Restaurant Group tumbles after profit warning

Shares in Restaurant Group tumbled on Friday after it warned over its annual profits, as it highlighted a further deterioration in trading conditions and announced the departure of its chief financial officer.

The company, which owns restaurants such as Garfunkel’s and Chiquito, said total sales were up 4.7% in the 17 weeks to 24 April, but like-for-like sales were down 2.7%.

It said the Leisure business in particular continued to be hit by the structural and business challenges mentioned in the March preliminary results statement.

Restaurant Group does not expect to see any improvement to underlying like-for-like trends and now anticipates full-year LFL sales to be down 2.5% to 5%, leading to a full-year pre-tax profit of between £74m and £80m, down from 2015’s £86.8m.

Chief executive officer Danny Breithaupt said: "We are focused in the short term on the operational levers that will improve our trading performance. In the medium term, we are reviewing the core strategic assumptions that differentiate our operating model to ensure that we optimise returns for shareholders.

“In spite of the current like for like challenges, overall returns remain strong, the business continues to be cash generative, and there is a strong core business to build on."

Also on Friday, the company said CFO Stephen Critoph will step down from his role with immediate effect after 11 years, adding that the search for a replacement was underway.

At 0910 BST, shares were down 24% to 286p.

Numis, which rates the stock at ‘buy’, reckoned the company’s new guidance was around 12% below current consensus.

The brokerage cut its pre-tax profit estimate for 2016 to £75.1m from £90m.