Interim results

RNS Number : 0152S

Restaurant Group PLC

02 September 2010

 



The Restaurant Group plc

 

Interim results for the 27 weeks ending 4 July 2010

The Restaurant Group plc operates 375 restaurants and pub restaurants.  Its principal trading brands are Frankie & Benny's, Chiquito and Garfunkel's. In addition it operates 42 Pub Restaurants as well as over 50 sites in its Concessions division which trades principally at major UK airports.

·      Record interim results despite a very challenging half year:

Statutory and adjusted results stated on a 27 week basis in 2010 compared with a 26 week basis for 2009	Note: 26 weeks comparable
- Revenue increased 9% to £229m (2009: £210m)	+5%
- Adjusted EBITDA increased by 10% to £39.8m (2009: £36.3m)	+6%
- Adjusted profit before tax increased by 13% to £24.6m (2009: £21.7m)	+10%
- Adjusted EPS rose 13% to 8.5p (2009: 7.5p)	+10%
- Statutory profit before tax was £24.8m (2009: £20.1m)
- Statutory EPS was 8.6p (2009: 8.7p)

Results marked as adjusted are stated excluding non-trading items (refer to note 2 of the condensed financial statements)

·      Excellent performance demonstrating the resilience of TRG's business and strength of its brands

·      Operations strongly cash generative; operating cash flow increased to £38.7m (2009: £31.9m) 

·      2010 interim dividend of 1.54p per share, an increase of 10%

·      Continuing new site development

-     Eight new sites opened in the first half year

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

-     20-25 new sites targeted for 2010

·      Resilient current trading with year to date like-for-like sales for the 35 weeks to 29 August 2010 flat, improved from -0.5% at the half year

·      Board is confident of another year of good progress in 2010

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

"These are good results, with double digit growth in earnings, dividends and free cashflow. They reflect TRG's strong market positions, focusing on our customers and standards, and providing a consistent quality of product and service. They also reflect the outstanding commitment of our people. We continue to open new restaurants, which are performing superbly, and this year we will open between 20 and 25. The second half has started well and we are determined to build further on this."

2 September 2010

Enquiries:

The Restaurant Group
Andrew Page, Chief Executive	020 7457 2020 (today)
Stephen Critoph, Group Finance Director	0845 612 5001 (thereafter)
College Hill
Matthew Smallwood	020 7457 2020

Chairman's statement

The first six months of 2010 have been characterised by a continuation of the challenging economic conditions experienced during 2009 and, at times, this has been exacerbated by extraneous factors which have adversely affected our business. Despite this I am delighted to report that The Restaurant Group plc ("TRG" or "the Group") has produced another record set of interim results. To have achieved this in the face of such difficult conditions is a very creditable performance and reflects not only the resilience of our business model but also the tenacity and professionalism of our team at TRG.

Our focus during this difficult period has been directed towards providing our customers with excellent value and service together with maintaining high standards of operational efficiency and execution. Our costs have been tightly controlled and this, too, has contributed to higher profits and margins. We have continued to open new restaurants (eight during the first half and a further four since then) and all are performing well and are set to deliver good returns.

During the first half the Group delivered increases in revenue, margins, profits and adjusted earnings per share. Adjusted profit before tax, for the 27 weeks to 4 July 2010, grew by 13% and, again, those increased profits have been converted into cash at a very healthy rate. Operating cashflow increased to £38.7m (2009: £31.9m) and free cashflow also increased, to £23.1m (2009: £19.4m). Group net debt level is below 1.0x rolling 12 month EBITDA.

Results*

*Results marked as adjusted are stated excluding non-trading items (refer to note 2 of the condensed financial statements) and, unless otherwise stated, reflect a 27 week period in 2010 compared with a 26 week period in 2009. Like-for-like information is stated for a consistent number of weeks in 2010 and 2009.

During the first half the Group delivered growth in revenues which increased by 9% to £229.5m (2009: £210.2m). EBITDA increased by 10% to £39.8m (2009: £36.3m), adjusted operating profit increased by 10% to £26.0m (2009: £23.6m) and adjusted earnings per share increased by 13% to 8.5p (2009: 7.5p). Group operating profit margin improved by 10 basis points to 11.3%. Like-for-like sales fell by 0.5% during the first half; excluding the impact of the volcanic ash cloud on the Concessions business we estimate that Group like-for-like sales would have been flat.

