Market Report: Slim pickings at Restaurant Group as rally hopes fade

Hopes in the City of a turnaround at Restaurant Group faded on Tuesday, eating into the value of the struggling restaurants operator.

Shares in the FTSE 250 group fell 18.2p, or 5.4%, to 318.4p, as concerns mounted that the new menu at Frankie & Benny’s would not be enough to stop sales from sliding.

UBS analysts tucked into the new menu, comparing it with that of 20 competitors. They reckon that while prices have fallen 6% on average, branded pubs chains, like Wetherspoons, are still around 22% cheaper than Restaurant Group’s chain.

They are also concerned that the menu remains too complex, with more than double the number of main courses than the average.

“A significant value gap remains with the branded pub chains… which we believe limits the ability of the new menu to drive the required footfall increase from the core family value-orientated customer F&B is looking to attract,” UBS wrote in its note.

The investment bank cut its rating to Sell and dropped its target price to 275p.

The FTSE 100 flirted with new highs as it put on 17.45 points to 7513.79, although gains were tentative in the wake of the attack at Manchester Arena.

EasyJet, which usually falls out of favour after terrorist attacks, rose 24p, or 1.9%, to 1293p after a couple of brokers called the bottom for the airline’s profits. RBC lifted its rating to Sector Perform, while UBS lifted its target price to 1425p.

Emergency home repairs firm HomeServe surged 96.5p, or 14%, to 798.5p on the mid-cap index after its annual results came in slightly ahead of guidance that had already been lifted by the company. Revenues jumped 24% to £785 million with pre-tax profits up 19% at £98.3 million.

Investors gorged on shares in sandwiches maker Greencore, which was not far behind HomeServe, up 17.7p, or 8%, at 245p after a strong performance in the UK in the six months to March.

Shanta Gold, an AIM-listed Tanzanian gold miner backed by hedge fund heavyweight Crispin Odey, rose 0.52p, or 7%, to 8.4p after producing the first ore from its underground mine.