Final Results

RNS Number : 4692R

Restaurant Group PLC

09 March 2016

 

The Restaurant Group plc

Final results for the 52 weeks ended 27 December 2015

·      2015 results

-       Group revenues £685m	up 7.9%
-       Like-for-like sales	up 1.5%
-       EBITDA £128.0m	up 9.4%
-       Operating profit £88.9m	up 10.5%
-       Profit before tax £86.8m	up 11.2%
-       EPS 33.8p	up 12.8%
-       Free cash flow £97.2m	up £11.7m

·      Record financial performance

·     Full year dividend 17.4p, up 13%

·      Good progress on new openings

-       44 new sites opened in the year

-       New sites generating consistently strong returns on investment

-      Strong pipeline of new sites

·      Business well positioned for further profitable growth in 2016 and beyond

Danny Breithaupt, Chief Executive commented:

 "TRG has made good progress in 2015 and, despite difficult trading conditions, delivered double digit growth in profits and earnings per share. Our strategy of improving the balance of the portfolio is starting to take shape. During the year we opened 44 new restaurants and pubs, taking us past 500 sites for the first time, an important milestone for the business. Our new sites are set to deliver strong returns.

In common with most consumer businesses we will again have some challenges to face in 2016. However, I am confident that the underlying strengths of our business will enable us to successfully navigate our way through this more challenging external environment.

TRG is a people business and these results could not have been achieved without the hard work, dedication and commitment of all our teams across the country. I would like to take this opportunity to thank all of our people for their contribution and I look forward to leading them through what I am sure will be another exciting year for TRG in 2016."

Enquiries:

The Restaurant Group
Danny Breithaupt, Chief Executive	020 3117 5001
Stephen Critoph, Chief Financial Officer	020 3117 5001
Instinctif:
Matthew Smallwood	020 7457 2020

Notes:

1.   The Restaurant Group plc (the Group) operates over 500 restaurants and pub restaurants in the UK. Its principal trading brands are Frankie & Benny's, Chiquito and Coast to Coast. The Group also operates Pub restaurants and a Concessions business which trades principally at UK airports.

2.   Nothing in this announcement should be construed as a profit forecast.

Chairman's statement

I am pleased to report that the Group has delivered another record set of financial results in 2015, with double digit growth in profits and earnings per share and strong growth in cash flow generation. This has been achieved despite a more challenging trading backdrop.

We made good progress on our opening programme with a total of 44 new restaurants opened during the year, taking us past the 500 mark for the first time. The Group has a consistent and successful track record established over a number of years of opening new restaurants. We expect to open a similar number of restaurants during 2016.

During the year the Group created over 1,500 new jobs and at the end of the year, we employed over 16,000 people. Good people are the life blood of our business and the continued growth and success of the Group is the product of the hard work, experience and dedication of all our staff. On behalf of the Board, I would like to record our thanks and appreciation to all our colleagues across the country.

As a result of this record financial performance, the Board is recommending a final dividend of 10.6 pence per share to give a total for the year of 17.4 pence per share, an increase of 13% on the prior year. The dividend is covered 2x by earnings per share in line with our stated dividend policy. Subject to shareholder approval at the Annual General Meeting to be held on 12 May 2016, the final dividend will be paid on 6 July 2016 and the shares will be marked ex-dividend on 16 June 2016.

This is my last Chairman's statement. As announced earlier this year I will be retiring at the end of the AGM on 12 May 2016. This will be the end of a 15 year journey for me during which time we have transformed the Company from being loss making in 2001 to the successful business of today.

It has been a terrific journey but now is the time to hand over to my successor Debbie Hewitt. As I said earlier this year when Debbie's appointment was announced, I am delighted that she has agreed to succeed me. Debbie has strong business credentials and I know she will add insight and guidance to the Board as she leads the Company through the next stages of growth.

TRG has a great team of people led by Danny Breithaupt and a strong roster of market-leading brands and offerings, backed by the financial resources to maximise the opportunities over the coming years. I am therefore confident that TRG will continue to make strong and profitable progress.

