Interim Results
Restaurant Group PLC
13 September 2006
The Restaurant Group plc
Interim results for the 26 weeks ending 2 July 2006
Continued strong underlying growth
The Restaurant Group plc ('the Group' or 'TRG') operates over 260 branded
restaurants across the UK, predominantly in leisure and airport locations. Its
primary brands are Frankie & Benny's, Chiquito, Garfunkel's and Blubeckers.
All figures are stated on an adjusted basis (excludes non-trading 2006 2005 % change
items and the 2005 result of DPP, as detailed in note 2)
Revenue (£m) 147.4 130.8 +12.7
EBITDA (£m) 24.1 21.4 +12.9
Operating profit (£m) 15.4 12.4 +23.5
Profit before tax (£m) 13.5 11.6 +16.5
Earnings per share (p) 4.29 3.59 +19.5
Interim dividend (p) 1.05 0.91 +15.4
Highlights
Key financial
• Significant increases in both profits and earnings per share
• Like-for-like sales growth of +3% for the first half, currently +4%
year-to-date
• Operating cashflow remains strong with £26.1m generated during the
period and sustains £17.9m in capital expenditure
• Net debt £45.1m
Key operational features
• Very buoyant trade during the first half demonstrating the strength of
our business and its ability to generate sustainable increases in
revenue and profit.
Leisure
• Frankie & Benny's enjoyed another superb half with strong
like-for-likes, excellent returns and increased margins
- Opening programme continues with 4 new restaurants in first half
year
- Introduction of smaller format, Little Frankie's; 7 opened in
first half year
• Chiquito returned the strongest like-for-like sales growth in the
Group. All financial metrics increased significantly
- 60% increase in profits
- 4 new units opened in first half year
• Blubeckers had a strong first half
- Business fully integrated with strong like-for-like sales
- 2 new sites opened in first half year
• Garfunkel's had a solid first half
- Steady performance in the first half year with uplifts seen since
half year
Concessions
• Excellent first half
- Revenue, EBITDA and profits all increased by 25% despite cost
pressures
- 4 new units opened in first half year
Current Trading and Outlook
• Strong start to second half year with like-for-like sales returning to
4% year to date
• Opening programme - on track to open between 40 and 45 new restaurants
in 2006 (including DPP conversions)
Commenting on these results, Andrew Page, Chief Executive, said:
'TRG has made an excellent start to 2006 and has begun the second half strongly.
Year to date, our like-for-like sales are +4% ahead of 2005.
Both the existing estate and our new developments continue to deliver high
returns and we are on track to deliver our opening programme across both
divisions. The Group is in excellent shape and we look forward to reporting
further good progress for the full year.'
13 September 2006
Enquiries:
The Restaurant Group plc
Alan Jackson, Chairman 020 7457 2020 (today)
Andrew Page, Chief Executive Officer 020 7747 7750 (thereafter)
Stephen Critoph, Group Finance Director
College Hill
Matthew Smallwood 020 7457 2020
Chairman's Statement
The Group has made a good start to 2006 with significant increases in revenue,
profits and earnings per share and, since the half year, we have continued to
make strong progress.
We enjoyed very buoyant trade during the first half year. From January until the
end of May our like-for-like sales were 4% ahead of 2005. As anticipated,
June's trade was impacted by the World Cup and this resulted in the Group's
like-for-like sales being 3% ahead of the comparable period for the 26 weeks to
2 July. However, for the 36 weeks to 10 September our like-for-like sales have
returned to a level of 4% ahead of the comparable period for last year.
Overall this is a very satisfactory result and demonstrates the strength of our
business and its capacity to generate sustainable increases in revenue and
profits.
This is our fifth successive year of posting increased profits and it is
particularly pleasing to see, yet again, the very healthy rate of conversion of
those profits into cash. Cashflow was strong during the first six months and,
notwithstanding the payment of a special dividend of £34.8 million and £17.9
million in capital expenditure, we finished the first half with net debt of
£45.1 million.
As reported in my previous Chairman's Statement, since the end of 2005 our Group
has been focused on two core divisions - Leisure and Concessions. Both of these
divisions are, we believe, capable of generating sustainable and growing profit
and cashflows.
2005 was a year of considerable change for the Group with the sale of the high
street businesses Est Est Est and Caffe Uno. During 2006 we have been - and
will be - concentrating on growing the Group organically by increasing profits
from the existing estate and rolling out new restaurants.
During the first six months of 2006 both of our divisions enjoyed good trade.
Our Leisure division produced an increase of 33% in profits and also saw an
improvement in margins. Our Concessions division also enjoyed a good first half
with profits up 25% and margins maintained. Against a background of cost
pressures (particularly in our airports business), this is a very creditable
performance.
During the first half we have opened a total of 21 new units and this includes a
total of nine conversions of former Deep Pan Pizza ('DPP') sites. I am delighted
to report that the initial performance of all of our first half openings has
been good. In the full year we expect to open between 40 and 45 new units
including DPP conversions.
These results represent an excellent first half performance and reflect the
efforts and hard work of our management team and staff.
Results *
* The adjusted results set out below exclude non-trading items. The 2005
comparative figures also exclude the results of the DPP business which was not
directly managed by the Group in that year. These adjusted results are set out
in detail in note 2 ('Additional Information').
The Group has made further good progress during the first six months. Revenue
grew by 12.7% to £147.4m (2005: £130.8m), EBITDA increased by 12.9% to £24.1m
(2005: £21.4m), operating profit excluding exceptional items increased by 23.5%
to £15.4m (2005: £12.4m), profit before tax and exceptional items (and before
the negative contribution from Living Ventures) increased by 20.7% to £14.3m
(2005: £11.9m) and earnings per share were 19.5% higher at 4.29p (2005: 3.59p).
In the light of this strong performance the Board is declaring an interim
dividend of 1.05p per share (2005: 0.91p) representing an increase of 15.4%. The
dividend will be paid on 19 October 2006 to shareholders on the register on 22
September 2006 and the shares will be marked ex-dividend on 20 September 2006.
During the first half we paid a special dividend of £34.8m and our balance sheet
continues to be strong. At the end of June our net debt stood at £45.1m (2005:
£40.1m) and net gearing was 77% (2005: 52%).
The increase in profit was the product of three principal components:
- like-for-like profit increases from the existing estate;
- profitable contribution from new units; and
- further cost savings from purchasing initiatives and operational
efficiencies.
This combination provides a very healthy basis from which the Group can continue
its profitable development.
Non-trading Items
The first half year results include a net non-trading charge (before tax) of
£1.5m. This consists of the following items:
• As indicated at the time of the Group's preliminary results announcement
earlier this year, a loss of £3.8m related to the integration and
rationalisation of the DPP business.
• A further £1.9m profit related to the disposal of Caffe Uno. This relates
to cost and potential warranty accruals no longer required, and the
completion of better than anticipated deals on disposal of some of the
residual Caffe Uno sites not sold to Paramount.
• A £0.4m credit on revaluations of the Group's interest rate swaps.
Cash Flow and Balance Sheet
The Group continues to be strongly cash generative and during the first half
operating cash flow increased to £26.1m (2005: £25.4m). This is a particularly
impressive performance in the light of the sale of the Est Est Est and Caffe Uno
businesses which, in the first six months of 2005 contributed approximately
£3.5m towards the total operating cashflow of £25.4m for the comparable period.
We continue to see a very healthy rate of conversion of our profits into
cashflow and this reflects the disciplined manner in which we run the business.
Capital expenditure for the first six months amounted to £17.9m of which £5.2m
represented maintenance capital expenditure, £10.7m represented the cost of
opening new units and of conversions of former DPP units and £2.0m represented
spend on new offices. The Group's new offices are nearly complete and the
consolidation into one office is underway. We expect that this exercise will
have concluded by mid-October when all of our operations and support services
will function out of a single location. This will yield considerable benefits
in terms of efficiency and improved communication.
We anticipate rolling out between 40 and 45 new restaurants during 2006
(including the conversion of former Deep Pan Pizza sites). Our strong balance
sheet and cashflows mean that we are able to fund this level of rollout from
internally generated funds.
Leisure
Total revenue: £109.5m Profit: £22.1m Operating margin: 20.2%
Frankie & Benny's (125 units)
Frankie & Benny's had an excellent first half with strong like-for-like growth.
During the first six months revenue, EBITDA, profit and margins all increased.
