Final Results

RNS Number : 1216E

Restaurant Group PLC

26 February 2020

The Restaurant Group plc ("TRG")

This announcement contains inside information

Final results for the 52 weeks ended 29 December 2019

2019 Highlights

· Delivering the benefits of the Wagamama transaction

o Market-leading like-for-like (LFL) sales performance of +8.5%

o Cost synergies ahead of plan, site conversion programme well progressed

o US Joint Venture (JV) established after year-end to facilitate capital-light growth plan

· Growing our Pubs and Concessions businesses

o Concessions LFL sales growth of +4.1% well ahead of passenger growth; strong presence in new Manchester terminal secured

o Pubs LFL sales growth +4.0% consistently outperforming the market; healthy pipeline of new sites in 2020

· Optimising our Leisure brands

o LFL sales decline of 2.8%, representing an improvement on previous years

o Delivery sales performing well, supported by targeted operational initiatives to improve food offering and brand proposition

o Overall estate size reduced by 18 sites to 350 sites via closures and conversions to Wagamama

Andy Hornby, Chief Executive Officer, commented:

"Having joined the business in August last year I am particularly pleased with the continued and significant progress made following the acquisition of Wagamama and the integration of the business into the Group, which has transformed the Group's growth trajectory and momentum.

Our three growth businesses of Wagamama, Concessions and Pubs are all out-performing their respective markets and have clear potential for further growth. I am also acutely aware of the challenges facing our Leisure business and the wider casual dining sector.

It is therefore clear that our strategic priorities need to evolve in order to maximise shareholder value in the medium term. Following extensive review we have defined three clear strategic priorities for the next two years:

· Grow our Wagamama, Concessions and Pubs businesses;

· Rationalise our Leisure business; and

· Accelerate our deleveraging profile

In order to support these strategic priorities, the Board has taken the decision to temporarily suspend the dividend. This will allow us to continue investing in our three high growth businesses, whilst facilitating an acceleration of our Leisure estate rationalisation and reducing our net debt.

We have made an encouraging start to the new financial year with like-for-like sales up 5.3% for the first six weeks of 2020."

2020 to 2021 Strategic priorities

· Grow our Wagamama, Concessions and Pubs businesses

o Continue selective approach to new sites generating strong returns

o Maintain like-for-like sales outperformance versus respective benchmarks

· Rationalise our Leisure business

o Accelerate rationalisation of the estate from 350 sites today to a target of 260-275 sites by the end of 2021

· Accelerate our deleveraging profile

o Target a reduction in net debt / EBITDA leverage from 2.1x today to below 1.6x by the end of 2021

Temporary suspension of dividend to facilitate strategic priorities

2019 Financial summary

· Group like-for-like sales up 2.7%, with total sales up 56.4% to £1,073.1m (2018: £686.0m)

· Adjusted¹profit before tax of £74.5m (2018: £53.2m). Statutory loss before tax of £37.3m (2018 Statutory profit: £13.9m)

· Adjusted¹ EBITDA of £136.7m (2018: £87.9m)

· Exceptional pre-tax charge of £111.8m (H1 2019: £115.7m, H2 2019: (£3.9m) credit) primarily related to impairment in our Leisure business recorded in the first half of 2019 (2018: £39.2m)

· Adjusted¹ EPS of 11.9p (2018: 14.7p). Statutory loss per share of 8.2p (2018 earnings per share: 2.4p)

· Operating cash flow of £140.5m (2018: £88.3m)

· Net bank debt of £286.6m (2018: £291.1m) with net debt/EBITDA at 2.1x

· No full year dividend declared to facilitate new strategic priorities

Current trading

Current trading is encouraging with like-for-like sales up 5.3% for the first six weeks of 2020.

¹ The Group's adjusted performance metrics such as like-for-like sales and free cash flow are defined within the glossary at the end of this report

Enquiries:

The Restaurant Group plc

Andy Hornby, Chief Executive Officer

Kirk Davis, Chief Financial Officer

020 3117 5001

MHP Communications

Oliver Hughes

Simon Hockridge

Alistair de Kare-Silver

020 3128 8789/8742

Investor and analyst conference call facility

In conjunction with today's presentation to analysts, a live conference call and webcast facility will be available starting at 08:45am. If you would like to register, please contact Robert Collett-Creedy at MHP Communications for details on 020 3128 8147 or email TRG@mhpc.com.

The presentation slides will be available to download from 08:30am from the Company's website

https://www.trgplc.com/investors/reports-presentations

Notes:

1. At the year-end The Restaurant Group plc operated over 650 restaurants and pub restaurants throughout the UK. Its principal trading brands are Wagamama, Frankie & Benny's, Chiquito and Brunning & Price. It also operates a multi-brand Concessions business which trades principally in UK airports. In addition the Wagamama business had 5 restaurants in the US and over 50 franchise restaurants operating across a number of territories.

2. Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect the Group's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

3. The Group's Adjusted performance metrics ('APMs') such as like-for-like sales, Adjusted measures and free cash flow are defined within the glossary at the end of this report.

4. The main factors that could affect the business and the financial results are described in the "Senior management Risk Committee" section in The Restaurant Group plc 2019 Annual Report, which will be available to shareholders in April 2020.

5. The information contained within this announcement is considered by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No.596/2016 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information will be considered to be in the public domain.

Chairman's statement

2019 has been a year of significant progress for the business, with the acquisition of Wagamama transforming the shape of the Group. We now have a diversified set of brands and a much greater emphasis on growth, providing firm foundations for future earnings.

Total revenues in the year were up 56% to £1,073m, with LFL sales up 2.7%, representing an improvement on the decline in LFL sales experienced in 2018. The divisional split of our performance was as follows:

· Wagamama continued to deliver exceptional growth in its first year as part of "TRG", trading well ahead of its core UK market and ahead of management expectations at +8.5% LFL sales;

· Our Concessions business traded strongly at +4.1% LFL sales, despite the impact of the demise of Thomas Cook and subsequent decline in passenger numbers;

· Our Pubs business continued to see LFL sales trade consistently ahead of the pub restaurant sector at +4.0%; and

· Our Leisure business saw a decline of 2.8% in LFL sales, an improvement on the prior year performance reflecting the tough competitive nature of this segment of the market.

Adjusted ¹ profit before tax was up 40% to £74.5m and Adjusted ¹ EPS was down 19% to 11.9p per share. Statutory loss before tax was £37.3m (2018 Statutory profit: £13.9m) including exceptional charges of £111.8m (2018 £39.2m) which are explained further in the Financial review section. Statutory loss per share was 8.2p (2018 earnings per share: 2.4p).

The Board is excited by the multiple opportunities identified in our three growth businesses (Wagamama, Concessions and Pubs) but is also mindful of the importance of rationalising the Leisure estate alongside reducing our leverage. We have therefore concluded that the temporary suspension of the dividend is the most sensible way to ensure that we retain the flexibility to grow the business, whilst facilitating an acceleration of our Leisure estate rationalisation and strengthening our balance sheet. We are now targeting net debt to EBITDA to be below 1.6x by the end of 2021. The Board is therefore not recommending a final dividend payment and the total dividend for the year is, therefore 2.1 pence per share.

The Group now employs over 21,500 people and they are the lifeblood of our business. The Board would like to record our thanks and appreciation for their continued hard work and commitment.

The Board is confident that we have a strong strategic plan with the focus and rigour to deliver increased shareholder value notwithstanding the current challenging consumer environment.

Debbie Hewitt MBE

Chairman

25 February 2020

Business review

Introduction

We have three Group priorities:

· Grow our Wagamama, Concessions and Pubs businesses: These businesses, which contribute c. 75% of Group Outlet EBITDA, are well aligned to structural growth and we have a number of opportunities to invest, whilst delivering attractive returns

· Rationalise our Leisure business: Our Leisure business has been particularly impacted by the declining retail footfall, changing customer preferences and rising costs that affect the broader casual dining market. We are therefore focused on maximising the cash return of this division while we exit structurally unattractive sites and optimise our propositions

· Accelerate our deleveraging profile: We are targeting a reduction in leverage from 2.1x to below 1.6x by the end of 2021, whilst retaining the flexibility to invest in our growth businesses and rationalise our Leisure business

1. Grow our Wagamama, Concessions and Pubs businesses

Wagamama

Wagamama is a differentiated, high growth pan-Asian proposition that has consistently and significantly outperformed its core UK market. It is well aligned to the key structural trends in our sector and addresses customer demand for speed of service, delivery and healthier options.

The Wagamama business is underpinned by a unique cohesive culture. In the year the business launched a refreshed set of core values that supported team engagement and saw a further reduction in team turnover to an all-time record low for both front and back of house teams.

The strong performance of our Wagamama business is reinforced by a highly selective approach to opening new sites, based on a methodical, data-driven approach and a capital expenditure investment appraisal that carefully evaluates and scores its key selection criteria, including demographic and competitive dynamics.

