Interim Results

Restaurant Group PLC 12 September 2007 The Restaurant Group plc Interim results for the 26 weeks ending 1 July 2007 12 September 2007 The Restaurant Group plc operates 294 branded restaurants predominantly in leisure locations and airports. Its primary brands are Frankie and Benny's, Chiquito, Garfunkel's and Blubeckers. â€¢ The Company has continued to trade very strongly during the first six months of the year: - 6.5% growth in like for like sales - EBITDA up 26% to Â£30.3m - Adjusted profit before tax increased by 30% to Â£17.6m - Adjusted EPS rose 37% to 5.87p - Statutory profit before tax increased by 71% to Â£17.2m - Statutory EPS rose 50% to 6.10p - Interim dividend of 1.26p, up 20% â€¢ Both divisions continued to grow revenue and operating margins: Frankie and Benny's - Trading strongly, eight new sites opened in the period and a further 8-12 to open in HY2. - Potential for over 250 sites (currently 147 units) Chiquito - Excellent performance driven by expansion and tight operational control - One new restaurant during HY1, three new restaurants since June and expect to open 6-8 units in the full year Blubeckers - Good results and management team strengthened - Three opened during the first half year and a further two opened since Garfunkel's - Nine units were closed for refurbishment during the period, strong growth in like-for-like sales post refurbishment Concessions - Traded well in a demanding environment. Exciting opportunity in Heathrow T5, opening four new units in 2008 - One new unit during the period and between one and three to open in HY2 â€¢ Strongly cash generative and self-funded rollout: - Â£28.1m of cash generated during the period - Â£19.1m of capital expenditure â€¢ Current trading is strong: - like for like sales for the 36 weeks to 9 September 2007 are 7% ahead of last year Andrew Page, Chief Executive, said: 'Our focus on the Leisure and Concessions markets continues to deliver great results for The Restaurant Group. Our business performed superbly during the first half with both divisions delivering significant increases in turnover and profits. Against a more demanding background for consumer-facing businesses, this is a credit to our team. with a strong start to the second half and an impressive pipeline of new sites, we are looking forward to another year of good progress.' 12 September 2007 Enquiries: The Restaurant Group Andrew Page, Chief Executive 020 7457 2020 (today) Stephen Critoph, Group Finance Director 0845 612 5001 (thereafter) College Hill Matthew Smallwood 020 7457 2020 Chairman's Statement I am pleased to report that the Group traded well for the first six months of the year, delivering 6.5% growth in like-for-like sales and increasing revenue, earnings and margins. Against a background of rising interest rates and more demanding conditions for customer-facing businesses this represents a superb performance, reflecting the robust and resilient positioning of The Restaurant Group's businesses. Since the end of the first half this positive trading pattern has continued with like-for-like sales currently 7% ahead of the prior year for the 36 weeks up until 9 September 2007. This is the sixth successive set of interim accounts showing increased profits and, notwithstanding the ever more demanding comparatives - 2006 saw adjusted earnings per share increase by 27% - we have again significantly outperformed both our sector and market in terms of earnings growth. Additionally, there has been a very healthy conversion of those increased earnings into cash. Strong cashflows during the first six months resulted in net debt falling to Â£35.6m at 1 July 2007 (Â£47.5m at 31 December 2006). These strong cashflows enable us to invest in our business, both in terms of maintaining the existing estate to a high standard and also adding new restaurants to our portfolio. We have also returned significant amounts of cash to shareholders through increasing our payments of ordinary dividends. During the first six months of 2007 both of our divisions performed well increasing revenue, profits and profit margins. Our Leisure division produced a 24% increase in operating profits and a 30 basis point increase in operating profit margin. Our Concessions division also performed well delivering a 15% increase in operating profits and a 20 basis point increase in operating profit margin. During the first half we opened a total of 13 new restaurants and I am delighted to report that they are all trading well. Since the end of the first half we have opened a further seven new units and we expect to open a total of 30 to 35 new restaurants for 2007 as a whole. We are also pleased to report that our pipeline of new sites has been further strengthened since our last statement with good visibility for 2008, 2009 and beyond. Results* *Results marked as adjusted are stated excluding non-trading items (refer to note 2) The Group has made further good progress during the first half. Revenue grew by 17% to Â£171.9m (2006: Â£147.4m), EBITDA increased by 26% to Â£30.3m (2006: Â£24.1m), adjusted operating profit grew by 31% to Â£20.1m (2006: Â£15.4m), adjusted profit before tax increased by 30% to Â£17.6m (2006: Â£13.5m) and adjusted earnings per share increased by 37% to 5.87p (2006: 4.29p). Statutory profit before tax increased by 71% to Â£17.2m (2006: Â£10.1m) and statutory earnings per share increased by 50% to 6.10p (2006: 4.08p). In the light of this excellent performance the Board is declaring an interim dividend of 1.26p per share (2006: 1.05p) representing an increase of 20%. The dividend will be paid on 18 October 2007 to shareholders on the register on 21 September 2007 and the shares will be marked ex-dividend on 19 September 2007. Again, the increase in profit was the product of three principal components: - Like-for-like profit increases from the existing estate; - Profitable contributions from new openings; and - Cost savings from purchasing initiatives and operational efficiencies. This represents a very healthy basis from which the Group can continue its further profitable growth. Leisure Total revenue: Â£134m Operating profit: Â£27.5m Operating margin: 20.5% Frankie & Benny's (147 units) Frankie & Benny's has traded superbly during the first half of 2007 with revenues and operating profits increasing. We opened eight new restaurants during the first half, all of which are trading strongly and are set to deliver returns at least consistent with those of the portfolio as a whole. Since June we have opened a further two new units and we anticipate opening between 16 and 20 Frankie & Benny's restaurants in total this year. Of these 16-20 new units, approximately half will be located on sites without cinemas. Over the last few years we have opened an increasing number of restaurants at non-cinema sites, and we have been very encouraged by the opportunity to trade these restaurants during a greater range of day parts combined with the increasing propensity for these restaurants to become destinations in their own right (due, inter alia, to the widespread appeal of Frankie & Benny's offering, ease of access, safe environment and good car parking facilities). This has meant that these types of sites have consistently delivered very high levels of return on investment. Consequently, we have been able to further refine our site selection criteria and are confident that Frankie & Benny's has the potential to grow to at least 250 sites in the UK over the next 5-8 years. Chiquito (46 units) Chiquito also performed admirably with a 54% increase in operating profit. This excellent performance is a result of strong operational controls combined with the incremental benefits arising from the expansion of the business. One new restaurant was opened during the first half and we are pleased with its performance. Since the half year we have opened three new restaurants and, for the year as a whole, we expect to open a total of six to eight new units. We are confident that we can maintain this rate of openings for the foreseeable future. Blubeckers (25 units) We are pleased with the performance of Blubeckers and regard it as a business with significant growth potential. During the first six months revenue and operating profits both showed good growth and we have opened three new restaurants. Since June we have opened a further two new restaurants and we expect to open between five and seven new units in total during 2007. In anticipation of accelerating the rate of rollout of Blubeckers in 2008 and beyond we have, during the first half of 2007, taken steps to strengthen the management team at Blubeckers. We now have in place a senior management team that has a proven track record within The Restaurant Group of successfully executing rollouts and developing scaleable businesses. This augurs well for the future growth of Blubeckers. Garfunkel's (27 units) During the first half we completed our refurbishment programme for Garfunkel's. This involved the temporary closure of nine restaurants, representing a loss of approximately 19 weeks trade. Post refurbishment, the Garfunkel's estate has performed very strongly with significant growth in like-for-like sales leading to increased profits at these units. Concessions (49 units) Total revenue: Â£38m Operating profit: Â£5.6m Operating margin: 14.7% Our Concessions business has had an excellent first half with revenue, operating profit and operating profit margins all improving. Against a very demanding operating background these are outstanding results. During the first half we opened one new unit and this is trading well. For the year as a whole, we expect to open between two and four new sites. Work is underway at Heathrow Terminal 5 where we have secured four new sites. These are scheduled to open at the end of the first quarter in 2008. This is one of the most exciting airport developments with which we have been involved and it leaves us very well positioned for the future. Following the opening of Terminal 5 we anticipate that there will be some changes to the pattern of trade at the other terminals in Heathrow