Final Results

RNS Number : 9598S

Restaurant Group PLC

15 March 2019

The Restaurant Group plc

Final results for the 52 weeks ended 30 December 2018

Strategic highlights

· Acquisition of high quality business in Wagamama which has continued to outperform the sector

· Concessions business opened 21 new units and entered four new airports

· Pubs increasingly outperformed the market and opened a record 21 pubs

· Leisure business improved like-for-like sales momentum in every quarter in 2018

· Group delivered like-for-like sales growth since the World Cup

· Enlarged group now strongly orientated towards growth

Financial highlights

· Like-for-like sales down 2.0%, with total sales up 1.0% to £686.0m (2017: £679.3m)

· Adjusted¹ profit before tax of £53.2m² (2017³: £57.8m²). Statutory profit before tax of £13.9m (2017³: £28.2m)

· Exceptional pre-tax charge of £39.2m (2017³: £29.7m)

· Adjusted¹ EBITDA of £87.9m (2017: £95.8m)

· Adjusted¹ EPS⁴ of 14.7p (2017³: 16.7p). Statutory EPS of 2.4p (2017³: 6.7p per share)

· Operating cash flow of £88.3m (2017: £107.8m)

· Net debt of £291.1m at year-end (2017³: £23.1m) following Wagamama acquisition, with proforma net debt/EBITDA at 2.2x

· The Board proposes a final dividend of 1.47p⁵, reflecting the Board's policy of paying a dividend covered two times by adjusted¹ profit after tax

1 Adjusted reflects pre-exceptional items and is further defined in the glossary at the end of this report

2 Includes a £2.2m benefit (2017: £0.7m) from lower depreciation following a prior year adjustment to the impairment provision

3 As restated, refer to Note 2 of the financial statements for details

4 Earnings per share adjusted for bonus element following the rights issue in both financial years

5 Full year dividend per share of 8.27p calculated such that the total cash paid out in dividends for the full year is covered twice by adjusted profit after tax. This is stated on the basis of dividends declared and paid not adjusted for the impact of the rights issue

Current trading

Current trading is in line with our expectations with like-for-like sales up 2.8% for the ten weeks to 10 March 2019.

Andy McCue, Chief Executive Officer, commented:

"We have made significant progress in 2018, acquiring a differentiated, high growth business in Wagamama, opening a record number of new sites in both our Pubs and Concessions businesses, and driving improved like-for-like sales momentum in the Leisure business throughout 2018. We now have a business that is orientated strongly towards growth and we continue to focus on delivering shareholder value."

Enquiries:

The Restaurant Group plc

Andy McCue, Chief Executive Officer

Kirk Davis, Chief Financial Officer

020 3117 5001

MHP Communications

Oliver Hughes

Simon Hockridge

Alistair de Kare-Silver

020 3128 8742

Investor and analyst conference call facility

In conjunction with today's management presentation meeting, a live conference call and webcast facility will be available starting at 10:00am. If you would like to register, please contact Robert Collett-Creedy at MHP Communications for details on 020 3128 8147 or email TRG@mhpc.com.

The presentation slides will be available to download from 9:45am from the Company's website https://www.trgplc.com/investors/reports-and-presentations

Notes:

1. At the year-end The Restaurant Group plc operated over 650 restaurants and pub restaurants throughout the UK. Its principal trading brands are Wagamama, Frankie & Benny's, Chiquito and Brunning & Price. It also operates a multi-brand Concessions business which trades principally in UK airports. In addition the Wagamama business had 5 restaurants in the US and over 50 franchise restaurants operating across a number of territories.

2. Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect the Group's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

3. The Group's Adjusted performance metrics ('APMs') such as like-for-like sales, Adjusted measures and free cash flow are defined within the glossary at the end of this report.

4. The main factors that could affect the business and the financial results are described in the "Senior management Risk Committee" section in The Restaurant Group plc 2018 Annual Report, which will be available to shareholders in April 2019.

Chairman's statement

2018 was a pivotal year for the Group. The acquisition of Wagamama and the development of our Pubs and Concessions businesses have accelerated our progress into growth sectors and we continue to make improvements to the customer proposition and our execution across our Leisure business.

Total revenues were up 1% to £686m, with like-for-like sales for the 52 weeks ended 30 December 2018 down 2%, representing an improvement on the decline in 2017. The group delivered like-for-like sales growth since the World Cup, with our Pubs business continuing to consistently trade ahead of the pub restaurant sector and our Concessions business trading strongly. Our Leisure business exhibited improved like-for-like sales momentum through 2018.

We opened a record 21 new pubs (inclusive of acquisitions) and a record 21 new concessions units during the year.

Adjusted¹ profit before tax was down 8.1% to £53.2m and Adjusted¹ EPS was down 11.9% to 14.7p per share. Statutory profit before tax was £13.9m (2017³: £28.2m) including exceptional charges of £39.2m (2017³: £29.7m) which are explained further in the Financial review section. Statutory EPS was 2.4p (2017³: 6.7p).

The acquisition of Wagamama formally completed on 24 December 2018. The business has a differentiated, high growth, pan-Asian proposition which has significantly and consistently outperformed its core UK market. It is well aligned to the key structural trends in our sector and addresses customer demand for speed of service, delivery and healthy options. We continue to believe that the acquisition will be transformative for the Group, allowing us to accelerate Wagamama's UK roll-out with selected TRG site conversions, expand the UK concessions presence leveraging our existing relationships, address delivery opportunities via restaurants and delivery kitchens, pilot pan-Asian cuisine 'food-to-go' offerings, explore international growth options and deliver at least £22m of synergies.

The enlarged Group now derives c.70 per cent. of outlet EBITDA (on a full-year 2018 pro-forma basis) from high growth segments (Wagamama, Concessions and Pubs) and is well equipped to address compelling growth avenues.

We were appreciative of the engagement of all of our investors during the process of acquiring Wagamama and the support provided for the rights issue that was undertaken to raise £315m in order to fund the acquisition.

The Group has continued to face external cost pressures throughout 2018, including increases in the national living wage and national minimum wage, the apprenticeship levy, the revaluation of business rates, higher energy taxes and increased purchasing costs due to the combined effects of a devalued pound and commodity inflation. As we seek to mitigate these cost pressures, our initiatives to improve the effectiveness of our labour scheduling and to exploit new technologies are on track and continue to drive efficiencies.

On 14 February 2019, we announced that Andy McCue, CEO, had informed the Board of his decision to leave the Company due to extenuating personal circumstances. Whilst the Board is clearly disappointed that Andy will not be able to provide the long-term leadership for the business, we recognise that his decision to step down is the right one for him and his family. The Board anticipates that Andy will remain in position while his successor is being recruited. An extensive search is well underway to recruit the new CEO. An announcement regarding the appointment will be made in due course.

Other Board changes during the year included the resignation of Paul May as Non-Executive Director in October 2018 and the appointment of Allan Leighton, who joined as a Non-Executive Director in December 2018, at the completion of the Wagamama transaction. Allan is currently Chairman of Co-operative Group Limited and Entertainment One Limited, among others, and has previously been Chief Executive Officer of ASDA Group Limited and Pandora A/S and Chairman of Pace plc and Royal Mail. He knows the Wagamama team well and has extensive experience of managing public and private companies in the retail and hospitality sectors and a wealth of experience in growing consumer businesses.

Simon Cloke, non-executive Director, will step down as Senior Independent Director at the AGM in May 2019 and will be replaced as Senior Independent Director by Allan Leighton.

Although a search had commenced to recruit an additional Non-Executive Director with digital credentials during 2019, the Board decided that it was sensible to postpone this search until such time as the new CEO is recruited. Simon Cloke has agreed to remain on the Board as a non-executive Director for a period of up to a year, to ensure continuity whilst the new CEO is recruited. The Board will then re-commence its search to recruit an additional non-executive Director with technology and digital credentials and at that point Simon Cloke will step down from the Board.

We have also added to the strength of the senior leadership team, with the appointment of Lisa Hillier as Chief People Officer, joining us from Just Eat plc.

The business continues to generate strong free cash flow, with £59.6m in 2018 (2017³: £85.1m). As announced at the time of the acquisition, we will adopt a policy of paying a dividend covered two times by adjusted¹ profit after tax, with this policy reflected in the final dividend that the Board has proposed for 2018 of 1.47 pence per share. The total dividend for the year is, therefore, 8.27 pence per share. The Board believes that this funding structure and dividend policy reflects an appropriate balance between delivering shareholder returns, enabling the Company to invest in further growth and enabling the Company to achieve an appropriate deleveraging profile.

The enlarged Group now employs over 22,000 people and they are the lifeblood of our business. The Board would like to record our thanks and appreciation for their hard work and commitment.

This has been a pivotal year for the Group, with progress on our strategic initiatives, improved like-for-like sales momentum in our Leisure business, growth in our Pubs and Concessions business, and a transformational acquisition that accelerates our momentum in growth segments. We continue to benefit from strong cash generation and a healthy balance sheet. The Board is confident that we have a robust plan and the focus and rigour to deliver value for shareholders in what is a challenging consumer environment.

Debbie Hewitt MBE

Chairman

15 March 2019

Business review

Introduction

Following the acquisition of Wagamama, the enlarged group is now strongly orientated towards growth with Wagamama and our Concessions and Pubs businesses contributing c. 70% of Group outlet EBITDA in the period (on a full-year 2018 pro-forma basis).

