Audited Annual Results and Notice of AGM

Hostmore PLC

03 May 2024

 

NOT FOR RELEASE, PUBLICATION, OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO, OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR

3 May 2024

Hostmore plc

AUDITED ANNUAL RESULTS AND NOTICE OF AGM

Transitional year with turnaround successfully implemented in H1, benefitting results in H2

Announced proposed transformational acquisition of TGI Fridays, Inc. subsequent to period end

Hostmore plc ("Hostmore" or the "Company" and, together with its subsidiaries, the "Group"), the hospitality business focused on 'TGI Fridays' and 'Fridays and Go', is pleased to announce its audited annual results for the 52 week period ended 31 December 2023 ("FY23").

Key highlights of FY23

·   Transitional year included appointment of new senior leadership, implementation of operating turnaround, and introduction of revised capital allocation policy

·   Total revenue of £190.7 million in comparison to £195.7 million in 2022

·   Cost reductions achieved in line with forecast, benefitting FY23 by £6.2 million, principally in H2

·   Full year annualised expense savings of £8.4 million on track to be achieved in FY24

·   Confirms H2 2023 EBITDA (FRS102) of £5.6 million, with an EBITDA profit being realised in each of the six months of the H2 2023 period

·   Loss from operations £11.1 million, greatly improved from £95.8 million in 2022

·   Basic loss per share of 22.0p (2022: 81.0p)

·   Closing FY23 net debt FRS102 of £25.1 million, improved from £31.3 million at end of H1 2023 ahead of forecast

·   New store openings deferred for FY23 to end FY24, saving approximately £15 million in cash expenditure

·    Successful operational and portfolio management of loss-making stores reducing annual EBITDA losses of £4.2 million to <£0.5 million run rate at end of 2023

·   Continued improvement in Guest Opinion Score and Net Promoter Score resulting from renewed focus on guest experience

Events subsequent to period end

·    In addition to new store opening deferrals referred to above, further extended deferral of requirement for new store openings under franchise agreement until FY26, saving a further £4.5 million of cash expenditure in FY25

·    Reached agreement to exit two stores which contributed an aggregate EBITDA loss of £0.5 million in FY23

·    Maturity of borrowing facilities with existing lenders extended from 1 January 2025 to 1 January 2026

·    Announced proposed all-share acquisition of TGI Fridays, Inc., with anticipated completion in Q3 2024

Financial summary

The Group's trading results for the 52 week period ended and at 31 December 2023 are summarised below.

	52 weeks ended / and at 31 December 2023	* Restated 52 weeks ended /and at 1 January 2023
Total revenue	£190.7m	£195.7m
Gross profit	£147.7m	£150.6m
Loss from operations	(£11.1m)	(£95.8m)
Group EBITDA  ⁽¹⁾	£22.2m	£31.1m
Group EBITDA FRS102	£1.6m	£11.3m
Basic loss per share	(22.0p)	(81.0p)
Adjusted basic (loss)/earnings per share  ⁽²⁾	(7.7p)	3.4p
Net debt IFRS16	(£166.0m)	(£178.4m)
Net bank debt FRS102  ⁽³⁾	(£25.1m)	(£27.7m)
Cashflows from operating activities	£22.2m	£28.8m

Notes

⁽¹⁾    Group EBITDA reflects the underlying trade of the overall business. It is calculated as statutory operating profit/(loss) adjusted for net interest and bank arrangement fees, tax, depreciation, net impairments, dilapidations, gain on disposal of property, plant and equipment and right of use assets and share based charges.

⁽²⁾    Adjusted basic (loss)/earnings per share represents the net (loss)/profit after tax before net impairments and exceptional items, divided by the number of shares in issue.

⁽³⁾    Net bank debt FRS102 is borrowings from bank facilities, excluding the unamortised portion of loan arrangement fees and leases, less cash and cash equivalents.

* Refer to note 5. In the 52 week period ended 1 January 2023, basic loss per share has been increased by 3.2p from previously reported 77.8p to 81.0p, adjusted basic earnings per share has been decreased by 0.2p from previously reported 3.6p to 3.4p. At 1 January 2023, total liabilities have increased by £4.0m from previously reported £209.8m to £213.8m, and net debt has increased by £2.1m from previously reported £176.3m to £178.4m.

Operational highlights

2023 was a year in which the whole Hostmore team demonstrated remarkable resilience with the macro-economic uncertainty and fluctuating consumer behaviour. The year was one of two halves with the first half (H1) being a transitional period focusing on senior leadership changes and full operational turnaround, with the second half (H2) showing a significant profit improvement over H1. Our positive 2023 Christmas trading period was a further improvement on this trend with like-for-like revenue +4% compared to December 2022.

Cash and Debt financing

On 26 April 2024, the Group entered into a bank facility amendment agreement with its lending banks. Under the terms of this agreement, amongst other matters, certain covenants in the previous facility agreement were relaxed and amended to align with the Group's updated business plan. The term of the facility was also extended a further year to 1 January 2026.

Continued focus on improving customer and staff proposition

Guest scores for TGI Fridays progressed throughout the year and ended extremely positively. We were consistently ranked within the top two casual dining brands in the UK for food and drink quality, coupled with outstanding service (Source: CGA research and insights company). Our Net Promoter Score continued this and ended the year at 48 - a significant increase from the 2022 score of 30. This is a superb result. We also finished the 2023 year with a Trip Advisor score for TGI Fridays of 4.5, maintaining our 2022 rating, with guests notably scoring TGI Fridays highly on 'value for money'.

Current trading and outlook

·    Revenue in Q1 2024, on a like-for-like ("LFL") basis versus Q1 2023, declined by 7%, due principally to reduced consumer demand across the sector

·    Q1 2024 EBITDA (FRS102) was £0.3 million, representing an improvement of £3.2 million on Q1 2023. Each month of the quarter showed increased improvement versus prior year, with March 2024 being £1.8 million ahead of the same period in FY23

·    Consolidated net bank debt at the end of Q1 2024 was £26.1 million, in line with expected seasonality and consistent with the forecasted position for the end of FY24

Stephen Welker, Chair of Hostmore, said: "2023 was a transitional year for Hostmore during which we successfully implemented a turnaround of the business. The turnaround reduced costs, deferred cash outlays for new store openings, and improved the operations of our existing stores, while introducing a revised capital allocation policy to focus on high ROI organic growth initiatives and prioritising the full repayment of our borrowings and initiating shareholder distributions. I would like to thank Julie McEwan our CEO, Matthew Bibby our CFO, and their colleagues both in store and at executive levels, for their continued commitment to Hostmore.

"Following the period end, we announced a proposed all-share acquisition of TGI Fridays, Inc., the Company's franchisor which operates through franchising and licensing agreements in 44 markets and a network of company-owned stores in the US. Subject to completion, the transaction will give the Group increased scale, flexibility and re-rating potential that will allow us to accelerate our existing strategy of prioritising debt reduction and enhancing the scope for shareholder returns."

Results presentation

The Company will publish an informational presentation to the Investor Relations page of the Hostmore website later today.

The abridged financial statements are not the Company's statutory financial statements. All statutory financial statements of the Company in previous years had unqualified audit reports and have been delivered to the registrar of companies. In the Group's base case forecasts, the Group has sufficient liquidity from its restated facilities to finance its operations for the next fifteen months to the end of July 2025, including the requisite compliance by the Group with its banking covenants and debt repayments as they come due under those facilities. The Directors are confident that the business will continue to trade for a period of at least 15 months following the signing of these financial statements and therefore that it is appropriate to prepare the financial statements on a going concern basis. The audit report for the period ended 31 December 2023 contains an emphasis of matter section relating to the Group's forecasts, highlighting a material uncertainty under a severe but plausible downside scenario, the group would breach the quarterly cumulative EBITDA covenant and the Net debt to EBITDA covenants in Quarter 4 FY 2024. In addition, in the severe but plausible model, there is uncertainty over the adequacy of liquidity from Quarter 4 FY 2024. The audit report is not qualified. Full detail of the going concern basis of preparation is provided in note 4.1 to the non-statutory financial statements.

Hostmore has also published the following documents:

·    Annual Report and Financial Statements for the 52 week period ended 31 December 2023 (the "Annual Report and Financial Statements 2023").

·    Notice of 2024 Annual General Meeting (the "Notice of AGM").

