Final Results
Restaurant Group PLC
08 March 2006
The Restaurant Group plc
Full year results for year ended 1 January 2006
The Restaurant Group plc operates 237 branded restaurants predominantly in
leisure locations and airports. Its primary brands are Frankie & Benny's,
Chiquito, Garfunkel's and Blubeckers.
2005 2004 % change
Adjusted revenue (£m)* 287.3 255.4 +12.5
Adjusted EBITDA (£m)* 50.0 43.3 +15.5
Adjusted profit before tax (£m)* 29.5 24.4 +21.0
Profit before tax, after non-trading items and DPP (£m) 32.1 21.0 +52.9
Adjusted earnings per share (p)* 9.08 7.84 +15.8
Earnings per share, after non-trading items and DPP (p) 10.78 6.59 +63.6
Proposed full year dividend (p) 4.75 4.20 +13.1
* Results are stated before non-trading items and DPP. Further information is
provided in note 2 to the financial information.
Key financial
• Like for like sales up 3% for the year
• Profit before tax, DPP and non-trading items up 21%
• Operating profit margin* increased by 90 basis points
• EPS (excluding non-trading items and DPP) up 16%
Key operational
• Significant corporate activity reduced exposure to the challenging
high street sector
Leisure
• Frankie & Benny's enjoyed another superb year with strong
like-for-likes and excellent returns
- EBITDA and profit increased significantly
- 14 new sites opened
• Chiquito
- Good growth in turnover, EBITDA and profit
- Nine new units opened
• Garfunkel's
- Challenging year with effects of London bombings
- Returned to previous trading levels
• Blubeckers
- Integration complete
- Good financial performance
- Site pipeline developing
Concessions
• Excellent year
• Eight new units opened
• Awarded concession to operate three brands at Birmingham International
Airport
Current Trading
• Continued good trading; like for like sales for nine weeks to 5 March
2006 at 4%
• 25-30 new sites in pipeline for 2006
Commenting on these results, Andrew Page, Chief Executive said:
'2005 was another good year. We have an excellent business, strong finances,
great people, market leading brands and a proven strategy for growth. We have
the capacity to fund significant future growth from new developments whilst
continuing to grow profits from our existing estate. We are confident that we
will make further good progress in the coming year.'
8 March 2006
Enquiries:
The Restaurant Group plc
Alan M Jackson, Chairman 020 7457 2020 (today)
Andrew Page, Chief Executive 020 7747 7750 (thereafter)
Stephen Critoph, Group Finance Director
College Hill
Matthew Smallwood 020 7457 2020
Chairman's Statement
Results are stated excluding non-trading items and DPP, as set out in more
detail in note 2.
I am delighted to report that, for the fourth successive year, the Group has
produced another excellent set of results. Against a challenging economic
backdrop and a more fragile consumer environment our business has continued to
prosper. Our brands delivered a like-for-like sales increase of 3% which, when
measured against a 5% increase in the previous year, was a fantastic
performance. As a result, our adjusted profit before tax increased by 21% on the
prior year. Cash generation was strong and we were able to finance the roll out
of 32 new restaurants from internally generated funds.
2005 was also a busy year for the Group on the corporate front with the sale in
March of Est Est Est to Living Ventures Limited ('LV') and the simultaneous
acquisition of a 40% shareholding in LV. At the end of June we purchased
Blubeckers for £27m in cash and we are delighted with its performance during our
first eight months of ownership. In December we sold the Caffe Uno business for
£33m in cash. We had, for some time, been concerned about the long-term
sustainability of profit and cashflow from our high street businesses (Est Est
Est and Caffe Uno) which operated in the increasingly competitive and rather
crowded high street pizza and pasta market. As a result of these disposals and
our acquisition of Blubeckers, our focus is now on non-high street locations.
The majority of our continuing business is located in areas where there are
distinct barriers to entry, where we are confident of delivering good growth in
profits and cashflows and of generating high returns on investment.
Simultaneously with the sale of Caffe Uno we also announced our intention to
return up to £35m to shareholders.
Building on an excellent first half performance, we continued our profitable
progress during the second half of 2005. Full year adjusted pre tax profits
increased by 21% to £29.5m (2004: £24.4m) with turnover from principal trading
brands increasing by 25% to £248.8m (2004: £199.6m). Adjusted earnings per share
increased by 16% to 9.08p (2004: 7.84p). As a result of this strong performance
the Board is recommending an increased final dividend of 3.84p per share (2004:
3.375p) an increase of 14%, giving a total dividend for 2005 of 4.75p per share,
an increase of 13%. Subject to approval at the Annual General Meeting, the final
dividend will be payable on 5 July 2006 to shareholders on the register on 9
June 2006 and will be marked ex-dividend on 7 June 2006.
Our Leisure and Concessions divisions traded well throughout the year, with both
recording significant increases in profits and cashflows and both divisions
ended the year on a strong note. During 2005 we opened a total of 32 new units
and these have all traded well. The new openings included seven sites that we
acquired from the Deep Pan Pizza Company and the performance of these new
openings has been superb. Since the year end we have assumed control over the
remaining 27 sites currently trading as Deep Pan Pizza and it is our intention
to convert many of these into our Leisure brands.
Our Leisure division (which now incorporates Frankie & Benny's, Chiquito's,
Blubeckers and Garfunkel's) had an excellent year. Notwithstanding the
devastating impact on Garfunkel's second half trade as a result of the London
bombings, the Leisure division recorded a 30% increase in operating profit.
During the year we opened 14 new Frankie & Benny's and nine new Chiquito's. 2005
also saw Frankie & Benny's open its one hundredth restaurant (in Livingston) and
the brand continues to go from strength to strength. Chiquito's turnaround is
now complete and profits for this brand increased by almost 50%. We are
confident that we can continue to grow Chiquito and we have been particularly
encouraged by the results of units co-located with Frankie & Benny's.
Our Concessions division also enjoyed a busy year with eight new units opened.
Of these, three were new shopping centre sites and five were airport sites. We
are pleased with the performance of our new openings and the growth that we have
achieved in this division.
As previously mentioned we have largely disposed of our high street restaurants.
During 2005 the Caffe Uno business struggled against an increasingly competitive
background and as a result its full year contribution to Group profit was about
25% lower than the previous year.
Our Est Est Est business was sold to Living Ventures at the end of the first
quarter and simultaneously we acquired a 40% shareholding in Living Ventures.
The LV team have had a busy year, integrating and repositioning the Est
business, and we are expecting to see the benefits from these efforts flow
through in 2006 and beyond. Since the year end we have returned to shareholders
by way of a special dividend the majority of the cash received from the two
disposals.
It is worth noting that the strategy for growth that we put in place at the end
of 2001 has resulted in a turnover increase between 2001 and 2005 of 83% in the
Leisure division and 93% in the Concessions division. Over the same period
profits have increased by 128% and 75% respectively. Our strong position in
these two markets means that we are well placed to continue to deliver good
growth.
You will note that there have been a number of changes to the accounting rules
following the introduction of International Financial Reporting Standards which
has had an impact on the way our results are presented. However, it is very
clear that whatever accounting basis is applied, these are an excellent set of
results and they are a testament to the hard work and dedication of the
management team and staff. On behalf of the Board, I would like to thank them
all for their valued contribution over the past year.
2005 was another good year for the Group. I am pleased to report that 2006 has
also started well with like-for-like sales for the first nine weeks 4% ahead. We
plan to open 25-30 new restaurants this year, we will continue to focus on ways
to further improve profitability and we will continue to invest in our people
and systems. We have an outstanding business with leading brands, a strong
pipeline of new sites, a great team and a proven strategy for growth. I am
confident that we will continue to make further good progress during the coming
year.
Alan M Jackson
Chairman
8 March 2006
Chief Executive's Review of Operations
Results are stated excluding non-trading items and DPP, as set out in more
detail in note 2.
Introduction
2005 was both an exciting and challenging year for TRG. Whilst we were very
active on the corporate front, delivering change which we believe will be value
accretive for the Group, we also remained closely focused on our core business
and secured further profitable growth.
Although 2005 was a tough year for companies operating in consumer-facing
businesses, our profits (and profitability) showed significant improvement in
both of our core divisions. Overall we have delivered a full year adjusted
profit before tax increase of 21%. We have also secured significant improvement
in our margins through scale, increased trading levels, efficiencies and
operational improvements and this has resulted in an improvement of 90 basis
points in our adjusted operating profit margin.
As last year, there has been a very healthy conversion of profits into cash and
strong growth in both earnings and cashflow per share. As a result, the Group
finances continue to be strong and our rollout programme has been funded from
internally generated cashflows. Following the sale of our Caffe Uno business in
December 2005, we announced the intention to return £35 million to shareholders
by way of a Special Dividend on 9 March 2006. The Group carries a manageable
level of debt, has a strong balance sheet and is well placed to continue to fund
its growth.
Our focus during 2005 has been very much geared towards further progressing our
strategy, set out at the end of 2001, of operating in areas with distinct
barriers to entry, good growth prospects and high returns. We are looking to
develop a business that is capable of producing long-term, sustainable and
growing cashflows and our strategy is geared to deliver this. We ended 2005 with
a rather different configuration of business than when we started the year.
Following the sale of Est Est Est and Caffe Uno, most of our business is now
located away from the high streets and, in particular, away from the crowded
high street pizza and pasta marketplace. The result of these changes is that we
now have a business with a higher quality of earnings and cashflow than at any
time in TRG's recent history. We intend to further develop these businesses and
to grow them so that we are able to maintain leading market positions and
continue to generate high returns.
All of the key performance metrics improved during 2005. Adjusted turnover
increased by 12%, adjusted EBITDA increased by 16% and adjusted operating profit
increased by 23%. In 2004 we exceeded one of our medium term targets, to achieve
an operating profit margin of 10%, and I am delighted that in 2005 we made
significant further progress in this regard with an increase of 90 basis points
to secure an adjusted operating margin of 11.1%. The increased profit was the
product of good like-for-like growth from the existing estate, strong returns
from new restaurants, cost savings from purchasing initiatives and further
operational efficiencies. This combination represents a healthy background to
our continuing profitable development.
Leisure
Total turnover: £189.0m Profit: £40.0m Operating margin: 21.1%
Frankie & Benny's (114 units)
Frankie & Benny's reached two major milestones during 2005 - firstly, in April
when the one hundredth unit opened and later in the year, in September, when it
celebrated its tenth anniversary. In total we opened 14 new units during the
year and the business performed superbly. Frankie & Benny's enjoyed strong
like-for-like sales increases and this, combined with strong performances from
new openings, meant that turnover rose significantly. Both EBITDA and operating
profit increased by approximately 30%. All of the key metrics improved with both
the EBITDA and operating margins improving by around 100 basis points. Of the
eight poorly performing sites acquired from the Deep Pan Pizza Company, we
converted three into Frankie & Benny's and the results have been superb. We plan
some further such conversions during 2006. All of our new openings have
performed well and they are set to generate very good returns. In 2006 we will
open 15-20 new restaurants and we anticipate new unit development will continue
at around this level for the rest of the decade.
Frankie & Benny's tenth anniversary year was marked by fundraising activities
for the BBC's Children in Need Appeal. I am delighted to report that the efforts
and generosity of staff and customers meant that over £150,000 was raised for
this very worthwhile cause.
Chiquito (34 units)
Chiquito had an outstanding 2005 with a significant increase in turnover, EBITDA
and operating profit. EBITDA increased by 38% and operating profit by 48%.
Margins also improved - EBITDA by 220 basis points and operating profit by 230
basis points. During the year we completed our refreshment and refurbishment
programme which has delivered a softer, more contemporary and more female and
family friendly style. We opened nine new Chiquito restaurants during 2005 of
which five were opened during the last six months of the year. These included
conversions of some former Deep Pan Pizza sites. All of the new openings have
performed well. We are delighted with the progress made with Chiquito over the
past two years and we are excited by the potential it has for further expansion.
We are particularly pleased to see this offering working alongside, and
complementing, Frankie & Benny's at several leisure sites. During 2006 we plan
to open 5-10 new Chiquito restaurants.
Blubeckers (17 units)
We acquired Blubeckers at the end of June 2005 and we are delighted with this
business. We spent the period to December 2005 integrating the business into TRG
and setting in place some refinements to the 'model' which are designed to
enable the business to improve profitability and to be further developed. To
date, the results from Blubeckers have been excellent. Like-for-like sales
growth improved significantly during the second half of 2005 and this
improvement has continued into 2006 with strong growth over the last few months.
We believe that Blubeckers has good potential and we are planning to add up to
six new sites during 2006 and thereafter we see scope to further grow this
business. Blubeckers position in the marketplace - a great offering with very
wide appeal across most socio - economic and age groups with meals served in a
relaxed and safe environment - is ideal for catering for future trends in the
eating out market. I would like to thank the team at Blubeckers for the
professional and efficient manner in which they have embraced the integration
into TRG.
Garfunkel's (29 units)
Garfunkel's year was one of two halves. A solid first half performance was
severely affected following the London bombings in July 2005. This had a
significant adverse effect on our Central London trade which typically accounts
for over 60% of Garfunkel's turnover and is heavily influenced by tourists and
customers who are participating in other leisure related activities such as
theatre, cinema and other visitor attractions. We estimate that these problems
resulted in a profit shortfall of around £0.9m in the second half.
However, during the final quarter of 2005 trade started to pick up and currently
we are enjoying like-for-like growth. Providing there is no repeat of last
year's atrocities we are confident that Garfunkel's will enjoy a solid 2006.
Concessions (43 units)
Total turnover: £59.8m Profit: £8.9m Operating margin: 14.9%
Our Concessions business has enjoyed another successful and busy year. During
2005 the business has delivered strong growth in turnover, EBITDA and operating
profit. Profits increased by 27% to £8.9m and the profit margin increased by 50
basis points to 14.9%. Against a background of cost pressures within the
airports business this is a commendable performance. During the year we opened
eight new units of which five were in airports and three in shopping centres. We
were delighted to win a tender for three units at Luton airport and these opened
at the end of the first half. During the second half we opened three shopping
centre sites and one airport site and these are trading in line with our
expectations. During 2006 we expect to open between four and six new sites
including three at Birmingham airport. We are delighted with the progress that
has been made within our Concessions business - over the past four years its
profits have increased by 75% - and we are determined to continue to develop it
to ensure a continuation of this trend. We enjoy a leading market position in UK
airport catering and have invested in our Concessions business and its people
with the objective of continuing to be the leading UK player and to secure
further profitable growth.