Alan Jackson

Chairman

9 March 2016

Business review

Overview of the year

2015 has been another year of good progress with growth in turnover, profits and cash flow. Turnover was up 8% and profit before tax was up 11%, a strong result against the backdrop of a challenging market. Free cash flow increased by £11.7m to £97.2m. We have started to change the balance of the portfolio with the mix of the restaurants we opened during the year. These are performing well and are set to deliver returns on investment in line with our usual parameters.

Trading patterns during the year were at times volatile, with weekends generally being strong, but midweek trading continuing to be softer. We had some strong trading periods, particularly in the first half of the year. There were also some more challenging periods, particularly towards the end of the year, when we saw weaker consumer demand exacerbated by floods in the North of the country and lower retail footfall. Against this backdrop the full year like-for-like sales performance of 1.5%, which was in line with the wider market, represents a creditable performance.

Brands

Frankie & Benny's (261 units)

Frankie & Benny's delivered growth in turnover, margins and profits. The new menu launched during the year included some rationalisation to reduce the total number of items, while at the same time introducing a greater element of freshness. Breakfast continues to be a growing and successful part of the business and further improvements to this are being introduced during 2016. A new App for the brand was launched towards the end of the year which is proving popular with our guests and enables us to collect much more granular information about our customers, their spending patterns and preferences. Of all our brands, Frankie & Benny's is the most exposed to some of the underlying challenges around retail footfall and the increased number of competitor openings and we have certainly seen the impact of this, particularly in the more retail focused locations. During the year we opened 14 new restaurants in this brand and we expect to open a similar number in 2016. The breadth of appeal of Frankie & Benny's, particularly to families, combined with high levels of customer recognition both contribute to its enduring success. This is evidenced by strong performances from our new openings and continuing high levels of individual site profitability.

Chiquito (86 units)

Chiquito had another good year with strong growth in turnover, margins and profits. The major changes introduced into this brand some years ago continue to generate significant improvements in trading performance. During the year we opened nine Chiquito restaurants, which are trading extremely well. We expect to open a similar number during 2016 and we see this as a key growth engine for the Group over the next few years. The core target market for this brand is young adults, a distinct market segment to both Frankie & Benny's and Coast to Coast.

Coast to Coast (21 units)

Coast to Coast also had a good year with growth in turnover and profits. Having opened our first Coast to Coast in Brighton at the end of 2011, this brand has carved out a distinctive market position for itself as a brand very much focused on the adult market looking for a more premium offering in a more sophisticated environment. During the year we opened eight Coast to Coast restaurants and we are very pleased with how these are performing.  Stand out new openings for this brand during the year were at the Trafford Centre and the Aberdeen Union Square development. We expect to open between five and seven sites in 2016. As with Chiquito, this brand will become an increasingly important driver of growth for the Group going forward.

Pub restaurants (54 units)

Our Pub restaurant business performed extremely well in 2015. There is a growing market for this traditional, quality, food-led pub offering. Our pubs have broad appeal and in particular attract the affluent grey market. During the year we opened three new Pub restaurants. We are broadening the geography of this business, which has historically been focused on the North West and South East. In particular we are now opening sites in the Midlands. The pipeline for 2016 is well developed and we expect to open between five and seven new pubs during the year.

Concessions (61 units)

Concessions had a year of strong growth in turnover and profit. During the year we opened seven new units, notable among which were three prominent units at the redeveloped Stansted Airport, including the first Coast to Coast in an airport environment. During 2016 we expect to open two to four new concession outlets.  We have a market-leading position in this sector, which continues to have strong underlying fundamentals in terms of passenger growth and dwell times.

Business model, strategy and market developments

Operating in the growing UK eating out market, our core objective is to grow shareholder value by building a business which delivers long-term, sustainable and growing cash flows. Within this market our strategy is to focus on areas where there are meaningful barriers to entry, good growth prospects and strong returns. Our growth model is primarily based on organic roll out of new sites across our portfolio of brands.

Our various different brands and offerings, most of which have been internally developed, address differing occasions and segments of the market. This means that, depending on market size, we can often open multiple brands alongside each other in the same location and each will deliver strong financial returns. Whilst most of our new sites are leasehold, we also acquire freehold premises where these give a satisfactory level of return.  Although not a core part of our development plans, we will consider acquisitions of existing businesses where there is a clear strategic rationale and where this would enhance shareholder returns.

