Final Results - Year Ended 31 December 1999

City Centre Restaurants PLC 28 March 2000 CITY CENTRE RESTAURANTS PLC Preliminary Results for the Year ended 31 December 1999 City Centre Restaurants plc is the largest, independent multi-site operator of branded restaurants in the UK and is listed on the London Stock Exchange. The Group's portfolio of core brands includes such well-known concepts as Caffe Uno, Garfunkel's, Wok Wok, Chiquito's, Est Est Est, Frankie & Benny's and Deep Pan Pizza. HIGHLIGHTS * Turnover up 10.5% to £205.0m (1998: £186.0m) * Operating profit up 12.4% to £20.4m (1998: £18.1m, excluding exceptional and non-recurring items) * Pre-tax profit rose to £18.1m (1998: £5.7m, after exceptional items) * Positive like for like sales and profit growth (excluding Deep Pan Pizza) * Basic earnings per share rose to 7.39p (1998: 2.10p) * Recommended final dividend of 2.66p (1998: 2.35p) per share, giving a total dividend for the year of 3.41p, which is 10% up on last year * Strong growth from Developing Brands where profits increased by 43% on turnover up 40%; Deep Pan Pizza trading has improved and like for like sales are now positive, up 4.3% for the first two months of the current year * 22 new units opened in 1999, plus rebranding of 24 restaurants and refurbishment of 52 sites; some 30 new openings planned for current year James Naylor, Chief Executive of City Centre Restaurants plc, commented: '1999 has been a year of progress and achievement. The Group has undergone a period of considerable upheaval as we have carried out an extensive rebranding and refurbishment programme to 26% of our total estate, yet we have delivered on our strategy and achieved a good uplift in operating profit. 'We have made substantial progress in repositioning our business to provide a clear focus on our principal brands. The current year has begun well and an encouraging start to trading in the first two months gives us confidence going forward. This, together with an increase in the rate of new openings, will contribute to the Group's future growth.' 28 March 2000 ENQUIRIES: City Centre Restaurants plc Today: 020 7457 2020 James Naylor, Chief Executive Thereafter: 020 7930 9324 John Wittich, Finance Director Thereafter: 020 7630 2800 College Hill Matthew Smallwood Justine Warren Tel: 020 7457 2020 CHAIRMAN'S STATEMENT I am pleased to report a year of progress and achievement. We have recorded a healthy uplift in operating profit even though a considerable number of restaurants have been closed for part of the year as a result of our previously reported extensive rebranding and refurbishment programme. The strategic decision which the Board took early in 1999 to focus on fewer brands has, in a short period of time, produced considerable benefits throughout the Group. Whilst we have continued to open new restaurants, and will be accelerating our opening programme this year, we have also successfully converted a number of restaurants to other of our leading concepts and disposed of some underperforming units where we did not see future potential. The results of these actions are already apparent and will, we believe, have a positive impact on our performance both in the current year and in the future. Results Operating profit for the year ended 31st December 1999 of £20.4m was an improvement of 12.4% compared to £18.1m in 1998, (operating profit before exceptional items and surrender of a lease). Turnover was ahead by 10.5% to £205m, (1998: £186m). Pre-tax profit for the year was £18.1m, (1998: £5.7m), and basic earnings per share were 7.39p, (1998: 2.10p). Net gearing was 51%, (1998: 28%) and interest was covered by operating profit 8.8 times. Capital Expenditure Capital expenditure incurred during the year amounted in total to £34m. The Group opened 22 new restaurants at a cost of £15m and rebranded 24 restaurants at an additional cost of £9m. Refurbishing a further 52 restaurants and other items of a general nature cost another £10m. At the year end there were 297 restaurants trading under the Group's brand names. Final Dividend The Directors are proposing a final dividend of 2.66p (1998: 2.35p) per share, bringing the total dividend for the year ended 31st December 1999 to 3.41p (1998: 3.10p), an increase of 10%, to be paid to shareholders on the register at 2nd May 2000. Review of Operations The Group has moved forward strongly in what has been a challenging year. In spite of the considerable disruption resulting from our rebranding programme, we have delivered what we set