Letter to Partners - FY 2025
January 2026
Dear Partners and friends of Colebrooke
The net return of Class A shares in the Colebrooke Opportunities Fund was -24.29% in the period from 1 January to 31 December 2025. The net return from inception in September 2024 is -19.1%.
One of the truths of investing, albeit an unpopular one currently, is that if price moves down relative to value, expected return increases. If prices move down and values move up, then expected return increases even further. This of course assumes that the investor is able to control their innate psychological reactions to the fall in prices and make rational decisions.
This was the story of our 2025. The gaps between value and price meant that if I were only managing my own money, it would have been a year of excitement: of sowing returns to harvest later; especially given the progress we’re making at Naked Wines, where I’m now Chair, and what we’re starting to build there.
But I’m not. And I believe that I have been blessed with what Charlie Munger called the ‘Fiduciary Gene’; so instead, there have been sleepless nights and butterflies in the stomach. I do however look back on the last year, and feel a (small) sense of satisfaction, as odd as that seems. I made rational decisions, demonstrated the right temperament for successful long-term investing, and we acquired two very high-quality companies, Greggs and Bloomsbury Publishing, at prices that do not come close to reflecting my estimate of their value. Thank you to each of you who has shown support and encouragement. I found every conversation with a partner or friend of Colebrooke valuable and any outperformance we enjoy from here will be as much down to you as to me.
Now to the road ahead: valuation gaps in our investment universe are wider than I’ve ever seen before. Our management teams agree with me, with 8 of our companies buying back meaningful amounts of stock at large discounts, and significant director buys at all our companies over the last 12 months. These buybacks, plus our portfolio management decisions, are what has, in my view, increased our long-term expected return going into 2026, despite the drawdown in our NAV.
Our position-weighted free-cash-flow yield going into 2026 is over 10%. All our businesses, even the couple that are unlikely to grow earnings this year due to macroeconomic factors, are taking share, widening their moats and strengthening their competitive positions. Costs as a percentage of revenue are coming down across the portfolio, as our management teams make the difficult decisions that challenging operating environments make necessary. As hard as they are, these decisions create stronger more resilient businesses and increase the operating leverage we will enjoy as business improves.
Before explaining why we purchased Greggs and Bloomsbury Publishing, I want to cover three important developments from within the portfolio.
ATG: Potential Offer from Fitzwalter Capital
Early in the New Year, a dispute between the board of Auction Technology Group and the biggest shareholder, Fitzwalter Capital, spilled over publicly. It emerged that Fitzwalter has made 11 offers to acquire the company, all of which have been rebuffed by the board. The highest price offered before year-end was 360p/share, which, while it does represent a 30% premium to the price the stock was trading at year-end, is materially below my estimate of value (600p+) and evidently below the board’s.
Fitzwalter has published several scathing letters to the board of ATG, filled with hyperbolic ‘mock shock’. Criticism is focused on the Chairish acquisition in August 2025, which I agree was purchased at a high valuation on trailing metrics, although I buy into the underlying rationale much more than other UK investors do, and think it will expand the business’s moat once list-price cross-selling is embedded into their art and antiques platforms.
Fitzwalter’s other main line of attack is shareholder value destruction, based on share price performance. Fitzwalter purchased their shares at decreasing prices and now are looking to acquire the remaining 79% of the business at a large discount to their cost basis, while portraying themselves as ‘rescuers’ of minority shareholders because of the small control premium involved in their bid. This is a bit more hypocrisy than I can swallow.
My view is that Fitzwalter built its position in a volatile business with a clear plan: to use any share price dislocation as an opportunity to acquire the company outright, applying post-hoc justification as needed. It’s a smart playbook. This interpretation is consistent with the fact that they have no other declared public equity positions and do not list public equity investing among their stated strategies.
As I write, the ‘potential offer’ price has been increased to 400p, and I can see a deal getting done at somewhere around 420p-450p. If that does occur, we will enjoy a short-term pop in our NAV, but I would argue, a decrease in our long-term expected return. The reality, of course, is that we may be unable to prevent a transaction at an undervalue if a sufficient proportion of shareholders are inclined to take the short-term premium and exit. Nonetheless, we will try.
Moonpig CEO Succession
Moonpig is undergoing a leadership transition, with Catherine Faiers set to take over as Chief Executive Officer from Nickyl Raithatha. Catherine joins from Auto Trader Group, where she served as Chief Operating Officer, and she comes highly regarded. In fact, multiple former colleagues from her Auto Trader days gave some of the strongest references we have ever encountered for an executive. This role will however be a significant step up for Catherine, as it marks her first time leading a business as CEO.
