Interim Results
City Centre Restaurants PLC
11 September 2003
CITY CENTRE RESTAURANTS PLC
Interim Results for the six months to 30 June 2003
City Centre Restaurants plc operated 247 branded restaurants across the UK and
Spain at the half year. Its portfolio of brands includes Frankie and Benny's,
Chiquito, Garfunkel's, Caffe Uno and Est Est Est.
Financial*
• Pre tax profit up 16% to £7million (2002: £6million)
• Earnings per share rose 14% to 2.32p (2002: 2.03p)
• Like-for-like sales across the estate up 3%
• Cash generated from operations of £14.6million (2002: £11.3million)
• Interim dividend of 0.75p (2002: 0.75p)
*stated before exceptional losses of £270,000
Operational
• Leisure Parks
- Frankie and Benny's delivered a strong sales growth and 25%
increase in profits
- 7 sites opened, 3 - 5 to open in second half
• Concessions
- Airports have had a superb first half
- 32% increase in profit
• High Street
- Profit and margins improvement in a challenging environment
Alan Jackson, Executive Chairman of City Centre Retaurants plc, said:
'City Centre Restaurants has performed strongly and delivered an excellent set
of first half results. We have produced double digit profit and earnings per
share growth. Against a challenging background, this is a first class
performance. The Company is stronger than at any time in its recent history,
has a good site pipeline and I look forward to reporting further progress.'
11 September 2003
ENQUIRIES:
City Centre Restaurants plc Tel: 020 7747 7750
Alan Jackson, Executive Chairman
Andrew Guy, Chief Executive
Andrew Page, Finance Director
College Hill Tel: 020 7457 2020
Matthew Smallwood
Justine Warren
City Centre Restaurants plc
Chairman's Statement
Introduction
The Company has enjoyed a good first half and I am delighted to report that our
Principal Trading Brands have produced strong growth in turnover, EBITDA and
profits. The year started very well for the Group with like-for-like sales
increases of 4% as reported at the AGM. However, these have settled back and are
currently running at a level 3% ahead of 2002.
I have previously highlighted that, for the past two years, we have focused our
business on three key segments: Leisure Parks, Concessions and High Streets. New
developments have been concentrated into the first two of those areas because we
believe that those segments deliver consistently the best returns on investment.
Our strategy continues to be to direct new development expenditure into those
areas that offer distinct barriers to entry, high returns on investment and good
growth prospects. This approach has served us well and we continue to benefit
from both our spread of businesses across our three core segments and also the
strength of our brands.
For the first six months each of our segments has produced growth in terms of
both profits and cash generation. Leisure Parks enjoyed a good first half with
turnover growth of 11%, EBITDA growth of 13% and profit growth of 14%. Profit
margins further improved from 17.5% to 18.0%. This result would have been even
better were it not for a disappointing perfomance in our Chiquito business. In
June we replaced the Chiquito senior operational management team, putting the
business under the stewardship of Kevin Bacon who has successfully led Frankie &
Benny's for the last two years. We have already initiated a number of changes
within Chiquito and I am optimistic that the business will respond positively in
the second half.
Our Concessions business has enjoyed an outstanding first half with turnover
growth of 11%, EBITDA growth of 21% and profit growth of 32%. Profit margins
improved from 12.4% to 14.7%. We continue to build on our position as a
restaurant operator of choice in the airport sector where our expertise and
experience of operating continues to benefit us as the trading environment
becomes increasingly complex and demanding.
Our High Street business has faced a very challenging environment, price
competition remains intense and the need to consistently provide excellent food
and service is paramount. I am particularly pleased, therefore, to be able to
report that we have been able to hold our position in the High Street segment
and that we produced a modest increase in profits and margins. Against a
difficult background this represents a creditable perfomance. This has been
achieved through focusing on consistency of service delivery and food offering
and also through paying close attention to margins and cost controls. By the
half year we had also successfully undertaken a refurbishment programme of just
over half of the Caffe Uno estate and this has produced good results.
Results*
Pre-tax profits improved 16% to £7m (2002: £6m). This was achieved on a turnover
of £107.6m (2002: £103.4m) which increased by 4%. Earnings per share were 2.32p
(2002: 2.03p), an increase of 14%.
In the light of the Group's performance the Board is declaring an interim
dividend of 0.75p per share to be paid on 31 October 2003 to shareholders on the
register on 26 September 2003 (2002: 0.75p).
*Results are stated before exceptional (property) losses of £270,000
Properties
The Board regularly reviews the Group's property portfolio and frequent and
particular attention is paid to underperforming units. Specific action
programmes are designed, implemented and (where necessary) modified for such
units. Where units continue to underperform they are earmarked for disposal.
During the first half a number of properties were sold. These disposals produced
aggregate proceeds of £400,000 and resulted in an exceptional loss on sale of
£270,000.