We opened four new restaurants during the first six months and this included the
conversion of two former DPP sites. We are delighted with the performance of the
new openings. Since June we have opened two new restaurants and anticipate
opening between 15 and 20 new Frankie & Benny's in total during 2006. During
the first half year the Group converted seven former DPP sites to Little
Frankie's, a derivative concept of Frankie & Benny's. This concept comprises a
smaller footprint and its menu caters for the smaller unit space whilst
retaining the traditional Frankie & Benny's favourites. The average cost of
conversion is approximately one third of an average Frankie & Benny's capital
spend. A further two units have been converted since the half year and it is
anticipated that the conversion of the former DPP estate will be completed by
year end.
Frankie & Benny's has, we believe, the potential to grow into an estate
numbering in excess of 200 units. The concept performs strongly in both
multiplex cinema Leisure sites as well as non-cinema retail sites. Our
developments are usually located in edge and out of town locations and we have
identified a significant number of future opportunities for this brand in these
types of locations.
Chiquito (38 units)
Chiquito performed superbly, with a 60% increase in profit and the strongest
like-for-like sales growth in the Group. Revenue, EBITDA, profit and margins all
increased significantly. Chiquito's profits and margins continue to improve and
we believe that there is scope to develop this business further. During the
first half we opened four new units and we expect to open a total of six to ten
in the full year. Returns from our new Chiquito units are good.
Blubeckers (19 units)
Blubeckers performed strongly with good like-for-like growth in sales. The
business is now fully integrated into TRG and we opened our first two new sites
during June. Since June we have opened another new site and we anticipate
opening four to six in total in 2006.
The trading at our new Blubeckers units is ahead of expectations and we are
expecting these sites to generate good levels of return on investment.
The performance of the original Blubeckers business continues to be strong.
This, combined with our plans to accelerate the roll out of new units as we move
into 2007 and beyond, indicates the potential of this business.
Garfunkel's (29 units)
Garfunkel's enjoyed a solid first half benefiting from a recovery in central
London trade following the tragedy of last July's bombings. Revenue, EBITDA and
profits were at similar levels to 2005 although prior to June these were ahead
of the previous year. Since the end of June we have seen a strong performance
from Garfunkel's (both against 2005 and 2004). Recently, we have trialled a
refreshed version of this popular brand at our Northumberland Avenue site and
the initial results are very encouraging. We plan to carry out a refurbishment
of several of the other Garfunkel's sites over the next 18 months.
Concessions (49 units)
Total revenue: £33.4m Profit: £4.8m Operating margin: 14.5%
Our Concessions business had an excellent first half, with revenue, EBITDA and
profits all increasing by over 25%. Like-for-like sales increased and margins
were held at last year's level. Against a background of cost pressure in our
airport business we are very pleased with this performance.
We opened four new units in the first half of which three were in airports (at
Birmingham International Airport) and one shopping centre site.
Non-core and Discontinued
The Group's results include a loss of £1.2m from non-core brands and a loss of
£0.2m from discontinued operations. The discontinued business consists of
residual Caffe Uno sites which were not sold to Paramount at the end of 2005.
The disposal of these residual sites is very well advanced and we expect that
any outstanding transactions will have been completed within the current
financial year.
The non-core result includes the losses of a number of the DPP sites for the
period up until either disposal or conversion to The Restaurant Group brands.
This process is now largely completed and in 2007 we anticipate that the
non-core result will be broadly in line with the figures reported in 2005.
Living Ventures
The Group has a 40% shareholding in Living Ventures ('LV') which was acquired at
the time of the sale of Est Est Est to LV.
During the first six months, our 40% share of Living Ventures' losses amounted
to £0.8m, although Living Ventures' trade tends to be more skewed towards the
second half of the year. The Living Ventures' management team are taking steps
to improve conversion from top to bottom line by overhead cost control and
further margin improvement and as a result we anticipate that they will make
better progress during the next 12 months.
Board changes
On 8 September 2006 the Company announced the resignation of Robert Ivell from
the Board and I would like to thank him for his contribution to the Group over
the past two and a half years.
Outlook
We have had a good first half of the year and the second half has started well.
Since the end of June our trade has been buoyant with our like-for-like sales
for the 36 weeks to 10 September running 4% ahead of last year. Both of our
divisions continue to perform strongly, our new openings are trading well and we
have a strong site pipeline for the remainder of 2006 and well into future
years. As always, our management team is focused on driving returns on
investment and on growing profits and cashflow. I look forward to reporting
further good progress for the full year.