New openings continue to generate strong returns - the 23 sites opened between 2016 and 2018 have generated on average a 44% return on invested capital (defined as 2019 rolling 12 months outlet EBITDA/initial invested capital).

These strong foundations uniquely position the business to continue its exceptional track record of out-performing the market.

2019 performance

Wagamama delivered a strong performance with the core UK business benefiting from strong in-restaurant and delivery growth. UK like-for-like sales growth remained significantly ahead of the wider market, with like-for-like sales up 8.5% in the period. Adjusted EBITDA (on a rolling 12 months basis) in 2019 grew to £60.7m from £44.6m in 2018.

Delivery sales rose to c.12% of total sales in 2019 from c.10% in the previous year, as we benefited from the implementation of operational and technology improvements such as bespoke delivery stations, Deliveroo tablets and a switch to fully recyclable packaging.

During the year the Wagamama team continued to drive innovation at pace. 2019 saw further menu development leading to an increased participation of our vegan range, with the "Avant Gard'n" dish proving particularly successful.

In 2019 we completed five transformational restaurant refurbishments, adding 200 covers with an expected return on invested capital of c.50%.

We made excellent progress on the cost synergy programme achieving £8m in 2019 and expect to achieve £15m in 2020, effectively delivering the cost synergy plan in only two years. In line with the acquisition plan, we prioritised the renegotiation of supply contracts for food, drinks and consumables, and have implemented a number of other initiatives across the Group.

On the site conversion programme we remain firmly on track to deliver an incremental EBITDA benefit of £7m per annum in 2021 from the conversion of 15 sites. We completed eight conversions in 2019 and these sites are generating an average weekly sales uplift of 120%, with an expected return on invested capital of over 40%. We are planning to convert five to six more sites in 2020 and believe there is scope for further conversions in 2021.

Growth opportunities

We continue to see opportunities to increase like-for-like sales in our business for the year ahead:

· 2020 will see further menu innovation, both on core menu dishes (e.g. vegan 'Suika' tuna launched for Veganuary) and through collaborations

· We will also be trialling new "pay-on-phone" functionality as part of a technology upgrade to provide our customers with faster service and remove the need to wait for the bill before paying and leaving

· In 2020 we plan to further develop our delivery operation by installing more bespoke delivery stations in high volume sites to speed up packing and working with our delivery partners

· A further five transformational restaurant refurbishments are planned for 2020, adding an additional 300 covers to those restaurants

As set out below, we also continued to make good progress on the multiple growth opportunities that the Wagamama acquisition has unlocked outside of the core business:

UK New sites: We continue to adopt a highly selective approach to new site openings. In 2019 we opened 10 Wagamama sites including eight conversions from our Leisure branded sites and two new sites at "The Bower" in Old Street London and Heathrow Terminal 3. We will continue our selective approach to high quality openings and currently expect to open up to 10 sites in 2020 including five to six conversions from our Leisure branded sites.

New formats: Away from the core UK business, we have made good progress in addressing the other growth opportunities associated with Wagamama. We currently operate three delivery kitchens and expect to open more this year focused on areas not covered by existing restaurants (e.g. Peckham) and towns and cities with demand opportunities (e.g. Leeds). In November 2019 we launched our first food-to-go concept, "Mamago", on Fenchurch Street in London. We expect to spend the next six months optimising the proposition before evaluating further roll-out potential.

US: As we previously announced, we launched a strategic review last year of how best to develop the Wagamama US business, given the well-known challenges of developing it as a fully owned business from the UK. Over the course of the last six months we identified and met with a number of potential development partners and are delighted to have entered a joint venture partnership (the "JV") with Conversion Venture Capital ("CVC2") as financial partners and Robert Cornog Jnr and Richard Flaherty as operating partners. Rob and Richard are two experienced US restaurant leaders who share our vision for Wagamama and have the financial support from Conversion Venture Capital, an investment firm that focuses on partnering with entrepreneurs and management teams that value flexible capital. Rob and Richard have a wealth of experience in the Hospitality segment, including most recently as senior leaders of the award-winning restaurant concept, "Punch Bowl Social" ("PBS"). The JV will be a 20:80 partnership (with TRG as the minority investor) and the JV will assume full ownership of the existing operations of the US business. The JV will provide Wagamama's US operations with local operational expertise and expansionary capital with the aim to further expand the brand in the United States. The JV Board will decide the precise scale of the expansion plans but we would expect to be opening approximately 30-40 restaurants over the first five to six years of the JV. TRG retains the option to repurchase the remaining 80% of the business starting in 2026. The JV therefore provides TRG with a capital efficient means for expanding the business in the US, whilst at the same time minimising losses in the near-term. The JV commenced on 31st of January 2020 and will license the Wagamama brand.

Concessions

Our Concessions business operates a wide variety of food and beverage formats, across over 35 brands, primarily in 16 UK airports. Our strong multi-brand portfolio consists of bespoke concepts designed with airport partners (45% of sites), TRG's own brands (15% of sites), and well-known third-party brands, which operate under franchise arrangements (40% of sites). We have established long-standing relationships with our airport partners having operated in this market place for 28 years.

Our unique capabilities, enabling us to consistently deliver high operational standards at high volume and peak-load intensity, along with our format development and partnering skills, has resulted in a strong track record of like-for-like sales growth, winning new sites and renewing existing space.

2019 performance

Our sales continue to trade ahead of passenger growth with like-for-like sales increasing by 4.1% in the year, and we continued our strong track record of retaining sites with 90% of sites having received contract renewals beyond the term of the initial contract following successful renewals on five sites during 2019. On average, our contracts have been extended for 100% of the original concession term.

We opened four new sites in 2019, including our Sonoma site at Gatwick airport which is our largest Concessions restaurant at c.7,000 square feet, accommodating over 300 covers at a time, as well as the first Shake-Shack restaurant in a UK airport, also at Gatwick.

Growth opportunities

We expect to open six sites in the first phase of the planned Manchester airport terminal redevelopment which is due to open in the second half of 2020. We are pleased with the broad portfolio of brands we have secured, which include a "Wagamama" restaurant, the first Pub with a brewery "Bridgewater exchange", the first "San Carlo" restaurant and the first ETM affiliated pub "Apiary" in a UK airport.

The market remains attractive with air passenger growth still positive albeit slowing, and airports continuing to invest in terminals, capacity and their offering. We see opportunities to expand our estate and will compete through a disciplined capital approach for forthcoming terminal development opportunities in the UK, including Birmingham, London City, Stansted and Luton airports, which will arise over the next three to four years. We continue to explore opportunities to expand our presence in adjacent markets, and expect to open two sites (both of which are bespoke brands) in locations within Hilton hotels in 2020.

Pubs

Our estate comprises of 72 Pubs within the "Brunning & Price" ("B&P") family, which are predominantly located in countryside and suburban locations, and 12 Pubs trading under the "Food & Fuel" banner, which are predominantly located in central London. Whilst having distinct difference; for example, the latter has a significantly higher dependence on drink rather than food sales, both are premium propositions focused on delivering for the local customer base.

Our Pubs business has been continuously outperforming the market as measured by the Coffer Peach Pub Restaurants tracker on a like-for-like sales basis for over five years.

A combination of factors contributes to this strong and consistently robust performance in B&P:

· Attractive location demographics (within a 10-15 minute drive time) with on average a total population of at least 50,000 with approximately 55% of residents forming part of the higher income classes A to C1 (according to Experian data). The pubs often benefit from limited quality competition nearby due to their semi-rural locations and the B&P operational support network of chefs and operation managers help them to consistently deliver a fresh food-led offering in a relaxed pub environment

· Our approach to running the Pubs business as a collection of individual local pubs, rather than a 'brand' or 'chain'. The aim is to delegate as much decision making as possible to the pub management in order to foster real ownership. Local chefs are able to create 30-50% of their own menu dishes and much of the drinks range is sourced by the manager and crew. This autonomy at site-level allows the pubs to evolve alongside their local community and respond quickly to customer-driven requirements; and

· Strong operational capability and consistent execution with our social media score reviews maintained at 4.4 out of 5 throughout the year

The business also benefits from strong asset backing with approximately 50% of our pubs being freehold. In November 2019, Savill's valued our freehold pub estate at £153 million.

2019 performance

The business continued to outperform the pub restaurant sector in 2019 with like-for-like sales increasing by 4.0%, with particularly strong trading over the Christmas period with like-for-like sales increasing by 8% (over the 3 week period ending 5^th January).

Growth opportunities

We continue to see opportunities to increase like-for-like sales in our business for the year ahead:

· Rapid and flexible menu development and product range changes to respond to new demand and further opportunities such as vegan, vegetarian, set menu occasions, low/no alcohol

· Ongoing evolution of already successful events including beer and gin festivals

· Further utilisation of existing space and external areas with outside bars and BBQ's

· Optimisation of group-managed phone bookings and online bookings - constant review and refinement of the booking algorithms for peak times to ensure maximum availability for customers to book and a steady, manageable flow of orders to assist smooth service

In terms of estate expansion, we opened four sites in 2019, which are trading well and ahead of expectations. We will continue our selective approach to site expansion with three to five sites planned for 2020 and see significant opportunity to expand our geographical reach across the UK.