Cashflow
The Group is strongly cash generative and during the first six months operating
cashflow increased to £14.6m (2002: £11.3m). Capital expenditure during the
period amounted to £9.9m and debt servicing absorbed £1.0m. Net debt was reduced
by £3.3m to £41.3m and interest charges were covered 6.8 times by operating
profit.
Board Changes
I am delighted to welcome Kevin Bacon to the Board. Kevin has been with the
Group for seven years and for the last two years has held the position of
Managing Director at Frankie & Benny's. I am confident that Kevin's skills and
experience will significantly benefit the Group in the future. We have a strong
board which is complemented by a professional and focused management team and
this augurs well for the future development of the Group.
Future prospects
We have made an excellent start to the year, and continue to enjoy growth on
last year, we also remain vigilant to the risk of a slowdown in trade. Economic
signals remain mixed but we believe that our brand positioning in the value
sector will continue to attract customer spend and loyalty. Against this
background we will continue to pursue our strategy for growth with the objective
of continuing to enhance shareholder value. We have a strong pipeline of new
sites for future development and I look forward to reporting further progress
for the full year.
Review of Operations
Leisure Parks
Total turnover: £49.0m Profit: £8.8m Operating Margin: 18.0%
Frankie & Benny's
Turnover: £36.4m Like-for-like sales: +5.6%
Frankie & Benny's has performed well with strong like-for-like sales growth and
an increase in profit of 25%. This performance is particularly encouraging
against a background of reduced cinema attendance figures and clearly
demonstrates the attractions of these restaurants as leisure destinations in
their own right. During the period we opened seven new restaurants and we
anticipate opening a further three to five in the second half. Frankie & Benny's
is the market leader and we will further grow this brand as it continues to
deliver consistently high returns.
Chiquito
Turnover: £12.6m Like-for-like sales: -6.4%
Chiquito's first half performance was disappointing as it experienced a decline
in turnover and profits. In May we initiated a number of significant changes in
Chiquito and brought the business under the leadership of Kevin Bacon who has
successfully led Frankie & Benny's for the past two years. We anticipate a
return to improved performance during the second half.
The Concessions Connection
Total turnover: £17.9m Like-for-like sales: +18.7% Profit: £2.6m
Operating Margin: 14.7%
Our concessions business, where the airport units are the cornerstone, enjoyed a
superb first half. Like-for-like sales increased by 18.7% and there was a 32%
increase in profits. We are particularly pleased to report also a strong
improvement in profit margins, against a background of increasing complexity and
cost pressures in the airport trading environment, this represents an
outstanding perfomance. During the period six of our units, having reached the
end of their concession, closed and we are delighted to have opened six new
units. This leaves us well-positioned in this important sector where there is
strong potential for further growth in air travel, particularly with low cost
airlines, the passengers of which are particularly attracted to our offerings.
Annually, approximately 40% of the UK population travels abroad by air, making
about 40 million trips. This has increased over the last 30 years from 10% of
the UK population, making 7 million trips abroad. We anticipate a continuation
of this growth trend.
High Street Restaurants
Total Turnover: £40.0m Profit: £4.9m Operating Margin: 12.2%
Garfunkel's
Turnover: £11.3m Like-for-like sales: +2.0%
Garfunkel's has enjoyed an encouraging first half with an increase in
like-for-like sales of 2.0%. Against a tough High Street trading background,
particularly in Central London, this represents a good performance.
Caffe Uno
Turnover: £19.4m Like-for-like sales: even
During the first half we have refurbished 21 of our Caffe Uno restaurants. The
results have been encouraging with like-for-like growth following refurbishment.
We have also put significant effort into marketing these restaurants,
particularly in their locality. We continue to place great emphasis on service
standards and delivery and we anticipate further progress with this brand going
forward.
Est Est Est
Turnover: £9.3m Like-for-like sales: -1.4%
Est Est Est suffered a slight decline in like-for-like sales during the first
half. In June we converted one of the units into a Caffe Uno and in August we
converted a second. The brand now comprises 19 units.
Non-Core Brands
Total Turnover: £0.7m Loss: (£0.6m)
During the first half non-core losses fell from £0.71m to £0.56m, a reduction of
21%. We will continue to take steps to mitigate the losses arising in the
non-core units.