Alan M Jackson
Non-executive Chairman
13 September 2006
Consolidated income statement
Six months to 2 July 2006 Six months to 30 June 2005
Continuing Discontinued Total Continuing Discontinued Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Notes £000 £000 £000 £000 £000 £000
Revenue 146,900 538 147,438 117,839 21,175 139,014
Cost of sales (121,807) (724) (122,531) (98,988) (19,524) (118,512)
Gross profit 25,093 (186) 24,907 18,851 1,651 20,502
Administration costs (9,536) (10) (9,546) (8,415) (616) (9,031)
Release of accrual for - - - - - -
property exit costs
Profit on sale of business 4 - 1,927 1,927 - 1,582 1,582
DPP integration costs 4 (3,818) - (3,818) - - -
Loss and provision for loss - - - (221) - (221)
on disposal of fixed assets
Operating profit 11,739 1,731 13,470 10,215 2,617 12,832
Interest payable (1,373) - (1,373) (1,140) - (1,140)
Interest receivable 674 - 674 331 - 331
Profit before share of 11,040 1,731 12,771 9,406 2,617 12,023
associate and tax
Share of post tax result in (790) - (790) (245) - (245)
associated undertaking
Profit before tax 10,250 1,731 11,981 9,161 2,617 11,778
Profit before tax, analysed
as:
Trading business - managed 13,714 (196) 13,518 10,573 1,035 11,608
DPP Restaurants Limited - - - (996) - (996)
trading result - not managed
Non-trading items 4 (3,464) 1,927 (1,537) (416) 1,582 1,166
Profit made on disposal of - - - - - -
business by Living Ventures
10,250 1,731 11,981 9,161 2,617 11,778
Tax on profit from ordinary 5 (4,700) 920 (3,780) (3,392) (349) (3,741)
activities
Profit for the financial period/ 5,550 2,651 8,201 5,769 2,268 8,037
year attributable to equity holders
Earnings per share (pence)
Basic 6 2.76 1.32 4.08 2.66 1.05 3.71
Diluted 6 2.75 1.32 4.07 2.66 1.05 3.71
Dividend per share (pence) 7 1.05 0.91
The Restaurant Group plc
Consolidated income statement
Year ended 1 January 2006
Continuing Discontinued Total
(audited) (audited) (audited)
Notes £000 £000 £000
Revenue 263,878 38,450 302,328
Cost of sales (218,049) (34,528) (252,577)
Gross profit 45,829 3,922 49,751
Administration costs (19,019) (777) (19,796)
Release of accrual for property exit costs 1,700 - 1,700
Profit on sale of business 4 - 5,274 5,274
DPP integration costs 4 - - -
Loss and provision for loss on disposal of (2,594) - (2,594)
fixed assets
Operating profit 25,916 8,419 34,335
Interest payable (2,692) - (2,692)
Interest receivable 689 - 689
Profit before share of associate and tax 23,913 8,419 32,332
Share of post tax result in associated (600) 400 (200)
undertaking
Profit before tax 23,313 8,819 32,132
Profit before tax, analysed as:
Trading business - managed 26,394 3,145 29,539
DPP Restaurants Limited trading result - (1,733) - (1,733)
not managed
Non-trading items 4 (1,348) 5,274 3,926
Profit made on disposal of business by - 400 400
Living Ventures
23,313 8,819 32,132
Tax on profit from ordinary activities 5 (7,567) (1,220) (8,787)
Profit for the financial period/ year attributable to 15,746 7,599 23,345
equity holders
Earnings per share (pence)
Basic 6 7.27 3.51 10.78
Diluted 6 7.22 3.48 10.70
Dividend per share (pence) 7 4.75
Consolidated statement of changes in equity
Six months to 2 Six months to 30 Year to 1
July 2006 June 2005 January 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Opening reserves (IFRS, excluding IAS 32 91,436 75,883 75,883
and IAS 39)
Adjustment to opening reserves for inclusion of
swaps
under IAS 32 and IAS 39 - 127 127
Opening reserves (IFRS, including IAS 32 91,436 76,010 76,010
and IAS 39)
Profit for the period 8,201 8,037 23,345
Foreign exchange translation differences 48 (166) (165)
Deferred tax credit on share based payments
taken
directly to reserves 519 239 411
Total recognised income and expense for the 8,768 8,110 23,591
