Final Results

Restaurant Group PLC 09 March 2005 The Restaurant Group plc Record results for the year ended 31 December 2004 The Restaurant Group plc operates 272 restaurants in Leisure, Concessions and High Street sites. Its primary brands are Frankie & Benny's, Chiquito, Caffe Uno, Garfunkel's and Est Est Est 2004 2003 % change Turnover (£m) 255.4 227.4 +12.3 Adjusted pre-tax profit (£m)* 24.7 19.3 +28.4 Earnings per share (p)* 7.64 6.50 +17.5 Full Year Dividend (p) 4.20 3.65 +15.1 * Results are stated excluding exceptional items Key financial points • Strong performance across the estate giving rise to record results • Turnover rise driven by +5% like for like sales increases and 29 new restaurant openings • Group operating margin rose to over 10% • Cash generation of £50m has enabled self funding opening programme and contributed to reduction in net debt to £11m (2003: £38m) • Full year dividend up 15% Key operational points • Market leading positions in Leisure & Concessions • Leisure continues to perform superbly with sales and margins growing strongly • Concessions improved turnover by 25% with 11 new units opened • All High Street brands improved profits except Est Est Est 2005 • 25-30 new openings planned for 2005 • Current trading very encouraging with like for like sales of +3% • Discussions with Living Ventures continue Commenting on these results, Alan Jackson, the Executive Chairman, said: 'The Restaurant Group has delivered another excellent set of results. We've achieved this through focusing our business in the growing and more robust segments of the popular dining out market. We offer our wide customer base a high quality product at the right price and in the right location. 2005 has started well and I am confident that we will continue to deliver strong returns' 9 March 2005 Enquiries: The Restaurant Group plc Alan Jackson, Executive Chairman 020 7457 2020 (today) Andrew Page, Group Managing Director 020 7747 7750 (thereafter) Stephen Critoph, Finance Director College Hill Matthew Smallwood 020 7457 2020 Executive Chairman's Statement It gives me great pleasure to report that The Restaurant Group plc has again delivered record results for 2004. An excellent top line performance, driven by a like for like sales increase of 5% resulted in our profit before tax increasing by one-third on the prior year. The business was strongly cash generative with net debt reducing by £27m to £11m and our balance sheet is now stronger than at any time in the Group's recent history. Against a competitive background and some uncertainty regarding the sustainability of consumer spend, these results represent a very creditable performance. Building on an excellent first half performance, the Group continued its profitable development during the second half of 2004. Adjusted pre-tax profits increased by 28% to £24.7m* (2003: £19.3m) with turnover increasing by 12.3% to £255.4m (2003:£227.4m). Adjusted earnings per share increased by 17.5% to 7.64p* (2003: 6.5p). In light of this strong performance, the Board is recommending an increased final dividend of 3.375p per share (2003: 2.9p), an increase of 16.4%, giving a total dividend for 2004 of 4.2p per share; an increase of 15% (2003: 3.65p). Subject to approval at the Annual General Meeting, the final dividend will be payable on 6 July 2005 to shareholders on the register on 10 June 2005 and will be marked ex-dividend on 8 June 2005. *Results are stated excluding exceptional items The increased profit was the product of strong like-for-like growth from our existing estate, excellent returns from new restaurants, cost savings from purchasing initiatives and operational efficiencies and lower interest charges. This combination represents a very healthy background to our continuing profitable development. Throughout 2004 we continued to adhere to our strategy for growth with a significant amount of capital investment in new restaurant units in both our Leisure and Concessions divisions. During the year we opened a total of 29 new units and I am pleased to report that we are generating excellent returns from these restaurants. Our rigorous approach to investment appraisal has ensured that we consistently generate strong returns and cashflow from new unit development. I have previously mentioned the leading positions which we occupy in two of our three chosen markets, namely Leisure and Concessions. This has enabled us to continue to deliver higher profits in each of these segments. Group wide, all but one of our brands made higher profits than last year. Our Leisure division had an extremely good year which saw operating profits increase by 29%. Fifteen new Frankie & Benny's restaurants were opened during the year and two new Chiquito's. The turnaround of our Chiquito business has been dramatic and the steady build up of like-for-like sales growth which we reported at the half year stage accelerated during the second half. Chiquito's operating profits increased by almost 40% in 2004. Our Concessions business underwent