The former Channel 4 chairman, Luke Johnson, made his name through the expansion of Pizza Express. Now the ice man has moved into angel investing, and explains to Growing Business what fuelled this move and drives his inspiration
Luke Johnson doesn’t really do small talk. Nor does the serial entrepreneur and investor seem to tolerate inefficiency or waste in any form. Sometimes, he even answers in spoken bullet-points.

However, with a CV covering interests as diverse as: chairing Channel 4 and the Royal Society of Arts; building and selling a chain of dental surgeries for £100m; starting successful restaurant chain Strada from scratch and taking Pizza Express stratospheric, it’s not surprising the 48-year-old father of three is accustomed to cutting to the chase. Current pursuits include a weekly column in the Financial Times and investments spanning greyhound tracks, fashion, patisseries, restaurants and angel network Beer & Partners, where he recently became the largest single investor, with a 27.4% stake.
 
Like many entrepreneurs, Johnson also seems to have a low boredom threshold. If your question is deemed interesting, it will be met with a courteous response. If not, he’ll fire a barbed one-liner. “Don’t invest in dying industries,” he replies, when asked what the purchase and subsequent demise of the Borders book chain has taught him.
Johnson’s reputation for restlessness and a refusal to suffer fools is sometimes seen as abrasiveness, but he claims he has mellowed since starting a family.

That said, during our interview at the Beer & Partners’ investment fair, he’s accommodating and engaging, despite having just flown in from the US. An interview with Luke Johnson encourages you to raise your game, and, if you are able to elicit a smile or even a slight nod of approval, you certainly feel as though you’ve earned it.

An ability to remain somewhat emotionally detached fits, by his own definition, the profile of a good investor, who also needs to be rational about risk and reward, understand portfolio investing, take it very seriously and do a lot of homework, Johnson says. And he should know. His career is punctuated with successful deals, but he made his name – and many of his millions – through the acquisition, flotation and rapid growth of restaurant chain Pizza Express. It was the first sign of Johnson’s ability to spot a brand’s untapped potential and turn an underperforming business around. It also earned him the nickname ‘Cool Hand Luke’ in the City.

Italian roots

Johnson and his then business partner Hugh Osmond (who he met while studying medicine at Oxford) performed a reverse takeover of Pizza Express through their company, Star Computer Group, in 1992, in a transaction valued at £20m. The pair famously transformed it from a small Italian restaurant business with 12 outlets, which floated at 40p a share, to a 250-strong chain with a share price of 900p and a market cap of more than £500m on exit in 1999.
 
Along with Pizza Express and Strada, Johnson, who was 540th on this year’s Sunday Times Rich List with an estimated fortune of £100m, has also owned and sold a number of the UK’s most successful eateries, from celebrity haunts The Ivy and Le Caprice to restaurant chain Belgo. Today, following his six-year tenure as chairman of Channel 4, which ended in January, his mid-market private equity firm, Risk Capital Partners (RCP), gets most of his attention.
 
RCP invests in established businesses, “normally making in excess of a million profit”, says Johnson. Its portfolio of investments includes restaurant chain Giraffe, GRA Greyhound stadia and Patisserie Valerie, which has around 70 outlets across the UK. With its “high sales per square foot across the chain”, Johnson believes Patisserie Valerie is the best deal he’s ever done. So what initially attracted him to the business? “Long-established, profitable,” he lists, before adding: “I think the fact that there are so few patisseries in Britain, so few rivals, it struck me as a gap.”

Like many businesspeople over the past couple of years, he has faced his fair share of challenges, too. He cites the acquisition of the UK branches of Borders as his biggest mistake. While RCP made a timely exit through a management buyout a few months before the administrators were called in, it’s safe to say the deal didn’t do wonders for his bank balance.
 
In what seemed like a bargain, RCP bought Borders’ UK stores in a firesale from its US parent in 2007 for £10m, with a further £10m contingent on future profits, reportedly ploughing £2m into the company to turn it around. It was already taking a hit from supermarket and online book sales, but the key to Johnson’s strategy was the launch of an online retail arm and live experiences in the stores. So what went wrong?
 
“We bought it as a turnaround thinking it was cheap, but the challenges were so great that I think it was always doomed,” he explains. “We misjudged just how powerful Amazon is and how strong the supermarkets are in book sales. Also, we bought it pre-downturn, so we didn’t see that coming, which perhaps we should have. Now there are e-books, which has put more of a strain on book-selling. I think that there are profound structural problems in book retailing. Just because you’re buying something at a huge discount, doesn’t necessarily mean that it’s cheap.”