2. Rationalise our Leisure business

Backdrop

The market place remains challenging for our Leisure business with chronic overcapacity in the sector and significant cost pressures particularly due to labour costs. As previously highlighted, we had identified 118 sites that are in structurally unattractive locations and we anticipate that we will exit at least 50% of leases when we are able to exercise a break clause or lease expiry.

2019 progress

We continue to take a disciplined approach to our estate optimisation and closed 18 Leisure sites in 2019 (eight of which were conversions to Wagamama) taking the overall size of the estate to 350 sites as at 29^th December 2019.

2020-2021 estate rationalisation plan

As part of our overall rationalisation plan for the Leisure business we are accelerating our reduction of the estate and are targeting to reach 260-275 sites by end of 2021. We will achieve this through a combination of exercising break clauses, lease expiries, selective conversions and are actively marketing other sites for disposal as follows:

· Conversions - 7-12 sites to be converted to Wagamama over the next two years

· Lease events - at least 31 sites will be exited at break or expiry, with this number potentially increasing if landlord negotiations to sensibly reduce rents and increase lease flexibility are not successful

· Freeholds - 12 freeholds will be sold where the EBITDA multiple delivers the required shareholder return

· Accelerated disposals - Sites are being marketed for sale and given the historic run rate of disposals over the last two years, we expect to dispose of 25-35 sites

Alongside our estate management activity we are focused on initiatives to improve the food offering and brand proposition as well as optimising the delivery opportunity for our Leisure business as set out below.

Targeted operational activities

Grow our delivery business

The delivery channel and online brands in particular, continue to be a core focus of growth for the Leisure business, with our delivery sales more than doubling in 2019 versus the previous year. We exited 2019 with delivery sales accounting for c.6% of total sales from our Leisure business, of which online only brands contributed c. 50% of total delivery sales.

Activity during the year included the launch a new online brand in the majority of Chiquito sites called 'Chicken Cartel', offering signature South American flavours across a variety of chicken and vegetarian formats (e.g. talera burgers, wraps, salad bowls and glazed chicken). We also continue to pursue opportunities with our existing brand, recently improving and extending the menu of 'Kick-Ass Burrito'. We are also trialling a Caribbean brand collaboration with Levi Roots in 12 sites on Uber eats.

We see further opportunities to extend the reach of delivery sales and have recently introduced a 'Vegan by Frankie's' online brand exclusive to Uber eats. We also trialled three new virtual brands in our Frankie and Benny's estate - pies, wraps and fish & chips - with a view to rolling out the most successful (Pies) across the estate in March 2020.

Improve our food credentials

As part of Frankie & Benny's October 2019 menu launch there was a particular focus on investing in food quality, targeting our grills category with an improved quality steak, as well as upgrading our pasta sauces (carbonara, meatballs). Customer and colleague feedback on the menu developments has been positive, and there are further plans to continue this momentum in 2020 with further quality investments and innovation in the pipeline. Additionally, to support the kitchen teams to consistently deliver the menu, we have reduced the number of items by 10%. The introduction of our vegan range at the start of 2019 helped meet our customers' needs and allowed us to attract new customers to the brand, with the most recent vegan campaign in January 2020 seeing the participation of vegan products climb to 10% of sales.

In Chiquito's, key food initiatives for the brand in the year included the launch of dedicated vegan and breakfast menus, which helped to extend the brand's reach to a broader range of customers and in our October menu launch we also enhanced our mainstream authentic Mexican offer and significantly reduced operational complexity.

New management team

We were delighted to announce the appointment of Mark Chambers as CEO of our Leisure Business, and Jacqui McManus as People Director for Leisure. Mark brings with him a wealth of experience in customer led multi-site retail businesses having most recently been Managing Director of the Retail business at GVC Group (owners of Ladbrokes Coral). Mark was responsible for a Retail estate of 3,500 shops (employing approximately 20,000 colleagues) and the Ladbrokes Coral Retail business has strongly out-performed the market under his leadership over the past few years.

Jacqui joined us in January from TGI Fridays where for the past ten years she has led the HR transformation agenda focused on people, culture and engagement with significant success (demonstrated through both significantly improved employee turnover and impressive business performance).

3. Accelerate our deleveraging profile

We are focused on reducing our leverage to a level that is sustainable and prudent through the cycle and over the course of 2019, we reduced leverage on an absolute basis and on a multiple basis, whilst growing the business. We have today announced the temporary suspension of the dividend to enable the Group to accelerate its deleveraging profile, whilst maintaining the ability to continue investing in our high growth segments (Wagamama, Concessions and Pubs) and provide the flexibility required to rationalise our Leisure estate. We are targeting leverage of below 1.6x by the end of 2021.

Summary

In summary:

· Strong financial performance by Wagamama in 2019 emphasising significant potential for future growth

· Concessions and Pubs continue to outperform their respective benchmarks with multiple opportunities for growth ahead

· Focused restructuring plan for the Leisure business

· Temporary suspension of dividend to facilitate strategic priorities

Financial review

Trading results

Like-for-like sales increased by 2.7% for the year, with total revenue up 56.4% to £1,073.1m (2018: £686.0m). Like-for-like sales and total sales increases reflect the benefit of the Wagamama acquisition, as well as a strong performance from our Concessions and Pubs businesses. In the period, we saw a strong performance from Wagamama, which has continued to significantly outperform the UK market delivering +8.5% like-for-like sales growth. Our Concessions business saw like-for-like sales increase by 4.1% (despite being impacted by the Thomas Cook collapse), well ahead of passenger growth. Our Pubs business delivered like-for-like sales growth of +4.0%, maintaining its outperformance to the market. Like-for-like sales in our Leisure business declined by 2.8%, representing an improvement on the rate of decline versus previous years.

Adjusted¹ operating profit increased by 64.4% to £91.1m (2018: £55.4m) with the adjusted¹ operating margin rising to 8.5% from 8.1%, reflecting the combined business post acquisition and cost synergies delivered from a successful integration programme. On a statutory basis, the Group's operating loss was £20.7m (2018: operating profit: £16.6m), reflecting an exceptional pre-tax charge of £111.8m predominantly relating to impairment and onerous lease provisions in our Leisure business.

Adjusted¹ profit before tax for the period was £74.5m (2018: £53.2m). Adjusted¹ profit after tax was £58.3m (2018: £41.8m). The adjusted¹ effective tax rate for the Group increased to 21.8% (2018: 21.4%). On a statutory basis, the increase in exceptional charges in the year led to an overall loss for the period, and resulted in an effective tax rate of 8.3% (2018: 50.6%). Adjusted¹ earnings per share were 11.9p (2018: 14.7p). On a statutory basis, loss before tax was £37.3m (2018 statutory profit: £13.9m). On a statutory basis, loss after tax was £40.4m (2018: Statutory profit £6.9m) and statutory loss per share was 8.2p (2018 earnings per share: 2.4p).

The adjusted measures (as shown on the face of the Income Statement) are summarised below:

	52 weeks ended 29 December 2019	52 weeks ended 30 December 2018
	£m	£m	% change
Revenue	1,073.1	686.0	+56.4%

Adjusted ¹ EBITDA	136.7	87.9	+55.6%

Adjusted ¹ operating profit	91.1	55.4	+64.4%
Adjusted ¹ operating margin	8.5%	8.1%

Adjusted ¹ profit before tax	74.5	53.2	+40.2%
Adjusted ¹ tax	(16.3)	(11.4)

Adjusted ¹ profit after tax	58.3	41.8	+39.4%

Adjusted ¹ EPS (pence)	11.9	14.7	(19.1%)

Cash flow and net debt

Operating cash flows remain strong, with free cash flow of £81.2m in the year (2018: £59.6m). The increased free cash flow generated in the year reflects the cash generated from the Wagamama operations, partially offset by the increased cost of financing. The Group's net debt at the year-end was £286.6m (2018: £291.1m), a decrease of £4.5m on the prior year. The decrease in net debt was driven by the increase in free cash flow generated by the business. In the year, we also completed the sale and leaseback of our head-office building raising gross proceeds of £26.9m and incurred acquisition and integration expenditure relating to Wagamama of £28.5m.