a significant amount of new unit development during the second half of 2004. This has put the division into a very strong position to drive sales, profit and cashflow growth going forward. The division produced good results for the year with profits increasing by 22%. Against a very competitive landscape most of our High Street business traded well during 2004. Profits in both Garfunkel's and Caffe Uno were higher than the previous year. However, Est Est Est continued to suffer severe competitive pressures in a handful of its 19 locations and this had an adverse impact on its performance. As a result Est Est Est's profits were significantly down on the prior year. As announced on 11th February we can confirm that we are in discussions with Living Ventures Limited (Living Ventures) about potentially making an investment in that company and also to sell Est Est Est to Living Ventures at the same time. Negotiations are ongoing and we will make a further announcement when appropriate. The Living Ventures business currently comprises 15 units operating three concepts: 11 Living Room restaurants and bars, 2 Prohibition bars and 2 Bar & Grill outlets. Living Ventures is a highly successful business with good potential for further rollout of all three concepts. Its customer base is quite similar to that of Est Est Est. We believe that the Living Ventures team, which possesses significant entrepreneurial flair, operational skills and marketing expertise, will be of great benefit to Est Est Est. 2004 was an exciting and highly profitable year for the Group and I am delighted to report that the start to 2005 has seen a continuation of this trend. Early signs are very encouraging with like-for-like sales currently 3% ahead. This, combined with our focus on securing further operational efficiencies and our plans for rolling out new units in the Leisure and Concession divisions leave us well placed to further develop our business. These excellent results could not have been achieved without the skill and dedication of our senior management team and the commitment of all of our staff. On behalf of the Board I would like to thank them all for their valued contribution over the past twelve months. We have an excellent management team, strong finances, leading brands, an exciting pipeline of new sites and a robust strategy. I am confident that we will continue to make further progress during the coming year. Alan M. Jackson Executive Chairman 9 March 2005 Group Managing Director's Review of Operations The Group made good progress during 2004 and has produced a strong set of results. Operationally we have been able to show significant improvement in most of our brands and the overall performance of the Group measures up well both against the leisure sector generally and the restaurant sector in particular. Financially the business is in very good shape with a strong balance sheet, very healthy conversion of profits into cash and good growth in both earnings and cashflow per share. Throughout 2004 we stuck to our strategy for profitable growth and focused our capital expenditure on new unit development in the two areas where we hold leading market positions: Leisure and Concessions. We also ensured that we maintained the whole of our estate to a high standard and this has resulted in improved profit delivery from all but one of our brands. In terms of our key performance metrics we showed significant improvement on the prior year with a 12% increase in turnover yielding a 17% increase in EBITDA and a 19% increase in operating profit. I am delighted that for 2004 we exceeded one of our key medium term targets, set at the beginning of 2003, of achieving an operating profit margin of 10%. The Group's ability to generate strong cashflow has resulted in a further reduction in net debt and an interest charge 54% lower than the previous year. Leisure Total turnover: £124.6m Profit: £25.7m Operating margin: 20.6% Frankie & Benny's Units: 101 Turnover: £97.4m Like-for-like sales: +7.9% Frankie & Benny's performed superbly throughout the year and enjoyed strong sales growth underpinned by an 8% increase in like-for-like sales. Turnover, EBITDA and profits all increased with the EBITDA and operating profit margins growing strongly. During 2004 we opened fifteen new Frankie & Benny's restaurants and these are all trading well. At the end of 2004 we had a total of 101 units trading including three in Spain. Frankie & Benny's continues to deliver excellent returns and these remain consistently good across the whole estate with the more recent years' openings delivering strong returns just as the older units continue to do. We are particularly pleased with the results of our units which do not occupy sites alongside multi-plex cinemas. Typically these 'non-cinema' units are located in out of town sites with adjacent leisure retail activities. The excellent results being achieved by these sites give us confidence that we can further accelerate the growth of Frankie & Benny's at other 