The Board is declaring an interim dividend of 1.54p per share (2009: 1.40p) an increase of 10%. This will be paid on 13 October 2010 to shareholders on the register on 17 September 2010 and the shares will be marked ex-dividend on 15 September 2010.

Leisure (318 units)

Total revenue: £186.7m              Operating profit: £34.9m Operating margin: 18.7%

Frankie & Benny's (189 units)

Frankie & Benny's traded well during the first half, growing revenues, profits and margins. This is a particularly creditable result as trade was adversely affected during the period of the World Cup tournament (at similar levels to those experienced during the 2006 World Cup). Excellent value, choice and service combined with careful cost control enabled the business to deliver these good results. We opened one new restaurant during the first half and have opened two more since. All are trading well and are expected to deliver strong returns. During 2010 we expect to open between eight and ten new Frankie & Benny's.

Chiquito (64 units)

Chiquito's first half performance was solid but, despite producing slightly higher revenues, its profits were a little below the prior year. As with Frankie & Benny's, the World Cup tournament also had an adverse impact on Chiquito's trading during June and July, although since then trade has been good.

We opened one new Chiquito restaurant during the first half, adjacent to our existing Frankie & Benny's in Victoria Place, Belfast. This is performing well and is set to deliver strong returns. During the second half we expect to open three or four new restaurants.

Pub Restaurants (42 units)

The Pub Restaurant business traded well during the first half, delivering increases in revenues, profits and margins. We are continuing with our programme of changing the former Blubeckers sites to bring them more into line with the Brunning & Price style of operation and the results have been very encouraging. This programme, which we started in the summer of 2009, will continue during 2010 and is anticipated to complete during 2011. We expect to open one new Pub Restaurant during the second half.

Garfunkel's (23 units)

Garfunkel's has performed superbly during the first half delivering very significant growth in revenues, profits and margins. Most of our Garfunkel's restaurants trade from prominent Central London locations and, as previously announced, we have embarked on a modest programme of expansion. During the past twelve months we have opened three new Garfunkel's restaurants (Tottenham Court Road in 2009; the O₂ Centre at Greenwich and Trafalgar Square in 2010). All are performing well and are expected to deliver strong returns. It is possible that we will open one more new Garfunkel's before the end of 2010 and we are currently looking at a handful of potential sites for 2011.

Concessions (57 units)

Total revenue: £42.8m               Operating profit: £6.1m              Operating margin: 14.2%

During the first half, our Concessions business was severely impacted by the effects on air traffic from the ash cloud from the Eyjafjallajökull volcano. This caused a reduction of around 90% in our sales over a seven day period in April and, we estimate, resulted in just over £0.5m adverse impact to profits. Trade in the first half was also adversely impacted by a series of strikes by the staff of BA although, overall, the effect of this was not as severe as had been anticipated.

Notwithstanding these difficulties our Concessions business has delivered double digit increases in revenues, EBITDA and profit. Profit margins improved by 70 basis points to 14.2%. This represents a superb performance and had it not been for the disruption noted above we estimate that EBITDA would have increased by more than £1.3m (rather than the £0.8m as reported). During the first half we opened five new units. These are trading well and are set to deliver strong returns and we continue to explore opportunities for further new Concession units.

Cash flow and balance sheet

Set out below is the summary cash flow statement for the first half. This once again clearly demonstrates the strong cash flow generation characteristics of the Group's business and the transparent conversion of operating profits into cash. Net cash flow from operations was £38.7m (2009: £31.9m) and free cash flow (defined as cash flow from operations less interest, tax and maintenance capex) was £23.1m (2009: £19.4m).

Net debt fell by £1.1m in the first half. Taking into account the earlier timing of a dividend payment this half year which was paid in the second half of 2009, and adjusting for this difference, the underlying net debt position would have fallen by almost £14m in the first half.

	2010 HY	2009 HY
	£m	£m
Operating profit	26.0	23.6
Working capital & non cash adjustments	(1.1)	(4.4)
Depreciation	13.8	12.7
Net cash flow from operations	38.7	31.9
Net interest paid	(1.3)	(0.9)
Tax paid	(8.3)	(6.1)
Maintenance capital expenditure	(6.0)	(5.5)
Free cash flow	23.1	19.4
New build capital expenditure	(8.6)	(10.4)
Dividends	(12.7)	-
Normalised net cash flow	1.8	9.0
Disposals	-	0.3
Net cash flow from share issues	1.8	0.6
SWAP termination payment	(1.0)	-
Purchase of shares	(1.4)	-
Financing costs offset against bank debt	(0.1)	(0.1)
Change in net debt	1.1	9.8
Net bank debt at start of period	(66.7)	(78.9)
Net bank debt at end of period	(65.6)	(69.1)

During the first half total capital additions were £14.6m (2009: £15.9m). £6.0m of this represented maintenance capex with the balance of £8.6m being accounted for by investment in new sites. In the full year we expect to spend between £30m and £35m on capital expenditure.

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

	Covenant	HY 2010	HY 2009
EBITDA / Interest ratio	>4x	27.6x	19.3x
Net debt / EBITDA ratio	<3x	0.8x	0.9x

Risks and uncertainties

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

Outlook

These are excellent results produced in the face of tough conditions. They are a reflection of our resilient business model, unique market positioning, clear focus on our customers, value for money offerings and the professionalism, commitment and dedication of our senior management team and staff.

Since my last report we have experienced a continuation of global economic uncertainty and, closer to home, political change. The new coalition government has announced a programme of fiscal austerity with the objective of reducing the level of National Debt and budget deficit and so we anticipate that it is likely that we will face a further continuation of current economic conditions for some time to come.

The second half of the year has started well with good growth in like-for-like sales and turnover.  Year to date, total sales are 9% ahead of the prior year (like-for-like: flat), the business is in great shape and I am confident that the Group is well placed to continue its further good progress.

Alan Jackson

Non-executive Chairman

2 September 2010

Notes:

 ⁽¹⁾ 2010 is a 53 week accounting period and the following detail is provided on a comparable basis for 2010 vs. 2009: on a non-statutory, pro-forma basis, revenue for the first 26 weeks of 2010 was £220.9m (2009: £210.2m), adjusted EBITDA was £38.6m (2009: £36.3m), adjusted operating profit was £25.3m (2009: £23.6m), adjusted profit before tax was £23.9m (2009: £21.7m) and adjusted EPS was 8.25p (2009: 7.49p).  Total revenue growth for the first 35 weeks of 2010 compared with the first 35 weeks of 2009 was 5.5%.

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

The Restaurant Group plc interim report 2010
Condensed financial statements 2010
Consolidated income statement
		27 weeks ended 4 July 2010				26 weeks ended 28 June 2009				Year ended 27 December 2009
		(unaudited)				(unaudited)				(audited)
		Trading	Non-			Trading	Non-			Trading	Non-
		business	trading	Total		business	trading	Total		business	trading	Total
	Note	£'000	£'000	£'000		£'000	£'000	£'000		£'000	£'000	£'000
Revenue		229,489	-	229,489		210,153	-	210,153		435,743	-	435,743
Cost of sales:
Excluding pre-opening costs	3	(189,252)	-	(189,252)		(173,798)	(467)	(174,265)		(356,889)	-	(356,889)
Pre-opening costs		(735)	-	(735)		(514)	-	(514)		(1,477)	-	(1,477)
		(189,987)	-	(189,987)		(174,312)	(467)	(174,779)		(358,366)	-	(358,366)
Gross profit/ (loss)		39,502	-	39,502		35,841	(467)	35,374		77,377	-	77,377
Administration costs	3	(13,493)	-	(13,493)		(12,254)	(70)	(12,324)		(24,017)	-	(24,017)
Trading profit/ (loss)		26,009	-	26,009		23,587	(537)	23,050		53,360	-	53,360
Loss on disposal of fixed assets	3	-	-	-		-	-	-		-	(526)	(526)
Operating profit/ (loss)		26,009	-	26,009		23,587	(537)	23,050		53,360	(526)	52,834
Interest payable	3	(1,484)	231	(1,253)		(2,011)	(1,024)	(3,035)		(3,517)	(1,169)	(4,686)
Interest receivable		44	-	44		125	-	125		186	-	186
Profit/ (loss) on ordinary activities before tax		24,569	231	24,800		21,701	(1,561)	20,140		50,029	(1,695)	48,334
Tax on profit/ (loss) from ordinary activities	4	(7,738)	(65)	(7,803)		(6,944)	3,901	(3,043)		(15,559)	4,497	(11,062)
Profit for the period		16,831	166	16,997		14,757	2,340	17,097		34,470	2,802	37,272
Earnings per share (pence)
Basic	5	8.47		8.56		7.49		8.68		17.48		18.90
Diluted	5	8.44		8.53		7.39		8.56		17.40		18.82
Dividend per share (pence) 1	6			1.54				1.40				8.00
1  The dividend per share of 1.54p (2009: 1.40p) is the interim dividend in respect of 2010 and the dividend per share of 8.00p is the two interim and the final dividend in respect of 2009.

