Interim Results

RNS Number : 3901N

Restaurant Group PLC

01 September 2011

 



The Restaurant Group plc

Interim results for the 26 weeks ending 3 July 2011

1 September 2011

The Restaurant Group plc ("TRG" or "the Group") operates 387 restaurants and pub restaurants.  Its principal trading brands are Frankie & Benny's, Chiquito and Garfunkel's. In addition it operates 43 Pub Restaurants as well as over 50 sites in its Concessions business which trades principally at major UK airports.

·      Strong performance in a difficult market:

- Adjusted results stated below are on a 26 week basis in 2011 and are compared with a 26 week basis for 2010 as detailed in Note 1 to the Chairman's statement.  Statutory results for 2010 were for a 27 week period and are set out in the condensed set of financial statements.  The additional non-comparable week in 2010 contributed £2m profit before tax, as disclosed in Note 1 to the Chairman's statement. Results marked as adjusted are stated excluding non-trading items.

- Total revenue increased 7.5% to £234m (2010: £218m) - Like-for-like sales increased by 3%

- Adjusted EBITDA increased by 6% to £39.7m (2010: £37.3m)

- Adjusted profit before tax increased by 8% to £24.4m (2010: £22.6m)

- Adjusted EPS rose 12% to 8.7p (2010: 7.8p)

- Statutory profit before tax was £17m (after charging £7.2m of non-trading items) (2010: £25m)

- Statutory EPS was 5.6p (2010: 8.6p)

·      Excellent performance demonstrating the resilience of TRG's business in difficult markets and the continued strength of its brands

·      Operations are strongly cash generative; adjusted operating cash flow increased to £39m (2010: £36m) 

·      Interim dividend increased to 4p per share (2010: 1.54p); rebalancing of split between interim and final dividend

·      Continuing new site development

-     Seven new sites opened in the first half year

-     A further four new sites opened to date in the second half year

-     22-27 new sites targeted for 2011

·      Continued strong trading with year to date like-for-like sales for the 34 weeks to 28 August 2011 at 2.75%

·      Board is confident of another year of good progress in 2011

Andrew Page, Chief Executive of The Restaurant Group plc commented as follows:

"These are good results from The Restaurant Group - turnover, profits, earnings, cashflow and dividend per share are all well ahead of last year. Against a tough economic backdrop, ongoing cost pressures and with household incomes being squeezed hard, this performance demonstrates the ongoing resilience of TRG's businesses and the strength of our team and our brands. After eight months we've opened 11 new restaurants; these are trading superbly and we're looking to add a further 11 to 16 new sites before the end of the year.

Despite the recent raft of downbeat newsflow, and the disturbances in early August, we've made a good start to the second half - year to date total turnover is up 7% and like-for-like sales are 2.75% ahead of the previous year. As always, we are continuing to focus our efforts on our customers by offering great service, value and hospitality.

Our team have been fantastic and I am confident that everyone will be working towards making sure that 2011 is another successful year."

1 September 2011

Enquiries:

The Restaurant Group
Andrew Page, Chief Executive	020 7457 2020 (today)
Stephen Critoph, Group Finance Director	020 3117 5001 (thereafter)
College Hill
Matthew Smallwood	020 7457 2020

Chairman's statement

The Group has traded well during the first six months of 2011 and, on a comparable basis, has delivered good growth in both revenues and profits. Against a tough backdrop, with increasing pressures on household incomes, lower levels of discretionary spend and rising input costs, this represents an excellent performance reflecting the resilience of our business model and the professionalism of TRG's team.

The tough conditions which were experienced by consumer-facing businesses during 2010 have continued into 2011 and, with consumers continuing to feel stretched, our efforts have been directed towards providing our customers with a wide choice of offerings throughout the day, excellent value for money and consistently high standards of service. This approach has enabled the Group to continue to grow revenues at a very satisfactory rate - during the first half of the year total sales, on a comparable 26 week basis, grew by 7.5% and like-for-like sales grew by 3%. Mitigating input cost pressures has also been a key point of focus and in this regard we have been well served by our disciplined approach to procurement with judicious use of fixed (or capped) price supply contracts. We have further reinforced this by applying our expertise, and using our buying scale, to ensure that cost pressures have not had a disproportionate impact upon margins and profits. Our experience over recent months has been for input cost increases to be at the upper end of our range of expectations and we are working on the assumption that this is likely to continue for the remainder of 2011.

