Preliminary Results

RNS Number : 6119C

Revolution Bars Group

02 October 2018

 

2 October 2018

Revolution Bars Group plc (LSE:  RBG)

Preliminary results for the 52 weeks ended 30 June 2018

Revolution Bars Group plc ("the Group"), a leading UK operator of 76 premium bars, trading under the Revolution and Revolución de Cuba brands, today announces its results for the 52 weeks ended 30 June 2018. 

Financial highlights

Performance as reported in the financial statements;

·     Sales of £141.9m (FY17: £130.5m), up 8.7%

·     FY like-for-like sales** decline of 0.6% following 1.9% growth in H1

·     Adjusted*** EBITDA £15.0m (FY17 Restated*: £15.1m), in line with revised guidance

·     Adjusted*** Operating profit £8.5m (FY17 Restated*: £9.6m)

·     Operating loss £3.0m (FY17 Restated*: Operating profit £5.5m) impacted by exceptional costs of £11.1m

·     (Loss) per share (5.7p) (FY17 Restated*: Earnings 7.7p)  

·     Adjusted*** Earnings per share 13.0p (FY17 Restated*: 14.6p)

·     Final dividend maintained at 3.3p per share (FY17: 3.3p per share)

Key points

·    H2 impacted by the uncertainty following corporate activity, management change, extremes of weather and the FIFA World Cup

·   Estate expansion continued throughout the period, with six new sites contributing to 8.7% total sales growth. New sites are achieving good overall returns

·     Strong balance sheet and highly cash generative

·     Rob Pitcher, new CEO, started six days before the year-end

Future Prospects

·     All aspects of the business reviewed, issues identified and actions planned to improve performance

·     Most recent like-for-like sales of -5%, but benefits of new initiatives put in place by new CEO yet to work through

·    Pre-booked Christmas sales up 20.3% (LFL : 14%) on same time last year, which augurs well for Q2 that historically has contributed just under half of full year profit

·     Two sites have opened since year-end, with three more expected by the end of November to capture the Christmas trade. New sites are performing well and our new site pipeline remains strong

Rob Pitcher, Chief Executive Officer, said:

"This is a fundamentally good business which has seen significant disruption over the past year and factors outside of its control. The group's strategy is sound and with a stable management team and better execution the company can rapidly return to growth. The performance of our new sites is encouraging, in line with our expectations and set to deliver good returns underpinning our strategic view of the business.  Our confidence in the potential of the Group is undiminished."

The information contained within this announcement is deemed to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Results for the 52 weeks ended 30 June 2018 and for the 52 weeks ended 1 July 2017 both included changes to accounting policies and practices that resulted in prior year adjustments. Further details on the impact of these prior period restatements on the financial statements are given in the Financial Review.

**   Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months

*** Adjusted performance measures exclude exceptional items, bar pre-opening costs and share based payment (credits)/charges.

Enquiries:

Revolution Bars Group plc                                                            0161 330 3876

Keith Edelman, Chairman

Rob Pitcher, CEO                                                                             

Mike Foster, CFO                                                                            

Instinctif Partners                                                                           020 7457 2020

Matthew Smallwood                                                                    

Tom Berger       

A presentation for analysts will be held today and the presentation will be made available on the Group's corporate website at www.revolutionbarsgroup.com. 

Chairman's statement

Our business

The Group is a leading operator of 76 premium bars with a strong presence throughout the UK for its two high-quality retail brands: Revolution, which is focused on young adults; and Revolución de Cuba, which attracts a broader age range. The Group is wet-led but also offers food, a significant growth opportunity.

Providing exceptional customer experiences is at the heart of the business' strategy to drive like-for-like sales growth through repeat visits and word-of-mouth marketing, while attracting new customers with targeted offers and social media activity. In addition, the Group seeks to expand its footprint with new sites in good locations.

At the beginning of the period, the Group operated from 67 venues (54 Revolution and 13 Revolución de Cuba venues). During the reporting period there were six new venue openings, three of each brand, as well as a re-opening of a bar. Therefore, the Group traded from 74 venues at the end of the reporting period since when two further bars have opened, one Revolution and one Revolución de Cuba.

Corporate activity and management changes

The business experienced significant and well-documented levels of corporate activity in the first half followed by the resignation of the Chief Executive Officer. During that activity, development work stalled while management was distracted, and in the aftermath a number of experienced senior managers on the operational side of the business resigned causing further disruption which adversely impacted trading. In this light, delivering record Christmas sales was an excellent result for the business.

There is no further update on a possible acquisition of Deltic Group Limited following the Group's statement regarding media speculation on 7 September 2018. The Board will notify Shareholders of any developments.

Trading conditions and like-for-like sales***

Like-for-like sales in the first half (up to and including week 27 to include New Year's Eve in both periods) were +1.9%, aided by record Christmas sales. In the second half (excluding week 27) like for like sales were -3.2%,

We estimate that the 'Beast from the East' disrupted sales by c£0.5m in early March; Easter trading was disrupted by the failure of Conviviality, owner of the Group's principal drinks supplier Matthew Clark, further distracting management from implementing new initiatives; and the hottest summer on record combined with England's extended World Cup run detracted from the appeal of our bars, which have neither TVs nor significant outside areas. These factors together with an unsettled workforce and the widely documented cost pressures faced by the whole sector led to 2017/18 being a disappointing year and one from which we expect to significantly improve upon.

Our results

Sales of £141.9m (2017: £130.5m) were up +8.7%, driven by new site openings.  Adjusted EBITDA*** of £15.0m (2017: £15.1m) was in line with our revised market guidance. Adjusted EBITDA*** is the key measure of underlying performance as it excludes exceptional items, bar opening costs that are a function of the timing of the new venue development programme, and (credits)/charges arising from long term incentive plans that are more reflective of changes in senior management than trading.

After exceptional items of £11.1m (2017 Restated*: £2.3m), bar opening costs of £2.0m (2017: £1.4m) and a credit from long term incentive plans of £1.6m (2017: charge £0.5m), the operating loss was £3.0m (2017 Restated*: profit £5.5m).

Exceptional items include non-cash charges of £7.8m for onerous lease provisions and asset impairments (2017 Restated*: £1.9m). The cash element £3.3m (2017: £0.4m) relates primarily to fees and expenses relating to the period's corporate activity.

Our board

The Group's CEO, Mark McQuater, resigned from the Board on 17 October 2017. I stepped in immediately as Executive Chairman and fulfilled that role until Rob Pitcher took up his appointment as the new CEO on 25 June 2018, when I reverted to Non-Executive Chairman.  The Board adopted an extensive and rigorous search for a new CEO and was particularly keen to recruit an individual with strong operational credentials, hands-on experience of other disciplines including Marketing and Human Resources, and responsibility for a significantly sized business. Rob fits the description perfectly.

Michael Shallow, who has served the Board as its senior Non-executive Director since its IPO, has advised that he intends not to seek re-election at the forthcoming AGM and will stand down form the Board on that date.  Jemima Bird will become senior Non-executive director from the date of the AGM.  A search is underway for an additional Non-executive Director.

Our auditor

Towards the end of 2017, the Board conducted a tender process for the provision of audit services to the Group. As a result of the tender process, PricewaterhouseCoopers LLP was appointed as the new independent auditor to the Group. 

