Results to 2 July 2000

Belgo Group PLC 12 September 2000 12 September 2000 Belgo Group PLC Preliminary Results for the 53 Weeks ended 2 July 2000 Belgo Group Plc, the leading restaurant group, which operates the well-known brands of Belgo Bierodrome and Strada, together with prestigious restaurants such as The Ivy, Le Caprice, J Sheekey and Daphne's announces its preliminary results for the 53 weeks ended 2 July 2000. Highlights - Group turnover up by 32% to £35.7m (1999: £27.09m) - Profit before taxation and goodwill amortisation up by 33% to £4.8m (1999: £3.6m) - 27% increase in Basic EPS (excluding goodwill amortisation) to 0.355p (1999: 0.278p) - Final dividend of 0.02p, making a total dividend for the year of 0.03p (1999: 0.03p) - Successful development and opening of a new roll-out brand - 'Strada' - opening of Strada Battersea Rise, Strada Parsons Green and Strada Exmouth Market - Further expansion of the Belgo/Bierodrome division through the opening of Bierodrome Clapham, Bierodrome Clerkenwell and Bierodrome Fulham - Three additional restaurants are currently under construction - a Bierodrome in Holborn and Stradas in Islington and the Regent Street area of London NB: In accordance with best practice the group has adopted the recently released accounting pronouncement UITF Abstract 24 'Accounting for start-up costs' and accordingly pre-opening costs are now written off as incurred. This change in accounting policy has resulted in a prior year adjustment. Andy Bassadone, Chief Executive commented: 'Although the London restaurant market has become more competitive, strongly differentiated brands such as Belgo and Strada are the key to continued growth. We currently have three new units under construction and are well positioned to continue our expansion with internally generated cash whilst remaining debt free.' Nick Fiddler, Finance Director commented: 'The last financial year was a period of consolidation. The group is now more efficient and better controlled as illustrated by our profit conversion rate which improved by nearly 30% in the second half as against the first. Our Strategy to invest in and expand our two principal brands, Belgo Bierodrome and Strada, is clear and we are now in a strong position to accelerate that process.' For further information please contact: Belgo Group PLC Tel: 020 7557 6333 Andy Bassadone, Chief Executive Nick Fiddler, Finance Director Citigate Dewe Rogerson Tel: 020 7638 9571 Simon Rigby / Kylie Child Chairman's Statement 53 Weeks ended 2 July 2000 For the year ended 2 July 2000, the group reported sales of £35.7 million, an increase of 32% over the preceding year. Profit before taxation and goodwill amortisation rose by 33% to £4.8 million. Basic earnings per share, before goodwill amortisation, rose by 28% to 0.355p. The final dividend is maintained at 0.02p per share to give an unchanged total of 0.03p per share for the year. The dividend is payable on 20 October 2000 to shareholders on the register on 22 September 2000. In accordance with best practice, we have adopted the new accounting pronouncement UITF 24 which deals with the treatment of pre-opening expenses, and have retrospectively adjusted the 1999 results accordingly. This change in accounting policy did not have a material effect on the results for the period ended 2 July 2000. The last financial year has been a challenging one. The London restaurant market has become more competitive with an increase in the number of new outlets. However, it is clear that strongly differentiated brands, that satisfy the ever more sophisticated and demanding guest, will prove to be successful in the future. Belgo Group's restaurants satisfy these criteria. Over the past financial year Belgo outperformed the industry as a whole in most categories, although there is still room for improvement in our margins. With the benefit of hindsight we were over-ambitious with certain openings in previous years and with last year's budget. This year we have been more cautious on both fronts. After a year of consolidation our strategy is clear and we are in a strong position to accelerate the organic expansion of our two principal brands Belgo and Strada. The group is now more efficient and better controlled. This is illustrated by comparing the two halves of our last financial year, where the second half profit