Wagamama is a differentiated, high growth pan-Asian proposition that has consistently and significantly outperformed its core UK market. That outperformance is driven by excellent operational standards, as well as being exceptionally well aligned to structural growth drivers as customers demand more convenient, faster, and healthier options.

Our Concessions business is a market leader in UK airports. Our strength in capability to develop and operate a broad range of formats in a wide range of infrastructure types has resulted in a strong track record of like-for-like sales growth, winning new sites and renewing existing space.

Our Pubs business is well positioned in the market with a premium, differentiated food-led offer that is increasingly outperforming the pub restaurant sector. The business benefits from operating and often owning differentiated assets and delivering an exceptional experience. There continues to be opportunities to expand this business and we have a healthy organic pipeline in place.

In our Leisure business we operate multi-brand casual dining restaurants across the UK. While the business is not inherently well exposed to structural growth drivers as a function of either location or proposition form, we are focused on optimising the propositions to maximise profitability. We will also be disciplined in our approach to capital allocation.

Our Group priorities are to:

- Deliver the benefits of the Wagamama acquisition;

- Grow our Concessions and Pubs businesses; and

- Optimise our Leisure brands

1. Deliver the benefits of the Wagamama acquisition

Wagamama

Wagamama has a strong competitive advantage as the only UK pan-Asian brand concept of scale.

The business is well aligned to key structural trends, consistently outperforming the market average on experience ratings⁶ in healthiness of food, convenience and speed.

Wagamama benefits from a high quality leadership team which operates the business as a standalone entity and has the freedom to cultivate its unique cohesive culture.

Wagamama has demonstrated an outstanding track record of like-for-like revenue growth. In its quarter three results (12 weeks up to 3 February) Wagamama increased like-for-like sales⁷ by 9.1%; resulting in like-for-like sales7 of 9.7% for its financial year to date (quarters one-to-three). The Wagamama team have identified clear opportunities to grow like-for-like sales further in 2019, including:

- Development of the drinks range to help drive higher participation

- Investment in local marketing and events to drive greater awareness, using new data sources to more effectively target audiences and win share

- Further expansion of the vegan range, including new collaboration hero dish 'Avant Gard'n', which features a vegan 'egg', being launched in partnership with vegan chef Gaz Oakley

- Increased delivery growth via greater reach of aggregators and technology integration both within and between restaurants

- Six major refurbishments planned for this year which will add 300 additional covers (equivalent to two new restaurants)

6 Source: Morar/BrandVue Q4 customer ratings

⁷ Like-for-like sales as per Wagamama Q3 bond report

The business is also progressing well on driving future growth via the levers identified at the time of the transaction:

UK Casual Dining: We expect to open between three to four new restaurants this year in the UK, as well as converting eight Leisure sites to Wagamama.

UK Concessions: The business has won a tender for a site in Heathrow Terminal 3 which is due to open in the second half of this year. A site has also been secured in the planned redevelopment of Manchester airport and is due to open in the first half of 2020. The business is also exploring a variety of other airport opportunities.

Delivery: The delivery kitchen in Battersea has been successfully trialled and we will be rolling out further delivery kitchens in the year.

International: We opened a new restaurant in Murray Hill, NYC earlier this year and will open in Midtown Manhattan in the Summer. A strategic review of our options for the US business has commenced and we will update investors on our plans later in the year.

Food to go formats: The business has developed a new grab and go concept which is to be branded "Mamago". The concept will offer a newly developed Asian menu to capitalise on increased customer demand for convenience. The initial pilot is planned for launch in the second half of this year.

Synergies

We will convert eight Leisure sites to Wagamama restaurants this year, with a similar number expected next year. Teams across the business have well developed people, marketing and design and build plans to ensure the new restaurants launch successfully. The eight sites are in locations which align well with the Wagamama customer demographic, and in competitive markets where we have high confidence that we can take share from less differentiated offerings. The eight TRG sites collectively make a modest profit today and we expect them to generate incremental EBITDA returns in excess of 50% of the cost of capital to convert. The converted sites will open between August and November 2019. We have continued confidence in delivering an incremental EBITDA benefit of at least £7m per annum at maturity in 2021 from our site conversion programme. We are progressing well with our cost synergy plans and collaborative cross-functional working groups across the business have been established. We have continued confidence in delivering at least £15m of cost synergies per annum in 2021. Synergies will be achieved through leveraging scale and consolidating spend across the following cost categories:

- Procurement and logistics

- Site level overheads

- Central costs

2. Grow our Concessions and Pubs businesses

Concessions

Our Concessions business operates a wide variety of food and beverage formats, across over 35 brands, primarily in UK airports. This includes bespoke concepts designed with airport partners, The TRG Group's own leisure brands, and well-known third-party brands, which operate under franchise arrangements.

Our trading continues to be strong and we continued our strong track record of retaining sites with c.85% having received contract renewals beyond the term of the initial contract. In particular during 2018 we successfully renewed contracts for existing large spaces at both Gatwick and Heathrow airports. On average our contracts have been extended for 90% of the original concession term.

Our unique capabilities enabling us to consistently deliver high operational standards at high volume and peak-load intensity, along with our format development and partnering skills, position us well for further contract wins in the future.

In 2018 we have been successful in winning 21 new units and adding five new clients in UK travel hubs as well as four new brand partnerships. These new openings were a mix of multiple formats and categories showcasing our operational capability strength and ability to provide full solutions to airport partners. This included a "Spuntino" restaurant in Heathrow, the first "Brewdog" bar in a UK airport in Edinburgh, two outlets for "Barburrito" and our first "Crepeaffaire" franchise unit. We also developed several in-house concepts such as the "Hawker Bar" in Luton and "Distilling House" pub in Aberdeen.

We expect to open at least 5 to 10 Concessions units in 2019. In addition to this we have secured a contract to operate a number of significant sites for the planned redevelopment at Manchester airport, due to trade in 2020.

Plans to grow our business outside of UK airports are progressing well. We have developed two new brands, "Mezze Box" and "Grains and Greens" with Sainsbury's. The initial trial has commenced with five counters opened so far this year. We are also building a team to support our longer term plans for growth into international airports.

Pubs

Our Pubs business is well positioned in the market with a premium offering tailored to local markets. The business continued to outperform the pub restaurant sector in 2018, with the extent of outperformance increasing year-on-year.

During the year we optimised our menu pricing architecture and developed a more flexible approach to our menus, with an expansion of the nibbles and sharing sections, and smaller plate options on some of the core dishes. In the year ahead we will be launching a gluten-free menu in all our pubs. We continue to refine our drinks range to ensure we cater for an increasing trend in craft beer and low alcohol/no alcohol drinks.

We continue to look at opportunities to leverage the existing space in our estate. Benefitting from the warm weather over the summer we ran an increased number of events such as our gin and prosecco festivals as well as live music events which are proving increasingly popular. During the year we opened three new private dining rooms and our first separate function space at the Red Fox pub which has been used for larger functions, including weddings. Following the successful opening of our first pub with accommodation in September, we opened another in February 2019. We anticipate additional revenue opportunities by continuing to leverage our existing space in the year ahead with further function space, private dining rooms and all-weather external terraces currently under consideration.

Our estate expansion plans are progressing well. We opened 21 new pubs in the year including the acquisitions of Ribble Valley Inns Ltd (consisting of four leasehold pubs) and Food & Fuel Ltd (consisting of 11 leasehold pubs and café-bars predominately situated in affluent London neighbourhoods). We have now refurbished three of the Ribble Valley sites and these are delivering a sales uplift in excess of 30% post refurbishment. The Food & Fuel Ltd sites are trading in line with expectations and plans are in place to further develop these propositions through 2019. Our single site Brunning and Price acquisitions are trading well and we expect to open at least seven more pubs in the coming year.

3. Optimise our Leisure business

The market backdrop for our Leisure business is challenging with a 27% increase in the number of branded restaurants over the past five years. This has been accompanied with a dramatic decrease in the growth rates of both total sales and like-for-like sales every year since 2014. Structural trends including declining retail footfall, the rapid rise of the delivery sector and fast changing customer preferences towards convenience and healthy options all create challenges for long established multi-site operators of scale. Profitability has been further challenged by the pressure of rising costs, with the bulk of our restaurant wage bill inflating by around 4%, electricity costs at eight year highs, and rent and rates costs remaining at high levels despite the decreasing consumer demand. In response, we are focused on ensuring our brands are competitively differentiated, increasing our exposure to healthy and convenient options and capitalising on 'off-trade' delivery and collection sales. However, given the market backdrop, we are acutely disciplined in how we allocate capital and highly discerning as to lease renewal commitments and the flexibility inherent within them.

Our Leisure estate is disproportionately highly exposed to these pressures. 56% of our estate directly neighbours retail, most of which are in out-of-town locations. As a result of our discipline over recent years, the vast majority of our Leisure portfolio remains EBITDA positive. 41% of our Leisure portfolio also has a lease end or break option within the next five years.

In order to ensure we make the correct property decisions, we have analysed every restaurant in our Leisure estate to determine its potential performance versus its actual performance. In the case of Frankie and Benny's, 31% of sites are in structurally unattractive locations, and as such, we will seek to exit these locations in future years. Of the remaining Frankie and Benny's locations, 60% are outperforming or in-line with their local markets; in 40% we believe there is scope for operational improvement.

