Restaurant groups face tough times as tourists shun capital

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Two London restaurant groups yesterday painted a bleak picture of the trade, signalling the challenge facing the industry as long as tourists continue to shun the capital.

Signature Restaurants, owned by Luke Johnson, warned that it expected trading to remain tough for the rest of the year, particularly in central London.

Mr Johnson, who made his name helping to transform PizzaExpress, said: "Conditions in the London restaurant market remain highly competitive and we do not anticipate a rapid recovery across the industry in central London during 2002." Shares in the group, which owns a broad range of restaurants including the moules-frites chain Belgo, the Italian pizza maker Strada and celebrity-packed hangouts such as The Ivy, fell 2 per cent to 37.75p.

Hartford Group, which owns Pharmacy – the stylish Notting Hill restaurant designed by the Turner Prize winning artist Damien Hirst, also said that sales fell in the wake of 11 September as it reported disappointing sales at the bar.

The continued poor performance at Signature prompted analysts to re-question the group's future as a listed company. Speculation that Signature, which was known as Belgo until last November, would be taken private has been rife in the past few weeks as corporate investors, including Hugh Osmond, Mr Johnson's friend-turned-rival, built up stakes in anticipation of corporate action.

However, Andy Bassadone, the chief executive, dismissed the rumours as nothing more than a product of the group's high profile. He also defended the collapse in pre-tax profits for the six months to 30 December. "Our poor performance is relative, last year was a very difficult year with foot and mouth, 11 September et cetera. The only bit that's really suffering is Belgo," he said. Pre-tax profits fell by 32 per cent to £1.5m on sales that were flat at £19.9m.

Underlying sales in the Belgo Bierodrome division, which serves Belgian food and beer, fell 18 per cent in the half-year period, prompting the disposal of two underperforming sites. Signature said it would press on with cautious expansion of its Strada chain, where like-for-like sales rose 4 per cent.

Hertford, which has beefed up its executive team by poaching James Kowszun from the bars chain SFI to lead the embryonic restaurant group, said its pre-tax loss for last year had widened to £5.9m from £3.3m on sales down 15 per cent to £6.2m.