Interim Results
City Centre Restaurants PLC
04 September 2002
City Centre Restaurants plc
Interim Results for the Six Months to 30 June 2002
City Centre Restaurants plc currently operates 248 branded restaurants. Its
portfolio of brands includes Frankie & Benny's, Chiquito, Garfunkel's, Est Est
Est and Caffe Uno.
• Turnover was £103 million (2001: £109 million)
• Pre-tax profit increased by more than 10% to £6.1 million (2001: £5.5
million)
• Earnings per share were up 23% to 2.03p (2001: pre-exceptional
earnings per share 1.65p)
• Maintained interim dividend of 0.75p per share (2001: 0.75p)
• Despite overall difficult market conditions, the Group has achieved
excellent profits growth in its expanding Leisure Parks business.
Frankie & Benny's has had a record period with profits up by 48%.
5 new Frankie & Benny's opened in the first half. A further 5 will
open in the second half and 12 to 15 in 2003
• Trading at high street locations remains competitive although there
are signs that tourist custom is returning to Garfunkel's. Est Est
Est and Caffe Uno are now showing the benefits of the foundations laid
over the last six months
• Launch of the new Metro-to-Go takeaway operation at Stansted aimed at
budget airline travellers. Trading has got off to an encouraging start
Alan Jackson, Executive Chairman of City Centre Restaurants, said:
'I am pleased to report that, after an inconsistent past, City Centre
Restaurants has now demonstated its ability to produce creditable results in a
most difficult market place. '
4 September 2002
ENQUIRIES:
City Centre Restaurants plc Tel: 020 7747 7750
Alan Jackson, Executive Chairman
Andrew Guy, Chief Executive
Andrew Page, Finance Director
College Hill Tel: 020 7457 2020
Matthew Smallwood
Justine Warren
Chairman's Statement
Introduction
The six month period under review has been a challenging one for our industry
and also for the Group, in contrast to a more benign start to 2001. The
difficulties faced by several of the companies operating in our sector have been
well-publicised and we, too, have faced increased competitive activity across
some of our businesses, most noticeably our High Street Restaurant operations.
During the second half of 2001 we developed a strategy for growth which focuses
on those of our business segments which display three key characteristics:
- High returns on investment
- Good growth prospects
- High barriers to entry
This led us to direct our development efforts into the Leisure Parks and
Concessions segments, both of which display these three key characteristics.
During the first half of 2002, our choice of strategy has been justified. We
have secured excellent profits growth in Leisure Parks and our Concessions
business (principally airport-based operations) has successfully confronted an
extremely difficult trading environment resulting from the continuing adverse
impact of the events of September 11. Whilst we do not anticipate a rapid
return in Gatwick and Manchester airports to increasing passenger numbers, we
have every confidence that our Concessions business will continue to develop and
grow profitably.
Meanwhile, a difficult economic environment, coupled with stiff competition in
the High Streets, has meant that we have been less able to grow profits in our
High Street Restaurants segment during the first half. However, we have
continued to focus on driving better returns from each of our High Street brands
and continue to concentrate our efforts on improving sales, cost control and
margins.
Overall, we are encouraged that, against such a difficult trading background,
the Group has achieved EBITDA and profit growth across the aggregate performance
of its principal trading brands. Group profit before taxation increased by more
than 10% and the corresponding increase in earnings per share was 23%.
Results
Pre-tax profits improved to £6.1 million (2001 pre-exceptionals: £5.5 million),
which represents a creditable performance over a difficult period. This was
achieved on a slightly reduced turnover of £103 million (2001: £109 million),
reflecting the sale of the Deep Pan Pizza business. Earnings per share were
2.03p (2001: pre-exceptional earnings per share 1.65p). In light of the Group's
performance the Board is declaring an interim dividend of 0.75p (2001: 0.75p).
Balance Sheet
The Group has adopted FRS 19: Deferred Tax, which requires full provision to be
made for deferred tax liabilities. Previously, under SSAP15, the Group provided
for deferred tax on a partial provision basis. This change has resulted in a
prior year charge of £13.7m as at 1 January 2002 which has impacted the Group's
Net Assets. Under FRS 19 the taxation charge for the half year under review is
at a rate of 35%. Net debt has fallen and as at 30 June 2002 was £47.5m (2001:
£58.5m).
Review of Operations
Leisure Parks
Total turnover: £44.2m Profit: £7.7m Operating margin: 17.5%
Frankie & Benny's
Total turnover: £30.5m Like-for-Like sales: +9.2%
Frankie & Benny's continues to perform well with strong like-for-like sales
increases and a rise in profit of 47.7%. We opened five new sites in the
period which brought the Group's total to 69 units in the UK at the half year
end. We plan to open a further five in the second half and 12 to 15 in 2003.
This brand continues to be an excellent performer and is without doubt the
market leader in the leisure park casual-dining market. Its success is based
on consistent quality and a competitively priced menu which continues to attract
a broad customer base.
Chiquito
Total turnover: £13.7m Like-for-Like sales: +4.4%
Chiquito's continues to perform in line with our expectations. There are now 26
restaurants trading under this brand across the country. We have recently put in
new management to increase the focus on improving returns from this brand.
Concessions
Total turnover: £16.1m Profit: £2.0m Operating margin: 12.4%
Like-for-Like sales: -3.5%
Our airports business has experienced a turbulent year in the aftermath of
September 11. We remain one of the leaders in operating food and drink
concessions within UK airports and currently have a presence in most of the
busiest London and regional airport terminals.
The success of the low cost airlines has been well documented and the Group has
benefited from their operations, particularly at Stansted. During the course of
the first six months, we have begun to operate an additional four units at this
airport - three in the airside lounge and Metro-to-Go on Pier 3, a new takeaway
concept aimed at the needs of travellers on no-frills airlines.
Our units at Heathrow have benefited from steadily increasing flight and
passenger numbers. However, trade at Gatwick and Manchester airports has
suffered as a result of substantially reduced passenger numbers and changes to
airline schedules.
High Streets
Total turnover: £40.5m Profit £4.8m Operating margin: 12.0%
As intimated in our preliminary statement, the Group has indicated that it views
the High Street trading environment as increasingly competitive and we have
looked to stabilise and improve the performance of our sites in these locations.
We have worked intensively in both Caffe Uno and Est Est Est in order to enhance
the quality of food and service.
Garfunkel's
Total turnover: £11.5m Like-for-Like sales: +2.2%
Unsurprisingly, Garfunkel's has suffered the effects of a downturn in the number
of tourists and domestic visitors in Central London in particular. However, we
are now seeing signs that domestic tourism is on the increase and that foreign
tourists are gradually returning. Consequently, we expect an overall
satisfactory performance for the year.
Caffe Uno
Total turnover: £19.6m Like-for-Like sales: +0.2%
Over the last few months, renewed focus has been applied to this brand with
particular attention on simplifying the menu and a revised cost structure has
been introduced. We have also expanded our marketing programme through a series
of promotions and awareness campaigns. In addition, the management team has
been strengthened and levels of customer service improved resulting in a more
encouraging performance over recent months.
Est Est Est
Total turnover: £9.4m Like-for-Like sales: -4.4%
Est Est Est operates at 21 locations of which five are in London. It has
continued to experience difficult trading conditions with a decline in
like-for-like sales. As with Caffe Uno we have taken steps to increase sales and
strengthen management.
Outlook
One of our Group's strengths is that our brands appeal to a broad cross-section
of customers in three distinctive markets. High Streets will remain highly
competitive but Garfunkel's, in particular, is seeing a return of business to
previous levels. Frankie & Benny's will continue to demonstrate its popularity
and growth. We anticipate a gradual improvement in our Concessions business as
the travel market returns to growth.
The Board remains confident that the Group has the management and the strategy
in place to deliver shareholder value. The second half is traditionally the
more important trading period for the business and we believe that we are on
track to achieve a satisfactory result for the year.
4 September 2002
Alan Jackson
Executive Chairman
Segmental Analysis
Six months ended 30 June 2002 Six months ended 30 June 2001
Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure Parks 44,214 9,991 22.6% 7,717 17.5% 37,418 7,704 20.6% 5,745 15.4%
Concessions 16,142 3,157 19.6% 1,994 12.4% 14,184 3,086 21.8% 2,186 15.4%
High Street 40,453 7,495 18.5% 4,845 12.0% 42,087 8,623 20.5% 5,975 14.2%
Restaurants
Principal 100,809 20,643 20.5% 14,556 14.4% 93,689 19,413 20.7% 13,906 14.8%
Trading Brands
Non core Brands 2,613 (547) (20.9%) (713) (27.3%) 15,547 400 2.6% (258) (1.7%)
Total all 103,422 20,096 19.4% 13,843 13.4% 109,236 19,813 18.1% 13,648 12.5%
Brands
Pre opening (110) (0.1%) (110) (0.1%) (34) (0.0%) (34) (0.0%)
Costs
Administration (5,625) (5.4%) (5,965) (5.8%) (5,632) (5.2%) (6,002) (5.5%)
EBITDA / 14,361 13.9% 7,768 7.5% 14,147 13.0% 7,612 7.0%
Operating
Profit
Interest (1,709) (2,107)
Charges
Profit before 6,059 5,505
Taxation and
Exceptional
Items
Exceptional - (11,766)
Items
Profit / (loss) on 6,059 (6,261)
ordinary activities
before Taxation
Group Profit and Loss Account
Half year Half year Year ended
ended ended
30 June 30 June 31 December
2002 2001 2001
(restated) * (restated) *
Note £000s £000s £000s
Turnover 103,422 109,236 227,909
Cost of sales:
Excluding pre-opening costs and exceptional items (89,579) (95,588) (195,729)
Pre-opening costs (110) (34) (378)
Provision for diminution in value of tangible fixed assets 2 - (5,253) (5,253)
Provision against fixed assets 2 - (3,102) (1,595)
(89,689) (103,977) (202,955)
Gross profit 13,733 5,259 24,954
Administrative expenses:
Excluding exceptional items (5,965) (6,002) (12,182)
Exceptional items 2 - (1,076) (1,361)
(5,965) (7,078) (13,543)
Operating profit/ (loss) 7,768 (1,819) 11,411
Loss and provision for loss on disposal of tangible fixed assets 2 - (2,335) (9,308)
and termination of business
Net interest payable (1,709) (2,107) (4,016)
Profit/ (loss) on ordinary activities before taxation 6,059 (6,261) (1,913)
Tax on profit/ (loss) on ordinary activities 4 (2,121) (2,037) (5,886)
Profit/(loss) on ordinary activities after taxation 3,938 (8,298) (7,799)
Dividends 5 (1,457) (1,457) (6,626)
Retained profit/ (loss) for the year 2,481 (9,755) (14,425)
All amounts relate to continuing activities.
Earnings/ (loss) per share 6
Basic earnings / (loss) per share, in pence 2.03 (4.27) (4.01)
Adjusted basic earnings per share, in pence 2.03 1.65 4.82
Diluted earnings / (loss) per share, in pence 2.01 (4.27) (4.01)
Adjusted diluted earnings per share, in pence 2.01 1.65 4.81
* Details regarding the impact of the change in accounting policy resulting from
the adoption of FRS 19 are provided in Note 3.
Statement of Total Recognised Gains and Losses
Half Half Year ended
year ended year ended
30 June 30 June 31 December
2002 2001 2001
(restated) * (restated) *
£000s £000s £000s
Profit / (loss) for the financial year 3,938 (8,298) (7,799)
Currency translation differences on foreign currency investments 12 - 2
Total recognised gains and losses relating to the year 3,950 (8,298) (7,797)
Prior year adjustment (as detailed in note 3) (13,727)
Total gains and losses recognised since last annual report (9,777)
Reconciliation of Movements in Shareholders' Funds
Half Half Year ended
year ended year ended
30 June 30 June 31 December
2002 2001 2001
(restated) * (restated) *
£000s £000s £000s
Total recognised gains and losses for the period 3,950 (8,298) (7,797)
Dividends (1,457) (1,457) (6,626)
Total movements during the period 2,493 (9,755) (14,423)
Shareholders' funds at 1 January (originally £54,024,000 40,297 54,720 54,720
at 1 January 2002 before deducting prior year adjustment
of £13,727,000)
Shareholders' funds at end of period 42,790 44,965 40,297
* Details regarding the impact of the change in accounting policy resulting from
the adoption of FRS 19 are provided in Note 3.
Group Balance Sheet
30 June 30 June 31 December
2002 2001 2001
(restated) * (restated) *
£000s £000s £000s
Fixed assets
Tangible assets 144,284 150,798 150,419
Current assets
Stocks 2,014 2,134 2,217
Debtors 18,992 13,041 11,988
Cash at bank and in hand 450 3,187 1,052
21,456 18,362 15,257
Creditors
Amounts falling due within one year (58,653) (43,312) (52,591)
Net current liabilities (37,197) (24,950) (37,334)
Total assets less current liabilities 107,087 125,848 113,085
Creditors
Amounts falling due after one year (45,329) (60,985) (53,657)
Provisions for liabilities and charges
Property provision (1,280) (2,980) (1,353)
Deferred tax (17,688) (16,918) (17,778)
(18,968) (19,898) (19,131)
Net assets 42,790 44,965 40,297
Capital and reserves
Called up share capital 48,576 48,576 48,576
Share premium account 10,192 10,192 10,192
Profit and loss account (15,978) (13,803) (18,471)
42,790 44,965 40,297
* Details regarding the impact of the change in accounting policy resulting from
the adoption of FRS 19 are provided in Note 3.
Group Statement of Cash Flows
30 June 30 June 31 December
2002 2001 2001
Note £'000 £'000 £'000
Net cash flow from operating activities 1 11,251 11,788 30,961
Returns on investments and servicing of finance
Interest received 8 34 79
Interest paid (1,701) (2,141) (3,854)
Net cash outflow from returns on
investments and servicing of finance (1,693) (2,107) (3,775)
Taxation
Corporation tax paid (1,901) (690) (3,065)
Capital expenditure
Payments to acquire tangible fixed assets (7,252) (6,841) (15,784)
Receipts from sales of tangible fixed assets 5,548 1,418 1,813
Net cash outflow for capital expenditure (1,704) (5,423) (13,971)
Acquisitions and disposals
Net proceeds received from the disposal of operations (234) - 68
Net cash (outflow) / inflow from acquisitions
and disposals (234) - 68
Equity dividends paid 5 - (5,169) (6,626)
Cash inflow/(outflow) before financing 7 5,719 (1,601) 3,592
Financing
Loans repaid 7 (8,328) (328) (7,656)
(8,328) (328) (7,656)
(Decrease) / increase in cash in the period 7 (2,609) (1,929) (4,064)
Notes to the Accounts
1) Reconciliation of operating profit to net cash inflow from operating activities
Half Half
year ended year ended Year ended
30 June 30 June 31 December
2002 2001 2001
£000s £000s £000s
Operating profit/ (loss) 7,768 (1,819) 11,411
Depreciation 6,593 6,535 13,240
Exceptional depreciation - 122 242
Exceptional item (provision for diminution in
value of tangible fixed assets) - 5,253 5,253
Exceptional item (provision in respect of non-
core units) - 2,980 1,353
Decrease/ (increase) in stocks 203 500 235
Decrease/ (increase) in debtors (7,004) (4,613) (3,123)
Increase/ (decrease) in creditors 3,691 2,830 2,350
Net cash inflow from operating activities 11,251 11,788 30,961
2) Exceptional items
Half Half
year ended year ended Year ended
30 June 30 June 31 December
2002 2001 2001
£000s £000s £000s
a) Exceptional operating items
Provision for diminution in value of tangible fixed assets - 5,253 5,253
Provision in respect of properties
Liabilities in respect of non-core units - 2,980 1,353
Exceptional depreciation following revision of the
economic life of certain assets - 122 242
Redundancy and restructuring costs - 1,076 1,361
- 9,431 8,209
b) Loss and provision for loss on disposal of properties - 2,335 4,535
c) Loss arising on disposal of Deep Pan Pizza - - 4,773
Total exceptional items - 11,766 17,517
Impact on taxation of exceptional items - 267 353
Net impact on earnings of exceptional items - 11,499 17,164
3) Prior Period Adjustment - Deferred Tax
City Centre Restaurants plc has adopted Financial Reporting Standard 19:
Deferred Tax (FRS 19) during the accounting period commencing 1 January 2002.
Deferred tax is now recognised on a full provision basis (with certain
exceptions required by the FRS) whereas previously the Group accounted for
deferred tax under the partial provision method under SSAP 15. Accordingly, the
Group has restated the consolidated balance sheet for the changes to the Group's
deferred tax balance and shareholders' funds, and restated the profit and loss
account and earnings per share.