Frankie and Benny's

The brand has seen considerable activity over the last twelve months, progressing well on a number of initiatives.

In May, we saw the launch of our new Feel Good Range, offering our customers increased and improved healthier options. The range has proved popular with penetration at c.10% of sales, with the top performers in this range being the Nashville Chicken Skewers and Skinny Chicken Pizza.

We launched on Comparethemarket's 'Meerkat Meals' partner platform in June and have seen really strong engagement with it becoming one of our most popular promotions.

We launched our squishies campaign in October through to November where we gave away a free Squishie toy with every kids meal. This proved successful in driving repeat visits.

Our payment at table feature, "pay my bill", is improving in popularity with customers, with over five percent of transactions being made through this channel.

Our customers are responding to these initiatives, and this has resulted in an improvement in our social review scores throughout the year as well as improved sales momentum.

We are currently trialling "order ahead" functionality in 25 sites. This gives our customers the ability to order and pay for their meal in advance, alongside a booked table, and have it ready for them when they arrive at the restaurant. Initial feedback from customers has been positive and we will look to roll out more broadly later in the year.

Upcoming activity includes continued improvement in the core proposition via new menus. We will shortly trial a simplified core menu with a large reduction in the number of dishes to help our teams improve operational consistency. Our marketing campaigns will become increasingly targeted to specific occasions and highlight new food development via limited time offers. We will invest in service and operational improvements in underperforming sites and actively manage the structurally disadvantaged tail.

Chiquito

The brand has evolved its offering over the course of the year with a number of initiatives employed. In January 2018 we launched a new core menu aimed at reinstating value, improving choice, simplifying navigation and focusing on more authentic Mexican dishes such as our 'build your own' tortillas option.

We invested in a stronger senior operational team throughout the year. This in turn allowed us to focus on the quality of our General Managers and drive standards up through peer group benchmarking.

Our promotional strategy has become more centred around Mexican favourites, generating a very encouraging take-up from customers.

We also launched a virtual brand "Kick-ass Burrito" which, across all delivery aggregators now has 131 points of sale.

Our customers are recognising these improvements with a notable increase in our social review scores throughout the year as well as improved trading momentum, with like-for-like sales improving in every quarter.

Our plans for the year ahead include the launch of a new menu in April which will feature a strong range of dishes catering for people with dietary restrictions as well as improving our vegan and vegetarian offer with dishes such as our jackfruit burrito with benefits, beetroot and feta lettuce wrap and bean and red chilli burger. We will also offer exciting trade-up options with premium ingredients such as our Picanha surf & turf dish and Barabacoa beef build your own option.

Summary and current trading

In summary:

- The enlarged group is now strongly orientated towards growth

- Wagamama like-for-like sales momentum is strong and we are progressing well on the growth avenues unlocked by the acquisition

- Strong growth continues in Concessions and Pubs

- We remain focused on optimising our Leisure brands and property portfolio

- Current trading for first 10 weeks of the year in line with our expectations with like-for-like sales up 2.8%

Financial review

Trading results

Like-for-like sales declined by 2.0% for the year, with total revenue up 1.0% to £686.0m (2017: £679.3m). The like-for-like sales decline reflected the annualisation of the investments we made in price and proposition across our Leisure brands in 2017, along with the impact of the adverse weather and the World Cup in 2018, which were partially offset by a strong like-for-like sales performance from both our Pubs and Concessions businesses. The Group delivered like-for-like sales growth since the World Cup with our Leisure business exhibiting improved like-for-like sales momentum through 2018.

With declining like-for-like sales and the well-known sector specific inflationary cost pressures, the Group's Adjusted¹ operating profit (EBIT) fell by 6.9% to £55.4m (2017³: £59.5m) with the Adjusted¹ operating margin falling from 8.8% to 8.1%. On a statutory basis, the Group's operating profit (EBIT) was £16.6m (2017³ £29.8m). Adjusted¹ operating profit (EBIT) includes a £2.2m (2017: £0.7m) benefit from lower depreciation following a prior year adjustment to the impairment provision. The prior year adjustment reflects the appropriate allocation of central costs to individual restaurants following a reassessment of our impairment methodology.

Adjusted¹ profit before tax for the period was £53.2m (2017³: £57.8m). Adjusted¹ profit after tax was £41.8m (2017³: £45.8m). The Adjusted¹ effective tax rate for the Group increased to 21.4% (2017³: 20.9%). On a statutory basis, the effective tax rate of 50.6% (2017³: 34.9%) reflects the higher exceptional charges in the year. Adjusted¹ earnings per share were 14.7p (2017: 16.7p). On a statutory basis, profit before tax was £13.9m (2017³: £28.2m) and EPS was 2.4p (2017³: 6.7p).

The adjusted measures are summarised below:

	52 weeks ended 30 December 2018	52 weeks ended 31 December 2017³
	£m	£m	% change
Revenue	686.0	679.3	1.0%

Adjusted¹ EBITDA	87.9	95.8	(8.3%)

Adjusted¹ operating profit	55.4	59.5	(6.9%)
Adjusted¹ operating margin	8.1%	8.8%

Adjusted¹ profit before tax	53.2	57.8	(8.1%)
Adjusted¹ tax	(11.4)	(12.1)

Adjusted¹ profit after tax	41.8	45.8	(8.6%)

Adjusted¹ EPS (pence)	14.7	16.7	(11.9%)

Cash flow and net debt

Operating cash flows remain strong with free cash flow of £59.6m in the year (2017: £85.1m). Free cash flow in the year reflects the lower EBITDA and higher refurbishment and maintenance capital expenditure. The Group's net debt at the year-end was £291.1m, an increase of £268.0m on the prior year net debt of £23.1m³ following the acquisition of Wagamama and significant capital investment for the strategic development of our Concessions and Pubs businesses.

Summary cash flow for the year is set out below:

	2018	2017³
	£m	£m

Adjusted¹ operating profit	55.4	59.5
Working capital and non-cash adjustments	0.4	12.0
Depreciation	32.5	36.3
Operating cash flow	88.3	107.8
Net interest paid	(1.0)	(0.7)
Tax paid	(7.4)	(7.1)
Refurbishment and maintenance expenditure	(20.3)	(14.9)
Free cash flow	59.6	85.1
Development expenditure	(33.0)	(18.4)
Acquisitions of RVI and Food and Fuel net of cash acquired	(14.8)	-
Movement in capital creditors	5.8	(5.9)
Dividends	(34.9)	(34.9)
Utilisation of onerous lease provisions	(11.2)	(12.7)
Exceptional restructuring costs	-	(6.8)
Acquisition of Wagamama net of cash acquired	(310.1)	-
Debt acquired on acquisition of Wagamama	(225.0)	-
Acquisition and refinancing exceptional costs	(10.1)	-
Proceeds from issue of share capital	305.8	-
Other items	(0.1)	0.5
Net cash flow	(268.0)	6.9
Net debt brought forward	(23.1)	(30.0)
Net debt carried forward	(291.1)	(23.1)

In December 2018 the Group refinanced its borrowings and now has £220m of revolving credit facilities that expire in December 2021 and a £10m overdraft facility. In addition the £225m Wagamama Bond matures in July 2022. At the year-end we had £161.9m of cash headroom and significant headroom against our banking covenants.

	Group banking covenant	2018	2017
Banking covenant ratios:
EBITDA / Interest cover	>4x	47x	66x
Net debt / EBITDA⁸	<3.5x	2.2x	0.2x
Other ratios:
Fixed charge cover	n/a	2.0x	2.1x
Balance sheet gearing	n/a	63%	11%

⁸On a full-year 2018 pro-forma basis

Capital expenditure

During the year the Group invested £68.5m (2017: £33.3m) in capital expenditure (excluding the acquisition of Wagamama). Our investment in refurbishment and maintenance capital expenditure increased to £20.3m (2017: £14.9m) reflecting the Frankie and Benny's capital refreshes on 16 sites and the conversions of four Coast to Coast units to Firejacks. Our investment in new site expenditure increased to £47.8m (2017: £18.4m) reflecting the higher number of new site openings across our Pubs and Concessions businesses in 2018 compared to 2017.

This expenditure included the acquisitions of "Ribble Valley Inns Ltd" and "Food & Fuel Ltd" which added 15 pubs to our portfolio.

During the year we closed 20 sites, comprising 15 sites from Leisure and five sites from Concessions. Within Concessions two of the sites had reached the end of their contractual life and the other three sites are currently undergoing redevelopments into new Concession units. In the year we also closed 15 Leisure sites, five of which had reached the end of their contractual life and the remainder were sites which no longer generated acceptable cash returns. The table below summarises openings and closures during the year.

	Year-end 2017	Opened	Closed	Transfers	Year-end 2018

Frankie & Benny's	259	1	(12)	-	248
Chiquito	85	-	(2)	-	83
Coast to Coast/Filling Station	25	-	(1)	(4)	20
Firejacks	1	-	-	4	5
Garfunkel's	8	-	-	-	8
Joe's Kitchen	4	-	-	-	4
Pub restaurants	60	21	-	-	81
Concessions	55	21	(5)	-	71
Wagamama	-	140	-	-	140
Total	497	183	(20)	-	660

We expect to spend £55m to £60m on development expenditure in 2019; comprising:

- At least seven new pubs

- Between 5 to 10 new Concessions sites in 2019, including the initial expenditure relating to Manchester terminal redevelopment

- At least six new Wagamama sites

- Eight Leisure site conversions to Wagamama

- Roll-out of delivery kitchens across the enlarged group and pilot of Wagamama Grab and Go concept

Refurbishment and maintenance capital expenditure will range between £30m to £35m. This will include six transformational refurbishments of Wagamama UK sites and several large-scale Concessions redevelopment projects.

