Price cuts put restaurant shares back on the menu

A confident update left investors hungry for The Restaurant Group shares yesterday, despite the firm reporting a fall in profits and revenue.

the company, which has more than 500 outlets, said it was trading in line with expectations and making good progress on cutting costs. in an update for the 26 weeks to July 2, the firm said it is a ‘transitional year’.

in its frankie & Benny’s outlets, prices have been slashed by an average of 7pc and a ‘win a holiday’ promotion has attracted more customers, while a new menu has been launched at its chiquito chain. Meanwhile, the group’s Garfunkel’s, filling Station and Joe’s Kitchen chains ‘are performing solidly’.

chief executive Andy Mccue said the firm had made good progress and is offering better value and higher quality products. the business has overhauled its purchasing and invested more in staff training and speeding up ordering and payment processing. it has cut its debts to £19.3m from £35.6m and expects to save around £10m this year.

Yet like-for-like sales are down 2.2pc compared with the same period a year ago, and total turnover has fallen. Adjusted pre-tax profit was £25.5m for the period, compared with £36.6m a year ago, while revenue fell 7.1pc to £333m.

the Restaurant Group also warned it was affected by rising labour, food, drink, utilities and rent costs because of a weaker pound and inflation.

But investors were heartened that the firm is finding its way again and shares soared 8.9pc, or 28.4p, to 346.5p.

Also among the day’s biggest risers was services outfit Serco, which rallied after UBS upped its rating on the business to a ‘Buy’.

Shares surged as analysts raised their target price for the stock by 20p to 145p. the bank said 2018 was likely to be a ‘major inflection point’ for Serco with a strong sales pipeline and earnings momentum likely to pick up. Shares jumped 8.4pc, or 9.1p, to 117.7p.

on the ftSe 100, positive investor sentiment meant just two stocks were in the red on the day. investment group Standard Life

Aberdeen was off just 0.1pc, or 0.2p, to 429.6p, while banking group Standard Chartered slipped 0.3pc, or 2.5p, to 770p.

the FTSE 100 finished up 0.89pc, or 65.36 points, at 7430.62. convenience store chain

McColl’s rallied as it revealed revenue was up 31.1pc in the third quarter. the integration of 298 acquired stores has boosted sales at the group, which is trading in line with expectations.

Mccoll’s shares soared earlier this month when it announced a wholesale agreement with supermarket firm Morrisons. Yesterday it said it would continue refreshing its stores and was looking forward to relaunching the Safeway brand. Shares edged up 0.9pc, or 2.5p, to 269p.

A surge in building activity helped Grafton Group to a 16pc increase in pre-tax profit.

the building materials distributor said pre-tax profit was £75.4m in the six months to June 30, while revenue was up 9pc to £1.3bn.

Grafton said that there had been a recovery in profitability in the UK and strong growth in ireland as well as an increase in its scale and profitability in the netherlands. Shares rose 1.1pc, or 8.5p, to 786p.

flooring firm Victoria said it was on track to meet all of its objectives for the year. the group is eyeing up acquisitions in europe as it expands. Shares leapt 4.4pc, or 27p, to 644p.

the miners continue to benefit from a rally in commodity prices.

Anglo American advanced 2.8pc, or 38.5p, to 1402.5p, while Evraz was up 6.2pc, or 19.7p, to 335.2p.