Private Investor: They won't hire cars, but they still have to eat

The spring clean continues, also known as my "spot the dog" exercise as I clear the portfolio of underperforming shares. When I say "underperforming", I mean stuff that not only hasn't fulfilled expectations, but which also shows no sign of ever doing so.

This week's eviction was Avis Europe plc. It obviously hasn't been trying quite hard enough. I was a long-term investor in the group, having bought in at the float in 1997 at 125p. I bought some more along the way as they tanked and tanked again, but last week I decided to ditch a big chunk of them, holding just a few in case some private equity deal turns up (there's been some gossip, but then there's always private equity gossip around virtually everything these days).

I sold my shares at a miserable 72p, a very poor return by any standards. The car-hire business seems to be one of the toughest to be in these days, and there are few signs of things getting better. I did have a glimmer of hope that Avis might be taken over by the likes of General Motors (Ford bought Hertz a few years ago, only to dispose of it again not long after), but that's obviously not going to happen now. Still, bygones are bygones, as the economists say, and it's time to look forwards.

I've always had a bit of a soft spot for restaurant group shares, and my taste buds have been stimulated by the unimaginatively named Restaurant Group. Now, the catering game is probably even more cut-throat than car hire, but if you've got a good enough product and a decent image, you can still make money.

That's why I've been a happy investor in La Tasca (up 50 per cent in six months and now being bought out by - yes, you've guessed it - private equity), in Tasty plc (dim sum), and in Clapham House plc (gourmet burgers and Bombay Bicycle). They all seem to have the smell of success about them.

The Restaurant Group is a slightly different proposition. Its strategy is based on avoiding the ever more crowded high street environment in favour of "captive" markets. Thus, its four businesses - Garfunkel's, Frankie & Benny's, Chiquito and Blubeckers - can be found at out-of-town locations such as airports and leisure parks. Now, only about 7 per cent of The Restaurant Group's takings come via the high street.

OK, it may have to pay BAA and its peers an inflated rent, but so far the strategy is producing some appetising returns. The most recent trading statement produced full-year figures at the top end of expectations. Pre-tax profit increased by 18 per cent to £35m on turnover up 10 per cent to £314.7m. The group's chief executive, Andrew Page, added that this year had begun well, with like-for-like sales up 5 per cent.

Chiquito was the best-performing chain, with 11 new restaurants opening during the year to take the total to 45. Frankie & Benny's boasts 139 outlets and saw earnings jump by more than 20 per cent in 2006. Some 25 new sites were opened, leaving the group with 284 mid-market eateries in Britain.

Many analysts think that the shares in The Restaurant Group are undervalued, and I tend to agree. You have two or three powerful underlying engines of growth here.

First, there's the captive market element. Second, there's the long-term trend towards more eating out and increased spending on leisure. And third, we have the seemingly insatiable appetite for foreign travel.

There's something about being at an airport that seems to rob people of their normal inhibitions about spending their cash, and The Restaurant Group's on-site outlets are very well placed to take advantage of this liberal attitude to spending. In both the long and the short term, I think that The Restaurant Group's prospects are sweet, so it joins my other restaurant shares in the portfolio (bought at 360p per share).

Having recently castigated the boards of some smaller building societies, I ought also to mention the total remuneration paid to directors the Family Assurance Society, another mutual but this time one of our friendly societies. (I am a member.)

I see from its annual report that the total bill for the Committee of Management (both execs and non-execs) rose from £868,000 in 2005 to a little more than £1m in 2006, a rise of 18 per cent. I think I'd get friendly with anyone for that sort of money.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
News
i100
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Life and Style
Mark's crab tarts are just the right size
food + drinkMark Hix cooks up some snacks that pack a punch
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

    Aren’t you glad you didn’t say that?

    The worst wince-and-look-away quotes of the year
    Hollande's vanity project is on a high-speed track to the middle of nowhere

    Vanity project on a high-speed track to nowhere

    France’s TGV network has become mired in controversy
    Sports Quiz of the Year

    Sports Quiz of the Year

    So, how closely were you paying attention during 2014?
    Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

    Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

    From Armstrong and Miller to Pointless
    Sanchez helps Gunners hold on after Giroud's moment of madness

    Sanchez helps Gunners hold on

    Olivier Giroud's moment of madness nearly costs them
    A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

    Christmas without hope

    Gaza fears grow that conflict with Israel will soon reignite
    After 150 years, you can finally visit the grisliest museum in the country

    The 'Black Museum'

    After 150 years, you can finally visit Britain's grisliest museum
    No ho-ho-hos with Nick Frost's badass Santa

    No ho-ho-hos with Nick Frost's badass Santa

    Doctor Who Christmas Special TV review
    Chilly Christmas: Swimmers take festive dip for charity

    Chilly Christmas

    Swimmers dive into freezing British waters for charity
    Veterans' hostel 'overwhelmed by kindness' for festive dinner

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect