The Restaurant Group: Rish dish dosh

When Rishi Sunak posed as a Wagamama waiter for a post summer statement publicity stunt on Wednesday, the chancellor took a meal to the wrong table. The confusion did not end there. The share price of the outlet’s parent, The Restaurant Group, jumped when Mr Sunak announced a handout to the entire sector. Those gains later evaporated as doubts set in over whether it would be enough to turn round the ailing chain’s fortunes.

The downwards trend continued on Friday. The group’s share price fell by a tenth — bringing this year’s decline to 71 per cent — after it announced a slower-than-expected pace of reopening. Data showing that pub and restaurants traded at below half their pre-pandemic levels when they opened in England last weekend added to the gloom. 

Still, the latest government help — a 15 per cent VAT cut, an August meal discount and a bonus for bringing back furloughed staff — is significant. Citi estimates The Restaurant Group’s cash flow could benefit by much as £35m, equating to more than a tenth of its market value. There are questions, though, over how much of the VAT cut will be passed on to consumers and whether the £10 “dish on Rish” will cannibalise sales from other voucher schemes.

A bigger puzzle concerns the impact of the pandemic on consumers’ habits. It may well result in more people working from home and supporting local businesses, says investment bank Liberum. Pub stocks such as Marston’s and Mitchells & Butlers could benefit from their limited business in central London and community focused sites. 

The Restaurant Group’s portfolio is more exposed, though it should benefit from its 50-odd gastropubs in rural locations. But it is at least better placed than it used to be. Last month’s company voluntary arrangement closed its worst-performing sites and cut the rent bills of others. The slimmed down group is now well placed to benefit from recovery, when it comes. Still, with six out of 10 Britons feeling uncomfortable about eating indoors at a restaurant, do not expect the share price to bounce back until confidence returns.

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