out to do and achieved a good uplift in operating profit. Trading conditions have been variable throughout the year. A strong summer followed a slow start to the year. Autumn trading was mixed but included an exceptionally strong half-term week which was followed by a satisfactory run up to Christmas. As expected Christmas and the Millennium falling over weekends was unhelpful but sales in the week in between were extremely good. As previously mentioned, the year as a whole was characterised by an abnormal amount of activity in restructuring and refurbishing our estate which affected 76 restaurants, 26% of the total. In all 1,800 trading days were lost as a result of this activity, compared with slightly less than half this number in a normal year. Whilst refurbishments will continue to form an ongoing role in our investment programme to ensure our restaurants remain fresh and contemporary, most of the conversion work was completed by the year end and we can look forward to less disruption in the year ahead. We have also sold or closed 29 poorly performing restaurants which, in the past year, accounted for approximately £600,000 of operating losses. Recently we have launched our own 'plc' and restaurant websites which we see forming an important part of our marketing mix. Further development is underway and we are exploring the promotional opportunities the internet can provide. Brand Highlights Developing Brands We continue to see strong growth from these brands which together posted a 43% increase in restaurant profit on turnover ahead by 40%. There are presently 65 Caffe Uno's, nine of which opened last year. It is now over six years since the brand was conceived and there is a rolling programme in place to refresh these restaurants to ensure they retain their customer appeal. Last year we refurbished eight restaurants and plan to refurbish a similar number this year. The Caffe Uno brand showed a strong uplift in profit in 1999 and is budgeted to show further advances this year. Frankie & Benny's, which was recently cited in an industry report as the fastest growing full service restaurant brand in the UK, is proving to be an immensely successful brand in our portfolio. Today there are 55 of these restaurants, of which 14 have been converted from Deep Pan Pizzas. In 1999 we carried out 11 of these conversions and also opened 7 new restaurants. Since the year end, we have completed the other three conversions and opened a further two new units. Mostly located on leisure parks, the brand nevertheless has demonstrated a clear destination element and although it naturally benefits from popular film releases, it also trades well on its own account. Recently we opened our fifth Frankie & Benny's in a high street location in Newcastle and its initial success encourages us in our belief the brand has wider applications. We have also seen a healthy growth in profits from our 24 Est Est Est restaurants. Last year we converted three Nacho's outlets in London to Est Est Est and these are trading successfully. We also opened another new restaurant in Glasgow. This year we have plans to open at least a further five of these branded restaurants, one of which will be a conversion of a Nachos in Islington and two will be at Heathrow and Gatwick airports. During the year we crystallised an agreement with the founders of Est Est Est, Derek and Edwina Lilley, to acquire their remaining 10% interest in the brand for £3.65m of which £1.75m was paid in 1999 and the remaining £1.9m will be settled in April this year. Full provision was made for this liability in previous years. The Est Est Est brand will continue to be operated by our strong, management team based in Knutsford, as before. Wok Wok has almost doubled its profit in the past year. There are now nine of these restaurants offering a fusion of oriental cuisines in contemporary surroundings. We opened a new and popular restaurant in Marlow last year and have very recently opened another restaurant in Richmond which is already trading well. Further openings are scheduled in Brighton and Edinburgh shortly and new sites are being actively canvassed for future development. Developed Brands Garfunkel's will be celebrating its 20th anniversary this year. Throughout this time it has proved to be an evergreen brand with a unique formula, operating equally successfully on busy high streets and at airport terminals. Last year was no exception and once again the brand has posted increases in sales and profits. As previously reported, trade