Our dividend

Given underlying earnings, as measured by Adjusted EBITDA***, broadly in line with the prior period, the Board is proposing a maintained final dividend of 3.3 pence per share (2017: 3.3 pence).  This will result in the dividend for the period being at 4.95 pence per share, an interim dividend of 1.65 pence per share (2017: 1.65 pence) having been paid on 12 April 2018.

The final dividend is subject to approval at the Company's Annual General Meeting and will be paid on 7 December 2018. 

Our people

The Group employs over 3,200 people who provide outstanding customer experience that is at the heart of our strategy. Those individuals are complemented by many others who work long hard hours providing the necessary support for our front-line staff. Strong cohesive teams have been built across our business with a focus on staff training and development to continuously improve individual capabilities and trading performance. I would like to recognise the commitment and the substantial effort of all our employees and thank them for their contribution to the Group's performance. It is their continued dedication and commitment to the business together with a clear strategic plan that is integral to our achievements.

Our future

In the first quarter of FY19, like-for-like** sales are -5.0%. However, with many exciting initiatives planned or currently being implemented, as detailed in the CEO's statement, we are confident of improvement. In addition, pre-booked revenue for the critically important Christmas trading period is currently up 20.3% on the same time last year (up 13.8% on a like-for-like** basis), which we expect to aid our performance. Furthermore, we do not anticipate a recurrence of the same external circumstances experienced to date in 2018.

Under Rob Pitcher, we anticipate following the same strategy with two strong but differing brands which we will continue to grow. Since the period end, we have opened Revolution Glasgow and Revolucion de Cuba Southampton with both trading in line with expectations. We expect to deliver five new openings in the first half, with an additional three sites expected to open prior to the end of November 2018 to benefit from the important Christmas trading period.

The strength of our new venue pipeline and good overall returns of our new sites gives us confidence in the brands and achieving further growth. Rob Pitcher's operational and executional focus, recently-strengthened operations teams, and the good range of initiatives planned or being implemented means that our belief in the potential of the business is undiminished.

Keith Edelman

Chairman

2 October 2018

* Restated - See note 1 of the consolidated financial statements for an explanation and analysis of the prior period adjustments included in respect of the profit for the 52 weeks ended 1 July 2017

**Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months.

***Adjusted EBITDA excludes exceptional items, bar opening costs and share based payment (credits)/charges (see reconciliation table in the  Finance review).

Chief Executive Officer's statement

Introduction

I joined the business six days before the end of the financial year with the last few months seeing significant activity while I looked into and reviewed every aspect of the business to properly understand the key challenges facing the Group. I deduced that the Group has two strong brands that have much potential but have been affected by an extended period of uncertainty and major operational management change.

At the end of August, we held a two-day conference enabling me to meet the management teams of all our sites. That, alongside the 50 sites I have visited so far, has confirmed the Group's vision and values are alive across the business and its employees. The conference outlined my plans for refocusing the business on delivering for our customers, our teams, and our shareholders.

There is significant potential and promise as well as a route back to the 18 consecutive quarters of like-for-like sales growth** that ended in the second half.

Our new openings are impressive and performing well and our development teams are creative in producing venues of great character and difference, standing them apart from the competition.

My first report as CEO sets out my early thoughts on our strategy and our priorities for taking the business forward and returning to like-for-like sales growth**.

Our strategy

·      Building customer loyalty, ensuring all visits to our venues are an excellent experience

·      Driving continued improvement across our existing estate

·      Expanding the footprint to new and profitable locations

I believe a continuation of this strategy is the right approach. Historically, the Group's brands have led their market segments but sustained success is delivered by focusing on the detail of our customer proposition - something that has waned due to management distractions and operational management change.

My immediate focus is to restore sales and profit growth to our core trading estate as I believe there is significant opportunity to deliver this over the coming months. Within this, the Revolution customer proposition is the key focus area and work is underway to review all customer touch points to ensure that we are delivering a premium experience.  The Revolucion de Cuba customer proposition is much clearer and is continuing to deliver well; it is differentiated in its market place, has a stronger focus on food, and a slightly more mature and affluent customer profile.

Building customer loyalty

Today's market conditions require an even stronger focus on engaging with our customers. Digital developments and innovations will aid in unlocking this potential.  We will deliver this in a number of ways:

·      We appointed a new and award-winning social media agency in Social Chain, having recognised our digital platforms have not kept pace with the rapid changes in customer behaviours. Email communication is now of limited benefit and shifting resources to social engagement will enable better communications with our target customer base.

·     Feedback data has been too focused on a single channel, Trip Advisor, distorting our view of the customer experience. In mid-September, we launched Reputation.com across the business to provide a broader view of the Group's online reputation by capturing all review websites and allowing on-site management to respond from one dashboard. A further benefit is that this provides local and national benchmarking against the top quartile of our sites, facilitating management focus on driving the business forward and truly delivering for the customer.

·     Our customers now expect a seamless digital journey, and we have developed an online table booking system planned for roll-out across the business pre-Christmas. This will allow customers to book a table in any of our bars and the system is integrated with and complements our central pre-booking systems.

·      Food delivery represents a significant opportunity, and we are looking to further develop our existing relationships with delivery partners to maximise revenue potential.  We are also looking to develop click and collect capabilities via our website and social channels.

·     Although our Cocktail masterclasses remain as popular as ever and are a significant source of like-for-like sales** growth, that rate of growth has slowed.  The events are synonymous with the brand and have become a real differentiator, providing a unique customer experience that is both fun and premium. With some of our competitors now offering similar experiences we have to identify new ways to innovate and add creativity to this important competitive socialising format. I am excited to see how the team further develops this offering.

·     We have invested additional resources in our central sales teams and corporate sales managers to provide further support and training to locally-based sales teams. This is producing encouraging results with committed revenue for the vitally important Christmas trading period 20.3%% ahead of last year.

·    We are also working with a consultancy to further refine the Revolution brand proposition, ensuring we provide customers with the best premium bar experience on the high street.  We expect to start trials on the recommendations in early 2019.

Driving profit improvement from existing sites

Given the cost headwinds our sector has faced and continues to face - National Living Wage, Apprenticeship Levy, Property Rates revaluation, rent rises - this strategic pillar requires ever increasing rigor and creativity. Key priorities in the coming year are:

·      A renewed operational focus. I intend to be very 'hands on' as this will best leverage my experience of managing other turnaround brands and  enable me a faster understanding of how best to improve the quality of operational management. As a result, the role of Chief Operations Officer, vacated due to resignation earlier in the year, will not be replaced. Our Operations Directors will now report directly to me. We have also appointed a third Operations Director, having operated with only two for over six months, and employed a Property Director following resignation earlier in the year.

·     Refreshing the food offering. Our new food menu launched in Revolution bars in mid-September and is the biggest refresh of our food offer in recent years, representing a fundamental shift in both quality and presentation. The menu introduces a theatrical element, creating the fun and excitement that are integral to our brand ethos. Responding to customer trends, 40% of the new menu is suitable for either vegan or vegetarian customers, an increasingly important factor for us given our young professional customer base. Following the success of a weekend brunch offer in a number of Revolucion de Cuba sites, a similar offer will be introduced to Revolution in the coming months, creating a new trading session for the Revolution brand.

·     I believe there is a significant opportunity to create value through the pricing models that we currently employ and have instigated a review of our current pricing across the business. This will ensure we are optimising our margin while delivering increased value to our customers.   