Condensed financial statements 2010
Consolidated statement of comprehensive income
	27 weeks ended 4 July 2010	26 weeks ended 28 June 2009	Year ended 27 December 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Profit for the period	16,997	17,097	37,272
Exchange differences on translation of foreign operations	(37)	(198)	(140)
Total comprehensive income for the period	16,960	16,899	37,132

Condensed financial statements 2010
Consolidated statement of changes in equity
				Foreign
				currency
		Share	Share	translation	Other	Retained	Total
		capital	premium	reserve	reserves	earnings
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 28 December 2009		55,568	21,867	493	(7,104)	45,108	115,932
Profit for the period		-	-	-	-	16,997	16,997
Exchange differences on translation of foreign operations		-	-	(37)	-	-	(37)
Total comprehensive income for the period		-	-	(37)	-	16,997	16,960
Issue of new shares		506	1,272	-	-	-	1,778
Dividends		-	-	-	-	(12,726)	(12,726)
Share-based payments - credit to equity		-	-	-	1,345	-	1,345
Employee benefit trust - purchase of shares		-	-	-	(1,431)	-	(1,431)
Current tax on share-based payments taken directly to equity		-	-	-	-	493	493
Deferred tax on share-based payments taken directly to equity		-	-	-	-	138	138
Balance at 4 July 2010 (unaudited)		56,074	23,139	456	(7,190)	50,010	122,489
Balance at 29 December 2008		55,333	21,104	633	(5,348)	21,884	93,606
Profit for the period		-	-	-	-	17,097	17,097
Exchange differences on translation of foreign operations		-	-	(198)	-	-	(198)
Total comprehensive income for the period		-	-	(198)	-	17,097	16,899
Issue of new shares		152	481	-	-	-	633
Dividends		-	-	-	-	(12,188)	(12,188)
Share-based payments - credit to equity		-	-	-	946	-	946
Employee benefit trust - purchase of shares		-	-	-	-	-	-
Current tax on share-based payments taken directly to equity		-	-	-	-	13	13
Deferred tax on share-based payments taken directly to equity		-	-	-	-	258	258
Balance at 28 June 2009 (unaudited)		55,485	21,585	435	(4,402)	27,064	100,167

				Foreign
				currency
		Share	Share	translation	Other	Retained	Total
		capital	premium	reserve	reserves	earnings
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 29 December 2008		55,333	21,104	633	(5,348)	21,884	93,606
Profit for the period		-	-	-	-	37,272	37,272
Exchange differences on translation of foreign operations		-	-	(140)	-	-	(140)
Total comprehensive income for the period		-	-	(140)	-	37,272	37,132
Issue of new shares		235	763	-	-	-	998
Dividends		-	-	-	-	(14,887)	(14,887)
Share-based payments - credit to equity		-	-	-	2,098	-	2,098
Employee benefit trust - purchase of shares		-	-	-	(3,854)	-	(3,854)
Current tax on share-based payments taken directly to equity		-	-	-	-	29	29
Deferred tax on share-based payments taken directly to equity		-	-	-	-	810	810
Balance at 27 December 2009 (audited)		55,568	21,867	493	(7,104)	45,108	115,932

