Hedge funds that are activists have led a revolt among shareholders over the pay and appointments of executives at Wagamama’s owner, The Restaurant Group. This is the latest battle in the campaign to shake up and partially sell the struggling casual dining operator.
Over 45 percent of the votes cast on Tuesday at TRG’s annual general meeting opposed the pay report. The company’s salary package included a PS675,000 for Andy Hornby, as part of an overall remuneration plan that allowed for up to 150 per cent additional shares on top of Hornby’s salary, regardless of performance.
Hornby was also denied re-election by 16 percent of those voting, and almost 25 percent voted against Ken Hanna, chair of the company, as well as Zoe Morgan, director of the remuneration panel.
The revolt at TRG’s AGM is just the latest in a long-running battle over the future of the company. It began earlier this year when Hong Kong fund Oasis management went public with its shares in the firm and complained about TRG’s falling share price.
Since then, other funds have purchased stock and gone beyond Oasis in calling for TRG’s operation — which includes Italian-American diner Frankie & Benny’s as well as pub chain Brunning & Price — to be divided and sold.
Hanna says that activists control between 15 to 20 percent of the stock. Oasis is the largest shareholder, with a 12,3 percent stake. Irenic Capital, Coltrane and other activists are among the top 20 shareholders.
Hanna referred to the activist funds at the meeting as “a vocal minority”. Columbia Threadneedle Fund Manager, TRG’s largest shareholder, publicly supported management. “Our role as a board of directors is to make sure that we are able to. . . keep everyone happy. Hanna said, “It’s not easy but we’ll get through it.”
Hanna did, however, hint that the management may be open to some of their demands. She said that “in time, we will announce our strategy publicly”.
TRG’s shares are down by more than 60% since March 2021 when it last raised equity. The casual dining operator is struggling to keep up with rising costs, and there are concerns about a slowdown in consumer spending.
The adjusted pre-tax profit across the group was PS20.3mn in the last year. This is up 22% on the previous year when the business had been affected by pandemic restriction. Frankie & Benny’s saw a 4 percent drop in like-for-like revenue after the March announcement of the closures of 35 stores.
But Hanna didn’t silence his critics. Orkun Kilic, founder of Berry Street Capital which holds about 1% of the shares, said that the board has “no respect for stakeholder and shareholder value”.
Kilic stated that a sale of TRG assets was “so obvious” but claimed the management were “conflicted amongst themselves because they are concerned about their seats and their egos”.
Daniel Wosner said that he was’very pleased’ with the way in which shareholders had “come forward to express their dissatisfaction [over executive compensation]”.
Kilic, who had previously undertaken an activist campaign with Oasis focusing on Premier Foods manufacturer, said that he was concerned about a “deadlock”, between activists and the management, unless there is a sale of assets soon.
TRG acknowledged in a press release the “significant” shareholder protest, and said the company would consult with investors for “appropriate solutions” regarding pay. “We are firmly committed to executing our plan for margin accretion,” the company added.