus

Whatever, but it is a phrase used on here by Ian Pickering who is clearly an HYP stalwart. I am not putting any more money into my HYP as it seems to be littered with capital destroyers these days, so it is not something occupying my thoughts that often and I will not bother to add any more on this topic.

[monabri]

In the last 3 years, TCG never crossed my radar as being a potential HYP buy. I haven't looked but I dont remember seeing much discourse on it neither on the HYP Practical board.

I'd describe TCG as " Carillion with wings"...lots of debt and a margin from business activities which never would be able to pay it off and that's the reason why the Government decided not to back it as it was only going to fail in the future.