Interim Results
City Centre Restaurants PLC
5 September 2000
Interim Results for the Six Months ended 30 June 2000
City Centre Restaurants plc is the largest, independent multi-site
operator of branded restaurants in the UK and is listed on the London
Stock Exchange. The Group's portfolio of core brands includes such
well-known concepts as Caffe Uno, Garfunkel's, Wok Wok, Chiquito's,
Est Est Est, Frankie & Benny's and Deep Pan Pizza.
HIGHLIGHTS
* Turnover up 6% to £103.1m (1999: £97.3m)
* Operating profit, in a difficult trading environment, improved to
£6.93m (1999: £6.89m)
* Pre-tax profit was £5.1m (1999: £5.9m)
* Basic earnings per share were 1.97p (1999: 2.24p)
* Interim dividend maintained at 0.75p (1999: 0.75p) per share
* Cash inflow from operating activities of £15.2m (1999: £6.2m)
* Trading has been variable across the Group and the sector remains
highly competitive
* 18 new units opened in the period, plus 4 restaurants rebranded
and 26 refurbishments completed. 11 new openings planned for H2
of which 4 have already begun trading, together with 1 unit to be
rebranded and no major refurbishments planned.
* Combination of benefit from new openings, refurbishment programme
substantially completed and absence of Millennium factor will
assist in the important second half period.
James Naylor, Chief Executive of City Centre Restaurants plc,
commented:
'A good start to the year has been undermined by an uncharacteristic
trading pattern in June and to some extent, August. In an
increasingly challenging market, City Centre has quality brands and
will continue to focus on maximising their potential.
'With the disruptive first half period now behind us and the benefits
of our refurbishment programme and important trading month of
December ahead of us, we are confident there are grounds for optimism
for the remainder of the year.'
5 September 2000
ENQUIRIES:
City Centre Restaurants plc Today: 020 7457 2020
James Naylor, Chief Executive Thereafter: 020 7930 9324
John Wittich, Finance Director Thereafter: 020 7630 2800
College Hill Tel: 020 7457 2020
Justine Warren
Matthew Smallwood
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Chairman's Statement
The year started strongly with the majority of our brands performing
well. This situation continued until the end of April. Since then
trading has been variable in an increasingly competitive environment.
Sales were particularly badly affected by the Euro 2000 tournament in
June and, since then, though to a lesser extent, by poor weekend
cinema attendances at leisure parks this August. This year we also
accelerated our annual restaurant refurbishment programme and, as a
result, a disproportionate number of restaurants were closed in the
first half year, including high volume units at Gatwick airport and
in Leicester Square. This has affected sales and margins in the
period, but will be to the benefit of the second half as there are no
more refurbishments scheduled. Today we are operating 307
restaurants, including 22 opened so far this year.
Operating profit for the half year to 30th June 2000 was £6,926,000
(1999: £6,888,000) on turnover up by 6% to £103,140,000. The
operating margin, before administration and pre-opening costs, was
13.0% compared with 13.2% in the same period last year.
Interest charges have increased to £1,721,000 (1999: £989,000),
reflecting the ongoing capital expenditure programme on opening new
restaurants, rebrandings and refurbishments. After these charges
profit before taxation was £5,055,000 (1999: £5,899,000).
Basic earnings per share amounted to 1.97p (1999: 2.24p). (See
detailed accounts).
Interim Dividend
An unchanged interim dividend of 0.75p (1999: 0.75p) will be paid on
12th October 2000.
Capital Expenditure
During the period, the Group incurred capital expenditure of £20.5
million (1999: £17.2 million), of which £10.6 million related to
investment in new restaurants and the remainder to refurbishing or
rebranding existing units.
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Chairman's Statement (cont'd)
Review of Operations and Developments
By the end of June we had opened 18 of the 29 new restaurants
scheduled for this year and four more have opened since then. We
have disposed of seven underperforming restaurants so far this year.
We have also, in the first half-year, refurbished 26 restaurants and
converted four restaurants to other brands.
We have been pleased with our new restaurant openings, which are
performing well, and have generally seen enhanced sales levels at
restaurants which we have refurbished and rebranded.
Developed Brands
Sales 2000: £35,943,000 (1999:£34,090,000)
Operating Profit 2000: £5,320,000 (1999: £4,961,000)
Our Garfunkel's restaurant brand, now in its 21st year, traded
strongly throughout the period at both high street and airport
locations and this pattern has continued throughout the summer months
with a strong tourist trade in Central London and increasing
passenger numbers at airport terminals contributing to this
performance. As part of the redevelopment of the Gatwick South
terminal, two of our restaurants were affected by phased closures for
12 weeks. They have subsequently re-opened to substantially higher
sales levels than before their closure. We have also opened three
new airport restaurants, two at Stansted and one at Manchester, with
sales considerably exceeding our forecasts. We shall also be opening
another restaurant at Heathrow's Terminal 2 before the end of the
year. Today this brand's operations team manages 28 high street
restaurants and 20 airport outlets which include two Est Est Est
restaurants and a Caffe Uno.
In January we opened a new Chiquito's restaurant in Cheshire and have
been encouraged by its performance to date. We also closed our
Leicester Square unit for 11 weeks for a major refurbishment. Since
re-opening, sales at this restaurant have been running at levels in
excess of 20% above last year. The remainder of the brand has traded
satisfactorily with the exception of the four conversions from Rick
Shaw's last year which are not yet trading to expectations. In all
there are 29 Mexican restaurants, including two Nachos restaurants
which are under the same brand management.
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Chairman's Statement (cont'd)
Developing Brands
Sales 2000: £54,652,000 (1999: £44,489,000)
Operating Profit 2000: £8,688,000 (1999: £7,978,000)
Three of our four developing brands, Caffe Uno, Est Est Est and Wok
Wok, are situated in high street locations throughout the UK where
competition from numerous new restaurant openings has intensified in
recent years. Our brands continue to trade competitively but due to
these pressures the performance of these restaurants has been
adversely affected as a whole.
Despite these competitive pressures Caffe Uno remains a strong brand
in our portfolio. This strength has been evident in the four new
restaurant openings in the first half of the year. Three of these
restaurants are already achieving sales well in excess of our
forecast levels. We shall be opening three more Caffe Uno units
before the year end. Presently there are 68 Caffe Uno restaurants,
excluding the one restaurant at Heathrow airport.
During the first half year we opened two new Est Est Est restaurants
at Gatwick and Heathrow airports, the latter replacing a pre-existing
Garfunkel's. We have been encouraged by the level of trade at both
these units. In the same period we also converted a Nachos
restaurant in Islington to this brand and shall be opening a further
Est Est Est in Wandsworth shortly. After a patchy start to the year,
a number of these restaurants are now trading ahead of last year and
we expect this trend to continue. Excluding airports we have 24 of
these restaurants today.
We continue to develop our Wok Wok brand and have, in the first half,
opened four new restaurants, making 12 in total, with another due to
open before the year end. These restaurants, offering a variety of
Asian cuisines, continue to attract favourable comment and are now
establishing themselves as a branded formula in a hitherto fragmented
market. We have been particularly pleased with the performance of
our most recent opening in Edinburgh which has considerably exceeded
our expectations.
The performance of our Frankie & Benny's restaurants, which are
mostly situated on leisure parks alongside multiplex cinemas, has
been strong. We opened five new restaurants of this type in the
first half year, three of which were the remaining conversions from
Deep Pan Pizza. Since the end of June we have opened a further four
restaurants, making 59 in total, with another new unit to follow by
the year end. They are all trading well. This brand had an
exceptionally strong start to the year with popular films attracting
high levels of visits to cinemas on leisure parks. This enabled the
brand to weather a marked downturn in trade in June.