before taxation and goodwill amortisation was £2.8 million on £18.7million sales as against £2million on £17 million sales for the first half. This represents a 27% improvement in the profit conversion rate. As we add more restaurants, our central overhead should rise only marginally. This will allow us to improve margins over time, by economies of scale. We can fund new restaurant openings through cash flow, and have no need to raise new capital or take on debt to execute our plans. Review of Operations The expansion of the Belgo brand has continued. We now have ten Belgo related operations with one currently under construction. The four Bierodromes are in Islington, Clapham, Fulham and Clerkenwell with a fifth under construction in the Holborn area of London. The Bierodrome concept is a well-differentiated brand that serves an exceptionally wide range of Belgian beers and genuine Belgian cuisine. Bierodrome offers a more exciting and distinctive experience than many of the new bar-restaurants that are springing up. The mix of our business has a much higher proportion of diners than most gastro-pub concepts and I believe there is a market for at least 25 Bierodromes in the UK. The original Belgo restaurants performed well, despite a serious fire in the premises adjoining Belgo Centraal which resulted in the restaurant being closed for some two months. Our restaurants in New York and Dublin were both disappointing, but trading has improved in recent months under new local management. We are continuing to improve the margins in the other new Belgo restaurants where overall trading has been better in recent months. Caprice Holdings, comprising The Ivy, Le Caprice and J Sheekey, enjoyed a good year. All three restaurants saw increased sales and profits and are unquestionably Britain's premier trio of fine dining establishments. We are confident this success will be maintained, under the long standing strong operational management team trained and developed by the highly talented Jeremy King and Chris Corbin, who remain with this division as non-executive Directors. The Signature division, comprising Daphne's, The Collection, Bam-Bou and Pasha, made solid returns in the second half after a disappointing first quarter. This is a cash- generative, tightly controlled business. Such one-off, high- class restaurants can make consistently impressive profits if well run. I outlined in the interim statement that the Group had opened a new concept, 'Strada', which we believe to be a brand with considerable roll-out potential that can be expanded alongside the Belgo and Bierodrome brands. Strada offers affordable high quality wood burning oven pizzas and pasta in stylish surroundings. The initial enthusiasm by which the first three have been received by customers and food critics alike convinces us that there is clear demand and market opportunity for a distinct premium pizza and pasta concept. Strada, with its finest quality ingredients and strong culinary base, offers by far the highest quality pizza and pasta in its price range. The first opened in November 1999 and we now have Stradas in Battersea Rise, Parson's Green and the Exmouth Market area of London with two more under construction within London. All three units are performing well and we envisage there is room for at least 50 across the UK. Prospects The restaurant and bar business is still growing in Britain and margins and cash returns can be exceptional with the right formula. We believe the Belgo and Strada brands, which are clearly differentiated, offer that right formula and we remain confident about the future success of the Group. We currently have 20 very high quality restaurants and bars that are run by able and dedicated staff. We have three units under construction and our strong financial position remains, with £2.6m of cash, despite having funded a substantial opening programme. Trading and profitability since the year end is showing a material improvement over the comparable period in 1999. The board believes that, with the expansion of the Belgo and Strada brands, the group is well placed to become one of the largest independent restaurant operators. I would like to thank our people for all their hard work, and our customers and shareholders for their support. Luke Johnson Chairman 12 September 2000 Consolidated Profit And Loss