year
Dividends - ordinary (7,442) (7,306) (9,277)
Dividends - special (34,794) - -
Issue of new shares 250 76 604
Share based payments - credit to equity 563 231 508
Total changes in equity in the year (32,655) 1,111 15,426
Closing reserves 58,781 77,121 91,436
Consolidated balance sheet
At 2 July At 30 June 2005 At 1 January 2006
2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Intangible assets 11,275 11,388 11,275
Property, plant and equipment 158,907 169,455 151,337
Investment in associate 7,936 8,926 8,727
Trade and other receivables 10,375 10,375 10,375
188,493 200,144 181,714
Current assets
Stock 2,345 2,301 2,763
Financial assets - derivative financial 361 - 7
instruments
Trade and other receivables 3,620 1,832 5,498
Prepayments 16,529 14,769 11,094
Cash and cash equivalents 3,942 1,520 426
26,797 20,422 19,788
Total assets 215,290 220,566 201,502
Current liabilities
Short-term borrowings - (1,147) (1,845)
Income tax liabilities (6,527) (5,407) (8,315)
Financial liabilities - derivative financial - (46) -
instruments
Trade and other payables (81,258) (75,489) (71,476)
(87,785) (82,089) (81,636)
Net current liabilities (60,988) (61,667) (61,848)
Non-current liabilities
Long-term borrowings (49,000) (40,500) (11,000)
Other payables (2,717) (4,005) (2,696)
Deferred tax liabilities (14,274) (16,226) (13,971)
Provisions (2,733) (625) (763)
(68,724) (61,356) (28,430)
Net assets 58,781 77,121 91,436
Equity
Share capital 54,510 54,120 54,366
Share premium 19,853 19,465 19,747
Foreign currency reserve 128 79 80
Other reserves 1,846 487 764
Retained earnings (17,556) 2,970 16,479
Total equity shareholders' interests 58,781 77,121 91,436
Consolidated cash flow statement
Six months to 2 Six months to Year to 1
July 2006 30 June 2005 January 2006
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Cash flow from operating activities
Cash generated from operations 3 26,081 25,363 55,484
Interest received 19 96 219
Interest paid (1,163) (617) (2,076)
Tax paid (4,746) (3,914) (8,199)
Net cash flow from operating activities 20,191 20,928 45,428
Cash flows from investing activities
Acquisition of associate - (10,027) (10,186)
Acquisition of subsidiary, net of cash - (26,797) (26,889)
acquired
Disposal of business, net of cash disposed (478) 5,797 32,982
Disposal of subsidiary, net of cash disposed - - 5,630
Purchase of property, plant and equipment (17,884) (19,049) (39,767)
Proceeds from sale of property, plant and 76 598 708
equipment
Net cash used in investing activities (18,286) (49,478) (37,522)
Cash flows from financing activities
Net proceeds from issue of ordinary share 250 76 604
capital
Net proceeds from issue of bank loan 38,000 33,500 4,000
Dividends paid to shareholders 7 (34,794) - (9,277)
Net cash from/ (used in) financing 3,456 33,576 (4,673)
activities
Net increase in cash and cash equivalents 5,361 5,026 3,233
Cash and cash equivalents at start of period (1,419) (4,652) (4,652)
/ year
Cash and cash equivalents at end of period/ 3,942 374 (1,419)
year
Notes to the
interim accounts
1) Segmental Six months to 2 July 2006 Six months to 30 June 2005
analysis
Revenue EBITDA EBITDA Profit Profit Revenue EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure 109,498 28,341 25.9% 22,133 20.2% 83,078 21,226 25.5% 16,652 20.0%
Concessions 33,387 6,931 20.8% 4,830 14.5% 26,553 5,449 20.5% 3,859 14.5%
Principal trading 142,885 35,272 24.7% 26,963 18.9% 109,631 26,675 24.3% 20,511 18.7%
brands
Non-core brands 4,015 (1,079) (26.9%) (1,178) (29.3%) 8,208 (620) (7.6%) (1,018) (12.4%)
Continuing 146,900 34,193 23.3% 25,785 17.6% 117,839 26,055 22.1% 19,493 16.5%
operations
Discontinued 538 (186) (34.6%) (186) (34.6%) 21,175 3,457 16.3% 1,651 7.8%
operations