Summary cash flow for the year is set out below:

	2019	2018
	£m	£m

Adjusted¹operating profit	91.1	55.4
Working capital and non-cash adjustments	3.8	0.4
Depreciation and amortisation	45.6	32.5
Operating cash flow	140.5	88.3
Net interest paid	(14.5)	(1.0)
Tax paid	(10.3)	(7.4)
Refurbishment and maintenance expenditure	(34.5)	(20.3)
Free cash flow	81.2	59.6
Development expenditure	(38.8)	(33.0)
Movement in capital creditors	(5.0)	5.8
Dividends	(17.5)	(34.9)
Utilisation of onerous lease provisions	(12.6)	(11.2)
2018 acquisitions* net of cash acquired	-	(324.9)
Debt acquired on acquisition of Wagamama	-	(225.0)
Integration costs	(11.2)	-
Acquisition and refinancing costs	(17.3)	(10.1)
Proceeds from issue of share capital	-	305.8
Proceeds from disposals	27.3	-
Other items	-	(0.1)
Cash movement	6.1	(268.0)
Group net debt brought forward	(291.1)	(23.1)
Non-cash movement in net debt	(1.6)	-
Group net debt carried forward	(286.6)	(291.1)

*Relates to Wagamama, Food & Fuel and Ribble Valley Inns acquisitions

In December 2018 the Group refinanced its borrowings and currently has £220m of revolving credit facilities that expire in December 2021 and a £10m overdraft facility repayable on demand. In addition the £225m Wagamama Bond matures in July 2022. At the year-end we had over £160m of cash headroom and significant headroom against our banking covenants.

Capital expenditure

During the year the Group invested £73.3m (2018: £68.5m excluding the acquisition of Wagamama). Our investment in refurbishment and maintenance capital expenditure increased to £34.5m (2018: £20.3m) reflecting an additional £16.0m in relation to Wagamama, which included five transformational refurbishment projects that created 200 additional covers in those restaurants. Our investment in new site expenditure of £38.8m (2018: £33.0) included £17.5m in relation to our Wagamama business. This investment included eight conversions of our Leisure sites to Wagamama, three new Wagamama restaurants (including one in the US), two new delivery kitchens and one "Mamago" site. We also opened four new Concessions sites and four new Pubs in the year.

During the year we closed 16 sites, comprising 10 sites from Leisure, four sites from Concessions, one Pub and one Wagamama restaurant in the US. The table below summarises openings and closures during the year.

	Year-end 2018	Opened	Closed	Conversions	Year-end 2019

Frankie & Benny's	248	-	(9)	(3)	236
Chiquito	83	-	-	(4)	79
Other Leisure Brands	37	-	(1)	(1)	35
Pub restaurants	81	4	(1)	-	84
Concessions	71	4	(4)	-	71
Wagamama*	140	6	(1)	8	153

Total	660	14	(16)	-	658

*Note: Wagamama sites include five Wagamama restaurants in the US, three delivery kitchens and one "Mamago" site in the UK

Restructuring and exceptional charge

An exceptional pre-tax charge of £111.8m has been recorded in the year (2018: £39.2m), which includes the following:

- A net impairment charge of £108.4m (2018: £14.0m) has been recognised in the period. Of this £102.1m was booked in the first half of the year and comprised two main elements:

(i) In the Leisure business we have recognised an impairment charge across sites that were identified as structurally unattractive; and

(ii) In addition, given the well documented over capacity and continued like-for-like sales decline in the casual dining market, and ongoing cost headwinds we have taken a more cautious medium term outlook when assessing the Leisure business for impairment.

- Onerous lease provisions resulted in a charge of £7.5m in the year (2018: £10.0m). The overall full-year charge comprises the following elements:

- A £1.0m credit in respect of unutilised provisions following the successful exit of eight sites ahead of expectations; and

- A further charge totalling £8.5m was provided for in the year. This comprised a charge of £7.9m in respect of newly identified onerous leases and an additional charge of £0.6m in respect of sites previously provided for.

- Acquisition and integration costs of £11.2m (2018: £14.8m) relating to costs incurred in the integration of Wagamama and the project costs to achieve the synergy cost saving and site conversion programme;

- An impairment of assets held for sale for £2.0m (2018: £nil) was incurred relating to Wagamama US sites which were under strategic review; and

- An exceptional profit of £17.2m has been recognised on the sale and leaseback of our freehold Head Office building.

The tax credit relating to these exceptional charges was £13.1m (2018: £4.3m).

Cash expenditure associated with the above exceptional charges was £13.8m in the year (2018: £21.3m) relating to the cash cost of the onerous leases of £12.6m (2018: £11.2m), and the cash cost of the acquisitions and refinancing of £28.5m (2018: £10.1m). This was offset by the £27.3m received in the year for the sale of our head office and one Leisure freehold site.

Tax

The adjusted¹ tax charge for the year was £16.3m (2018: £11.4m), summarised as follows:

	2019	2018
	£m	£m

Corporation tax	15.5	10.4
Deferred tax	0.8	1.0
Total	16.3	11.4
Effective adjusted¹ tax rate	21.8%	21.4%

The effective adjusted¹ tax rate for the year was 21.8% compared to 21.4% in the prior year. The Group's effective tax rate will continue to track above the headline UK tax rate primarily due to our capital expenditure programme and the significant levels of disallowable capital expenditure therein. The statutory effective tax rate for the year was 8.3%, a decrease from the 2018 rate of 50.6%. This was due to an increase in exceptional charges in the year and an overall loss for the period.

FY20 Guidance

• 2020 development capital expenditure - £40m to £45m

- Three to four new Pubs

- Eight new Concessions sites, including six sites in phase one of Manchester airport terminal redevelopment

- Three to four new Wagamama sites in the UK

- Five to six Leisure site conversions to Wagamama

• 2020 refurbishment and maintenance capital expenditure - £30m to £35m, including five further transformational refurbishments of Wagamama sites

• Net cost inflation expected to be £15m, which is £2m-£3m higher than previous expectations due predominately to the recently announced 6.2% increase in National Minimum Wage and National Living Wage

The Restaurant Group plc
Consolidated income statement
		52 Weeks ended 29 December 2019


		Trading	Exceptional items
		business	(Note 6)	Total
	Note	£'000	£'000	£'000

Revenue	3	1,073,052	-	1,073,052

Cost of sales		(930,566)	(117,894)	(1,048,460)

Gross profit/(loss)	4	142,486	(117,894)	24,592

Administration costs		(51,393)	6,068	(45,325)

Operating profit/(loss)		91,093	(111,826)	(20,733)

Interest payable	7	(16,660)	-	(16,660)
Interest receivable	7	98	-	98

Profit/(loss) on ordinary activities before tax		74,531	(111,826)	(37,295)

Tax on profit/(loss) from ordinary activities	8	(16,260)	13,149	(3,111)

Profit/(loss) for the year		58,271	(98,677)	(40,406)

Other comprehensive income:
Foreign exchange differences arising on consolidation		578	-	578
Total comprehensive income for the year		58,849	(98,677)	(39,828)

Earnings per share (pence)
Rights adjusted basic	9	11.87	-	(8.23)
Rights adjusted diluted	9	11.87	-	(8.23)



EBITDA		136,743	(6,038)	130,705

Depreciation, amortisation and impairment		(45,650)	(105,788)	(151,438)

Operating profit/(loss)		91,093	(111,826)	(20,733)

The Restaurant Group plc
Consolidated income statement
		52 Weeks ended 30 December 2018


		Trading	Exceptional items
		business	(Note 6)	Total
	Note	£'000	£'000	£'000

Revenue	3	686,047	-	686,047

Cost of sales		(603,332)	(23,997)	(627,329)

Gross profit/(loss)	4	82,715	(23,997)	58,718

Administration costs		(27,313)	(14,775)	(42,088)

Operating profit/(loss)		55,402	(38,772)	16,630

Interest payable	7	(2,233)	(467)	(2,700)
Interest receivable	7	1	-	1

Profit/(loss) on ordinary activities before tax		53,170	(39,239)	13,931

Tax on profit/(loss) from ordinary activities	8	(11,361)	4,312	(7,049)

Profit/(loss) for the year		41,809	(34,927)	6,882

Other comprehensive income:
Foreign exchange differences arising on consolidation		-	-	-
Total comprehensive income for the year		41,809	(34,927)	6,882

Earnings per share (pence)
Rights adjusted basic	9	14.67	-	2.42
Rights adjusted diluted	9	14.63	-	2.41



EBITDA		87,855	(24,802)	63,053

Depreciation, amortisation and impairment		(32,453)	(13,970)	(46,423)

Operating profit/(loss)		55,402	(38,772)	16,630

Consolidated balance sheet


		At 29 December 2019	At 30 December 2018
	Note	£'000	£'000

Non-current assets
Intangible assets	11	616,787	619,493
Property, plant and equipment	12	335,710	430,631
Fair value lease assets		1,211	1,361
		953,708	1,051,485

Current assets
Inventory		9,274	8,678
Other receivables		21,924	22,912
Prepayments		26,088	31,096
Cash and cash equivalents		49,756	65,903
Assets of disposal group held for sale	13	4,081	-
		111,123	128,589

Total assets		1,064,831	1,180,074

Current liabilities
Overdraft		(9,950)	-
Trade and other payables		(188,287)	(212,477)
Corporation tax liabilities		(6,210)	(2,702)
Provisions		(14,549)	(11,018)
Liabilities of disposal group help for sale	14	(4,081)	-
		(223,077)	(226,197)

Net current liabilities		(111,954)	(97,608)

