Market report: Restaurant Group rejected on doubts over price cuts

Investors had been tucking into shares in struggling Restaurant Group of late on hopes of a revival, but the City turned sour on its prospects today.

The Frankie & Benny’s owner slipped 8.18p, or 2.3%, to 343.42p as Berenberg cut its rating to Sell, unconvinced by the recent share price rally.

Analyst Ned Hammond said the strategy unveiled by the new management appears “relatively credible” but it has “not altered our view that the company has a very tough task ahead”.

The main problem will be when it has to slash prices to win back customers from rival eateries, with “significant price correction” needed to compete.

The analyst estimates the company’s main brands, which include Chiquito and Garfunkel’s, are between 10% and 20% more expensive.

“We continue to believe it could take considerable time for the brands’ reputations to improve sufficiently for volume growth to offset lower prices,” Hammond said.

There was little action among the blue-chips and the FTSE 100 edged down 3.01 points to 7337.70.

Acacia Mining, which has just ended talks with Canada’s Endeavour over a £3 billion merger, lost more of its shine after revealing that the Tanzanian ban on gold and copper concentrate exports was costing it $1 million (£800,000) a day. The shares dipped 8.2p to 456p.

Annual results from oil rig-maker Lamprell were as expected as it slumped to a $182 million pre-tax loss after a $25 million settlement with drilling contractor Ensco over rig delays. The shares were a touch weaker, down 0.25p at 100.75p.

On the junior market, IG Design, the gift-wrapping firm formerly known as International Greetings, revelled in a profits upgrade.

It tipped annual revenues to pass £300 million and said profits will beat analyst forecasts, lifting the shares 33.5p, or 13%, to 298p.