Alan M. Jackson
Executive Chairman
11 September 2003
CITY CENTRE RESTAURANTS plc
Segmental Analysis
Six months ended 30 June 2003 Six months ended 30 June 2002
Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit
Margin Margin Margin Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
Leisure Parks 49,041 11,310 23.1% 8,825 18.0% 44,214 9,991 22.6% 7,717 17.5%
Concessions 17,872 3,823 21.4% 2,626 14.7% 16,142 3,157 19.6% 1,994 12.4%
High Street
Restaurants 39,979 7,578 19.0% 4,887 12.2% 40,453 7,495 18.5% 4,845 12.0%
Principal
Trading Brands 106,892 22,711 21.2% 16,338 15.3% 100,809 20,643 20.5% 14,556 14.4%
Non core Brands 718 (342) (47.6%) (562) (78.3%) 2,613 (547) (20.9%) (713) (27.3%)
Total all Brands 107,610 22,369 20.8% 15,776 14.7% 103,422 20,096 19.4% 13,843 13.4%
Pre-opening Costs (255) (0.2%) (255) (0.2%) (110) (0.1%) (110) (0.1%)
Administration (6,871) (6.4%) (7,311) (6.8%) (5,625) (5.4%) (5,965) (5.8%)
EBITDA /
Operating
Profit 15,243 14.2% 8,210 7.6% 14,361 13.9% 7,768 7.5%
Interest Charges (1,201) (1,709)
Profit before
Taxation and
Exceptional
Items 7,009 6,059
Exceptional Items (270) -
Profit / (loss)
on ordinary
activities
before
Taxation 6,739 6,059
CITY CENTRE RESTAURANTS plc
Group Profit and Loss Account
Half year Half year
ended ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
Note £000s £000s £000s
Turnover 107,610 103,422 216,386
Cost of sales:
Excluding pre-opening (91,834) (89,579) (183,474)
costs
Pre-opening costs (255) (110) (211)
(92,089) (89,689) (183,685)
Gross profit 15,521 13,733 32,701
Administrative (7,311) (5,965) (12,602)
expenses:
Operating profit 8,210 7,768 20,099
Loss and provision for 2 (270) - (53)
loss on disposal of
tangible fixed assets
Net interest payable (1,201) (1,709) (3,284)
Profit on ordinary
activities before
taxation 6,739 6,059 16,762
Tax on profit on 3 (2,381) (2,121) (3,771)
ordinary activities
Profit on ordinary 4,358 3,938 12,991
activities after
taxation
Dividends 4 (1,457) (1,457) (6,801)
Retained profit for 2,901 2,481 6,190
the period
All amounts relate to continuing activities.
Earnings per share 5
Basic earnings per
share, in pence 2.24 2.03 6.69
Basic earnings per
share, excluding
exceptional items, in
pence 2.32 2.03 6.71
Diluted earnings per
share, in pence 2.23 2.01 6.65
Basic earnings per
share, excluding
exceptional items and
taxation over
provision from
previous years, in
pence 2.32 2.03 5.68
CITY CENTRE RESTAURANTS plc
Statement of Total Recognised Gains and Losses
Half year ended Half year ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000s £000s £000s
Profit for the period 4,358 3,938 12,991
Currency translation
differences on foreign
currency investments 155 12 73
Total recognised gains
and losses relating to
the period 4,513 3,950 13,064
Reconciliation of Movements in
Shareholders' Funds
Half year ended Half year ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000s £000s £000s
Total recognised gains
and losses for the
period 4,513 3,950 13,064
Dividends (1,457) (1,457) (6,801)
Total movements during
the period 3,056 2,493 6,263
Shareholders' funds at
1 January 46,560 40,297 40,297
Shareholders' funds at
end of period 49,616 42,790 46,560
CITY CENTRE RESTAURANTS plc
Group Balance Sheet
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000s £000s £000s
Fixed assets
Tangible assets 147,529 144,284 143,799
Current assets
Stocks 1,985 2,014 2,266
Debtors 19,101 18,992 13,479
Cash at bank and in hand 1,994 450 1,057
23,080 21,456 16,802
Creditors
Amounts falling due within one
year (60,901) (58,653) (96,555)
Net current liabilities (37,821) (37,197) (79,753)
Total assets less current 109,708 107,087 64,046
liabilities
Creditors
Amounts falling due after one
year (43,000) (45,329) -
Provisions for liabilities and
charges
Property provision (694) (1,280) (1,208)
Deferred tax (16,398) (17,688) (16,278)
(17,092) (18,968) (17,486)
Net assets 49,616 42,790 46,560
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 (9,152) (15,978) (12,208)
49,616 42,790 46,560
CITY CENTRE RESTAURANTS plc
Group Statement of Cash Flows
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Net cash flow from 1 14,556 11,251 31,366
operating activities
Returns on investments
and servicing of
finance
Interest received 32 8 137
Interest paid (1,023) (1,701) (3,483)
Net cash outflow from
returns on
investments and
servicing of finance (991) (1,693) (3,346)
Taxation
Net corporation tax
paid (464) (1,901) (5,007)
Capital expenditure
Payments to acquire (9,875) (7,252) (14,660)
tangible fixed assets
Receipts from sales of 40 5,548 5,825
tangible fixed assets
Net cash outflow for
capital expenditure (9,835) (1,704) (8,835)
Acquisitions and
disposals
Net proceeds received
from the disposal of
operations - (234) 1,109
Net cash inflow/
(outflow) from
acquisitions
and disposals - (234) 1,109
Equity dividends paid 4 - - (6,626)
Cash inflow/ (outflow)
before financing 6 3,266 5,719 8,661
Financing
New loans drawn down 6 43,000 - -
Loans repaid 6 (45,329) (8,328) (8,656)
(2,329) (8,328) (8,656)
Increase/ (decrease)
in cash in the period 6 937 (2,609) 5
CITY CENTRE RESTAURANTS plc
Notes to the Interim Financial Statements
1) Reconciliation of operating profit to net cash inflow from operating
activities
Half Half
year ended year ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000s £000s £000s
Operating profit 8,210 7,768 20,099
Depreciation 7,033 6,593 13,434
Decrease/ (increase) in
stocks 281 203 (49)
Decrease/ (increase) in
debtors (5,622) (7,004) (2,649)
Increase/ (decrease) in
creditors 4,654 3,691 531
Net cash inflow from
operating activities 14,556 11,251 31,366
2) Exceptional items
The group has recognised losses and provision for losses on the disposal of
certain properties. The taxation impact of these disposals is to reduce the tax
charge for the period by £121,000.