Long-term borrowings		(323,822)	(354,420)
Other payables		(26,077)	(27,521)
Fair value lease liabilities		(9,605)	(10,426)
Deferred tax liabilities		(42,007)	(52,674)
Provisions	14	(38,344)	(50,244)
		(439,855)	(495,285)

Total liabilities		(662,932)	(721,482)

Net assets		401,899	458,592

Equity
Share capital		138,234	138,234
Share premium		249,686	249,686
Other reserves		(5,921)	(7,158)
Retained earnings		19,900	77,830
Total equity		401,899	458,592

The Restaurant Group plc
Consolidated statement of changes in equity

		Share	Share	Other	Retained
		capital	premium	reserves	earnings	Total
	Note	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2018		56,551	25,554	(7,753)	105,814	180,166

Profit for the year		-	-	-	6,882	6,882
Issue of new shares		81,683	224,132	-	-	305,815
Dividends	10	-	-	-	(34,866)	(34,866)
Share-based payments - credit to equity		-	-	761	-	761
Deferred tax on share-based payments taken directly to equity		-	-	(42)		(42)
Purchase of treasury shares		-	-	(124)	-	(124)


Balance at 30 December 2018		138,234	249,686	(7,158)	77,830	458,592

Balance at 31 December 2018		138,234	249,686	(7,158)	77,830	458,592

Profit for the year		-	-	-	(40,406)	(40,406)
Other comprehensive income		-	-	578	-	578
Total comprehensive income		-	-	578	(40,406)	(39,828)
Dividends	10	-	-	-	(17,524)	(17,524)
Share-based payments - credit to equity		-	-	576	-	576

Deferred tax on share-based payments taken directly to other reserves		-	-	(83)	-	(83)
Purchase of treasury shares		-	-	-	-	-


Balance at 29 December 2019		138,234	249,686	(5,921)	19,900	401,899

During the year, the Group made a £578,092 (2018: £Nil) foreign currency gain on translation of foreign subsidiaries. There is no further other comprehensive income other than the profit for the year ended 29 December 2019 or the year ended 30 December 2018.

Other reserves represents the Group's share-based payment transactions, shares held by the employee benefit trust and treasury shares held by the Group.

The Restaurant Group plc
Consolidated cash flow statement
		52 Weeks ended 29 December 2019	52 Weeks ended 30 December 2018
	Note	£'000	£'000


Operating activities
Cash generated from operations	15	140,501	88,307
Interest received		98	10
Interest paid		(14,638)	(1,013)
Tax paid		(10,252)	(7,364)
Payment against provisions		(12,642)	(11,183)
Payment of acquisition and refinancing costs		(28,464)	(10,103)
Net cash flows from operating activities		74,603	58,654

Investing activities
Purchase of property, plant and equipment		(75,972)	(47,514)
Purchase of intangible assets		(2,334)	(1,532)
Proceeds from disposal of property, plant and equipment		27,325	370
Purchase of subsidiaries		-	(364,197)
Cash acquired on acquisition of subsidiaries		-	39,270
Net cash flows from investing activities		(50,981)	(373,603)

Financing activities
Net proceeds from issue of ordinary share capital		-	305,815
Repayments of borrowings	16	(32,000)	(170,000)
Drawdown of borrowings		-	272,000
Drawdown of overdraft	16	9,950	-
Upfront loan facility fee paid		-	(1,500)
Dividends paid to shareholders	10	(17,524)	(34,866)
Finance lease principal payments	16	(170)	(208)
Net cash flows used in financing activities		(39,744)	371,241

Net increase in cash and cash equivalents		(16,122)	56,292

Cash and cash equivalents at the beginning of the year	16	65,903	9,611
Foreign exchange movement in cash		(25)	-

Cash and cash equivalents at the end of the year		49,756	65,903

1 General Information

Corporate information

The Restaurant Group plc (the 'Company') is a public listed company incorporated and registered in Scotland. The consolidated financial statements of the Group for the year ended 29 December 2019 comprise the Company and its subsidiaries (together referred to as the 'Group').

The consolidated preliminary results of the Group for the year ended 29 December 2019 were approved by the directors on 25 February 2019. The 2020 AGM will be held at 10:00 am on Tuesday 19 May 2020 at the offices of MHP Communications at 6 Agar Street, London WC2N 4HN.

Accounting policies

Basis of preparation

Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRSs.

The consolidated financial statements comprise the financial statements of the Group as at 29 December 2019 and are presented in UK Sterling and all values are rounded to the nearest thousand (UK £'000), except when otherwise indicated.

Going concern basis

The financial statements have been prepared on a going concern basis as, after making appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future at the time of approving the financial statements.

Nature of financial information

The financial information contained within this preliminary announcement for the 52 weeks to 29 December 2019 and the 52 weeks to 30 December 2018 do not comprise statutory financial statements for the purpose of the Companies Act 2006, but are derived from those statements. The statutory accounts for The Restaurant Group plc for the 52 weeks to 30 December 2018 have been filed with the Registrar of Companies and those for the 52 weeks to 29 December 2019 will be filed following the Company's Annual General Meeting.

The auditor's reports on the accounts for both the 52 weeks to 29 December 2019 and 52 weeks to 30 December 2018 were unqualified and did not include a statement under Section 498 (2) or (3) of the Companies Act 2006.

The Annual Report will be available for Shareholders in April 2020

New accounting standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the consolidated preliminary results are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 29 December 2019. There have been no changes to the accounting standards in the current year that have materially impacted the Group financial statements. The only future accounting policy to have a material impact on the group financial statements if IFRS 16, as described below.

IFRS 16 'Leases' was issued in January 2016 and introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees and will supersede the current lease guidance including IAS 17 'Leases' and the related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and will be adopted by the Group for the financial year commencing 30 December 2019.

The standard represents a significant change in the accounting and reporting of leases, impacting the income statement and balance sheet as well as statutory and alternative performance measures used by the Group.

As a result, the profile of costs recognised in the consolidated income statement will change materially in comparison to IAS 17 as follows:

- Depreciation will increase due to the recognition of right-of-use assets

- Existing rental costs will reduce - the only rental costs that remain will relate to low value assets, turnover based leases, or short-term leases

- Finance costs will increase due to the unwinding of the discounted lease liability

There is no net cash flow impact on application of IFRS 16, although the classification of cash flows will be affected as operating lease payments under IAS 17 are presented as operating cash flows, whereas under the IFRS 16 model, the lease payments will be split into a principal and an interest portion which will be presented as operating and financing cash flows respectively.

The Group is in the process of conducting an extensive review of all the Group's leasing arrangements in light of the new accounting standard. The Group has elected to use the Modified Retrospective approach to calculate the impact of IFRS 16. This will mean that the results for the year ended 27 December 2020 will be presented under IFRS 16 but the year ended 29 December 2019 will not be restated. The opening balance sheet as at 30 December 2019 will be restated to recognise the right of use asset and lease liability.

The transition work stream is nearing completion and the Group estimates that, had IFRS 16 been applied in the 52 weeks ended 29 December 2019, the impact on the consolidated balance sheet would have been:

- Recognition of a right-of-use asset in the range of £850m - £890m disclosed within non-current assets.

- Recognition of a corresponding lease liability in the range of £920m - £960m.

- Derecognition of other balance sheet items, including onerous lease provisions, rent free accruals and fair value adjustments relating to acquired leases of around £70m.

- The above results in a reduction in opening retained earnings in the range of £5m - £20m (before adjusting for associated tax impacts).

Key judgements have been addressed, including the assessment of how reasonably certain it is considered to be that a lease option (extension, expiry or break) will be exercised, and the determination of an appropriate discount rate used to calculate the present value the lease liability and to initially measure the right-of-use asset. With regards to these, the Group has determined that the lease term will correspond to the duration of the contracts except in cases where the Group is reasonably certain that it will exercise contractual extension, break options, or management expect to be able to exit the lease in another manner. The incremental borrowing rate on transition has been based on the implicit rate within the lease agreement, where the implicit rate in the lease is not readily determinable this has been estimated.

2 Segmental analysis

Operating Segments

IFRS 8 Operating Segments requires operating segments to be based on the Group's internal reporting to its Chief Operating Decision Maker (CODM). The CODM is regarded as the combined Executive team of the Chief Executive Officer, and the Chief Financial Officer. The Group trades in two reportable segments, defined as the 'Growth Business' and the 'Leisure Business'. These have been defined based on the Leisure Business having different economic characteristics from the Growth businesses. The different brands within each reporting segment all meet the aggregation criteria set out in Paragraph 12 of IFRS 8.