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Chairman's Statement (cont'd)
Deep Pan Pizza
Sales 2000: £11,366,000 (1999: £16,221,000)
Operating Loss 2000: (£661,000) (1999: £83,000)
The programme to reduce the number of Deep Pan Pizza restaurants has
continued according to plan and at the end of June there were 57
units remaining out of the original estate of 105. Our target is to
further reduce this number. We have made good progress in this
direction by disposing of three more restaurants since the start of
the year and converting a further three to Frankie & Benny's.
The reduction in the number of trading units principally accounts for
the lower level of sales and the operating loss in the period,
compared with the same period last year. We also converted 16 of the
better performing Deep Pan Pizza restaurants to other brands where
they have produced a greater profit contribution. Under new
management this brand has now stabilised, is showing positive cash
flow and like for like sales growth. We expect the brand to trade
profitably in the second half of the year.
Future Prospects
For the important second half our businesses will face less
disruption as our refurbishments and the majority of new openings
have been completed earlier than usual. In addition last year trade
was adversely affected because Christmas and New Year both fell on
weekends. This situation will not recur this year. We have a well
managed business with a portfolio of quality brands, and whilst these
factors have, to a degree, mitigated some of the effects of a
difficult trading environment in the first half year, we cannot
ignore conditions in the restaurant market as a whole.
As a result it will prove difficult to recover the sales shortfalls
seen in June, and to some extent August, and consequently it is
unlikely the Group will achieve its internal profit forecasts for the
year.
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Chairman's Statement (cont'd)
Our business remains strongly cash generative and in the first half
had a net cash inflow from operating activities of £15.2 million. We
are actively exploring ways of further improving performance at all
levels of our business. In this increasingly competitive environment
our customers demand ever higher levels of service and we are placing
increased management emphasis on this aspect of our business through
our quality control and customer care programmes. We are also
looking at ways of simplifying our operations so as to reduce
overheads and improve margins and consistency. We are adopting an
increasingly selective approach to any new capital investment. We
believe these are the correct steps to take at this time and that
they will lead to improvements in operating performance and cash
generation.
Henry King
Chairman
5 September 2000
City Centre Restaurants plc
Interim Results for the Half Year ended 30th June 2000
Profit & Loss Account
Half year ended 30th June 2000 Half year ended 30th June 1999 Increases
Turnover Profit Margin Turnover Profit Margin Turnover Profit
£'000 £'000 % £'000 £'000 % % £'000
Developing
Brands 54,652 8,688 15.9% 44,489 7,978 17.9% 22.8% 8.9%
Developed 35,943 5,320 14.8% 34,090 4,961 14.6% 5.4% 7.2%
Brands
Principal 90,595 14,008 15.5% 8,579 12,939 16.5% 15.3% 8.3%
Trading Brands
Deep Pan Pizza 11,366 (661) -5.8% 16,221 83 0.5% -29.9%
OK Diners 1,179 13 1.1% 1,757 28 1.6% -32.9% -53.6%
Discontinued - - 698 (241)
Brands
Non core 12,545 (648) -5.2% 18,676 (130) -0.7% -32.8%
Brands
103,140 13,360 13.0% 97,255 12,809 13.2% 6.1% 4.3%
Pre-opening (748) -0.7% (658) -0.7% 13.7%
costs
Administration (5,686) -5.5% (5,263) -5.4% 8.0%
Operating 6,926 6.7% 6,888 7.1% 0.6%
Profit
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Group Profit and Loss Account
Half year Half year Year
ended ended ended 31st
30th June 30th June December
2000 1999 1999
£000 £000 £000
Turnover 103,140 97,255 205,291
Cost of sales:
Excluding pre-opening costs (89,780) (84,446) (173,330)
Pre-opening costs (748) (658) (1,096)
(90,528) (85,104) (174,426)
Gross Profit 12,612 12,151 30,865
Administrative expenses (5,686) (5,263) (10,481)