Our market continues to develop to meet changing tastes and trends in consumer behaviour. The growth of online shopping, resulting in lower footfall at some of the retail schemes where we operate has clearly had an impact. In addition, a greater range and number of branded restaurant offerings and food-led pubs run by a number of operators are providing a higher level of competition. We are very much alive to these changes, which we monitor closely. We will continue to adapt and evolve our business as necessary in order to navigate our way through this changing environment and to ensure that we continue to deliver strong returns for shareholders.

Business strengths

TRG is well placed to continue performing strongly in the current market environment and will continue to benefit from the core strengths and competencies of the Group.

1.   Range of brands and offerings

TRG has a well segmented range of brands and offerings appealing to different audiences and occasions. We believe this is a unique attribute of our business. In our Leisure portfolio, Frankie & Benny's main focus is the family market where it continues to enjoy huge loyalty and success. Our Chiquito business is focused on the young adult market, people looking for a higher tempo occasion. Coast to Coast is designed to appeal to a more affluent adult market with a more sophisticated menu and environment. The fact that these three brands all have their own specific market segments means that they can be co-located and operate successfully in the same geographical location. Our Pub business appeals to another type of occasion and has broad appeal across a range of age groups, also attracting the affluent grey market. Finally, in our Concessions business we have a market-leading position providing food and beverage offerings in UK airports, where we continue to benefit from growing passenger numbers and dwell times.

2.   Roll out capability

All of the brands described above have substantial roll out scalability in the UK. We are confident that we can expand the Group to 850+ restaurants, all financed out of internally generated cash flow. As we have clearly demonstrated in the past the Company has the financial and operational capability to deliver this scale of roll out successfully while maintaining consistently high levels of return.

3.   Infrastructure and people

The Company has strong infrastructure in terms of people, processes and systems to successfully manage a growing business of this size and scale. We have strengthened our teams and other elements of infrastructure in recent years to support the continued growth of the Group.

4.   Financial strength

The Group's financial strength and disciplined focus on return on investment and cash flow means that we have the financial capacity to deliver on our long-term growth objectives. This financial strength also means that we can continue to invest in maintaining our existing sites and infrastructure to a high standard and at the same time pay a growing level of dividend.

Business priorities

During 2016 our priorities will be:

·      Continued focus on improving levels of customer service and food quality to ensure that our guests always have a great experience when they visit one of our restaurants or pubs. We are implementing new guest experience measurement processes during 2016 to ensure we are able to properly monitor and respond to the feedback appropriately.

·      Ongoing evolution and development of our brands and offerings to ensure they remain relevant to the changing tastes of UK consumers. During 2016, building on the work undertaken in Frankie & Benny's during 2015, we will continue to evolve our menus to ensure that they stay relevant. These developments include a new breakfast menu in Frankie & Benny's, introduction of a street food section on the Chiquito menu and a new menu in Coast to Coast including some fresher and lighter options.

·      Continuing to exploit new technology to improve our business, whether this be improved back of house systems or leveraging the new Frankie & Benny's App referred to earlier, to improve guest communication and experience.

·      Managing our cost base to ensure we continue to run the business efficiently. In 2016 this will include initiatives to mitigate the impact of the National Living Wage, such as better rostering and improved labour productivity. We will also be maintaining our relentless focus on driving efficiencies in our supply chain, whilst at the same time closely managing all other areas of our cost base.

·      Open new restaurants which continue to provide good returns on investment. At the same time we will continue to develop our pipeline of future openings to secure the continued successful roll out of our brands in future years.

Current trading and outlook

After 10 weeks trading in 2016 total sales are up by 6% and like-for-like sales are down by 1.5%. The more challenging trading conditions we saw at the end of last year have continued into the early part of 2016, reflecting a softening in consumer demand and weaker overall consumer confidence. Whilst still early in the year, our assessment is that this more challenging environment and recent trading patterns are likely to persist.  Although total sales will continue to increase as our new restaurants open and deliver good returns, in the current environment consistent like-for-like sales increases are likely to be difficult to generate.