Condensed financial statements 2010
Consolidated balance sheet
		At 4 July 2010	At 28 June 2009	At 27 December 2009
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Non-current assets
Intangible assets		26,241	26,241	26,241
Property, plant and equipment		255,661	252,815	254,841
		281,902	279,056	281,082
Current assets
Stock		3,104	3,203	4,122
Trade and other receivables		3,338	4,938	5,042
Prepayments		12,290	19,830	12,951
Cash and cash equivalents		1,904	1,515	2,831
		20,636	29,486	24,946
Total assets		302,538	308,542	306,028
Current liabilities
Short-term borrowings		(1,909)	(145)	-
Corporation tax liabilities		(8,004)	(7,808)	(9,298)
Trade and other payables		(74,818)	(97,475)	(80,326)
Financial liabilities - derivative financial instruments		(983)	(2,097)	(2,242)
Other payables - finance lease obligations		(286)	(275)	(276)
Provisions		(692)	(912)	(928)
		(86,692)	(108,712)	(93,070)
Net current liabilities		(66,056)	(79,226)	(68,124)
Non-current liabilities
Long-term borrowings		(65,589)	(70,427)	(69,515)
Other payables - finance lease obligations		(2,745)	(2,685)	(2,718)
Deferred tax liabilities		(21,408)	(22,843)	(21,161)
Provisions		(3,615)	(3,708)	(3,632)
		(93,357)	(99,663)	(97,026)
Total liabilities		(180,049)	(208,375)	(190,096)
Net assets		122,489	100,167	115,932
Equity
Share capital		56,074	55,485	55,568
Share premium		23,139	21,585	21,867
Foreign currency translation reserve		456	435	493
Other reserves		(7,190)	(4,402)	(7,104)
Retained earnings		50,010	27,064	45,108
Total equity		122,489	100,167	115,932

Condensed financial statements 2010
Consolidated cash flow statement
		27 weeks ended 4 July 2010	26 weeks ended 28 June 2009	Year ended 27 December 2009
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	7	38,717	31,878	77,075
Interest received		44	125	186
Interest paid		(2,395)	(1,068)	(2,377)
Tax paid		(8,218)	(6,081)	(13,724)
Net cash flows from operating activities		28,148	24,854	61,160
Cash flows from investing activities
Purchase of property, plant and equipment		(14,605)	(15,873)	(31,519)
Proceeds from sale of property, plant and equipment		-	286	463
Net cash flows used in investing activities		(14,605)	(15,587)	(31,056)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		1,778	633	998
Employee benefit trust - purchase of shares		(1,431)	-	(3,854)
Net repayments of loan draw downs	8	(4,000)	(14,000)	(15,000)
Dividends paid to shareholders		(12,726)	-	(14,887)
Net cash flows used in financing activities		(16,379)	(13,367)	(32,743)
Net decrease in cash and cash equivalents		(2,836)	(4,100)	(2,639)
Cash and cash equivalents at beginning of period		2,831	5,470	5,470
Cash and cash equivalents at end of period		(5)	1,370	2,831

Condensed financial statements 2010
Responsibility Statement
We confirm that to the best of our knowledge:
(a)  the condensed set of financial statements has been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial reporting';
(b)  the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 27 weeks and description of principal risks and uncertainties for the remaining 26 weeks of the year); and
(c)  the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board,
Alan Jackson	Stephen Critoph ACA
Non-executive Chairman	Group Finance Director
2 September 2010	2 September 2010
Accounting policies
Basis of preparation
The annual financial statements of The Restaurant Group plc are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union.  The accounting policies and methods of computation used are consistent with those used in the Group's latest annual audited financial statements, except for as described below.
General information
The comparatives for the full year ended 27 December 2009 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditors report on these accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Going concern
As referred to in the Chairman's statement, there are significant economic uncertainties facing the United Kingdom and consumer-facing industries in particular.  Potential risk factors and uncertainties that could affect the business are also discussed in the Chairman's statement.  The Group enjoys negative working capital as, due to the nature of the business, it generally does not give credit to its customers.  The Group has a debt facility of £120m which matures in December 2012 and had net debt at 4 July 2010 of £65.6m.  Based on the Group's plans for the next 12 months and after making enquiries (including preparation of reasonable trading forecasts, consideration of current financing arrangements and current headroom for liquidity and covenant compliance), the Directors have a reasonable expectation that the Group has adequate resources to continue operations for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the condensed financial statements.
Changes in accounting policies
In the current financial year, the Group has adopted International Financial Reporting Standard 3 "Business Combinations" (revised 2008) and International Accounting Standard 27 "Consolidated and Separate Financial Statements" (revised 2008).  There has been no impact on the interim financial statements on adoption of these standards.