Restructuring and exceptional charge

An exceptional pre-tax charge of £39.2m has been recorded in the year (2017³: £29.7m, including the prior year restatement of £16.5m), which includes the following:

- Onerous lease review resulted in a charge of £10.0m in the year (2017: £4.2m). This comprises:

· A £5.2m credit in respect of unutilised provisions following the successful exit of 28 sites ahead of expectations; and

· A further charge of £15.2m was provided for in the year. This comprised a charge of £11.1m in respect of newly identified onerous leases and a charge of £4.1m in respect of sites previously provided for

- A net impairment charge of £14.0m (2017³: £20.7m, including the prior year restatement of £16.5m) was made against the carrying value of specific restaurant assets due to recent changes in certain markets. This comprises an impairment charge of £17.1m partially offset by reversals of previously recognised impairment losses of £3.1m

- An exceptional charge of £14.8m has been recorded in the year in relation to the acquisitions of Wagamama, Food and Fuel Ltd and Ribble Valley Inns Ltd. Acquisition related costs are items of one-off expenditure, including legal and professional fees, incurred in connection with the acquisitions

- Restructuring and strategic review costs of £nil (2017: £4.8m) relating to costs incurred in the restructuring projects that were initiated in 2017 to implement the new strategy and cost initiatives; and

- An exceptional charge of £0.5m has been recognised in the year as a result of the refinancing which took place to fund the acquisition of Wagamama. The charge relates to the write off of unamortised finance costs connected to the old debt facility

The tax credit relating to these exceptional charges was £4.3m (2017³: £2.2m).

Cash expenditure associated with the exceptional charges was £21.3m in the year (2017: £19.5m). Cash costs relate to onerous leases of £11.2m (2017: £12.7m), acquisitions and refinancing costs of £10.1m (2017:£nil) and costs associated with the implementation of the new business strategy of £nil (2017: £6.8m)

Tax

The Adjusted¹ tax charge for the year was £11.4m (2017: £12.1m), summarised as follows:

	2018	2017
	£m	£m

Corporation tax	10.4	10.8
Deferred tax	1.0	1.3
Total	11.4	12.1
Effective adjusted tax rate	21.4%	20.9%

The effective Adjusted¹ tax rate for the year was 21.4% compared to 20.9% in the prior year. The Group's effective tax rate will continue to track above the headline UK tax rate primarily due to our capital expenditure programme and the significant levels of disallowable capital expenditure therein. The statutory effective tax rate for the year was 50.6%, which increased from the 2017³ rate of 34.9% due to the increase in exceptional charges in the year.

The Restaurant Group plc

Consolidated income statement

52 weeks ended 30 December

2018

52 weeks ended 31 December

2017

Restated (Note 2)

Trading

Exceptional items

Trading

Exceptional items

business

(Note 6)

Total

business

(Note 6)

Total

Note

£'000

Revenue

686,047

679,282

Cost of sales

(603,332)

(23,997)

(627,329)

(588,594)

(24,894)

(613,488)

Gross profit/(loss)

82,715

(23,997)

58,718

90,688

(24,894)

65,794

Administration costs

(27,313)

(14,775)

(42,088)

(31,188)

(4,772)

(35,960)

Operating profit/(loss)

55,402

(38,772)

16,630

59,500

(29,666)

29,834

Interest payable

(2,233)

(467)

(2,700)

(1,712)

Interest receivable

Profit/(loss) on ordinary activities before tax

53,170

(39,239)

13,931

57,839

(29,666)

28,173

Tax on profit/(loss) from ordinary activities

(11,361)

4,312

(7,049)

(12,076)

2,249

(9,827)

Profit/(loss) for the year

41,809

(34,927)

6,882

45,763

(27,417)

18,346

Earnings per share (pence)

Rights adjusted basic

14.67

2.42

16.66

6.68

Rights adjusted diluted

14.63

2.41

16.58

6.65

The table below is provided to give additional information to shareholders on a key performance indicator:

EBITDA

87,855

(24,802)

63,053

95,755

(8,973)

86,782

Depreciation, amortisation and impairment

(32,453)

(13,970)

(46,423)

(36,255)

(20,693)

(56,948)

Operating profit/(loss)

55,402

(38,772)

16,630

59,500

(29,666)

29,834

The Restaurant Group plc
Consolidated balance sheet
		At 30 December 2018	At 31 December 2017
			Restated (Note 2)
	Note	£'000	£'000

Non-current assets
Intangible assets	11	613,685	26,433
Property, plant and equipment	12	434,298	327,320
Fair value lease assets		1,361	-
		1,049,344	353,753

Current assets
Inventory		8,678	5,930
Other receivables		22,912	14,949
Prepayments		31,096	17,473
Cash and cash equivalents		65,903	9,611
		128,589	47,963

Total assets		1,177,933	401,716

Current liabilities
Corporation tax liabilities		(2,702)	(2,129)
Trade and other payables		(211,705)	(114,841)
Other payables		(272)	(164)
Provisions	13	(9,377)	(10,408)
		(224,056)	(127,542)

Net current liabilities		(95,467)	(79,579)

Non-current liabilities
Long-term borrowings		(354,420)	(31,223)
Other payables		(27,521)	(24,596)
Fair value lease liabilities		(10,426)	-
Deferred tax liabilities		(52,674)	(4,301)
Provisions	13	(50,244)	(33,888)
		(495,285)	(94,008)

Total liabilities		(719,341)	(221,550)

Net assets		458,592	180,166


Equity
Share capital		138,234	56,551
Share premium		249,686	25,554
Other reserves		(7,158)	(7,753)
Retained earnings		77,830	105,814
Total equity		458,592	180,166

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 2 January 2017 (Restated)	56,550		25,542				(9,987)	122,334		194,439

Profit for the year (Restated)	-		-				-	18,346		18,346
Issue of new shares	1		12				-	-		13
Dividends	-		-				-	(34,866)		(34,866)
Share-based payments- credit to equity	-		-				2,158	-		2,158
Deferred tax on share-based payments taken directly to equity		-		-		76			-	76

Balance at 31 December 2017 Restated (Note 2)	56,551		25,554		(7,753)			105,814		180,166


Balance at 1 January 2018	56,551		25,554		(7,753)			105,814		180,166

Profit for the year	-		-		-			6,882		6,882
Rights issue of new shares	81,683		224,132		-			-		305,815
Dividends	-		-		-			(34,866)		(34,866)
Share-based payments - credit to equity	-		-		761			-		761
Deferred tax on share-based payments taken directly to equity	-		-		(42)			-		(42)
Purchase of treasury shares	-		-		(124)			-		(124)

Balance at 30 December 2018	138,234		249,686		(7,158)			77,830		458,592

There is no comprehensive income other than the profit for the year in the year ended 30 December 2018 or the year ended 31 December 2017.

Other reserves represents the Group's share-based payment transactions, shares held by the Employee Benefit Trust and treasury shares held by the Group.

Consolidated cash flow statement
		52 weeks ended 30 December 2018	52 weeks ended 31 December 2017
			Restated (Note 2)
	Note	£'000	£'000


Operating activities
Cash generated from operations	14	88,307	107,819
Interest received		10	55
Interest paid		(1,013)	(751)
Tax paid		(7,364)	(7,068)
Cash outflows from exceptional onerous lease provisions	6	(11,183)	(12,738)
Cash outflows from exceptional restructuring costs	6	-	(6,792)
Cash outflows from exceptional acquisition and refinancing costs		(10,103)	-
Net cash flows from operating activities		58,654	80,525

Investing activities
Purchase of property, plant and equipment		(47,514)	(39,275)
Purchase of intangible assets		(1,532)	-
Proceeds from disposal of property, plant and equipment		370	828
Purchase of subsidiaries		(364,197)	-
Cash acquired on acquisition of subsidiaries		39,270	-
Net cash flows used in investing activities		(373,603)	(38,447)

Financing activities
Net proceeds from issue of ordinary share capital		305,815	13
Repayments of borrowings		(170,000)	(106,500)
Drawdown of borrowings		272,000	99,500
Upfront loan facility fee paid		(1,500)	-
Dividends paid to shareholders	10	(34,866)	(34,866)
Finance lease principal payments		(208)	(182)
Net cash flows used in financing activities		371,241	(42,035)

Net increase in cash and cash equivalents		56,292	43

Cash and cash equivalents at the beginning of the year		9,611	9,568

Cash and cash equivalents at the end of the year		65,903	9,611

1. General information

Corporate information
The Restaurant Group plc (the "Company") is a public listed company incorporated and registered in Scotland. The consolidated preliminary results of the Company as at and for the year ended 30 December 2018 comprise the Company and its subsidiaries (together referred to as the "Group").

The consolidated preliminary results of the Group for the year ended 30 December 2018 were approved by the directors on 14 March 2019. The Annual General Meeting of The Restaurant Group plc will be held at 9:30am on Friday 17 May 2019 at the offices of MHP Communications at 6 Agar Street, London WC2N 4HN.

Accounting policies

Basis of preparation
Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRSs.