Account 53 weeks 52 weeks ended ended Notes 2 July 27 June 2000 1999 (unaudited) (unaudited) (As £'000 restated) £'000 Turnover Continuing 36,573 18,115 Acquisition - 9,511 Less share of joint (898) (536) ventures (continuing) ______ ______ Group turnover 1 35,675 27,090 Cost of sales (10,056) (7,488) ______ ______ Gross profit 25,619 19,602 Administrative (21,303) (16,390) expenses Amortisation of 2 (734) (561) goodwill Group operating 5,050 3,773 profit excluding goodwill amortisation Group operating profit Continuing 4,316 2,385 Acquisition - 827 4,316 3,212 Share of joint 3 (196) (280) venture operating loss ______ ______ 4,120 2,932 Net interest received 78 154 Share of joint (140) (39) venture interest payable ______ ______ Profit on ordinary 4,058 3,047 activities before taxation Taxation (1,156) (868) ______ ______ Profit on ordinary 2,902 2,179 activities after taxation Dividends - equity 5 (307) (307) ______ ______ Retained profit for 2,595 1,872 the period ______ ______ Earnings per ordinary 6 0.283p 0.221p share - basic - diluted 6 0.260p 0.197p Earnings per ordinary share excluding goodwill amortisation - basic 6 0.355p 0.278p - diluted 6 0.326p 0.248p Consolidated Balance Sheet At 2 July 2000 At 27 June 1999 (unaudited) (unaudited) Notes (As restated) £'000 £'000 £'000 £'000 Fixed Assets Intangible assets 2 13,160 14,129 Tangible assets 4 16,491 13,005 Investments Joint ventures Share of gross 3 1,330 1,250 assets 3 (1,900) (1,474) Share of gross liabilities (570) (224) Other investments 120 208 (450) (16) ______ ______ 29,201 27,118 Current Assets Stock 1,052 831 Debtors 2,448 1,906 Cash at bank and 7,098 7,364 in hand ______ ______ 10,598 10,101 Creditors: amounts (12,611) (12,374) falling due within one year ______ ______ Net current (2,013) (2,273) liabilities ______ ______ Total assets less 27,188 24,845 current liabilities Creditors: amounts - (3) falling due after more than one year Provision for - (288) liabilities and charges ______ ______ Net assets 27,188 24,554 ______ ______ Capital and Reserves Called up share 10,244 10,231 capital Share premium 19,227 19,150 account Merger reserve 162 162 Goodwill reduction 5,868 5,868 reserve Profit and loss (8,313) (10,857) account ______ ______ Equity shareholders' 7 27,188 24,554 funds ______ ______ Consolidated Cash Flow Statement 53 weeks 52 weeks ended ended Notes 2 July 27 June 2000 1999 (unaudited) (unaudited) (As restated) £'000 £'000 £'000 £'000 Net cash inflow 8 6,172 2,534 from operating activities Returns on investments and servicing of finance Interest received 315 476 Interest paid (10) (34) Finance lease (2) (11) interest Loan note (225) (277) interest ______ ______ 78 154 Taxation UK Corporation (89) (626) tax Capital expenditure and financial investment Purchase of (4,463) (6,690) Tangible fixed assets Disposal proceeds 14 54 on sale of fixed assets ______ ______ (4,449) (6,636) Acquisitions and disposals Purchase of - (1,692) subsidiaries Equity dividends (307) (102) paid ______ ______ Cash inflow/(outflow) 1,405 (6,368) before management of liquid resources and financing Management of liquid resources Decrease in bank 1,500 4,514 deposit accounts Increase in - (6,000) restricted deposits ______ ______ 1,500 (1,486) Financing Issue of ordinary - 8,468 share capital Share issue costs - (230) Repayment of (1,551) (898) loans Repayment of (47) (62) finance leases ______ ______ Net cash (1,598) 7,278 (outflow) / inflow from financing ______ ______ Increase/ 9 1,307 (576) (decrease) in cash in the period ______ ______ Notes forming part of the financial statements 1. Group turnover arises substantially in the United Kingdom. Turnover, results and net assets derive from the Group's ongoing principal activity of operating restaurants. The acquisition in the period ended 27 June 1999 related to Caprice Holdings Limited, the principal business of which is the operation of Le Caprice, The Ivy and J. Sheekey. The total cost of sales and administrative expenses relating to this acquisition amounted to £900,000 and £1,785,000 respectively. 