·     Premiumisation and creativity of our drinks range, particularly cocktails, continues.  We launch four new cocktail menus each year, the latest being the beginning of September.  We collaborate closely with the brand owners of premium spirits who are keen to associate their products with our businesses and provide significant marketing support. They help us to innovate and allow us to see other offerings from around the world to aid in elevating our offering.

·      Re-establish our market-leading position for Friday and Saturday night entertainment. We researched what the best party nights look like and are in the process of trialing new initiatives at three sites. We have also appointed an established agency to provide a more consistent, improved and on-brand offer for live music and DJs. The early signs are encouraging.

·      Continued cost controls. As part of our cost reduction programme, we implemented labour scheduling software at the beginning Q4 in FY18, however engagement at venue level has been disappointing. In the coming months, we will be working hard to ensure that the benefits of the system are fully realised.  During the period, average hourly wage rates increased by 3.7% due to statutory increases in the National Living and National Minimum Wage. A further 1.0% increase in employer's pension contributions applied from 1 April.  The increase in total venue labour costs at like-for-like** sites was limited to 1.7% due to improvements in deployment-driving labour efficiencies.

·      Energy costs have been an important focus in recent months following the appointment of consultants. Their work has only just commenced but we are already seeing benefits through monitoring consumption on a daily basis and site surveys that identify fast paybacks from carefully focused investments on equipment replacement, LED lighting, and energy saving devices.

·      A new accounting system providing the business with far improved management information is being installed. This will be vital in highlighting further efficiency opportunities.

Expansion of our estate

Our property team is driving significant value through high quality site selection, and property development. Innovation and creativity are key attributes of their work.  The team has the vision to take unique buildings with interesting but often challenging space, see the potential, and deliver inspiring backdrops for our brands which are very different to those of our competitors.  A number of recent developments have roof-top bars and/or retractable roofs, creating inside/outside areas.

During the reporting period, we opened six new venues, three Revolution and three Revolucion de Cuba sites.  Since the end of the reporting period, we have opened Revolution Glasgow (Mitchell Street) and Revolucion de Cuba in Southampton. Both are stunning developments with great potential. Three further openings are planned before the end of November, meaning the Group will trade from 79 venues at that time.

Our pipeline of new sites remains healthy and we have many exciting prospects including two sites that could open in the second half of the FY19.  In the short term, we intend to take a slightly more cautious approach to new sites given that we believe our immediate priority and management focus must be to return our existing business to growth.  This may also necessitate an increased focus on the refurbishment of the existing estate, particularly if our work on the customer proposition and late-night entertainment identifies that remedial actions requiring capital investment are required in order to drive like-for-like growth**.

Employees and management teams

I would like to acknowledge the dedication and commitment demonstrated by our three thousand-strong team. I've been impressed with the calibre of our people in our sites and the support centre and their commitment to our brands.

The last year has presented some extraordinary challenges that tested many of our teams, however, I am confident that their continuing hard work and support will yield improved performance in the near future.  I would also like to thank all of our employees for their warm welcome when I joined the business and I am hugely looking forward to working with them in the coming years. 

Rob Pitcher

Chief Executive Officer

2 October 2018

 Restated - See note 1(c) of the consolidated financial statements for an explanation and analysis of the prior period adjustments included in respect of the profit for the 52 weeks ended 1 July 2017

**Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months.

***Adjusted EBITDA excludes exceptional items, bar opening costs and share based payment (credits)/charges (see reconciliation table in the Finance review).

FINANCIAL REVIEW

Prior Period Adjustments

The financial statements include three prior period adjustments resulting in a restatement of financial statements for the 52 weeks ended 1 July 2017.  These adjustments relate to the methodology applied to undertake asset impairment reviews, the re-designation of a deferred tax credit as a prior period adjustment and recognition of the interest charge associated with a movement on the provision for onerous leases.  These adjustments are detailed in note 1 (b) to the financial statements.  In aggregate, the effect of the prior period restatement is to reduce net assets at 2 July 2016 by £4.5m. The cumulative effect of the restatements is to reduce profit after tax for the 52 weeks ended 1 July 2017 by £0.3m, and to reduce net assets as at 1 July 2017 by £4.8m.

Throughout this report, the 2017 comparatives are described as "Restated" which means they are adjusted for prior period adjustments.

The restatements of the key comparative measures for the 52 weeks ended 1 July 2017 are set out below:

			As originally published	Restated
			£m	£m
Statutory measures
Operating profit			3.7	5.5
Profit on ordinary activities before taxation			3.6	5.2
Profit and total comprehensive income for the period			4.1	3.8
Basic earnings per share (pence)			8.2	7.7
Non-GAAP measures
Adjusted EBITDA***			15.1	15.1
Adjusted operating profit***			9.5	9.6
Adjusted Profit before Tax***			9.3	9.4
Adjusted earnings per share (pence)***			14.2p	14.6p

Results

Revenue for the period was £141.9m (2017: £130.5m), a +8.7% increase compared with the prior period.  The revenue increase comprised part-period contributions from six new sites opened during the period and the annualisation of six new sites opened in the prior period offset by lower sales from established sites.  Revenue from like-for-like** venues decreased on the prior period by 0.6%. 

The Group incurred an operating loss of £3.0m (2017 Restated*: profit £5.5m) but this was after charging exceptional items of £11.1m (2017 Restated*: £2.3m).

The underlying result, as measured by adjusted EBITDA***, was £15.0m (2017: £15.1m), a decrease of 0.4%.  This reflects an adjusted EBITDA*** margin of 10.6% of revenue compared with 11.6% in the prior period.  The reduction in EBITDA margin is predominantly the result of the reduction in like-for-like** sales whilst costs have increased significantly as a result of minimum wage pay rates and higher overheads on both rent and particularly property rates following the first full period post the 2017 rating revaluation.

The table below shows how adjusted EBITDA*** has changed in the constituent parts of the estate.

			Number of venues	2018	2017
Adjusted EBITDA***
				£m	£m
Venues opened pre July 2017			61	20.7	21.7
Venues opened in prior period			6	1.3	0.8
Venues opened in current period			6	0.8	-
Other non like-for-like venue			1	(0.2)	(0.3)
Adjusted EBITDA from venues			74	22.6	22.2
Central support costs				(7.6)	(7.1)
Adjusted EBITDA				15.0	15.1

Year-on-year cost increases at venues opened pre July 2017 included wages +£0.5m (up 1.7%), rent +£0.4m (up 4.1%) and general property rates +£0.6m (up 14.1%).  These cost increases were mitigated by improved gross margin (+0.1 percentage points) and savings in marketing (down £0.7m) and insurance (down £0.2m).

Of the six venues opened in the prior period, four Revolucion de Cuba venues opened in the first half and two Revolutions opened towards the end of the second half.  Five of these sites have performed to expectation but Revolution Torquay (opened May 2017) has fallen significantly short particularly outside of the tourist season and has dragged down the overall performance of investments in the prior financial period. A different strategy is to be adopted for this site including lowering the operating costs during the winter months and a different marketing approach to improve daytime trade.  EBITDA conversion from this group of investments was 11.6%, significantly below the ultimate target of 20%. Whilst profit conversion will continue to improve as these sites mature, a turnaround of the Torquay performance will be crucial if this group is to achieve target. 