In accordance with Listing Rule 9.6.1, a copy of each of these documents has been uploaded to the National Storage Mechanism and is available for viewing shortly at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report and Financial Statements 2023 and the Notice of AGM are also available on the Company's website: https://www.hostmoregroup.com/results-reports-presentations

The 2024 Annual General Meeting of the Company (the 'AGM') will be held on Monday 3 June 2024 at 10.30 am. at the offices of Herbert Smith Freehills LLP, Exchange House, 12 Primrose Street, London, EC2A 2EG. Full details of the AGM (including how to participate in the AGM) and the resolutions that will be put to shareholders are set out in the Notice of AGM.

In conformity with DTR 6.3.5(1A), the regulated information required under DTR 6.3.5 is available in unedited full text within the Annual Report and Financial Statements 2023 as uploaded and available on the National Storage Mechanism and on the Company's website as noted above.

ENDS

Enquiries

Hostmore plc

Matthew Bibby, Chief Financial Officer                          Email: [e-mail]

Dentons Global Advisors

Jonathon Brill, James Styles                                               Tel: [phone]

                                                                                                Email: [e-mail]

CHIEF EXECUTIVE'S STATEMENT

Overview

2023 was a year in which the whole Hostmore team demonstrated remarkable resilience with the macro-economic uncertainty and fluctuating consumer behaviour, as headwinds continued. The year was one of two halves for Hostmore. Half year one (H1) was a transitional period focusing on senior leadership changes, including me joining the board as CEO. It also saw the implementation of a full operating turnaround, after a drop in revenue, supported by a revised capital allocation policy.

Half year two (H2) saw revenue flat vs 2022, representing a significant improvement vs H1, with H1 2023 revenue of £93.6m and H2 2023 revenue of £97.0m. Our positive 2023 Christmas trading period was a further improvement on this trend with like-for-like revenue +4% compared to December 2022. This was the best Christmas trading for Hostmore since 2019.

Strategy

Our strategic business measures are yielding promising results, with each month of H2 FY23 producing positive EBITDA returns. We have consolidated our approach, building on the evolution of our journey outlined in the FY22 results. The progress includes organic growth and cost reduction initiatives, menu price increases and revised capital allocation strategies, all contributing to our improved performance across the TGI estate.

Our Dine-In experience was our primary focus for 2023 and is continuing to be so in 2024. This has produced further menu evolution, underpinned by quality, relevance and simplicity. 2023 saw the iconic "TGI" put back into Fridays, regaining our brand equity. TGI Fridays has always been associated as a place of fun and celebrations where delicious food and drinks can be enjoyed. It is pleasing that these elements of investment in our menus and service improvements have delivered a positive impact on the overall guest experience as evidenced by our guests' feedback. We have sought to achieve this by maintaining pricing discipline, as demonstrated by the roll out of our value proposition 'Kids Eat Free' which acknowledges the pressures on our core family disposable income. This has been received extremely positively and continues to be a component of our offering. To complement this and widen our appeal to new audiences, we continue to embed our 'Raising the Bar' strategy. This has been a headline initiative for TGI Fridays as we seek to build on Fridays' heritage and values. This has included introducing fun and innovative offers and concepts, such as TGI Fridays Bottomless Brunches, Cocktail Masterclasses, and new celebration packages, showcasing the very best of our brand. This has attracted many new guests

Dine out remains an important channel to our consumers. As consumer spending tightened during 2023, we maintained our market share of delivery by partnering with three delivery companies: Deliveroo, Just Eat and Uber Eats. The alignment of our dine out platform during 2023 has enabled us to acquire new guests through a strategic approach. Our delivery metrics have significantly improved, meaning we now have more of our restaurants being able to advertise on our aggregators' main carousel, meaning our exposure has increased in the delivery market.

Our brand vision is to regain our position in the UK as the Original American cocktail bar and restaurant famous for everyday celebrations.

Our brand objective is to grow this perception with our core target of families aged 25-44. We are working on engaging with a new younger audience of 18-24s to underpin our long term sales growth. We leverage our guest touchpoints through digital, store, social and PR to market our brand externally and engage with existing and new audiences.

We believe in putting the guest at the heart of our brand experience. Our loyalty strategy is embedded in our marketing and guest experience. Our 'Rewards Stripes' programme delivers exclusivity to our guests through valuable offers and experiences. We see high guest engagement and continue to see significant growth.

In 2023 we launched a new website experience which significantly improved the quality of the guest journey. Our digital platforms via online, social media and the rewards app gives guests the opportunity

to interact with us across multiple platforms before, during and after their visit to our restaurants. In 2024 we are continuing to develop this experience with the aim of a seamless end-to-end journey and giving us a single customer view of our guests.

This has included a focus on trialled, scalable, low- risk organic growth initiatives with promotional activities, upselling efforts, with strategic partnerships to enhance bookings. The success of initiatives such as our 2-for-1 cocktail offer under the 'Raising the Bar' project highlights our commitment to providing a compelling guest experience and driving revenue and margin growth.

Digital transformation

Considering the existing UK economic pressures, securing consumer spend is increasingly challenging across the casual dining sector. TGI Fridays is no exception to this. By taking a data-led approach, we are seeking to enhance the guest experience by leveraging the power of digital to establish a competitive advantage. This is part of our strategy to head towards a single guest view that informs, enhances, and grows our guest proposition. I look forward to reporting further during this year on the progress of this digital transformation programme, accompanied by highly focused marketing activity around our refreshed TGI Friday's brand. This is leveraging our existing heritage and loyalty with guests, all of which consolidates the brand and the TGI Friday's experience more effectively.

Guest feedback

While trading during 2023 remained challenging, our guest sentiment continued to improve with engaged and motivated restaurant teams, fully committed to delivering those truly memorable TGI Fridays experiences. Guest scores for TGI Fridays progressed throughout the year and ended extremely positively. We were consistently ranked within the top two casual dining brands in the UK for food and drink quality, coupled with outstanding service (Source: CGA research and insights company). Our Net Promoter Score continued this and ended the year at 48 - a significant increase from the 2022 score of 30. This is a superb result.

We also finished the 2023 year with a Trip Advisor score for TGI Fridays of 4.5, maintaining our 2022 rating, with guests notably scoring TGI Fridays highly on 'value for money'. This was as we also achieved significant improvements around speed of service, food quality and guest interaction, as well as confirming that our promotions were well received. We recognised throughout 2023 that our guests were looking for more experiential occasions, as well as personalisation, while they keep an eye on costs as they continued to expect value for their money.

People and Culture

Improving as an employer of choice, the Hostmore business continues to be significantly underpinned by a strong family culture where every team member plays a part in our recipe for success. Again, I pay tribute to all our team members, in both our support centre and every one of our restaurants. Being an employer of choice in the hospitality sector is vitally important to us and we offer every team member the opportunity to grow and develop.

Our refreshed career pathway provides team members structured development opportunities at every level, from apprenticeships, Head Chef certifications, through to our General Manager 'Aspire' development programme. In 2023, 45 team members enrolled on our development programmes and a further 42 team members started apprenticeship schemes. The focus on further intensive bar training to certify Master Bartenders continues to support our "Raising the Bar" strategy. Also, our Deputy General Manager 'Inspire' development programme has a cohort of 14. This ensures that succession planning is a key part of our culture of retaining and motivating the best people within our business and rewarding by promoting from within.

We remain committed to building a leaner and more focused organisation. Cost base efficiencies have been achieved throughout 2023, with both our operations teams and support centre being restructured during the year. We are continuing to progress this during 2024.

Supply Chain

With food supply improving during 2023, we worked closely with our business partners to ensure we secured quality products whilst proactively managing inflationary factors. Our multiple sourcing strategies proved to be very successful, as we limited our supply chain risk. As a result, we incurred food inflation of just 3% over the year to December 2023, when our sector saw food inflation of 13.8% by December (Prestige Purchasing 2023 Foodservice Inflation, published December 2023). The value of these mitigation strategies against the market norm delivered a saving of £3.5m to the Group.

Inflation in the beverage category increased significantly over 2023 and resulted in our costs increasing by 9%, against a sector forecast of 12%. Half of our increases occurred in our soft drinks, with significant increases due to soaring prices on energy, glass, sugar, fruit juices and commodities. We also experienced increases in the price of spirits and beers, as the industry grappled with increased costs for packaging, transport, glass and CO2 management.