with Terminal 2, where we have just one unit, slated for closure in 2008. Elsewhere within our Concessions business we expect to continue to benefit from the on-going growth in air travel (in particular low cost flying) and the more rigorous security environment at UK airports which is tending to result in an increase in dwell times. These positive macro trends and structural characteristics, combined with low supply-side risk and our high levels of expertise, intellectual capital and significant UK scale, augur well for the continuing profitable development of this division. Cash flow and balance sheet The Group continues to be strongly cash generative and during the first half cash flows from operations increased to Â£28.1m (2006: Â£26.1m). The Group continues to convert its increasing profits into cash at a very healthy rate and this reflects the disciplined manner in which we run the business. Our touchstones, and the core bases behind our decision-making, continue to be cash flow and returns on investment. This approach has served the Group well over the past six years and I am confident that this will continue. During the first half of 2007 Â£19.1m of our cash was applied to capital expenditure of which Â£5.9m represented maintenance capital expenditure and Â£13.2m represented investment in opening new restaurants. For the full year we anticipate spending between Â£33m and Â£37m on opening new restaurants. The efficacy of our business model enables us to fund all of this capital expenditure from internally generated funds. Non-trading items The first half results include a net non-trading charge (before taxation) of Â£0.4m. This consists of the following items: - A provision of Â£1.7m against the carrying value of the Group's investment in Living Ventures; we have now provided in full against the carrying value of this investment; - A credit of Â£1.0m recognised in respect of outstanding loan note interest received from Living Ventures at the time of the sale of the Living Room business in June 2007; and - A positive revaluation of Â£0.3m in respect of our interest rate swap. On 29 June 2007 The Restaurant Group plc Employee Benefit Trust acquired 1.5m Company shares at a price of 327.05p per share for satisfaction of future vesting of share awards under the Long Term Incentive Plan. The cash settlement of this took place on 3 July 2007 for a total consideration of Â£5.0m. Living Ventures The Group continues to hold a minority shareholding in Living Ventures and during the first six months this resulted in a trading loss to the Group of Â£0.75m. In June we announced that Living Ventures had disposed of the whole of its Living Room business for Â£28m. As a result of the sale the Group received cash proceeds, including accrued loan note interest, to the amount of Â£7.8m. Following the disposal of the Living Room, the Group's ongoing interest in the residual business comprises a 38% shareholding in Blackhouse Grill Ltd, which owns and operates restaurants trading under the brands Est Est Est, Blackhouse Grill, and Bar and Grill. As part of this transaction we have made full provision against the residual carrying value of this investment. Board changes As announced earlier in the year, David Richardson joined the Board as a non-Executive Director in February 2007. Outlook The Group has performed well during the first half and this pattern of trade has continued to date. Our like-for-like sales for the 36 weeks to 9 September 2007 are running 7% ahead of last year. Whilst recognising that we have some demanding comparatives for the second half of 2007, the robustness of our business model and the commitment and enthusiasm of our management team should ensure that we enjoy another successful year. I am confident of reporting further good progress for the full year. Alan M. Jackson Non-executive Chairman 12 September 2007 The Restaurant Group plc Consolidated income statement Six months to 1 July 2007 Six months to 2 July 2006 Continuing Discontinued Total Continuing Discontinued Total (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Revenue 171,935 - 171,935 146,900 538 147,438 Cost of sales (140,695) - (140,695) (121,807) (724) (122,531) _________________________________________________________________________________ Gross profit/ (loss) 31,240 - 31,240 25,093 (186) 24,907 Administration costs (11,118) - (11,118) (9,536) (10) (9,546) Provision against 5 (1,656) - (1,656) - - - carrying value of associate Loss on integration of 4 - - - (3,818) - (3,818) DPP _________________________________________________________________________________ Operating profit/ (loss) 18,466 - 18,466 11,739 (196) 11,543 Interest payable (1,800) - (1,800) (1,373) - (1,373) Interest receivable 1,261 - 1,261 674 - 674 _________________________________________________________________________________ Profit/ (loss) before 17,927 - 17,927 11,040 (196) 10,844 share of associate and tax Share of post tax result (749) - (749) (790) - (790) in associated undertaking Profit/ (loss) before 17,178 - 17,178 10,250 (196) 10,054 tax Profit/ (loss) before tax, analysed as: Trading business 17,589 - 17,589 13,714 (196) 13,518 Non-trading items 4,5 (411) - (411) (3,464) - (3,464) 17,178 - 17,178 10,250 (196) 10,054 _________________________________________________________________________________ Tax on profit/ (loss) on 6 (5,237) - (5,237) (4,700) 66 (4,634) ordinary activities _________________________________________________________________________________ Profit/ (loss) on 11,941 - 11,941 5,550 (130) 5,420 ordinary activities after tax Profit on sale of - - - - 2,781 2,781 businesses net of tax _________________________________________________________________________________ Profit/ (loss) for the 11,941 - 11,941 5,550 2,651 8,201 financial period / year attributable to equity shareholders _________________________________________________________________________________ Earnings per share (pence) Basic 7 6.10 - 6.10 2.76 1.32 4.08 Diluted 7 6.09 - 6.09 2.75 1.32 4.07 _________________________________________________________________________________ Dividend per share (pence) - ordinary 8 1.26 1.05 - special 8 - - _________________________________________________________________________________ The Restaurant Group plc Consolidated income statement Year ended 31 December 2006 Continuing Discontinued Total Note (audited) (audited) (audited) Â£'000 Â£'000 Â£'000 Revenue 314,018 730 314,748 Cost of sales (256,060) (1,026) (257,086) _____________________________________ Gross profit/ (loss) 57,958 (296) 57,662 Administration costs (18,475) - (18,475) Provision against 5 (9,500) - (9,500) carrying value of associate Loss on integration of 4 (4,582) - (4,582) DPP _____________________________________ Operating profit/ (loss) 25,401 (296) 25,105 Interest payable (3,308) - (3,308) Interest receivable 699 - 699 _____________________________________ Profit/ (loss) before 22,792 (296) 22,496 share of associate and tax Share of post tax result (917) - (917) in associated undertaking _____________________________________ Profit/ (loss) before tax 21,875 (296) 21,579 Profit/ (loss) before tax, analysed as: Trading business 35,312 (296) 35,016 Non-trading items 4,5 (13,437) - (13,437) _____________________________________ 21,875 (296) 21,579 _____________________________________ Tax on profit/ (loss) on 6 (11,264) 101 (11,163) ordinary activities _____________________________________ Profit/ (loss) on 10,611 (195) 10,416 ordinary activities after tax Profit/ (loss) on sale of - 3,950 3,950 businesses net of tax _____________________________________ Profit/ (loss) for the 10,611 3,755 14,366 financial period / year attributable to equity shareholders Earnings per share (pence) Basic 7 5.36 1.90 7.26 Diluted 7 5.34 1.89 7.23 _____________________________________ Dividend per share (pence) - ordinary 8 6.00 - special 8 16.00 _____________________________________ The Restaurant Group plc Consolidated statement of changes in equity Six months to 1 Six months to Year ended 31 July 2007 2 July 2006 December 2006 (unaudited) (unaudited) (audited) Note Â£'000 Â£'000 Â£'000 Opening equity 65,204 91,436 91,436 Profit for the period / year 11,941 8,201 14,366 Foreign exchange translation differences (51) 48 1 Deferred tax (charge) / credit on share (103) 519 1,529 based payments taken directly to equity _____________________________________ Total recognised income and expense for the 11,787 8,768 15,896 period / year Dividends - ordinary 8 (9,702) (7,443) (9,490) Dividends - special 8 - (34,793) (34,793) Issue of new shares 593 250 1,096 Share based payments - credit to equity 950 563 1,059 Employee benefit trust - purchase of shares (4,955) - - _____________________________________ Total changes in equity in the period / year (1,327) (32,655) (26,232) _____________________________________ Closing equity 63,877 58,781 65,204 _____________________________________ The Restaurant Group plc Consolidated balance sheet At 1 July At 2 July At 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Note Â£'000 Â£'000 Â£'000 Non-current assets Intangible assets 11,275 11,275 11,275 Property, plant and equipment 182,537 158,907 174,035 Investment in associate - 7,936 7,810 Trade and other receivables - 10,375 875 ____________________________________________ 193,812 188,493 193,995 ____________________________________________ Current assets Stock 2,349 2,345 2,992 Financial assets - derivative financial instruments 911 361 652 Trade and other receivables 1,876 3,620 5,170 Prepayments 17,477 16,529 12,138 Cash and cash equivalents 6,387 3,942 683 ____________________________________________ 29,000 26,797 21,635 ____________________________________________ Total assets 222,812 215,290 215,630 ____________________________________________ Current liabilities Short-term borrowings 9 (42,000) - (1,165) Income tax liabilities (6,021) (6,527) (4,947) Trade and other payables (88,552) (81,258) (74,864) ____________________________________________ (136,573) (87,785) (80,976) ____________________________________________ Net current liabilities (107,573) (60,988) (59,341) ____________________________________________ Non-current liabilities Long-term borrowings - (49,000) (47,000) Other payables - finance lease debt (2,783) (2,717) (2,737) Deferred tax liabilities (16,185) (14,274) (16,247) Provisions (3,394) (2,733) (3,466) ____________________________________________ (22,362) (68,724) (69,450) ____________________________________________ Net assets 63,877 58,781 65,204 ____________________________________________ Equity Share capital 55,129 54,510 54,863 Share premium 20,673 19,853 20,346 Foreign currency reserve 30 128 81 Other reserves (2,182) 1,846 1,823 Retained earnings (9,773) (17,556) (11,909) ____________________________________________ Total equity shareholders' interests 63,877 58,781 65,204 ____________________________________________ The Restaurant Group plc Consolidated cash flow statement Six months to 1 Six months to 2 Year ended 31 July 2007 July 2006 December 2006 (unaudited) (unaudited) (audited) Note Â£'000 Â£'000 Â£'000 Cash flows from operating activities Cash generated from operations 3 28,092 26,081 63,374 Interest received 1,524 19 68 Interest paid (1,559) (1,163) (2,906) Tax paid (4,328) (4,746) (9,656) ____________________________________________ Net cash flows from operating 23,729 20,191 50,880 activities ____________________________________________ Cash flows from investing activities Disposal of business, net of cash - (478) (1,455) disposed Net proceeds from disposal by 5 6,449 - - associate Integration of business - - (584) Purchase of property, plant and (19,051) (17,884) (40,775) equipment Proceeds from sale of property, plant 149 75 58 and equipment ____________________________________________ Net cash used in investing activities (12,453) (18,287) (42,756) ____________________________________________ Cash flows from financing activities Net proceeds from issue of ordinary 593 250 1,096 share capital (Repayment of borrowings)/ net proceeds from (5,000) 38,000 36,000 issue of bank loan Dividends paid to shareholders - (34,793) (44,283) ____________________________________________ Net cash used in financing activities (4,407) 3,457 (7,187) ____________________________________________ Net increase in cash and cash 6,869 5,361 937 equivalents Cash and cash equivalents at start of (482) (1,419) (1,419) period / year ____________________________________________ Cash and cash equivalents at end of 6,387 3,942 (482) period / year ____________________________________________ The Restaurant Group plc Notes to the interim accounts 1 Segmental analysis Six months to 1 July 2007 Six months to 2 July 2006 Revenue EBITDA EBITDA Operating Operating Revenue EBITDA EBITDA Operating Operating Profit Profit Margin Profit Margin Margin Profit Margin Â£'000 Â£'000 % Â£'000 % Â£'000 Â£'000 % Â£'000 % ______________________________________________________________________________________________________ Leisure 133,928 34,779 26.0% 27,465 20.5% 109,498 28,341 25.9% 22,133 20.2% Concessions 37,722 7,831 20.8% 5,552 14.7% 33,387 6,931 20.8% 4,830 14.5% ______________________________________________________________________________________________________ Principal 171,650 42,610 24.8% 33,017 19.2% 142,885 35,272 24.7% 26,963 18.9% trading brands ______________________________________________________________________________________________________ Non-core 285 (681) (239.2%) (832) (292.3%) 4,015 (1,079) (26.9%) (1,178) (29.3%) brands ______________________________________________________________________________________________________ Continuing 171,935 41,929 24.4% 32,185 18.7% 146,900 34,193 23.3% 25,785 17.6% operations ______________________________________________________________________________________________________ Discontinued - - - - - 538 (186) (34.6%) (186) (34.6%) operations ______________________________________________________________________________________________________ Total all 171,935 41,929 24.4% 32,185 18.7% 147,438 34,007 23.1% 25,599 17.4% brands ______________________________________________________________________________________________________ Pre-opening (945) (0.5%) (945) (0.5%) (692) (0.5%) (692) (0.5%) costs (included in cost of sales) Administration (9,720) (5.7%) (10,168) (5.9%) (8,635) (5.9%) (8,983) (6.1%) Share based (950) (0.6%) (950) (0.6%) (563) (0.4%) (563) (0.4%) payments ___________________________________________________________________________________________ Total before 30,314 17.6% 20,122 11.7% 24,117 16.4% 15,361 10.4% non-trading items ___________________________________________________________________________________________ Provision against (1,656) - carrying value of investment in associate Loss on integration of - (3,818) DPP ______ _______ Operating profit 18,466 11,543 ______ _______ 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. EBITDA is operating profit before depreciation and non-trading items The Restaurant Group plc Notes to the interim accounts (continued) 1 Segmental analysis (continued) Year ended 31 December 2006 Revenue EBITDA EBITDA Operating Operating