I view Nickyl’s seven-year tenure positively on balance and we extend our thanks to him. He guided Moonpig through a successful IPO and built a very strong core business; the flagship Moonpig cards platform continues to deliver steady c.10% annual revenue growth with healthy margins. However, the broader Moonpig Group has not performed as well in recent years, as key acquisitions have lagged expectations. For instance, the group’s Netherlands-based brand Greetz stagnated post-IPO, and its gift experiences arm (acquired in 2022 as ‘Buyagift’) struggled to contribute meaningfully. Thankfully we purchased our shares with this growth as a ‘free option’, but still the point remains valid.
Moonpig’s board appears to have pivoted away from Nickyl’s expansionary, M&A-driven playbook toward a strategy of improving the performance of the existing non-core businesses. There is considerable scope for improvement in these divisions: Greetz has only recently returned to modest growth, and the gifting experiences segment is just now showing encouraging trading momentum after a weak stretch. The clear priority today should be to optimize and integrate the assets on hand, improving attach rate and AOV, rather than to expand further.
This strategic shift aligns well with Catherine’s skill set. Nickyl is a dynamic, growth-oriented leader, and former consultant, who seemed energized by change. He spearheaded Moonpig’s evolution from a cards retailer into a broader tech-enabled gifting platform, whereas Catherine’s strengths lie in disciplined execution and cultural leadership. Catherine is unlikely to frame Moonpig as a high-flying ‘AI/tech’ company (an angle Nickyl often emphasized). Instead, she appears to recognize what truly makes Moonpig special, its beloved brand, its loyal customer base, and the emotional connection of its core proposition.
We will, of course, be watching this leadership change closely. That said, Moonpig is one of those portfolio businesses where truly exceptional management may not be strictly necessary for a good outcome. The core franchise is so fundamentally strong that as long as the new CEO doesn’t break anything delicate, the business should continue to perform well. In other words, our base-case expectation here is one of continuity: Catherine inherits a high-quality platform and a sound strategy, and we suspect she will have little incentive to disrupt what already works. A steady hand that preserves Moonpig’s strengths would be a perfectly acceptable outcome for us as investors. Although being able to exercise our free option through the gifting business really starting to hum would be a better one.
On a related note, Susan Hooper, who sits on Moonpig’s board, has recently joined me on the Naked Wines board as our Senior Independent Director. I believe that Naked has a lot to learn from Moonpig and this cross-pollination should help that along.
Watches of Switzerland: Tariff Update
Watches of Switzerland had a good year from an operational perspective, with flagship store openings going to (or ahead of) plan, and trading in the US being particularly strong. The share price however declined by £1/share or 17% in the year.
As described in our brief Q3 update (here and extracted below), we added materially to our position at the lows of <£3.30 per share in August. My reasoning:
As students of game theory, we do not expect the punitive tariffs on Switzerland to be permanent. More importantly, our thesis is that WOS is a highly valued and trusted distribution partner of several Swiss brands, especially Rolex. Therefore, while we expect the eventual response to tariffs to be some combination of price increases, manufacturer margin sacrifice and distributor margin sacrifice, we believe that Rolex will ensure that WOS retains sufficient economics in the value chain to remain highly motivated to continue to meet (and often exceed) Rolex’s expectations as a partner.
Indeed, as I write, it is being reported that Rolex was among the businesses that met with President Trump last week to urge him to reconsider his position, which he seems willing to do. This forms part of a sophisticated charm offensive dating back to at least September, when Rolex invited the President to a box at the US Open.
It is no coincidence that Rolex is the only major watch brand that has not responded to the 39% tariff with further price increases or distributor margin cuts. It’s clear to me that they believe there is a deal to be done. Swiss watch prices go up every year, but they never come down. It is therefore understandable that Rolex wishes to wait until the tariff environment is clearer before adjusting its medium-term pricing strategy. This is particularly important, as price rises are likely to be worldwide, not US-specific.
That came to pass in late November, when the Swiss government announced that the US would reduce the levy from 39% to 15%. WOS remains very well placed to push ahead with their US expansion plans and management continue to impress to the upside, with recent acquisitions of Roberto Coin and Hodinkee both performing very pleasingly. Rolex also finally showed its hand and raised prices in January by an average of 5% in the UK and 7% in the US.