We have continued to adopt a disciplined approach to promotional activity and have seen some further benefits from our digital initiatives as these continue to widen the audience of potential customers. As previously indicated, we have eschewed deep discounting and have geared our promotional activity towards building footfall whilst also maintaining good levels of margins and profits.

During the first six months we opened seven new restaurants and since the end of June we have opened a further four new restaurants. Our new openings are performing strongly and we anticipate opening between 22 and 27 new restaurants during the year.

Results*

*Results marked as adjusted are stated excluding non-trading items and, unless otherwise stated, reflect a 26 week period in 2011 compared with the comparable 26 week period in 2010 (see note 1 to this Chairman's statement). Statutory interim results for 2010 were stated on a 27 week reporting period. Like-for-like information is stated for a consistent number of weeks in 2011 and 2010.

During the first half the Group delivered increases in revenue, profits and earnings per share. Operating margins at 10.8% were 20 basis points below the comparable period in 2010 (11.0%), reflecting the input cost increases referred to above. Revenues increased by 7.5% to £234m (2010: £218m), adjusted EBITDA increased by 6% to £39.7m (2010: £37.3m), adjusted operating profit increased by 5% to £25.2m (2010: £24.0m), adjusted profit before tax grew by 8% to £24.4m (2010: £22.6m) and adjusted earnings per share increased by 12% to 8.7p (2010: 7.8p). Again, profits have converted into cash at a very healthy rate and, for the first half, adjusted operating cashflows were £38.7m (2010: £36.2m) and free cashflow was £23.8m (2010: £20.6m).

As a result of this strong performance the Board is declaring an interim dividend of 4.0p (2010: 1.54p) per share. We have decided that it is appropriate to rebalance the weighting of the payment of the dividend between the interim and final dividends. In previous years the dividend has tended to be more heavily weighted towards the final dividend, with the total dividend being split between approximately 20% interim and 80% final. Going forward, we are intending that the total dividend for each financial year should be set at a level such that approximately 40% of the full year's dividend is paid as an interim dividend with the balance being paid as a final dividend. This approach more appropriately reflects the balance of earnings between the first and second halves of the financial year, whilst allowing an element of discretion should trade demonstrate a material movement between the first and second halves. Our objective will continue to be to pursue a progressive dividend policy with dividends for each year covered approximately 2x by earnings.

The interim dividend will be paid on 12 October 2011 to shareholders on the register on 16 September 2011 and the shares will be marked ex-dividend on 14 September 2011.

Frankie & Benny's (197 units)

Frankie & Benny's traded strongly during the first half of the year. Excellent value, a wide range of choice and consistently good service combined with careful control of costs and margins enabled this business to deliver excellent results. We opened three new restaurants during the first half. These are trading well and are set to deliver strong returns. During 2011 we expect to open between 13 and 16 Frankie & Benny's restaurants.

Chiquito (67 units)

Chiquito delivered a solid performance during the first half producing good levels of revenue and profits. We opened two new Chiquito restaurants during the first half. These are trading well and are expected to deliver strong returns. During 2011 we expect to open three or four new restaurants.

Pub Restaurants (43 units)

Our Pub Restaurant business traded well during the first half although trade was disrupted at a number of the former Blubeckers units which were closed for several weeks whilst undergoing conversion to the Brunning & Price style of operation. This programme is now substantially completed and the results following conversion have been excellent. During 2011 we expect to open one or two new Pub Restaurants.

Garfunkel's (21 units)

Our Garfunkel's business has traded well during the first half and this looks set to continue during the second half of the year. We expect to open two or three new Garfunkel's restaurant during the second half and we are currently looking at a small number of other potential sites.

Concessions (59 units)

Our Concessions business traded strongly during the first half of the year benefiting from an absence of airport disruptions, as experienced in 2010, and a gradual improvement in passenger numbers at several of the UK's principal airports. During the first half we opened two new units at Gatwick airport. These are trading well and are set to deliver strong returns.

Non-trading items

The results include a £7.2m charge for non-trading items.  During the first half of the year, we identified a number of sites which were deemed unlikely to deliver returns at the level which we require. We are now in the process of exiting these sites, including the Group's Spanish business and some of the former Edwinns sites which do not lend themselves to the Brunning & Price model of operation. The non-trading charge includes actual and expected losses against book value on disposal, and provisions for actual or expected closure costs.