Profit Margin Profit Margin Â£'000 Â£'000 % Â£'000 % _______________________________________________________ Leisure 236,258 62,703 26.5% 50,745 21.5% Concessions 72,479 15,154 20.9% 11,088 15.3% _______________________________________________________ Principal 308,737 77,857 25.2% 61,833 20.0% trading brands _______________________________________________________ Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%) _______________________________________________________ Continuing 314,018 76,068 24.2% 59,834 19.1% operations _______________________________________________________ Discontinued 730 (296) (40.6%) (296) (40.6%) operations _______________________________________________________ Total all brands 314,748 75,772 24.1% 59,538 18.9% _______________________________________________________ Pre-opening (1,876) (0.6%) (1,876) (0.6%) costs (included in cost of sales) Administration (17,192) (5.5%) (17,416) (5.5%) ___________________________________________ Share based (1,059) (0.3%) (1,059) (0.3%) payments ___________________________________________ Total before 55,645 17.7% 39,187 12.5% non-trading items Provision against carrying (9,500) value of investment in associate Loss on (4,582) integration of DPP _______ Operating profit 25,105 _______ The Restaurant Group plc Notes to the interim accounts (continued) 2a Additional income statement Six months to 1 July 2007 Six months to 2 July 2006 Continuing Dis-continued Trading Non- Continuing Dis-continued Trading Non- business operations business trading Total business operations business trading Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Revenue 171,935 - 171,935 - 171,935 146,900 538 147,438 - 147,438 Cost of sales: Excluding (139,750) - (139,750) - (139,750) (121,115) (724) (121,839) - (121,839) pre-opening costs Pre-opening (945) - (945) - (945) (692) - (692) - (692) costs (140,695) - (140,695) - (140,695) (121,807) (724) (122,531) - (122,531) Gross profit / 31,240 - 31,240 - 31,240 25,093 (186) 24,907 - 24,907 (loss) Administration (11,118) - (11,118) - (11,118) (9,536) (10) (9,546) - (9,546) costs Trading profit 20,122 - 20,122 - 20,122 15,557 (196) 15,361 - 15,361 / (loss) Provision - - - (1,656) (1,656) - - - - - against carrying value of associate Loss on - - - - - - - - (3,818) (3,818) integration of DPP Operating 20,122 - 20,122 (1,656) 18,466 15,557 (196) 15,361 (3,818) 11,543 profit / (loss) Interest (1,800) - (1,800) - (1,800) (1,373) - (1,373) (1,373) payable Interest 16 - 16 1,245 1,261 320 - 320 354 674 receivable Profit / 18,338 - 18,338 (411) 17,927 14,504 (196) 14,308 (3,464) 10,844 (loss) before share of associate and tax Share of post (749) - (749) - (749) (790) - (790) - (790) tax result in associated undertaking Profit / 17,589 - 17,589 (411) 17,178 13,714 (196) 13,518 (3,464) 10,054 (loss) on ordinary activities before tax Tax on profit (6,102) - (6,102) 865 (5,237) (4,955) 66 (4,889) 255 (4,634) / (loss) from ordinary activities Profit / 11,487 - 11,487 454 11,941 8,759 (130) 8,629 (3,209) 5,420 (loss) on ordinary activities after tax Profit on sale - - - - - - - - 2,781 2,781 of business net of tax Profit / 11,487 - 11,487 454 11,941 8,759 (130) 8,629 (428) 8,201 (loss) for the period / year Earnings per share (pence) Basic 5.87 6.10 4.29 4.08 Diluted 5.86 6.09 4.28 4.07 Dividend per share (pence) - ordinary 1.26 1.05 - special - - The Restaurant Group plc Notes to the interim accounts (continued) 2a Additional income statement (continued) Year ended 31 December 2006 Continuing Discontinued Trading Non- business operations business trading Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Revenue 314,018 730 314,748 - 314,748 Cost of sales: _____________________________________________________________ Excluding (254,184) (1,026) (255,210) - (255,210) pre-opening costs Pre-opening costs (1,876) - (1,876) - (1,876) _____________________________________________________________ (256,060) (1,026) (257,086) - (257,086) _____________________________________________________________ Gross profit / 57,958 (296) 57,662 - 57,662 (loss) Administration (18,475) - (18,475) - (18,475) costs _____________________________________________________________ Trading profit / 39,483 (296) 39,187 - 39,187 (loss) Provision against - - - (9,500) (9,500) carrying value of associate Loss on - - - (4,582) (4,582) integration of DPP _____________________________________________________________ Operating profit / 39,483 (296) 39,187 (14,082) 25,105 (loss) Interest payable (3,308) - (3,308) - (3,308) Interest 54 - 54 645 699 receivable _____________________________________________________________ Profit / (loss) 36,229 (296) 35,933 (13,437) 22,496 before share of associate and tax Share of post tax (917) - (917) - (917) result in associated undertaking _____________________________________________________________ Profit / (loss) on 35,312 (296) 35,016 (13,437) 21,579 ordinary activities before tax Tax on profit / (12,364) 101 (12,263) 1,100 (11,163) (loss) from ordinary activities _____________________________________________________________ Profit / (loss) on 22,948 (195) 22,753 (12,337) 10,416 ordinary activities after tax Profit on sale of - - - 3,950 3,950 business net of tax _____________________________________________________________ Profit / (loss) 22,948 (195) 22,753 (8,387) 14,366 for the period / year Earnings per share (pence) Basic 11.50 7.26 Diluted 11.45 7.23 Dividend per share (pence) - ordinary 6.00 - special 16.00 Additional income statement information is provided as a useful guide to underlying trading performance. The adjustments from the statutory income statement exclude the non-trading items and are to aid understanding of the income statement and should be read in conjunction with, rather than as a substitute for, the reported information. The Restaurant Group plc Notes to the interim accounts (continued) 2b Additional information * * Results are stated excluding non-trading items Six months to 1 July 2007 Six months to 2 July 2006 Revenue EBITDA EBITDA Operating Operating Revenue EBITDA EBITDA Operating Operating Profit Profit Margin Profit Margin Margin Profit Margin Â£'000 Â£'000 % Â£'000 % Â£'000 Â£'000 % Â£'000 % __________________________________________________________________________________________________ Leisure 133,928 34,779 26.0% 27,465 20.5% 109,498 28,341 25.9% 22,133 20.2% Concessions 37,722 7,831 20.8% 5,552 14.7% 33,387 6,931 20.8% 4,830 14.5% Principal 171,650 42,610 24.8% 33,017 19.2% 142,885 35,272 24.7% 26,963 18.9% trading brands Non-core 285 (681) (239.2%) (832) (292.3%) 4,015 (1,079) (26.9%) (1,178) (29.3%) brands Continuing 171,935 41,929 24.4% 32,185 18.7% 146,900 34,193 23.3% 25,785 17.6% operations Discontinued - - - - - 538 (186) (34.6%) (186) (34.6%) operations Total all 171,935 41,929 24.4% 32,185 18.7% 147,438 34,007 23.1% 25,599 17.4% brands Pre-opening (945) (0.5%) (945) (0.5%) (692) (0.5%) (692) (0.5%) costs (included in cost of sales) Administration (9,720) (5.7%) (10,168) (5.9%) (8,635) (5.9%) (8,983) (6.1%) Share based (950) (0.6%) (950) (0.6%) (563) (0.4%) (563) (0.4%) payments EBITDA / 30,314 17.6% 20,122 11.7% 24,117 16.4% 15,361 10.4% operating profit Total net interest (1,784) (1,053) charges Profit before taxation 18,338 14,308 and share of associate's result Share of losses of (749) (790) associated company Profit before taxation 17,589 13,518 Taxation (6,102) (4,889) Profit after taxation 11,487 8,629 Earnings per share (pence) Trading business Basic 5.87 4.29 Diluted 5.86 4.28 2b Additional information* (continued) * Results are stated excluding non-trading items Year ended 31 December 2006 Revenue EBITDA EBITDA Operating Operating Profit Margin Profit Margin Â£'000 Â£'000 % Â£'000 % Leisure 236,258 62,703 26.5% 50,745 21.5% Concessions 72,479 15,154 20.9% 11,088 15.3% Principal 308,737 77,857 25.2% 61,833 20.0% trading brands Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%) Continuing 314,018 76,068 24.2% 59,834 19.1% operations Discontinued 730 (296) (40.6%) (296) (40.6%) operations Total all 314,748 75,772 24.1% 59,538 18.9% brands Pre-opening (1,876) (0.6%) (1,876) (0.6%) costs (included in cost of sales) Administration (17,192) (5.5%) (17,416) (5.5%) Share based (1,059) (0.3%) (1,059) (0.3%) payments EBITDA / 55,645 17.7% 39,187 12.5% operating profit Total net interest charges (3,254) Profit before taxation and share 35,933 of associate's result Share of losses of associated (917) company Profit before taxation 35,016 Taxation (12,263) Profit after taxation 22,753 Earnings per share (pence) Trading business Basic 11.50 Diluted 11.45 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. Additional income statement information is provided as a useful guide to underlying trading performance. The adjustments from the statutory income statement exclude the non-trading items and are to aid understanding of the income statement and should be read in conjunction with, rather than as a substitute for, the reported information. EBITDA is operating profit before depreciation and non-trading items 3 Reconciliation of profit before tax to net cash flow from operating activities Six months to 1 Six months to 2 Year ended July 2007 July 2006 31 December 2006 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Profit before tax 17,178 10,054 21,579 Net finance charges 539 699 2,609 Loss on integration of DPP (net of - 3,818 4,101 operating cash flow) Provision against carrying value of loan 1,656 - 9,500 note from associate Share of loss made by associate 749 790 917 Share option charge 950 563 1,059 Depreciation 10,192 8,756 16,458 Decrease / (increase) in stocks 643 418 (229) Increase in debtors (3,201) (3,836) (1,295) (Decrease) / increase in creditors (614) 4,819 8,675 ___________________________________________ Cash flows from operating activities 28,092 26,081 63,374 ___________________________________________ 4 Non-trading items The Group has taken a credit of Â£0.3m (2006: Â£0.4m) to interest receivable in respect of the remeasurement of its interest rate swap. In the six months to 2 July 2006, the Group recorded a loss of Â£3.8m in respect of the integration of the Deep Pan Pizza business. The costs were comprised of employee and contract terminations and a number of property costs including the write down of the carrying value of the business on integration, provisions for onerous leases and premiums on disposal of some of the properties. As detailed below in note 5, a Â£1.7m provision has been made against the carrying value of the Group's associate company, Living Ventures Limited, and a credit of Â£1.0m has been recorded in respect of accrued loan note interest not previously recognised. A non-trading taxation credit of Â£1.2m has been recognised in the income statement due to the impact of the rate change on the deferred tax liability. 