Condensed financial statements 2010
Notes to the condensed interim financial statements
1 Segmental analysis
	27 weeks ended 4 July 2010						26 weeks ended 28 June 2009
					Operating						Operating
	Turnover	EBITDA	EBITDA	Operating	profit		Turnover	EBITDA	EBITDA	Operating	profit
			margin	profit	margin				margin	profit	margin
	£'000	£'000	%	£'000	%		£'000	£'000	%	£'000	%
Leisure	186,708	46,175	24.7%	34,852	18.7%		172,681	42,268	24.5%	32,199	18.6%
Concessions	42,781	8,217	19.2%	6,054	14.2%		37,465	7,367	19.7%	5,072	13.5%
Principal trading brands	229,489	54,392	23.7%	40,906	17.8%		210,146	49,635	23.6%	37,271	17.7%
Non-core	-	(669)	-	(669)	-		7	(815)	-	(916)	-
Total all brands	229,489	53,723	23.4%	40,237	17.5%		210,153	48,820	23.2%	36,355	17.3%
Pre-opening costs		(735)	(0.3%)	(735)	(0.3%)			(514)	(0.2%)	(514)	(0.2%)
Administration costs		(11,855)	(5.2%)	(12,148)	(5.3%)			(11,054)	(5.3%)	(11,308)	(5.4%)
Share-based payments		(1,345)	(0.6%)	(1,345)	(0.6%)			(946)	(0.4%)	(946)	(0.4%)
Total before non-trading items		39,788	17.3%	26,009	11.3%			36,306	17.3%	23,587	11.2%
Write downs and associated costs for sites exited post period end				-						(537)
Loss on disposal of fixed assets				-						-
Operating profit				26,009						23,050
Total net interest charges				(1,209)						(2,910)
Profit on ordinary activities before tax				24,800						20,140
EBITDA is operating profit before depreciation, amortisation and non-trading items.
There has been no change in the basis of segmentation or in the basis of measurement of profit or loss in the period.
The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest annual financial statements.  Segment results represent the profit earned by each segment without allocation of central administration costs including Directors' salaries, investments revenue and finance costs, and income tax expense.  This is the measure reported to the Group's Chief Executive for the purposes of resource allocation and assessment of segment performance.

		Year ended 27 December 2009
						Operating
		Turnover	EBITDA	EBITDA	Operating	profit
				margin	profit	margin
		£'000	£'000	%	£'000	%
Leisure		353,552	89,525	25.3%	69,076	19.5%
Concessions		82,184	15,862	19.3%	11,040	13.4%
Principal trading brands		435,736	105,387	24.2%	80,116	18.4%
Non-core		7	(787)	-	(1,262)	-
Total all brands		435,743	104,600	24.0%	78,854	18.1%
Pre-opening costs			(1,477)	(0.3%)	(1,477)	(0.3%)
Administration costs			(21,384)	(4.9%)	(21,919)	(5.0%)
Share-based payments			(2,098)	(0.5%)	(2,098)	(0.5%)
Total before non-trading items			79,641	18.3%	53,360	12.2%
Write downs and associated costs for sites exited post period end					-
Loss on disposal of fixed assets					(526)
Operating profit					52,834
Total net interest charges					(4,500)
Profit on ordinary activities before tax					48,334

Condensed financial statements 2010
2 Additional non-statutory information*
Additional non-statutory income statement information is provided as a useful guide to underlying trading performance.  The 2010 and 2009 results include a number of items which are of a one-off nature or are unrelated to the period's result and hence are not representative of the underlying trading performance of the business.  The following segmental analysis excludes these non-trading items, as described in note 3, and is provided to aid understanding of the income statement and should be read in conjunction with, rather than as a substitute for, the reported information.