'non-cinema' locations. During 2005 we are aiming to open approximately 20 new Frankie & Benny's restaurants. Early this year we will open our 100th restaurant in the UK and we will also celebrate the tenth anniversary of Frankie & Benny's. We are marking this important event by joining with the BBC's Children in Need Appeal with restaurants organising fund raising activities in their locality. Chiquito Units: 25 Turnover: £27.2m Like-for-like sales: +5.8% Chiquito has performed exceptionally well during 2004 with profits increasing by nearly 40%. In mid-2003 we put a new management team into this brand. After an initial period of stabilising the business the team began, in early 2004, to embark on a refocusing and refurbishment programme for the brand. By the end of 2004 approximately one half of the units had been refurbished in a softer, more contemporary and more female and family friendly style. Changes to the menu offering with a sharper focus on quality, freshness and authenticity were also implemented. Staff and employee motivation was enhanced through a combination of training and reward and incentive programmes. By the half year stage it was apparent that this brand had not only been stabilised but that it represented a real growth opportunity. During the second half we opened two new Chiquito restaurants (in Cardiff and Southampton) and the first few months' results from these units are highly encouraging with good sales and returns. During 2005 we will conclude the refurbishment programme at Chiquito and we currently anticipate that we will open between 3-5 new restaurants this year. Concessions Units: 36 Total turnover: £48.9m Like-for-like sales: +12.0% Profit: £7.0m Operating margin: 14.4% Our Concessions division had a very busy year with a total of 11 new unit openings. This division now consists of 36 units of which 33 are situated on airports. Turnover increased by almost 25% and this resulted in a 22% increase in operating profit. During 2004 we opened a new balcony food court at Gatwick, comprising five units, which is trading well. We also opened a new Est Est Est unit at the Trafford Centre in Manchester, the trading of which has, so far, exceeded our expectations. The quality of earnings and cash flow from our concession units is high and we occupy a market leading position in the provision of food and beverages in UK airports. We are particularly encouraged with the performance of our units in airports where we are enjoying growth in turnover per square foot in excess of the growth in passenger numbers. The auguries for this business are good with strong growth forecast in air travel and, more particularly, good growth in passengers flying with low cost airlines. During 2005 we expect to add up to six new units in our Concessions business whilst seeing the benefit of the significant increase in new units opened during 2004 flow through to the bottom line. 2005 has started well and we are delighted to have recently been awarded three new concession units at Luton airport. These will open in the summer of 2005. High Street Restaurants Total turnover: £81.9m Profit: £11.9m Operating margin: 14.5% Garfunkel's Units: 31 Turnover: £26.1m Like-for-like sales: +2.5% Garfunkel's traded well during 2004, with a 5% increase in turnover. Like-for-like sales increased by 2.5% which, in a competitive market place, represents a creditable performance. Close attention to costs and operating efficiencies meant that margins also improved. Garfunkel's, which is now in its 26th year, continues to generate excellent returns and strong cash flow. During 2004 we refurbished a small number of our London units in a more contemporary style and we anticipate this exercise continuing during 2005. We have a very stable and enthusiastic team in the Garfunkel's business and the gradual evolution of the offering should enable us to continue to deliver good returns. Caffe Uno Units: 60 Turnover: £38.5m Like-for-like sales: -1.0% Caffe Uno traded reasonably well during 2004 in a very competitive segment of the popular dining market. During the year there was significant focus on driving through more operational efficiencies and this meant that, despite a lower level of turnover, the business made higher profits than last year and enjoyed an improvement in operating profit margin. During 2005 we will be looking to continue the tight control on costs and margins whilst also looking for an improvement in top line turnover. Est Est Est Units: 19 Turnover: £17.2m Like-for-like sales: -2.1% Est Est Est comprises 19 units and accounts for about 7% of Group turnover. As previously reported we have faced particularly tough competitive conditions in a handful of our Est Est Est units. Despite tight cost controls the impact of this increased competitive supply in certain locations has resulted in a 7% drop in turnover and a lower level of operating profit than last year. Non-Core Brands Total turnover: £0.1m Loss: (£1.5m) During the year losses from non-core activities increased from £1.1m to £1.5m. At the end of 2004 we disposed of a number of non-core units which previously made a profit contribution - this had the effect of increasing the aggregate losses from non-core units but, concomitantly, has the benefit of yielding cash proceeds for the Group and thus saving interest costs. We will continue to take steps to mitigate the losses from non-core units. Future prospects 2004 was a good year for the Group, building on the foundations laid in the previous two years. We have an excellent business which is clearly focused across three distinct market segments, each with differing dynamics, which lends a high quality balance to the Group's earning and cashflows. Our financial strength and management resource means that we are well placed to not only continue to drive higher returns from our existing units but also to accelerate expansion in those areas where we are confident of securing high returns. At The Restaurant Group, we have a business which occupies market leading positions in two of our three segments and a portfolio of units that positions us well to continue to deliver good growth in earnings and cashflow. We remain focused on delivering high quality and good service to all of our customers, to sticking to our area of expertise and most importantly continuing to grow shareholder value. Andrew Page Group Managing Director 9 March 2005 Finance Director's Review Results * As noted in the Executive Chairman's statement the Group has had another very strong year. Total Group turnover for the year increased by 12.3% to £255.4m (2003: £227.4m). This was the result of a highly satisfactory 5% growth in like for like sales plus the impact of new unit openings as described in the Group Managing Director's review of operations. EBITDA increased by an impressive 17.2% to £43.1m, and operating profit increased by 18.9% to £25.9m. It is very pleasing to see that the Group has made further progress again this year in improving margins with operating margin increasing from 9.6% to 10.1%. Group interest costs reduced from £2.5m to £1.2m, reflecting further reductions in net debt during the year as a result of strong cash flow and the £13.4m placing in January 2004. Profit before tax at £24.7m is up 28% compared to prior year, resulting in a 17.5% increase in normalised earnings per share to 7.64p (2003: 6.50p). * Results are stated excluding exceptional items Exceptional Items Exceptional charges during the year amounted to £2.6m net (2003: £2.6m). During the year the Group disposed of a number of properties resulting in a loss on disposal of £0.6m. In addition provision has been made for losses on a number of properties where disposal was at an advanced stage of negotiations at the year end (£1.9m). Also included are the write off of £0.5m in respect of consideration due from DPP Restaurants Limited (as announced in November 2004), partially offset by release of an over accrual and costs recovered of £0.46m relating to the aborted acquisition of ASK Central plc. Financing Following the Extraordinary General Meeting held on 14 January 2004, the Company placed 19,430,000 shares (representing approximately 10% of the then existing share capital) on 15 January 2004, at a price of 71p per share which represented a discount of 1.4% to the closing mid-market price on 17 December 2003 (the last Dealing Day prior to the announcement of the Placing). The Placing raised £13.4m net of expenses, further reduced the Group's net debt and is being used to fund the continued roll-out of the Group's successful branded restaurant concepts. In addition the Company has issued 2.6 million shares following the exercise of share options by employees and directors of The Restaurant Group plc. Cashflow and Balance Sheet The Group continues to be strongly cash generative. Cash flow from operations was £49.5m, an increase of 30% compared to prior year. This resulted from the strong growth in operating profit referred to above combined with a net working capital inflow of £6.0m. Total capital expenditure in the year was £26m, a 28% increase on prior year. It is extremely encouraging to see that the Group's internally generated cash flow is sufficient to support this increased level of investment, while at the same time overall Group net debt has reduced from £38.2m last year end to £11.3m. Group interest cover (the number of times net interest charges are covered by operating profit) in 2004 was 22.4 times (2003: 7.9 times). Before exceptional items interest cover was 22 times (2003: 8.6 times). Group gearing (net debt as a percentage of net assets) was 16% compared to 76% in 2003. Clearly the Group's financial position by either of these measures has strengthened considerably in the year. In assessing the appropriate capital structure of the Group other ' gearing' factors also need to be considered, in particular the Group's ongoing net property rental costs, which were £32.5m in 2004 (2003: £28.2m). Capital Expenditure During the year the Group invested £26.0m (2003: £20.4m) in opening 29 new units (2003: 18 new units) and in maintaining the existing estate to a high standard. The Group operates a rigorous investment appraisal process. The financial viability of all significant projects is subject to a detailed review by reference to a financial model which relates the expected return on investment to the Group's cost of capital. This process includes a critical assessment of the underlying trading and other assumptions factored into the model. All new sites are reviewed and approved by the Board. The Group also conducts post-investment appraisals on new sites and these have indicated continued strong performance. Deep Pan Pizza ('DPP') On 17 November 2004 the Group announced that it had been granted an option to take full control of DPP in the event of certain events taking place. The total net amount receivable from DPP at the date of the announcement was £1.8m in rent and £0.5m of deferred consideration. As indicated at the time of the announcement the Group has made full provision against the deferred consideration as an exceptional charge in the 2004 accounts. The level of net rent receivable has subsequently reduced to £1.5m at the year end. On 31 December 2004 the option became exercisable following a failure on the part of DPP to make a payment due under the warrant agreement. The option has not been exercised to date and we continue to monitor the situation closely. Taxation The taxation charge for the year amounted to £7.0m (2003: £5.6m). This consists of a mainstream corporation tax charge of £7.7m and a deferred tax credit of £0.7m. An analysis of the current year tax charge is set out in note 3 of the abridged accounts attached to this statement. The tax charge incorporates an adjustment to deferred tax to take account of capital losses now expected to be available to the Group. Excluding this the underlying tax charge under FRS 19 is 34% (2003: 34%). International Financial Reporting Standards ('IFRS') & Disclosure Changes Listed institutions are required to report their consolidated financial statements under IFRS for accounting periods commencing on or after 1 January 2005. Consequently our first published financial statements under IFRS will be the 2005 Interim Results. We are currently completing our detailed analysis of the impact of IFRS and we will be making an announcement during the second quarter of 2005 on this subject. It should be noted that following the Deep Pan Pizza ('DPP') warrant option becoming exercisable (see above), under IAS 27 we will be required to consolidate the results of DPP, regardless of whether the option has been exercised or not. In the interim 2005 results announcement we also intend to make some changes to the level of disclosure that is currently given. Subject to any modifications required by IFRS it is our intention to maintain the divisional segmental analysis in its current format, showing turnover and profit by division and cease disclosing sales and like for like sales performance by brand. We will continue to report like for like sales on a total Group basis. Stephen Critoph Finance Director 9 March 2005 Segmental Analysis Year ended 31 December Year ended 31 December 2004 2003 Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure 124,634 32,179 25.8% 25,687 20.6% 104,102 25,127 24.1% 19,962 19.2% Concessions 48,882 9,925 20.3% 7,018 14.4% 39,152 8,586 21.9% 5,754 14.7% High Street 81,855 17,824 21.8% 11,880 14.5% 83,247 17,517 21.0% 12,013 14.4% Restaurants Principal Trading 255,371 59,928 23.5% 44,585 17.5% 226,501 51,230 22.6% 37,729 16.7% Brands Non-core Brands 75 (1,270) - (1,496) - 937 (746) (79.6%) (1,140) (121.7%) Total all Brands 255,446 58,658 23.0% 43,089 16.9% 227,438 50,484 22.2% 36,589 16.1% Pre opening Costs (948) (0.4%) (948) (0.4%) (403) (0.2%) (403) (0.2%) Administration (14,628) (5.7%) (16,237) (6.4%) (13,327) (5.9%) (14,393) (6.3%) EBITDA / Operating 43,082 16.9% 25,904 10.1% 36,754 16.2% 21,793 9.6% Profit* Interest Charges (1,179) (2,539) Profit before 24,725 19,254 Taxation and Exceptional Items Exceptional Items (2,597) (2,613) Profit on ordinary 22,128 16,641 activities before taxation No geographical segment analysis has been provided as the Directors do not consider there to be materially significant geographical segments. The Group currently operates three restaurants outside of the United Kingdom. No segmental analysis for net assets has been provided as the Directors consider this would be prejudicial to the Group. * EBITDA and Operating Profit are stated before exceptional costs Profit and Loss Account Unaudited preliminary results for the year ended 31 December 2004 2004 2003 Before Exceptional Exceptional Items Items Total Total Note £'000 £'000 £'000 £'000 Turnover 255,446 - 255,446 227,438 Cost of sales: Excluding pre-opening costs (212,357) - (212,357) (190,849) Pre-opening costs (948) - (948) (403) (213,305) - (213,305) (191,252) Gross profit 42,141 - 42,141 36,186 Administrative expenses: Excluding exceptional items (16,237) - (16,237) (14,393) Exceptional items 2 - 457 457 (1,630) (16,237) 457 (15,780) (16,023) Operating profit 25,904 457 26,361 20,163 Loss on termination of business 2 - (500) (500) Loss and provision for loss on disposal 2 - (2,554) (2,554) (983) of tangible fixed assets Net interest payable (1,179) - (1,179) (2,539) Profit on ordinary activities before 24,725 (2,597) 22,128 16,641 taxation Tax on profit on ordinary activities 3 (7,747) 708 (7,039) (5,606) Profit on ordinary activities after 16,978 (1,889) 15,089 11,035 taxation Dividends 4 (9,083) (7,655) Retained profit for the year 6,006 3,380 All amounts relate to continuing activities. Earnings per share 5 Basic earnings per share, in pence 7.06 5.68 Basic earnings per share, excluding 7.95 6.66 exceptional items, in pence Diluted earnings per share, in pence 7.05 5.64 Basic earnings per share, excluding 7.64 6.50 exceptional items and taxation over provision from prior years, in pence Statement of total recognised gains and losses Unaudited preliminary results for the year ended 31 December 2004 2004 2003 Note £'000 £'000 Profit for the financial year 15,089 11,035 Currency translation differences on foreign currency investments (36) 204 Total recognised gains and losses relating to the year 15,053 11,239 Reconciliation of movements in shareholders' funds Total recognised gains and losses for the year 15,053 11,239 Dividends 4 (9,083) (7,655) Issue of ordinary shares - Placing on 15 January 2004 13,427 - Issue of ordinary shares - exercise of share options 1,314 - Total movements during the year 20,711 3,584 Shareholders' funds at 1 January 50,144 46,560 Shareholders' funds at 31 December 70,855 50,144 Group balance sheet Unaudited preliminary results for the year ended 31 December 2004 As at 31 December 2004 2003 £'000 £'000 Fixed assets Tangible assets 149,683 146,220 Current assets Stocks 2,437 2,508 Debtors 14,524 15,999 Cash at bank and in hand 482 526 17,443 19,033 Creditors Amounts falling due within one year (72,554) (62,650) Net current liabilities (55,111) (43,617) Total assets less current liabilities 94,572 102,603 Creditors Amounts falling due after one year (7,000) (35,000) Provisions for liabilities and charges Property provision (625) (687) Deferred tax (16,092) (16,772) Total provisions for liabilities and charges (16,717) (17,459) Net assets 70,855 50,144 Capital and reserves Called up share capital 54,087 48,576 Share premium account 19,422 10,192 Profit and loss account (2,654) (8,624) Shareholders' funds - equity 70,855 50,144 Group statement of cash flows Unaudited preliminary results for the year ended 31 December 2004 2004 2003 Note £'000 £'000 Net cash flow from operating activities 6 49,538 37,955 Returns on investments and servicing of finance Interest received 98 221 Interest paid (1,476) (2,683) Net cash outflow from returns on investments and servicing (1,378) (2,462) of finance Taxation Corporation tax paid (6,753) (3,295) Capital expenditure Payments to acquire tangible fixed assets (26,021) (20,375) Receipts from sales of tangible fixed assets 4,719 988 Net cash outflow for capital expenditure (21,302) (19,387) Acquisitions and disposals Net proceeds received from the disposal of Deep Pan Pizza - 427 Net cash inflow from acquisitions and disposals - 427 Equity dividends paid (7,977) (6,801) Cash inflow before financing 12,128 6,437 Financing Loans taken out 7 - 43,000 Loans repaid 7 (28,000) (53,657) Net proceeds received from issue of shares 14,741 - (13,259) (10,657) Decrease in cash in the period 7 (1,131) (4,220) Notes to the accounts For the year ended 31 December 2004 1) Deep Pan Pizza In December 2001 The Restaurant Group plc ('TRG') disposed of the Deep Pan Pizza ('DPP') business for a consideration of £3.3m of which £1m was paid on completion with the balance to be paid on a deferred basis. Since then, a further £1.8m has been received, leaving an outstanding balance of £500,000. DPP has faced a challenging trading environment during the latter part of 2004 and has sought to counter this through a programme of estate rationalisation and in so far as its financial resources have permitted by investing in and refreshing some restaurants. Throughout this time DPP has enjoyed the continuing support of its bank and the support of TRG through the facilitation of delayed settlement of rent. On 17 November 2004 TRG announced that it had deferred settlement of the outstanding consideration due from DPP and had taken a warrant which incorporates an option (exercisable in certain specified circumstances) to convert its outstanding £500,000 deferred consideration balance into new DPP ordinary shares at par. The option became exercisable on 31 December 2004 but TRG has currently not chosen to convert the warrant. If TRG were to exercise its option it would gain full control of DPP. As noted in the announcement on 17 November 2004 full provision has been made for the deferred consideration due from DPP and this is highlighted in note 2 (exceptional items). As at 31 December 2004 