Interim Results
Restaurant Group PLC
21 September 2005
The Restaurant Group plc
Interim results for the six months ended 30 June 2005
The Restaurant Group plc operates 279 restaurants across the UK predominantly in
leisure locations and airports. Its primary brands are Frankie & Benny's,
Chiquito, Caffe Uno, Garfunkel's and most recently Blubeckers.
2005 2004 % change
Turnover (£m) 130.8 118.0 +10.8
IFRS EBITDA (£m) 21.4 18.5 +15.6
UK GAAP EBITDA (£m) 21.4 18.3 +16.7
IFRS Profit before tax (£m) 11.6 9.6 +20.4
UK GAAP Profit before tax (£m) 11.9 9.8 +21.8
IFRS Adjusted earnings per share (p) 3.59 3.01 +19.3
UK GAAP Adjusted earnings per share (p) 3.68 3.05 +20.7
Interim dividend (p) 0.91 0.825 +10.3
Results are stated before non-trading items and DPP (as detailed below)
Key financial
• Profit before tax and non-trading items up over 20%
• EPS (excluding non-trading items and DPP) up over 19%
• Cash generated from operations up 37%
• Underlying net debt before acquisitions reduced by £2 million
• Leisure and Concessions now contribute over 80% of brand profit
Key operational
Leisure
• Frankie & Benny's enjoyed another superb half with strong like-for-likes
and excellent returns
- EBITDA and profit increased significantly
- Four new sites opened
• Chiquito
- Good growth in turnover, EBITDA and profit
- Four new units opened
Concessions
• Excellent first half
• Four new units opened - three at Luton and one at Heathrow
• Awarded concession to operate three brands at Birmingham International
Airport
• Shopping centre concessions also performing well
High Streets
• Almost £6m EBITDA and satisfactory returns
• Market conditions remain challenging
Blubeckers
• Acquired end of June 2005
• Exciting future potential
Current Trading
• Continued good trading; like for like sales for 37 weeks to 18 September
2005 at 3%
Commenting on these results, Alan Jackson, the Executive Chairman, said:
'TRG has made an excellent start to the year, with earnings up 20%. Our strategy
for profitable growth, implemented at the end of 2001, continues to deliver
excellent results and we are well placed to build further upon this performance.
In each of our two key divisions, Leisure and Concessions, we occupy market
leading positions with strong brands offering good value. We have an outstanding
team which ensures that we consistently deliver the right product, in the right
place at the right price. I view TRG's future with confidence.'
21 September 2005
Enquiries:
The Restaurant Group plc
Alan Jackson, Executive Chairman 020 7457 2020 (today)
Andrew Page, Group Managing Director 020 7747 7750 (thereafter)
Stephen Critoph, Finance Director
College Hill
Matthew Smallwood 020 7457 2020
Executive Chairman's Statement
The Group has performed strongly for the first half of 2005 and since June has
continued to make good progress. Overall, trading has been extremely buoyant
with the Group enjoying strong underlying like-for-like growth of 3% in the
principal brands and also benefiting from new openings. This is our fourth
successive year of posting increased profits and cash generation and I am very
pleased that the efforts of the team at TRG continue to deliver such good
results.
The first half has also seen activity on the corporate front with the disposal
of Est Est Est to Living Ventures Limited ('Living Ventures') and the
simultaneous acquisition of a 40% shareholding in Living Ventures. At the end of
June we purchased Blubeckers Limited for £27 million in cash and we are
delighted with this acquisition, which we believe has significant future
potential.
Introduction
Building on a strong performance in 2004 the Group has continued its progress
and we have remained focused on our core strategy. We have invested in new unit
developments in our Leisure and Concessions divisions and during the period we
acquired an exciting new restaurant business, Blubeckers, which is located
predominantly in rural and semi-rural locations away from the High Street.
During the first six months of the year our strongest trading has been within
our Leisure and Concessions divisions which, as we enter the second half, now
account for about 80% of the Group's revenues. Each of these divisions has seen
an increase in profit of more than 30% and against a challenging market backdrop
this is an outstanding performance.
Our Leisure businesses, (Frankie & Benny's, Chiquito and Blubeckers) are well
placed to benefit from an increasing demand from customers to eat out at
restaurants offering good value for money, in locations which are readily
accessible, have good car parking facilities and are safe, trouble-free
environments.
Both Frankie & Benny's and Chiquito enjoyed good growth in turnover, EBITDA and
profits during the first half year, with EBITDA and profit margins also growing
strongly. It is very satisfying to see us building on the turnaround at Chiquito
and during the first half we opened 4 new restaurants under this brand.
Our Concessions business has also enjoyed a very successful first half
benefiting both from the new unit openings and also strong underlying
like-for-like growth. During the first half turnover grew by 26% and profits by
37%, with EBITDA and profit margins also showing good progress.
