Leading analysts Mark Brumby at Langton Capital, and Anna Barnfather at Panmure Gordon, give their respective takes on the changes at the top of The Restaurant Group (TRG). Brumby says that “arguably the last time we saw such a wholesale clear-out at board level was post M&B’s hedge-loss debacle back during the credit crunch” and that TRG can expect “a period in the dog-house”. At the same time, Barnfather welcomes the change in CEO and believes that Andy McCue’s gaming background could also add an injection of pace based on “more effective data analysis and customer engagement/marketing”.
Brumby says: “Arguably the last time we saw such a wholesale clear-out at board level was post M&B’s hedge-loss debacle back during the credit crunch. At the time, M&B’s shares had been flirting with £8 per share and they are still, some nine years later, below £3. Coincidentally, TRG’s shares also flirted with £8 and then fell to below £3. They are currently above that level and have continued to edge higher. And at MAB, the first set of management changes were by no means the last. This may not happen with regard to TRG as there are differences here (vs MAB), some helpful, some less so.
“The share registers of both companies are very different (which should help – or at least not arguably hinder) TRG’s rehabilitation but new capacity, high and rising rents and a reliance on leasehold assets could work in the other direction. And the company had perhaps been ‘running on fumes’ for a number of years. Shareholders should have known that but they are unlikely to blame their own judgement in the short term.
“A period in the dog-house is maybe to be expected – but nine years might be a shade harsh. In the meantime, the group will need to persuade investors (and we have seen a big churn in the register, many holders are new to the company) that the worst is over and ultimately regain its mojo. That may be easier said than done in a market awash with nimble, aggressive and well-funded competitors.”
Barnfather said: “This hopefully concludes the Board refresh with new Chairman, new CEO, new CFO and new NED in less than six months. We see this as a positive catalyst in dealing with the pent up problems of the past and expect the news to be well received.
“We believe that the plan to reduce exposure to retail sites, update menus and accelerate maintenance capex makes sense but that further action is required to address the underperforming sites and restore LFL momentum. Its recent woes limit its ability to pass on wage inflation costs, adding to margin pressure. A significant scale back of expansion plans as well as selective cull of the tail end of the estate would be welcome. We believe Andy McCue’s gaming background could also add an injection of pace based on more effective data analysis and customer engagement/marketing.”