Disposals
During 2005 we sold our Est Est Est and Caffe Uno businesses. Prior to sale both
businesses were performing below the previous year's level of profitability and
did not demonstrate sufficient potential going forward to justify TRG's
continuing ownership. Both businesses were sold for very satisfactory prices and
the bulk of the combined cash proceeds is to be returned to shareholders by way
of a Special Dividend.
As part of the terms of sale of the Est Est Est business we agreed to acquire a
40% shareholding in the acquiring company, Living Ventures Limited. Since
acquiring Est Est Est the team at Living Ventures have been fully occupied with
its integration and relaunch. We anticipate that the results of their efforts
will start to come through in the current year and thereafter.
DPP
Shortly after the year end TRG exercised its option to take control of the DPP
business. The Group is now in the process of integrating and rationalising DPP
which will result in certain one-off charges in 2006, covered in the Finance
Director's Report.
Non-core brands
During the year losses from non-core activities reduced by £0.5m to £0.9m. We
will continue to take steps to mitigate the losses from non-core units.
Future prospects
We ended 2005 in a form rather different from that in which we started the year.
Activity on the corporate front has resulted in our business having a focus
geared largely towards out of town leisure and concession locations.
Furthermore, our remaining high street restaurants are located mainly in sites
which benefit from high footfalls of tourists, shoppers and customers pursuing
leisure-related activities such as the theatre. We believe that this more
focused composition enables the Group to deliver higher quality profits and
cashflows.
We have an excellent business, strong finances, great people and market-leading
brands. Our operations are now predominantly in areas where we benefit from
distinct barriers to entry, good growth prospects and high returns. We have the
capacity to fund significant future growth from new developments whilst
continuing to grow profits from our existing restaurants - a healthy background
to further profitable development.
Our focus will continue to be on growing shareholder value, through developing a
Group capable of delivering sustainable and growing earnings and cash flows. The
market outlook, prospective economic conditions and challenges for 2006 are, we
believe, fairly similar to those which prevailed during much of 2005. We made
good progress last year and we are confident of continuing to do so in 2006.
Andrew Page
Chief Executive
8 March 2006
Group Finance Director's Review
Results *
*Results are stated excluding non-trading items and DPP, as set out in more
detail in note 2.
As noted in the Chairman's statement the Group has had another very strong year.
Turnover of the principal trading brands increased by 24.6% to £248.8m. This was
the result of a highly satisfactory 3% growth in like for like sales combined
with the impact of new site openings. Group EBITDA increased by 15.5% to £50.0m,
and operating profit increased by 22.6% to £32.0m. Total Group profit before tax
of the trading business, after taking into account finance charges and TRG's
share of the Living Ventures business, amounted to £29.5m, an increase of 21%
compared to the prior year.
IFRS
The Group's results have been prepared this year on an IFRS basis for the first
time. As noted in the IFRS statement in June and the Interim Results
announcement last September, this has resulted in some changes to the reported
results compared to UK GAAP. These primarily relate to treatment of share
options, finance leases and the interest rate swaps. In addition, as a result of
the existence of the option to convert debt due from Deep Pan Pizza ('DPP') into
equity, we have been required under IFRS to consolidate the losses incurred by
DPP during the year. This is covered in more detail later in this review. A full
analysis of the impact of IFRS was provided in the Group's IFRS conversion
statement last June.
Non-trading items
The Group's results include a profit before tax of £4.3m in relation to
non-trading items. This is made up of the following items:
£m
Profit on disposal of Caffe Uno 3.6
Profit on disposal of Est Est Est 1.6
Share of Living Ventures' profit on disposal 0.4
Property disposal losses (net of release of property exit accrual) (0.9)
Restructuring costs (primarily related to integration of Blubeckers) (0.3)
Interest rate swap impact (0.1)
As noted in the Chief Executive's Review, there will be certain one-off charges
relating to the rationalisation and integration of the DPP business. This
charge is expected to be between £3m to £4m. This will be booked as a
non-trading charge in the 2006 accounts.
Cash flow and balance sheet
The Group continues to be strongly cash generative. Cash generated from
operations was £55.5m. Free cash flow (defined as cash generated from operations
less interest, tax and maintenance capex) was £35.7m.
It is worth noting that the Group's free cash flow of £35.7m has financed
virtually all of the substantially increased level of development capital
expenditure as well as an increase in the normal dividend.
Group interest cover (the number of times net interest charges are covered by
operating profit) was 17.8 times compared to 15.4 times in the prior year (both
calculated on an IFRS basis including finance lease interest). In addition to
interest charges, the Group has a significant level of largely fixed rental
charges as a result of the lease based business model. Total fixed charge cover
in 2005 was 2.3 times, compared to the prior year figure of 2.2 times. The basis
of these calculations is set out below:
2005 2004
Interest cover
Adjusted operating profit (£m) 32.0 26.1
Net interest (£m) (1.8) (1.7)
Interest cover 17.8x 15.4x
Fixed charge cover
EBITDA (£m) 50.0 43.3
Add back: rent (£m) 35.0 32.1
EBITDAR (£m) 85.0 75.4
Fixed charges
Net interest (£m) 1.8 1.7
Rent (£m) 35.0 32.1
Fixed charges (£m) 36.8 33.8
Fixed charge cover 2.3x 2.2x
Year end balance sheet gearing was 14% (2004: 15%).
Capital expenditure
During the year the Group invested a total of £40.9m (2004: £26.9m) in capital
expenditure. This consisted of:
• £25.4m on developing 32 new sites (an increase of 36% on the prior
year), including the acquisition of several freeholds,
• £9.7m on refurbishment and maintenance capital expenditure, and
• £5.8m of costs in relation to acquisition and development of the new
Group head office.
The investment in refurbishment and maintenance of £9.7m includes completion of
the Chiquito refurbishment programme. The £5.8m of office acquisition and
redevelopment costs relate to the freehold office premises acquisition referred
to in the 2005 interim results announcement and the first phases of the
redevelopment. As noted in the Interim Statement this will enable all corporate
and brand management functions to be consolidated into one building by the end
of 2006.
As the Group accelerates its organic development programme it remains paramount
to ensure that we are focused on optimising financial returns from our capital
investments. In order to ensure that this is achieved, the Group operates a
rigorous investment appraisal process with the financial viability of all
significant projects being subject to a detailed review. This review includes a
critical assessment of all the underlying trading and other assumptions,
including analysis of competition and demographic factors. All new sites are
reviewed and approved by the Board. The Group also conducts post investment
appraisals and these have indicated continuing strong financial performance.
Deep Pan Pizza
As has been noted previously, the existence of an option to take control of DPP
during the year means that under IFRS we are required to consolidate the results
of that Company, notwithstanding the fact that throughout 2005 this was an
independently run and managed business over which TRG had no management control.
