Final Results

Indian Restaurants Group PLC 28 March 2008 28 March 2008 Indian Restaurants Group Plc ('Indian Restaurants' or 'the Company') Preliminary Results for the year ended 30 September 2007 Indian Restaurants Group Plc (AIM: IRGP), formerly India Outsourcing Services plc, is pleased to present its preliminary results for the year ended 30 September 2007. Highlights • During the period the Company pursued its strategy of evaluating business process outsourcing opportunities in India • The high valuations of potential targets prompted a change of strategy resulting in the acquisition, post the year end, of the Mela Group of three Indian restaurants in London • The Company's strategy is to roll out the Mela Group's Mela and Chowki restaurant brands to create the UK's first national, branded provider of Indian cuisine • Post-tax loss of £262,797 (2006: post-tax loss of £950,801) and loss per share of 2.8p (2006: 15.3p) • Strong balance sheet - cash at bank and in hand of £2.54 million Haresh Kanabar, Indian Restaurants Group's Chairman, said: 'During the period, the Board decided to widen the search for potential acquisitions, in terms of both geographic location and industry sector, as we were not prepared to overpay for outsourcing assets in India. In February this year we were delighted to announce the acquisition of the Mela Group of Indian restaurants in London, which we believe provides an ideal basis from which to generate shareholder value. 'The Mela Group's highly acclaimed restaurants offer an outstanding opportunity to roll out the first UK chain of branded Indian restaurants under the Mela Group's Mela and Chowki brands. Given the large but fragmented Indian restaurant market in the UK we believe we are particularly well placed to replicate over time the success seen in pizza, pasta and tapas chains. 'The spend per head at the Mela and Chowki brands is relatively modest offering some insulation from current economic conditions, which in many respects provide an ideal time during which to begin to build a significant restaurant chain. We look forward to the future with confidence.' For further information: Indian Restaurants Group Plc Tel: 020 7297 0010 Haresh Kanabar, Chairman Amit Pau, Chief Executive W.H. Ireland Limited Tel: 0121 265 6334 Tim Cofman/Katy Birkin Buchanan Communications Tel: 020 7466 5000 Mark Court EXTRACTS FROM THE CHAIRMAN'S STATEMENT AND THE REPORT OF THE DIRECTORS This year has been a challenging year for our company, primarily due to the rising valuations of Indian BPO companies. Valuations of BPO companies in India are continuing at a level where the creation of value for our shareholders from making an acquisition at these valuations was somewhat difficult to deliver. As a result the Board, in consultation with its key shareholders, decided to widen the search in terms of both geographic location and industry sectors for potential acquisitions and investments as we were not prepared to overpay for outsourcing assets in India. During the year there has been very careful cost control at the Company, even though there has been a significant level of activity as a result of our decision to broaden the investment search geographically and also to include sectors outside of the BPO market. Despite the challenges and after a long period of negotiations we successfully completed our first acquisition, with the purchase of the Mela Group which comprises of three Indian restaurants and an outside catering business in February 2008. Following the completion of the acquisition, the Company has changed its name to Indian Restaurants Group Plc. In addition, we are delighted to welcome Kuldeep Singh and Ashraf Rahman to the Board. Background for the Acquisition The total Consideration for the Acquisition was £1,998,999, satisfied by £100,000 in cash and the issue of the Consideration Shares (valued at 26.37p per share), of which £949,499 comprises Initial Consideration Shares and £949,500 comprises Deferred Consideration Shares, the issue of which is conditional on the achievement of certain targets. The Initial Consideration Shares represented 27.53 per cent. of the company's enlarged issued Share Capital and the Consideration Shares in total will represent 43.17 per cent. of the further enlarged share capital assuming the issue of the Deferred Consideration Shares. The Directors intend to create a chain of restaurants providing authentic, home style Indian food on a consistent basis across the Group. The Group will initially target (i) the mid market (pricing at approximately £25 per head) and (ii) the 'fast casual' dining market (pricing at approximately £15 per head). Additionally, based on the facilities of the chain, the Directors intend to extend the Group's brands into, sports catering, lunchtime takeaway menu and event catering including weddings. The Directors believe that the combination of the Mela Group's business and the Company's existing cash resources and its access to the equity market, has the potential for delivering positive returns to shareholders in both the short and medium term. The Directors believe that this strategy will create shareholder value and that the acquisition of the Mela Group satisfies the Company's investment