The consolidated financial statements comprise the financial statements of the Group as at 30 December 2018 and are presented in UK Sterling and all values are rounded to the nearest thousand (UK £'000), except when otherwise indicated.

Going concern
The financial statements have been prepared on a going concern basis as, after making appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future at the time of approving the financial statements.

Nature of financial information
The financial information contained within this preliminary announcement for the 52 weeks to 30 December 2018 and 52 weeks to 31 December 2017 do not comprise statutory financial statements for the purpose of the Companies Act 2006, but are derived from those statements. The statutory accounts for The Restaurant Group plc for the 52 weeks to 31 December 2017 have been filed with the Registrar of Companies and those for the 52 weeks to 30 December 2018 will be filed following the Company's Annual General Meeting.

The auditor's reports on the accounts for both the 52 weeks to 30 December 2018 and 52 weeks to 31 December 2017 were unqualified and did not include a statement under Section 498 (2) or (3) of the Companies Act 2006.

The Annual Report will be available for Shareholders in April 2019.

New accounting standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the consolidated preliminary results are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 30 December 2018.

The Restaurant Group plc

Notes to the accounts

For the year ended 30 December 2018

2 Restatement of comparatives

	As originally disclosed	Capital contributions (i)	Rent Free periods (ii)	Finance lease (iii)	Dilapidations provision (iv)	Impairment & onerous leases (v)	As restated
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Consolidated income statement for the 52 weeks ended 31 December 2017
Cost of sales before exceptional items	(589,490)	387	-	(199)	-	708	(588,594)
Exceptional cost of sales	(8,386)	-	-	-	-	(16,508)	(24,894)
Interest payable	(1,911)	-	-	199	-	-	(1,712)
Trading tax on profit from ordinary activities	(12,076)	-	-	-	-	-	(12,076)
Exceptional tax credit	1,423	-	-	-	-	826	2,249
Profit after tax	32,933	387	-	-	-	(14,974)	18,346

Adjusted EBITDA	95,118	842	-	(205)	-	-	95,755
Depreciation and amortisation	(36,514)	(455)	-	6	-	708	(36,255)

Consolidated balance sheet at 31 December 2017
Property, plant and equipment	335,029	16,460	-	84	-	(24,253)	327,320
Trade and other payables - current	(124,238)	(841)	8,038	-	2,200	-	(114,841)
Other payables - non-current	(2,548)	(15,232)	(8,038)	1,222	-	-	(24,596)
Deferred tax liabilities	(5,127)	-	-	-	-	826	(4,301)
Provisions - non-current	(31,688)	-	-	-	(2,200)	-	(33,888)
Retained earnings	127,548	387	-	1,306	-	(23,427)	105,814

Consolidated statement of changes in equity
Retained earnings as at 1 January 2017	129,481	-	-	1,306	-	(8,453)	122,334

Basic and diluted earnings per share
Weighted average ordinary shares for the purposes of basic earnings per share	200,376,258	-	-	-	-	-	200,376,258
Weighted average ordinary shares for the purposes of diluted earnings per share	201,344,618	-	-	-	-	-	201,344,618
Total profit for the year (£'000)	32,933	387	-	-	-	(14,974)	18,346

Basic profit/ (loss) per share for the year (pence)	16.44	0.19	-	-	-	(7.47)	9.16
Diluted profit/ (loss) per share (pence)	16.36	0.19	-	-	-	(7.44)	9.12

Adjusted basic profit per share for the year (pence)	22.29	0.19	-	-	-	-	22.48
Adjusted diluted profit per share (pence)	22.18	0.19	-	-	-	-	22.37

During the year, management have identified five items for which we have retrospectively amended the financial statements.

(i) Lease incentives - capital contributions

The Group has historically recognised contributions received from landlords to offset against the cost of fitting out a restaurant as a reduction in Property, plant and equipment. Management has identified this error in the year, and reclassified to Trade and other payables, split between current and non-current. Whereas these have previously been depreciated each year, over the lease life, all lease incentives are now recognised, within Cost of sales in the income statement. The prior year credit was also reclassified from Depreciation into Cost of sales. This has resulted in:

- An increase in the Property, plant and equipment as at 1 January 2017 of £16.9m, representing the reversal of prior incentives, with a corresponding increase in the Trade and other payables balance for the remaining incentives to recognise over the lease life.

- An increase in the Depreciation charge for 2017 of £0.5m and a decrease in rent of £0.8m.

(ii) Lease incentives - rent free periods
The Group has previously accounted for rent free lease incentives as a current liability, despite them being recognised in the income statement over the life of the lease. The Group has reclassified amounts that will be unwound to the income statement after one year to non-current Other payables. This has resulted in:

- An £8.0m increase in non-current Other payables as at 1 January 2017, and a corresponding decrease in current Trade and Other payables.

- There is no impact on the 2017 income statement as the incentive was released appropriately.

(iii) Finance lease

The historical accounting for finance leases on a number of sites was incorrect. A mechanical calculation error had led to the future cash outflows being overstated. This has resulted in:

- A £1.7m reduction in non-current Other payables, and a corresponding reduction in Retained earnings as at 1 January 2017. There is less than a £0.1m impact on Property, plant and equipment as these sites have been fully impaired.

- The impact on the income statement for 2017 is considered immaterial, and has not been adjusted.

(iv) Dilapidations provision
The Group historically recorded dilapidation provisions within current Trade and other payables. The Group has corrected the reclassification of dilapidations to non-current Provisions. This has resulted in:

- A £2.2m increase in non-current Provisions, and a corresponding decrease in current Trade and other payables as at 1 January 2017.

- No impact on the income statement for 2017 as these were recognised prior to 1 January 2017.

(v) Impairment and onerous lease

As part of the year-end process, management reviewed and re-assessed the method by which central costs are allocated to the individual CGUs for the purposes of impairment testing. As a result, an appropriate portion of the central costs were allocated to the CGUs to more accurately determine their future cash flows. This change has been applied retrospectively to the 1 January 2017 balance sheet. This has resulted in:

- A write down of the 1 January 2017 Property, plant and equipment values of £8.5m and corresponding reduction in opening Retained earnings; and

- An additional 2017 Exceptional impairment charge of £16.5m and a reduction in Depreciation of £0.7m, totalling a £15.8m impact on Profit before tax.

3 Segmental analysis

The Group trades in one business segment (that of operating restaurants) primarily within the United Kingdom. In addition, the Group operates restaurants in the United States and generates revenues from franchise royalties primarily in the Middle East and Europe. The segmentation between geographical location and restaurant operations and royalty revenues are not considered significant to be reportable segments under IFRS 8.

4 Revenue

Revenue has been generated from the operation of restaurants, with approximately 99% of revenue generated within the United Kingdom. The remainder is attributable to restaurants within the United States and from franchise royalties primarily in the Middle East and Europe.

5 Profit for the year	2018	2017
		Restated (Note 2)
	£'000	£'000
Cost of sales consists of the following:

Continuing business excluding pre-opening costs	601,928	586,451
Pre-opening costs	1,404	2,143
Trading cost of sales	603,332	588,594

Exceptional items (Note 6)	23,997	24,894

Total cost of sales for the year	627,329	613,488


	2018	2017
		Restated (Note 2)
Profit for the year has been arrived at after charging /(crediting):	£'000	£'000

Amortisation (Note 11)	342	-
Depreciation (Note 12)	32,111	36,255
Impairment of property, plant and equipment (Note 12)	13,970	20,693
Purchases of food, beverages and consumables	149,586	147,079
Staff costs	242,375	236,981

Minimum lease payments	78,182	73,063
Contingent rents	12,515	10,093
Total operating lease rentals of land and buildings	90,697	83,156
Rental income	(2,300)	(2,007)
Net rental costs	88,397	81,149

6 Exceptional items	2018	2017
		Restated (Note 2)
	£'000	£'000
Included within cost of sales:
Onerous lease provision in respect of closed and other sites	10,027	4,201
Impairment of property, plant and equipment	13,970	20,693
	23,997	24,894
Included within administration costs:
Acquisition related costs	14,775	-
Restructuring and strategic review costs	-	4,772
	14,775	4,772
Included within interest payable:
Refinancing costs	467	-
Exceptional items before tax	39,239	29,666


Credit in respect of tax rate change	219	176
Tax effect of exceptional Items	(4,531)	(2,425)
	(4,312)	(2,249)

Net exceptional items for the year

34,927

27,417

An exceptional pre-tax charge of £39.2m has been recorded in the year (2017 Restated: £29.7m), which includes the following:

- Onerous lease provisions resulted in a charge of £10.0m in the year (2017: £4.2m). This comprises:

· A £5.2m credit in respect of unutilised provisions following the successful exit of 28 sites ahead of expectations;

· A further charge totalling £15.2m was provided for in the year. This comprised a charge of £11.1m in respect of newly identified onerous leases and a charge of £4.1m in respect of sites previously provided for.

- A net impairment charge of £14.0m (2017 Restated: £20.7m) was made against the carrying value of specific restaurant assets due to continuing challenging trading conditions in the markets in which the Group's restaurants operate as well as a challenging outlook, and has had a significant impact on the Group and the wider casual dining market. There has been an improvement in trading conditions and outlook at certain of the Group's restaurants which has resulted in the reversal of some previous historic impairment charges. The net charge comprises an impairment charge of £17.1m partially offset by reversals of previously recognised impairment losses of £3.1m.

