Shares in Wagamama’s owner The Restaurant Group PLC (LSE:RTN) (TRG) are down close to 60% compared to two years ago and for investors determined to spark change in the company, this year may be the final straw.
Demands over the past six months have come from numerous activist investors, from long-time high-stake shareholders to newer backers with smaller holdings, however, most calls for change have focused on the same few areas.
Wagamama focus
One of the key areas of change called for by investors was the divestment of its loss-making ‘leisure’ business which involved brands like Chiquito’s and Frankie & Benny’s, with shareholders hoping a sale may allow the focus to remain on the group’s most successful area, Wagamama.
As the company weathered stakeholder discontent for months, it seemed all had gone quiet at TRG and that business was as usual at the hospitality group.
Not so. Selling the majority of its ‘Leisure’ brands on Monday to Café Rouge owner Big Table Group certainly wasn’t business as usual and it represents a huge shift to fall in line with what activist investors have been calling for.
Analysts at Shore Capital welcomed the deal, adding; “The Leisure division disposal removes a loss-making, group margin drag and sharpens the strategic focus to Pubs, Concessions and Wagamama.”
Hoping to further deleverage the business, the analysts believe “further divisional disposals are possible” and when combined with the savings cutting maintenance and refurbishment costs this is expected to result in healthy reductions to capital expenditure.
Hanna-other one bites the dust
Activist investors like Irenic Capital weren’t satisfied with the performance of chairman Ken Hanna, with the first sense of disgruntlement occurring when the company’s management all received bumper pay packets despite lagging sales.
Hanna scraped by in an AGM reinstatement vote but it was clear investors weren’t confident about the current management and shortly after, the group’s finance chief declared he was stepping down.
Not enough for most investors, who believed the replacement finance chief would not bring the change required, activists continued to call for Hanna’s exit, after months of criticism, and less than a week after a strong set of interims were published, he did exactly that.
Private
The critical voices had been calling for the core Wagamama business to go private, perhaps even follow the path taken by the likes of SportsTech, leaving the stock market in search of greener pastures in the private equity world.
TRG is up 5.5% on Monday, having opened the week trading at around 49p.