Operating Profit 6,926 6,888 20,384
Loss on disposal of tangible (150) - -
fixed assets
Interest payable (net) (1,721) (989) (2,307)
Profit on Ordinary Activities
before Taxation 5,055 5,899 18,077
Tax on profit on ordinary (1,220) (1,557) (3,727)
activities (note 2)
Profit on Ordinary Activities
after Taxation 3,835 4,342 14,350
Dividends (note 3) (1,457) (1,457) (6,626)
Retained Profit for the 2,378 2,885 7,724
period
Earnings per Share (note 4)
Basic earnings per share 1.97p 2.24p 7.39p
Diluted earnings per share 1.97p 2.23p 7.38p
All amounts relate to continuing activities
There were no recognised Gains or Losses other than the profit for
the period
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Reconciliation of Movements in Shareholders' Funds
Half year Half Year Year
ended ended ended
30th June 30th June 31st December
2000 1999 1999
£000 £000 £000
Total recognised gains
and losses for the
period 3,835 4,342 14,350
Dividends (1,457) (1,457) (6,626)
Other movements:
New shares issued - 29 29
Goodwill written back - - 1,000
Total movements during 2,378 2,914 8,753
the period
Shareholders' funds at
the beginning of the 81,071 72,318 72,318
period
Shareholders' funds at
the end of the period 83,449 75,232 81,071
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Group Balance Sheet
30th June 30th June 31st December
2000 1999 1999
£000 £000 £000
Fixed Assets
Tangible Assets 174,766 149,789 162,144
Current Assets
Stocks 2,130 1,877 2,419
Debtors 10,231 10,309 6,998
Cash at bank and in 240 1,183 221
hand
12,601 13,369 9,638
Creditors:
amounts falling due
within one year (67,528) (51,123) (54,306)
Net current liabilities (54,927) (37,754) (44,668)
Total Assets less
Current Liabilities 119,839 112,035 117,476
Creditors:
amounts falling due (31,641) (32,297) (31,969)
after one year
Provision for
liabilities and
charges:
Deferred taxation (4,749) (4,506) (4,436)
83,449 75,232 81,071
Capital and Reserves
Called up share capital 48,576 48,576 48,576
Share premium account 10,192 10,192 10,192
Profit and loss account 24,681 16,464 22,303
Equity Shareholders'Funds 83,449 75,232 81,071
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Group Statement of Cash Flows
Half year Half year Year
ended ended ended 31st
30th June 30th June December
2000 1999 1999
£000 £000 £000
Net Cash inflow from Operating 15,234 6,177 27,524
Activities (note 1)
Returns on Investments and
Servicing of Finance
Interest received 5 13 31
Interest paid (1,726) (1,002) (2,338)
Net Cash Outflow from Returns on
Investments and Servicing of
Finance (1,721) (989) (2,307)
Taxation
Corporation tax paid (118) (440) (2,373)
Capital Expenditure
Payments to acquire tangible (19,329) (17,508) (36,524)
fixed assets
Receipts from sales of tangible 705 121 245
fixed assets
Net Cash Outflow for Capital (18,624) (17,387) (36,279)
Expenditure
Acquisitions and Disposals
Payment and expenses paid for the
acquisition of the minority interest in
Est Est Est Group (2,038) - (1,839)
(2,038) - (1,839)
Equity Dividends paid (5,168) (4,565) (6,022)
Cash Outflow before Financing (12,435) (17,204) (21,296)
Financing
Issues of ordinary share capital - 29 29
New loans received - 30,000 30,000
Loans repaid (329) (329) (656)
(329) 29,700 29,373
(Decrease)/Increase in Cash in the (12,764) 12,496 8,077
period
CITY CENTRE RESTAURANTS PLC
Interim Results for the Half Year Ended 30th June 2000
Notes to the Accounts
1.Reconciliation of Operating Profit to Net Cash Inflow from
Operating Activities
Half year Half year Year
ended ended ended 31st
30th June 30th June December
2000 1999 1999
£'000 £'000 £'000
Operating profit 6,926 6,888 20,384
Depreciation 6,548 4,934 10,617
Decrease/(Increase) in stocks 289 194 (348)
(Increase) in debtors (2,758) (5,463) (2,616)
Increase/(Decrease) in 4,229 (376) (513)
creditors
Net Cash Inflow from Operating 15,234 6,177 27,524
Activities
2. Taxation
The taxation charge has been calculated by reference to the net
profit for the period. The effective tax rate is less than the
standard rate of corporation tax because full provision has not been
made for deferred tax.