Six venues opened in the current period, Revolución de Cuba in Belfast early in the period with three Revolutions in Solihull, Inverness and Putney opened just before Christmas at the end of the first half.  Two further Revolucion de Cuba venues opened during the second half; in Birmingham just before Easter and in Newcastle-upon-Tyne just two days before the period end.  These six venues achieved total revenue in the period of £7.0m and adjusted EBITDA*** of £0.8m which equates to 11.4% of revenue.  The three Revolucion de Cuba venues are large sites and all are trading strongly, and EBITDA conversion is expected to improve over an extended period consistent with earlier large Revolucion de Cuba openings.  The Board is confident that this group of sites will achieve in excess of the targeted EBITDA conversion of 20%.

Support centre costs represent 5.4% revenue the same as the prior period and equate to £103k per venue.

The Group reported a pre-tax loss for the period of £3.6m (2017 Restated*: profit £5.2m). The reported result for the period has been significantly impacted by exceptional items £11.1m (2017 Restated*: £2.3m), bar opening costs for new venues of £2.0m (2017: £1.4m) and a credit arising from long-term incentive plans of £1.5m credit (2017: charge £0.5m). The Board's preferred profit measure is adjusted pre-tax profit, which excludes exceptional items, bar opening costs and credits/charges arising from long term incentive plans all of which items can fluctuate significantly from year to year and serve to distract from the underlying performance of the business. On this basis, adjusted pre-tax profit was below the prior period at £8.0m (2017 Restated*: £9.4m).

	2018	2017
		Restated*
	£m	£m
Reported pre-tax (loss)/profit	(3.6)	5.2
Exceptional items	11.1	2.3
Bar opening costs	2.0	1.4
(Credit)/Charge arising from long-term incentive plans	(1.5)	0.5
Adjusted pre-tax profit	8.0	9.4
add back Finance costs	0.5	0.3
add back Depreciation	6.5	5.4
Adjusted EBITDA	15.0	15.1

Exceptional items, bar opening costs and accounting for long term incentive plans

Exceptional items, by virtue of their size, incidence or nature, are disclosed separately in order to allow a better understanding of the underlying trading performance of the Group. Costs of £11.1m (2017 Restated*: £2.3m) were associated with the takeover and merger approaches received from the Stonegate Pub Company Limited and the Deltic Group Limited during the first half of the reporting period, the resignations of the Chief Executive Officer ("CEO") and Chief Operating Officer ("COO") and the recruitment of a replacement CEO, additional resourcing to support the review of accounting policies, a fixed assets impairment charge, an increase in the provision for onerous leases and charges relating to the long term incentive plan.  A full analysis of the costs associated with each of these items together with the items charged in the comparative period are given in note 3 to the financial statements.  £7.8m of the exceptional costs are non-cash items (2017: £1.9m).

Bar opening costs refer to costs incurred in getting new sites fully operational and primarily include costs incurred before opening and in preparing for the launch.  The most significant element of these costs relates to property overheads incurred between signing the lease and opening for trading.  Whilst six venues were opened in the reporting period, the total charge also includes £0.6m in respect of the five venues opening in the first half of the subsequent reporting period (all by mid-November 2018).  Two of these sites there have been subject to significant delay since the leases were signed and have contributed significantly to these extra costs; Revolution Glasgow which opened towards the end of August 2018 was delayed by several months due to issues obtaining the building warrant and Bristol has been delayed by a licensing issue but will open in October 2018.

Credit arising from long term incentive plans resulted from the resignation of the CEO and COO both of whom received significant share option awards at the time of the Initial Public Offering ("IPO") in March 2015.  A number of other senior managers in receipt of significant awards at the time of the IPO also resigned during the period.  The cumulative charges made in earlier reporting periods in respect of these individuals were reversed on their resignations.  This is also a non-cash item.

The Board believes that the performance measures, adjusted EBITDA***, adjusted operating profit*** and adjusted pre-tax profit***, give a clearer indication of the underlying performance of the business as they exclude exceptional items, bar opening costs that are a function of the timing of the new venue development program rather than the underlying trade, and charges relating to long-term incentive schemes which tend to reflect changes in the management team rather than being a measure of performance.

Finance cost

Finance costs of £0.55m (2017: £0.3m) relate to borrowings under the Group's committed Revolving Credit Facility and also include commitment fees relating to any undrawn element of the Facility, the amortisation of arrangement fees over the life of the Facility, and interest on the movement in the onerous lease provision.  The Group has a revolving credit facility £25m that is committed to December 2021.  The facility provides flexibility in managing the timing of capital investments so that good opportunities are not foregone and also provides headroom against unforeseen short term trading issues.  At the end of the period, loans of £15.5m (2017: £7.5m) were outstanding on the Revolving Credit Facility.

Taxation

The current period shows a tax credit of £0.7m (2017 Restated*: charge £1.4m) due mainly to tax relief arising from exceptional items and a high level of capital investment supporting capital allowance claims in excess of depreciation. Corporation tax on profits in the current period is a credit of £0.5m (2017: charge £0.9m) and a net deferred tax credit of £0.2m arising from timing differences (2017 Restated*: charge £0.5m).

Capital expenditure and returns on invested capital

The Group invested £14.3m (2017: £12.9m) in total during the period of which £9.8m (2017: £8.6m) related to new venues and £3.8m (2017: £3.7m) related to developing and maintaining the existing estate.  A further £0.7m was spent on computers and IT related items (2017: £0.5m).   £2.4m of the expenditure on new venues related to venues that will open in the months following the end of the reporting period - Glasgow Revolution (August 2018), Southampton Revolucion de Cuba (September 2018) and Bristol Revolucion de Cuba (October 2018).  The latter venue included a lease premium that was paid earlier in 2018.  The comparable position at the end of the 2017 reporting period was spend of £1.5m in respect of 2018 openings.

The six venues opened in the prior period generated adjusted EBITDA*** in the current period of £1.3m.  The capital development cost for these six venues was £7.1m producing a return on capital of 18 per cent during the current reporting period (adjusted EBITDA*** divided by capital cost).  As indicated in the results section, the performance of this group of investments is being held back by one significantly underperforming venue.  Six venues opened in the current period at a cost of £8.8m.  These venues are trading well and expected to achieve an overall return of at least 30 per cent at maturity.

Operating cash flow and net debt

The Group generated net cash flow from operating activities in the period of £10.2m, £0.6m more than in the prior period (2017 Restated*: £9.6m).  This was mainly attributable to lower corporation tax payments £0.6m (2017: £1.1m).  Capital investments of £14.3m (2017: £12.8m), Dividends £2.5m (2017: £2.5 m) and Interest £0.5m (2017: £0.2m) resulted in a net cash outflow in the period of £7.1m (2017 Restated*: £5.8m) and opening net debt of £4.4m moving to a closing net debt position of £11.5m. Net cash outflow for 2017 was restated due to uncleared customer credit and debit card transactions at period end relating to sales within the reporting period, which have historically been treated as cash and cash equivalents in the statement of financial position and cash flow statement now being reported as receivables rather than cash and cash equivalents.

Earnings per share

Basic (loss) per share for the period was (5.7) pence (2017 Restated*: earnings 7.7 pence).  Adjusting for exceptional items, non-recurring bar opening costs and (credits)/charges arising from long term incentive plans results in an adjusted earnings per share for the period of 13.0 pence (2017 Restated*: 14.6 pence). 

Dividend

The Board has recommended a final dividend of 3.3 pence per share (2017: 3.3 pence), which is to be proposed at the Company's Annual General Meeting on 26 November 2018. 