* Results are stated excluding non-trading items
	27 weeks ended 4 July 2010						26 weeks ended 28 June 2009
					Operating						Operating
	Turnover	EBITDA	EBITDA	Operating	profit		Turnover	EBITDA	EBITDA	Operating	profit
			margin	profit	margin				margin	profit	margin
	£'000	£'000	%	£'000	%		£'000	£'000	%	£'000	%
Leisure	186,708	46,175	24.7%	34,852	18.7%		172,681	42,268	24.5%	32,199	18.6%
Concessions	42,781	8,217	19.2%	6,054	14.2%		37,465	7,367	19.7%	5,072	13.5%
Principal trading brands	229,489	54,392	23.7%	40,906	17.8%		210,146	49,635	23.6%	37,271	17.7%
Non-core	-	(669)	-	(669)	-		7	(815)	-	(916)	-
Total all brands	229,489	53,723	23.4%	40,237	17.5%		210,153	48,820	23.2%	36,355	17.3%
Pre-opening costs		(735)	(0.3%)	(735)	(0.3%)			(514)	(0.2%)	(514)	(0.2%)
Administration costs		(11,855)	(5.2%)	(12,148)	(5.3%)			(11,054)	(5.3%)	(11,308)	(5.4%)
Share-based payments		(1,345)	(0.6%)	(1,345)	(0.6%)			(946)	(0.4%)	(946)	(0.4%)
EBITDA/  adjusted operating profit		39,788	17.3%	26,009	11.3%			36,306	17.3%	23,587	11.2%
Total net interest charges				(1,440)						(1,886)
Adjusted profit before tax				24,569						21,701
Tax				(7,738)						(6,944)
Adjusted profit after tax				16,831						14,757
Earnings per share (pence) - trading business
Basic				8.47						7.49
Diluted				8.44						7.39

Condensed financial statements 2010
2 Additional non-statutory information* (continued)
* Results are stated excluding non-trading items
				Year ended 27 December 2009
										Operating
				Turnover		EBITDA	EBITDA		Operating	profit
							margin		profit	margin
				£'000		£'000	%		£'000	%
Leisure				353,552		89,525	25.3%		69,076	19.5%
Concessions				82,184		15,862	19.3%		11,040	13.4%
Principal trading brands				435,736		105,387	24.2%		80,116	18.4%
Non-core				7		(787)	-		(1,262)	-
Total all brands				435,743		104,600	24.0%		78,854	18.1%
Pre-opening costs						(1,477)	(0.3%)		(1,477)	(0.3%)
Administration costs						(21,384)	(4.9%)		(21,919)	(5.0%)
Share-based payments						(2,098)	(0.5%)		(2,098)	(0.5%)
EBITDA/  adjusted operating profit						79,641	18.3%		53,360	12.2%
Total net interest charges									(3,331)
Adjusted profit before tax									50,029
Tax									(15,559)
Adjusted profit after tax									34,470
Earnings per share (pence) - trading business
Basic									17.48
Diluted									17.40

Condensed financial statements 2010

Notes to the condensed financial statements

3 Non-trading items

The Group has recorded a credit of £0.2m in respect of the remeasurement of its interest rate swaps (26 weeks ended 28 June 2009: charge of £1.0m, 12 months ended 27 December 2009: charge of £1.2m).  On 8 February 2010, one of the Group's interest rate swaps was terminated on payment of £1.0m.

There was no gain or loss arising on fixed asset disposals in the 27 weeks ended 4 July 2010.  In the 26 weeks ended 28 June 2009, the Group recognised a charge of £0.5m in relation to write downs and associated costs for properties exited after the period end date and in the year ended 27 December 2009, the Group recognised a loss on disposal of £0.5m in relation to these properties.

4 Tax

The tax charge has been calculated by reference to the expected effective current and deferred tax rates for the full financial year to 2 January 2011 applied against the profit before tax for the period ended 4 July 2010.  The full year effective tax charge on the underlying trading profit is estimated to be 31.5% (2009: 32%).

