Oasis Reaffirms its Position and the Need for Change at The Restaurant Group
February 21 2023 - 1:00AM
Business Wire
Oasis, the second largest shareholder in The Restaurant Group
(“TRG” or the “Company”), notes the response of the Board of
Directors (“Board”) to our initial press release (both dated 16th
February 2023).
Oasis makes the following key points of clarification:
1. TRG’s Communication with the
Market:
The Board states that “the operational performance of TRG since
COVID has also been strong” across its business. This confirmation
is welcomed by Oasis as – most significantly for shareholders –
- TRG had not disclosed any trading information on its
performance since the publication of its interim results on 8th
September 2022.
- In TRG’s interim results, the Board highlighted considerable
risk associated with the cost-of-living crisis impacting customer
spend. However, unlike other major listed companies in the UK
hospitality sector, the Board decided not to issue a trading update
in January 2022, missing a clear opportunity to inform stakeholders
on the impact of those concerns.
- Further to this, the statutory accounts provide no segmental
information on the operating performance of its four business areas
(other than on sales), making it impossible for shareholders and
the market to assess how any or all of its segments are performing,
and thus, unsurprisingly, TRG is assigned a low valuation
rating.
- The Board also points to its two-year debt extension as “hugely
important”, even though no details were provided on announcement of
the new lending terms and the associated costs of the refinancing.
One negative outcome is that TRG’s cash headroom has fallen from
£227m in June 2021 to £184m in June 2022 and to £140m in December
2022.
Again, Oasis reiterates the need for increased transparency with
the market, especially on financially material developments.
2. TRG’s Strategic
Review:
Oasis welcomes the limited public disclosure that the Board is
reviewing the Group’s strategic options as no announcement had been
made on such a review prior to the Board’s response.
Despite this, the Board has refrained from communicating detail
on the scope and the process which this review is following. It is
important that a process like this is supported and aligned to the
expectations of shareholders in order to optimize the outcome,
therefore, engagement of shareholders in the process from the start
should have been considered necessary.
- The Board’s response is the first public announcement of any
strategic review conducted by TRG.
- The Board has made no prior attempt to publicly communicate any
details of the scope or process of this review to shareholders –
let alone engage with them on it.
The Board’s decision to exclude shareholders from the ongoing
strategic review process necessitates heightened scrutiny on the
announced outcome and expectations will be equally high on the
retrospective disclosure.
Given this lack of timely and transparent communication, Oasis
reminds the Board that it is not a shareholder’s responsibility to
come up with the strategy for the Board to consider. However,
shareholders are well within their rights to request an independent
review following a considerable period of share price
underperformance, where no strategic review has been communicated
publicly and there is considerable doubt as to the Board’s
alignment with the shareholder experience.
3. Oasis’s Shareholding:
Oasis confirms that it has continuously maintained a
shareholding in TRG since August 2020 and made the necessary
regulatory disclosures when required.
The Board’s attempt to denigrate Oasis’s engagement by their
statement that “our Chairman met Oasis face-face for the first time
in December 2022” omits to mention that Oasis: (1) has been
communicating since well before the incumbent Chair’s tenure; and
(2) first requested a meeting with the new Chairman following a
meeting with TRG’s CEO in June 2022; the earliest date offered to
Oasis was a September phone conversation, nearly three months after
our initial request.
4. Engagement with
Shareholders:
The Board’s response to our press release also completely avoids
any mention of TRG’s three equity capital raises in the past 5
years (two of which were under the current management team) at
prices substantially in excess of the current share price.
Shareholders unfortunate enough to participate in those equity
raises in the past 5 years (two of which were under the current
management team) – have seen the value of their investment collapse
by c.70% since 2018.
- Longer-term shareholders have suffered even worse, losing a
staggering c.93% since the 2015 peak, whilst currently receiving no
dividends, buybacks or capital appreciation.
Rather than acknowledge the existence of any longer-term
underperformance, the Board’s sole response is to refer to the
intervening impact of the pandemic. Without such recognition,
shareholders can have no confidence in the Board’s ability to
remedy the situation and drive shareholder value growth, which
serves only to demonstrate the need for increased Board
accountability.
As noted in Oasis’ initial press release, TRG losses are
“materially worse than its closest peers, and disproportionately
worse than what the impact of the challenging sector backdrop would
alone justify” and illustrate a decline “which began before the
pandemic”. The Board’s refusal to acknowledge this objective
reality serves only to widen the gap between the shareholder
experience and the need for accountability at Board level.
Oasis reiterates its desire to co-operate constructively with
the Board. However, more of the same ruinous and devastating
share price performance is not an option – failure by the Board to
recognise and work with stakeholders who are committed to TRG’s
future will leave shareholders with no recourse but to seek to hold
TRG’s representatives to account.
—————————————————
Oasis is publishing this release solely for informational
purposes in its capacity as manager of and/or investment advisor to
private funds managed and/or advised by it. The release and the
information, statements, opinions, interpretations and beliefs
contained in it are exclusively those of Oasis and are provided in
good faith, but no representation or warranty, either expressed or
implied, is provided in relation to the accuracy, completeness or
reliability of the contents of the release, and no person shall be
entitled to place any reliance on the release or its contents. This
release is not intended to be, nor should it be construed as,
investment, financial, tax or legal advice, or a recommendation to
buy, sell or hold any security or other investment or pursue any
investment strategy. Neither the release nor any of its contents
constitutes an inducement or offer to purchase or sell or a
solicitation of an offer to purchase or sell any securities or
other investments in The Restaurant Group PLC or any other
person.
About Oasis
Oasis Management Company Ltd. manages private investment funds
focused on opportunities in a wide array of asset classes across
countries and sectors. Oasis was founded in 2002 by Seth H.
Fischer, who leads the firm as its Chief Investment Officer. More
information about Oasis is available at https://oasiscm.com.
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Taylor Hall media@oasiscm.com
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