2. Results are consolidated from the date of acquisition of subsidiary undertakings. In accordance with FRS 10, goodwill arising on the difference between the fair value of the consideration paid and the fair value of the identifiable net assets acquired is capitalised and amortised over 20 years being the estimated useful economic life. Goodwill arising prior to the implementation of FRS10 was written off directly to reserves or, in the case of negative goodwill, credited to a merger reserve. On subsequent disposal any such goodwill will be charged to the profit and loss account. 3. In accordance with FRS 9 joint ventures are accounted for using the gross equity method. 4. In accordance with the recent release of the accounting pronouncement UITF Abstract 24 - 'Accounting for Start up Costs', the Group now writes off pre-opening costs in the year in which they are incurred. This change in accounting policy has given rise to a prior year adjustment of £797,000 and accordingly the results for the year ended 27 July 1999 have been restated. The effect of the change in accounting policy was not material to the results for the period to 2 July 2000. 5. Proposed final dividend represents 0.02p per ordinary share to give a unchanged total dividend of 0.03p per share (1999 - 0.03p). 6. The calculation of earnings per share is based on the weighted average number of issued ordinary shares during the period of 1,023,838,870 (1999 - 986,553,691) and earnings of £2,902,000 being the result after taxation (1999 - £2,179,000). Diluted earnings per share includes 94,763,874 (1999 -117,223,987) shares in respect of options and warrants, giving a total number of shares of 1,130,274,395 (1999 - 1,103,777,678). Earnings per share excluding the amortisation of goodwill of £734,000 (1999 - £561,000) is based on adjusted earnings of £3,636,000 (1999 - £2,740,000). 7. The movement in shareholders' funds can be summarised as follows: As at As at 2 July 27 June 2000 1999 (unaudited) (unaudited) (As restated) £'000 £'000 Profit for the 2,902 2,179 financial period Dividends (307) (307) ______ ______ 2,595 1,872 New share capital 90 14,476 subscribed in period Share issue expenses - (230) Goodwill written off - (109) Exchange differences (51) (22) ______ ______ 2,634 15,987 Openings shareholders' 24,554 8,567 funds (originally £25,351,000 before deducting the prior year adjustment of £797,000) ______ ______ Closing shareholders' 27,188 24,554 funds ______ ______ 8. Reconciliation of operating profit to net cash inflow from operating activities 53 weeks 52 weeks ended ended 2 July 2000 27 June 1999 (unaudited) (unaudited) (As restated) £'000 £'000 Operating profit 4,316 3,212 Depreciation charge 1,052 643 Amortisation of 734 561 goodwill Profit on disposal - (103) of fixed assets Increase in stock (221) (421) Increase in debtors (452) (579) Increase / (decrease) 743 (779) in creditors _____ ______ Net cash inflow from 6,172 2,534 operating activities ______ ______ 9. Reconciliation of net cash inflow to movement in net funds 53 weeks 52 weeks ended ended 2 July 2000 27 June 1999 (unaudited) (unaudited) £'000 £'000 Increase/(decrease) 1,307 (576) in cash in the period Cash outflow from 1,598 960 decrease in debt and lease financing (Decrease) / Increase (1,500) 1,486 in cash deposits _____ ______ Increase in net 1,405 1,870 funds resulting from cash flows Loans/finance - (962) leases acquired with subsidiary Loan notes issued - (6,000) _____ _____ Movement in net 1,405 (5,092) funds in the period Opening net funds 1,161 6,253 _____ _____ Closing net funds 2,566 1,161 ______ ______ 10. Analysis of net funds As at Cash As at 27 June Flow 2 July 1999 2000 £'000 £'000 £'000 Cash at bank 1,364 1,234 2,598 and in hand Cash deposits 6,000 (1,500) 4,500 ______ ______ ______ 7,364 (266) 7,098 Overdrafts (73) 73 - ______ ______ ______ 7,291 (193) 7,098 Debt due within (6,051) 1,551 (4,500) 1 year Finance leases (79) 47 (32) _____ _____ ______ Total 1,161 1,405 2,566 ______ ______ ______ 11. The results for the period to 2 July 2000 have been extracted from the draft accounts upon which the auditors are yet to report. These results have been prepared utilising the accounting policies adopted by the Group in the audited accounts for the period ended 27 June 1999 except for the adoption of UITF Abstract 24 'Accounting for Start-up Costs' (see note 4). The statutory accounts for the period ended 27 June 1999 have been delivered to the Registrar of Companies and were unqualified and did not contain a statement under section 237 (2) or 237 (3) of the Companies Act 1985.

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