However, notwithstanding this backdrop, we are confident that the underlying strengths of our business and brands, combined with the mitigating actions we are taking, will ensure that TRG continues to making profitable progress in 2016 and the years ahead.

Financial review

Results

TRG performed strongly again in 2015 with good growth in turnover and profits, summarised in the table below:

	2015	2014	%
	£m	£m	change
Revenue Site EBITDA	685.4 170.5	635.2 154.4	+7.9% +10.4%
Branch profit	132.3	118.6	+11.5%
%	19.3%	18.7%
Administration	(38.0)	(33.4)
Underlying operating profit	94.3	85.2	+10.7%
%	13.8%	13.4%
Pre-opening costs	(5.4)	(4.7)
EBITDA %	128.0 18.7%	117.0 18.4%	+9.4%
Operating profit	88.9	80.5	+10.5%
%	13.0%	12.7%
Interest	(2.1)	(2.4)
PBT	86.8	78.1	+11.2%

Total revenue increased by 7.9%, a product of 1.5% like-for-like sales growth and the impact of new openings. Total EBITDA for the year was £128m, an increase of 9.4% on the prior year and operating profits increased by 10.5% to £88.9m. Group operating margin for the year was 13.0%, an increase of 30 basis points on the prior year. Within this, our administration cost base increased as a percentage of turnover by 30 basis points, reflecting the increase in resource in many of our central support functions during the latter part of 2014. This was more than offset by efficiencies elsewhere and the benefit of minimal food cost inflation, resulting in the overall 30 basis point improvement in margin.
 

Interest costs were a little lower this year, partly due to a lower level of average net debt during the year and partly due to improved terms under the new financing arrangements which were completed in June. This resulted in total profit before tax of £86.85m, an 11.2% increase on the prior year. The average tax rate in the year was 22.4%, a little lower than the prior year, resulting in earnings per share of 33.8p, an increase of 13% on the prior year.

Cash flow

Cash generation was again strong. Free cash flow increased by over 13% to £97.2m. After development capital expenditure of £55.1m, £32.1m of dividend payments and other non-trading items, net debt reduced by £10.2m in the year to £28.4m at year end. Set out below is a summary cash flow for the year:

	2015	2014
	£m	£m
Operating profit	88.9	80.5
Working capital and non-cash adjustments	7.5	8.0
Depreciation	39.1	36.5
Operating cash flow	135.5	125.0
Net interest paid	(1.0)	(1.3)
Tax paid	(17.6)	(18.2)
Maintenance capital expenditure	(19.7)	(20.0)
Free cash flow	97.2	85.5
Development capital expenditure	(55.1)	(50.1)
Dividends (ordinary)	(32.1)	(29.5)
Purchase of shares for EBT	(1.7)	(5.3)
Other items	1.9	2.7
Net cash flow	10.2	3.3
Net bank debt brought forward	(38.6)	(41.9)
Net bank debt carried forward	(28.4)	(38.6)

Cost inflation

Food cost inflation continued to be negligible during 2015. This was due to a number of factors including the relative strength of sterling against the Euro, generally good harvests in recent years and a slowdown in demand from China and other emerging markets. In addition, we have continued to focus on the rationalisation of our supply chain as part of our continuous drive to improve efficiency in this area. We expect the outlook for food and beverage inflation in 2016 to continue to be benign.

During 2015 we saw a significant increase in underlying wage cost inflation above and beyond the minimum wage increases. We expect this to be a continuing trend for the time being, particularly given the introduction of the National Living Wage in April, which will add some £2m of incremental direct cost in 2016. The most recent data suggests that the pace of wage inflation may be abating, however any benefit from this is likely to be offset by the National Living Wage impact.

Our other two largest costs items are rent and utility costs. Rental inflation continues to increase modestly, driven by better underlying economic fundamentals. Utility cost inflation on the other hand continues to be negligible, with reductions in the wholesale cost of energy being offset by increases in regulatory and infrastructure levies.