 

The Group's procurement team progressed our 2022 strategy to reduce complexity across the Group. Significant cost pressures in the logistics market saw our logistics spend increase by 30% from September 2023. These increased costs were in line with market rates, confirming that we had benefited from rates significantly below market norms for 2022 and the majority of 2023.

 

New restaurant openings and the creation of Fridays and Go

We set a clear strategy for 2023 to focus on delivering improved performance across the existing TGI Fridays estate, following a previous management focus on expansion during 2022. As a management team we committed to deferring new site openings until 2026.

This strategy remains as we continue with a more sustainable approach of organically growing the existing business. In H1 2023 and extended in H1 2024, in contrast to prior year requirements, our Franchisor agreed for Hostmore to not increase its restaurant portfolio for 2024 and 2025. Our 'Fridays & Go' quick service restaurant (QSR) offering is an exciting proposition still in trial stage, with the potential to offer valuable diversification for future growth.

Conclusion

I am confident in our ability to drive growth and profitability. This will be achieved by accelerating the many strategic initiatives that have underpinned Hostmore's resilience, fuelled by a strong leadership team and a relentless focus on delivering value for our guests. As we navigate challenges and capitalise on opportunities, we remain committed to achieving long- term success and creating value for all stakeholders in 2024 and beyond.

Julie McEwan

Chief Executive Officer

3 May 2024

Calculation of key financial performance indicators and alternative performance measures

The Board uses several key performance indicators ("KPIs") to track the financial and operating performance of its business. These measures are derived from the Group's internal systems. Some of the KPIs are alternative performance measures ("APMs") that are not defined or recognised under IFRS. They may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for analysis of the Group's operating results reported under IFRS. The following information on KPIs and APMs includes reconciliations to the nearest IFRS measures where relevant.

Sales

Like-for-like ("LFL") sales measure the performance of the Group on a consistent year-on-year basis. The table below includes sites that were open for all of 2022 for comparability and separately includes sites opened since 2022 or subsequently disposed of.

	52 weeks ended 31 December 2023 £'000	52 weeks ended 1 January 2023 £'000
LFL gross of VAT benefit in 2022	185,989	192,311
Less VAT benefit in 2022	-	(2,664)
Net LFL	185,989	189,647
Additions since January 2022	4,294	2,064
Disposals since January 2022	606	1,453
Deferred revenue provisions	(227)	(108)
Total net of VAT benefit in 2022	190,662	193,056
Add VAT benefit in 2022	-	2,664
Total	190,662	195,720

In Q1 2022 the VAT rate was lowered in restaurants such as those operated by the Group to 12.5% before returning to 20% in Q2 2022. The VAT benefit adjustment reflects the benefit received in H1 2022 to provide fair comparability with 2023 LFL sales. This is calculated from the net sales across the period in FY22 when VAT was 12.5% and calculating what the net sales would have been if VAT had been 20%. The difference is shown as the VAT benefit.

EBITDA

EBITDA is the Group's earnings before net interest and bank arrangement fees, tax, depreciation, and other non-cash items.

	52 weeks ended 31 December 2023 £'000	*Restated 52 weeks ended 1 January 2023 £'000
Loss before tax	(25,529)	(108,346)
Net interest payable and bank arrangement fees	14,396	12,584
Depreciation	17,964	20,504
Net impairment of property, plant and equipment and right of use assets	17,768	30,601
Impairment of goodwill	-	75,166
Release of dilapidations provision	(465)	-
Gain on disposal of property, plant and equipment	(133)	-
Gain on lease modification	(1,951)	-
Share based payment charge	141	581
EBITDA	22,191	31,090

* Refer to note 5. In the 52 week period ended 1 January 2023 loss before tax has been increased by £4,001k from previously reported £104,345k to £108,346k, net interest payable and bank arrangement fees have been increased by £106k from previously reported £12,478k to £12,584k, depreciation has been increased by £165k from previously reported £20,339k to £20,504k, net impairment of property, plant and equipment and right of use assets has been decreased by £578k from previously reported £31,179k to £30,601k and impairment of goodwill has been increased by £4,308k from previously reported £70,858k to £75,166k. This has had no net effect on EBITDA for the 52 weeks ended 1 January 2023 as previously reported of £31,090k.

EBITDA FRS102

EBITDA FRS102 is the Group's EBITDA under IFRS, adjusted for rent paid to lessors and rent received from subleases.

	52 weeks ended 31 December 2023 £'000	52 weeks ended 1 January 2023 £'000
EBITDA	22,191	31,090
Less rent paid to lessors	(20,644)	(19,931)
Add rent received from subleases	37	101
EBITDA FRS102	1,584	11,260

 

Free cash flow

In the prior period, a table of Free cash flow was included in key performance indicators and alternative performance measures calculations. A more detailed KPI analysis of movement in Cashflow and Net debt is included in the Chief Financial Officer's Review  in the Annual Report published today and therefore the Free cash flow table has not been included here

Net debt

Net debt is the Group's long-term borrowings (excluding issue costs) and lease liabilities less cash and cash equivalents at each period end.

	31 December 2023 £'000	*Restated 1 January 2023 £'000
Gross bank loans and borrowings	(36,100)	(36,800)
Lease liabilities	(140,925)	(150,658)
Cash & cash equivalents	10,989	9,091
Net debt	(166,036)	(178,367)

* Refer to note 5. In the 52 week period ended 1 January 2023 lease liabilities have been increased by £2,103k from previously reported £148,555k to £150,658k and net debt has been increased by £2,103k from previously reported £176,264k to £178,367k.

Net debt FRS102

Net debt calculated in accordance with FRS102, is the Group's long-term borrowings (excluding issue costs) less cash and cash equivalents at each period end.

	31 December 2023 £'000	1 January 2023 £'000
Gross bank loans and borrowings	(36,100)	(36,800)
Cash & cash equivalents	10,989	9,091
Net debt	(25,111)	(27,709)

% Cash conversion

In the prior period, a table of % Cash conversion was included in key performance indicators and alternative performance measures calculations. A more detailed analysis of movements in Cashflow and Net debt is included in the Chief Financial Officer's Review in the Annual Report published today and therefore the % Cash conversion table has not been included here.

Return on capital employed (ROCE)

ROCE is calculated as EBITDA divided by total assets less current liabilities.

	31 December 2023 £'000	*Restated 1 January 2023 £'000
EBITDA	22,191	31,090
Total assets less current liabilities	140,112	186,064
ROCE	16%	17%

* Refer to note 5. In the 52 week period ended 1 January 2023 total assets less current liabilities have been decreased by £2,049k from previously reported £188,113k to £186,064k.

Consolidated statement of comprehensive income for the 52 week period ended 31 December 2023

	Note	52 weeks ended 31 December 2023 £'000	*Restated 52 weeks ended 1 January 2023 £'000
Revenue		190,662	195,720
Cost of sales		(42,959)	(45,103)
Gross profit		147,703	150,617
Underlying administrative expenses*		(141,173)	(141,317)
Exceptional items - impairment of goodwill*		-	(75,166)
Administrative expenses		(141,173)	(216,483)
Impairment reversal of property, plant and equipment and right of use assets	11	5,570	5,712
Impairment of property, plant and equipment and right of use assets*	11	(23,338)	(36,313)
Other operating income		105	705
Loss from operations		(11,133)	(95,762)
Finance income		219	78
Finance expense*	6	(14,615)	(12,662)
Loss before tax		(25,529)	(108,346)
Tax (charge)/credit	7.1	(1,893)	6,801
Loss for the period		(27,422)	(101,545)
Total comprehensive expense		(27,422)	(101,545)

* Refer to note 5.

All operations are continuing operations.

There are no amounts recognised within other comprehensive income in the current or prior period.

(Loss)/earnings per share in pence	Note	52 weeks ended 31 December 2023	*Restated 52 weeks ended 1 January 2023
Basic loss per share*	8	(22.0)	(81.0)
Diluted loss per share*	8	(22.0)	(81.0)
Adjusted basic (loss)/earnings per share*	8	(7.7)	3.4
Adjusted diluted (loss)/earnings per share*	8	(7.7)	3.3

* Refer to note 5. Adjusted basic and diluted loss per share excludes impairments and exceptional items.