While I can understand the in-year volatility we saw, the 1 January – 31 December decline makes no sense to me. The business got demonstrably better during that time, trading into peak was good, particularly in the US, and we ended the year with as much certainty on tariffs as one can hope for. WOS therefore remains our second-largest position.
Acquisition of Greggs
In the summer, we purchased shares in Greggs plc at around £16.50 per share. I have long been drawn to Greggs as a high-quality business that was always too expensive for us to purchase. But in 2025, due to short-term challenges and near-term uncertainty, we got our opportunity.
Greggs is the UK’s leading food-on-the-go bakery chain with a nationwide footprint and a beloved brand. It aims to be where people are when they need food from a trusted and excellent value outlet. Our thesis was that the market’s focus on immediate headwinds had obscured Greggs’ strong fundamentals and long-term growth potential. In my view, the stock’s depressed valuation (less than 13× forward earnings at purchase) provided an attractive entry point into a company capable of compounding value over many years.
Throughout 2025, Greggs faced several challenges that weighed on its performance and investor sentiment. Consumer spending in the UK was subdued amid cost-of-living pressures, which led to slower like-for-like sales growth (hovering in the low single digits for much of the year). At the same time, the company grappled with high input cost inflation and rising wages, squeezing profit margins. Indeed, profit growth stalled in 2025; management indicated that earnings would be roughly flat year-on-year, a contrast to the double-digit growth of prior years. These headwinds, combined with a cautious market mood, drove Greggs’ share price down nearly 40% from its peak in early 2025 to our entry level. In short, a mix of economic pressure and investor pessimism created the temporary dislocation that allowed us to buy this great business at a discount.
In my view, Greggs’ long-term growth drivers remain intact and highly compelling, and investors are dramatically undervaluing its brand strength. I see multiple avenues for sustained value creation over the coming years:
Store Expansion: Greggs has ample room to grow its store footprint. The company ended 2024 with over 2,600 shops and is targeting more than 3,000 UK locations in the next few years (with an ultimate goal of around 3,500). New shops are being opened at a pace of roughly 150 net additions per year, including in under-served formats such as retail parks, drive-thrus, and travel hubs. Each new outlet typically achieves a payback on investment in just a few years, demonstrating strong unit economics and fueling profitable expansion.
Evening Trading: Historically, Greggs has been synonymous with the breakfast and lunchtime crowd, but it is now extending opening hours to capture the evening meal trade. This push into later-day trading is starting to bear fruit. Sales after 4pm have grown to nearly 10% of total revenue, up from a very low base a few years ago. By adapting its menu (e.g. more hot food options) and operations for the dinner segment, Greggs is tapping into a new customer occasion. I believe there is significant runway for the company to increase its share of the evening food-to-go market, which could become a meaningful growth avenue as awareness of Greggs’ evening offering builds.
Digital and Delivery: Greggs is leveraging digital channels to enhance customer engagement and convenience. The company’s mobile app and loyalty program have been a success, with well over a quarter of transactions now conducted via the Greggs app or scanned for loyalty rewards. This digital ecosystem increases customer frequency and basket sizes by rewarding repeat purchases. In addition, Greggs has partnered with delivery platforms (such as Just Eat and Uber Eats) to reach customers beyond its physical store footfall. Delivery still represents a mid-single-digit percentage of sales and is growing steadily. These digital and delivery initiatives are extending Greggs’ reach and should continue to drive incremental revenue as consumer habits evolve.
Cost Efficiency and Scale: A core strength of Greggs is its vertically integrated supply chain. The company manufactures much of its food in-house and distributes it through its own logistics network. This model provides cost advantages and quality control, which Greggs is doubling down on through scale. Significant investments were made in 2024 and 2025 to build new production and distribution facilities to support the larger store base of the future. While these expenditures have elevated costs in the short term, they set the stage for greater efficiency. As store count and volumes grow, Greggs should be able to leverage its fixed cost base and infrastructure, driving margin improvement over the longer term. I expect that as the current expansion phase moderates over the next 18 months, the combination of higher sales and a more efficient supply chain will result in improved operating leverage and profitability.