	Growth Business		Leisure Business		Total
	Growth Business		Leisure Business		Total
	2019	2018	2019	2018	2019	2018
	£'000	£'000	£'000	£'000	£'000	£'000
Sales	689,846	279,720	383,206	406,327	1,073,052	686,047
Outlet EBITDA	142,908	56,456	45,085	58,712	187,993	115,168

Central allocations					(51,250)	(27,313)
Group trading EBITDA					136,743	87,855

Exceptional items					(111,826)	(38,772)
Depreciation and amortisation					(45,650)	(32,453)
Net finance charges					(16,562)	(2,699)
Tax					(3,111)	(7,049)
Net profit/(loss)					(40,406)	6,882

Geographical Segments

The Group trades primarily within the United Kingdom. The Group operates restaurants in the United States and generates revenue from franchise royalties primarily in the Europe and the Middle East. The segmentation between geographical location does not meet the quantitative thresholds and so has not been disclosed.

3 Revenue

Revenue has been generated from the operation of restaurants, with approximately 98% of revenue generated within the United Kingdom. The remainder is attributable to restaurants within the United States and from franchise royalties primarily in Europe and the Middle East.

4 Profit for the year	2019	2018
	£'000	£'000
Profit for the year has been arrived at after charging/(crediting):
Amortisation (Note 11)	2,589	342
Depreciation (Note 12)	43,061	32,111
Impairment of property, plant and equipment (Note 12)	105,788	13,970
Purchases of food, beverages and consumables	218,630	149,586
Staff costs (Note 5)	392,690	242,375

Minimum lease payments	110,118	78,182
Contingent rents	15,617	12,515
Total operating lease rentals of land and buildings	125,735	90,697
Rental income	(2,766)	(2,300)
Net rental costs	122,969	88,397

5 Staff costs

a) Average staff numbers during the year (including Directors)	2019	2018
Restaurant staff	20,819	15,375
Administration staff	475	321
	21,294	15,696

	2019	2018
b) Staff costs (including Directors) comprise:	£'000	£'000
Wages and salaries	358,959	224,486
Social security costs	27,285	14,723
Share-based payments	576	761
Pension costs and salary supplements	5,870	2,405
	392,690	242,375

	2019	2018
c) Directors' remuneration	£'000	£'000
Emoluments	1,909	1,398
Salary supplements	127	165
	2,036	1,563
(Credit)/ charge in respect of share-based payments	(204)	(85)
	1,832	1,478

6 Exceptional items
	2019	2018
	£'000	£'000

Included within cost of sales:
- Impairment of property, plant, equipment and software	105,788	13,970
- Onerous lease provisions in respect of closed and other sites	7,455	10,027
- Write off of closed site property, plant and equipment	2,632	-
- Loss on assets held for sale	2,019	-

	117,894	23,997
Included within administration costs:

- Acquisition and integration costs	11,180	14,775
- Profit from sale of property, plant and equipment	(17,248)	-

	(6,068)	14,775
Included within interest payable:
- Refinancing costs
Exceptional items before tax	-	467
	111,826	39,239


Tax effect of exceptional Items	(13,149)	(4,312)
	(13,149)	(4,312)

Net exceptional items for the year	98,677	34,927

An exceptional pre-tax charge of £111.8m has been recorded in the year (2018: £39.2m), which includes the following:

A net impairment charge of £105.8m (2018: £14.0m) has been incurred against property, plant and equipment and software assets. Of the £105.8m charge, £103.1m related to restaurants trading within our Leisure operating segment which has a recoverable amount of £115.4m based on its value in use. £2.7m of the impairment charge relates to four Wagamama restaurants predominantly in the US. The impairment charge comprised of two main elements:

(i) In the Leisure operating segment we have recognised an impairment charge across sites that were identified as structurally unattractive; and

(ii) In addition, given the well documented over capacity and continued like-for-like sales decline in the casual dining market, and ongoing cost headwinds, a more cautious medium term outlook has been taken when assessing the Leisure operating segment for impairment.

• Onerous lease provisions resulted in a charge of £7.5m in the year (2018: £10.0m). This comprises:

- A £1.0m credit in respect of unutilised provisions following the successful exit of 8 sites ahead of expectations;

-A further charge totalling £8.5m was provided for in the year. This comprised a charge of £7.9m in respect of newly identified onerous leases and a charge of £0.6m in respect of sites previously provided for.

• An impairment of assets held for sale for £2.0m (2018: £nil) was incurred relating to Wagamama US sites which were under strategic review

• During the year the Group sold and leased back the head office building, for a gain of £17.2m. This was made up of the cost of the building of £6.2m, fixtures and fittings disposed of £3.3m, offset by the £26.7m, net of selling fees, received in the year for the sale of the head office building.

• An exceptional charge of £11.2m (2018: £14.8m) has been recorded in the year in relation to the integration of Wagamama.

• A write off of £2.6m was made to the carrying value of the property, plant and equipment for Leisure sites which are converting to Wagamama in line with the Leisure estate rationalisation plan.

The tax credit relating to these exceptional charges was £13.1m (2018: £4.3m).

7 Net finance charges


	2019	2018
	£'000	£'000

Bank interest payable	14,413	1,355
Other interest payable	20	-
Onerous lease interest	634	375
Amortisation of facility fees	1,423	333
Interest on obligations under finance leases	170	170
Trading borrowing costs	16,660	2,233

Exceptional refinancing costs (Note 6)	-	467
Total borrowing costs	16,660	2,700

Other interest receivable	(98)	(1)
Total interest receivable	(98)	(1)

Trading net finance charges	16,562	2,232
Total net finance charges	16,562	2,699

8 Tax
	Trading	Exceptional	Total	Total
	2019	2019	2019	2018
a) The tax charge comprises:	£'000	£'000	£'000	£'000

Current tax
UK corporation tax	15,186	(1,233)	13,953	7,736
Adjustments in respect of previous years	305	(579)	(274)	191
Foreign tax relief	(1)	-	(1)	-
Foreign tax suffered	19	-	19	-
	15,509	(1,812)	13,697	7,927


Deferred tax
Origination and reversal of temporary differences	2,362	(429)	1,933	1,832
Adjustments in respect of previous years	(1,337)	-	(1,337)	(634)
Credit in respect of fixed asset impairment	(273)	(10,908)	(11,181)	(2,076)
	751	(11,337)	(10,586)	(878)

Total tax charge for the year	16,260	(13,149)	3,111	7,049


b) Factors affecting the tax charge for the year

The tax charged for the year varies from the standard UK corporation tax rate of 19% (2018: 19%) due to the following factors:

	Trading	Exceptional	Total	Total
	2019	2019	2019	2018
	£'000	£'000	£'000	£'000

Profit/(Loss) on ordinary activities before tax	74,531	(111,826)	(37,925)	13,931

Profit on ordinary activities before tax multiplied
by the standard UK corporation tax rate of 19% (2018: 19%)	14,161	(21,147)	(7,086)	2,647

Effects of:
Depreciation/impairment on non-qualifying assets	1,583	8,683	10,266	1,844
Expenses not deductible for tax purposes	466	1,165	1,631	2,872
Movement on unrecognised deferred tax asset	966	139	1,105	-

Effect of overseas tax rates	20	-	20	-
Adjustment in respect of previous years	(1,033)	(579)	(1,612)	(443)
Release of tax provisions	-	-	-	(15)
Business combinations	-	-	-	(80)
Profit on disposal of properties	-	(1,310)	(1,310)	-
Share options	97	-	97	224
Total tax charge for the year	16,260	(13,149)	3,111	7,049

9 Earnings per share
	2019	2018

a) Basic earnings per share:
Weighted average ordinary shares for the purposes of basic earnings per share	490,904,049	284,959,978

Total profit/(loss) for the year (£'000)	(40,406)	6,882

Basic earnings per share for the year (pence)	(8.23)	2.42
Total profit/(loss) for the year (£'000)	(40,406)	6,882
Effect of exceptional items on earnings for the year (£'000)	98,677	34,927
Earnings excluding exceptional items (£'000)	58,271	41,809

Adjusted earnings per share (pence)	11.87	14.67
b) Diluted earnings per share:

Weighted average ordinary shares for the purposes of basic earnings per share	490,904,049	284,959,978
	490,904,049	284,959,978
Effect of dilutive potential ordinary shares:
Dilutive shares to be issued in respect of options granted under the share option schemes	-	64,070
	-	64,070
Shares held by employee benefit trust	-	688,276

	490,904,049	285,712,324

Diluted earnings per share (pence)	(8.23)	2.41
Adjusted diluted earnings per share (pence)	11.87	14.63

Diluted earnings per share is based on adjusting the weighted average number of shares for the purposes of basic earnings per share in respect of notional share awards made to employees in regards to share option schemes and the shares held by the employee benefit trust. The conversion, exercise or other potential issue of ordinary shares has an antidilutive effect on earnings per share and there is therefore no reduction from basic earnings per share.