Consolidated statement of financial position at 31 December 2023

Note			31 December 2023 £'000	*Restated 1 January 2023 £'000
Assets
Non-current assets
Property, plant and equipment*	9		25,432	37,973
Right of use assets*	10		79,138	97,043
Goodwill*	13		70,813	70,813
Net investment in subleases			735	95
Deferred tax assets	7.2		9,981	12,801
Total non-current assets			186,099	218,725
Current assets
Inventories			1,390	1,464
Trade and other receivables			3,355	6,285
Current tax assets			918	740
Net investment in subleases			61	12
Cash and cash equivalents			10,989	9,091
Total current assets			16,713	17,592
Total assets			202,812	236,317
Liabilities
Non-current liabilities
Loans and borrowings		14	15,414	23,146
Lease liabilities*		12	124,442	135,213
Provisions			4,975	5,143
Total non-current liabilities			144,831	163,502
Current liabilities
Trade and other payables*			24,991	20,034
Contract liabilities			1,075	1,004
Loans and borrowings		14	20,019	13,295
Lease liabilities*		12	16,483	15,445
Provisions			132	475
Total current liabilities			62,700	50,253
Total liabilities			207,531	213,755
Net current liabilities			(45,987)	(32,661)
Net (liabilities)/assets			(4,719)	22,562

* Refer to note 5.

		31 December 2023 £'000		*Restated 1 January 2023 £'000
Issued capital and reserves attributable to owners of the Company
Share capital			25,225		25,225
Share premium reserve			14,583		14,583
Merger reserve			(181,180)		(181,180)
Share based payment reserve			775		634
Retained earnings*			135,878		163,300
Total (accumulated losses)/equity			(4,719)		22,562

* Refer to note 5.

Consolidated statement of changes in equity for the 52 week period ended 31 December 2023

	Share capital £'000	Share premium reserve £'000	Merger reserve £'000	Share based payment reserve £'000	Retained earnings £'000	Total equity £'000
At 3 January 2022 Comprehensive expense for the 52 week period ended 1 January 2023	25,225	14,583	(181,180)	53	265,345	124,026
Loss for the period	-	-	-	-	(97,544)	(97,544)
Total comprehensive expense for the 52 week period ended 1 January 2023	-	-	-	-	(97,544)	(97,544)
Correction of error*	-	-	-	-	(4,001)	(4,001)
Total comprehensive expense for the 52 week period ended 1 January 2023 (restated)	-	-	-	-	(101,545)	(101,545)
Contributions by and distributions to owners
Share purchases by Employee Benefit Trust	-	-	-	-	(500)	(500)
Share based payment charge	-	-	-	581	-	581
Total contributions by and distributions to owners	-	-	-	581	(500)	81
At 1 January 2023	25,225	14,583	(181,180)	634	163,300	22,562

* Refer to note 5.

	Share capital £'000	Share premium reserve £'000	Merger reserve £'000	Share based payment reserve £'000		Retained earnings £'000	Total accumulated losses £'000
At 2 January 2023	25,225	14,583	(181,180)	634		163,300	22,562
Comprehensive expense for the 52 week period ended 31 December 2023
Loss for the period	-	-	-	-	(27,422)		(27,422)
Total comprehensive expense for the 52 week period ended 31 December 2023	-	-	-	-	(27,422)		(27,422)
Contributions by and distributions to owners
Share based payment charge	-	-	-	141	-		141
Total contributions by and distributions to owners	-	-	-	141	-		141
At 31 December 2023	25,225	14,583	(181,180)	775	135,878		(4,719)

Consolidated statement of cash flows for the 52 week period ended 31 December 2023

Note				52 weeks ended 31 December 2023 £'000	52 weeks ended 1 January 2023 £'000
Cash flows from operating activities	15			22,191	28,800
Movements in working capital: Decrease/(increase) in trade and other receivables				2,961	(2,415)
Decrease in inventories				75	25
Increase/(decrease) in trade and other payables				5,561	(8,071)
(Decrease)/increase in provisions				(49)	2,391
Cash generated from operations				30,739	20,730
Corporation taxes recovered/(paid)				748	(857)
Rental income from subleases				20	105
Net cash from operating activities				31,507	19,978
Cash flows from investing activities
Purchases of property, plant and equipment				(4,721)	(10,311)
Proceeds from sale of property, plant and equipment				121	-
Interest received				200	70
Net cash used in investing activities				(4,400)	(10,241)
Cash flows from financing activities
Repayment of bank borrowings				(27,100)	(18,000)
Payment of loan arrangement fees				(954)	-
Receipt of bank borrowings				26,400	10,500
Interest paid on bank borrowings				(3,297)	(2,291)
Share purchases by Employee Benefit Trust				-	(500)
Payment of lease liabilities				(20,258)	(22,435)
Net cash used in financing activities				(25,209)	(32,726)
Net cash increase/(decrease) in cash and cash equivalents				1,898	(22,989)
Cash and cash equivalents at the beginning of period				9,091	32,080
Cash and cash equivalents at the end of the period				10,989	9,091

Notes to the consolidated financial statements for the 52 weeks ended 31 December 2023

1.        Reporting entity

Hostmore plc (the 'Company') is a public limited company incorporated and domiciled in the United Kingdom. The Company's registered office is at Highdown House, Yeoman Way, Worthing, West Sussex, BN99 3HH and the Company's registered number is 13334853. These consolidated financial statements comprise the Company and its subsidiaries (collectively the 'Group' and individually 'Group companies'). The Group is primarily involved in the development and operation of branded restaurants and bars and ancillary activities.

2.        Basis of preparation

The Group's consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

On 31 December 2020 EU-adopted IFRS was brought into UK law and became UK-adopted international accounting standards, with future changes to IFRS being subject to endorsement by the UK Endorsement Board. The consolidated financial statements of the Group transitioned to UK-adopted international accounting standards with effect from 3 January 2022.

The Group reports its results for the 52 week or 53 week period ending on the nearest Sunday to 31 December. The results for 2023 are for the 52 weeks that ended 31 December 2023 and those for the comparative period are for the 52 weeks ended 1 January 2023.

Details of the Group's accounting policies are included in the Hostmore plc Annual Report and financial statements for the 52 week period ended 31 December 2023.

In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Group accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

3.        Functional and presentation currency

These consolidated financial statements are presented in pounds sterling, which is the Group's functional currency. All amounts have been rounded to the nearest thousand pounds ("£'000"), unless otherwise indicated.

4. Selected accounting policies

4.1 Going concern

The financial statements for the 52 weeks ended 31 December 2023 have been prepared on a going concern basis.

The banking facilities available to the Group were amended and restated on 28 April 2023, amended on 28 September 2023 and further amended on 26 April 2024. The latest amendments included, amongst other elements, the waiver of the cumulative EBITDA covenant and the Adjusted Leverage covenant for Q2 and Q3 2024 and a revision of subsequent covenant levels to 1 January 2026 in line with the Group's business plan. The maturity of the facility was also extended from 1 January 2025 to 1 January 2026. In addition, if the proposed combination referred to below does not proceed, the Group would be required, on 7 March 2025, to make a part repayment of the bank facility. This would be the lower of, the lowest amount of liquidity that the Group is forecasting for 12 months forward from 28 February 2025 that exceeds £2.5m, and £5m. In that scenario, there is also the requirement for the Directors to commence a sale process and to appoint an additional Non-Executive Director acceptable to them and to the banks. The Liquidity covenant requiring a minimum liquidity level of £1.5m remains in place. These amendments are referred to in more detail in note 14 to the non-statutory financial statements.

The Group has prepared forecasts of the expected cash flows up to 31 December 2025, which includes a severe but plausible downside scenario. The base case scenario broadly assumes that the trading performance in the second half of 2023 continues throughout 2024, with moderate growth in 2025. It is based on the position before taking account of the proposed combination referred to below, given its early stage of negotiation. Under the base case scenario, the revised covenants are met and the Group has adequate liquidity throughout the going concern assessment period. This scenario assumes that if the proposed combination referred to below does not proceed, the part repayment of the facility due on 7 March 2025 would be financed by pausing expansion capital expenditure.

The severe but plausible downside scenario assesses the cash flows in a depressed trading environment with reduced recovery in H2 2024 and the whole of FY 2025, despite the cost saving initiatives that saw an improvement in EBITDA in the second half of 2023. The model calculates the impact that this scenario would have on the amended covenants of the Group. Under this severe but plausible scenario, the Group would breach the quarterly cumulative EBITDA covenant and the Net debt to EBITDA covenants in Q4 FY 2024 and the monthly minimum liquidity covenant of £1.5m in Q1 FY 2025, which would make the loans repayable on demand. In addition, in the severe but plausible scenario, there is uncertainty over the adequacy of liquidity within the 12 months from the date of approval of the financial statements. In this scenario, management would take steps to manage the Group's liquidity position.