the net rent receivable from DPP was £1.5m. 2) Exceptional items 2004 2003 £'000 £'000 a) Net costs recovered / (incurred) in respect of the aborted bid for ASK 457 (1,183) Central plc b) Payments in respect of termination of employment contract - (447) Net exceptional costs included in operating profit 457 (1,630) c) Provision in respect of deferred consideration due from Deep Pan Pizza (500) - d) Loss and provision for loss on disposal of properties (2,554) (983) Total exceptional costs (2,597) (2,613) Impact on taxation of exceptional items 708 714 Net impact on earnings of exceptional items (1,889) (1,899) 3) Taxation 2004 2003 £'000 £'000 a) The taxation charge comprises: Current taxation UK Corporation tax at 30% (2003: 30%) 7,601 5,425 Adjustments in respect of previous periods 118 (313) 7,719 5,112 Deferred taxation Origination and reversal of timing differences 148 494 Adjustments in respect of previous periods (828) - (680) 494 7,039 5,606 b) Factors affecting the corporation tax charge for the year The tax assessed for the year is higher than the standard UK corporation tax rate of 30% due to the following factors: 2004 2003 £'000 £'000 Profit on ordinary activities before taxation 22,128 16,641 Profit on ordinary activities before taxation multiplied 6,638 4,992 by the standard UK corporation tax rate of 30% (2003: 30%) Effects of: Capital allowances for period in excess of depreciation (197) (466) Net expenses not deductible for tax purposes 1,160 899 Movement in respect of prior years 118 (313) 7,719 5,112 4) Dividend 2004 2003 £'000 £'000 Interim paid of 0.825p per share (2003: 0.75p) 1,779 1,457 Final proposed of 3.375p per share (2003: 2.90p) 7,304 6,198 9,083 7,655 The proposed dividend, if approved by shareholders at the Annual General Meeting, will be paid on 6 July 2005. 5) Earnings per share 2004 2003 a) Basic earnings per share: Weighted average ordinary shares in issue during the year: 213,638,719 194,301,733 Total basic profit for the year (£'000): 15,089 11,035 Basic earnings per share for the year (pence) 7.06 5.68 Effect of exceptional items on earnings for the year (£'000) 1,889 1,899 Earnings excluding exceptional items (£'000) 16,978 12,934 Adjusted earnings per share (pence) 7.95 6.66 Taxation over provision from prior years (£'000) (666) (313) Earnings excluding exceptional items and taxation over provision from prior years (£'000) 16,312 12,621 Basic earnings per share excluding exceptional items and 7.64 6.50 taxation over provision from prior years (pence) b) Diluted earnings per share: Weighted average ordinary shares in issue during the year: 213,638,719 194,301,733 Dilutive shares to be issued in respect of options granted under the Share Option Schemes: 315,824 1,418,767 213,954,543 195,720,500 Diluted earnings per share (pence) 7.05 5.64 Diluted earnings per share excluding exceptional items (pence) 7.94 6.61 Diluted earnings per share excluding exceptional items and taxation over provision from prior years (pence) 7.62 6.45 The additional Earnings Per Share information (where exceptional items and the taxation over-provision release relating to prior years have been added back) has been provided as the Directors believe they provide a useful indication as to the underlying performance of the Group. 6) Reconciliation of operating profit to net cash inflow from operating activities 2004 2003 £'000 £'000 Operating profit 26,361 20,163 Depreciation 17,178 14,961 Decrease / (increase) in stocks 71 (242) Decrease / (increase) in debtors 975 (3,090) Increase in creditors 4,953 6,163 Net cash inflow from operating activities 49,538 37,955 7) Reconciliation of changes in cash to the movement in net debt 2004 2003 £'000 £'000 At the beginning of the period (38,163) (44,600) Movements during the period: Loans taken out - (43,000) Loans repaid 28,000 53,657 Cash outflow (1,131) (4,220) At the end of the period (11,294) (38,163) Represented by: At Cash flow At 1 January movements 31 December 2004 in the year 2004 £'000 £'000 £'000 Cash at bank and in hand 526 (44) 482 Overdrafts (3,689) (1,087) (4,776) (1,131) Bank loans due after one year (35,000) 28,000 (7,000) (38,163) 26,869 (11,294) 8) Basis of preliminary statement The financial information set out above has been prepared on the basis of the accounting policies set out in the Group's 2003 statutory accounts. It does not constitute the company's statutory accounts for the years ended 31 December 2004 or 2003, but is derived from those accounts. Statutory accounts for 2003 have been delivered to the Registrar of Companies and those for 2004 will be delivered following the company's annual general meeting. The auditors have not yet reported on the 2004 accounts but do not expect their report to be qualified. Their report on the 2003 accounts was unqualified and did not contain statements under the Companies Act 1985, s237(2) or (3). This information is provided by RNS The company news service from the London Stock Exchange

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