FTSE struggles for direction as UK borrowing figures lower than forecast, Restaurant Group gets a reopening boost

“The FTSE 100 was struggling for direction like a drunkard in a blindfold on Tuesday morning, not unfairly given the continuing uncertainties over vaccines versus variants, the risks of inflation and the continuing volatility in the commodity and cryptocurrency markets,” says AJ Bell Investment Director Russ Mould.

“A relatively resilient jobs market has helped Government borrowing come in a little lower than expected for April. The question longer term is if this means tax increases and spending cuts can be eased slightly from the current projections.

“Shares in guarantor lender Amigo Loans had a horror show of a day after the company’s plan to cap customer compensation were struck out by the High Court, raising yet more questions over the future of the business.

“London’s West End property investor Shaftesbury laid bare the devastating impact of the pandemic on the area as it collected just half the rent due in the year to March – although there are signs of some green shoots since the big reopening on 12 April.”

Restaurant Group

“Restaurant Group’s latest trading update reveals that Britons didn’t lose their appetite for eating out during the pandemic.

“The company has shown flexibility to offer delivery and takeaway services during lockdown and outdoor dining as restrictions have been gradually eased – benefiting from sites, particularly its pubs and Wagamama outlets, with a decent amount of space outside.

“Impressively, where indoor dining has been allowed some restaurants are running ahead of 2019 levels.

“The poor relation in the portfolio, if we ignore the concessions sites in travel hubs where tighter restrictions have more or less wiped out trade, is the leisure sites – the Frankie & Benny’s and Chiquitos found on leisure and retail parks up and down the UK.

“This reflects more limited capacity for serving food outside and the more limited footfall as many leisure destinations like cinemas and bowling alleys have only very recently been able to open their doors.

“It also reinforces the fact that these brands are at the more tired and frayed end and there is little surprise that the company is signalling a plan to prioritise investment in its pubs and Wagamama businesses instead.

“The acquisition of Wagamama in 2018, while expensive and adding significantly to the company’s debt pile, looks more and more crucial in preserving the group’s relevance in a post-Covid future.

“Now the company has to hope that the pent-up enthusiasm for eating out doesn’t fade with time as it looks to move from recovery to expansion mode.”

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