in central London was marginally affected by a decline in the number of tourists but this was more than compensated by the growth in passenger volumes at airport terminals where we continue to have a strong presence. At the year end, this brand's operations encompassed 47 restaurants, of which 17 are located at airports. Looking forward, I am pleased to announce we shall shortly be opening two new restaurants at Stansted airport which will further extend our reach in this important marketplace. A new management team is bringing fresh impetus to our Mexican restaurant division. Like for like sales are growing and the prospects for this year are encouraging. Last year we opened six new Chiquito restaurants, including four conversions from Rick Shaw's, a brand we decided to discontinue. We also embarked on a programme of refurbishment which is continuing with a total refit of our high volume restaurant in Leicester Square. More recently we opened a new restaurant in Cheshire which is already generating sales well ahead of expectations. Today, there are 29 Mexican restaurants including the two remaining Nachos restaurants which form part of this area of our business. Four other Nachos restaurants have been, or are being, rebranded as Est Est Est restaurants. Deep Pan Pizza We are well advanced with our plan to focus on the 49 restaurants we consider to form the core of this brand. We are currently trading from 59 Deep Pan Pizza outlets as compared with 89 at the start of last year. Of the total reduction of 30 units, 16 of the best performing restaurants have been converted to other brands with the remaining 14 being disposals. Three of these conversions and one disposal have been completed since the year end. Further disposals and lease expiries will, over time, account for the remaining 10 units which do not meet our ongoing plans for this brand. Our new management team are now successfully rebuilding the brand. During 1999 they have refurbished 34 restaurants and plan to refurbish the remaining 15 in the current year. Total sales of this brand are lower than in previous years due to the reduction in the number of restaurants. The decline in sales of the present units in the brand has been halted and they are now growing. In the second half of 1999 like for like sales declined by 1.5% as compared with a decline of 10.5% in the first half. In the first two months of this year like for like sales grew by 4.3%. From now on, we expect to see this brand to continue improving on the back of superior standards of service which are attracting favourable customer comment. OK Diners In September, we stated we had made considerable progress in reducing the number of OK Diner roadside restaurants we operate from 22 to 11. Since then we have disposed of one further site. The remaining ten units produce a modest operating profit and will continue to be managed by the Group. Management and Staff I would like to express my appreciation and offer my thanks to all our staff who have worked hard in the last year to bring about the changes which are now contributing to our much improved performance. The Group's operations are supported by a talented and professional management team who, together with all our employees, have been assiduous in promoting the standards of service and delivery we seek to give all our customers. Our future success depends on training, rewarding and motivating employees at every level within the Group and we believe we have these foundations in place to ensure we can grow our business with confidence. Strategy and Development We plan to continue to grow our principal brands in the expanding casual dining market. There will be selective growth in relation to our developed brands and a more rapid roll-out of our developing brands. We have restricted the number of brands which we operate but retain the flexibility of exploring other opportunities for growth so as to keep abreast of changes in the marketplace. This year we aim to open some 30 more restaurants and are already well advanced in our site acquisition programme. Future Prospects We have made substantial progress in the past year towards repositioning our business to provide a clear focus on our principal brands which now account for 98% of our restaurant profit. The rewards of the investment we have made, both financially and in management time, are now becoming evident in our improved performance. The year has begun well and strong trading in the first two months of the year gives us confidence for