The Restaurant Group (TRG) is expected to be on the front foot at its full year results announcement next Wednesday (8 March), with analyst Singer said to be expecting management to put forward “a cogent strategic plan”.
However, contrary to rumours about a potential sale of its pubs business Brunning & Price, Singer said in its recent note that while it expects the plan to address the rebuilding of shareholder value and profitability – an issue raised by activist investor Oasis Management Company – it does not anticipate the kind radical action favoured by Oasis.
“Muddling along is clearly not an option given a depressed share price (-60% since Jan’22) and Hong Kong based activist investor, Oasis Management, wanting radical action,” read the note.
“Whilst we do not anticipate any major strategic reset, we do expect to hear plans around strengthening the top-line and possibly cost efficiencies. Given favourable property opportunities, we see scope around more Wagamama openings in secondary UK towns based on recent success in these locations. Barburrito aspirations may also be lifted but not pubs given high valuations.”
It added that a significant proportion of the FY22/23 EBITDA downgrades in the past 12 months have been due to unprecedented cost inflation, and that any meaningful easing of these pressures, alongside like-for-like outperformance, would not only drive upgrades but lower leverage.
The analyst said it was expecting current trading to be satisfactory, with limited exposure to train and tube strikes given only 6% of its portfolio is in central London.
According to The Times’ Dominic Walsh, private equity firms are reported to have been running a preliminary slide rule over the business, with one City source claiming that former Wagamama chief executive David Campbell has been sounded out by at least one suitor about becoming involved in a break-up.