Cash flow and balance sheet

Set out below is the summary cash flow statement for the first half. This once again clearly demonstrates the strong cash flow generation characteristics of the Group's business and the transparent conversion of operating profits into cash.

	26 weeks to 3 July 2011	27 weeks to 4 July 2010
	£m	£m
Operating profit (26 weeks in 2010)	25.2	24.0
Working capital & non cash adjustments	(1.0)	(1.1)
Depreciation (26 weeks in 2010)	14.5	13.3
Net cash flow from operations	38.7	36.2
Net interest paid	(0.7)	(1.3)
Tax paid	(7.5)	(8.3)
Maintenance capital expenditure	(6.7)	(6.0)
Free cash flow	23.8	20.6
Development capital expenditure	(9.5)	(8.6)
Dividends	(14.5)	(12.7)
Normalised net cash flow	(0.2)	(0.7)
Extra trading week in 2010 (EBITDA)	-	2.5
Disposals	(1.3)	-
Net cash flow from share issues	0.9	1.8
SWAP termination payment	(0.4)	(1.0)
Purchase of shares	(3.1)	(1.4)
Financing costs offset against bank debt	(0.1)	(0.1)
Change in net debt	(4.2)	1.1
Net bank debt at start of period	(46.9)	(66.7)
Net bank debt at end of period	(51.1)	(65.6)

During the first half total capital additions were £16.2m (2010: £14.6m). £6.7m of this represented maintenance capex with the balance of £9.5m being investment in new sites and freehold acquisitions. In the full year we expect to spend between £40m and £45m on capital expenditure.

The Group continues to be in a very strong financial position. We have banking facilities of £120m in place, committed until the end of 2012 and we continue to have substantial head room against our bank facility covenants. We expect to have concluded a renegotiation of these facilities by the end of Q1 2012.  On a rolling 12 month basis to the half year end date, our key metrics on bank covenants are as follows:

	Covenant	HY 2011	HY 2010
EBITDA / interest ratio	>4x	38.5x	27.6x
Net debt / EBITDA ratio	<3x	0.6x	0.8x

Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.  These have not materially changed from the information on the principal risks and uncertainties of the Group which are set out on pages 21 and 22 of our latest Annual Report and Accounts⁽²⁾. The key risks and uncertainties facing the Group in the second half of the year include adverse economic conditions, increased competitive supply, a failure of suppliers delivering to the Group and increased raw material and other costs.

Outlook

These are excellent results delivered against a tough backdrop for consumer-facing businesses. As in the previous two financial years, we have had to cope with tough macro-economic conditions and these results are a testament to the strength and resilience of our business model and the tenacity and determination of our management team.

The second half of the year has started well - year to date, total turnover is up 7% and like-for-like sales are up 2.75%. Our business continues to demonstrate its resilience and wide appeal and, although we expect trading conditions for the remainder of 2011 to be similar to those experienced during the first half, I am confident that the Group is well placed to deliver further good progress.

Alan Jackson

Non-executive Chairman

1 September 2011

Notes to the Chairman's statement:

 ⁽¹⁾ The prior year statutory half year results were for a 27 week period.  Set out below is the trading income statement for half year 2011 compared to the comparable 26 week period for 2010.

	26 weeks ended 3 July 2011	Comparable 26 weeks ended 4 July 2010	% change	Memo: 27 weeks ended 4 July 2010
	£m	£m		£m
Revenue	234.2	217.8	+7.5%	229.5
Cost of sales	(195.0)	(180.3)		(189.3)
Pre-opening costs	(0.6)	(0.7)		(0.7)
Gross profit	38.6	36.8	+4.8%	39.5
Administration costs	(12.0)	(11.4)		(12.1)
Share-based payments	(1.4)	(1.4)		(1.4)
Adjusted EBITDA	39.7	37.3	+6.3%	39.8
Depreciation	(14.5)	(13.3)		(13.8)
Adjusted operating profit	25.2	24.0	+5.0%	26.0
Net interest	(0.8)	(1.4)		(1.4)
Adjusted profit before tax	24.4	22.6	+7.7%	24.6
Tax	(7.0)	(7.1)		(7.8)
Adjusted profit after tax	17.4	15.5	+12.4%	16.8
Adjusted EPS (pence)	8.73	7.81	+11.9%	8.47

⁽²⁾ The latest Annual Report and Accounts for The Restaurant Group plc can be found at www.trgplc.com