As previously announced on 12 January 2006 TRG exercised its option to take full
control of DPP. This followed the very successful conversion of eight
problematic DPP sites into very successful TRG branded restaurants over the
course of the last 15 months. We are currently integrating the DPP business into
the TRG structure and completing a detailed review of the site portfolio. The
integration and portfolio rationalisation process will, as indicated elsewhere
in this review, result in a one-off charge which will be taken in the 2006
results as an exceptional non-trading item.
During 2005, the already difficult trading situation experienced by DPP in the
first half was compounded by the impact of the London bombings in July. This
resulted in a second half performance significantly weaker than previously
anticipated. It should be noted that the full year trading loss of £1.7m
includes: £1.0m of head office costs; £0.3m of losses incurred by sites disposed
of during the year; and some £0.6m of site depreciation. After adjusting for
these items, the business was positive at a site EBITDA level.
As noted in the January announcement concerning the exercise of the option, we
expect to convert a substantial number of these sites to TRG Leisure brands
during the course of 2006, with the remaining sites being slated for disposal.
Living Ventures
As noted in the Chief Executive's Review, as part of the disposal of Est Est
Est, the Group acquired a 40% shareholding in the acquiring company, Living
Ventures Limited. The key elements of the transaction, as announced at the time
were as follows:
• TRG acquired a 40% shareholding in Living Ventures for £7.7m. In
addition TRG acquired preference shares in LV for £2.2m, redeemable in full
in 2008.
• Simultaneously Living Ventures purchased the Est Est Est business
for consideration of £16.4m of which £6.0m has been paid in cash with the
balance satisfied by a loan note, also repayable in 2008.
• TRG was granted a call option (but not an obligation) to purchase
the remaining 60% of Living Ventures in 2008 based on a pre-agreed company
valuation based on eight times EBITDA less debt.
• TRG was also granted a separate call option to purchase back the
residual Est Est Est business on a multiple of six times EBITDA.
TRG's 40% interest in Living Ventures is accounted for using the equity
accounting method. This appears in the year end balance sheet under non-current
assets at a carrying value of £8.7m. The loan note balance of £10.4m is also
included under non-current assets.
As noted in the Chief Executive's Review, since acquiring Est Est Est the Living
Ventures management team has been fully occupied with integrating and
relaunching the Est Est Est business. This has involved major capital investment
at five of the sites. In addition, during this period the Company has opened two
new Living Room sites in London and Oxford. This activity has absorbed a great
deal of management time and also significant levels of pre-opening costs which
are taken as a charge against profits during the period in which they arise.
In December Living Ventures disposed of its Prohibition bar business to Ultimate
Leisure realising a profit on disposal before tax of £1.5m. This transaction was
in line with the Living Ventures' strategy of focusing on the core restaurant
business.
The accounts of TRG for the full year include a net loss of £0.2m in respect of
the Group's share of Living Ventures' post tax results for the nine months to
December 2005. This can be summarised as follows:
£m
Operating EBITDA 3.12
Depreciation (2.24)
Share option scheme provision (0.12)
Operating profit 0.76
Interest (including £0.5m payable to TRG) (1.43)
Loss before tax and one-off costs (0.67)
Pre-opening costs (0.83)
Profit on disposal of Prohibition 1.50
Net profit before tax 0.0
Tax on disposal of Prohibition (0.5)
Net loss after tax (0.5)
TRG share (40%) (0.2)
In this context it should also be noted that TRG's results include £0.5m of
interest receivable from Living Ventures Limited on the loan notes.
Following the disposal of the Prohibition business and one loss making Est Est
Est unit, the Living Ventures business currently comprises a total of 31 units.
This is made up of:
• 16 Est Est Est outlets (of which four have been subject to major
capital redevelopment);
• 13 Living Room outlets (including the two new sites in Oxford and
London); and
• Two Bar and Grill outlets, (including one Est Est Est conversion).
For the period since the deal the Living Ventures team have been fully occupied
with integrating the Est Est Est business and managing major capital expenditure
projects at five of those sites as well as developing and opening two new Living
Room locations. With this phase now complete, the management team is now
focussed on ensuring that the business fully capitalises on this period of
intense change and development.
Taxation
The total taxation charge for the year is £8.8m compared to £6.9m in 2004. This
consists of a mainstream corporation tax charge of £11.0m and a deferred tax
release of £2.2m. The overall tax charge of £8.8m and the comparable year
analysis is as follows:
2005 2004
£m £m
Taxation on trading business 9.9 7.6
Taxation credit on DPP (0.8) -
Net taxation credit on non-trading items (0.3) (0.7)
Total taxation charge 8.8 6.9
The underlying tax rate in respect of 2005 was 33% (2004: 34%).
Special dividend and share consolidation
On 7 February 2006 TRG announced details of a special dividend of £35m and
associated eight for nine share consolidation. This followed the sale of the
Caffe Uno business which completed on 12 December 2005 and the announcement at
that time of the Group's intention to return approximately £35m to shareholders.
Dealing in the new ordinary shares commenced on 27 February 2006 and the special
dividend to all shareholders on the register on 24 February 2006 will be paid on
9 March 2006.
Adjusting for the £35m special dividend, year end net debt would have been
£47.4m (compared to the actual figure of £12.4m) and net debt to equity gearing
would have been 84% compared to the reported figure of 14%. Interest will be
payable on the increased level of debt from March 2006 onwards.
