Final Results

City Centre Restaurants PLC 28 March 2001 City Centre Restaurants plc Preliminary Results for the year ended 31st December 2000 City Centre Restaurants plc, operates 307 branded restaurants across the UK. Its portfolio of brands includes Garfunkels, Frankie and Benny's, Caffe Uno, Est Est Est, Wok Wok, Chiquito's and Deep Pan Pizza. Financials Year ended Year ended 31st December 31st December 2000 1999 £'000 £'000 Turnover 217,608 205,291 EBITDA (pre exceptionals) 33,206 31,001 Operating profit (pre exceptionals) 19,742 20,384 Profit before tax (pre exceptionals) 15,974 18,077 Dividends per share 3.41p 3.41p Basic earnings per share (pre exceptional 6.26p 7.39p items) (after exceptional items) (4.53p) 7.39p * Management changed and strengthened at both Board and operational levels * Group resolved to operate with fewer brands * Board decision to reduce the carrying value of certain brands resulting in a one time exceptional item of £21.6 million * New openings restricted to performing brands and to internally generated cash flow * 15 new restaurants to open in the current year and 22 in 2002 Alan Jackson, Chairman said: 'City Centre has some excellent brands, but also some issues that need to be addressed. We will focus on fewer brands which will allow management to spend its time more effectively. Much has been achiveved already this year but further change will ensue in the pursuit of the restoration of shareholder value.' 28 March 2001 ENQUIRIES: City Centre Restaurants plc Tel: 020 7747 7750 Alan Jackson, Executive Chairman Andrew Guy, Chief Executive College Hill Tel: 020 7457 2020 Matthew Smallwood Justine Warren City Centre Restaurants plc Preliminary Results for the year ended 31st December 2000 Chairman's Statement On the 20th March 2001, I was appointed as Chairman of your Board. As a consequence, therefore, my comments will be more concerned with addressing the future than describing past performance. I am delighted to join City Centre Restaurants. I believe that the company operates some excellent brands, but equally has some issues that have to be addressed. It is my firm intention that in the future we will operate fewer brands, this being achieved through the disposal of non-core operations. We can then focus on the Company's high performance brands with expansion being funded by internally generated cash. Our aim will be to open some 15 new restaurants in the current year, principally in the Frankie & Benny's brand, and then a further 22 in 2002. We shall continue to take all appropriate courses of action necessary to create strong performance throughout the Group. At the same time the Board will continue to review all options available to enhance shareholder value. Final Dividend The Directors are proposing a final dividend of 2.66p (1999: 2.66p) per share bringing the total dividend for the year ended 31st December 2000 to 3.41p (1999: 3.41p) to be paid to shareholders on the register on 4th May 2001. Future Prospects The year has started well for Garfunkel's, Airports and Frankie & Benny's, all of which have positive like for like sales over the first twelve weeks of 2001. Caffe Uno is also showing positive signs of improvement under its new management, and, after a slow start in January, Chiquito's is producing some good results. The other brands have found trading conditions difficult, but we are confident that with new senior managers recently appointed to each of them, and a recovery strategy in place, we can greatly better the performance of the Group and consequently improve returns for shareholders. City Centre Restaurants plc Preliminary Results for the year ended 31st December 2000 Chief Executive's Review The year under review saw a considerable difference in the performance of our brands. Some delivered results in line with, or exceeding, our expectations, whilst others failed to maintain their previously strong track records. The Group's results for the year 2000 are below the Board's initial expectations for the year and, as a consequence, actions were taken during the final quarter to rectify the position and improve the Group's performance going forward. Results Turnover for the year ended 31st December 2000 was £217.6 million (1999: £ 205.3 million) an increase of 6%. Operating profit (before exceptional items) was £19.7 million (1999 : £20.4 million) and, after increased interest charges, profit before exceptional items and tax declined from £18.1 million to £16 million. Exceptional items in the year amounted to £21.6 million. These comprised principally of a provision for diminution in the carrying value of certain assets and payments made to executives on termination of their employment. Capital Expenditure Capital expenditure incurred during the year amounted to £31.2 million. The Group opened 26 new restaurants at a cost of £17.3 million and rebranded 5 restaurants at an additional cost of £2.4 million. The Group's flagship Chiquito's restaurant in Leicester Square, London was subject to a major refurbishment at a cost of £1.9 million and further refurbishments and additional equipment cost £9.6 million. At the year end there were 307 restaurants trading under the Group's brand names. Review