Mike Foster

Chief Financial Officer

2 October 2018

*Restated - See note 1 of the consolidated financial statements for an explanation and analysis of the prior period adjustments included in respect of the profit for the 52 weeks ended 1 July 2017

**Like-for-like sales are defined as total retail sales from bars that have been trading continuously for at least 12 months.

***Adjusted EBITDA excludes exceptional items, bar opening costs and share based payment (credits)/charges (see reconciliation table in the Finance review).

Consolidated statement of profit and loss and other comprehensive income

for the 52 weeks ended 30 June 2018

		52 Weeks ended 30 June 2018 £000	52 Weeks ended 1 July 2017 Restated* £000
Revenue		141,939	130,467
Cost of sales		(33,751)	(31,075)
Gross profit		108,188	99,392
Operating expenses:
- operating expenses, excluding exceptional items		(100,120)	(91,624)
- exceptional items	3	(11,087)	(2,288)
Total operating expenses	3	(111,207)	(93,912)
Operating (loss)/profit		(3,019)	5,480
Finance expense		(555)	(290)
(Loss)/profit before taxation		(3,574)	5,190
Tax credit/(charge)	5	730	(1,361)
(Loss)/profit and total comprehensive (expense)/income for the period		(2,844)	3,829
(Loss)/earnings per share:
- basic and diluted (pence)	6	(5.7)	7.7
Dividend declared per share (pence)		4.95	4.95

Non-GAAP measure
Revenue		141,939		130,467
Operating (loss)/profit		(3,019)		5,480
Exceptional items	3	11,087		2,288
(Charge)/credit arising from long-term incentive plans	10	(1,566)		483
Bar opening costs	3	2,029		1,393
Adjusted operating profit		8,531		9,644
Finance expense		(555)		(290)
Adjusted profit before tax		7,976		9,354
Depreciation		6,477		5,422
Finance expense		555		290
Adjusted EBITDA			15,008	15,066

* See Note 1 for an explanation and analysis of the prior year restatements included above in respect of the 52 weeks ended 1 July 2017. 

Consolidated statement of financial position

at 30 June 2018

		30 June 2018	1 July 2017 Restated*	2 July 2016 Restated*
	Note	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	7	60,195	53,353	45,898
Current assets
Inventories		3,892	3,320	2,961
Trade and other receivables		11,474	10,554	9,230
Tax receivable		265	-	-
Cash and cash equivalents	8	4,025	3,050	1,843
		19,656	16,924	14,034
Total assets		79,851	70,277	59,932
Liabilities
Current liabilities
Trade and other payables		(22,891)	(20,517)	(21,525)
Provisions	9	(1,065)	(302)	(383)
Tax payable		-	(843)	(1,034)
		(23,956)	(21,662)	(22,942)
Non-current liabilities
Deferred tax liability		(690)	(925)	(448)
Financial liabilities		(15,500)	(7,500)	(500)
Provisions	9	(8,912)	(3,441)	(1,697)
Rent free creditor		(2,433)	(1,504)	(937)
		(27,535)	(13,370)	(3,582)
Total liabilities		(51,491)	(35,032)	(26,524)
Net assets		28,360	35,245	33,408
Equity attributable to equity holders of the Parent
Share capital		50	50	50
Merger reserve		11,645	11,645	11,645
Retained earnings		16,665	23,550	21,713
Total equity		28,360	35,245	33,408

* See Note 1 for an explanation and analysis of the prior period restatements included in respect of the profit for the 52 weeks ended 1 July 2017 and in respect of other prior periods.

Consolidated statement of changes in equity

for the 52 weeks ended 30 June 2018

				Reserves
	Issued Share Capital		Merger reserve		Retained earnings		Total shareholders' equity
	£'000		£'000		£'000		£'000
At 3 July 2016 - as reported	50		11,645		26,188		37,883
Impact of restatements*	-		-		(4,475)		(4,475)
At 3 July 2016 - restated*	50		11,645		21,713		33,408
Total comprehensive income for the period - restated	-		-		3,829		3,829
Credits arising from long-term incentive plans	-		-		483		483
Dividends paid	-		-		(2,475)		(2,475)
At 1 July 2017 (Restated*)	50		11,645		23,550		35,245
Total comprehensive expense for the period	-		-		(2,844)		(2,844)
Charges arising from long-term incentive plans	-		-		(1,566)		(1,566)
Dividends paid	-		-		(2,475)		(2,475)
At 30 June 2018	50		11,645		16,665		28,360

* See Note 1 for an explanation and analysis of the prior period adjustments included above in respect of the profit for the 52 weeks ended 1 July 2017 and in respect of other prior periods.

Consolidated statement of cash flow

for the 52 weeks ended 30 June 2018

	52 weeks ended 30 June 2018 £'000	52 weeks ended 1 July 2017 Restated* £'000
Cash flow from operating activities
(Loss)/profit before tax from operations	(3,574)	5,190
Adjustments for:
Net finance costs	555	290
Depreciation of property, plant and equipment	6,477	5,422
Impairment of property, plant and equipment	860	-
Tax credit	(48)	-
(Charges)/credits arising from long term incentive plans	(1,566)	483
Operating cash flows before movement in working capital	2,704	11,385
Increase in inventories	(572)	(359)
Increase in trade and other receivables	(920)	(1,324)
Increase/(decrease) in trade and other payables	3,323	(644)
Increase in provisions	6,234	1,663
	10,769	10,721
Tax paid	(565)	(1,075)
Net cash flow generated from operating activities	10,204	9,646
Cash flow from investing activities
Purchase of property, plant and equipment	(14,276)	(12,779)
Net cash flow used in investing activities	(14,276)	(12,779)
Cash flow from financing activities
Equity dividends paid	(2,475)	(2,475)
Interest paid	(478)	(185)
Drawdown of borrowings	8,000	7,000
Net cash flow from financing activities	5,047	4,340
Net increase in cash and cash equivalents	975	1,207
Opening cash and cash equivalents	3,050	1,843
Closing cash and cash equivalents	4,025	3,050

* See Note 1 for an explanation and analysis of the prior year restatements included above in respect of the 52 weeks ended 1 July 2017.

1.     General Information

(a)    Basis of preparation

The accounting period runs to the Saturday which falls nearest to 30 June each year and therefore normally comprises a 52-week period but with a 53-week period falling at approximately five-year intervals. The period ended 30 June 2018 was a 52-week period; the period ended 1 July 2017 was also a 52-week period. The consolidated financial statements have been prepared under the historical cost convention in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. References to 2018 relate to the 52-week period ended 30 June 2018 and references to 2017 relate to the 52-week period ended 1 July 2017 unless otherwise stated. The consolidated financial statements are presented in Pounds Sterling with values rounded to the nearest hundred thousand, except where otherwise indicated. These policies have been applied consistently unless otherwise stated.

(b)    Going Concern

The Group has a £25m revolving credit facility committed to 31 December 2021.  The facility provides liquidity to cover normal monthly and seasonal cash outflows, a safety net for the business to ride out short-term downturns in trade, and potentially to facilitate an acceleration of expansion plans if good site acquisition opportunities are identified in excess of the Company's stated target of a minimum of five new sites per annum.  The Group has opened six new sites in each of the last two financial years and will open a further five new sites in the first half of the new financial period. A number of these new sites have been in large cities requiring larger than average footprints and at higher cost.  This accelerated rate of investment together with the one-off exceptional costs relating to corporate activity and executive director changes has seen utilisation of the facility over the last two financial periods increase from £5.0m to £15.5m with a further increase to £19.0m as at the date of signing the financial statements.