On 16 April 2024 the Company announced the proposed combination of the Group with TGI Fridays, Inc (the "Combined Group") with Heads of Terms having been agreed by both parties. Funding of the Combined Group has not been finalised at the date of approval of these financial statements. In addition, the proposal to create the Combined Group will require the approval of shareholders. For the purposes of conducting the going concern assessment, the Directors have made the assumption that an appropriate funding structure will be put in place by both parties before the proposed prospectus and related circular to shareholders are issued, such that the Company and the Combined Group will continue to trade and to meet their liabilities as they fall due from when the combination is effected which is envisaged to be in Q3 2024.

The Directors are confident that the business will continue to trade for a period of at least fifteen months following the signing of these financial statements and therefore that it is appropriate to prepare these financial statements on a going concern basis. The conditions referred to above indicate the existence of a material uncertainty which may cast significant doubt on the Group's and the Company's ability to continue as a going concern. The financial statements do not include adjustments to the carrying amounts or classification of assets and liabilities that would result if the Company and Group were unable to continue as a going concern.

4.2       Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business, less any accumulated impairment losses.

Goodwill does not generate cash flows independently of other assets or groups of assets and is normally required to be allocated to each CGU or group of CGUs that benefits from the business combination that gave rise to

the goodwill. The Group does not allocate goodwill to individual CGUs as it represents the ongoing value of the existing business and brand and it cannot be allocated to individual restaurants on a non-arbitrary basis. The goodwill is therefore allocated to all CGUs as a group. The recoverable amount represents the value-in-use, using discounted forecasted cashflows and each restaurant's ability to cover its costs, including an allocation of central overheads, marketing and maintenance standards of assets. The Group tests all CGUs for impairment at each reporting date on a value-in-use basis. Where a CGU is considered to be impaired, its carrying value is reduced to its recoverable amount. The impairment loss is allocated pro-rata between the assets of the CGU on the basis of the carrying amount of each asset. After this initial allocation of impairment losses, if the combined carrying amount of the CGUs and goodwill is higher than the recoverable amount of the group of all CGUs, the residual impairment losses are allocated to goodwill.

4.3       The Group as a lessee

The principal leasing activity of the Group is the leasing of property for the operation of restaurants.

●       A lease liability is measured at its present value, discounted using an appropriate incremental borrowing rate for each lease depending on the lease term at the date of inception. This ranges from 3.1% for leases with shorter terms to 7.5% for leases with longer terms. Payments included in initial measurement are all fixed payments. Any variable payments that are based on an index or a rate, are initially measured using the index or rate at the commencement date.

●       A right-of-use (RoU) asset is measured at an amount equal to the lease liability, adjusted by any prepaid or accrued lease payments, and inclusive of any dilapidations and onerous lease provisions.

●       The Group does not recognise leases with a term of 12 months or less or where the underlying asset is considered of low value.

Subsequent to initial measurement, lease liabilities are reduced for lease payments made and increased as a result of interest charged at a constant rate on the balance outstanding. Where lease payments depend on an index of an extended lease, any changes in future lease payments resulting from a change in the index, lead to a re-assessment of the lease liability using a revised discount rate. RoU assets are amortised on a straight-line basis over the remaining term of the lease.

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to be made over the revised term, which are discounted at a revised discount rate. An equivalent adjustment is made to the carrying value of the RoU asset, with the revised carrying amount being amortised over the remaining revised lease term.

4.4         Impairment of tangible assets

At each reporting date, the Group assesses whether an item of property, plant and equipment and RoU asset is impaired. Each restaurant is considered to be a separate CGU of property, plant and equipment and RoU asset. The Group tests all CGUs for impairment on a value-in-use basis. Where a CGU is considered impaired, its carrying value is reduced to its recoverable amount. The recoverable amount represents the value-in-use, using discounted forecasted cashflows and each restaurant's ability to cover its costs, including an allocation of central overheads, marketing and maintenance standards of assets. The impairment loss is allocated pro-rata between the assets of the CGU on the basis of the carrying amount of each asset.

Where there is an indication that an impairment loss recognised in prior periods no longer exists, the relevant part of the impairment loss is reversed and credited to the consolidated statement of comprehensive income. The reversal is allocated to the CGU's assets on a pro-rata basis. The carrying amount of an individual asset is not increased above the lower of its recoverable amount and its historical depreciated cost.

5.        Prior period restatement

In the prior period to 1 January 2023 there were IFRS 16 lease modifications that were not accounted for. As a result of the prior period IFRS 16 lease modifications, property, plant and equipment and right of use asset balances were primarily affected. The tables in this note set this out in more detail. This restatement also resulted in a further goodwill impairment charge of £845k.

A further prior period restatement, related to an error identified in the prior period impairment model for one store, which resulted in the property, plant and equipment and right of use assets impairment charge being overstated by £1,923k and property, plant and equipment and right of use assets balances being understated by £293k and £1,630k respectively. As a result, the overall goodwill impairment charge was understated by £1,923k and a goodwill balance was overstated by the same amount which has been corrected in the prior period adjustment.

An additional prior period restatement has been made to additions to property, plant and equipment which had not been accrued at the prior period end. This has resulted in property, plant and equipment, and trade and other payables, both being increased by £1,540k in the prior period adjustment. As a result of this restatement, the impairment charge of goodwill has been increased by £1,540k and goodwill has decreased by the same amount.

 

The IFRS 16 lease modifications, impairment model error and under-accrual of additions to property, plant and equipment have been corrected by restating each of the relevant financial statement line items for the prior period as follows:

Consolidated statement of comprehensive income (extract)	Previously reported 52 weeks ended 1 January 2023 £'000	IFRS 16 lease modifications £'000	Impairment model £'000	Property, plant and equipment additions £'000	*Restated 52 weeks ended 1 January 2023 £'000
Underlying administrative expenses	(141,152)	(165)	-	-	(141,317)
Exceptional items - impairment of goodwill	(70,858)	(845)	(1,923)	(1,540)	(75,166)
Administrative expenses	(212,010)	(1,010)	(1,923)	(1,540)	(216,483)
Impairment of property, plant and equipment and right of use assets	(36,891)	(1,345)	1,923	-	(36,313)
Loss from operations	(91,867)	(2,355)	-	(1,540)	(95,762)
Finance expense	(12,556)	(106)	-	-	(12,662)
Loss before tax	(104,345)	(2,461)	-	(1,540)	(108,346)
Loss for the period	(97,544)	(2,461)	-	(1,540)	(101,545)
Total comprehensive expense	(97,544)	(2,461)	-	(1,540)	(101,545)
Basic loss per share (pence)	(77.8)	(2.0)	-	(1.2)	(81.0)
Diluted loss per share (pence)	(77.8)	(2.0)	-	(1.2)	(81.0)
Adjusted basic earnings per share (pence)	3.6	(0.1)	-	(0.1)	3.4
Adjusted basic diluted earnings per share (pence)	3.6	(0.2)	-	(0.1)	3.3

Consolidated statement of financial position (extract)	Previously reported 1 January 2023 £'000	IFRS 16 lease modification £'000	Impairment model £'000	Property, plant and equipment additions £'000	*Restated 1 January 2023 £'000
Property, plant and equipment	36,140	-	293	1,540	37,973
Right of use assets	94,568	845	1,630	-	97,043
Goodwill	75,121	(845)	(1,923)	(1,540)	70,813
Non-current lease liabilities	133,261	1,952	-	-	135,213
Total non-current liabilities	161,550	1,952	-	-	163,502
Trade and other payables	18,136	358	-	1,540	20,034
Current lease liabilities	15,294	151	-	-	15,445
Total current liabilities	48,204	509	-	1,540	50,253
Total liabilities	209,754	2,461	-	1,540	213,755
Net current liabilities	(30,612)	(509)	-	(1,540)	(32,661)
Net assets	26,563	(2,461)	-	(1,540)	22,562
Retained earnings	167,301	(2,461)	-	(1,540)	163,300
Total equity	26,563	(2,461)	-	(1,540)	22,562

6.            Finance income and expense

	52 weeks ended 31 December 2023 £'000	52 weeks ended 1 January 2023 £'000
Finance income	219	78
Other interest receivable

	52 weeks ended 31 December 2023 £'000		*Restated 52 weeks ended 1 January 2023 £'000
Finance expense
Bank interest payable	4,256	2,393
Amortisation of loan arrangement fees	721	209
Interest on lease liabilities	9,406	9,832
Unwinding of discount on provisions	87	52
Other interest payable	145	176
Total finance expense	14,615	12,662

* Refer to note 5. In the 52 week period ended 1 January 2023, interest on lease liabilities has been increased by £106k from previously reported £9,726k to £9,832k.