of Operations Developed Brands Garfunkel's & Airport Restaurants The Garfunkel's management currently operate 49 restaurants, 21 of which are situated at major UK airports. The restaurants at the airports are principally Garfunkel's and Cafe Metro but also include three Caffe Uno and two Est Est Est. This division had another successful year with turnover ahead by 9.3% and profits by 6.5%. Like for like sales were ahead by 3.7%, reflecting a very good year for foreign tourists and UK visitors, especially to London, and increased passenger traffic through the airports. Measured by sales volume, the Group is now the second largest food and beverage operator at UK airports and with passenger traffic forecast to double from its present levels by 2015 this division is set to enjoy further success. Chiquito's Chiquito's now operates 28 Mexican restaurants, one of which continues to trade under the Nachos name. The year 2000 was largely affected by the closure for eleven weeks of the flagship restaurant in Leicester Square for refurbishment. However, since reopening, average weekly turnover at this restaurant has increased by 24%. Three other restaurants had major refurbishments and one new Chiquito's restaurant was opened during the year at Cheshire Oaks. The Nachos brand was shrunk from three units to one. Turnover and profits for this business were broadly in line with 1999, with like for like sales declining by 2.2%, largely due to the closures for refurbishments. Developing Brands Frankie & Benny's Frankie & Benny's continued to improve on the excellent results achieved in 1999. During the year ten new restaurants were opened, three of which were successful conversions of Deep Pan Pizza premises, and at the year end there were a total of 60 restaurants. Turnover and profits increased by 33% and 42% respectively, and like for like sales were ahead by 1.0%. We will maintain this successful expansion programme by opening approximately 12 new restaurants in 2001, nearly all in the second half. Caffe Uno Four new Caffe Uno restaurants were opened during the year bringing the total number in this brand to 68 at the year end. Although there were satisfactory increases in like for like sales at a number of the restaurants, overall like for like sales for this brand declined by 3.5%. Turnover for the year was ahead of 1999 by 3.6% but profits fell by 15.2%, largely due to the decline in like for like sales and increased labour costs as a result of high staff turnover. This brand is now under new management, a number of plans are already in place to improve sales and profits, and we are confident that its previous growth record will be restored. Est Est Est Est Est Est had a number of senior management changes during the year 2000 which, together with some poor performing restaurants, culminated in a very difficult year for this brand. The What's Cooking restaurant in Chester and the Wine Bar in Knutsford, which came with the original purchase in 1997, were sold during the year and these were replaced with two new restaurants in London, one being a conversion of the Nachos restaurant in Islington. Although turnover was ahead of 1999 by 8.5%, like-for-like sales fell by 3.1% and profits declined by 22.3%. This was principally as a result of number of menu changes which were ill conceived and very weak management of the London restaurants. Under new management these issues are now being addressed in order to restore profitability to previous levels. Wok Wok Wok Wok opened six new restaurants in the year making the total at the year end of 14. These new units are marginally profitable having not yet reached the levels they are capable of achieving. Turnover was ahead by 28.0% although like-for-like showed a decline of 4.4% and profits were down by 2.9%. A new management team was installed in January and is focusing on simplifying this operation in order to achieve profits and return on capital in line with our more successful brands. Deep Pan Pizza The number of Deep Pan Pizza restaurants was reduced from 63 at the start of the year to 54 at the year end. The declining number of restaurants in this brand accounts for the shortfall in turnover when compared with 1999, as like for like sales for the core estate of 48 units were level. For the year, this brand has posted a loss which is solely attributable to the restaurants sold during 2000 and the six units not considered to be part of the core estate. Despite the overall loss, the brand is still cash positive but having reviewed the carrying value of the assets the Board consider it prudent to make a provision for diminution of value. O K Diners This brand, although marginally profitable, was not considered to be part of the portfolio going forward and since the year end agreement has been reached to sell to its management. As a result thereof, a provision has been made in the 2000 Accounts against the carrying value of the assets. Management and Staff In October 2000 we saw the departure of James Naylor, the Chief Executive, and in December, Scott Charlesworth, a main board director, left the Company. Additionally, a number of other senior executives have departed. As previously announced on 20th March 