I have high regard for Greggs’ management team and the way they navigated the recent headwinds. The leadership has a strong track record of strategic execution. For instance, they laid out a growth plan in 2021 to roughly double sales by 2026, and as of 2025 they are well on their way to that goal. Facing the challenges of 2025, management made sensible decisions to protect the long-term health of the business. Notably, they maintained Greggs’ value-for-money pricing strategy (e.g. keeping the popular low-cost meal deals attractive) to preserve customer traffic and loyalty, even as input costs rose. This helped Greggs continue gaining market share in food-to-go, albeit at the expense of some near-term margin. Management also demonstrated discipline by adjusting the pace of expansion and capital spending. 2025 marked a peak in capital expenditure for new capacity, and they plan to moderate investment in 2026 to safeguard the balance sheet. In our view, these actions reflect prudent stewardship and a long-term mindset. The willingness to trade off short-term earnings in order to uphold the brand’s strength and customer trust is exactly what we want to see from management in a difficult year. It gives us confidence that once external pressures ease, Greggs will emerge in an even stronger competitive position.
Our investment in Greggs exemplifies Colebrooke’s philosophy of investing through dislocation and short-term uncertainty. We look for situations where a high-quality business hits a temporary snag or falls victim to broader market pessimism, resulting in a stock price dislocation that our analysis shows to be unwarranted. Greggs perfectly fit this pattern: a market leader with a durable competitive advantage saw its shares sell off due to short-term economic pressures, weather, and investor impatience. In such moments, we are willing to step in decisively. We were able to buy a world-class UK brand at a time when others were fearful, on the conviction that the company’s long-term earnings power was intact. This contrarian, long-term approach is central to our investment process. By buying into weakness and remaining focused on fundamentals, we position the portfolio to benefit from the recovery and growth of businesses like Greggs. We have acquired an excellent business at an attractive price, and we are prepared to ride out the near-term headwinds in exchange for the substantial compounding we expect over time.
Acquisition of Bloomsbury Publishing
I have followed Bloomsbury Publishing plc for some time, drawn by its unique mix of consumer and academic publishing, but similarly to Greggs, for years the stock didn’t trade at a compelling price. That changed in mid-2025 when a signaled post-pandemic sales breather sent Bloomsbury’s shares down to levels that no longer reflected its quality. The company had just delivered record revenues and solid profits, yet the market fixated on the normalisation after an exceptional prior year (when lockdown reading and a TikTok-fueled bestseller boom turbocharged results). As growth inevitably cooled off, and academic textbook demand briefly softened as universities adjusted budgets in response to pressure from reduced government support, sentiment swung to undue pessimism. We took advantage of this, buying into another high-caliber business at a discount.
Bloomsbury is an unusual publisher in that it effectively contains two businesses in one. On one side is a Consumer division, powered by bestsellers like Harry Potter and Sarah J. Maas’s fantasy novels. On the other side is an Academic & Professional division supplying universities and libraries with digital databases, textbooks, and research materials. This balanced ‘portfolio of portfolios’ structure gives Bloomsbury multiple growth engines and a natural hedge between them. When one segment faces a slower patch, the other can pick up slack. We saw this during Covid, when surging consumer book sales offset academic softness, and vice versa in the period after. I believe the market underappreciates how this diversification smooths out performance across cycles. It’s a model that provides both resilience and optionality: steady subscription-like income from academic content alongside the upside of consumer publishing hits.
The Academic & Professional division generates defensible, recurring revenue with high margins, increasingly more akin to a software business than a traditional publisher. Bloomsbury Digital Resources (the group’s online libraries and database offering) sells subscriptions to institutions worldwide, boasting renewal rates around 90%. Once a university library signs on to a Bloomsbury platform, it tends to stick with it, providing years of steady income at minimal incremental cost. This scalability was enhanced by the major acquisition last year of Rowman and Littlefield that nearly doubled Bloomsbury’s academic catalog, expanding the content they can monetize digitally. In effect, Bloomsbury has built a growing annuity stream in academic publishing: customers pay annually for access to rich archives of scholarly content, and each new customer adds disproportionately to profit. The division’s profit margins are already higher than the consumer side, and as digital revenue grows, those margins should expand further. In an industry undergoing a digital transition, with shifts toward e-books, online learning, and even Open Access policies, Bloomsbury’s proactive move into digital subscriptions gives it a strong footing. There may be cyclical budget headwinds now and then (as we saw recently with some library spending pauses), but the long-term demand for quality academic content online is only increasing. I believe this side of the business provides a stable foundation that is both under-appreciated and hard to replicate.