The Restaurant Group plc Interim report 2011
Condensed financial statements 2011
Consolidated income statement
		26 weeks ended 3 July 2011				27 weeks ended 4 July 2010
		Trading	Non-			Trading	Non-
		business	trading	Total		business	trading	Total
		(unaudited)	(unaudited)	(unaudited)		(unaudited)	(unaudited)	(unaudited)
	Note	£'000	£'000	£'000		£'000	£'000	£'000
Revenue		234,191	-	234,191		229,489	-	229,489
Cost of sales:
Excluding pre-opening costs	2	(194,992)	(5,358)	(200,350)		(189,252)	-	(189,252)
Pre-opening costs		(645)	-	(645)		(735)	-	(735)
		(195,637)	(5,358)	(200,995)		(189,987)	-	(189,987)
Gross profit/ (loss)		38,554	(5,358)	33,196		39,502	-	39,502
Administration costs		(12,000)	-	(12,000)		(12,148)	-	(12,148)
Share-based payments		(1,340)	-	(1,340)		(1,345)	-	(1,345)
Trading profit/ (loss)		25,214	(5,358)	19,856		26,009	-	26,009
Loss on disposal of fixed assets	2	-	(2,071)	(2,071)		-	-	-
Earnings before interest, tax, depreciation and amortisation:		39,695	(4,468)	35,227		39,788	-	39,788
Depreciation		(14,481)	(2,961)	(17,442)		(13,779)	-	(13,779)
Operating profit/ (loss)		25,214	(7,429)	17,785		26,009	-	26,009
Interest payable	2	(830)	230	(600)		(1,484)	231	(1,253)
Interest receivable		8	-	8		44	-	44
Profit/ (loss) on ordinary activities before tax		24,392	(7,199)	17,193		24,569	231	24,800
Tax on profit/ (loss) from ordinary activities	3	(6,952)	992	(5,960)		(7,738)	(65)	(7,803)
Profit/ (loss) for the period		17,440	(6,207)	11,233		16,831	166	16,997
Earnings per share (pence)
Basic	4	8.73		5.63		8.47		8.56
Diluted	4	8.72		5.62		8.44		8.53
Dividend per share (pence) 1	5			4.00				1.54
1 The dividend per share of 4.00p (2010: 1.54p) is the interim dividend in respect of 2011 and the dividend per share of 9.00p is the interim and final dividend in respect of 2010.

The Restaurant Group plc Interim report 2011
Condensed financial statements 2011
Consolidated income statement
		53 weeks ended 2 January 2011
		Trading	Non-
		business	trading	Total
		(audited)	(audited)	(audited)
	Note	£'000	£'000	£'000
Revenue		465,704	-	465,704
Cost of sales:
Excluding pre-opening costs	2	(379,268)	-	(379,268)
Pre-opening costs		(1,591)	-	(1,591)
		(380,859)	-	(380,859)
Gross profit/ (loss)		84,845	-	84,845
Administration costs		(24,054)	-	(24,054)
Share-based payments		(2,235)	-	(2,235)
Trading profit/ (loss)		58,556	-	58,556
Loss on disposal of fixed assets	2	-	-	-
Earnings before interest, tax, depreciation and amortisation:		85,806	-	85,806
Depreciation		(27,250)	-	(27,250)
Operating profit/ (loss)		58,556	-	58,556
Interest payable	2	(2,788)	596	(2,192)
Interest receivable		114	-	114
Profit/ (loss) on ordinary activities before tax		55,882	596	56,478
Tax on profit/ (loss) from ordinary activities	3	(16,186)	(167)	(16,353)
Profit/ (loss) for the period		39,696	429	40,125
Earnings per share (pence)
Basic	4	19.95		20.16
Diluted	4	19.90		20.11
Dividend per share (pence) 1	5			9.00

The Restaurant Group plc Interim report 2011
Condensed financial statements 2011
Consolidated statement of comprehensive income
	26 weeks ended 3 July 2011	27 weeks ended 4 July 2010	53 weeks ended 2 January 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Profit for the period	11,233	16,997	40,125
Exchange differences on translation of foreign operations	24	(37)	(5)
Total comprehensive income for the period	11,257	16,960	40,120