7.        Tax (charge)/credit 

7.1      Tax (charge)/credit recognised in consolidated statement of comprehensive income

	52 weeks ended 31 December 2023 £'000	52 weeks ended 1 January 2023 £'000
Corporation tax credit	927	192
Adjustments in respect of prior periods
Total corporation tax credit	927	192
Deferred tax (charge)/credit
Origination and reversal of temporary timing differences	(1,248)	4,842
Adjustments in respect of prior periods	(1,572)	27
Change in future tax rate	-	1,740
Total deferred tax (charge)/credit	(2,820)	6,609
Tax (charge)/credit for the period	(1,893)	6,801

7.2      Deferred tax assets

Deferred tax assets in the consolidated statement of financial position arose as follows:

	3 January 2022 £'000	Recognised in consolidated statement of comprehensive income £'000	1 January 2023 £'000
Deferred tax assets in relation to:
Property, plant and equipment differences	1,970	1,141	3,111
Other temporary differences	71	5	76
Losses carried forward	-	228	228
Deferred tax arising from leases	4,151	5,235	9,386
Total deferred tax assets	6,192	6,609	12,801

	2 January 2023 £'000	Recognised in consolidated statement of comprehensive income £'000	31 December 2023 £'000
Deferred tax assets in relation to:
Property, plant and equipment differences	3,111	(3,111)	-
Other temporary differences	76	18	94
Share based payments	-	17	17
Losses carried forward	228	(228)	-
Deferred tax arising from leases	9,386	484	9,870
Total deferred tax assets	12,801	(2,820)	9.981

Deferred tax unwinding within 12 months from 31 December 2023 is expected to be immaterial. Deferred tax not recognised at 31 December 2023 amounted to £7.5m (2022: £nil). This is based on the more challenging industry-wide backdrop in which the Group operates and reflects the Group's forecasts of expected cash flows that have been used in assessing impairments at the period end.

8.        Loss/(earnings) per share

	52 weeks ended 31 December 2023	*Restated 52 weeks ended 1 January 2023
Basic loss per share
Weighted average outstanding number of shares ('000)	124,880	125,427
Loss after tax for the period (£'000)	(27,422)	(101,545)
Basic loss per share (pence)	(22.0)	(81.0)
Diluted loss per share
Weighted average outstanding number of shares ('000)	124,880	125,427
Dilutive shares ('000)	-	-
Loss after tax for the period (£'000)	124,880	125,427
	(27,422)	(101,545)
Diluted loss per share (pence)	(22.0)	(81.0)
Adjusted basic earnings per share
Weighted average outstanding number of shares ('000)	124,880	125,427
Loss after tax for the period (£'000)	(27,422)	(101,545)
Exceptional items - impairment of goodwill (£'000)	-	75,166
Net impairment of property, plant and equipment and right of use assets (£'000)	17,768	30,601
Adjusted (loss)/profit for the period (£'000)	(9,654)	4,222
Adjusted basic (loss)/earnings per share (pence)	(7.7)	3.4
Adjusted diluted earnings per share
Weighted average outstanding number of shares ('000)	124,880	125,427
Dilutive shares ('000)	-	656
	124,880	126,083
Loss after tax for the period (£'000)	(27,422)	(101,545)
Exceptional items (£'000)	-	75,166
Net impairment of property, plant and equipment and right of use assets (£'000)	17,768	30,601
Adjusted (loss)/profit for the period (£'000)	(9,654)	4,222
Adjusted diluted (loss)/earnings per share (pence)	(7.7)	3.3

* Refer to note 5 to the non-statutory financial statements. In the 52 week period ended 1 January 2023, loss after tax for the period has been increased by £4,001k from previously reported £97,544k to £101,545k, basic and diluted loss per share has been increased by 3.2p from previously reported 77.8p to 81.0p, adjusted basic earnings per share have been decreased by 0.2p from previously reported 3.6p to 3.4p and adjusted diluted earnings per share have been decreased by 0.3p from previously reported 3.6p to 3.3p.

As referred to in note 15, on 16 April 2024 the Company announced that it had reached agreement on a non- binding basis for a proposed all-share acquisition of TGI Fridays, Inc. This is subject to, among other things, completion of confirmatory due diligence, the parties entering into binding transaction documentation and shareholder approval. It is therefore too early to determine whether this proposed transaction will be undertaken or what impact it might have on the Earnings per Share of the Group in future periods.

The calculation of adjusted (loss)/profit and the resultant calculation of adjusted basic (loss)/earnings per share and adjusted diluted (loss)/earnings per share, excludes the impairment of property, plant and equipment, right of use assets and exceptional items. The adjusted basic (loss)/earnings per share and adjusted diluted (loss)/ earnings per share figures have not been adjusted for the tax effects of adjusting items. This is because the goodwill impairment recorded for the 52 week period ended 1 January 2023 is not tax deductible and therefore had no tax effect on the adjusted earnings per share calculations. The property, plant and equipment and right of use assets impairments will reverse over time. For the 52 week period ended 31 December 2023, the deferred tax impact on property, plant and equipment was £1.4m (2022: £1.4m) and right of use assets was £2.3m (2022: £5.7m). Accordingly, while these are post-tax measures, they have not been adjusted for the tax effect of adjusting items where there is no current tax impact or where the tax effect will only reverse over time.

9.        Property, plant and equipment

	Leasehold property improvements £'000	Plant and machinery £'000	Fixtures and fittings £'000	Total £'000
Cost
At 3 January 2022	9,874	50,665	90,058	150,597
Additions	-	5,138	6,423	11,561
Disposals	-	(397)	(88)	(485)
At 1 January 2023 (restated)*	9,874	55,406	96,393	161,673
Accumulated depreciation and impairment
At 3 January 2022	9,874	43,846	54,096	107,816
Depreciation charge for the period	-	3,096	5,510	8,606
Impairment reversal for the period	-	-	(757)	(757)
Impairment charge for the period	-	-	8,463	8,463
Disposals	-	(392)	(36)	(428)
At 1 January 2023	9,874	46,550	67,276	123,700
Net book value
At 2 January 2022	-	6,819	35,962	42,781
At 1 January 2023 (restated)*	-	8,856	29,117	37,973

* Refer to note 5. In the 52 week period ended 1 January 2023, plant and machinery additions have been increased by £816k from previously reported £4,322k to £5,138k, fixtures and fittings additions have been increased by £724k from previously reported £5,699k to £6,423k, fixtures and fittings impairment charge has been decreased by £293k from previously reported £8,756k to £8,463k, increasing total net book value by £1,833k from previously reported £36,140k to £37,973k.

	Leasehold property improvements £'000	Plant and machinery £'000	Fixtures and fittings £'000	Total £'000
Cost
At 2 January 2023	9,874	55,406	96,393	161,673
Additions	-	2,800	920	3,720
Disposals	-	(512)	(1,147)	(1,659)
At 31 December 2023	9,874	57,694	96,166	163,734
Accumulated depreciation and impairment
At 2 January 2023	9,874	46,550	67,276	123,700
Depreciation charge for the period	-	2,942	4,579	7,521
Impairment reversal for the period	-	-	(2,107)	(2,107)
Impairment charge for the period	-	-	10,811	10,811
Disposals	-	(277)	(1,346)	(1,623)
At 31 December 2023	9,874	49,215	79,213	138,302
Net book value
At 1 January 2023	-	8,856	29,117	37,973
At 31 December 2023	-	8,479	16,953	25,432

10.      Right of use assets

	Property £'000	Motor vehicles £'000	Total £'000
Cost
At 3 January 2022	158,521	262	158,783
Additions and modifications	15,448	-	15,448
At 1 January 2023 (restated)*	173,969	262	174,231
Accumulated depreciation and impairment
At 3 January 2022	42,177	218	42,395
Depreciation charge for the period	11,866	32	11,898
Impairment reversal for the period	(4,955)	-	(4,955)
Impairment charge for the period	27,850	-	27,850
At 1 January 2023 (restated)*	76,938	250	77,188
Net book value
At 2 January 2022	116,344	44	116,388
At 1 January 2023 (restated)*	97,031	12	97,043

* Refer to note 5. In the 52 week period ended 1 January 2023, Right of use assets additions have been increased by £2,355k from previously reported £13,093k to £15,448k, Right of use assets depreciation charge for the period has been increased by £165k from previously reported £11,733k to £11,898k, Right of use assets impairment charge for the period has been decreased by £285k from previously reported £28,135k to £27,850k, increasing total net book value by £2,475k from previously reported £94,568k to £97,043k.