The Consumer publishing division, meanwhile, is structurally positioned in some of the most attractive niches of the book world: children’s and fantasy literature. Bloomsbury’s list here reads like a who’s who of enduring franchises and cult favorites. Most famously, it is the original publisher of Harry Potter, the once-in-a-generation phenomenon that continues to sell robustly decades on and still has new life (an HBO television adaptation is in the works, which should ignite interest in the books for new generations). In recent years Bloomsbury has also nurtured new blockbuster authors, notably Sarah J. Maas, whose fantasy series have developed massive global followings and drove a surge in U.S. sales. These kinds of titles give the company a formidable base in the market: children’s and YA fantasy are segments with long revenue tails (fans keep buying related books, sequels, box sets, merchandise, etc.), and they travel well internationally. Indeed, over three-quarters of Bloomsbury’s revenue now comes from outside the UK, with the United States recently becoming its largest market, a testament to the universal appeal of its content.
Admittedly, consumer publishing can be hit-driven; not every year will produce a record-breaking bestseller. But Bloomsbury has shown it can consistently cultivate popular content and capitalize on its back-catalog when opportunity knocks. For example, even in a quieter year after the big Covid-era boom, the Consumer division still grew modestly, supported by ongoing demand for its deep library of titles. My view is that Bloomsbury’s strong positioning in these genres gives it a durable competitive advantage. It owns or controls rights to beloved stories that readers return to again and again. That intellectual property has lasting value and is a well of cash flow that can span decades, and Bloomsbury continues to refresh it with new hits and media tie-ins. In short, the Consumer arm provides the excitement and upside of big hits, while the Academic arm provides steady earnings, which I believe is a powerful and unique combination.
Bloomsbury is still led by its founder, Nigel Newton, who built the company from scratch in 1986 and has guided it for four decades. Under his leadership and that of his seasoned team, Bloomsbury has grown from a tiny independent press into a FTSE-250 global publisher, all while maintaining a prudent, long-term approach. The management’s capital allocation record is excellent. They have a habit of making accretive bolt-on acquisitions and funding them out of internal resources rather than diluting shareholders. Our thesis, based on numerous conversations with former staff members, is that when the time comes for Nigel to move on, the model will continue to flourish, even if some of the magic is missing.
Now to address the elephant in the room (and most rooms!): AI represents both a risk and an opportunity for Bloomsbury. On the one hand, large language models trained on copyrighted material pose an intellectual property challenge, particularly for academic publishers whose content is often scraped and repurposed without permission. Bloomsbury’s back catalogue, rich in high-quality scholarly texts and curated reference material, is precisely the kind of data that generative AI models would seek to ingest. Management is alive to this risk and has joined other publishers in advocating for enforceable protections around content usage and licensing.
Encouragingly, Bloomsbury is already taking steps to turn AI disruption into advantage: earlier this year, the company announced a licensing agreement with Google to supply content to help train its models in a structured, permissioned manner. The financial terms have not been disclosed, but it signals a pragmatic and proactive approach, treating generative AI not simply as a threat to be fended off, but as a new distribution and monetisation channel for proprietary content. If Bloomsbury can position itself as a high-integrity, legally licensed source of quality data, particularly in academic and reference publishing, AI may evolve into a tailwind for the business rather than a headwind. As ever, we’ll watch this space closely, but the early signs are that management is engaging with the opportunity sensibly and from a position of strength.
The early evidence since our investment has been encouraging. The company continues to report solid progress, with digital academic revenues grinding higher despite wider market malaise, and new consumer releases selling well. We are long-term owners and Bloomsbury’s value, in my opinion, will compound over time as its academic subscriptions scale up and as the next wave of readers discovers the stories that Bloomsbury has in its vaults and in its pipeline. Our job now is to be patient, watchful, and let that thesis play out. In the meantime, we can sleep well at night owning a business with resilient cash flows, savvy stewards in management, and plenty of runway ahead.
Thank you
We’re excited for what 2026 will bring, with positive operating momentum across the portfolio and our management teams making rational decisions on how best to take advantage of the opportunities in front of them. I will endeavour to continue to do the same. As always, please shout with any questions you have, or if you know of someone that might be interested in partnering with us. Thank you for your continued and patient confidence.
Yours
Jack
This letter is provided for information purposes only and is intended solely for professional investors as defined by the FCA. It does not constitute investment advice or a recommendation to buy or sell any security. The views expressed are those of the investment manager as at the date of this letter and are subject to change. References to specific securities are for illustrative purposes only and do not represent all portfolio holdings or investment decisions. Past performance is not a reliable indicator of future results.