The Restaurant Group plc Interim report 2011
Condensed financial statements 2011
Consolidated statement of changes in equity
				Foreign
				currency
		Share	Share	translation	Other	Retained
		capital	premium	reserve	reserves	earnings	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 3 January 2011		56,101	23,234	488	(6,302)	71,192	144,713
Profit for the period		-	-	-	-	11,233	11,233
Exchange differences on translation of foreign operations		-	-	24	-	-	24
Total comprehensive income for the period		-	-	24	-	11,233	11,257
Issue of new shares		199	682	-	-	-	881
Dividends		-	-	-	-	(14,525)	(14,525)
Share-based payments - credit to equity		-	-	-	1,340	-	1,340
Employee benefit trust - purchase of shares		-	-	-	(3,050)	-	(3,050)
Current tax on share-based payments taken directly to equity		-	-	-	-	1,127	1,127
Deferred tax on share-based payments taken directly to equity		-	-	-	-	(398)	(398)
Balance at 3 July 2011 (unaudited)		56,300	23,916	512	(8,012)	68,629	141,345
Balance at 28 December 2009		55,568	21,867	493	(7,104)	45,108	115,932
Profit for the period		-	-	-	-	16,997	16,997
Exchange differences on translation of foreign operations		-	-	(37)	-	-	(37)
Total comprehensive income for the period		-	-	(37)	-	16,997	16,960
Issue of new shares		506	1,272	-	-	-	1,778
Dividends		-	-	-	-	(12,726)	(12,726)
Share-based payments - credit to equity		-	-	-	1,345	-	1,345
Employee benefit trust - purchase of shares		-	-	-	(1,431)	-	(1,431)
Current tax on share-based payments taken directly to equity		-	-	-	-	493	493
Deferred tax on share-based payments taken directly to equity		-	-	-	-	138	138
Balance at 4 July 2010 (unaudited)		56,074	23,139	456	(7,190)	50,010	122,489

The Restaurant Group plc Interim report 2011

Condensed financial statements 2011

Consolidated statement of changes in equity

				Foreign
				currency
		Share	Share	translation	Other	Retained
		capital	premium	reserve	reserves	earnings	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 28 December 2009		55,568	21,867	493	(7,104)	45,108	115,932
Profit for the period		-	-	-	-	40,125	40,125
Exchange differences on translation of foreign operations		-	-	(5)	-	-	(5)
Total comprehensive income for the period		-	-	(5)	-	40,125	40,120
Issue of new shares		533	1,367	-	-	-	1,900
Dividends		-	-	-	-	(15,706)	(15,706)
Share-based payments - credit to equity		-	-	-	2,235	-	2,235
Employee benefit trust - purchase of shares		-	-	-	(1,433)	-	(1,433)
Current tax on share-based payments taken directly to equity		-	-	-	-	525	525
Deferred tax on share-based payments taken directly to equity		-	-	-	-	1,140	1,140
Balance at 2 January 2011		56,101	23,234	488	(6,302)	71,192	144,713

The Restaurant Group plc Interim report 2011
Condensed financial statements 2011
Consolidated balance sheet
		At 3 July 2011	At 4 July 2010	At 2 January 2011
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Non-current assets
Intangible assets		26,433	26,241	26,433
Property, plant and equipment		257,663	255,661	259,583
		284,096	281,902	286,016
Current assets
Stock		3,479	3,104	3,630
Trade and other receivables		4,287	3,338	5,573
Prepayments		12,687	12,290	13,541
Cash and cash equivalents		1,086	1,904	2,738
		21,539	20,636	25,482
Total assets		305,635	302,538	311,498
Current liabilities
Short-term borrowings		(405)	(1,909)	-
Corporation tax liabilities		(6,133)	(8,004)	(8,539)
Trade and other payables		(77,588)	(74,818)	(81,945)
Financial liabilities - derivative financial instruments		-	(983)	(618)
Other payables - finance lease obligations		(311)	(286)	(296)
Provisions		(2,452)	(692)	(602)
		(86,889)	(86,692)	(92,000)
Net current liabilities		(65,350)	(66,056)	(66,518)
Non-current liabilities
Long-term borrowings		(51,750)	(65,589)	(49,662)
Other payables - finance lease obligations		(2,788)	(2,745)	(2,772)
Deferred tax liabilities		(19,206)	(21,408)	(19,091)
Provisions		(3,657)	(3,615)	(3,260)
		(77,401)	(93,357)	(74,785)
Total liabilities		(164,290)	(180,049)	(166,785)
Net assets		141,345	122,489	144,713
Equity
Share capital		56,300	56,074	56,101
Share premium		23,916	23,139	23,234
Foreign currency translation reserve		512	456	488
Other reserves		(8,012)	(7,190)	(6,302)
Retained earnings		68,629	50,010	71,192
Total equity		141,345	122,489	144,713