Capital expenditure

During the year the Group invested a total of £74.8m in capital expenditure compared to £70.1m in the prior year. We invested £19.7m in maintenance and refurbishment expenditure and £55.1m in development expenditure. During the year we opened a total of 44 new sites. 10 sites closed in the year including a number of marginal end of life leases which we declined to renew. In addition we closed a number of airport concessions which had reached the end of their contractual life, although in a number of cases these have been replaced with new sites (e.g. Stansted Airport). The table below summarises openings and closures during the year:

	Year end 2014	Opened	Closed	Transfers	Year end 2015
Frankie & Benny's	247	14	(1)	1	261
Coast to Coast/Filling Station	20	8	-	-	28
Chiquito	80	9	(3)	-	86
Garfunkel's	15	-	-	(2)	13
Joes Kitchen	-	3	-	-	3
Pub restaurants	52	3	(1)	-	54
Concessions	58	7	(5)	1	61
Total	472	44	(10)	-	506

Financing and key financial ratios

During the year the Group renewed its £140m credit facility, which now runs until June 2020. The new facility is on generally more favourable terms than the previous facility and this has contributed to a modest reduction in our interest costs. The key covenant tests are the same as under the previous arrangement. These are summarised in the table below with other key financial ratios:

	Banking covenant	2015	2014
Banking covenant ratios:
EBITDA / interest cover	>4x	63x	49x
Net debt / EBITDA	<3x	0.24x	0.34x
Other ratios:
Fixed charge cover	n/a	2.7x	2.7x
Balance sheet gearing	n/a	10%	16%

Tax

The total trading tax charge for the year was £19.4m, summarised as follows:

	2015	2014
	£m	£m
Corporation tax	19.1	18.1
Deferred tax	0.3	(0.1)
Total	19.4	18.0
Effective tax rate	22.4%	23.0%

The effective trading tax rate for the year was 22.4% compared to 23.0% in the prior year. The lower tax rate reflects the ongoing reduction in the mainstream corporation tax rate and we would expect to see a further small reduction in 2016. As noted in previous reports the Group's effective tax rate will continue to be higher than the headline UK tax rate primarily due to our capital expenditure programme and the significant levels of disallowable capital expenditure therein.

Definitions

Fixed charge cover - calculated by dividing EBITDAR (operating profit before depreciation and rent) by the sum of interest and rent.

Free cash flow - operating cash flow less tax, interest and maintenance capital expenditure, before new development capital expenditure, dividends and other non-trading items.

Like-for-like performance - calculated by comparing the performance of all mature sites in the current period vs. the comparable period in the prior year.

The Restaurant Group plc
Consolidated income statement
		52 weeks ended 27 December 2015
		Trading	Non-
		business	trading	Total
	Note	£'000	£'000	£'000
Revenue	2	685,381	-	685,381
Cost of sales:
Excluding pre-opening costs	3	(553,106)	-	(553,106)
Pre-opening costs	3	(5,385)	-	(5,385)
		(558,491)	-	(558,491)
Gross profit		126,890	-	126,890
Administration costs		(37,999)	-	(37,999)
Trading profit		88,891	-	88,891
Disposal of investment in associate	4	-	-	-
Earnings before interest, tax, depreciation and amortisation		127,991	-	127,991
Depreciation		(39,100)	-	(39,100)
Operating profit		88,891	-	88,891
Interest payable	5	(2,128)	-	(2,128)
Interest receivable	5	82	-	82
Profit on ordinary activities before tax		86,845	-	86,845
Tax on profit from ordinary activities	6	(19,447)	1,488	(17,959)
Profit for the year		67,398	1,488	68,886
Earnings per share (pence)
Basic	7	33.80		34.55
Diluted	7	33.50		34.24
The Restaurant Group plc
Consolidated income statement
		52 weeks ended 28 December 2014
		Trading	Non-
		business	trading	Total
	Note	£'000	£'000	£'000
Revenue	2	635,225	-	635,225
Cost of sales:
Excluding pre-opening costs	3	(516,623)	-	(516,623)
Pre-opening costs	3	(4,702)	-	(4,702)
		(521,325)	-	(521,325)
Gross profit		113,900	-	113,900
Administration costs		(33,450)	(138)	(33,588)
Trading profit		80,450	(138)	80,312
Disposal of investment in associate	4	-	7,000	7,000
Earnings before interest, tax, depreciation and amortisation		116,972	6,862	123,834
Depreciation		(36,522)	-	(36,522)
Operating profit		80,450	6,862	87,312
Interest payable	5	(2,488)	-	(2,488)
Interest receivable	5	103	-	103
Profit on ordinary activities before tax		78,065	6,862	84,927
Tax on profit from ordinary activities	6	(17,958)	30	(17,928)
Profit for the year		60,107	6,892	66,999
Earnings per share (pence)
Basic	7	29.96		33.39
Diluted	7	29.92		33.35

