The Restaurant Group to outline growth strategy amid activist pressure

Wagamama owner The Restaurant Group (TRG) will seek to quell pressure from activist investors next week amid a key period in the group’s recovery following the pandemic.

The London-listed firm, which runs around 460 restaurants, is set to update shareholders on Wednesday March 8 with its results for 2022.

TRG is expected to post a sharp jump in revenues for the year and swing back to an adjusted profit after pandemic restrictions were eased.

Analysts at Singer have predicted that the company will record an almost 35% jump in sales to £858 million for the past year, as well as an adjusted pre-tax profit of £19.1 million.

Nevertheless, shares in the company are less than a third of pre-pandemic levels as rampant cost inflation has put pressure on the group’s profitability.

TRG has cut a raft of loss-making sites over the period, including the closure of the majority of its Chiquito restaurants at the start of the pandemic in a bid to bolster its finances.

However, it is now facing increased calls for a rejuvenated strategy to boost profits and shareholder returns.

The calls have been led by activist investor Oasis Management, which has built a 6.5% stake in the restaurant business.

Oasis called on the hospitality firm to “realign its priorities” and take immediate steps to restore market confidence last month.

The Hong Kong-based investor accused the board of “strategic stagnation” and will be hoping for a new vision of the future from TRG bosses.

The Times reported earlier this week that there was speculation the group could sell its Brunning & Price pub business as a result.

David Wheatcroft, equity analyst at Jefferies, said he agreed with the hedge fund’s sentiment that “significant value resides” within the group.

“The arrival of an activist should act as a catalyst to highlight that value,” he added.

TRG has been strong in its rebuttal of some of Oasis’ calls and stressed that its operating performance has been “resilient”.

The group highlighted that it would lay out its latest performance and “medium-term strategy” in the update next week.

Singer’s Sahill Shan said: “We expect management to be on the front foot at next week’s finals, articulating a cogent strategic plan to rebuild profitability and shareholder value without the kind of radical action favoured by activist shareholder Oasis.

“Whilst we do not anticipate any major strategic reset, we do expect to hear plans around strengthening the top-line and possibly cost efficiencies”.

The analyst suggested TRG could outline more opening plans for Wagamama and increased ambitions for the Barburrito business it bought for £7 million last year.