It is particularly pleasing to note that we have recently opened three new units
at Luton airport and that we have been selected to operate three brands at
Birmingham International Airport which will open in 2006. This further
demonstrates the successful development of this important division within TRG
and re-enforces our position as a market leader in catering at UK airports. We
are also looking forward to some exciting new openings at shopping centres in
Norwich, Gateshead and Manchester during the second half of the year.
Our High Streets division had a difficult first half and has recorded a decline
of almost 19% in profits. Garfunkels' profits were just ahead of the previous
year's levels, but Caffe Uno's profits fell and its performance reflects an
increasingly competitive marketplace with several new competitors' offerings
opening alongside our restaurants which contributed to significant pressure on
the top line.
Overall, we are expecting the second half to be as difficult as the first, as an
improving trend in Caffe Uno outside of London is likely to be offset by a
difficult Central London market impacting both Caffe Uno and Garfunkel's.
I am very pleased to report that our purchase of Blubeckers is both an excellent
strategic fit and rather timely. Likewise, our disposal of Est Est Est, to
Living Ventures and the acquisition of a 40% shareholding in the enlarged Living
Ventures is expected to yield benefits for the Group.
Overall, this is a very good performance from the Group and is a testament to
the hard work and dedication of the management team and staff.
Results *
*Results are stated excluding non trading items and DPP.
The Group has made good progress during the first six months. On a UK GAAP
basis, turnover grew by 10.8% to £130.8m (2004:£118.0m), EBITDA increased by
16.7% to £21.4m (2004: £18.3m) and profit before tax and non trading items
increased by 21.8% to £11.9m (2004: £9.8m). Earnings per share were 20.7% higher
at 3.68p (2004: 3.05p). In the light of this strong performance, the Board is
declaring an interim dividend of 0.91p per share (2004: 0.825p), representing an
increase of 10.3%. The dividend will be paid on 27 October 2005 to shareholders
on the register on 30 September 2005 and the shares will be marked ex-dividend
on 28 September 2005.
On an IFRS basis the figures were as follows: EBITDA £21.4m, (up 15.6%) profit
before tax and non trading items £11.6m (up 20.4%) and earnings per share 3.59p
(up 19.3%). A reconciliation between UK GAAP and IFRS is included in the
appendices. All subsequent numbers in this statement are on an IFRS basis.
Cash generation was strong and, stripping out the impact of the Blubeckers
acquisition and Living Ventures transaction, we reduced net debt by a further
£2m, notwithstanding a significantly higher level of first half capital
expenditure of £19.0m (2004: £10.2m).
Our Balance Sheet continues to be strong with a net debt level of £40.1m (2004:
£18.6m) and net gearing of 52% (2004: 27%).
The increase in profit was again generated from four sources:
- strong like-for-like growth from the existing estate;
- consistently strong profit performance from new units;
- cost savings from purchasing initiatives and operational efficiencies;
and
- lower interest charges
Non Trading Items
The non trading profit amounts to £1.2m. This includes a profit on the disposal
of Est Est Est of £1.6m, a loss of £0.2m on the disposal of a number of poor
performing sites and an unrealised loss on swap instruments used to hedge
interest rate exposure. The full year results will include a one off
non-trading charge in connection with the reorganisation and integration of the
Blubeckers business.
Cash flow and Balance Sheet
The Group continues to be strongly cash generative and during the first half
operating cash flow increased by 37% to £25.4m (2004: £18.5m).
The high rate of conversion of profit into cash is particularly noteworthy and
demonstrates the rigorous discipline applied across our business.
Capital expenditure during the period amounted to £19.0m (2004: £10.2m). This
includes £5m relating to the acquisition of freehold office premises. Following
further investment in development and refurbishment this will enable all
corporate and brand management functions to be consolidated into one building by
late 2006. Consolidation into one office will yield significant benefits in
terms of efficiency and improved internal communication. Net debt (on a
pro-forma basis and excluding the impact of the acquisition of Blubeckers and
the Living Ventures transaction) fell by £2m. Following the acquisition of
Blubeckers, net debt at 30 June 2005 stood at £40.1m.
We have a strong balance sheet with sufficient capacity to finance our
accelerated roll out programme at Frankie & Benny's and to continue growing
Chiquito and Concessions at an annual rate at least equivalent to that recorded
over the past twelve months. Additionally, once we have integrated Blubeckers,
we anticipate adding up to six new units to this brand in 2006.
Review of Operations
Leisure
Total revenue: £70.5m Profit: £14.7m Operating Margin: 20.9%
Frankie & Benny's (105 units)
Frankie & Benny's enjoyed a superb first half with strong like-for-like growth.
During the period, turnover, EBITDA, profit and margins increased significantly.
We opened 4 new restaurants during the first half including 2 sites which were
previously trading as Deep Pan Pizza (DPP) units. It is worth noting that the
early indications from these DPP conversions are very encouraging with weekly
turnover increases averaging in excess of 100%. During the second half we
anticipate opening a further 10 to 13 new units including converting some more
DPP units.
The returns being generated from new units continue to be at levels consistent
with both recent years' openings and those delivered by the older Frankie &
Benny's units.