Stephen Critoph
Group Finance Director
8 March 2006
The Restaurant Group plc
Consolidated income statement
Year ended 1 January 2006 Year ended 31 December 2004
Continuing Discontinued Total Continuing Discontinued Total
Notes £000 £000 £000 £000 £000 £000
Revenue 3 263,878 38,450 302,328 199,680 55,766 255,446
Cost of sales 4 (218,049) (34,528) (252,577) (164,332) (48,617) (212,949)
Gross profit 45,829 3,922 49,751 35,348 7,149 42,497
Administration costs 4 (19,019) (777) (19,796) (15,317) (1,446) (16,763)
Release of accrual for property exit
costs 5 1,700 - 1,700 - - -
Profit/ (loss) on sale of business 5 - 5,274 5,274 (500) - (500)
Loss and provision for loss on disposal
of fixed assets 5 (2,594) - (2,594) (2,554) - (2,554)
Operating profit 25,916 8,419 34,335 16,977 5,703 22,680
Interest payable (2,692) - (2,692) (1,937) - (1,937)
Interest receivable 689 - 689 270 - 270
Profit before share of associate and tax 23,913 8,419 32,332 15,310 5,703 21,013
Share of post tax result in associated
undertaking 5 (600) 400 (200) - - -
Profit before tax 23,313 8,819 32,132 15,310 5,703 21,013
Profit before tax, analysed as:
Trading business excluding DPP 26,394 3,145 29,539 18,700 5,703 24,403
DPP Restaurants Limited trading result 6 (1,733) - (1,733) - - -
Non-trading items 5 (1,348) 5,274 3,926 (3,390) - (3,390)
Profit made on disposal of business by
Living Ventures 5 - 400 400 - - -
23,313 8,819 32,132 15,310 5,703 21,013
Tax on profit from ordinary activities 11 (7,567) (1,220) (8,787) (5,154) (1,788) (6,942)
Profit for the financial year
attributable to equity shareholders of
the parent 15,746 7,599 23,345 10,156 3,915 14,071
Earnings per share (pence) 13
Basic 7.27 3.51 10.78 4.75 1.84 6.59
Diluted 7.22 3.48 10.70 4.74 1.84 6.58
Dividend per share (pence) 12 4.75 4.20
The Restaurant Group plc
Consolidated statement of changes in equity
Year to 1 Year to 31
January 2006 December 2004
£'000 £'000
Opening reserves (IFRS, excluding IAS 32 and IAS 39) 75,883 54,835
Adjustment to opening reserves for inclusion of swaps under
IAS 32 and IAS 39 127 -
Opening reserves (IFRS, including IAS 32 and IAS 39) 76,010 54,835
Profit for the year 23,345 14,071
Foreign exchange translation differences (168) (36)
Pre-acquisition losses of DPP Restaurants Limited taken
directly to reserves - (197)
Deferred tax credit on share based payments taken
directly to reserves 414 256
Total recognised income and expense for the year 23,591 14,094
Dividends (9,277) (7,977)
Issue of new shares 604 14,741
Share based payments - credit to equity 508 190
Total changes in equity in the year 15,426 21,048
Closing reserves 91,436 75,883
The Restaurant Group plc
Consolidated balance sheet
At 1 January At 31 December
2006 2004
£'000 £'000
Non-current assets
Intangible assets 11,275 -
Property, plant and equipment 151,337 154,678
Investment in associate 8,727 -
Trade and other receivables 10,375 -
181,714 154,678
Current assets
Stock 2,763 2,599
Financial assets - derivative financial
instruments 7 -
Trade and other receivables 5,498 3,731
Prepayments 11,094 10,612
Cash and cash equivalents 426 482
19,788 17,424
Total assets 201,502 172,102
Current liabilities
Short-term borrowings (1,845) (5,134)
Income tax liabilities (8,315) (5,531)
Trade and other payables (71,476) (57,773)
(81,636) (68,438)
Net current liabilities (61,848) (51,014)
Non-current liabilities
Long-term borrowings (11,000) (7,000)
Other payables (2,696) (4,431)
Deferred tax liabilities (13,971) (15,725)
Provisions (763) (625)
(28,430) (27,781)
Net assets 91,436 75,883
Equity
Share capital 54,366 54,087
Share premium 19,747 19,422
Foreign currency reserve 80 245
Other reserves 764 256
Retained earnings 16,479 1,873
Total equity shareholders' interests 91,436 75,883
The Restaurant Group plc
Consolidated cash flow statement
Year to 1 Year to 31
January 2006 December 2004
Note £'000 £'000
Cash flow from operating activities
Cash generated from operations 14 55,484 49,538
Interest received 219 98
Interest paid (2,076) (1,476)
Tax paid (8,199) (6,753)
Net cash flow from operating activities 45,428 41,407
Cash flows from investing activities
Acquisition of associate (10,186) -
Acquisition of subsidiary, net of cash acquired (26,889) (358)
Disposal of business, net of cash disposed 32,982 -
Disposal of subsidiary, net of cash disposed 5,630 -
Purchase of property, plant and equipment (39,767) (26,021)
Proceeds from sale of property, plant and equipment 708 4,719
Net cash used in investing activities (37,522) (21,660)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 604 14,741
Net proceeds from issue of bank loan 4,000 -
Repayment of borrowings - (28,000)
Dividends paid to shareholders (9,277) (7,977)
Net cash used in financing activities (4,673) (21,236)
Net increase/ (decrease) in cash and cash equivalents 3,233 (1,489)
Cash and cash equivalents at start of year 15 (4,652) (3,163)
Cash and cash equivalents at end of year 15 (1,419) (4,652)
The Restaurant Group plc
Notes to the accounts
1) Segmental analysis
Year ended 1 January 2006 Year ended 31 December 2004
Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure 189,009 49,541 26.2% 39,974 21.1% 150,723 38,747 25.7% 30,710 20.4%
Concessions 59,771 12,360 20.7% 8,919 14.9% 48,882 9,925 20.3% 7,018 14.4%
Principal trading
brands 248,780 61,901 24.9% 48,893 19.7% 199,605 48,672 24.4% 37,728 18.9%
Non-core brands 63 (691) (1096.7%) (901) (1430.6%) 75 (1,192) (1591.8%) (1,432) (1912.4%)
Continuing
operations 248,843 61,210 24.6% 47,992 19.3% 199,680 47,480 23.8% 36,296 18.2%
Discontinued
operations 38,450 6,977 18.1% 3,922 10.2% 55,766 11,602 20.8% 7,149 12.8%
Total all brands 287,293 68,187 23.7% 51,914 18.1% 255,446 59,082 23.1% 43,445 17.0%
Pre-opening costs (included
in cost of sales) (1,511) (0.5%) (1,511) (0.5%) (948) (0.4%) (948) (0.4%)
Administration (16,158) (5.6%) (17,933) (6.2%) (14,628) (5.7%) (16,237) (6.4%)
Share based payments (508) (0.2%) (508) (0.2%) (190) (0.1%) (190) (0.1%)
Sub-total 287,293 50,010 17.4% 31,962 11.1% 255,446 43,316 17.0% 26,070 10.2%
DPP Restaurants 15,035 (94) (0.6%) (652) (4.3%) - - - - -
Limited
DPP Restaurants
Limited
administration (1,021) (6.8%) (1,021) (6.8%) - - - -
Non-recurring items included
within administration
Restructuring costs (334) (0.1%) (334) (0.1%) - - - -
Recovered aborted
bid costs - - - - 457 0.2% 457 0.2%
Impairment of - - - - - - (793) (0.3%)
goodwill
EBITDA / Profit
before non-trading
items 302,328 48,561 16.1% 29,955 9.9% 255,446 43,773 17.1% 25,734 10.1%
Release of accrual
for property exit
costs 1,700 -
Profit/ (loss) on
sale of business 5,274 (500)
Loss and provision for loss
on disposal of fixed assets (2,594) (2,554)
Operating profit 34,335 22,680
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.
The Restaurant Group plc
Note 2 - Additional income statement
Additional income statement information is provided as a useful guide to
underlying trading performance. The adjustments from the statutory income
statement are to aid understanding of the income statement and should be read in
conjunction with, rather than as a substitute for, the reported information.
DPP Restaurants Limited ('DPP') has been consolidated as a subsidiary under IAS
27 throughout the year even though The Restaurant Group plc ('TRG' or 'the
Group') legally only held 19.9% of the issued share capital (as detailed further
in note 6). As TRG has subsequent to the year end acquired full control of DPP,
the trading performance of DPP has been shown separately due to the different
shape that this division will have going forward.
Non-trading items include redundancy and restructuring costs incurred following
the acquisition of Blubeckers Limited and for redundancy costs incurred in DPP
Restaurants Limited, profits and losses made on disposal of businesses and
property, plant and equipment, and finance charges arising on the remeasurement
of swap instruments.