5 Investment in Living Ventures Limited The 38% investment in Living Ventures Limited is accounted for using the equity method. On 22 June 2007, Living Ventures disposed of the Living Rooms business. As a result of this transaction, the Group received a consideration of Â£6.3 million in cash, net of costs. In addition, the outstanding interest on the loan note, amounting to Â£1.5m, was settled in full. The Directors now conclude that it is appropriate to make a further provision of Â£1.7 million, which together with the Â£9.5 million provision made in the year ended 31 December 2006, leaves a Â£nil carrying value of both the investment and the loan note. 6 Taxation The taxation charge has been calculated by reference to the expected effective corporation and deferred tax rates for the full financial year to end on 30 December 2007 applied against profit before tax for the period ended 1 July 2007. The full year effective tax charge on the underlying trading profit is estimated to be 33% (2006: 34%). Finance Act 2007 reduced the rate of corporation tax from 30% to 28% from 1 April 2008, and this rate is required to be used in calculating deferred tax provisions. This has resulted in the reduction in the effective rate and also a one-off credit to the income statement of Â£1.2m. 7 Earnings per share 6 months to 1 July 2007 6 months to 2 July 2006 Year ended 31 December 2006 (unaudited) (unaudited) (audited) 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 Â£'000 millions pence Â£'000 millions pence Â£'000 millions pence __________________________________________________________________________________________________ Basic EPS Earnings 11,941 195.6 6.10 8,201 201.0 4.08 14,366 197.8 7.26 attributable to shareholders Effect of dilutive securities Options 0.4 0.5 0.9 Diluted 11,941 196.0 6.09 8,201 201.5 4.07 14,366 198.7 7.23 earnings per share Supplementary earnings per share Trading 11,487 195.6 5.87 8,629 201.0 4.29 22,753 197.8 11.50 business Non-trading 454 195.6 0.23 (428) 201.0 (0.21) (8,387) 197.8 (4.24) items Basic earnings 11,941 195.6 6.10 8,201 201.0 4.08 14,366 197.8 7.26 8 Dividends Following approval at the Annual General Meeting on 16 May 2007, the proposed dividend in respect of 2006 of 4.95p per share, totalling Â£9.7 million, is to be recognised through reserves in the interim and final financial statements of 2007. This is in accordance with IAS 10 'Events after the Balance Sheet Date'. This dividend was paid to shareholders on 4 July 2007. The Directors have declared an interim dividend of 1.26p per share, amounting to Â£2.5 million, which will be paid on 18 October 2007 to ordinary shareholders on the register at close of business on 21 September 2007. 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 Â£34.8 million, following the disposal of Caffe Uno and a share consolidation whereby each nine existing shares were exchanged for eight new shares. 9 Short-term borrowings The Group has a syndicated loan facility of Â£80m which is due to expire in April 2008. Discussions are currently on-going for renewal of the facility. 10 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 30 December 2007. The accounting policies and method of computation used are consistent with those used in the financial statements for the year ended 31 December 2006. The comparatives for the full year ended 31 December 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. The interim financial statements were approved by the Board on 12 September 2007. Independent Review Report to The Restaurant Group plc Introduction We have been instructed by the company to review the financial information for the 26 weeks ended 1 July 2007 which comprise the consolidated income statement, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 10. 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. This report is made solely to the company in accordance with Bulletin 1999/4 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 interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying 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 twenty-six weeks ended 1 July 2007. Deloitte & Touche LLP Chartered Accountants London 12 September 2007 This information is provided by RNS The company news service from the London Stock Exchange

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