	Property £'000	Motor vehicles £'000		Total £'000
Cost
At 2 January 2023	173,969	262	174,231
Modifications	1,602	-	1,602
Disposals	(770)	-	(770)
At 31 December 2023	174,801	262	175,063
Accumulated depreciation and impairment
At 2 January 2023	76,938	250	77,188
Depreciation charge for the period	10,432	11	10,443
Impairment reversal for the period	(3,463)	-	(3,463)
Impairment charge for the period	12,527	-	12,527
Disposals	(770)	-	(770)
At 31 December 2023	95,664	261	95,925
Net book value
At 1 January 2023	97,031	12	97,043
At 31 December 2023	78,137	1	79,138

11.      Impairment losses recognised in property, plant and equipment and right of use assets

The Group performs an impairment assessment at the end of each reporting period. For the purposes of impairment of right of use assets, each restaurant in the Group is considered a separate CGU. An impairment charge is recognised when the recoverable amount is less than the carrying value of the property, plant and equipment and right of use assets of the CGU. Where there is an indication that an impairment loss recognised in prior periods no longer exists, the impairment loss is reversed and credited to the consolidated statement of comprehensive income.

The recoverable amount is based on value-in-use calculations, using discounted forecasted cashflows of each restaurant and its ability to cover its costs, including an allocation of central overheads, marketing and maintenance standards of assets.

The value-in-use calculations are based on the Group's base case business plan for 2024 and 2025, sensitised down from the 2024 budget with cash flow projections over the lease term of each restaurant, applying a long-term annual growth rate of 2%.

The discount rate applied in the value-in-use calculations has been calculated with reference to the Group's weighted average cost of capital and similar benchmarks in the industry. A pre-tax discount rate of 10.5% (2022: 14.2%) has been applied in the value-in-use calculations.

During the 52-week period ended 31 December 2023, an impairment charge was recognised because the recoverable amount of the CGUs as calculated above was less than the carrying value of property, plant and equipment and right of use assets. There was also an indication that an impairment loss recognised in prior periods in respect of two restaurants now no longer existed. In accordance with the Group's accounting policy, the impairment loss in respect of these restaurants in prior periods has been reversed and credited to the consolidated statement of comprehensive income in the 52-week period ended 31 December 2023.

In this assessment, the recoverable amount of property, plant and equipment at 31 December 2023, was £48,850k (2022: £56,320k). The above calculations have resulted in an impairment charge of £10,811k for the period ended 31 December 2023 (2022: £8,463k) and an impairment reversal of £2,107k (2022: £757k) against property, plant and equipment. The recoverable amount of right of use assets at 31 December 2023, was £116,251k (2022: £132,461k). The above calculations have also resulted in an impairment charge of £12,527k for the period ended 31 December 2023 (2022: £27,850k) and an impairment reversal of £3,463k (2022: £4,955k) against right of use assets. In the 52 weeks ended 31 December 2023, the Group recorded the total of the above, being an impairment charge of £23,338k and a reversal of £5,570k, resulting in a net impairment of £17,768k for the period (2022: net impairment of £30,601k).

12.      Group as a lessee

The Group has entered into a number of leases on properties from which it operates its restaurants. It has also entered into lease arrangements for motor vehicles for use by employees. These have all been recognised as right of use assets in the consolidated statement of financial position. The total cash outflow for leases for the 52 week period ended 31 December 2023 was £21,536k (2022: £23,775k).

Lease liabilities are due as follows:

	31 December 2023 £'000	*Restated 1 January 2023 £'000
Contractual undiscounted cash flows due
Not later than one year	21,149	21,071
Between one year and five years	80,944	81,948
Between five years and ten years	68,385	79,973
Greater than ten years	16,644	23,253
Total contractual undiscounted cash flows	187,122	206,245

* Refer to note 5. As a result of IFRS 16 lease modifications and dilapidation charge exclusion, the prior period amounts within the above maturity table have been restated. 'Not later than one year' balance has increased by £146k from previously reported £20,925k to £21,071k. 'Between one year and five years' balance has increased by £1,184k from previously reported £80,764k to £81,948k. The 'Later than five years' category has been further analysed into the above categories of 'Between five years and ten years' and 'Greater than ten years' to provide greater analysis. Further to note 5, both categories have been decreased by £1,447k from the previously reported total of £104,673k to £79,973k and £23,253k respectively

	31 December 2023 £'000	*Restated 1 January 2023 £'000
Contractual discounted cash flows of lease liabilities
Non-current	124,442	135,213
Current	16,483	15,445
Total lease liabilities	140,925	150,658

* Refer to note 5. At 1 January 2023, non-current lease liabilities have been increased by £1,952k from previously reported £133,261k to £135,213k and current lease liabilities have been increased by £151k from previously reported £15,294k to £15,445k.

The contractual cash flows of lease liabilities have been discounted by applying an appropriate incremental borrowing rate for each lease depending on the remaining lease term ranging from 3.1% for leases with shorter terms to 7.5% for leases with longer terms.

The total lease liability at 31 December 2023 decreased by £9,733k (2022: £336k) from the previous period end. This relates to the payment of lease liabilities during the year and the exit from the lease of one store during the period. Following the amendment to the franchise agreement agreed in Q1 2023, no new stores were opened during the 52 week period ended 31 December 2023.

13.         Goodwill

	*Restated £'000
Cost
At 3 January 2022 and 1 January 2023	155,284
Accumulated impairment
At 3 January 2022	9,305
Impairment charge for the period	75,166
At 1 January 2023 (restated)*	84,471
Net book value
At 2 January 2022	145,979
At 1 January 2023 (restated)*	70,813

* Refer to note 5. In the 52 week period ended 1 January 2023, goodwill impairment charge have been increased by £4,308k from previously reported £70,858k to £75,166k, decreasing the net book value by the same amount from previously reported £75,121k to £70,813k.

	£'000
Cost
At 2 January 2023 and 31 December 2023	155,284
Accumulated impairment
At 2 January 2023 and 31 December 2023	84,471
Net book value
At 1 January 2023 and 31 December 2023	70,813

The Directors consider that the TGI Fridays brand is the sole CGU of goodwill as it cannot be allocated to individual restaurants on a non-arbitrary basis. The Group continues to assess goodwill for impairment at each reporting date.

The value-in-use calculations are based on the Group's base case business plan for 2024 and 2025, sensitised down from the 2024 budget, applying a long-term annual growth rate of 2%, producing the future projected cashflows of the operating business, over the lease term of each restaurant, assuming profitable stores' leases will be extended into perpetuity, discounted back using a pre-tax discount rate of 13.3% (2022: 15.8%). In the comparative period ended 1 January 2023, the net book value of all assets, goodwill, property, plant and equipment and right of use assets were assessed to be £75,166k higher than the value-in-use calculations and therefore an impairment charge of £75,166k has been recorded at that date. For the 52 week period ended 31 December 2023, no further impairment charge was required as the value-in-use calculations are significantly in excess of the net book value of all assets, goodwill, property, plant and equipment and right of use assets inclusive of the prior year impairment charge.

