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Restaurant Group finds favour with the City

Several brokers upgraded their price targets and/ or recommendations for the Frankie & Benny’s owner today

frankie and benny's restaurant
The verdict from the City is that Restaurant Group has set itself on the right path for recovery

Chiquito owner Restaurant Group PLC (LON:RTN) was in favour with a host of City brokers today, despite posting an 11% fall in pre-tax profits for 2016.

The well-flagged results showed like-for-like sales were down almost 4% to £710mln, while adjusted pre-tax profits fell by 11% to £77mln.

In response to a difficult year the company said it had undertaken a strategy review across all of its brands, which also include well-known chains such as Garfunkel’s and Frankie & Benny’s.

It was this review which found favour with, among others, Liberum analyst Wayne Brown who applauded the “pragmatic and honest” approach taken by the company’s top brass.

“The strategy is based on rebuilding value in the group's core brands where customer awareness remains strong but value and offer credentials need to be restored,” noted Brown.

The analyst repeated his ‘buy’ recommendation for the stock and upped his price target to 430p.

Similarly, N+1 Singer’s Sahill Shan was a fan of the review, commenting that it included some “well thought-out initiatives to revive the business”.

Shan added: “We take the view that market forecasts have been sufficiently reset and whilst recovery will take time we are encouraged by the strategic review.

“We come off the fence and move to a ‘buy’ with 415p [as a price target] (from 350p).”

Brown echoes the thought that the recovery won’t be instant and may take a little a while.

“We see 2017 as a transformational year, and while we could see some improvement in performance this year, we think like-for-like sales and volume growth will accelerate in 2018.”

Essentially, the message from the brokers is that it although it may take a little for tangible progress to be made, Restaurant Group has set itself on the right path.

Shares in the company were unchanged at 370p shortly before midday on Thursday.

Quick facts: Restaurant Group PLC

Price: 147 GBX

LSE:RTN
Market: LSE
Market Cap: £722.5 m
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