- An exceptional charge of £14.8m has been recorded in the year in relation to the acquisitions of Wagamama, Food and Fuel and Ribble Valley Inns. Refer to Note 17 for further details.

- An exceptional charge of £0.5m has been recognised in the year as a result of the refinancing which took place to fund the acquisition of Wagamama.

The tax credit relating to these exceptional charges was £4.3m (2017 Restated: £2.2m).

Cash expenditure associated with the above exceptional charges was £21.3m in the year (2017: £19.5m) relating to the cash cost of the onerous leases of £11.2m (2017: £12.7m), the cash cost of the acquisitions and refinancing of £10.1m (2017: £nil), and costs associated with the implementation of the new business strategy of £nil (2017: £6.8m).

7 Net finance charges

2018

2017

Restated

(Note 2)

£'000

Bank interest payable

1,355

746

Onerous lease interest

375

409

Amortisation of facility fees

333

365

Interest on obligations under finance leases

170

192

Trading borrowing costs

2,233

1,712

Exceptional refinancing costs (Note 6)

467

Total borrowing costs

2,700

1,712

Other interest receivable

(1)

(2)

Loan note interest receivable

(49)

Total interest receivable

(1)

(51)

Trading net finance charges

2,232

1,661

Total net finance charges

2,699

1,661

8 Tax

Trading 2018

Exceptional 2018

Total

2018

Total

2017

Restated (Note 2)

a) The tax charge comprises:

£'000

Current tax

UK corporation tax at 19% (2017: 19.25%)

10,183

(2,447)

7,736

10,568

Adjustments in respect of previous years

191

(683)

10,374

(2,447)

7,927

9,885

Deferred tax

Origination and reversal of temporary differences

1,832

Adjustments in respect of previous years

(634)

1,190

Charge/(credit) in respect of rate change on deferred tax liability

(211)

219

165

Credit in respect of fixed asset impairment

(2,084)

(1,507)

987

(1,865)

(878)

(58)

Total tax charge for the year

11,361

(4,312)

7,049

9,827

The adjustments in respect of previous years predominantly relates to allocations of property, plant and equipment between qualifying and non-qualifying expenditure.

b) Factors affecting the tax charge for the year

The tax charged for the year varies from the standard UK corporation tax rate of 19.00% (2017: 19.25%) due to the following factors:

Trading

Exceptional

Total

2017

2018

Restated

(Note 2)

£'000

Profit on ordinary activities before tax

53,170

(39,239)

13,931

28,173

Profit/(loss) on ordinary activities before tax multiplied by the standard UK

corporation tax rate of 19.00% (2017: 19.25%)

10,102

(7,455)

2,647

5,423

Effects of:

Depreciation/impairment on non-qualifying assets

1,266

570

1,836

3,720

Expenses not deductible for tax purposes

518

2,354

2,872

475

(Credit)/charge in respect of rate change on deferred tax liability

(211)

219

165

Adjustment in respect of previous years

(443)

507

Release of tax provisions

(15)

(478)

Business combinations

(80)

(182)

Share options

224

197

Total tax charge for the year

11,361

(4,312)

7,049

9,827

The Finance (No.2) Act 2015 introduced a reduction in the main rate of corporation tax from 20% to 19% from April 2017 and from 19% to 18% from April 2020. These reductions were substantively enacted on 26 October 2015.

The Finance Act 2016 introduced a further reduction in the main rate of corporation tax to 17% from April 2020. This was substantively enacted on 6 September 2016. The deferred tax provision at the balance sheet date has been calculated at this rate, resulting in a £nil tax charge (2017 restated: £0.2m).

9 Earnings per share (EPS)

2018

2017

Restated

(Note 2)

a) Basic earnings per share:

Weighted average ordinary shares for the purposes of basic earnings per share

284,959,978

274,616,270

Total profit for the year (£'000)

6,882

18,346

Basic earnings per share for the year (pence)

2.42

6.68

Total profit for the year (£'000)

6,882

18,346

Effect of exceptional items on earnings for the year (£'000)

34,927

27,417

Earnings excluding exceptional items (£'000)

41,809

45,763

Adjusted earnings per share (pence)

14.67

16.66

b) Diluted earnings per share:

Weighted average ordinary shares for the purposes of basic earnings per share

284,959,978

274,616,270

Effect of dilutive potential ordinary shares:

Dilutive shares to be issued in respect of options granted under the share option schemes

64,070

383,856

Shares held by employee benefit trust

688,276

943,284

285,712,324

275,943,410

Diluted earnings per share (pence)

2.41

6.65

Adjusted diluted earnings per share (pence)

14.63

16.58

On the 14 December 2018 the group issued 290,428,830 new ordinary shares of 28.125p each through a rights issue. To reflect the rights issue, the number of shares previously used to calculate basic and diluted earnings per share and adjusted earnings per share have been amended in the table above in accordance with IAS 33.

A bonus adjustment factor of 1.370 has been applied, based on the ratio of an adjusted closing share price of 200.0p per share on 30 October 2018, the business day before the shares started trading ex rights price at that date of 108.5 pence per share.

Prior to this re-presentation, the EPS for the year ended 31 December 2017 as restated (Note 2) was 9.16 pence (basic), 9.12 pence (diluted), 22.48 pence (adjusted basic) and 22.37 pence (adjusted diluted).

Diluted earnings per share information is based on adjusting the weighted average number of shares for the purposes of basic earnings per share in respect of notional share awards made to employees in regards of share option schemes and the shares held by the employee benefit trust. The calculation of diluted earnings per share does not assume conversion, exercise or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share.

10 Dividend

2018

2017

£'000

Amounts recognised as distributions to equity holders during the year:

Final dividend for the 52 weeks ended 31 December 2017 of 10.60p (2016: 10.60p) per share

21,240

Interim dividend for the 52 weeks ended 30 December 2018 of 6.80p (2017: 6.80p) per share

13,626

Total dividends paid in the year

34,866

Proposed final dividend for the 52 weeks ended 30 December 2018 of 1.47p (2017 actual proposed and paid: 10.60p) per share

7,232

21,240

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting to be held on 23 May 2019 and is not recognised as a liability in these financial statements. The proposed final dividend payable reflects the number of shares in issue on 30 December 2018, adjusted for the 0.7m shares owned by the employee benefit trust for which dividends have been waived.

11 Intangible assets		Trademarks	Franchise	Software & IT
	Goodwill	and licences	agreements	development	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 2 January and 31 December 2017	26,433	-	-	-	26,433

Accumulated amortisation
At 2 January and 31 December 2017	-	-	-	-	-

Cost
At 1 January 2018	26,433	-	-	-	26,433
Additions	-	-	-	1,532	1,532
Additions on acquisition of subsidiaries (Note 17)	-	479	-	1,207	1,686
Intangibles recognised on acquisition of subsidiaries (Note 17)	326,476	236,000	21,900	-	584,376
At 30 December 2018	352,909	236,479	21,900	2,739	614,027

Accumulated amortisation
At 1 January 2018
Charged during the year	-	-	28	314	342
At 30 December 2018	-	-	28	314	342

Net book value as at 31 December 2017	26,433	-	-	-	26,433
Net book value as at 30 December 2018	352,909	236,479	21,872	2,425	613,685

The intangible assets reported on the balance sheet represent goodwill, trademarks and licences, franchise agreements and software and IT development arising on the previous acquisition of Blubeckers Limited and Brunning and Price Limited, which now trade as pub restaurants, and current year acquisitions of Ribble Valley Inns Limited, Food and Fuel Limited and Wagamama. Refer to Note 17 for further details of intangible assets recognised on acquisition of subsidiaries.

Goodwill and trademarks arising on business combinations are not amortised but are subject to an impairment review annually, or more frequently if events or changes in circumstances indicate that they might be impaired. Therefore, goodwill and trademarks arising on acquisition are monitored and an impairment test is carried out which compares the value in use of each cash generating unit (CGU) to its carrying value.

The recoverable amount of the goodwill and trademark CGU's is £352.9m and £236.5m as at 30 December 2018 respectively. The recoverable amounts have been based on value in use estimates using cash flow projections based on one year budgets approved by the Board. The value in use estimates differ depending upon the area of the business. The projected cash flows have been discounted using a rate based on the Group's pre-tax Weighted Average Cost of Capital of 9.2% (2017: 10.2%) that reflects the risk of these assets. Cash flows are extrapolated in perpetuity with an annual growth rate of 2%. Perpetuity is believed to be reasonable due to the significant proportion of freeholds in the estate and the nature of the leasehold properties. It was concluded that the value in use for the CGU's is higher than its carrying value and therefore did not require impairment.

The Group has conducted a sensitivity analysis taking into consideration the impact on key impairment test assumptions arising from a range of possible trading and economic scenarios. The scenarios have been summarised as follows:
- An increase in the discount rate of 1%
- A decrease of 5% on forecast cash flows
The sensitivity analysis shows that no impairment would result from either an increase in the discount rate or a decrease in forecast cash flows.

