Expectations have been fairly high for Restaurant Group’s recovery after the market had time to digest the (expensive) purchase of Wagamama and how it might actually help to revive the group. It also seemed as if management had finally got a grasp on the problems hanging over its other brands including Frankie & Benny’s.
AJ Bell said: “Unfortunately its half year results don’t quite live up to the hype around its recovery efforts. Yes, Wagamama is doing well and there are signs of progress with repairing its other interests. But there are a few items on the menu which leave investors with a stomach ache.
“It has suffered £115.7m in one-off charges including a large impairment on its leisure business (which is primarily Frankie & Benny’s and Chiquito) where management are taking a more cautious view. A mere 0.2% like-for-like sales growth in the most recent six weeks is also very disappointing.
“There are a lot of moving parts with the business and it will take a lot longer to get each one running smoothly.
“On the positive side operating cash flow has greatly improved and there is a clear plan to execute. On the negative side is a weak consumer backdrop, intense competition in the casual dining sector and uncertainties that Brexit will bring to the UK economy and consumer spending in general.
“Today’s very negative share price reaction is down to expectations being too high and Restaurant Group not delivering enough good news to keep the stock rising.”