A reconciliation of the balances impacted by this change in accounting standard
is provided below:
Adjustment to the Group Profit and Loss Account Half
year ended Year ended
30 June 31 December
2001 2001
Profit/ (loss) on ordinary activities before taxation (6,261) (1,913)
Previously reported tax on profit / (loss) (1,065) (3,090)
Impact of implementation of FRS 19 (972) (2,796)
Tax on profit / (loss) on ordinary activities (2,037) (5,886)
Loss on ordinary activities after taxation (revised) (8,298) (7,799)
Adjustment to the Group Balance Sheet
Previously reported Deferred Tax (5,015) (4,051)
Impact of implementation of FRS 19 (11,903) (13,727)
Deferred Tax (revised) (16,918) (17,778)
Previously reported Net Assets / Shareholders equity 56,868 54,024
Impact of implementation of FRS 19 - prior periods (10,931) (10,931)
Impact of implementation of FRS 19 - current period (972) (2,796)
44,965 40,297
4) Taxation
As detailed in note 3, the Group has adopted FRS 19, and has fully provided for
deferred tax. The taxation charge has been calculated by applying the expected
effective taxation rate for corporation and deferred tax to the profit made in
the period.
5) Dividends
The Directors have declared an interim dividend of 0.75p (2001: 0.75p) per share
which will be paid on 31 October 2002 to Ordinary Shareholders on the Register
at the close of business on 27 September 2002. On 4 July 2002 the Group paid the
final dividend for 2001 of 2.66p per share, or £5,169,000 in total.
6) Earnings per share
The calculation of basic earnings / (loss) per share is based on the profit
after taxation for the period and on the weighted average number of ordinary
shares in issue during the period. As at 30 June 2002, 30 June 2001 and 31
December 2001, the average weighted number of shares in issue was 194,301,733.
Adjusted basic earnings per share represents the basic earnings / (loss) per
share, calculated as set out above, as adjusted for the effect on earnings of
exceptional items and provision for loss on disposal of fixed assets.
The calculation of diluted earnings / (loss) per share is based on 195,500,039
shares (six months ended 30 June 2001: 194,552,997 shares and year ended 31
December 2001: 194,517,223 shares).
Adjusted diluted earnings per share represents the diluted earnings / (loss) per
share, as set out above, adjusted for the effect on earnings of exceptional
items and provision for loss on disposal of fixed assets.
Comparative figures for earnings have been adjusted for the effects of FRS19
shown in note 3 and the resulting loss per share figures restated according.
7) Reconciliation of changes in cash to the movement in net debt
Half Half
year ended year ended Year ended
30 June 30 June 31 December
2002 2001 2001
£000s £000s £000s
Net debt at the beginning of the period (53,261) (56,853) (56,853)
Movements during the period:
New loans drawn down - - -
Loans repaid 8,328 328 7,656
Cash inflow/ (outflow) (2,609) (1,929) (4,064)
Net debt the end of the period (47,542) (58,454) (53,261)
Analysis of net debt At Cash flow Other At
31 December movements movements 30 June
2001 in the period in the period 2002
£'000 £'000 £'000 £'000
Cash at bank and in hand 1,052 (602) - 450
Bank overdraft - (2,007) - (2,007)
1,052 (2,609) - (1,557)
Bank loan due within one year (656) 328 (328) (656)
Bank loans due after one year (53,657) 8,000 328 (45,329)
(53,261) 5,719 - (47,542)
Interim financial statements
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2001 statutory accounts, except for
the treatment of deferred tax. Further information as to the treatment of
deferred tax and the impact on the financial statements is provided in Note 3.
The interim financial statements were approved by a duly appointed committee of
the Board of Directors on 3 September 2002 and are unaudited. The auditors have
carried out a review and their report is set out below.
The figures for the year ended 31 December 2001 have been extracted from the
statutory accounts which have been filed with the Registrar of Companies, other
than where amended in order to comply with Financial Reporting Standard 19:
Deferred Tax, which has been adopted for the first time in these financial
statements. The auditors' report on the 2001 financial statements was
unqualified and did not contain any statement under section 237 of the Companies
Act 1985. The interim financial statements do not constitute statutory
accounts.
Independent Review Report to City Centre Restaurants plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2002. We have read the other information contained
in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying data and based
thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of control and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.
BDO Stoy Hayward
London
3 September 2002
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