The Restaurant Group plc Interim report 2011
Condensed financial statements 2011
Consolidated cash flow statement
		26 weeks ended 3 July 2011	27 weeks ended 4 July 2010	53 weeks ended 2 January 2011
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Operating activities
Cash generated from operations	6	38,733	38,717	87,821
Interest received		8	44	114
Interest paid		(1,119)	(2,395)	(3,289)
Tax paid		(7,521)	(8,218)	(17,518)
Net cash flows from operating activities		30,101	28,148	67,128
Investing activities
Purchase of property, plant and equipment		(16,206)	(14,605)	(31,982)
Disposal of fixed assets	2	(1,258)	-	-
Net cash flows used in investing activities		(17,464)	(14,605)	(31,982)
Financing activities
Net proceeds from issue of ordinary share capital		881	1,778	1,900
Employee benefit trust - purchase of shares		(3,050)	(1,431)	(1,433)
Net proceeds from/ (repayments of) loan draw downs	7	2,000	(4,000)	(20,000)
Dividends paid to shareholders		(14,525)	(12,726)	(15,706)
Net cash flows used in financing activities		(14,694)	(16,379)	(35,239)
Net decrease in cash and cash equivalents		(2,057)	(2,836)	(93)
Cash and cash equivalents at beginning of period		2,738	2,831	2,831
Cash and cash equivalents at end of period		681	(5)	2,738

The Restaurant Group plc Interim report 2011

Condensed financial statements 2011

Responsibility statement

We confirm that to the best of our knowledge:

(a)  the condensed set of financial statements has been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial reporting';

(b)  the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 26 weeks and description of principal risks and uncertainties for the remaining 26 weeks of the year); and

(c)  the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board,

Alan Jackson	Stephen Critoph ACA
Non-executive Chairman	Group Finance Director
1 September 2011	1 September 2011

Accounting policies

Basis of preparation

The annual financial statements of The Restaurant Group plc are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union.  The accounting policies and methods of computation used are consistent with those used in the Group's latest annual audited financial statements.

General information

The comparatives for the 53 weeks ended 2 January 2011 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditors report on these accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Going concern

As referred to in the Chairman's statement, there are significant economic uncertainties facing the United Kingdom and consumer-facing industries in particular.  Potential risk factors and uncertainties that could affect the business are also discussed in the Chairman's statement.  The Group enjoys negative working capital as, due to the nature of the business, it generally does not give credit to its customers.  The Group has a debt facility of £120m which matures in December 2012 and had net debt at 3 July 2011 of £51.1m.  Based on the Group's plans for the next 12 months and after making enquiries (including preparation of reasonable trading forecasts, consideration of current financing arrangements and current headroom for liquidity and covenant compliance), the Directors have a reasonable expectation that the Group has adequate resources to continue operations for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the condensed financial statements.

Changes in accounting policies

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

The Restaurant Group plc Interim report 2011

Condensed financial statements 2011

Notes to the condensed financial statements

1 Segmental analysis

The Group trades in one business segment (that of restaurants) and one geographical segment (being the United Kingdom).

The Group previously reported its results in three business segments, Leisure, Concessions and non-core.  The Directors have concluded that these businesses meet the criteria for aggregation as one reporting segment.

2 Non-trading items

The Group has recorded a credit of £0.2m in respect of the remeasurement of its interest rate swaps (27 weeks ended 4 July 2010: credit of £0.2m, 53 weeks ended 2 January 2011: credit of £0.6m).  On 9 February 2011, the Group's only remaining interest rate swap was terminated on payment of £0.4m.

During the 26 weeks ended 3 July 2011, the Group has disposed of various fixed assets, including the three restaurants the Group operated in Spain, and realised a net loss including closure costs of £2.1m (27 weeks ended 4 July 2010: £nil, 53 weeks ended 2 January 2011: £nil).  This resulted in a net cash outflow of £1.3m.  In addition the Group has provided £5.4m, including £3.0m fixed asset impairment, for the expected exit costs of a number of other sites where trade has ceased in the first half of 2011 or negotiations for disposal are ongoing.