the remainder of the year. Unaudited Preliminary Results for the Year ended 31 December 1999 Disclosure of Results before Exceptional Items Year ended 31 December 1999 Year ended 31 December 1998 Rest Turn Profit Margin Rest Turn Profit Margin aurants over £'000 % aurants over £'000 % Trading £'000 Trading £'000 at year at year end end Developing Brands 148 98,786 19,028 19.3% 118 70,338 13,334 19.0% Developed Brands 76 72,696 12,443 17.1% 72 70,507 12,231 17.3% Principal Brands 224 171,482 31,471 18.4% 190 140,845 25,565 18.2% Deep Pan Pizza 63 30,080 788 2.6% 89 38,567 3,520 9.1% OK Diners 10 3,031 49 1.6% 22 4,178 (56) -1.4% Discontinu ed Brands - 698 (347) 4 2,277 (299) Pre- opening (1,096) (1,271) costs 297 205,291 30,865 15.0% 305 185,867 27,459 14.8% Compensati on for surrender of lease - 1,197 Administra tion (10,481) -5.1% (9,326) -5.0% expenses Operating Profit 20,384 9.9% 19,330 10.4% Interest Payable (2,307) (net) (1,282) Profit before tax 18,077 18,048 Unaudited Preliminary Results for the Year ended 31 December 1999 Group Profit and Loss Account Year ended 31 December 1998 Year Before ended 31 Except Except December Total ional ional 1999 £'000 items items £'000 £'000 £'000 Turnover 205,291 185,867 185,867 - Cost of sales: Excluding pre-opening costs (173,330) (157,137) (157,137) - and exceptional items Pre-opening costs (1,096) (1,271) (1,271) - Compensation for surrender of Lease - 1,197 1,197 - Provision for diminution in value of tangible fixed assets - (9,814) - (9,814) (174,426) (167,025) (157,211) (9,814) Gross Profit 30,865 18,842 28,656 (9,184) Administrative expenses: Excluding exceptional items (10,481) (9,326) (9,326) - Exceptional items: Provision for payment due to the originator and Managing Director of Caffe Uno division - (2,016) - (2,016) Abortive costs relating to disposal of restaurants - (506) - (506) (10,481) (11,848) (9,326) (2,522) Operating Profit 20,384 6,994 19,330 (12,336) (Loss) on disposal of tangible fixed assets - (39) - (39) Interest payable (net) (2,307) (1,282) (1,282) - Profit on Ordinary Activities before Taxation 18,077 5,673 18,048 (12,375) Tax on profit on ordinary activities (note 2) (3,727) (1,600) (3,218) 1,618 Profit on Ordinary Activities after Taxation 14,350 4,073 14,830 (10,757) Dividends (note 3) (6,626) (6,021) Retained Profit/(Deficit) for the year 7,724 (1,948) Earnings per Share (note 4) Basic Earnings per share 7.39p 2.10p 7.64p (5.54p) Diluted earnings per share 7.21p 2.07p 7.52p (5.45p) All amounts relate to continuing activities. There were no recognised Gains or Losses other than the profit for the year Reconciliation of Movements in Shareholders' Funds Total recognised gains and losses for the year 14,350 4,073 Dividends (6,626) (6,021) Other movements: New shares issued 29 37 Goodwill written back/(off) 1,000 (2,000) Total movements during the 8,753 (3,911) year Shareholders' funds at the beginning of the year 72,318 76,229 Shareholders' funds at the end of the year 81,071 72,318 Unaudited Preliminary Results for the Year ended 31 December 1999 Group Balance Sheet 31 December 31 December 1999 1998 £'000 £'000 Fixed Assets Tangible Assets 162,144 138,121 Current Assets Stocks 2,419 2,071 Debtors 6,998 4,382 Cash at bank and in hand 221 901 9,638 7,354 Creditors: amounts falling due within one year (54,306) (61,679) Net current liabilities (44,668) (54,325) Total Assets less Current Liabilities 117,476 83,796 Creditors: amounts falling due after more than (31,969) (7,626) one year Provision for liabilities and charges: Deferred taxation (4,436) (3,852) 81,071 72,318 Capital and Reserves Called up equity share capital 48,576 48,561 Share premium account 10,192 10,178 Profit and loss account 22,303 13,579 Equity Shareholders' Funds 81,071 72,318 Unaudited Preliminary Results for the Year ended 31 December 1999 Group Statement of Cash Flows Year ended Year ended 31 December 31 December 1999 1998 £'000 £'000 Net Cash Inflow from Operating Activities (note 1) 27,842 32,225 Returns on Investments and Servicing of Finance Interest received 31 51 Interest paid (2,338) (1,333) Net Cash Outflow from Returns on Investments and Servicing of Finance (2,307) (1,282) Taxation Corporation tax paid (2,373) (3,873) (2,373) (3,873) Capital Expenditure Payments to acquire tangible fixed assets (36,524) (39,844) Receipts from sales of tangible fixed assets 1,025 3,473 Payments for lease surrenders and expenses of (1,098) - disposals Net Cash Outflow for Capital Expenditure (36,597) (36,371) Acquisitions and Disposals Payment and expenses for the acquisition of the minority interest in Est Est Est Group (1,839) - (1,839) - Equity Dividends paid (6,022) (6,019) Cash Outflow before Financing (21,296) (15,320) Financing Issues of ordinary share capital 29 37 New loans received 30,000 - Loans repaid (656) - 29,373 37 Increase/(Decrease) in Cash in the year (note 5) 8,077 (15,283) Notes 1. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Year ended Year ended 31 December 31 December 1999 1998 £'000 £'000 Operating profit 20,384 6,994 Exceptional items - 9,814 Depreciation 10,935 10,007 (Increase)/Decrease in stocks (348) 146 (Increase) in debtors (2,616) (620) (Decrease)/Increase in creditors (513) 5,884 Net Cash Inflow from Operating Activities 27,842 32,225 2. Taxation The taxation charge has been calculated by reference to the net profit for the year. The effective tax rate is less that the standard rate of corporation tax because full provision has not been made for deferred tax. 3. Dividends The directors will propose a final dividend of 2.66p (1998: 2.35p) per share bringing the total dividend for the year ended 31 December 1999 to 3.41p (1998: 3.10p). If approved this dividend will be paid on 1 June 2000 to Ordinary Shareholders on the Register at the close of business on 2 May 2000. 4. Earnings per share Year ended 31 December Year ended 31 December 1999 1998 Basic Earnings per share Weighted average 194,278,718 194,195,129 ordinary shares in issue during the period Post Tax pence per Post Tax pence per profit share profit share £'000 £'000 Total basic earnings for the period 14,350 7.39 4,073 2.10 Effect of exceptional items: Provision for diminution in value of assets - - 9,169 4.72 Provision for payment due to the originator and Managing Director of the Caffe Uno - - 1,114 0.58 division Abortive costs relating to disposal of restaurants - - 448 0.23 Loss on disposal of tangible fixed - - 26 0.01 assets - - 10,757 5.54 Earnings before exceptional items 14,350 7.39 14,830 7.64 Diluted earnings per share Weighted average ordinary shares in issue during the 194,278,718 194,195,129 period Shares to be issued in respect of options granted under the Executive 925,000 Share Option Schemes 3,350,175 Shares to be issued in respect of options granted under the SAYE Share 1,281,604 1,988,854 Option Scheme 198,910,491 197,108,983 Diluted earnings per share (pence) 7.21 2.07 5. Reconciliation of Changes in Cash to the Movement in net (Debt)/Funds Year ended Year ended 31 31 December December 1999 1998 £'000 £'000 At beginning of the year (20,129) (4,846) Movements during the year: New loans drawndown (30,000) - Loans repaid 656 - Cash inflow/(outflow) 8,077 (15,283) (21,267) (15,283) At end of the year (41,396) (20,129) Represented by At Movements At end of beginning the of the year during the year year £'000 £'000 £'000 Cash at bank and in hand 901 (680) 221 Bank overdraft (17,748) 8,757 (8,991) Bank loans (3,282) (29,344) (32,626) (20,129) (21,267) (41,396) 6. Acquisition of Subsidiary Undertaking Under the terms of the acquisition agreement for Est Est Est Group the outstanding 10% of the equity of Est Est Est Restaurants Limited, not owned by the Company, has been acquired by the Company from Mr and Mrs Lilley. In accordance with the agreement, the minimum purchase price of £1,750,000 was paid in 1999 and the balance will be discharged in 2000 when the audited accounts are available. The total purchase price and costs associated therewith are not expected to exceed £4,000,000 and therefore £1,000,000 of the provision of £5,000,000 has been released directly to reserves. Preliminary Financial Statements The financial information set out in this document does not constitute the Group's statutory accounts for the years ended 31 December 1999 or 31 December 1998. These preliminary results and the accounts for the year ended 31 December 1999 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 1998 have been delivered to the Registrar of Companies. The Auditors' report on the statutory accounts for 1998 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 Scotland at the George Inter-Continental Hotel, 19-21 George Street, Edinburgh, EH2 2PB on Wednesday, 24 May 2000 at 11.00am. Annual Report The Annual Report and Accounts for 1999 will be sent to all shareholders. Further copies of this report and the Annual Report for 1998 are available from the Company's office at 55/62 Wilton Road, London SW1V 1DE (Telephone: 020 7630 2800)

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