12 Property, plant and equipment

Fixtures,

Land and buildings

equipment and vehicles

Total

£'000

Cost

At 1 January 2017 - Restated (Note 2)

541,655

191,593

733,248

Additions

16,192

17,146

33,338

Disposals

(17,459)

(8,440)

(25,899)

Transfers to provisions

500

At 31 December 2017 - Restated (Note 2)

540,888

200,299

741,187

Accumulated depreciation and impairment

At 1 January 2017 - Restated (Note 2)

239,163

139,594

378,757

Provided during the year - Restated (Note 2)

20,353

15,902

36,255

Impairment - Restated (Note 2)

16,249

4,444

20,693

Disposals

(14,177)

(7,661)

(21,838)

At 31 December 2017 - Restated (Note 2)

261,588

152,279

413,867

Cost

At 1 January 2018

540,888

200,299

741,187

Additions

38,374

14,913

53,287

Additions on acquisition of subsidiaries

67,900

32,346

100,246

Disposals

(569)

(751)

(1,320)

At 30 December 2018

646,593

246,807

893,400

Accumulated depreciation and impairment

At 1 January 2018

261,588

152,279

413,867

Provided during the year

18,498

13,613

32,111

Impairment

14,582

(612)

13,970

Disposals

(141)

(705)

(846)

At 30 December 2018

294,527

164,575

459,102

Net book value as at 31 December 2017

279,300

48,020

327,320

Net book value as at 30 December 2018

352,066

82,232

434,298

The impairment charge comprises a charge of £17.1m partially offset by reversals of previously recognised impairment losses of £3.1m. Refer to Note 6 for further details. Included within the book value of property, plant and equipment are assets under construction of £2.8m (2017: £0.7m) which are not depreciated.

During the period the Group amended its estimate of residual values for property, plant and equipment by reference to an external valuation.

Impairment testing on the Group's property, plant and equipment has been based on value in use estimates using cash flow projections based on one year budgets approved by the Board. The value in use estimates differ depending on the area of the business. The projected cash flows have been discounted using a rate based on the Group's pre-tax Weighted Average Cost of Capital of 9.2% (2017: 10.2%) that reflects the risk of these assets. Cash flows are extrapolated in perpetuity or to the end of the lease life with an annual growth rate of 2%.

The key assumptions in the value in use estimates are the discount rate applied and the forecast cash flows. An increase of 1% in the discount rate would give rise to an additional impairment charge of approximately £1.2m, whilst a decrease of 1% in the discount rate would give rise to a reduction in impairment of approximately £0.5m. The forecast cash flows take into account management's experience of the specific sites and its long term expectations of the market. A 10% reduction in these forecast cash flows would result in an additional impairment charge of approximately £2.8m.

	2018					2017
						Restated
						(Note 2)
Net book value of land and buildings:	£'000					£'000

Freehold					114,919	108,419
Long leasehold					4,102	3,640
Short leasehold					233,045	167,241

					352,066	279,300

Assets held under finance leases					2018	2017
						Restated
						(Note 2)
Costs					£'000	£'000
At the beginning of the year					1,595	1,961
Disposals during the year					-	(366)
At the end of the year					1,595	1,595

Depreciation
At the beginning of the year					1,434	1,681
Provided during the year					11	25
Disposals during the year					-	(272)
At the end of the year					1,445	1,434

Net book value at the end of the year					150	161
13 Provisions
				2018		2017
						Restated (Note 2)
				£'000		£'000

Provision for onerous leases				57,421		41,805
Other provisions				2,200		2,491

Balance at the end of the year				59,621		44,296

Analysed as:
Amount due for settlement within one year				9,377		10,408
Amount due for settlement after one year				50,244		33,888

				59,621		44,296

		Onerous contracts & other property provisions	Other			Total
		£'000	£'000			£'000

Balance at 1 January 2018 - Restated (Note 2)		41,805	2,491			44,296
Transfer from other provisions		291	(291)			-
Provisions acquired (Note 16)		16,758	-			16,758
Release of onerous lease provision in respect of closed sites now disposed		(5,214)	-			(5,214)
Onerous lease provision in respect of distressed and other sites		14,669	-			14,669
Amounts utilised		(11,263)	-			(11,263)
Unwinding of discount		375	-			375

Balance at 30 December 2018		57,421	2,200			59,621

The onerous lease provisions are for onerous contracts in respect of lease agreements. The provision comprises the onerous element of expenditure over the life of those contracts which are considered onerous, expiring in 1 to 30 years, and exit costs including the costs of strip out, dilapidations and the costs expected to be incurred over the void period until the property is sublet.

- Onerous lease provisions resulted in a charge of £9.5m in the year (2017: £4.5m). This comprises:

• A £5.2m credit in respect of unutilised provisions following the successful exit of 28 sites ahead of expectations;

• A further charge totalling £14.7m was provided for in the year. This comprised a charge of £11.1m in respect of newly identified onerous leases and a charge of £3.6m in respect of sites previously provided for.

During the year £16.8m of provisions were acquired through business combinations. Refer to Note 16 for further details.

Included in the opening balance is a £2.2m reclassification of dilapidations to other provisions, which are expected to be utilised within three years. Refer to Note 2 for further details.

Changes in the EBITDA performance of each site could impact on the value of the provision. It is estimated that, a 10% decline in the EBITDA performance of the sites included in the provision would generate an additional provision of £0.3m. Additionally, it is estimated that, should all leases with more than ten years remaining on the committed lease term be exited two years ahead of expiry, the provision would reduce by £1.0m. A 1% increase in the risk free rate would reduce the provision by £1.7m while a reduction of similar magnitude would result in an additional provision of £1.9m.

14 Reconciliation of profit before tax to cash generated from operations							2018		2017
									Restated (Note 2)
							£'000		£'000

Profit before tax							13,931		28,173
Net interest charges							2,232		1,661
Impairment of property, plant and equipment							13,970		20,693
Onerous lease and other property provisions							10,027		4,201
Restructuring costs							-		4,772
Acquisition costs							14,775		-
Refinancing costs							467		-
Share-based payments							761		2,158
Amortisation							342		-
Depreciation							32,111		36,255
Loss on disposal of fixed assets							104		-
Decrease/(increase) in stocks							83		(298)
(Increase)/decrease in receivables							(3,983)		2,185
Increase in creditors							3,487		8,019

Cash generated from operations							88,307		107,819
15 Reconciliation of changes in cash to the movement in net debt							2018			2017
										Restated (Note 2)
							£'000			£'000
Net debt:
At the beginning of the year							(23,102)			(29,966)
Movements in the year:
Net (withdrawals)/repayments of borrowings							(102,000)			7,000
Debt acquired on acquisition of subsidiary							(226,164)			-
Unamortised loan fees acquired on acquisition of subsidiary							2,493			-
Upfront loan facility fee							1,500			-
Finance leases							208			182
Non-cash movements in the year							(359)			(361)
Net cash inflow							56,292			43

At the end of the year							(291,132)			(23,102)
Represented by:
				At 30
	At 2 January	Cash flow movements	Non-cash movements	December 2017 & 1 January	Cash flow movements	Debt acquired on	Unamortised loan fees acquired on	Upfront loan facility		Non-cash movements	At 30 December
	2017	in the year	in the year	2018	in the year	acquisition	acquisition	fee		in the year	2018
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000		£'000	£'000
Cash and cash equivalents	9,568	43	-	9,611	56,292	-	-	-		-	65,903
Bank loans falling due after one year	(37,882)	7,000	(341)	(31,223)	(102,000)	(225,000)	2,493	1,500		(190)	(354,420)
Finance leases	(1,652)	182	(20)	(1,490)	208	(1,164)	-	-		(169)	(2,615)

	(29,966)	7,225	(361)	(23,102)	(45,500)	(226,164)	2,493	1,500		(359)	(291,132)

Cash and cash equivalents are comprised of cash at bank and cash floats held on site. The cash and cash equivalents balance includes credit card receipts that were cleared post year end. The non-cash movements in bank loans are in relation to the amortisation of prepaid facility costs.

16 Basis of preparation

The Group's preliminary announcement and statutory accounts in respect of 2018 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 30 December 2018 or 31 December 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's Annual General Meeting. The 2018 statutory accounts are prepared on the basis of the accounting policies stated in the 2017 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.

17 Acquisitions in 2018
During the year the Group undertook three business combinations. Details of the purchase consideration, the provisional fair value of the identifiable assets the and liabilities acquired and goodwill are as follows:

	Ribble Valley Inns	Food and Fuel	Wagamama	Total
Purchase consideration	£'000	£'000	£'000	£'000
Cash paid	939	14,263	348,995	364,197
Total purchase consideration	939	14,263	348,995	364,197

Assets	£'000	£'000	£'000	£'000
Trademark (Note 11)	-	-	236,000	236,000
Franchise agreements (Note 11)	-	-	21,900	21,900
Intangible assets (Note 11)	-	-	1,686	1,686
Fair value lease assets	-	417	1,115	1,532
Property, plant and equipment (Note 12)	835	6,366	93,045	100,246
Cash and cash equivalents	114	268	38,888	39,270
Prepayments	-	339	10,265	10,604
Other receivables	50	98	6,834	6,982
Corporation tax receivable	-	37	-	37
Stock	44	145	2,641	2,830
	1,043	7,670	412,374	421,087


Liabilities
Fair value lease liabilities	-	(1,102)	(10,183)	(11,285)
Trade payables	(284)	(842)	(27,398)	(28,524)
Other payables	(202)	-	(9,226)	(9,428)
Accruals	(120)	(518)	(18,479)	(19,117)
Other tax and social security	(63)	(455)	(21,760)	(22,278)
Corporation tax liability	-	-	(47)	(47)
Deferred tax liability	(28)	(846)	(48,335)	(49,209)
Provisions	-	-	(16,758)	(16,758)
Long term liabilities	-	-	(4,213)	(4,213)
Secured loan notes	-	-	(222,507)	(222,507)
	(697)	(3,763)	(378,906)	(383,366)

Total identifiable net assets at fair value	346	3,907	33,468	37,721

Goodwill arising on acquisition (Note 11)	593	10,356	315,527	326,476
Total purchase consideration	939	14,263	348,995	364,197

The net cash flow impact of the acquisition is:
	£'000	£'000	£'000	£'000
Cash consideration	(939)	(14,263)	(348,995)	(364,197)
Cash acquired	114	268	38,888	39,270
	(825)	(13,995)	(310,107)	(324,927)

The Group made fair value adjustments on acquisition in respect of trademarks, franchise agreements, goodwill, property, plant and equipment and lease assets and lease liabilities. The accounting for the acquisitions made in the year is provisional and will be finalised in the window allowed by IFRS 3.