This year Frankie & Benny's is celebrating its tenth anniversary and, during the
first half, we opened the 100th UK restaurant. The brand goes from strength to
strength and it occupies a leading market position in multiplex cinema leisure
sites and is becoming increasingly dominant in non-multiplex cinema, Leisure
Retail, sites. We are confident that this business can continue its profitable
growth under its experienced and very able management team.
Chiquito (29 units)
Chiquito has performed very well during the first six months with strong
like-for-like growth. Building on the foundations we put in place during 2004 we
have seen good growth in turnover, EBITDA and profit. During the first half we
opened 4 new units, including converting 1 ex DPP site - again the early
indications for this converted site are every bit as encouraging as those
converted into Frankie & Benny's, referred to above. During the second half we
will open between 2 and 4 new Chiquito restaurants, including some further DPP
conversions.
We are delighted that the turnaround at Chiquito is virtually complete, the
refreshed format has been well received by both existing and new customers and
we look forward to adding new units to the portfolio. The team at Chiquito are
doing an excellent job!
Concessions (40 units)
Total revenue: £26.6m Profit: £3.9m Operating Margin: 14.5%
Our Concessions business had an excellent first half and this is likely to
continue for the rest of the year. We have an exciting programme of new openings
for 2005 and during the first half four new units opened; three at Luton and a '
Giraffe' restaurant concept (which we operate under a franchise agreement) at
Heathrow Terminal 1. Early indications from the new openings are very
encouraging.
During the first half turnover grew by 26% to £26.6m (2004:£21.1m), EBITDA grew
by 29% to £5.4m (2004: £4.2m) and profit grew by 37% to £3.9m (2004: £2.8m).
Margins also grew strongly.
During the second half we anticipate opening further units including three at
shopping centres. Shopping centres are a relatively new area of growth for the
Concessions division - we opened our first at the Trafford Centre in Manchester
last year and it is delivering superb returns.
We are delighted that our representation at UK airports continues to increase.
During the first half we opened three new concession sites at Luton airport and
we have recently been awarded a seven year concession to operate three brands at
Birmingham International Airport, which is likely to open in 2006. This further
strengthens our position as a leading operator of catering outlets in UK
airports.
High Street (88 units)
Total revenue: £30.1m Profit: £3.8m Operating Margin: 12.4%
The first six months was very challenging with an increasing amount of
competitor activity impacting several of our High Street units.
Garfunkel's (30 units)
Garfunkel's had a steady first half and was able to deliver profits slightly
ahead of last year. However, in light of the London bombings in July, we are
adopting a cautious stance for the remainder of 2005. In 2004, approximately
two-thirds of Garfunkel's turnover was generated in Central London and we expect
it to be some time before trading returns to previous levels. In the meantime,
we are embarking on a number of marketing initiatives to secure as much of the
Central London trade as possible and we continue to be vigilant on costs.
Garfunkel's has a great portfolio of sites many of which are in the most popular
tourist areas. The resilience of this business is as good as any of its
competitors and, longer term, it will continue to deliver good profits and
cashflow.
Caffe Uno (58 units)
Caffe Uno has faced a significant amount of new competition in several locations
over the past 12 months and this has adversely impacted turnover. In turn this
has had a detrimental impact upon profit. Recent months have seen an improvement
in the trend of business outside of Central London and we expect to see this
trend continuing during the balance of the second half. As with Garfunkel's, we
have embarked on a number of marketing initiatives, including a loyalty scheme,
to drive topline growth and we are encouraged by the early results of these.
Blubeckers (17 units)
We acquired Blubeckers at the end of June 2005, for a cash consideration of
£27m. We believe that there are good opportunities to create higher
profitability from the existing units and to grow this business by expanding the
concept into new locations. The integration of the business is well underway and
the integration of the Finance, IT, Purchasing and support functions will be
concluded shortly. On an ongoing basis, this will yield good cost savings.
There will be a one-off cost associated with the integration of Blubeckers,
which will be disclosed as a non-trading item in the full year results.
The Blubeckers team has vast experience of the business and many of the staff
have been there for ten years or more. We are delighted to welcome them to TRG
and are very encouraged by the enthusiasm and energy which they have
demonstrated since the acquisition.
Non-Core Brands
This category includes the results of Est Est Est for the first three months of
this year (prior to its sale to Living Ventures at the end of March) and during
this time it recorded a loss.
We continue to take steps to minimise losses from our non-core units and we are
pleased with the progress in this area during the first half with a reduction in
non-core losses (excluding Est Est Est).
Deep Pan Pizza
As announced previously the Group has an option to take full control of DPP,
which became exercisable on 31 December 2004. To date this option has not been
exercised and our shareholding remains at 20%. However, as highlighted in the
Group's IFRS statement in June, we are required to consolidate 100% of DPP, even
though the option has not been exercised. This treatment is reflected in the
Group's IFRS financial statements.