A reconciliation of profit before tax between the reported financial information
and the additional financial information is provided below:
Year ended 1 January 2006
Continuing Discontinued Trading Non DPP
business operations business trading trading Total
£000 £000 £000 £000 £000 £000
Reported statutory profit before tax 23,313 8,819 32,132 - - 32,132
DPP Restaurants Limited 1,733 - 1,733 - (1,733) -
Restructuring costs (including redundancies) 334 - 334 (334) - -
Profit on disposal of Est Est Est Restaurants
Limited - (1,582) (1,582) 1,582 - -
Profit on disposal of Caffe Uno - (3,692) (3,692) 3,692 - -
Release of accrual for property exit costs (1,700) - (1,700) 1,700 - -
Loss and provision for loss on disposal of fixed
assets 2,594 - 2,594 (2,594) - -
Finance charge arising on interest rate swap 120 - 120 (120) - -
Profit made on disposal of business by Living
Ventures Limited - (400) (400) 400 - -
Additional reported profit before tax 26,394 3,145 29,539 4,326 (1,733) 32,132
Year ended 31 December 2004
Continuing Discontinued Trading Non DPP
Business Operations Business Trading Trading Total
£000 £000 £000 £000 £000 £000
Reported statutory profit before tax 15,310 5,703 21,013 - - 21,013
Recovered aborted bid costs (457) - (457) 457 - -
Impairment of goodwill arising on acquisition of
DPP Restaurants Limited 793 - 793 (793) - -
Impairment of receivable arising on disposal of DPP 500 - 500 (500) - -
Loss and provision for loss on disposal of fixed
assets 2,554 - 2,554 (2,554) - -
Additional reported profit before tax 18,700 5,703 24,403 (3,390) - 21,013
A detailed income statement is supplied below (note 2a), reflecting the
supplementary presentation, and this is also analysed in an additional
presentation of the segmental analysis (note 2b).
The Restaurant Group plc
Note 2a - Additional income statement
Year to 1 January 2006
Continuing Discontinued Trading Non DPP
business operations business trading trading Total
£000 £000 £000 £000 £000 £000
Revenue 248,843 38,450 287,293 - 15,035 302,328
Cost of sales:
Excluding pre-opening costs (200,851) (34,528) (235,379) - (15,687) (251,066)
Pre-opening costs (1,511) - (1,511) - - (1,511)
(202,362) (34,528) (236,890) - (15,687) (252,577)
Gross profit/ (loss) 46,481 3,922 50,403 - (652) 49,751
Administration costs
Excluding one-off costs (17,664) (777) (18,441) - (1,021) (19,462)
Recovered aborted bid costs - - - - - -
Restructuring costs - - - (334) - (334)
Impairment of goodwill - - - - - -
(17,664) (777) (18,441) (334) (1,021) (19,796)
Trading profit/ (loss) 28,817 3,145 31,962 (334) (1,673) 29,955
Profit/ (loss) on sale of business - - - 5,274 - 5,274
Release of accrual for property exit - - - 1,700 - 1,700
costs
Loss and provision for loss on - - - (2,594) - (2,594)
disposal of fixed assets
Operating profit/ (loss) 28,817 3,145 31,962 4,046 (1,673) 34,335
Interest payable (2,512) - (2,512) (120) (60) (2,692)
Interest receivable 689 - 689 - - 689
Profit/ (loss) before share of
associate and tax 26,994 3,145 30,139 3,926 (1,733) 32,332
Share of post tax result in
associated undertaking (600) - (600) 400 - (200)
Profit/ (loss) before tax 26,394 3,145 29,539 4,326 (1,733) 32,132
Tax on profit / (loss) from ordinary
activities (8,817) (1,050) (9,867) 300 780 (8,787)
Profit/ (loss) for the financial year
attributable to equity shareholders
of the parent 17,577 2,095 19,672 4,626 (953) 23,345
Earnings per share (pence)
Basic 9.08 10.78
Diluted 10.70
Dividend per share (pence) 4.75
The Restaurant Group plc
Note 2a - Additional income statement
Year to 31 December 2004
Trading Discontinued Trading Non DPP
business operations business trading trading Total
£000 £000 £000 £000 £000 £000
Revenue 199,680 55,766 255,446 - - 255,446
Cost of sales:
Excluding pre-opening costs (163,384) (48,617) (212,001) - - (212,001)
Pre-opening costs (948) - (948) - - (948)
(164,332) (48,617) (212,949) - - (212,949)
Gross profit/ (loss) 35,348 7,149 42,497 - - 42,497
Administration costs
Excluding one-off costs (14,981) (1,446) (16,427) - - (16,427)
Recovered aborted bid costs - - - 457 - 457
Restructuring costs - - - - - -
Impairment of goodwill - - - (793) - (793)
(14,981) (1,446) (16,427) (336) - (16,763)
Trading profit/ (loss) 20,367 5,703 26,070 (336) - 25,734
Profit/ (loss) on sale of business - - - (500) - (500)
Release of accrual for property exit
costs - - - - - -
Loss and provision for loss on
disposal of fixed assets - - - (2,554) - (2,554)
Operating profit/ (loss) 20,367 5,703 26,070 (3,390) - 22,680
Interest payable (1,937) - (1,937) - - (1,937)
Interest receivable 270 - 270 - - 270
Profit/ (loss) before share of
associate and tax 18,700 5,703 24,403 (3,390) - 21,013
Share of post tax result in
associated undertaking - - - - - -
Profit/ (loss) before tax 18,700 5,703 24,403 (3,390) - 21,013
Tax on profit/ (loss) from ordinary
activities (5,862) (1,788) (7,650) 708 - (6,942)
Profit/ (loss) for the financial year
attributable to equity shareholders
of the parent 12,838 3,915 16,753 (2,682) - 14,071
Earnings per share (pence)
Basic 7.84 6.59
Diluted 6.58
Dividend per share (pence) 4.20
The Restaurant Group plc
Notes to the accounts
Note 2b - Additional information - segmental analysis excluding DPP and
non-trading items
Year ended 1 January 2006 Year ended 31 December 2004
Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure 189,009 49,541 26.2% 39,974 21.1% 150,723 38,747 25.7% 30,710 20.4%
Concessions 59,771 12,360 20.7% 8,919 14.9% 48,882 9,925 20.3% 7,018 14.4%
Principal trading
brands 248,780 61,901 24.9% 48,893 19.7% 199,605 48,672 24.4% 37,728 18.9%
Non-core brands 63 (691) (1096.7%) (901) (1430.6%) 75 (1,192) (1591.8%) (1,432) (1912.4%)
Continuing
operations 248,843 61,210 24.6% 47,992 19.3% 199,680 47,480 23.8% 36,296 18.2%
Discontinued 38,450 6,977 18.1% 3,922 10.2% 55,766 11,602 20.8% 7,149 12.8%
operations
Total all brands 287,293 68,187 23.7% 51,914 18.1% 255,446 59,082 23.1% 43,445 17.0%
Pre-opening costs
(included in cost
of sales) (1,511) (0.5%) (1,511) (0.5%) (948) (0.4%) (948) (0.4%)
Administration (16,158) (5.6%) (17,933) (6.2%) (14,628) (5.7%) (16,237) (6.4%)
Share based
payments (508) (0.2%) (508) (0.2%) (190) (0.1%) (190) (0.1%)
EBITDA / operating
profit* 287,293 50,010 17.4% 31,962 11.1% 255,446 43,316 17.0% 26,070 10.2%
Net interest
charges (1,896) (1,179)
Interest receivable
from Living
Ventures Limited 522 -
Finance lease
interest (449) (488)
Total net interest
charges (1,823) (1,667)
Profit before taxation and 30,139 24,403
share of associate's result*
Share of losses of
associate (600) -
Profit before
taxation* 29,539 24,403
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.