Ribble Valley Inns

On 21 May 2018, Brunning and Price Limited acquired 100% of issued shares in Ribble Valley Inns Limited, a pubs business, for consideration of £0.9m. The Group acquired Ribble Valley Inns in order to accelerate its expansion strategy of its pubs division. The goodwill premium on acquisition was paid to allow the Group to quickly expand the successful pubs business through acquisitions.

In the year to 30 December 2018 acquisition related costs of £0.2m have been recognised within exceptional acquisition and refinancing related costs totalling £15.2m (Note 6). Since 21 May 2018 Ribble Valley Inns Limited has contributed revenue of £2.0m, EBITDA loss of £0.4m, operating loss of £0.5m and loss before tax of £0.5m.

If the acquisition of Ribble Valley Inns Limited had taken place at the start of the financial period, the enlarged TRG Group would have recognised revenue of £3.2m, EBITDA loss of £0.5m, operating loss of £0.8m and loss before tax of £0.8m. The Group refurbished three out of the four pubs in the period since acquisition with the pubs shut for an extended period during that time. The group also invested in marketing and training to coincide with the relaunch.

Food and Fuel

On 29 August 2018, Brunning and Price Limited acquired 100% of issued shares in Food and Fuel Limited, a premium pubs business, for consideration of £14.3m. The Group acquired Food and Fuel in order to accelerate its expansion strategy of its pubs division. The goodwill premium on acquisition was paid to allow the Group to quickly expand the successful pubs business through acquisitions.

The fair value lease assets and liabilities recognised upon acquisition of £0.4m and £1.1m arose due to current rental on operating leases being favourable or unfavourable to current market terms. The mark to market adjustment on operating leases values the difference between contractual and market rents until that difference is extinguished. The market rents were sourced from external property advisors. An income approach and discounted cash flow methodology was applied to fair value the mark to market lease adjustments. A discount rate of 6% was applied based on average retail property yields in the UK, which implicitly reflect future rental growth expectations. The fair value lease assets and liabilities are being amortised over the life of the leases, which is up to 24 years.

In the year to 30 December 2018 acquisition related costs of £0.5m have been recognised within exceptional acquisition and refinancing related costs totalling £15.2m (Note 6). Since 29 August 2018 Food and Fuel Limited has contributed revenue of £4.2m, EBITDA of £0.4m, operating profit of £0.2m and profit before tax of £0.2m. If the acquisition of Food and Fuel Limited had taken place at the start of the financial period, the enlarged TRG Group would have recognised revenue of £12.7m, EBITDA of £1.0m, operating profit of £0.4m and profit before tax of £0.4m.

Wagamama

On 24 December 2018, The Restaurant Group plc acquired 100% of issued shares in Mabel Topco Group, which operates a chain of pan-Asian style noodle bars, trading in the UK through Wagamama Limited, and in the USA through Wagamama Inc. The UK business also operates as a franchisor of the brand in all territories in which Wagamama trades outside of the UK and USA. The consideration paid consists of funding through a rights issue and bank loan.

The acquisition of Wagamama provided the enlarged TRG Group the opportunity to deliver on multi-pronged growth strategies and provide the enlarged group clear scale advantages as Wagamama is a differentiated high growth brand with clear structural advantages.

Goodwill of £315.5m represents the buyer specific synergies the Group will be able to achieve from acquiring Wagamama, the potential for future franchise agreements, growth potential in the UK and US through further roll-out and access to a workforce with vast experience in operating a successful pan-Asian restaurant chain.

Trademark intangibles of £236.0m have been recognised upon acquisition on the basis that Wagamama is a large and well recognised Casual Dining brand, with high awareness among casual dining chains and is highly advocated, with one of the highest Net Promoter Scores amongst its competitors. The brand is particularly strong with young, affluent consumers who are familiar with international cuisine. A relief-from-royalty valuation approach was used to value the trademark. The trademark is deemed to have an indefinite useful life.

Franchise agreements of £21.9m have been recognised upon acquisition following a valuation of the agreements that were in place as at the acquisition date. A multi-period excess earnings method was used in the valuation. Franchise agreements are being amortised over a useful economic life of 15 years.

The valuation of leasehold improvements and fixtures and fittings has resulted in a downward fair value adjustment of £19.0m. The depreciated direct replacement cost approach has been applied to value the tangible assets and the replacement cost has been based on the cost of recent fit out projects undertaken for Wagamama. Depreciation has been based on the existing depreciation policies.

The fair value lease assets and liabilities recognised upon acquisition of £1.1m and £10.2m arose due to current rental on operating leases being favourable or unfavourable to current market terms. The mark to market adjustment on operating leases value the difference between contractual and market rents until that difference is extinguished. The market rents were either sourced from advice provided by external property advisors, current lease negotiations or ongoing monitoring of restaurant rental levels in connection with the day to day management of the lease portfolio. An income approach and discounted cash flow methodology was applied to fair value the mark to market lease adjustments. A discount rate of 5% was applied for locations in London and 7% for locations outside of London based on average retail property yields in those areas, which implicitly reflect future rental growth expectations. The fair value lease assets and liabilities are being amortised over the life of the leases, which is up to 24 years.

In the year to 30 December 2018 acquisition related costs of £14.5m have been recognised within exceptional acquisition and refinancing related costs totalling £15.2m (Note 6). A further £2.1m of upfront loan fees have been capitalised against the new revolving credit debt facility and £9.3m of share issue costs have been recognised in share premium.

Since 24 December 2018 the Wagamama Group has contributed revenue of £7.0m, adjusted EBITDA of £1.1m, operating profit of £0.7m and profit before tax of £0.5m.

If the acquisition of the Wagamama Group had taken place at the start of the financial period, the enlarged TRG Group would have recognised revenue of £328.3m, adjusted EBITDA of £44.6m, EBITDA of £34.5m, adjusted operating profit of £27.5m, operating profit of £17.4m, adjusted profit before tax of £17.9m and profit before tax of £7.8m.

18 Publication of Annual Report

This preliminary statement is not being posted to shareholders. The Annual Report will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company.

Copies of the Annual Report will be available from the Company's website in April 2019.

Responsibility statement of the directors on the Annual Report

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ended 30 December 2018. Certain parts of the annual report are not included within this announcement.

We confirm that, to the best of our knowledge:-

a) the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

b) the Business review includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole.

On behalf of the Board

Andy McCue Kirk Davis

Chief Executive Officer Chief Financial Officer

14 March 2019 14 March 2019

Glossary

The directors believe the Adjusted Performance Metrics used within this report, and defined below, provide additional useful information for shareholders to evaluate and compare the performance of the business from period to period. These are also the KPIs used by the directors to assess performance of the business. The adjusted metrics are reconciled to the statutory results for the year on the face of the income statement and the relevant supporting notes.

Trading business	Represents the performance of the business before exceptional costs and is considered as the key metrics for shareholders to evaluate and compare the performance of the business from period to period.
Exceptional items	Those items that, by virtue of their unusual nature or size, warrant separate additional disclosure in the financial statements in order to fully understand the performance of the Group.
Like-for-like ('LFL') sales	This measure provides an indicator of the underlying performance of our existing restaurants. There is no accounting standard or consistent definition of 'like-for-like sales' across the industry. Group like-for-like sales are calculated by comparing the performance of all mature sites in the current period versus the comparable period in the prior year. Sites that are closed, disposed or disrupted during a financial year are excluded from the LFL calculation.
Adjusted EBITDA	Earnings before interest, tax, depreciation, amortisation and exceptional items. Calculated by taking the Trading business operating profit and adding back depreciation and amortisation.
EBITDA	Earnings before interest, tax, depreciation, amortisation and impairment.
Net debt	Net debt is calculated as the net of the long-term borrowings and finance leases.
Free cash flow	EBITDA less working capital and non-cash movements (excluding exceptional items), tax payments, interest payments and maintenance capital expenditure.
Adjusted operating profit	Earnings before interest, tax and exceptional items.
Adjusted EPS	Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year.
Adjusted diluted EPS	Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year, including the effect of dilutive potential ordinary shares.
Adjusted profit before tax	Calculated by taking the profit before tax of the business pre-exceptional items.
Theoretical Ex-Rights Price	This Is the price per Ordinary Share calculated as at a date by applying the following formula: Current price * Existing Ordinary Shares) plus (Rights issue Price * New Ordinary shares) divided by existing Ordinary Shares plus New Ordinary Shares.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR LIFILVVIELIA

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