During the first half we took over a number of underperforming DPP restaurants
and converted them into Frankie & Benny's and Chiquito formats. The subsequent
turnaround in performance has been remarkable, with the converted units enjoying
weekly increases in turnover averaging approximately 100% and in one case over
200%.
It is likely that we will look to take on additional DPP units and then convert
them into our successful formats during the next 12 months.
In the meantime, we are closely monitoring the performance of DPP. DPP is
profitable at the core restaurant EBITDA level but is loss making after
depreciation, closed branch and head office costs. Recently the management of
DPP has taken steps to reduce its head office costs and this combined with the
disposal of several of their underperforming units is having a positive impact.
However, these actions occurred at the end of the first half and have therefore
not had any impact on the current results. The first half is typically a much
weaker trading period than the second half, and this is reflected in the loss
incurred in the period. DPP is also heavily dependent on its Central London
business, which in common with many other businesses, has been affected by the
London bombings in July.
Living Ventures
Following the transaction announced on 31 March 2005, Living Ventures acquired
the Est Est Est ('Est') business and the Group has a 40% share of the enlarged
Living Ventures group. In the Group consolidated financial statements this 40%
interest is accounted for using the equity accounting method.
The Living Ventures management team have now largely completed the process of
integrating Est and have embarked on implementing their business plan for the
enlarged LV Group. Initial results are encouraging: there are clear improvements
in the underlying sales trends in the Est business; the first Est refurbishment
and relaunch has been very successful with sales more than doubling in the first
few weeks; the Living Room opening programme is continuing with a new site in
Oxford recently opening, and further openings planned over the next six months.
The result for Living Ventures is in line with expectations and reflects the
normal seasonal nature of the business.
Properties
The Group regularly reviews its property portfolio to ensure that it is
maximising opportunities in its estate. During the period 3 units were sold with
net cash proceeds of £0.6m raised.
IFRS
This is the first set of Group accounts to be prepared on an IFRS basis. For
comparison purposes we are showing the consolidated income statement on both
IFRS and proforma UK GAAP bases. The notes include a reconciliation between the
IFRS and proforma UK GAAP figures.
Board
At the end of this year, I will have served as the Company's executive Chairman
for almost five years. During that time, the Company has been transformed from
an unfocused and poorly performing business with fragile finances, into a
successful and highly profitable operator of popular dining restaurants. Today
we have a company occupying leading market positions, producing prodigious
growth in earnings and cash flows, with strong finances and a robust strategy
geared to achieving our core objective of continuing to grow shareholder value.
We also have in place a very able executive management team committed to
achieving our core objective. Therefore, I believe that it is now appropriate
for me to assume the role of non-executive Chairman, which I will be doing
effective from the start of 2006, reducing my time commitment to about two days
per week. At the same time Andrew Page, who for the past two years has been the
Company's Group Managing Director, will be appointed as Chief Executive. Andrew
joined the Company in 2001 and has played a major role in restoring the business
to a sound financial position, devising and implementing a strategy for
profitable growth and building a strong team.
As non-executive Chairman I will continue to be responsible for the leadership
of the board of directors and I confidently look forward to a continuation of
the success enjoyed over the past four years.
Outlook
We have made an excellent start to the year with a 20% increase in profits in
the first half and are well placed to build further on this performance. We have
started the second half well with like for like sales growth for the 37 weeks to
18 September 2005 of 3%. We have a very strong business, the majority of which
now operates in areas where we occupy market leading positions.
We have, and will, continue to stick to the strategy that has served us well
over recent years, building on our strong market positions, investing in new
unit developments in the Leisure and Concessions divisions, and driving
increased levels of profit and cash flow. Our core objective remains the same -
to grow shareholder value - and the whole of our team is committed to achieving
this. I am confident that we will continue to produce good returns and I look
forward to reporting continued progress for the full year.