Total all brands 147,438 34,007 23.1% 25,599 17.4% 139,014 29,512 21.2% 21,144 15.2%
Pre-opening costs (692) (0.5%) (692) (0.5%) (642) (0.5%) (642) (0.5%)
(included in cost
of sales)
Administration (8,635) (5.9%) (8,983) (6.1%) (7,964) (5.7%) (8,800) (6.3%)
Share based (563) (0.4%) (563) (0.4%) (231) (0.2%) (231) (0.2%)
payments
EBITDA / 147,438 24,117 16.4% 15,361 10.4% 139,014 20,675 14.9% 11,471 8.3%
operating profit
Release of - -
accrual for
property exit
costs
Profit on sale of 1,927 1,582
business
Termination costs (3,818) -
Loss and provision for loss - (221)
on disposal of fixed assets
Operating 13,470 12,832
profit
1) Segmental analysis Year ended 1 January 2006
Revenue EBITDA EBITDA Profit Profit
Margin Margin
£'000 £'000 % £'000 %
Leisure 189,009 49,541 26.2% 39,974 21.1%
Concessions 59,771 12,360 20.7% 8,919 14.9%
Principal trading 248,780 61,901 24.9% 48,893 19.7%
brands
Non-core brands 15,098 (785) (5.2%) (1,553) (10.3%)
Continuing operations 263,878 61,116 23.2% 47,340 17.9%
Discontinued 38,450 6,977 18.1% 3,922 10.2%
operations
Total all brands 302,328 68,093 22.5% 51,262 17.0%
Pre-opening costs (1,511) (0.5%) (1,511) (0.5%)
(included in cost of
sales)
Administration (17,179) (5.7%) (18,954) (6.3%)
Share based payments (508) (0.2%) (508) (0.2%)
EBITDA / operating 302,328 48,895 16.2% 30,289 10.0%
profit
Release of accrual for 1,700
property exit costs
Profit on sale of 5,274
business
Termination costs (334)
Loss and provision for (2,594)
loss on disposal of
fixed assets
Operating profit 34,335
No geographical segment analysis has been provided as the Directors do not
consider there to be materially significant geographical segments. The Group
currently operates three restaurants outside of the United Kingdom.
Information disclosed as 'discontinued' relates to the Caffe Uno and Est Est Est
brands, which were disposed in 2005.
2) Additional Six months to 2 July 2006 Six months to 30 June 2005
information
Revenue EBITDA EBITDA Profit Profit Revenue EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure 109,498 28,341 25.9% 22,133 20.2% 83,078 21,226 25.5% 16,652 20.0%
Concessions 33,387 6,931 20.8% 4,830 14.5% 26,553 5,449 20.5% 3,859 14.5%
Principal trading 142,885 35,272 24.7% 26,963 18.9% 109,631 26,675 24.3% 20,511 18.7%
brands
Non-core brands 4,015 (1,079) (26.9%) (1,178) (29.3%) 32 (509) (1,590.6%) (616) (1,925.0%)
Continuing 146,900 34,193 23.3% 25,785 17.6% 109,663 26,166 23.9% 19,895 18.1%
operations
Discontinued 538 (186) (34.6%) (186) (34.6%) 21,175 3,457 16.3% 1,651 7.8%
operations
Total all brands 147,438 34,007 23.1% 25,599 17.4% 130,838 29,623 22.6% 21,546 16.5%
Pre-opening costs (692) (0.5%) (692) (0.5%) (642) (0.5%) (642) (0.5%)
(included in cost
of sales)
Administration (8,635) (5.9%) (8,983) (6.1%) (7,396) (5.7%) (8,232) (6.3%)
Share based (563) (0.4%) (563) (0.4%) (231) (0.2%) (231) (0.2%)
payments
EBITDA / 147,438 24,117 16.4% 15,361 10.4% 130,838 21,354 16.3% 12,441 9.5%
operating profit
Net interest (1,205) (593)
charges
Interest receivable from 301 230
Living Ventures Limited
Finance lease (149) (225)
interest
Total net (1,053) (588)
interest charges
Profit before taxation and 14,308 11,853
share of associate's result
Share of losses (790) (245)
of associated
company
Profit before 13,518 11,608
taxation
Taxation (4,889) (3,843)
Profit after 8,629 7,765
taxation
Earnings per share (pence)
- Trading business
Basic 4.29 3.59
Diluted 4.28 3.58
Year ended 1 January 2006
Revenue EBITDA EBITDA Profit Profit
2) Additional information Margin Margin
£'000 £'000 % £'000 %
Leisure 189,009 49,541 26.2% 39,974 21.1%
Concessions 59,771 12,360 20.7% 8,919 14.9%
Principal trading brands 248,780 61,901 24.9% 48,893 19.7%
Non-core brands 63 (691) (2,159.4%) (901) (1,430.6%)