criteria as the Mela Group offers it an experienced management team with a track record of building and managing businesses. This team will play an integral part of the future growth and expansion, an ability to generate revenue streams and an existing platform from which further growth can be developed. We intend to build upon the numerous awards received by the Mela Group and nominations including the Evening Standard London Tonight and Tio Pepe ITV London Restaurant Awards. The Directors believe that the key features of the Indian restaurant sector are that, it is well established with market size in excess of £3 billion; it is an extremely fragmented market with over 11,500 restaurants in the UK; and there is no current UK national branded provider and therefore opportunity to consolidate in this niche with the UK's first nationwide chain. The Directors believe that the Indian restaurant sector offers the opportunity for significant organic growth through the development of a branded chain of restaurants offering authentic cuisine consistently cooked to a high standard. The Mela Group, with its highly acclaimed restaurants, offers an outstanding opportunity to roll out the first UK chain of branded Indian restaurants under the Mela and Chowki brands. In addition, the Directors believe that there are consolidation opportunities within the fragmented Indian restaurant sector and envisage that the Group may be acquisitive in the future. Financials The Company has contained costs during the period and we are reporting a post tax loss of £262,797 compared to a restated post tax loss of £950,801 in the previous financial year. The main reason for the reduction in losses was the substantial reduction in due diligence costs year on year. The loss per share for the year is 2.8p compared to 15.3p for the year ending September 2006. As at the end of the year the Company had £2.5 million in cash and net assets of £2.4 million. The movement in the balance sheet cash and net assets is as a result of incurring a loss in the year. Outlook We are very excited about the strategy going forward and we look forward to the future with confidence. Results and dividends The directors do not recommend the payment of a dividend for the year (2006: £nil). Principal activities, trading review and future developments The principal activity of the company was to capitalise on acquisition and investment opportunities within the Business Process Outsourcing sector primarily in India. Post the year end following the acquisition of Indian restaurants the principal activity is to operate a chain of Indian restaurants. Haresh Kanabar Chairman 28 March 2008 Indian Restaurants Group Plc Profit and Loss Account for the year ended 30 September 2007 Notes Year ended 30 Year ended September 2007 30 September 2006 As Restated £ £ Administrative expenses (406,585) (1,035,705) ____________ ____________ Operating loss (406,585) (1,035,705) Net interest receivable 143,788 84,904 ____________ ____________ Loss on ordinary activities before taxation (262,797) (950,801) Tax on loss on ordinary activities - - ____________ ____________ Loss for the financial year (262,797) (950,801) ____________ ____________ Loss per share-basic and diluted 2 (2.8)p (15.3p) ____________ ____________ All amounts relate to continuing activities. Indian Restaurants Group Plc Statement of total recognised gains and losses for the year ended 30 September 2007 Year ended Year ended 30 September 2007 30 September 2006 Restated £ £ Loss for the financial year (262,797) (950,801) ____________ ____________ Total recognised gains and losses for the financial year (262,797) (950,801) Prior year adjustments- share based payments (as explained in note 1) (75,246) - ____________ Total gains and losses recognised since last financial statements (338,043) - Indian Restaurants Group Plc Balance sheet as at 30 September 2007 2007 2006 £ £ Fixed assets Tangible assets - 1,141 ____________ ____________ - 1,141 Current assets Debtors 28,660 24,404 Cash at bank and in hand 2,537,590 2,800,000 ____________ ____________ 2,566,250 2,824,404 Creditors: amounts falling due within one year (142,381) (186,777) ____________ ____________ Net current assets 2,423,869 2,637,627 ____________ ____________ Net assets 2,423,869 2,638,768 ____________ ____________ Capital and reserves Called up share capital 947,917 947,917 Share premium account 2,990,775 2,990,775 Profit and loss account (1,514,823) (1,299,924) ____________ ____________ Shareholders' funds 2,423,869 2,638,768 ____________ ____________ The financial statements were approved by the Board of Directors and authorised for issue on 28 March 2008 and were signed on its behalf by: HD Kanabar Director Indian Restaurants Group Plc Cash Flow Statement for the year ended 30 September 2007 Year ended Year ended 30 September 2007 30 September 2006 £ £ Net cash outflow from operating activities (369,053) (933,272) Returns on investments and servicing of finance Interest received 143,788 84,904 ____________ ____________ Net cash inflow from returns on investments and servicing of finance 143,788 84,904 ____________ ____________ Net cash outflow before financing (225,265) (848,368) Financing Issue of ordinary shares - 3,500,000 Expenses paid in connection with share issues - (248,572) ____________ ____________ Cash inflow from financing - 3,251,428 ____________ ____________ (Decrease)/ increase in net cash (225,265) 2,403,060 ____________ ____________ Notes to the financial statements 1 Accounting policies Basis of preparation The results have been prepared using accounting policies consistent with those used in the preparation of the statutory accounts. The financial information is derived from the financial statements for the Years ended 30 September 2006 and 2007, and does not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The financial statements on which the auditors have given an unqualified report do not contain a statement under Section 237 (2) or (3) of the Companies Act. Statutory Accounts for 2006 have been delivered to the Registrar of Companies and Accounts for 2007 will be delivered to the Registrar of Companies in due course. The financial statements have been prepared under the historical cost convention and in accordance with the United Kingdom, Generally Accepted Accounting Practice. The following principal accounting policies have been applied: Share-based payments The cost of equity-settled transactions with suppliers of goods and services is measured by reference to the fair value of the good or service received, unless that fair value cannot be estimated reliably. The fair value of the good or service received is recognised as an expense as the Group receives the good or service. The cost of equity-settled transactions with employees, and transactions with suppliers where fair value cannot be estimated reliably, is measured by reference to the fair value of the equity instrument. The fair value of equity-settled transactions with employees is recognised as an expense over the vesting period. The fair value of the equity instrument is determined at the date of grant, taking into account market based vesting conditions. The fair value is determined using an option pricing using Black Scholes model. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will ultimately vest, or in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity. Adoption of FRS 20 - Share- Based Payment The Company has adopted Financial Reporting Standard (FRS) 20 'Share-based Payment' during the year. The adoption of this standard constitutes a change in accounting policy. Therefore, the impact has been reflected as a prior year adjustment in accordance with FRS 3 'Reporting Financial Performance'. The standard requires that where shares or rights to shares are granted to third parties, including employees, a charge should be recognised in the profit and loss account based on the fair value of the shares at the date the grant of shares or right to shares is made. The adoption of FRS 20 has resulted in a net increase in the loss for the year of £47,898 and for the year ended 2006 the net increase in the loss was £75,246. There is no impact on the net assets of the Company. The share-based payments expense has been included in the administrative expenses line of the profit and loss account. 2 Loss per share The calculation of loss per share of 2.8 pence (2006: 15.3 pence as restated) is based on the loss for the year of £262,797 (2006: £950,801 as restated) and on the weighted average number of ordinary shares in issue during the year of 9,479,167 (2006: 6,197,116). Due to the losses incurred during the year a diluted loss per share has not been disclosed as this would serve to reduce the basic loss per share. There are share options outstanding at the end of the year that could potentially dilute basic earnings per share in the future. 3 Post Balance Sheet Events. The Board announced on 29 January 2008 that the Company had conditionally agreed to acquire the Mela Group. The consideration for the acquisition was £1,998,999, to be satisfied by £100,000 in cash and the issue of ordinary shares (' Consideration Shares') (valued at 26.37p per share) conditional, inter alia, on readmission to AIM and, in the case of the Deferred Consideration Shares, also conditional on the achievement of certain targets. The Mela Group, comprises a group of three companies holding between them three Indian restaurants and an outside catering business. In conjunction with the Acquisition, the Company increased its share capital, changed its name to Indian Restaurants Group Plc and increased its borrowing powers. The transaction took place on 26 February 2008. The Initial Consideration Shares represents 27.53 per cent. of the company's enlarged Share Capital and the Consideration Shares in total will represent 43.17 per cent. of the further enlarged share capital assuming the issue of the Deferred Consideration Shares. In view of the size of the Mela Group relative to the Company, the Acquisition constituted a reverse takeover of the Company under the AIM Rules and therefore required the prior approval of Shareholders at a General Meeting. The Annual Report will be posted shortly to all shareholders. Additional copies are available from 22 Soho Square, London W1D 4NS. This information is provided by RNS The company news service from the London Stock Exchange

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