In a public letter, Oasis Management, the Hong Kong-based hedge fund that owns a 6.5% stake in the business, described TRG as having “one of the worst performing share prices of any UK leisure company; materially worse than its closest peers, and disproportionately worse than what the impact of the challenging sector backdrop would alone justify”.
Shares in the group, which owns restaurant brands including Wagamama and pub group Brunning & Price, fell in value by around 65% last year, prompting Oasis to call for change at the company.
Oasis Management took a 5% stake in TRG in January.
“Oasis maintains that this decline – which began before the pandemic – is due to group level decision-making and failure of oversight by a board that has lost focus on long-term value creation and its alignment with the shareholder perspective,” it says. “Oasis considers that the board’s approach has caused strategic stagnation and the deterioration of standards in market communication, resulting in a continuing and prolonged period of relative share price underperformance.”
The shareholder goes on to describe there being “little hope for the future based on the current trajectory, propagating low market confidence and unattractiveness to new investor capital”.
“We implore the board to urgently discuss with its shareholders the necessity for meaningful, immediate and near-term governance change at TRG to promote alignment with the shareholder perspective,” it says.
Wagamama 'outperforming' on sales
Responding to the letter, TRG says that the current cost-of-living crisis and the challenges that UK Hospitality industry faces has been reflected in its share price, adding that its performance since Covid has been strong when compared to the wider UK casual dining sector.
“Wagamama has continued to trade extremely well over the past three years as indicated by its consistent market outperformance on sales and leading customer ratings,” it says.
“Brunning & Price has delivered exceptional market out-performance on sales and consistently strong customer ratings. Our Leisure business has been carefully restructured to maximise cashflow, our Concessions business has been successfully re-sized and is well placed to benefit from strong earnings growth as air travel continues to recover in 2023 and 2024.
“In addition to this resilient operating performance, TRG announced in December 2022 a long-term debt re-financing for the next four years with flexible covenant arrangements and the ability to make further repayments as appropriate. This is hugely important in a casual dining sector where debt financing has proved difficult to achieve since Covid.”
TRG will announce its full year results on 8 March, which it says will provide an opportunity to update shareholders on 2022 results, current trading and the company’s medium-term strategy.