Continuing operations 248,843 61,210 24.6% 47,992 19.3%
Discontinued operations 38,450 6,977 18.1% 3,922 10.2%
Total all brands 287,293 68,187 23.7% 51,914 18.1%
Pre-opening costs (included in cost (1,511) (0.5%) (1,511) (0.5%)
of sales)
Administration (16,158) (5.6%) (17,933) (6.2%)
Share based payments (508) (0.2%) (508) (0.2%)
EBITDA / operating profit 287,293 50,010 17.4% 31,962 11.1%
Net interest charges (1,896)
Interest receivable from Living 522
Ventures Limited
Finance lease interest (449)
Total net interest charges (1,823)
Profit before taxation and share of 30,139
associate's result
Share of losses of associated (600)
company
Profit before taxation 29,539
Taxation (9,867)
Profit after taxation 19,672
Earnings per share (pence) - Trading
business
Basic 9.08
Diluted 9.01
No geographical segment analysis has been provided as the Directors do not
consider there to be materially significant geographical segments. The Group
currently operates three restaurants outside of the United Kingdom.
The additional information is provided as comparative information and excludes
the results of DPP Restaurants Limited for 2005. This is provided as a useful
guide to the underlying trading performance of the Group, and this information
is on the same basis as that information provided in the 2005 interim statement
and 2005 Annual Report and Accounts. This additional information should be read
in conjunction with, rather than as a substitute for, the reported information.
3) Reconciliation of operating profit to net cash inflow from
operating activities
Six months to 2 Six months to Year to 1
July 2006 30 June 2005 January 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit before tax 11,981 11,778 32,132
Net finance charges 699 809 2,003
Exceptional item (profit on (1,660) (1,582) (5,274)
sale of business)
Exceptional item ((profit)/ loss (176) 243 2,594
on sale of tangible fixed assets)
Release of accrual for - - (1,700)
property exit costs
Exceptional item (termination 3,727 - -
costs)
Loss made by associate 790 245 200
Non cash charge reversed in 563 231 508
reserves
Depreciation 8,756 9,204 18,606
Decrease/ (increase) in stocks 418 313 (439)
Increase in debtors (3,836) (3,165) (2,451)
Increase in creditors 4,819 7,287 9,305
Cash generated from operations 26,081 25,363 55,484
4) Non-trading items
The Group has recorded a loss of £3.8m (2005: nil) following the acquisition of
DPP Restaurants Ltd, on 11 January 2006 when the warrant, issued in November
2004, to acquire the business was exercised. The loss is in relation to costs
incurred on integration and rationalisation of the Deep Pan Pizza business.
The Group has released accruals of £1.9m created on the disposal of the Caffe
Uno business in December 2005 as they are no longer required, and following the
completion of better than anticipated deals on disposal of some of the residual
Caffe Uno sites not sold to Paramount. In addition the Group has taken a credit
of £0.4m (2005: £0.2m charge) to finance charges arising from the remeasurement
of its interest rate swap.
In the six months to 30 June 2005, the Group disposed of Est Est Est for a
profit of £1.6 million, incurred a charge of £0.2 million in respect of loss and
provision for loss on disposal of assets and had a charge of £0.2 million in
respect of the remeasurement of the interest rate swap (as noted above).
References to 'exceptional items' include the integration and rationalisation
costs in respect of Deep Pan Pizza, and other restructuring costs, the profit on
disposal of Caffe Uno, and profits or losses incurred on disposal of assets and
property exit costs. 'Non-trading items' includes exceptional items and the
charge or credit in respect of the remeasurement of the interest rate swap.
