Wagamama owner 'likely to remain under pressure' from investors

Wagamama owner the Restaurant Group (TRG) is likely to remain under pressure from activist investors following a contentious annual meeting last week, an advisory group has warned.

 

Shareholders narrowly voted to approve all resolutions on 23 May following a backlash over the large pay deals for bosses amid widening losses.

 

Chief executive Andy Hornby, who has led TRG since 2019, is set to receive a share award worth as much as 125% his salary, which rose to £674,450 for 2023.

 

However, the company’s share price has dropped around 70% during his tenure and TRG’s pre-tax losses more than doubled from £35.2m to £86.8m last year.

 

Investors had also called for TRG to change its strategy to sell off its wider pub and restaurant estate, which includes the Frankie & Benny’s and Chiquito brands, and focus on its profitable Wagamama chain.

 

Some 45% of shareholders voted against the remuneration policy, 23% voted against the re-election of chairman Ken Hannah and 16% voted against the re-election of Hornby last week.

 

Following the narrow vote, TRG said its remuneration policy would remain under “active review”.

 

“The threat of activists blowing the lid off the pressure cooker, otherwise known as Restaurant Group, did not materialise,” advisory firm Finncap said in a note to investors.

 

“Activist pressure is likely to remain until either management has bowed to their demands or the share price has recovered to take the heat out of the confrontation.”

 

TRG’s share price has dropped from 50.9p on the day of the shareholder vote to around 45p the following week.

 

Finncap said the company was “significantly undervalued” but breaking up the business was “not the right option at present”.

 

Although Wagamama is “undoubtedly the star” of the company, accounting for an estimated 66% of its value, Finncap said there was little value in trying to sell other brands off the back of depressed earnings.

 

TRG plans to close 35 restaurants under its leisure division this year and focus on opening more Wagamama sites.

 

Last month, the company said trading in the first quarter of 2023 had been "very encouraging" with Wagamama sales up 9% on a like-for-like basis.

 

The group owns more than 400 UK restaurants and bought Wagamama for £559m in 2018.