The Finance Act 2010, which provides for a reduction in the main rate of corporation tax from 28% to 27% effective from 1 April 2011, was substantially enacted on 21 July 2010.  As it was not substantially enacted at the balance sheet date, the rate reduction is not yet reflected in these financial statements in accordance with IAS 10, as it is a non-adjusting event occurring after the reporting period.

The impact of the rate reduction, which will be reflected in the next reporting period, is estimated to reduce our UK deferred tax liability provided at 4 July 2010 by £0.8m.

The Government has also indicated that it intends to enact future reductions in the main tax rate of 1% each year down to 24% by April 2014.  The future 1% main tax rate reductions are expected to have a similar impact on our financial statements as outlined above, however the actual impact will be dependent on our deferred tax position at that time.

5 Earnings per share

	27 weeks ended 4 July 2010				26 weeks ended 28 June 2009				Year ended 27 December 2009
		(unaudited)				(unaudited)				(audited)
	Earnings	Weighted average number of shares	Per-share amount		Earnings	Weighted average number of shares	Per-share amount		Earnings	Weighted average number of shares	Per-share amount
	£'000	millions	pence		£'000	millions	pence		£'000	millions	pence
Basic earnings per share	16,997	198.6	8.56		17,097	197.0	8.68		37,272	197.2	18.90
Effect of dilutive options	-	0.7	(0.03)		-	2.7	(0.12)		-	0.9	(0.08)
Diluted earnings per share	16,997	199.3	8.53		17,097	199.7	8.56		37,272	198.1	18.82
Basic earnings per share	16,997	198.6	8.56		17,097	197.0	8.68		37,272	197.2	18.90
Effect of non-trading items	(166)	-	(0.09)		(2,340)	-	(1.19)		(2,802)	-	(1.42)
Earnings per share - trading business	16,831	198.6	8.47		14,757	197.0	7.49		34,470	197.2	17.48

6 Dividends
A second interim dividend of 6.30p was paid on 30 March 2010.  Following approval at the Annual General Meeting on 6 May 2010, the final dividend in respect of 2009 of 0.30p per share, totalling £0.6m, was paid to shareholders on 7 July 2010.
The Directors have declared an interim dividend of 1.54p per share, which will be paid on 13 October 2010 to ordinary shareholders on the register at close of business on 17 September 2010.  In accordance with IAS 10, this will be recognised in the reserves of the Group in the second half of the year.
7 Reconciliation of profit before tax to net cash flow from operating activities
		27 weeks ended 4 July 2010	26 weeks ended 28 June 2009	Year ended 27 December 2009
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Profit before tax		24,800	20,140	48,334
Net finance charges		1,209	2,910	4,500
Write downs and associated costs for sites exited post period end		-	537	-
Loss on disposal of fixed assets		-	-	526
Share-based payment expense		1,345	946	2,098
Depreciation		13,779	12,719	26,281
Decrease / (increase) in stocks		1,018	730	(189)
Decrease / (increase) in debtors		2,366	(5,995)	758
Decrease in creditors		(5,800)	(109)	(5,233)
Cash flows from operating activities		38,717	31,878	77,075
8 Bank loans
During the 27 weeks ended 4 July 2010, the Group repaid £4m of draw downs under the existing facility.  As previously disclosed, the Group has a committed bank facility of £120m in place until December 2012.
9 Share capital
Share capital at 4 July 2010 amounted to £56.1m.  The number of shares allotted, called up and fully paid increased from 197,575,863 to 199,373,084 in the period following the exercise of share options by employees, amounting to 1,797,221 shares.
10 Related party transactions
There were no significant changes in the nature and size of related party transactions for the period to those reported in the Annual Report and Accounts for the year ended 27 December 2009.
11 Contingent liabilities
There were no significant changes in the nature and size of contingent liabilities at 4 July 2010 to those reported in the Annual Report and Accounts for the year ended 27 December 2009.

Independent review report to The Restaurant Group plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 27 weeks ended 4 July 2010 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 27 weeks ended 4 July 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

London, UK

2 September 2010

 

END

 

 

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