The Restaurant Group plc
Consolidated statement of changes in equity
	Share	Share	Other	Retained	Total
	capital	premium	reserves	earnings
	£'000	£'000	£'000	£'000	£'000
Balance at 29 December 2014	56,433	24,495	(11,971)	175,567	244,524
Profit for the year	-	-	-	68,886	68,886
Issue of new shares	85	760	-	-	845
Dividends	-	-	-	(32,115)	(32,115)
Share-based payments - credit to equity	-	-	2,900	-	2,900
Employee benefit trust - purchase of shares	-	-	(1,746)	-	(1,746)
Other reserve movements	-	-	(263)	-	(263)
Current tax on share-based payments taken directly to equity	-	-	-	818	818
Deferred tax on share-based payments taken directly to equity	-	-	-	(289)	(289)
Balance at 27 December 2015	56,518	25,255	(11,080)	212,867	283,560
Balance at 30 December 2013	56,432	24,491	(8,940)	143,982	215,965
Profit for the year	-	-	-	66,999	66,999
Issue of new shares	1	4	-	-	5
Dividends	-	-	-	(36,367)	(36,367)
Share-based payments - credit to equity	-	-	2,795	-	2,795
Employee benefit trust - purchase of shares	-	-	(5,272)	-	(5,272)
Other reserve movements	-	-	(554)	-	(554)
Current tax on share-based payments taken directly to equity	-	-	-	1,474	1,474
Deferred tax on share-based payments taken directly to equity	-	-	-	(521)	(521)
Balance at 28 December 2014	56,433	24,495	(11,971)	175,567	244,524

There is no comprehensive income other than the profit for the year in the year ended 27 December 2015 or the year ended 28 December 2014.

The Restaurant Group plc
Consolidated balance sheet
		At 27 December 2015			At 28 December     2014
	Note	£'000			£'000
Non-current assets
Intangible assets		26,433			26,433
Property, plant and equipment		403,640			368,576
		430,073			395,009
Current assets
Stock		6,389			5,530
Trade and other receivables		13,366			8,991
Prepayments		15,267			14,009
Cash and cash equivalents	10	2,983			880
		38,005			29,410
Total assets		468,078			424,419
Current liabilities
Overdraft	10	(838)			-
Corporation tax liabilities		(8,692)			(8,055)
Trade and other payables		(125,388)			(112,254)
Other payables - finance lease obligations		(355)			(332)
Provisions		(1,130)			(993)
		(136,403)			(121,634)
Net current liabilities		(98,398)			(92,224)
Non-current liabilities
Long-term borrowings	10	(30,527)			(39,458)
Other payables - finance lease obligations		(2,956)			(2,930)
Deferred tax liabilities		(12,096)			(12,947)
Provisions		(2,536)			(2,926)
		(48,115)			(58,261)
Total liabilities		(184,518)			(179,895)
Net assets		283,560			244,524
Equity
Share capital		56,518			56,433
Share premium		25,255			24,495
Other reserves		(11,080)			(11,971)
Retained earnings		212,867			175,567
Total equity		283,560			244,524
The Restaurant Group plc
Consolidated cash flow statement
				52 weeks ended 27 December 2015		52 weeks ended             28 December   2014
			Note	£'000		£'000
Operating activities
Cash generated from operations			9	135,535		124,992
Interest received				82		103
Interest paid				(1,125)		(1,424)
Tax paid				(17,644)		(18,222)
Net cash flows from operating activities				116,848		105,449
Investing activities
Purchase of property, plant and equipment				(74,817)		(70,070)
Disposal of fixed assets				250		2,828
Net proceeds from repayment of loan note				-		7,000
Net cash flows used in investing activities				(74,567)		(60,242)
Financing activities
Net proceeds from issue of ordinary share capital				845		5
Employee benefit trust - purchase of shares				(1,746)		(5,272)
Net repayments of loan draw downs				(8,000)		(10,000)
Dividends paid to shareholders			8	(32,115)		(36,367)
Net cash flows used in financing activities				(41,016)		(51,634)
Net decrease in cash and cash equivalents				1,265		(6,427)
Cash and cash equivalents at the beginning of the year			10	880		7,307
Cash and cash equivalents at the end of the year			10	2,145		880