Alan M Jackson
Executive Chairman
21 September 2005
Consolidated income statement for the six months ended 30 June 2005 (unaudited)
International Financial Reporting Standards
Six months to 30 June 2005 Six months to 30 June 2004 Year to 31 December 2004
Trading Non Deep Total Trading Non Deep Total Trading Non Deep Total
business trading Pan business trading Pan business trading Pan
Pizza Pizza Pizza
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 130,838 - 8,176 139,014 118,036 - - 118,036 255,446 - - 255,446
Cost of sales
Excluding (109,292) - (8,578) (117,870) (99,279) - - (99,279) (212,001) - - (212,001)
pre-opening
costs
Pre-opening (642) - - (642) (320) - - (320) (948) - - (948)
costs
(109,934) - (8,578) (118,512) (99,599) - - (99,599) (212,949) - - (212,949)
Gross profit 20,904 - (402) 20,502 18,437 - - 18,437 42,497 - - 42,497
Administration
costs
Excluding (8,463) - (568) (9,031) (7,755) - - (7,755) (16,427) - - (16,427)
one-off items
Recovered - - - - - 357 - 357 - 457 - 457
aborted bid
costs
(8,463) - (568) (9,031) (7,755) 357 - (7,398) (16,427) 457 - (15,970)
Trading profit 12,441 - (970) 11,471 10,682 357 - 11,039 26,070 457 - 26,527
Profit on sale - 1,582 - 1,582 - - - - - (500) - (500)
of business
Impairment of - - - - - - - - - (793) - (793)
goodwill
Loss and - (243) 22 (221) - (1,097) - (1,097) - (2,554) - (2,554)
provision for
loss on disposal
of tangible
fixed assets
Operating 12,441 1,339 (948) 12,832 10,682 (740) - 9,942 26,070 (3,390) - 22,680
profit
Net finance (588) (173) (48) (809) (1,042) - - (1,042) (1,667) - - (1,667)
charges
Share of post (245) - - (245) - - - - - - - -
tax result in
associated
undertaking
Profit before 11,608 1,166 (996) 11,778 9,640 (740) - 8,900 24,403 (3,390) - 21,013
tax
Tax on profit (3,843) 102 - (3,741) (3,257) 182 - (3,075) (7,650) 708 - (6,942)
on ordinary
activities
-
Profit for the 7,765 1,268 (996) 8,037 6,383 (558) - 5,825 16,753 (2,682) - 14,071
financial
period
Attributable
to:
Equity 7,765 1,268 (996) 8,037 6,383 (558) - 5,825 16,753 (2,682) - 14,071
shareholders
Minority - - - - - - - - - - - -
interests
7,765 1,268 (996) 8,037 6,383 (558) - 5,825 16,753 (2,682) - 14,071
Earnings per
share (pence)
Basic 3.59 0.59 (0.46) 3.71 3.01 (0.26) - 2.75 7.84 (1.26) - 6.59
Diluted 3.71 2.73 6.58
Dividends per 0.91p 0.825p 4.20p
share (pence)
Consolidated balance sheet at 30 June 2005 (unaudited)
International Financial Reporting Standards
As at As at As at
30 June 2005 30 June 2004 31 December 2004
£000 £000 £000
Non-current assets
Intangible assets 11,388 - -
Property, plant and equipment 169,455 148,981 154,678
Investment in associates 8,926 - -
Trade and other receivables 10,375 - -
200,144 148,981 154,678
Current assets
Stocks 2,301 1,991 2,599
Trade and other receivables 1,832 4,084 3,731
Prepayments 14,769 14,146 10,612
Cash and cash equivalents 1,520 505 482
20,422 20,726 17,424
Total assets 220,566 169,707 172,102
Current liabilities
Short-term borrowings (1,147) (6,552) (5,134)
Income tax liabilities (5,407) (4,547) (5,531)
Financial liabilities - derivative financial (46) - -
instruments
Trade and other payables (75,489) (58,589) (57,773)
Provisions - - -
(82,089) (69,688) (68,438)
Net current liabilities (61,667) (48,962) (51,014)
Non-current liabilities
Long-term borrowings (40,500) (12,000) (7,000)
Other payables (4,005) (4,398) (4,431)
Deferred tax liabilities (16,226) (16,646) (15,725)
Provisions (625) (614) (625)
(61,356) (33,658) (27,781)
Net assets 77,121 66,361 75,883
Equity
Share capital 54,120 53,494 54,087
Share premium 19,465 18,848 19,422
Foreign currency reserve 79 141 245
Other reserves 487 133 256
Retained earnings 2,970 (6,255) 1,873
Total equity shareholders' interests 77,121 66,361 75,883
Minority interests - - -
Total equity 77,121 66,361 75,883
Consolidated cash flow statement for the six months ended 30 June 2005
(unaudited)
International Financial Reporting Standards
Six months to 30 Six months to Year to 31
June 2005 30 June 2004 December 2004
£000 £000 £000
Cash flow from operating activities
Cash generated from operations (see note 1) 25,363 18,463 49,538
Interest received 96 63 98
Interest paid (617) (878) (1,476)
Tax paid (3,914) (3,042) (6,753)
Net cash from operating activities 20,928 14,606 41,407
Cash flows from investing activitites
Acquisition of associate (10,027) - -
Acquisition of subsidiary; net of cash acquired (26,797) - (358)
Disposal of subsidiary, net of cash disposed 5,797 - -
Proceeds from sale of property, plant and equipment 598 2,118 4,719
Purchase of property, plant and equipment (19,049) (10,182) (26,021)
Net cash used in investing activities (49,478) (8,064) (21,660)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 76 13,574 14,741
Net proceeds from issue of new bank loan 33,500 - -
Repayment of borrowings - (23,000) (28,000)
Dividends paid to shareholders - - (7,977)
Net cash used in financing activities 33,576 (9,426) (21,236)