The Group continues to be very cash generative pre expansionary capital expenditure, has ample headroom on its facility to cover working capital and seasonal cash flow needs and can potentially cover a significant reduction in trading performance relative to recent levels.   The acceleration of capital investment has coincided with a number of events that have adversely impacted trading performance and therefore the Board has recently agreed with its bank some revisions to facility covenants that will provide a greater level of tolerance over existing test levels.  The Directors have reviewed the Group's trading forecast, which demonstrate that the Group has adequate financial resources to continue in operational existence for at least 12 months from the date of approval of the financial statements and to remain compliant with the terms of the revolving credit facility and the financial covenants (tested quarterly) attached to it.  For this reason the Directors continue to adopt the going concern basis in preparing the consolidated financial information.

(c)    Prior period adjustments

As previously reported, a number of prior period adjustments were reflected in the accounts for the 52 weeks ended 1 July 2017 following a review of the Group's accounting policies and practices. Those adjustments were fully explained and the resulting corrections made to prior periods were detailed in those accounts.  As a result of the circumstances, as detailed below, the following prior period adjustments have been reflected in these financial statements.

Asset impairments

The Executive Chairman's statement accompanying this review references the Board's decision to change the Group's auditors and to undertake a tender process that required prospective auditors to undertake their own review of the Group's accounting policies and practices.  This identified that the Group's methodology for identifying and providing for asset impairments should be improved. Historically, it had not been the Group's practice to fully allocate head office costs to trading venues as part of its impairment test calculations. As this methodology had been consistently applied for a number of periods, a prior period adjustment has been made. This adjustment benefits the earnings of future periods as a result of reducing depreciation charges and does not affect cash flow.  Its effect is to reduce net assets as at 2 July 2016 by £6.2m and to increase profit after tax for the 52 weeks ended 1 July 2017 by £1.5m.

Deferred tax

As a result of an internal review following an enquiry from the Financial Reporting Council regarding a material deferred tax credit reported in the accounts for the period ended 1 July 2017, the directors have now determined that this item should have been treated as a prior period adjustment.  This item relates to temporary timing differences on fixed assets as at 2 July 2016 that were originally calculated using a closing tax written down value of £14.1m whereas the capital allowances summary submitted with the 2016 tax computations subsequently showed a tax written down value of £24.3m. The income statement credit arising from this reduction in deferred tax liability has now been recognised in the period ended 2 July 2016. The effect is a decrease of the deferred tax liability as at 2 July 2016, and a consequential increase to profit after tax of £1.7m in the period ended 2 July 2016. This deferred tax credit was originally reported as a credit to profit in the period ended 1 July 2017 and as such the impact of the restatement is to reduce the profit for the period ended 1 July 2017 by £1.7m. There is no impact on net assets as at 1 July 2017. When reviewing the Company's 2017 Annual Report and Accounts, the FRC has made clear to us the limitations of its review as follows:

•          its review is based on the 2017 Annual Report and Accounts only and does not benefit from a detailed knowledge of the Group's business or an understanding of the underlying transactions entered into;

•          communications from the FRC provide no assurance that the Company's 2017 Annual Report and Accounts are correct in all material respects and are made on the basis that the FRC (and its officers, employees and agents) accepts no liability for reliance on them by the Company or any third party, including but not limited to investors and shareholders; and 

•           the FRC's role is not to verify information provided but to consider compliance with reporting requirements.

Onerous lease provision

When the movement on the onerous lease provision was reported in the 52 weeks ended 1 July 2017, the interest charge associated with the movement on the provision was not separately disclosed in the income statement and cash flow statement. An adjustment has been made to correct this disclosure with no effect on profit or net assets for the 52 weeks ended 1 July 2017.

Cash and cash equivalents

Customer credit and debit card transactions that have not yet cleared the bank account at period end but relate to sales within the reporting period have historically been treated as cash and cash equivalents in the statement of financial position and cash flow statement. These amounts are now reported as receivables rather than cash and cash equivalents and accordingly an adjustment of £1.3m has been made to the relevant balances at 1 July 2017 (2 July 2016: £0.9m). This change in disclosure has no effect on profit or net assets for the 52 weeks ended 1 July 2017.

Summary

The directors are confident that they have taken the appropriate steps to ensure that the accounts are drawn up in accordance with the relevant accounting standards.  The disclosures in these accounts describe the nature and impact of the most recent corrections and how this has been reflected in the accounts for the 52 weeks ended 30 June 2018. Throughout this report, the 2017 comparatives are described as "Restated" which means they are adjusted for prior period adjustments, compared to those originally reported in the 2016 and 2017 Financial Statements. 

In aggregate, the effect of all of the prior period restatement is to reduce net assets at 2 July 2016 by £4.5m. The cumulative effect of the restatements to the 2017 Financial Statements is to reduce profit after tax for the period ended 1 July 2017 by £0.3m, and to reduce net assets as at 1 July 2017 by £4.8m.

A summary of the combined impact of the prior period adjustments on the consolidated statement of profit and loss account and consolidated statement of cash flow for the 52 weeks ended 1 July 2017 and on the consolidated statements of financial position as at 1 July 2017 and at 2 July 2016 arising from the restatement, are as follows:

Restated Consolidated Statement of Comprehensive Income for the 52 weeks ended 1 July 2017:

	1 July 2017  As published £'000	Impairments* £'000	Onerous lease provisions £'000	Deferred tax £'000	Share-based payments £'000	1 July 2017 Restated £'000
Operating profit before exceptionals	8,088	163	-	-	(483)	7,768
Exceptional charge	(4,352)	1,476	105	-	483	(2,288)
Operating profit after exceptionals	3,736	1,639	105	-	-	5,480
Finance expense	(185)	-	(105)			(290)
Profit before tax	3,551	1,639	-	-	-	5,190
Tax	560	(187)	-	(1,734)	-	(1,361)
Profit after tax	4,111	1,452	-	(1,734)	-	3,829
Adjusted EBITDA	15,066	-	-	-	-	15,066

*Impairments includes the effect of restatement on depreciation charge (£163k) as a result of assets being written down in prior periods.

Consolidated Statement of Financial Position as at 1 July 2017

	1 July 2017  As published £'000	Impairments* £'000	Debit and credit cards £'000	Deferred tax £'000	1 July 2017 Restated £'000
Property, plant and equipment	58,722	(5,369)	-	-	53,353
Inventories	3,320	-	-	-	3,320
Trade and other receivables	9,268	-	1,286	-	10,554
Cash and cash equivalents	4,336	-	(1,286)	-	3,050
Current assets	16,924	-	-	-	16,924
Trade and other payables	(20,819)	-	-	-	(20,819)
Tax payable	(843)	-	-	-	(843)
Current liabilities	(21,662)	-	-	-	(21,662)
Deferred tax liabilities	(1,537)	612	-	-	(925)
Financial liabilities	(7,500)	-	-	-	(7,500)
Provisions	(3,441)	-	-	-	(3,441)
Other liabilities	(1,504)	-	-	-	(1,504)
Non-current liabilities	(13,982)	612	-	-	(13,370)
Net assets	40,002	(4,757)	-	-	35,245