* Results are stated before non-trading costs, and do not include the
performance of DPP Restaurants Limited
The Restaurant Group plc
Notes to the accounts
For the year ended 1 January 2006
3) Revenue 2005 2004
£'000 £'000
Revenue consists of the following:
Continuing business - owned and managed during the year 248,843 199,680
DPP Restaurants Limited 15,035 -
Continuing operations 263,878 199,680
Discontinued operations 38,450 55,766
Total revenue for the year 302,328 255,446
DPP Restaurants Limited has been consolidated as a subsidiary under IAS 27 throughout the year even
though TRG legally only held 19.9% of the issued share capital (as detailed further in note 6). As TRG
has subsequent to the year end acquired full control of DPP, the trading performance of DPP has been
shown separately due to the different shape that this division will have going forward.
4) Operating expenses 2005 2004
£'000 £'000
Included in cost of sales are the following:
Continuing business - owned and managed during the year 200,851 163,384
Pre-opening costs 1,511 948
DPP Restaurants Limited 15,687 -
Continuing operations 218,049 164,332
Discontinued operations 34,528 48,617
Total cost of sales for the year 252,577 212,949
Included in administration costs are the following:
Continuing business - owned and managed during the year 17,664 14,981
Restructuring costs 334 -
Recovered aborted bid costs - (457)
Impairment of goodwill - 793
DPP Restaurants Limited 1,021 -
Continuing operations 19,019 15,317
Discontinued operations 777 1,446
Total administration costs for the year 19,796 16,763
5) Non-trading items
2005 2004
£'000 £'000
Items classified as non-trading are as follows:
Included within continuing business:
Restructuring costs (334) -
Recovered aborted bid costs - 457
Impairment of goodwill - (793)
Release of accrual for property exit costs 1,700 -
Loss on disposal of DPP business - (500)
Loss and provision for loss on disposal of fixed assets (2,594) (2,554)
Finance charge arising from remeasurement of interest rate swap (120) -
(1,348) (3,390)
Included within discontinued business:
Profit on disposal of Est Est Est Restaurants Limited 1,582 -
Profit on disposal of the Caffe Uno business 3,692 -
5,274 -
Profit made on disposal of business by associate 400 -
5,674 -
Total non-trading items before taxation: 4,326 (3,390)
6) Post balance sheet events
a) DPP Restaurants Limited
In November 2004, The Restaurant Group plc ('the Group' or 'TRG') announced that
it had been granted an option to take full control of DPP Restaurants Limited
('DPP'), operators of the Deep Pan Pizza chain of restaurants. This option
became exercisable on 31 December 2004, and, under IFRS, the Group was required
to consolidate 100% of DPP, even though the option had not been exercised.
Consequently the Group's results for 2005 have included 100% of the losses made
by DPP, although legally TRG only owned 19.9% of DPP.
On 12 January 2006, the Group announced that it had acquired full control of DPP
Restaurants Limited for a nominal sum. TRG originally sold 52 branches to DPP
Restaurants Limited brand in 2001. Subsequently DPP has disposed of 19 units
(eight of which have been to TRG). Those units which have been converted into
TRG brands have shown an average turnover increase of over 100%.
b) Return of value and share consolidation
Following the disposal of Caffe Uno to Craftbutton Limited in December 2005 (see
note 10 for further details) the Group announced that it would make a return of
value to shareholders. On 7 February 2006 the Group announced a special
dividend of 16p per share (totalling £34.8m) which is to be paid to shareholders
on 9 March 2006. At an Extraordinary General Meeting on 23 February 2006,
shareholders granted approval for a share consolidation whereby nine existing
ordinary shares were exchanged for eight new ordinary shares. On 27 February
2006 the new ordinary shares were admitted to the London Stock Exchange's market
for listed securities.
7) Disposal of Est Est Est Restaurants Limited
On 31 March 2005, the Group sold Est Est Est Restaurants Limited to Living
Ventures Limited. Proceeds were £16.375m, of which £6m was received in June 2005
and the remainder is payable in 2008. Interest is accruing on the outstanding
balance at LIBOR. A profit of £1.6m was made on disposal. The disposal of shares
in Est Est Est Restaurants Limited qualifies for substantial shareholding
exemption, and consequently no tax charge has been recognised in respect of that
profit.
The analysis of assets and liabilities sold and consideration received is
detailed below:
£'000
Property, plant and equipment 14,492
Stock 157
Trade and other receivables 287
Cash and cash equivalents 11
Trade and other payables (283)
Deferred tax (1,719)
Net assets 12,945
Gross profit arising on disposal 3,137
16,082
40% of profit not recognised following investment in Living Ventures Limited (1,255)
Accrual for warranty claims (300)
Net profit arising on disposal 1,582
Sale proceeds
Cash consideration received 6,000
Deferred consideration 10,375
Professional fees (293)
16,082
8) Acquisition of 40% stake in Living Ventures Limited
The Group has recognised a profit of £1.6m following the disposal of Est Est Est
Restaurants Limited to Living Ventures Limited on 31 March 2005. As the Group
has taken a 40% stake in Living Ventures Limited, the profit recognised on the
disposal of Est Est Est Restaurants Limited has been reduced by 40% to reflect
the unrealised element of profit. This unrecognised profit was £1,255,000 as
disclosed in note 7.
9) Acquisition of Blubeckers Limited
On 21 June 2005 The Restaurant Group plc completed the acquisition of 100% of
the ordinary share capital of Blubeckers Limited for £22.75m, and a further
payment of £4.3 million for the repayment of intercompany debt. Blubeckers
Limited operates two restaurant brands, 'Blubeckers' and 'Edwinns', and at the
date of acquisition had 17 restaurants in the south of England. In the six
months that Blubeckers was a subsidiary of the Group it contributed £1.3m to net
profit. If the acquisition had occurred on 1 January 2005, Group revenue
(including DPP Restaurants Limited) would have been £310.8m and profit before
tax (including DPP Restaurants Limited) would have been £32.5m.
The acquisition had the following effect on the Group's assets and liabilities:
Preliminary
Recognised fair value Carrying
values adjustments amounts
£'000 £'000 £'000
Property, plant and equipment 19,884 (36) 19,848
Stocks 287 (115) 172
Trade and other receivables 200 (123) 77
Cash and cash equivalents 938 - 938
Trade and other payables (1,816) (71) (1,887)
Deferred tax (226) (2,370) (2,596)
Net identifiable assets and liabilities 19,267 (2,715) 16,552
Goodwill on acquisition 11,275
Consideration paid, satisfied in cash 27,827
Cash (acquired) (938)
Net cash outflow 26,889
Following the acquisition there has been a programme of integrating operational
and support functions into The Restaurant Group plc. As a result of this, costs
of £221,000 have been incurred. These costs are considered as non-trading as
they relate to the acquisition and integration.
