RBC upgrades The Restaurant Group to 'outperform'

The Restaurant Group is a "new beast" focused on Wagamama, Royal Bank of Canada said as it upgraded its recommendation for the company's shares to 'outperform'.

Analyst Christine Zhou said Restaurant Group had squeezed a five-year restructuring plan into five months, prompted by the Covid-19 crisis. She increased her price target for the company's shares to 80.0p from 70.0p and raised her recommendation from 'sector perform'.

Restaurant Group Chief Executive Andy Hornby has closed 125 poorly performing eateries in the company's leisure division and is renegotiating rents and leases with landlords. Hornby brought forward plans to shut branches of tired brands such as Frankie & Benny's and Chiquito's to concentrate on Wagamama, the popular Asian chain it bought at the end of 2018.

"Covid-19 has been a catalyst for RTN to accelerate its five-year restructuring programme into five months, positioning it well for the recovery," Zhou said in a note to clients: "We believe investors should be able to look through the legacy leisure business now and focus on the growth areas - in particular Wagamama."

RBC's note did little to support Restaurant Group shares, which fell 8.3% to 52.9p at 15:06 BST, outpacing a decline in the wider market.