14.       Loans and borrowings

	31 December 2023 £'000	1 January 2023 £'000
Secured bank loans and borrowings
Non-current	15,414	23,146
Current	20,019	13,295
Total secured bank loans and borrowings	35,433	36,441

Movement of loans	31 December 2023 £'000	1 January 2023 £'000
Opening balance	36,441	43,422
Loans drawn down	26,400	10,500
Loans repaid	(27,100)	(18,000)
Loan arrangement fees incurred in the period	(1,029)	(15)
Amortisation of loan arrangement fees	721	209
Loan arrangement fees waived	-	325
Closing balance	35,433	36,441

On 28 April 2023, the Group signed a bank facility amendment agreement with its lending banks. This was subsequently amended on 28 September 2023 and the term facility extended to 1 January 2025. On 26 April 2024 a further amendment to the facility was agreed, extending the facility to 1 January 2026. Under this amended facility, there are no cumulative EBITDA covenants for Q2 and Q3 of FY24, with amended covenants set for Q4 FY24 and FY25 in line with the Group's updated forecasts for FY24 and FY25. The covenants measure cumulative EBITDA and the ratio of EBITDA to net debt. There is also a minimum liquidity requirement of £1.5m and loan amortisation of £1.5m per quarter, both of which remain unchanged. In addition, if the proposed combination referred to in note 16 to the non-statutory financial statements does not proceed, the Group would be required, on 7 March 2025, to make a part repayment of the bank facility. This would be the lower of, the lowest amount of liquidity that the Group is forecasting for 12 months forward from 28 February 2025 that exceeds £2.5m, and £5m. In that scenario, there is also the requirement for the Directors to commence a sale process and to appoint an additional Non-Executive Director acceptable to them and to the banks.

The Group's loans are denominated in pounds sterling. There is no foreign exchange risk on the Group's loan arrangements. The carrying value of loans and borrowings classified as financial liabilities are measured at amortised cost, which approximates to their fair value. The balances at 31 December 2023 are summarised below:

Loan Facility	Nominal interest rate	Date of maturity	Repayment schedule	31 December 2023 £'000	1 January 2023 £'000
Secured bank loan	Margin plus compound reference rate based on SONIA	1 January 2026	£1.5m per quarter, with balance on maturity	21,600	29,300
Revolving credit facility	Margin plus compound reference rate based on SONIA	1 January 2026	At end of term	14,500	7,500
Unamortised loan arrangement fees				(667)	(359)
				35,433	36,441

During the 52 week period ended 31 December 2023 the Group complied with all covenants within its bank facilities as amended. This has continued to the date of approval of these results.

The amended facility agreement as at the year-end includes the following covenants:

●   Minimum Liquidity covenant tested on a weekly basis, requiring an aggregate of cash and undrawn commitments under the Revolving Credit Facility of not less than £1.5m tested by reference to quarterly forward forecasts. At 31 December 2023 the Group complied with the Minimum Liquidity covenant as set out in the facility agreement in operation for the period ended 31 December 2023 and had liquidity of £12.3m.

●   Adjusted Leverage covenant, being Group net debt at the end of each quarter as a percentage of adjusted EBITDA (calculated in accordance with FRS102 and as adjusted in the manner set out in the facility agreement as restated from time to time) which is not tested at 30 June 2023 and 30 September 2023 and then tested in subsequent periods in the amended facility agreement, with each period to not exceed prescribed ratios set out in the amended facility agreement. At 31 December 2023 the Group complied with this Adjusted Leverage covenant of EBITDA as adjusted in the manner set out in the facility agreement in operation for the period ended 31 December 2023.

●   Cumulative Monthly EBITDA covenant (calculated in accordance with FRS102) covenant tested monthly between 31 October 2023 and 31 March 2024, not tested at 30 June 2023 and 30 September 2023 and then tested on a latest twelve months basis each quarter from 31 December 2024 to 31 December 2025. The covenant requires the Group's cumulative EBITDA for each period to be not less than prescribed amounts set out in the amended agreement. For the quarter ended 31 December 2023, the Group complied with this Cumulative Monthly covenant as set out in the facility agreement in operation for the period ended 31 December 2023 and had cumulative EBITDA of £4.1m.

●   Capital Expenditure covenant that is tested annually on 31 December, requiring the Group to have incurred capital expenditure of not greater than prescribed values set out in the restated agreement. For the year ended 31 December 2023 the Group complied with this covenant and incurred Capital Expenditure of £4.7m.

Interest on the Group's loan facility is payable at the aggregate of a compound reference rate based on SONIA plus a rachet based on adjusted leverage of the loan, being ratio of total net debt to adjusted EBITDA, calculated in accordance with FRS102. The amount of rachet is set out in the table below, with any increase or decrease in the margin as a result of the margin rachet applying from the beginning of the next interest quarter.

Interest rate margin payable in addition to SONIA	Margin % per annum
Adjusted leverage
Less than 1.0x	3.25
Greater than or equal to 1.0x but less than 1.5x	3.50
Greater than or equal to 1.5x but less than 2.0x	3.75
Greater than or equal to 2.0x	4.00

In addition, a further interest charge accrues at a rate of 5% per annum on the amount of bank debt in excess of 2.5x adjusted leverage. This additional interest will become payable on the earlier of repayment of the loan, including under a refinancing, or at maturity of the loan on 1 January 2026.

The borrower subsidiary and guarantor Group companies under the facilities agreement and the Company's subsidiary Hostmore Group Limited have provided fixed and floating charges over all of their assets in support of the obligors' obligations under the facilities agreement. Hostmore plc has granted a debenture to Hostmore Group Limited and the obligor companies under the facility.

At 31 December 2023, and in accordance with the terms of the facility agreement, there was £1.5m of interest owed to the lenders which has been accrued in these financial statements.

Undrawn facilities

The Group had committed undrawn borrowing facilities at floating rates at 31 December 2023 as follows:

	31 December 2023 £'000	1 January 2023 £'000
Expiring between one and two years	5,600	22,500

Undrawn loan facilities incur a charge at 40% of the interest rate margin on the drawn facilities.

15.      Cash flows from operating activities

The Group's cashflows from operating activities arose as follows:

	52 weeks ended 31 December 2023 £'000		*Restated 52 weeks ended 1 January 2023 £'000
Loss for the period	(27,422)		(101,545)
Adjustments for non-cash items and amounts disclosed separately:
Depreciation of property, plant and equipment and right of use assets	17,964		20,504
Impairment reversal of property, plant and equipment and right of use assets	(5,570)		(5,712)
Impairment of property, plant and equipment and right of use assets	23,338		36,313
Impairment of goodwill	-		75,166
Finance income	(219)	(78)
Finance expense	14,615	12,662
Covid-19 rent concessions	-		(2,290)
Gain on disposal of property, plant and equipment	(133)		-
Gain on lease modification	(1,951)		-
Release of dilapidations provision	(465)		-
Income tax charge/(credit)	1,893		(6,801)
Share based payment charge	141		581
Cash flows from operating activities	22,191		28,800

* Refer to note 5. In the 52 week period ended 1 January 2023, depreciation of property, plant and equipment and right of use assets have been increased by £165k from previously reported £20,339k to £20,504k, impairment of property, plant and equipment and right of use assets have been decreased by £578k from previously reported £36,891k to £36,313k, impairment of goodwill have been increased by £4,308k from previously reported £70,858k to £75,166k, finance expense has been increased by £106k from previously reported £12,556k to £12,662k, increasing loss for the period by £4,001k from previously reported £97,544k to £101,545k. This has had no net effect on the cash flows from operating activities for the 52 weeks ended 1 January 2023 as previously reported of £28,800k.

16.     Subsequent events

On 16 April 2024, the Company announced that it had reached agreement on a non-binding basis for a proposed all-share acquisition of TGI Fridays, Inc. ("TGI Fridays") (the "Proposed Transaction"). TGI Fridays is the Company's franchisor and operates primarily through franchising and licensing agreements in the US and in 43 international markets. It also operates a network of company-owned stores in the US. The parties agreed that the Proposed Transaction would result in existing Hostmore shareholders holding a 36% shareholding in the enlarged business upon completion (the "Combined Group"), with TGI Fridays shareholders holding a 64% shareholding in the Combined Group. The Proposed Transaction is being negotiated on an exclusive basis and is subject to, among other things, completion of confirmatory due diligence and the parties entering into binding transaction documentation. The Proposed Transaction would be classified as a Reverse Takeover under the Listing Rules of the Financial Conduct Authority and therefore would be conditional upon the approval of an ordinary resolution by existing Hostmore shareholders. Should the parties enter into binding transaction documentation, a summary of the material terms and conditions of such documentation will be set out in a further announcement to the market.

On 26 April 2024, the parties to the facilities agreement referred to in note 14. signed a bank facility amendment agreement. Under the terms of this agreement, amongst other matters, certain covenants in the previous facility agreement were amended to align with the Group's updated business plan and the term of the facility was extended to 1 January 2026.

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