Net increase / (decrease) in cash and cash 5,026 (2,884) (1,489)
equivalents
Cash and cash equivalents at 1 January (4,652) (3,163) (3,163)
Cash and cash equivalents at period end 374 (6,047) (4,652)
Consolidated statement of changes in equity at 30 June 2005 (unaudited)
International Financial Reporting Standards
As at As at As at
30 June 2005 30 June 2004 31 December 2004
£000 £000 £000
Opening reserves (IAS, excluding IAS 32 and IAS 39) 75,883 54,835 54,835
Adjustment to opening reserves for inclusion of Swaps 127 - -
under IAS 39
Opening reserves (IAS, including IAS 32 and IAS 39) 76,010 54,835 54,835
Profit for the period 8,037 5,825 14,071
Foreign exchange translation differences (166) (140) (36)
Pre-acquisition losses of DPP taken directly to reserves - - (197)
Deferred tax credit on share based payments taken 239 162 256
directly to equity
Total of recognised income and expense for the period 8,110 5,847 14,094
Dividends (7,306) (7,963) (7,977)
Issue of new shares 76 13,574 14,741
Share based payments - credit to equity 231 68 190
Total changes in equity in the period 1,111 11,526 21,048
Closing reserves 77,121 66,361 75,883
Segmental analysis for the six months ended 30 June 2005 (unaudited)
International Financial Reporting Standards
2005 2004
Revenue EBITDA EBITDA Profit Profit Revenue EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure 70,474 18,503 26.3% 14,732 20.9% 57,469 14,077 24.5% 11,156 19.4%
Concessions 26,553 5,449 20.5% 3,859 14.5% 21,128 4,222 20.0% 2,820 13.3%
High Street 30,138 5,933 19.7% 3,751 12.4% 30,838 6,770 22.0% 4,617 15.0%
Restaurants
Principal Trading 127,165 29,885 23.5% 22,342 17.6% 109,435 25,069 22.9% 18,593 17.0%
Brands
Non core Brands 3,673 (262) (7.1%) (796) (21.7%) 8,601 1,095 12.7% 164 1.9%
Total all Brands 130,838 29,623 22.6% 21,546 16.5% 118,036 26,164 22.2% 18,757 15.9%
Pre opening Costs (642) (0.5%) (642) (0.5%) (320) (0.3%) (320) (0.3%)
Administration (7,396) (5.7%) (8,232) (6.3%) (7,302) (6.2%) (7,688) (6.5%)
Share based payments (231) (0.2%) (231) (0.2%) (67) (0.1%) (67) (0.1%)
EBITDA / Operating 21,354 16.3% 12,441 9.5% 18,475 15.7% 10,682 9.0%
Profit
Interest Charges (593) (798)
Interest receivable 230 -
from Living Ventures
Limited
Finance lease interest (225) (244)
TOTAL interest (588) (1,042)
Profit before Taxation 11,853 9,640
and Exceptional Items
of wholly owned
operations
Share of profits of (245) -
Associated companies
Profit before Taxation 11,608 9,640
and Exceptional Items
Tax (3,843) (3,257)
Profit after taxation 7,765 6,383
Earnings per share 3.59 3.01
(pence)
Notes to the interim financial statements (unaudited)
International Financial Reporting Standards
1) Reconciliation of profit before tax to net cash inflow from operating
activities
Six months to 30 Six months to 30 Year to 31
June 2005 June 2004 December 2004
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Profit before tax 11,778 8,900 21,013
Net finance charges 809 1,042 1,667
Exceptional item ((profit) / loss on sale of (1,582) - 500
business)
Exceptional item (impairment of goodwill on - - 793
acquisition of DPP)
Exceptional item (loss on sale of tangible fixed 243 1,097 2,554
assets)
Depreciation 9,204 7,793 17,304
Decrease in stocks 313 517 70
Decrease/ (increase) in debtors (3,165) (2,231) 975
Increase in creditors 7,763 1,345 4,662
Cash generated from operations 25,363 18,463 49,538
2) Non-trading items
The Group has recognised a profit of £1.6 million following the disposal of Est
Est Est Restaurants Limited to Living Ventures Limited on 31 March 2005. As the
Group has taken a 40% stake in Living Ventures Limited, the profit recognised on
the disposal of Est Est Est Restaurants Limited has been reduced by 40% to
reflect the unrealised element of the profit.
A loss on disposal of fixed assets of £0.2 million (2004: £1.1 million) has been
charged in the six months to 30 June 2005 in respect of property disposals.
In addition, the Group has incurred a charge of £0.2 million in respect of the
fair value of swap instruments, following the adoption of IAS 39.
3) 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 2005 applied against the profit before tax for the period ended 30 June
2005. The underlying effective full year tax charge including deferred tax is
estimated to be 34% for the year.
4) Dividends
Following approval at the Annual General Meeting on 25 May 2005, the proposed
dividend in respect of 2004 of 3.375p per share has been recognised through
reserves in the interim statements of 2005. This is in accordance with IAS 10.
Under UK GAAP this proposed dividend had been recognised in reserves in 2004.
This dividend was paid to shareholders on 6 July 2005.
The Directors have declared an interim dividend in respect of 0.91p per share
which will be paid on 27 October 2005 to ordinary shareholders on the register
at the close of business on 30 September 2005. This will be recognised in the
reserves of the Group in the second half of the year.