The Restaurant Group plc

Notes to the accounts

For the year ended 27 December 2015

1 Segmental analysis

The Group trades in one business segment (that of operating restaurants) and one geographical segment (being the United Kingdom).  The Group's brands meet the aggregation criteria set out in paragraph 22 of IFRS 8 "Operating Segments" and as such the Group report the business as one reportable segment.

2 Revenue	2015	2014
	£'000	£'000
Income for the year consists of the following:
Revenue from continuing operations	685,381	635,225
Other income not included within revenue in the income statement:
Rental income	2,688	2,950
Interest income	82	103
Total income for the year	688,151	638,278

3 Profit for the year	2015	2014
	£'000	£'000
Cost of sales consists of the following:
Continuing business excluding pre-opening costs	553,106	516,623
Pre-opening costs	5,385	4,702
Total cost of sales for the year	558,491	521,325
	2015	2014
Profit for the year has been arrived at after charging / (crediting):	£'000	£'000
Depreciation	39,100	36,522
Purchases	142,325	139,141
Staff costs	225,642	205,197
Minimum lease payments	67,009	62,028
Contingent rents	9,607	8,278
Total operating lease rentals of land and buildings	76,616	70,306
Rental income	(2,688)	(2,950)
Net rental costs	73,928	67,356

4 Non-trading items

During the 52 weeks ended 27 December 2015, the Group has recognised a non-trading tax credit of £1.5m (further details are provided in note 6).

On 17 April 2014 the Group disposed of part of its interest in the Living Ventures group following the sale of the Gusto business.

The Group received £7m of cash proceeds in respect of this disposal and the resulting profit on disposal of £6.9m, net of costs, was reported as a non-trading item in the 52 weeks ended 28 December 2014. The net proceeds of the disposal were distributed by way of a special dividend of 3.45 pence per share on 9 July 2014.  Following the disposal, the Group's only remaining interest in the residual business is a £3.7m loan note which has been fully provided against as a result of a detailed review of the trading performance of the business. In the 52 weeks ended 27 December 2015, the Group received £0.1m of loan note interest, all of which was recognised in the income statement (2014: £0.1m of which the Group recognised £0.1m).

5 Net finance charges	2015	2014
	£'000	£'000
Bank interest payable	1,075	1,378
Other interest payable	334	420
Facility fees	338	314
Interest on obligations under finance leases	381	376
Total borrowing costs	2,128	2,488
Bank interest receivable	(9)	(11)
Other interest receivable	(13)	(1)
Loan note interest receivable	(60)	(91)
Total interest receivable	(82)	(103)
Net finance charges	2,046	2,385

6 Tax
	2015	2014
The tax charge comprises:	£'000	£'000
Current tax
UK corporation tax at 20.25% (2014: 21.5%)	19,624	18,668
Adjustments in respect of previous years	(525)	(642)
	19,099	18,026
Deferred tax
Origination and reversal of temporary differences	24	(161)
Adjustments in respect of previous years	324	63
Credit in respect of rate change	(1,488)	-
	(1,140)	(98)
Total tax charge for the year	17,959	17,928

The Finance Act 2012 introduced a reduction in the main rate of corporation tax from April 2015 from 21% to 20% resulting in a blended rate of 20.25% being used to calculate the tax liability for the 52 weeks ended 27 December 2015.