3) Taxation
The taxation charge has been calculated by reference to the expected effective
corporation tax and deferred tax rates for the full financial year 2003 applied
against the profit before tax for the period to 30 June 2003. The effective tax
charge including deferred tax is estimated to be 35% for the year.
4) Dividends
The Directors have declared an interim dividend of 0.75p (2002: 0.75p) per share
which will be paid on 31 October 2003 to Ordinary Shareholders on the Register
at the close of business on 26 September 2003. On 3 July 2003 the Group paid the
final dividend for 2002 of 2.75p per share, or £5,344,000 in total.
5) Earnings per share
The calculation of basic earnings per share is based on the profit after
taxation for the period and on the weighted average number of ordinary shares in
issue during the period. As at 30 June 2003, 30 June 2002 and 31 December 2002,
the average weighted number of shares in issue was 194,301,733.
Adjusted basic earnings per share represents the basic earnings per share,
calculated as set out above, as adjusted for the effect on earnings of
exceptional items.
The calculation of diluted earnings per share is based on 195,210,838 shares
(six months ended 30 June 2002: 195,500,039 shares and year ended 31 December
2002: 195,392,025 shares).
Basic earnings per share adjusted for exceptional items and the release of the
taxation over-provision is included for comparative purposes. The taxation
adjustment was in relation to a release of a tax accrual in the second half of
2002.
6) Reconciliation of changes in cash to the movement in net debt
Half Half
year ended year ended Year ended
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000s £000s £000s
Net debt at the beginning of
the period (44,600) (53,261) (53,261)
Movements during the period:
New loans drawn down (43,000) - -
Loans repaid 45,329 8,328 8,656
Cash inflow/ (outflow) 937 (2,609) 5
Net debt at the end of the
period (41,334) (47,542) (44,600)
Analysis of net debt At Cash flow At
31 December movements 30 June
2002 in the period 2003
(audited) (unaudited) (unaudited)
£'000 £'000 £'000
Cash at bank and in hand 1,057 937 1,994
Bank overdraft - - -
1,057 937 1,994
Bank loan due within one
year (45,657) 45,329 (328)
Bank loans due after one
year - (43,000) (43,000)
(44,600) 3,266 (41,334)
During the period, the Group negotiated and agreed a refinancing of its bank
facilities. A new five year, £70 million revolving credit facility has been
secured. The terms and conditions for the new facility are similar to those
which it replaced.
CITY CENTRE RESTAURANTS plc
Interim Financial Statements
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2002 statutory accounts.
The interim financial statements were approved by a duly appointed committee of
the Board of Directors on 11 September 2003 and are unaudited. The auditors
have carried out a review and their report is set out below.
The figures for the year ended 31 December 2002 have been extracted from the
statutory accounts which have been filed with the Registrar of Companies. The
auditors' report on the 2002 financial statements was unqualified and did not
contain any statement under section 237 of the Companies Act 1985. The interim
financial statements do not constitute statutory accounts.
Independent Review Report to City Centre Restaurants plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2003, on pages 6 to 12. 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.
This report is made solely to the company in accordance with the terms of our
engagement to assist the
company in meeting the requirements of the Listing Rules of the Financial
Services Authority. Our review has been undertaken so that we might state to
the company those matters we are required to state to it in this report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work, for
this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which 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 contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of 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 United Kingdom 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 30 June 2003.
BDO Stoy Hayward
London
11 September 2003
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