10 Dividend

	2019	2018
	£'000	£'000
Amounts recognised as distributions to equity holders during the year:

Final dividend for the 52 weeks ended 30 December 2018 of 1.47p (2017: 10.60p) per share	7,215	21,240
	7,215	21,240
Interim dividend for the 52 weeks ended 29 December 2019 of 2.10p (2018: 6.80p) per share	10,309	13,626
	10,309	13,626
Total dividends paid in the year	17,524	34,866


Proposed final dividend for the 52 weeks ended 29 December 2019 of £nil (2018 actual proposed and paid: 1.47p) per share	-	7,232

11 Intangible assets		Trademarks and	Franchise	Software and IT
	Goodwill	licences	agreements	development	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 1 January 2018	26,433	-	-	-	26,433
Additions	-	-	-	1,532	1,532
Additions recognised on acquisition of subsidiaries	-	479	-	1,207	1,686
Intangibles recognised on acquisition of subsidiaries*	332,284	236,000	21,900	-	590,184
At 30 December 2018	358,717	236,479	21,900	2,739	619,835

Accumulated amortisation and impairment
At 1 January 2018	-	-	-	-	-
Charged during the year	-	-	28	314	342
At 30 December 2018	-	-	28	314	342

Cost
At 31 December 2018	358,717	236,479	21,900	2,739	619,835
Additions	-	-	-	2,320	2,320
Amounts transferred to asset held for sale	(1,641)	(479)	-	-	(2,120)
Disposals	-	-	-	(223)	(223)
At 29 December 2019	357,076	236,000	21,900	4,836	619,812

Accumulated amortisation
At 31 December 2018	-	-	28	314	342
Charged during the year	-	10	1,460	1,119	2,589
Impairment	-	-	-	327	327
Amounts transferred to asset held for sale	-	(10)	-	-	(10)
Disposals	-	-	-	(223)	(223)
At 29 December 2019	-	-	1,488	1,537	3,025

Net book value as at 30 December 2018	358,717	236,479	21,872	2,425	619,493
Net book value as at 29 December 2019	357,076	236,000	20,412	3,299	616,787

* During 2018, Brunning and Price Limited acquired 100% of issued shares in Food and Fuel Limited and the Group recognised provisional fair values of the identifiable assets and liabilities acquired. During 2019, the Group undertook an external valuation of the property, plant and equipment which was representative of its fair value at the acquisition date. This has resulted in a £3.7m decrease in acquired property, plant and equipment from £6.4m to £2.7m and a £3.7m increase in goodwill. In addition to this, deferred consideration of £0.5m became payable resulting in a further £0.5m increase in goodwill. The total increase to goodwill was £4.2m, from £10.4m to £14.6m. As permitted under IFRS the fair value of property, plant and equipment, other payables and goodwill have been retrospectively adjusted.

*During 2018, The Restaurant Group acquired 100% of issued shares in Mabel Topco Group and the Group recognised provisional fair values of the identifiable assets and liabilities acquired. During 2019, the Group identified a further £1.6m provision on acquisition which has resulted in a corresponding increase in goodwill of £1.6m. As permitted under IFRS the fair value of other provisions and goodwill have been retrospectively adjusted.

Goodwill and trademarks arising on business combinations are not amortised but are subject to an impairment review annually, or more frequently if events or changes in circumstances indicate that they might be impaired. The impairment test compares the higher of value in use, or recoverable amount, of CGU to its carrying value. In relation to intangible assets, CGU's have been defined as the original group of sites acquired in each acquisition. It is not practicable to go down to the site level as this would require an arbitrary allocation of the intangible assets. The values ascribed to each CGU are shown in the table below.

The recoverable amount of the goodwill and trademark CGUs is £1,214.7m as at 29 December 2019. The recoverable amount has been based on value in use estimates using one year budgets approved by the Board and a further two years forecast by Management. The projected cash flows have been discounted using a rate based on the Group's pre-tax weighted average cost of capital of 8.9% (2018: 9.2%) that reflects the risk of these assets. Cash flows are extrapolated in perpetuity with an annual growth rate of 2%. It was concluded that the value in use for each CGU is higher than its carrying value and therefore did not require impairment.

The carrying amount of goodwill and indefinite life intangible assets allocated to groups of CGUs is presented below along with the group of CGU's recoverable amounts:

		Goodwill	Total intangibles	Recoverable Amount
	Trademarks & Licenses	Goodwill	Total intangibles	Recoverable Amount
	£'000	£'000	£'000	£'000
Wagamama	236,000	315,527	551,527	1,058,714
Brunning & Price	-	15,158	15,158	71,513
Blubeckers	-	11,275	11,275	65,121
Food & Fuel	-	14,526	14,526	16,354
Ribble Valley Inns	-	590	590	3,017
	236,000	357,076	593,076	1,214,719

The Group has conducted a sensitivity analysis taking into consideration the impact on key impairment test assumptions arising from a range of possible trading and economic scenarios. The key assumptions used in the recoverable amount estimates are the discount rate applied, the like-for-like sales growth and the perpetuity growth rates. The forecast cash flows and perpetuity growth rates take into account management's experience of the specific sites and its long term expectations of the market. The sensitivity analysis shows that no reasonably possible movements in these assumptions would lead to an impairment, with the exception of Food & Fuel.

The goodwill attributable to the Food and Fuel acquisition is supported on the basis of future trading projections produced by Management. These plans include a material improvement to current trading based on a two to three year improvement plan, which is currently being implemented. If this plan is not effective and sales are less than forecast then part or all of the goodwill amount may be impaired. The Group has conducted a sensitivity analysis on the key impairment test assumptions for the group of CGU's as summarised above.

US liquor licenses and trademarks have been transferred to the disposal group classified as held for sale. This amounts to £469k and relates to assets used by the Wagamama US business. Goodwill relating to the acquisition of Wagamama US has been transferred to assets held for sale amounting to £1,641k. See Note 13 for further details regarding the disposal group held for sale assets.

12 Property, plant and equipment		Fixtures,
		equipment
	Land and	and
	buildings	vehicles	Total
	£'000	£'000	£'000
Cost
At 1 January 2018	540,888	200,299	741,187
Additions	38,374	14,913	53,287
Additions on acquisition of subsidiaries*	64,980	31,599	96,579
Disposals	(569)	(751)	(1,320)
At 30 December 2018	643,673	246,060	889,733

Accumulated depreciation and impairment
At 1 January 2018	261,588	152,279	413,867
Provided during the year	18,498	13,613	32,111
Impairment	14,582	(612)	13,970
Disposals	(141)	(705)	(846)
At 30 December 2018	294,527	164,575	459,102

Cost
At 31st December 2018	643,673	246,060	889,733
Additions	36,819	32,998	69,817
Disposals	(12,266)	(8,035)	(20,301)
Amounts transferred to Asset held for sale	(20,608)	(5,651)	(26,259)
Foreign exchange differences	(323)	(73)	(396)
At 29 December 2019	647,295	265,299	912,594

Accumulated depreciation and impairment
At 31st December 2018	294,527	164,575	459,102
Provided during the year	21,023	22,038	43,061
Impairment	85,009	20,452	105,461
Disposals	(2,222)	(6,142)	(8,364)
Amounts transferred to Asset held for sale	(17,595)	(4,674)	(22,269)
Foreign exchange differences	(84)	(23)	(107)
At 29 December 2019	380,658	196,226	576,884
Net book value as at 30 December 2018	349,146	81,485	430,631
Net book value as at 29 December 2019	266,637	69,073	335,710

* During 2018, Brunning and Price Limited acquired 100% of issued shares in Food and Fuel Limited and the Group recognised provisional fair values of the identifiable assets and liabilities acquired. During 2019, the Group undertook an external valuation of the property, plant and equipment which was representative of its fair value at the acquisition date. This has resulted in a £3.7m decrease in acquired property, plant and equipment from £6.4m to £2.7m and a £3.7m increase in goodwill. As permitted under IFRS the fair value of property, plant and equipment, other payables and goodwill have been retrospectively adjusted.

Impairment testing on the Group's property, plant and equipment has been based on value in use estimates using cash flow projections based on one year budgets approved by the Board and a further two years forecast by Management. The value in use estimates differ depending on the area of the business. The projected cash flows have been discounted using a rate based on the Group's pre-tax weighted average cost of capital of 8.9% (2018: 9.2%) that reflects the risk of these assets. Cash flows are extrapolated in perpetuity or to the end of the lease life with an annual growth rate of between nil and 2% per annum depending on Management's assessment of the future profitability of the specific CGU.

The key assumptions in the value in use estimates are the discount rate applied and like-for-like sales growth. An increase of 1% in the discount rate would give rise to an additional impairment charge of approximately £0.3m, whilst a decrease of 1% in the discount rate would give rise to a reduction in impairment of approximately £0.3m. The forecast like-for-like sales growth takes into account management's experience of the specific sites and its long term expectations of the market. A 2% reduction in the forecast like-for-like sales growth would result in an additional impairment charge of approximately £1.3m while a 2% increase would reduce the impairment by £22.3m.

	2019	2018
Net book value of land and buildings:	£'000	£'000

Freehold	116,397	114,919
Long leasehold	3,128	4,102
Short leasehold	147,112	230,125
	266,637	349,146

Assets held under finance leases	2019	2018
	£'000	£'000
Costs
At the beginning of the year	1,595	1,595
At the end of the year	1,595	1,595

Depreciation
At the beginning of the year	1,445	1,434
Provided during the year	11	11
At the end of the year	1,456	1,445

Net book value at the end of the year	139	150

Property plant and equipment transferred to the disposal group classified as held for sale amounts to £4,361k and relates to assets used by the Wagamama US business. See Note 13 for further details regarding the disposal group held for sale assets.

