Andy Hornby, the former HBOS chief executive, will face the scrutiny of the City for the first time in more than a decade this week as the new boss of the Restaurant Group, the owner of Wagamama.
Hornby, who stepped down from HBOS in 2008 after its emergency rescue by Lloyds TSB, took over the top job at the Restaurant Group at the beginning of August and will present first-half results on Tuesday. It is the first time he has led a publicly listed company since leaving HBOS at the height of the financial crisis.
He has joined the company, which also owns the Frankie & Benny’s, Chiquito and Garfunkel’s chains, at a challenging time for the casual dining market. Jamie Oliver’s Italian chain closed in May and several others, including Prezzo and Strada, closed branches.
Hornby, who took over from Andy McCue a month ago, is not expected to reveal a radical change in strategy, but analysts are hoping he will swiftly address the group’s hefty debts and the problems facing its casual chains.
“People won’t be looking for any drama at all,” said Russ Mould, an analyst at AJ Bell. “They will be interested in the integration of Wagamama and underlying trading at the [other] chains.”
The former Asda and Boots executive, who was most recently co-chief operating officer of gambling group GVC Holdings, arrives at The Restaurant Group at a tricky time. McCue, the architect of a £559m takeover of the Wagamama chain, resigned in February “due to extenuating personal circumstances”. The company had to tap shareholders for £315m to help fund the deal and 40% of investors voted against the acquisition, which they considered too expensive.
The deal was finalised during a crisis for the casual dining sector, which has been squeezed by rising costs, low consumer confidence and heavy competition as a result of private equity fuelled overexpansion of chains such as Byron, Strada and Carluccio’s.
The trend toward home delivery boosted by apps such as Deliveroo and Just Eat is also eating into restaurants’ profits as they make less money on takeaways.
Negotiating a way forward for the Restaurant Group would be the next step in a rehabilitation for Hornby, who was criticised in a 2013 inquiry for being in part responsible for “catastrophic failures of management” that led to HBOS’s near-collapse during the 2008 financial crisis.
“Hornby’s CV has one big black mark against it, but he is generally a leisure industry person and his record there is pretty good,” said Russ Mould, investment director at AJ Bell.
Analysts at Peel Hunt predict the group will report a 2.5% to 3% rise in underlying sales helped by the acquisition of Wagamama, delivery growth, relatively poor summer weather and a helpful sporting calendar compared with the men’s World Cup last year which kept people at home.
But analyst Douglas Jack said: “The structural challenges remain unchanged, with the Restaurant Group, like others, resorting to delivery to support sales growth.”
Other analysts expect trading at the group’s leisure chains, including Frankie & Benny’s, to have stabilised after the closure of some underperforming sites. Wagamama has brought much needed potential for long-term growth, including overseas, while the numerous closures by struggling rivals have eased the competitive pressure.
The 52-year-old is joining the FTSE 250-listed firm on a package worth up to £3.9m in his first year.
