Ann: Trading update and Board appointment, page-6

Disappointing update, for mine.

Strikes me that - in their urgency to reduce the balance sheet liabilities - they cut not just all the SKU fat, but into some of the muscle.

From the time this new management assumed the helm some 18 months ago, the investment thesis in my mind had had two parts:

1.   Stopping the bleeding and staving off the prospect of insolvency.

2.   Growing earnings by increasing margins due to SKU rationalisation and lowering CoDB.


Part 1. happened quickly and in spades - taking the share price from $2.00 in 2019 to over $7.00 within a few months.

Unfortunately Part 2. - which, by my reckoning would have taken the stock to close to a $10 valuation - has proven to be elusive (masked to a large extent by Covid over the past 12 months, in the company's defense).

Experience has taught me that turnarounds sometimes don't.
Or when they do, they do so only incompletely.   

Part 2 might still materialise at some point, but this update is significantly weaker than I had expected.  

I think that one needs to have clear milestone expectations for turnaround stories such as this, and when those milestones are not met, to have the discipline to sell and to move on.

Otherwise you could very easily end up with, at best, incurring opportunity cost or, worse, losing the value of your capital.

So I've sold my TRS shares today.

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