5) Taxation
The taxation charge has been calculated by reference to the expected effective
corporation tax and deferred tax rates for the full financial year to end on 31
December 2006 applied against the profit before tax for the period ended 2 July
2006. The underlying effective full year tax charge including deferred tax is
estimated to be 34% (2005: 34%) for the year.
6) Earnings per share
6 months to 2 July 2006 6 months to 30 June 2005 Year to 1 January 2006
Earnings Weighted Per-share Earnings Weighted Per-share Earnings Weighted Per-share
average amount average amount average amount
number of number of number of
shares shares shares
£000 millions pence £000 millions pence £000 Millions pence
Basic EPS
Earnings attributable 8,201 201.0 4.08 8,037 216.4 3.71 23,345 216.6 10.78
to shareholders
Effect of dilutive
securities
Options 0.5 0.2 1.6
Diluted earnings 8,201 201.5 4.07 8,037 216.6 3.71 23,345 218.2 10.70
per share
Supplementary
earnings per share
Trading business 8,629 201.0 4.29 7,765 216.4 3.59 19,672 216.6 9.08
Deep Pan Pizza (996) 216.4 (0.46) (953) 216.6 (0.44)
Trading business 8,629 201.0 4.29 6,769 216.4 3.13 18,719 216.6 8.64
and DPP
Non-trading items (428) 201.0 (0.21) 1,268 216.4 0.59 4,626 216.6 2.14
Basic earnings 8,201 201.0 4.08 8,037 216.4 3.71 23,345 216.6 10.78
7) Dividends
Following approval at the Annual General Meeting on 24 May 2006, the proposed
dividend in respect of 2005 of 3.84p per share, totalling £7.4 million, is to be
recognised through reserves in the interim and final statements of 2006. This
is in accordance with IAS 10. This dividend was paid to shareholders on 5 July
2006.
The Directors have declared an interim dividend of 1.05p per share, amounting to
£2.0 million, which will be paid on 19 October 2006 to ordinary shareholders on
the register at the close of business on 22 September 2006. In accordance with
IAS 10, this will be recognised in the reserves of the Group in the second half
of the year.
On 9 March 2006 the Company paid a special dividend of 16p per share, or £34.8
million, following the disposal of Caffe Uno and the share consolidation,
detailed in note 8.
8) Share consolidation
Following approval by shareholders at an Extraordinary General Meeting held on
23 February 2006, The Restaurant Group plc undertook a share consolidation
whereby each nine existing shares were exchanged for eight new shares. The
share consolidation was accompanied by a special dividend of 16p per share paid
to shareholders on 9 March 2006. The share consolidation took effect on 27
February 2006. The nominal value of an ordinary share in The Restaurant Group
plc is now 28 1/8p. The authorised share capital is 284,444,444 shares and the
allotted, called up and fully paid number of shares was 193,300,064 immediately
after the share consolidation. In addition 513,165 shares were allotted, called
up and fully paid following the exercise of share options in the period to 2
July 2006.
9) Basis of preparation
The interim financial statements have been prepared in accordance with the
accounting policies and presentation required by those International Financial
Reporting Standards, incorporating International Accounting Standards ('IASs')
and Interpretations (collectively 'IFRS'), which are expected to be endorsed by
the EC and are to be used in the company's annual financial statements for the
year ended 31 December 2006. The comparatives for the full year ended 1 January
2006 are from the Company's full consolidated statutory accounts for that year.
A copy of the statutory accounts for that year has been delivered to the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain a statement under section 237(2)-(3) of the Companies Act
1985.
Independent Review Report to The Restaurant Group plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 2 July 2006 on pages 7 to 19. 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.
Our report has been prepared in accordance with the terms of our engagement to
assist the company in meeting the requirements of the Listing Rules of the
Financial Services Authority and for no other purpose. No person is entitled to
rely on this report unless such a person is a person entitled to rely upon this
report by virtue of and for the purpose of our terms of engagement or has been
expressly authorised to do so by our prior written consent. Save as above, we
do not accept responsibility for this report to any other person or for any
other purpose and we hereby expressly disclaim any and all such liability.
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 financial information should be
consistent with those applied in preparing the preceding annual financial
statements, 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 management and applying analytical
procedures to the financial information and underlying financial 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 controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) 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 2 July 2006.
BDO Stoy Hayward LLP
London
13 September 2006
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