10) Disposal of Caffe Uno
On 12 December 2005 the Group completed the disposal of 53 of the 59 sites that
formed the Caffe Uno brand. The associated business assets were sold to
Craftbutton Limited for £33.025m, which was received in cash, less associated
expenses (including expenses pertaining to the return of value to shareholders).
The remaining sites will be sold or rebranded, and accordingly have been
written down to their estimated realisable value. The disposal was completed as
an asset transaction and consequently there is a taxation charge arising on the
profit on disposal. A working capital adjustment has been made (subsequent to
the year end) whereby Craftbutton Limited has paid the book value of
identifiable working capital balances.
The analysis of assets and liabilities sold and consideration received is
detailed below:
£'000
Cash consideration received 33,025
Professional costs - paid (43)
Professional costs - accrued (2,237)
(2,280)
Impairment of Caffe Uno units not disposed to Craftbutton
Limited (2,290)
Provision for dilapidations and warranties (2,030)
Property, plant and equipment (23,176)
Finance lease assets (901)
Finance lease debt 1,344
Net assets disposed (22,733)
Profit before tax 3,692
Taxation (470)
Profit after tax 3,222
11) Taxation
2005 2004
The taxation charge comprises: £'000 £'000
Current taxation
UK corporation tax at 30% 11,190 7,601
Adjustments in respect of previous years (187) 118
11,003 7,719
Deferred taxation
Origination and reversal of temporary differences (1,803) 51
Adjustments in respect of previous years (413) (828)
(2,216) (777)
Taxation charge 8,787 6,942
12) Dividend
2005 2004
£'000 £'000
Amounts recognised as distributions to equity holders during the year:
Final dividend for the year ended 31 December 2004 of 3.375p (2003:
2.90p) per share 7,306 6,198
Interim dividend for the year ended 1 January 2006 of 0.91p (2004:
0.825p) per share 1,971 1,779
9,277 7,977
Proposed final dividend for the year ended 1 January 2006 of 3.84p
(2004: 3.375p) per share 7,423 7,306
The proposed final dividend is subject to approval by shareholders at the Annual
General Meeting and has not been included as a liability in these financial
statements. The dividend payable reflects the number of shares in issue
following the share consolidation which became effective on 27 February 2006.
In addition, a special dividend of 16p per share (totalling £34.8m) is due to be
paid to shareholders on 9 March 2006. This is in respect of the return of value
to shareholders following the disposal of Caffe Uno in December 2005.
13) Earnings per share
2005 2004
a) Basic earnings per share:
Weighted average ordinary shares in issue during the year: 216,576,330 213,638,719
Total basic profit for the year (£'000): 23,345 14,071
Basic earnings per share for the year (pence) 10.78 6.59
Effect of non-trading items on earnings for the year (£'000) (4,626) 2,682
Effect of consolidation of DPP Restaurants Limited for the year
(£'000) 953 -
Earnings excluding non-trading items (£'000) 19,672 16,753
Adjusted earnings per share (pence) 9.08 7.84
b) Diluted earnings per share:
Weighted average ordinary shares in issue during the year: 216,576,330 213,638,719
Dilutive shares to be issued in respect of options granted under the
Share Option Scheme: 1,668,454 315,824
218,244,784 213,954,543
Diluted earnings per share (pence) 10.70 6.58
The additional earnings per share information (where non-trading items and the
performance of DPP Restaurants Limited, which was not managed by The Restaurant
Group plc for the period under review, have been added back) has been provided
as the Directors believe they provide a useful indication as to the underlying
performance of the Group.
14) Reconciliation of operating profit to net cash inflow from profit before
tax
2005 2004
£'000 £'000
Profit before tax 32,132 21,013
Net finance charges 2,003 1,667
Profit on sale of business - Est Est Est (1,582) -
Profit on sale of business - Caffe Uno (3,692) -
Loss on sale of property, plant and equipment 2,594 2,554
Release of accrual for property exit costs (1,700) -
Loss on sale of business - 500
Impairment of goodwill - 793
Net loss made by associate 200 -
Non-cash charge reversed in reserves 508 -
Depreciation 18,606 17,304
(Increase)/ decrease in stock (439) 70
(Increase)/ decrease in receivables (2,451) 975
Increase in payables 9,305 4,662
Cash flow from operating activities 55,484 49,538
15) Reconciliation of changes in cash to the movement in net bank debt
2005 2004
£'000 £'000
At the beginning of the year (11,652) (38,163)
Movements in the year:
Loans (taken out) / repaid (4,000) 28,000
Cash inflow/ (outflow) 3,233 (1,489)
At the end of the year (12,419) (11,652)
Represented by: At Cash flow At
1 January movements 1 January
2005 in the year 2006
£'000 £'000 £'000
Cash at bank and in hand 482 (56) 426
Overdrafts (5,134) 3,289 (1,845)
3,233
Bank loan due within one year - - -
Bank loans due after one year (7,000) (4,000) (11,000)
(4,000)
(11,652) (767) (12,419)
16) Basis of preliminary statement
The Group's consolidated financial statements are prepared in accordance with
International Financial Reporting Standards as adopted by the European Union and
which are effective at 1 January 2006. The Group issued an announcement on 28
June 2005 setting out the transition for the Group to International Financial
Reporting Standards. It included details of the Group's principal accounting
policies under IFRS, and the financial information set out in the preliminary
results has been prepared in accordance with those accounting policies. The
Directors have applied those policies in the preparation of the financial
statements for the year ended 1 January 2006.
The transition date for adoption of IFRS is determined in accordance with IFRS 1
First Time Adoption of International Financial Reporting Standards, and has been
determined as 1 January 2004.
The financial information included in this document is unaudited and does not
comprise statutory accounts within the meaning of section 240 of the Companies
Act 1985. The comparative figures for the financial year ended 31 December 2004
are not the Group's statutory accounts for that financial year. Those accounts,
which were prepared under UK GAAP, have been reported on by the Group's auditors
and delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
Appendix - Reconciliation to proforma UK GAAP basis
Profit before Tax Profit after
tax tax
£'000 £'000 £'000
Year ended 1 January 2006
Proforma UK GAAP 34,149 (9,538) 24,611
Share based payments (508) 152 (356)
Finance leases 459 (138) 321
Consolidation of DPP Restaurants Limited (1,848) 814 (1,034)
Rolled over gains - (113) (113)
Fair value of interest rate swaps (120) 36 (84)
IFRS 32,132 (8,787) 23,345
Year ended 31 December 2004
Proforma UK GAAP 22,128 (7,039) 15,089
Share based payments (190) 57 (133)
Finance leases (132) 40 (92)
Impairment of goodwill arising on DPP (793) - (793)
Fair value of interest rate swaps - - -
IFRS 21,013 (6,942) 14,071
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