The Finance (No.2) Act 2015 introduced a reduction in the main rate of the corporation tax from 20% to 19% from April 2017 and from 19% to 18% from April 2020. These reductions were substantially enacted on 24 October 2015 therefore the deferred tax provision at the balance sheet date has been calculated using a blended rate, resulting in a £1.5m tax credit.

7 Earnings per share	2015	2014
a) Basic earnings per share:
Weighted average ordinary shares for the purposes of basic earnings per share	199,408,183	200,647,834
Total profit for the year (£'000)	68,886	66,999
Basic earnings per share for the year (pence)	34.55	33.39
Total profit for the year (£'000)	68,886	66,999
Effect of non-trading items on earnings for the year (£'000)	(1,488)	(6,892)
Earnings excluding non-trading items (£'000)	67,398	60,107
Adjusted earnings per share (pence)	33.80	29.96
b) Diluted earnings per share:
Weighted average ordinary shares for the purposes of basic earnings per share	199,408,183	200,647,834
Effect of dilutive potential ordinary shares:
Dilutive shares to be issued in respect of options granted under the share option schemes	488,349	275,381
Shares held by employee benefit trust	1,262,608	-
	201,159,140	200,923,215
Diluted earnings per share (pence)	34.24	33.35
Adjusted diluted earnings per share (pence)	33.50	29.92

8 Dividend
	2015	2014
	£'000	£'000
Amounts recognised as distributions to equity holders during the year:
Final dividend for the 52 weeks ended 28 December 2014 of 9.30p (2013: 8.75p) per share	18,550	17,373
Interim dividend for the 52 weeks ended 27 December 2015 of 6.80p (2014: 6.10p) per share	13,565	12,145
	32,115	29,518
Special dividend of 3.45p per share paid on 9 July 2014	-	6,849
Total dividends paid in the year	32,115	36,367
Proposed final dividend for the 52 weeks ended 27 December 2015 of 10.60p (2014 actual proposed and paid: 9.30p) per share	21,176	18,550

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting to be held on 12 May 2016 and is not recognised as a liability in these financial statements.  The proposed final dividend payable reflects the number of shares in issue on 27 December 2015, adjusted for the 1.2m shares owned by the employee benefit trust for which dividends have been waived.

9  Reconciliation of profit before tax to cash generated from operations
	2015	2014
	£'000	£'000
Profit before tax	86,845	84,927
Net finance charges	2,046	2,385
Disposal of investment in associate	-	(6,862)
Share-based payments	2,900	2,795
Depreciation	39,100	36,522
Increase in stocks	(859)	(445)
Increase in debtors	(5,633)	(605)
Increase in creditors	11,136	6,275
Cash generated from operations	135,535	124,992

10 Reconciliation of changes in cash to the movement in net debt
			2015	2014
			£'000	£'000
Net debt:
At the beginning of the year			(38,578)	(41,857)
Movements in the year:
Repayments of loan draw downs			8,000	10,000
Non-cash movements in the year			931	(294)
Cash inflow / (outflow)			1,265	(6,427)
At the end of the year			(28,382)	(38,578)

Represented by:	At 30	Cash flow	Non-cash	At 28 and 29	Cash flow	Non-cash	At 27
	December	movements	movements	December	movements	movements	December
	2013	in the year	in the year	2014	in the year	in the year	2015
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cash and cash equivalents	7,307	(6,427)	-	880	2,103	-	2,983
Overdraft	-	-	-	-	(838)	-	(838)
Bank loans falling due after one year	(49,164)	10,000	(294)	(39,458)	8,000	931	(30,527)
	(41,857)	3,573	(294)	(38,578)	9,265	931	(28,382)

11 Basis of preparation

The Group's preliminary announcement and statutory accounts in respect of 2015 have been prepared on the going concern basis. The financial information set out above does not constitute the Group's statutory accounts for the years ended 27 December 2015 or 28 December 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's Annual General Meeting. The 2015 statutory accounts are prepared on the basis of the accounting policies stated in the 2014 statutory accounts. The auditor has reported on those accounts; their reports were unqualified and unmodified and did not contain statements under s498 (2) or (3) of the Companies Act 2006.

 

END

 

 

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