13 Assets held for sale

The assets and liabilities relating to the trading Wagamama US restaurants have been presented as held for sale following commencement of a sale process in September 2019. The transaction was completed subsequent to the balance sheet date in January 2020. The Group entered into a joint venture agreement with a third party to operate the Wagamama US restaurants, In accordance with IFRS 5, the assets held for sale were written down to their fair value less costs to sell at the date of classification as held for sale and reassessed as at the Group's year end date. As at 29 December 2019, a fair value loss adjustment of £2,019k has been recorded within exceptional items in the consolidated income statement.

Assets of £3,990k have been transferred in from property, plant and equipment, and £2,110k from intangible assets. Onerous lease liabilities of £4,081k have been transferred from Provisions. These assets and liabilities have been contributed to the joint venture and in return the Group received a 20% share in the joint venture, which the Directors have assessed as having a fair value of £nil. The assets have subsequently been fair valued down from £6,100k to £4,081k and a loss on transfer to assets held for sale of £2,019k has been recognised in exceptional administration costs.

14 Provisions
	2019	2018
	£'000	£'000
Provision for onerous leases	48,862	57,421
Other provisions*	4,031	3,841
Balance at the end of the year	52,893	61,292
Analysed as:
Amount due for settlement within one year*	14,549	11,018
Amount due for settlement after one year	38,344	50,244
	52,893	61,262



	Onerous contracts & other property provisions	Other	Total
	£'000	£'000	£'000

Balance at 31 December 2018*	57,421	3,841	61,262
Transfer from other provisions	187	(187)	-
Provisions classified as held for sale	(4,081)	-	(4,081)
Release of onerous lease provision in respect of closed sites now disposed	(1,064)		(1,064)
Onerous lease provision in respect of distressed and other sites	8,291	228	8,519
Other provisions recognised	-	576	576
Amounts utilised	(12,493)	(460)	(12,953)
Unwinding of discount	601	33	634

Balance at 29 December 2019	48,862	4,031	52,893

The onerous lease provisions are for onerous contracts in respect of lease agreements. The provision comprises the onerous element of expenditure over the life of those contracts which are considered onerous, expiring in 1 to 30 years, and exit costs including the costs of strip out, dilapidations and the costs expected to be incurred over the void period until the property is sublet.

Onerous lease provisions resulted in a charge of £7.5m in the year (2018: £10.0m). This comprises:

- A £1.0m credit in respect of unutilised provisions following the successful exit of 8 sites ahead of expectations;

- A further charge totalling £8.5m was provided for in the year. This comprised a charge of £7.9m in respect of newly identified onerous leases and a charge of £0.6m in respect of sites previously provided for.

Changes in the EBITDA performance of each site could impact on the value of the provision. It is estimated that, a 2% decline in the like-for-like sales performance of sites would generate an additional provision of £0.7m. A 1% increase in the risk free rate would reduce the provision by £1.9m, while a reduction of similar magnitude would result in an additional provision of £0.9m. An increase of 1 year of rent in the cost to exit would result in an increase in the provision of £4.5m, while a decrease of 1 year would result in a decrease of £4.5m.

Provisions transferred to the disposal group classified as held for sale amounts to £4.1m and relate to assets used by the Wagamama US business. See Note 13 for further details regarding the disposal group held for sale assets.

* During 2018, The Restaurant Group plc acquired 100% of issued shares in Mabel Topco Group and the Group recognised provisional fair values of the identifiable assets and liabilities acquired. During 2019, a £1.6m provision was identified resulting in a £1.6m increase in goodwill and provisions.

15 Reconciliation of profit before tax to cash generated from operations
	2019	2018
	£'000	£'000
Profit/(loss) on ordinary activities before tax	(37,295)	13,931
Net interest charges	16,562	2,232
Impairment of property, plant and equipment	105,788	13,970
Onerous lease and other property provisions	7,455	10,027
Acquisition and integration costs	11,180	14,775
Loss on Assets held for sale	2,019	-
Refinancing costs	-	467
Depreciation and amortisation	45,650	32,453
(Profit)/loss on disposal of property, plant and equipment	(15,388)	104
Other non-cash items	(11)	761
(Increase)/decrease in inventory	(596)	83
Decrease/(increase) in receivables	(261)	(3,983)
(Decrease)/increase in payables	5,398	3,487

Cash generated from operations	140,501	88,307

16 Reconciliation of changes in cash to the movement in net debt	2019	2018
	£'000	£'000
Net debt:
At the beginning of the year	(291,132)	(23,102)
Movements in the year:
Net repayments/(withdrawals) of borrowings	32,000	(102,000)
Drawdown of overdraft	(9,950)	-
Debt acquired on acquisition of subsidiary	-	(226,164)
Unamortised loan fees acquired on acquisition of subsidiary	-	2,493
Upfront loan facility fee	-	1,500
Finance leases	170	208
Non-cash movements in the year	(1,594)	(359)
Net cash (outflow)/inflow	(16,122)	56,292

At the end of the year	(286,630)	(291,132)

Represented by:

	At 31 December	Cash flow movements	Debt acquired on	Unamortised loan fees acquired on	Upfront loan facility	Non-cash movements	At 30 December	Cash flow movements	Non-cash movements	At 29 December
	2017	in the year	acquisition	acquisition	fee	in the year	2018	in the year	in the year	2019
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000

Cash and cash equivalents	9,611	56,292	-	-	-	-	65,903	(16,122)	(25)	49,756
Cash and cash equivalents
Overdraft	-	-	-	-	-	-	-	(9,950)	-	(9,950)
Overdraft
Bank loans falling due after one year	(31,223)	(102,000)	(225,000)	2,493	1,500	(190)	(354,420)	32,000	(1,402)	(323,822)
Bank loans falling due after one year
Finance leases	(1,490)	208	(1,164)	-	-	(169)	(2,615)	170	167	(2,612)
Finance leases
	(23,102)	(45,500)	(226,164)	2,493	1,500	(359)	(291,132)	6,098	(1,594)	(286,630)

Cash and cash equivalents are comprised of cash at bank and cash floats held on site. The cash and cash equivalents balance includes credit card receipts that were cleared post year end.

The non-cash movements in bank loans are in relation to the amortisation of prepaid facility costs.

17 Publication of Annual Report

This preliminary statement is not being posted to shareholders. The Annual Report will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company. Copies of the Annual Report will be available from the Company's website in April 2020.

Responsibility statement of the directors on the Annual Report

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ended 29 December 2019. Certain parts of the annual report are not included within this announcement.

We confirm that, to the best of our knowledge

a) the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

b) The Business review includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole.

On behalf of the Board

Andy Hornby	Kirk Davis
Chief Executive Officer	Chief Financial Officer
25 February 2020	25 February 2020

The directors believe the Adjusted Performance Metrics used within this report, and defined below, provide additional useful information for shareholders to evaluate and compare the performance of the business from period to period. These are also the KPIs used by the directors to assess performance of the business. The adjusted metrics are reconciled to the statutory results for the year on the face of the income statement and the relevant supporting notes.

Trading business	Represents the performance of the business before exceptional items and is considered as the key metrics for shareholders to evaluate and compare the performance of the business from period to period.
Exceptional items	Those items that, by virtue of their unusual nature or size, warrant separate additional disclosure in the financial statements in order to fully understand the performance of the Group.
Like-for-like sales	This measure provides an indicator of the underlying performance of our existing restaurants. There is no accounting standard or consistent definition of 'like-for-like sales' across the industry. Group like-for-like sales are calculated by comparing the performance of all mature sites in the current period versus the comparable period in the prior year. Sites that are closed, disposed or disrupted during a financial year are excluded from the like-for-like sales calculation.
EBITDA	Earnings before interest, tax, depreciation, amortisation and impairment.
Adjusted EBITDA	Earnings before interest, tax, depreciation, amortisation and exceptional items. Calculated by taking the Trading business operating profit and adding back depreciation and amortisation.
Outlet EBITDA	EBITDA directly attributable to individual sites and therefore excluding corporate and central costs.
Net debt	Net debt is calculated as the net of the long-term borrowings and finance lease obligations less cash and cash equivalents.
Free cash flow	EBITDA less working capital and non-cash movements (excluding exceptional items), tax payments, interest payments and maintenance capital expenditure.
Adjusted operating profit	Earnings before interest, tax and exceptional items.
Adjusted EPS	Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year.
Adjusted diluted EPS	Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year, including the effect of dilutive potential ordinary shares.
Adjusted profit before tax	Calculated by taking the profit before tax of the business pre-exceptional items.
Adjusted tax	Calculated by taking the tax of the business pre-exceptional items.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR SEUEFIESSEIE

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