Consolidated Statement of Financial Position as at 2 July 2016

	2 July 2016 As published £'000	Impairments* £'000	Debit and credit cards £'000	Deferred tax £'000	2 July 2016 Restated £'000
Property, plant and equipment	52,906	(7,008)	-	-	45,898
Inventories	2,961	-	-	-	2,961
Trade and other receivables	8,303	-	927	-	9,230
Cash and cash equivalents	2,770	-	(927)	-	1,843
Current assets	14,034	-	-	-	14,034
Trade and other payables	(21,908)	-	-	-	(21,908)
Tax payable	(1,034)	-	-	-	(1,034)
Current liabilities	(22,942)	-	-	-	(22,942)
Deferred tax liabilities	(2,981)	799	-	1,734	(448)
Interest-bearing loans and borrowings	(500)	-	-	-	(500)
Provisions	(1,697)	-	-	-	(1,697)
Other liabilities	(937)	-	-	-	(937)
Non-current liabilities	(6,115)	799	-	1,734	(3,582)
Net assets	37,883	(6,209)	-	1,734	33,408

Consolidated statement of cash flow for the 52 weeks ended 1 July 2017

	1 July 2017 As published £'000	Debit and credit cards £'000	1 July 2017 Restated £'000
Net cash inflow from operating activities	10,005	(359)	9,646
Net cash outflow from investing activities	(12,779)	-	(12,779)
Net cash inflow from financing activities	4,340	-	4,340
Net increase in cash and cash equivalents	1,566	(359)	1,207
Net cash and cash equivalents at beginning of period	2,770	(927)	1,843
Net cash and cash equivalents at end of period	4,336	(1,286)	3,050

2.     Segmental information

The Group's continuing operating businesses are organised and managed as reportable business segments according to the information used by the Group's CODM in its decision making and reporting structure.

The Group's internal management reporting is focused predominantly on revenue and EBITDA, as these are the principal drivers of the Group's business and its allocation of resources. The CODM receives information on each trading venue and each of which is considered to be an operating segment.  All operating segments have the same characteristics and, in accordance with IFRS 8, are aggregated to form an 'Ongoing business' reportable segment.  Within the ongoing business, assets and liabilities cannot be allocated to individual operating segments and are not used by the CODM for making operating and resource allocation decisions.

The Group performs all of its activities in the United Kingdom. All of the Group's non-current assets are located in the United Kingdom. Revenue is earned from the sale of drink and food with a small amount of admission income.     

	52 weeks ended 30 June 2018        £'000	52 weeks ended 1 July 2017 Restated*        £'000
Revenue	141,939	130,467
Cost of sales	(33,751)	(31,075)
Gross profit	108,188	99,392
Operating expenses:
- operating expenses excluding exceptional items	(100,120)	(91,624)
- exceptional items	(11,087)	(2,288)
Total operating expenses	(111,207)	(93,912)
Operating (loss)/profit	(3,019)	5,480

3.     Operating expenses

	52 weeks ended 30 June 2018 £'000	52 weeks ended 1 July 2017 Restated* £'000
Administrative expenses	14,256	12,697
Sales and distribution	96,951	81,215
Total operating expenses	111,207	93,912
Exceptional items
Administrative expenses:
- professional fees for takeover activity	1,707	-
- other exceptional fees (see below)	585	239
- termination of directors' contracts	948	190
- impairment of property, plant and equipment	860	-
- Onerous lease provisions	6,987	1,859
Total exceptional items	11,087	2,288

3.   Operating expenses (continued)

Exceptional items, by virtue of their size, incidence or nature, are disclosed separately in order to allow a better understanding of the underlying trading performance of the Group.  Exceptional charges in the period amounted to £11.1m (2017 Restated*: £2.3m) and included the following:

·    Professional fees for aborted merger and acquisition activities comprise legal and corporate advisory fees, and registrar and virtual data room services provided in respect of the Board recommended offer from Stonegate Pub Company Limited and the merger proposals from the Deltic Group Limited.

·      Other exceptional fees relate to work undertaken in connection with accounting reviews and restatements during the period.

·    The costs associated with termination of Director's contracts relate to compensation payments and legal costs associated with the resignations of the Chief Executive Officer ("CEO") and Chief Operating Officer and also fees and expenses relating to the recruitment of the replacement CEO.  The comparative figure relates to the contract termination of Chris Chambers, Chief Financial Officer.

·      As a result of the annual impairment testing of property, plant and equipment, the net book value of assets at four of the Group's bars was written down either partially or in full.

·     Following a more robust analysis of the performance of the Group's bars, 7 leases were identified as requiring an onerous lease provision based on projected trading contributions and rental commitments.  The adjustment will reduce rental charges in future periods; it has no impact on the Group's cash flows.  In the comparative period, an onerous lease provision in respect of two properties was substantially reinstated following the discontinuation of negotiations relating to the potential sub-let of these properties.

Bar opening costs

	52 weeks ended 1 July 2018 £'000	52 weeks ended 1 July 2017 £'000
Bar opening costs	2,029	1,393

Bar opening costs relate to costs incurred in getting new sites fully operational and primarily include costs incurred before the opening date and preparing for the launch.  The most substantial part of the costs is for rent and rates incurred between the start of the lease and opening.  In the 52 weeks ended 30 June 2018, six new bars were opened (2017: six) but costs incurred in the year also relate to bars opening in future periods. 

4.  Group operating (loss)/profit

Group operating (loss)/profit is stated after charging:	52 weeks ended 30 June 2018 £'000	52 weeks ended 1 July 2017 Restated* £'000
Depreciation of owned fixed assets	6,477	5,422
Impairment of property, plant and equipment	860	-
Rentals payable under operating leases:
- leasehold premises	10,577	10,053
- other	482	504
Auditor's remuneration:
- audit fees payable to the Company's auditor for the audit of these financial statements	158	105
Fees payable to the Company's auditor for:
- audit of financial statements of subsidiary	20	20
- tax services	-	1
- forensic audit	120	-
- interim review	30	20
- audit-related services	27	23

5.  Taxation

The major components of the Group's tax (credit)/charge for the period are:

	52 weeks ended 30 June 2018 £'000	52 weeks ended 1 July 2017 Restated* £'000
Analysis of (credit)/charge in the period
Current tax
UK corporation tax on the (loss)/profit for the period	-	884
Adjustment in respect of prior periods	(495)	-
Deferred tax
Origination and reversal of timing differences	(235)	285
Adjustment in respect of prior periods	-	192
Total tax	(730)	1,361
Factors affecting current tax (credit)/charge for the period
(Loss)/profit before taxation	(3,574)	5,190
Profit at standard rate of UK corporation tax (2018: 19%; 2017: 19.75%)	(679)	1,025
Effects of:
- expenses not deductible for tax and other permanent differences	563	591
- adjustment in respect of prior periods	(812)	(132)
- adjustments in respect of changes in tax rates on deferred tax balances	198	(123)
Total tax (credit)/charge for the period	(730)	1,361

The UK rate of corporation tax, currently 19%, will reduce to 17% on 1 April 2020 under provisions contained in the Finance Act 2016. The Group has recognised deferred tax in relation to UK companies at either 19% or 17% depending on the period in which the deferred tax asset or liability is expected to reverse.

6.     (Loss)/earnings per share

The calculation of earnings per Ordinary Share is based on the results for the period, as set out below.

	52 weeks ended 30 June 2018	52 weeks ended 1 July 2017 Restated*
(Loss)/profit for the period (£'000)	(2,844)	3,829
Weighted average number of shares (as adjusted for share subdivision) - basic and diluted ('000)	50,029	50,000
Basic and diluted (loss)/earnings per ordinary share (pence)	(5.7)	7.7

(Loss)/profit for the period was impacted by one-off exceptional costs and bar opening costs. A calculation of adjusted earnings per ordinary share is set out below.