3. Dividend
The directors have declared an interim dividend of 0.75p (1999:
0.75p) per share which will be paid on 12th October 2000 to Ordinary
Shareholders on the Register at the close of business on 15 September
2000.
4. Earnings per share
Half year Half year Year
ended ended ended 31st
30th June 30th June December
2000 1999 1 999
Total basic earnings for the
period Post tax profit (£'000) 3,835 4,342 14,350
Basic Earnings per share
Weighted average ordinary
shares in issue during the
period 194,301,732 194,262,616 194,278,718
Basic Earnings per share
(pence) 1.97p 2.24p 7.39p
Diluted Earnings per share
Weighted average ordinary
shares in issue during
the period 194,301,732 194,262,616 194,278,718
Shares to be issued in respect
of options
Granted under the Share
Option Schemes 27,187 256,001 227,650
194,328,919 194,518,617 194,506,368
Diluted Earnings per share 1.97p 2.23p 7.38p
(pence)
5. Reconciliation of the Changes to the Movement in Net(Debt)/Funds
Half year Half year Year ended
ended ended ended 31st
30th June 30th June December
2000 1999 1999
£'000 £'000 £'000
At the beginning of (41,396) (20,129) (20,129)
the period
Movements during the period:
New loans drawn down - (30,000) (30,000)
Loans repaid 329 329 656
Cash inflow/(outflow) (12,764) 12,496 8,077
At the end of the (53,831) (37,304) (41,396)
period
Represented by:
At the Cash Flow Other At the
beginning Movements Movements end
of the during the during the of the
period period period period
£'000 £'000 £'000 £'000
Cash at bank and in 221 19 - 240
hand
Bank overdraft (8,991) (12,783) - (21,774)
Bank loan due
within one year (657) 329 (328) (656)
Bank loans due (31,969) - 328 (31,641)
after one year
(41,396) (12,435) - (53,831)
Interim Financial Statements
The interim statements have been prepared on the basis of the
accounting policies set out in the Group's 1999 statutory accounts
except for the adoption of Financial Reporting Standard 15 'Tangible
Fixed Assets'. In previous years, no depreciation was charged
against profit in respect of freehold properties. This was because
it was considered that the length of lives and residual values of
these buildings were such that any depreciation would be immaterial.
Following the implementation of FRS 15, the asset lives and residual
values attributable to freehold assets have been revised. The
additional depreciation charge in the half year to 30th June 2000 was
£57,000. The periods ended 30th June 2000 and 30th June 1999 are
regarded as distinct financial periods for accounting purposes;
income and costs are recognised in the profit and loss account as
they arise. The statements were approved by a duly appointed
committee of the Board of Directors on 5th September 2000 and are
unaudited, the auditors have carried out a review and their report is
set out below.
The figures for the year ended 31st December 1999 have been extracted
from the statutory accounts which have been filed with the Registrar
of Companies. The auditors' report on those accounts was unqualified
and did not contain any statement under section 237 of the Companies
Act 1985.
Independent Review Report to City Centre Restaurants plc
Introduction
We have been instructed by the company to review the financial
information set out in this document and we have read the other
information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities
The interim report, including the financial statement contained
therein, is the responsibility of, and has been approved by, the
directors. The Listing Rules of the Financial Services Authority
require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing
the preceding annual accounts except where any changes, and the
reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance in Bulletin
1999/4 issued by the Auditing Practices Board. A review consists
principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying
financial data and based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as
tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material
modifications that should be made to the financial information as
presented for the six months ended 30th June 2000.
Ernst & Young
London
5th September 2000
Copies of this report will be sent to all shareholders and further
copies of this report and the Annual Report 1999 are available from
the Company Secretary at 56/62 Wilton Road, London SW1V 1DE
(Telephone: 020 7630 2800).
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