5) Acquisition of Blubeckers Limited
On 21 June 2005 The Restaurant Group plc completed the acquisition of 100% of
the ordinary share capital of Blubeckers Limited for £22.75m, and a further
payment of £4.3 million for the repayment of intercompany debt. Blubeckers
Limited operates two restaurant brands, 'Blubeckers' and 'Edwinns', and at the
date of acquisition had 17 restaurants in the south of England. In the nine
days that Blubeckers was a subsidiary of the Group it contributed £0.0m to net
profit. If the acquisition had occurred on 1 January 2005, Group revenue would
have been £147.5m and profit before tax would have been £12.2m.
The acquisition had the following effect on the Group's assets and liabilities:
Preliminary
Recognised fair value Carrying
values adjustments amounts
(unaudited) (unaudited) (unaudited)
£000 £000 £000
Property, plant and equipment 19,884 (36) 19,848
Inventories 287 (115) 172
Trade and other receivables 200 (45) 155
Cash and cash equivalents 938 - 938
Trade and other payables (2,138) (52) (2,190)
Deferred tax (226) (2,350) (2,576)
Net identifiable assets and liabilities 18,945 (2,598) 16,347
Goodwill on acquisition 11,388
Consideration paid, satisfied in cash * 27,735
Cash (acquired) (938)
Net cash outflow 26,797
* Includes stamp duty and professional fees amounting to £689,000.
6) Earnings per share
International Financial Reporting Standards
6 months to 30 June 2005 6 months to 30 June 2004 Year to 31 December 2004
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 8,037 216.4 3.71 5,825 212.2 2.75 14,071 213.6 6.59
to shareholders
Effect of dilutive
securities
Options - 0.2 0.8 0.4
Diluted earnings per 8,037 216.6 3.71 5,825 213.0 2.73 14,071 214.0 6.58
share
Supplementary
earnings per share
Trading business 7,765 216.4 3.59 6,383 212.2 3.01 16,753 213.6 7.84
Deep Pan Pizza (996) 216.4 (0.46) - 212.2 - - 213.6 -
Trading business and 6,769 216.4 3.13 6,383 212.2 3.01 16,753 213.6 7.84
DPP
Non-trading items 1,268 216.4 0.59 (558) 212.2 (0.26) (2,682) 213.6 (1.26)
Basic earnings 8,037 216.4 3.71 5,825 212.2 2.75 14,071 213.6 6.59
7) 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 applicable for use in the company's annual financial statements for
the year ended 31 December 2005.
Comparative information for the six months ended 30 June 2004 and for the year
ended 31 December 2004 has been restated on an IFRS basis. The endorsed IFRS
that will be effective (or available for early adoption) in the annual financial
statements for the year ended 31 December 2005 are still subject to change and
to additional interpretations and therefore cannot be determined with certainty.
Accordingly, the accounting policies for the period will only be determined
finally when the annual consolidated financial statements are prepared for the
year ended 31 December 2005.
The comparatives for the full year ended 31 December 2004 are not the Company's
full statutory accounts for that year. These have been restated following the
implementation of IFRS. A copy of the statutory accounts for that year,
prepared on a UK GAAP basis, 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.
The comparative numbers are in accordance with those announced to the London
Stock Exchange on 27 June 2005 save for certain consolidated entries in respect
of DPP Restaurants Limited (the company which is required to be consolidated
under IAS 27) following the finalisation of that company's financial statements
for the period to 31 December 2004. These entries are, in effect, adjustments
on acquisition and the associated goodwill has been written off to reserves in
December 2004. The net reduction in consolidated reserves of the Group at 31
December 2004 as a result of these entries was £256,000. The treatment is
consistent with that adopted for the acquisition of DPP Restaurants Limited as
disclosed in the announcement of 27 June 2005 made by The Restaurant Group plc.
The proforma UK GAAP information contained in the appendices reflects applicable
accounting standards as at 31 December 2004, as disclosed in the Group's
statutory accounts at that date.