Adjusted EPS	52 weeks ended 30 June 2018 £000	52 weeks ended 1 July 2017 Restated* £'000
(Loss)/profit on ordinary activities before taxation	(3,574)	5,190
Exceptional items, share based payments and bar opening costs	11,550	4,164
Adjusted profit on ordinary activities before taxation	7,976	9,354
Taxation on ordinary activities	730	(1,361)
Taxation on exceptional items and bar opening costs	(2,200)	(699)
Adjusted profit of ordinary activities after taxation	6,506	7,294
Basic and diluted number of shares ('000)	50,029	50,000
Adjusted basic and diluted EPS (pence per share)	13.0	14.6

7.     Property, plant and equipment

Group	Freehold land and buildings £'000	Short leasehold premises £'000	Fixtures and fittings £'000	IT equipment and office furniture £'000	Total £'000
Cost
At 2 July 2016	1,426	55,392	43,326	6,315	106,459
Additions	-	9,381	2,925	571	12,877
At 1 July 2017	1,426	64,773	46,251	6,886	119,336
Additions	-	9,946	3,511	722	14,179
At 30 June 2018	1,426	74,719	49,762	7,608	133,515
Depreciation
At 2 July 2016 - restated*	(1,216)	(21,044)	(33,490)	(4,811)	(60,561)
Provided in the period - restated*	-	(2,259)	(2,513)	(650)	(5,422)
Impairment charges - restated*	-	-	-	-	-
At 1 July 2017 - restated*	(1,216)	(23,303)	(36,003)	(5,461)	(65,983)
Provided in the period	-	(3,479)	(2,292)	(706)	(6,477)
Impairment charges	-	(676)	(184)	-	(860)
At 30 June 2018	(1,216)	(27,458)	(38,479)	(6,167)	(73,320)
Net book value
At 30 June 2018	210	47,261	11,283	1,441	60,195
At 1 July 2017 - restated*	210	41,470	10,248	1,425	53,353
At 2 July 2016 - restated*	210	34,348	9,836	1,504	45,898

The Group has determined that for the purposes of impairment testing each bar is a cash generating unit ("CGU"). The bars are tested for impairment in accordance with IAS 36 "Impairment of Assets" when a triggering event is identified. The recoverable amounts for CGUs are predominantly based on value in use, which is calculated from the cash flows expected to be generated to the end of the lease term discounted at the Group's weighted average cost of capital.

In the 52 weeks ended 30 June 2018, the Group impaired the assets of four CGUs, either partially or in full, based on the value in use of the CGU determined by discounted cash flow projections being lower than the net book value. When an impairment loss is recognised, the asset's adjusted carrying value over is depreciated over its remaining useful economic life.

Following the restatements to the 2 July 2016 statement of financial position described in note 1(c) to the financial statements, in the 52 weeks ended 1 July 2017 no CGUs were impaired.

At the end of each reporting period, a filter test, based on annual run rate of EBITDA, is used to identify whether any asset is potentially impaired. The test compares a multiple of run rate EBITDA, adjusted for central overheads, to the carrying value of the asset.  The multiple is based on the shorter of the remaining lease term or 8 years. If the filter test indicates a potential impairment, a more detailed value in use review is performed. These value in use calculations use cash flows based on Board-approved forecasts covering a three-year period. These forecasts combine management's understanding of historical performance and knowledge of local market environments and competitive conditions to give realistic views for future performance. Cash flows beyond this three-year period are extrapolated using a long-term growth rate to the end of the lease term.

8.     Cash and cash equivalents

	30 June 2018	1 July 2017 Restated*
	£'000	£'000
Cash and cash equivalents	4,025	3,050

Cash and cash equivalents consist entirely of cash at bank and on hand, including cash floats held at venues. Balances are denominated in Sterling. The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value.   As referred to in note 1(c) to the financial statements, uncleared debit and credit card takings have previously been reported in Cash and cash equivalents but are now reported in receivables and accordingly comparatives have been restated.

9.     Onerous lease provision	30 June 2018 £'000	1 July 2017 £'000
Opening balance	3,743	2,080
Provisions used in period	(830)	(301)
Provisions made in period	6,987	1,859
Interest charged in period	77	105
	9,977	3,743
Current	1,065	302
Non-current	8,912	3,441
	9,977	3,743

The onerous lease provision is expected to be unwound over the remaining lease terms.

The calculation is most sensitive to changes in the assumptions used to forecast trading cash flows, and the risk-free discount rate of 1.3%.  Management considers that it is reasonably possible that the risk free discount rate could change by +/- 0.5% which would result in a change in the corresponding liability of +/- £140,000.  Similarly, a 0.1 per cent reduction in the long-term growth rate assumption would increase the provision recorded by £0.1 million.

10.  Share-based payments

The table below summarises the amounts recognised in the income statement during the year:

			52 weeks ended 30 June 2018		52 weeks ended 1 July restated*  2017
			£'000		£'000
IPO LTIP AWARD
Tranche 1			(849)		265
Tranche 2			(411)		41
Tranche 3			(267)		67
			(1,527)		373
2016 LTIP AWARD
Tranche 1			(1)		34
Tranche 2			-		9
Tranche 3			-		7
			(1)		50
2017 Award			(80)		60
2018 Award			42		-
Total Charges			(1,566)		483

During the year, Mark McQuater (Chief Executive Officer) and several other senior managers left the business. As a result, their awards which comprised a material element of the IPO award in 2015 largely lapsed and charges booked in previous years, relating to these awards, reversed.  

11.  Dividends

A final dividend of 3.3p per share totalling £1,650,000 was declared on 2 November 2017 and was paid on 8 December 2017.

An interim dividend of 1.65p per share totalling £825,000 was declared on 2 March 2018 and paid on 12 April 2018.

A final dividend of 3.30p per share is proposed for the 52 weeks ended 30 June 2018. The proposed final dividend is subject to approval by shareholders at the annual general meeting and has not yet been included as a liability in these financial statements.

12.  Key Risks

The directors believe that the principal risks and uncertainties faced by the business are as set out below.  Occurrence of any of these risks or a combination of them may significantly impact the achievement of the Group's strategic goals;

·      Dependence on key sites

·      Acquisition of new sites

·      Consumer demand

·      Discounting

·      Health and safety

·      Leasehold rents

·      Supplier concentration

·      National minimum/living wage legislation

The financial information set out in the preliminary statement of annual results has been extracted from the Group's financial statements which have been approved by a resolution of the Board and agreed with the Company's auditor.

The financial information set out above does not constitute the company's statutory accounts for the 52 week periods ended 30 June 2018 or 1 July 2017. Statutory accounts for the 52 weeks ended 1 July 2017 have not yet been delivered to the registrar of companies but the auditor reported on those consolidated accounts; their report was (I) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

13. Subsequent events

On 28 September 2018, the Group's revolving credit facility was reviewed in light of the trading results in the second half of the financial period and post period end. The facility was reconfirmed at £25 million and for the period to December 2021. The financial covenants associated with the facility were revised to reflect recent trading results. A fee of £62,500 was incurred in relation to this, which will be charged to the profit and loss account over the period from October 2018 to December 2021. There were no other changes to the terms of the facility, including interest margin.

 

END

 

 

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