3 Tax

The tax charge has been calculated by reference to the expected effective current and deferred tax rates for the full financial year to 1 January 2012 applied against the profit before tax for the period ended 3 July 2011.  The full year effective tax charge on the underlying trading profit is estimated to be 28.5% (2010: 31.5%).

The Budget 2011 introduced a reduction in the main rate of corporation tax from 1 April 2011 from 28% to 26%.  This was substantively enacted on 29 March 2011 and the impact of this reduction has therefore been reflected in the interim statement.

The Finance Act 2011, which provides for a reduction in the main rate of corporation tax from 26% to 25% effective from 1 April 2012, was substantially enacted on 5 July 2011.  As it was not substantially enacted at the balance sheet date, the rate reduction is not yet reflected in these financial statements in accordance with IAS 10 'Events After The Reporting Period', as it is a non-adjusting event occurring after the reporting period.  The impact of the rate reduction, which will be reflected in the next reporting period, is estimated to reduce our UK deferred tax liability provided at 3 July 2011 by £0.7m.

The Government has also indicated that it intends to enact future reductions in the main tax rate of 1% each year down to 23% by April 2014.  The future 1% main tax rate reductions are expected to have a similar impact on the financial statements as outlined above, however the actual impact will be dependent on our deferred tax position at that time.

4 Earnings per share
		26 weeks ended 3 July 2011 (unaudited)				27 weeks ended 4 July 2010 (unaudited)				53 weeks ended 2 January 2011 (audited)
		Earnings	Weighted average number of shares	Per-share amount		Earnings	Weighted average number of shares	Per-share amount		Earnings	Weighted average number of shares	Per-share amount
		£'000	millions	pence		£'000	millions	pence		£'000	millions	pence
Basic earnings per share		11,233	199.7	5.63		16,997	198.6	8.56		40,125	199.0	20.16
Effect of dilutive options		-	0.2	(0.01)		-	0.7	(0.03)		-	0.5	(0.05)
Diluted earnings per share		11,233	199.9	5.62		16,997	199.3	8.53		40,125	199.5	20.11
Basic earnings per share		11,233	199.7	5.63		16,997	198.6	8.56		40,125	199.0	20.16
Effect of non-trading items		6,207	-	3.10		(166)	-	(0.09)		(429)	-	(0.21)
Earnings per share - trading business		17,440	199.7	8.73		16,831	198.6	8.47		39,696	199.0	19.95

5 Dividends

Following approval at the Annual General Meeting on 11 May 2011, the final dividend in respect of 2010 of 7.46p per share, totalling £14.5m, was paid to shareholders on 17 June 2011.

The Directors have declared an interim dividend of 4.00p per share which will be paid on 12 October 2011 to ordinary shareholders on the register at close of business on 16 September 2011.  In accordance with IAS 10, this will be recognised in the reserves of the Group in the second half of the year.

6 Reconciliation of profit before tax to cash generated from operations
	26 weeks ended 3 July 2011	27 weeks ended 4 July 2010	53 weeks ended 2 January 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Profit before tax	17,193	24,800	56,478
Net finance charges	592	1,209	2,078
Loss on disposal of fixed assets	2,071	-	-
Share-based payments	1,340	1,345	2,235
Depreciation and impairment	17,442	13,779	27,250
Decrease in stocks	151	1,018	492
Decrease / (increase) in debtors	2,135	2,366	(1,121)
(Decrease) / increase in creditors	(2,191)	(5,800)	409
Cash generated from operations	38,733	38,717	87,821

7 Bank loans

The Group has a committed bank facility of £120m in place until December 2012.  During the 26 weeks ended 3 July 2011, the Group drew down an additional £2m under this facility. 

8 Share capital

Share capital at 3 July 2011 amounted to £56.3m.  The number of shares allotted, called up and fully paid increased from 199,470,892 to 200,177,835 in the period following the exercise of share options by employees, amounting to 706,943 shares. 

9 Related party transactions

There were no significant changes in the nature and size of related party transactions for the period to those reported in the Annual Report and Accounts for the 53 weeks ended 2 January 2011.

10 Contingent liabilities

There were no significant changes in the nature and size of contingent liabilities at 3 July 2011 to those reported in the Annual Report and Accounts for the 53 weeks ended 2 January 2011.

Independent review report to The Restaurant Group plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 3 July 2011 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in the accounting policies, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 3 July 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

London, UK

1 September 2011

 

END

 

 

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