Appendix 1
Consolidated income statement for the six months ended 30 June 2005 under
proforma UK GAAP (unaudited)
Six months to 30 June 2005 Six months to 30 June 2004 Year to 31 December 2004
Trading Non Total Trading Non Total Trading Non Total
business trading business trading business trading
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 130,838 - 130,838 118,036 - 118,036 255,446 255,446
Cost of sales
Excluding pre-opening (109,453) - (109,453) (99,457) - (99,457) (212,357) (212,357)
costs
Pre-opening costs (642) - (642) (320) - (320) (948) (948)
(110,095) - (110,095) (99,777) - (99,777) (213,305) - (213,305)
Gross profit 20,743 - 20,743 18,259 - 18,259 42,141 - 42,141
Administration costs
Excluding one-off (8,232) - (8,232) (7,688) - (7,688) (16,237) (16,237)
items
Recovered aborted bid - 357 357 - 457 457
costs
(8,232) - (8,232) (7,688) 357 (7,331) (16,237) 457 (15,780)
Trading profit 12,511 - 12,511 10,571 357 10,928 25,904 457 26,361
Profit on sale of - 1,582 1,582 - - - - (500) (500)
business
Impairment of goodwill - - - - - - - - -
Loss and provision for - (388) (388) - (1,097) (1,097) - (2,554) (2,554)
loss on disposal of
tangible fixed assets
Operating profit 12,511 1,194 13,705 10,571 (740) 9,831 25,904 (2,597) 23,307
Net finance charges (363) - (363) (798) - (798) (1,179) - (1,179)
Share of post tax (245) - (245) - - - - - -
result in associated
undertaking
Profit before tax 11,903 1,194 13,097 9,773 (740) 9,033 24,725 (2,597) 22,128
Tax on profit on (3,931) 50 (3,881) (3,302) 182 (3,120) (7,747) 708 (7,039)
ordinary activities
-
Profit for the 7,972 1,244 9,216 6,471 (558) 5,913 16,978 (1,889) 15,089
financial period
Attributable to:
Equity shareholders 7,972 1,244 9,216 6,471 (558) 5,913 16,978 (1,889) 15,089
Minority interests - -
7,972 1,244 9,216 6,471 (558) 5,913 16,978 (1,889) 15,089
Earnings per share
(pence)
Basic 3.68 0.57 4.26 3.05 (0.26) 2.79 7.95 (0.88) 7.06
Appendix 2
Segmental analysis for the six months ended 30 June 2005 - under proforma UK
GAAP (unaudited)
2005 2004
Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure Parks 70,474 18,444 26.2% 14,683 20.8% 57,469 14,017 24.4% 11,107 19.3%
Concessions 26,553 5,449 20.5% 3,859 14.5% 21,128 4,223 20.0% 2,820 13.3%
High Street 30,138 5,841 19.4% 3,671 12.2% 30,838 6,656 21.6% 4,519 14.7%
Restaurants
Principal Trading 127,165 29,734 23.4% 22,213 17.5% 109,435 24,896 22.7% 18,446 16.9%
Brands
Non core Brands 3,673 (302) (8.2%) (828) (22.5%) 8,601 1,056 12.3% 133 1.5%
Total all Brands 130,838 29,432 22.5% 21,385 16.3% 118,036 25,952 22.0% 18,579 15.7%
Pre opening Costs (642) (0.5%) (642) (0.5%) (320) (0.3%) (320) (0.3%)
Administration (7,396) (5.7%) (8,232) (6.3%) (7,302) (6.2%) (7,688) (6.5%)
Share based payments - - - - - - - -
EBITDA / Operating 21,394 16.4% 12,511 9.6% 18,330 15.5% 10,571 9.0%
Profit
Interest Charges (593) (798)
Interest receivable 230 -
from Living Ventures
SWAP Interest - -
Lease interest - -
TOTAL interest (363) (798)
Profit before Taxation 12,148 9,773
and Exceptional Items
of wholly owned
operations
Share of profits of (245) -
Associated companies
Profit before Taxation 11,903 9,773
and Exceptional Items
Tax (3,931) (3,302)
Profit after taxation 7,972 6,471
Earnings per share 3.68 3.05
(pence)
Appendix 3
Reconciliation of proforma UK GAAP to IFRS
Profit Before Tax Tax Profit After Tax
Six months ended 30 June 2005
Proforma UK GAAP 13,097 (3,881) 9,216
Share based payments (231) 69 (162)
Finance leases 81 19 100
Consolidation of Deep Pan Pizza (996) - (996)
Fair value of interest rate swaps (173) 52 (121)
11,778 (3,741) 8,037
Six months ended 30 June 2004
Proforma UK GAAP 9,033 (3,120) 5,913
Share based payments (67) 22 (45)
Finance leases (66) 22 (44)
Consolidation of Deep Pan Pizza - - -
Fair value of interest rate swaps - - -
8,900 (3,076) 5,824
Year ended 31 December 2004
Proforma UK GAAP 22,128 (7,039) 15,089
Share based payments (190) 57 (133)
Finance leases (132) 40 (92)
Impairment of goodwill arising on DPP (793) - (793)
Fair value of interest rate swaps - - -
21,013 (6,942) 14,071
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 30 June 2005 on pages 10 to 21. 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.
As disclosed in note 7, the next annual financial statements of the group will
be prepared in accordance with Accounting Standards adopted for use in the
European Union. This interim report has been prepared in accordance with the
basis set out in note 7.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained in note 7, there is,
however, a possibility that the directors may determine that some changes are
necessary when preparing the full annual financial statements for the first time
in accordance with accounting standards adopted for use in the European Union.
The IFRS standards and IFRIC interpretations that will be applicable and adopted
for use in the European Union at 31 December 2005 are not known with certainty
at the time of preparing this interim financial information.
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 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 2005.
BDO Stoy Hayward LLP
London
21 September 2005
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