2001, the Board has appointed Alan Jackson as Executive Chairman of the Group. He brings with him a wealth of experience in our sector and will greatly assist in setting the future direction of the Group. Henry King stood down as Chairman, and will retire from the Board in July. On behalf of the Directors and staff of City Centre Restaurants, I would like to thank him for his wisdom and guidance over the years. I also express my appreciation and offer my thanks to all of our staff who have worked hard in what has been a very difficult year. City Centre Restaurants plc Group Preliminary Results - Unaudited for the year ended 31st December 2000 Disclosure of Results before Exceptional Items Year ended 31st December Year ended 31st December 2000 1999 Turnover Profit Profit Turnover Profit Profit £'000 £'000 Margin £'000 £'000 Margin % % Developing 114,564 19,397 16.9% 98,786 19,028 19.3% Brands Developed Brands 77,552 12,979 16.7% 72,696 12,443 17.1% Principal 192,116 32,376 16.9% 171,482 31,471 18.4% Trading Brands Deep Pan Pizza 23,072 (854) -3.7% 30,080 788 2.6% OK Diners 2,420 85 3.5% 3,031 49 1.6% Discontinued - - - 698 (347) - Brands Non core Brands 25,492 (769) -3.0% 33,809 490 1.5% Total 217,608 31,607 14.5% 205,291 31,961 15.6% Pre-opening (982) (1,096) costs 217,608 30,625 14.1% 205,291 30,865 15.0% Administration (10,883) -5.0% (10,481) -5.1% Operating Profit 19,742 9.1% 20,384 9.9% Interest (3,768) (2,307) Profit before 15,974 18,077 Tax City Centre Restaurants plc Group Preliminary Results - Unaudited for the year ended 31st December 2000 Year Ended 31st December 2000 Group Profit and Loss Year ended Account 31st December Before 1999 Exceptional Exceptional items items Total £'000 £'000 £'000 £'000 Turnover 217,608 - 217,608 205,291 Cost of sales: Excluding pre-opening costs (186,001) - (186,001) (173,330) and exceptional items Pre-opening costs (982) - (982) (1,096) Provision for diminution in - (19,975) (19,975) - value of tangible fixed assets (186,983) (19,975) (206,958) (174,426) Gross Profit 30,625 (19,975) 10,650 30,865 Administrative expenses: Excluding exceptional items (10,883) - (10,883) (10,481) Exceptional items (note 2) - (1,147) (1,147) - (10,883) (1,147) (12,030) (10,481) Operating Profit/(Loss) 19,742 (21,122) (1,380) 20,384 (Loss) on disposal of - (459) (459) - tangible fixed assets Interest payable (net) (3,768) - (3,768) (2,307) (Loss)/Profit on Ordinary 15,974 (21,581) (5,607) 18,077 Activities before Taxation Tax on (loss)/profit on (3,804) 617 (3,187) (3,727) ordinary activities (note 3) (Loss)/Profit on Ordinary 12,170 (20,964) (8,794) 14,350 Activities after Taxation Dividends (note 4) (6,626) (6,626) Retained (Deficit)/Profit (15,420) 7,724 for the year (Loss)/Earnings per Share (note 5) Basic (Loss)/Earnings per 6.26p (10.79p) (4.53p) 7.39p share Diluted (Loss)/Earnings per 6.26p (10.79p) (4.53p) 7.38p share All amounts relate to continuing activities. There were no recognised Gains or Losses other than the loss for the year Reconciliation of Movements in Shareholders' Funds Total recognised gains and (8,794) 14,350 losses for the year Dividends (6,626) (6,626) Other movements: New shares issued - 29 Goodwill written back - 1,000 Total movements during the (15,420) 8,753 year Shareholders' funds at the 81,071 72,318 beginning of the year Shareholders' funds at the 65,651 81,071 end of the year City Centre Restaurants plc Group Preliminary Results - Unaudited for the year ended 31st December 2000 Group Balance Sheet 31st 31st December December 2000 1999 £'000 £'000 Fixed Assets Tangible Assets 158,505 162,144 Current Assets Stocks 2,634 2,419 Debtors 7,645 6,998 Cash at bank and in hand 5,116 221 15,395 9,638 Creditors: amounts falling due within one year (41,921) (54,306) Net current liabilities (26,526) (44,668) Total Assets less Current Liabilities 131,979 117,476 Creditors: amounts falling due after one year (61,313) (31,969) Provision for liabilities and charges: Deferred taxation (5,015) (4,436) 65,651 81,071 Capital and Reserves Called up equity share capital 48,576 48,576 Share premium account 10,192 10,192 Profit and loss account 6,883 22,303 Equity Shareholders' Funds 65,651 81,071 City Centre Restaurants plc Group Preliminary Results - Unaudited for the year ended 31st December 2000 Group Statement of Cash Flows Year ended Year ended 31st 31st December December 2000 1999 £'000 £'000 Net Cash Inflow from Operating Activities (note 32,537 27,524 1) Returns on Investments and Servicing of Finance Interest received 65 31 Interest paid (3,833) (2,338) Net Cash Outflow from Returns on Investments and Servicing of Finance (3,768) (2,307) Taxation Corporation tax paid (3,277) (2,373) (3,277) (2,373) Capital Expenditure Payments to acquire tangible fixed assets (32,679) (36,524) Receipts from sales of tangible fixed assets 394 245 Net Cash Outflow from Capital Expenditure (32,285) (36,279) Acquisitions and Disposals Payment and expenses for the acquisition of the minority interest in Est Est Est Group (2,038) (1,839) (2,038) (1,839) Equity Dividends paid (6,626) (6,022) Cash Outflow before Financing (15,457) (21,296) Financing Issues of ordinary share capital - 29 New loans received 30,000 30,000 Loans repaid (657) (656) 29,343 29,373 Increase in Cash in the year (note 6) 13,886 8,077 City Centre Restaurants plc Group Preliminary Results - Unaudited for the Year ended 31st December 2000 Notes 1. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Year ended Year ended 31st December 31st December 2000 1999 £'000 £'000 Operating (loss)/profit (1,380) 20,384 Exceptional items 19,975 - Depreciation 13,464 10,617 (Increase) in stocks (215) (348) (Increase) in debtors (175) (2,616) Increase/(Decrease) in creditors 868 (513) Net Cash Inflow from Operating Activities 32,537 27,524 2. Exceptional Items Payments made to executives on termination (1,147) - of employment and fees for corporate advice Provision for diminution in value of assets (19,975) - Loss on disposal of tangible fixed assets (459) - Exceptional items before taxation (21,581) - Tax on exceptional items 617 - (20,964) - 3. Taxation The taxation charge has been calculated by reference to the net (loss)/profit for the year. The effective tax rate before exceptional items is less than the standard rate of corporation tax because full provision has not been made for deferred tax. The actual tax charge for 2000 reflects the non-deductability of impairment write downs of £19,975,000 as shown in the exceptional items in note 2. 4. Dividends The directors will propose a final dividend of 2.66p (1999: 2.66p) per share bringing the total dividend for the year ended 31st December 2000 to 3.41p (1999: 3.41p). If approved this dividend will be paid on 8th June 2001 to Ordinary Shareholders on the Register at the close of business on 4th May 2001. City Centre Restaurants plc Group Preliminary Results - Unaudited for the Year ended 31st December 2000 Notes (cont'd) 5. Earnings per share Year ended Year ended 31st 31st December December 2000 1999 Basic (Loss)/Earnings per share Weighted average ordinary shares 194,301,732 194,278,718 in issue during the period Post Tax Post profit pence Tax pence £'000 per profit per share £'000 share Total basic (loss)/earnings for the period (8,794) (4.53) 14,350 7.39 Effect of exceptional items: Provision for diminution in value of 19,702 10.14 - - assets Exceptional administrative expenses 803 0.41 - - Loss on disposal of tangible fixed assets 459 0.24 - - 20,964 10.79 - - Earnings before exceptional items 12,170 6.26 14,350 7.39 Diluted (Loss)/Earnings per share Weighted average ordinary shares 194,301,732 194,278,718 in issue during the period Dilutive shares to be issued in respect of - 227,650 options granted under the Share Option Schemes 194,301,732 194,506,368 Diluted (loss)/earnings per share (pence) (4.53) 7.38 City Centre Restaurants plc Group Preliminary Results - Unaudited for the Year ended 31st December 2000 Notes (cont'd) 6. Reconciliation of Changes in Cash to the Movement in net debt Year ended Year ended 31st December 31st December 2000 1999 £'000 £'000 At beginning of the year (41,396) (20,129) Movements during the year: New loans drawndown (30,000) (30,000) Loans repaid 657 656 Cash inflow 13,886 8,077 (15,457) (21,267) At end of the year (56,853) (41,396) Represented by: Cash Flow Other At Movements Movements beginning during during At end of of the the the the year year year year £'000 £'000 £'000 £'000 Cash at bank and in 221 4,895 - 5,116 hand Bank overdraft (8,991) 8,991 - - Bank loan due within (657) 657 (656) (656) one year Bank loans due after (31,969) (30,000) 656 (61,313) one year (41,396) (15,457) - (56.853) Preliminary Financial Statements The financial statements have been prepared on the basis of the accounting policies set out in the Group's 1999 statutory accounts except for the adoption of Financial Reporting Standard ('FRS') 15 'Tangible Fixed Assets'. In previous years, no depreciation was charged against profit in respect of freehold properties. This was because it was considered that the length of lives and residual values of these buildings were such that any depreciation would be immaterial. Following the implementation of FRS 15, the asset lives and residual values attributable to certain fixed assets have been revised resulting in an additional depreciation charge on those assets of £105,000 (1999:£nil). Notes (cont'd) The financial information set out in this document does not constitute the Group's statutory accounts for the years ended 31st December 2000 or 31 December 1999. These preliminary results and the accounts for the year ended 31st December 2000 are subject to final audit and accordingly have not been reported on by the auditors or delivered to the Registrar of Companies. Statutory accounts for 1999 have been delivered to the Registrar of Companies. The Auditors' report on the statutory accounts for 1999 was unqualified and did not contain a statement under section 237 of the Companies Act 1985. Annual General Meeting The Annual General Meeting will be held this year in London on 5th June 2001 at 11.00am. Annual Report The Annual Report and Accounts for 2000 will be sent to all shareholders. Further copies of this report and the Annual Report for 1999 are available from the Company's office at 55/62 Wilton Road, London SW1V 1DE (Telephone: 020 7630 2800).

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