Interim Results

RNS Number : 1525L

Restaurant Group PLC

31 August 2012

 



The Restaurant Group plc

Interim results for the 26 weeks ending 1 July 2012

The Restaurant Group plc ("TRG" or "the Group") operates 406 restaurants and pub restaurants.  Its principal trading brands are Frankie & Benny's, Chiquito and Garfunkel's. In addition it operates 42 Pub Restaurants as well as over 50 sites in its Concessions business which trades principally at major UK airports.

·      Continued strong performance in a difficult market:

Results marked as adjusted are stated excluding non-trading items.

-     Total revenue increased 7.5% to £252m (2011: £234m)

-     Like-for-like sales increased by 3.25%

-     Adjusted operating profit increased by 8% to £27.3m (2011: £25.2m)

-     Adjusted profit before tax increased by 7% to £26.1m (2011: £24.4m)

-     Adjusted EPS rose 10.3% to 9.6p (2011: 8.7p)

-     Statutory profit before tax was £26.1m (2011: £17.2m)

-     Statutory EPS was 9.6p (2011: 5.6p)

·      Excellent performance demonstrating the resilience of TRG's business in difficult markets and the continued strength of its brands

·      Operations are strongly cash generative; adjusted operating cash flow of £38.5m (2011: £38.7m) 

·      Interim dividend increased by 12.5% to 4.5p per share (2011: 4.0p)

·      Continuing new site development

-     Eight new sites opened in the first half year

-     A further five new sites opened to date in the second half year

-     25-30 new sites targeted for 2012

·      Continued strong trading with year to date like-for-like sales for the 34 weeks to 26 August 2012 at 3.25%

·      Board is confident of another year of good progress in 2012

Andrew Page, Chief Executive of The Restaurant Group plc commented as follows:

"The Restaurant Group has delivered a record first half performance with a 7.5% increase in total sales and a 10.3% increase in earnings per share.  Since the beginning of the year we have opened 13 new restaurants and we expect to open a total of 25-30 for the full year.  Trading continues to be good with the year to date like-for-like sales 3.25% ahead of last year.  We have a fantastic team at TRG which has worked very hard to deliver this performance and they will all be looking to build further on this during the second half."

31 August 2012

Enquiries:

The Restaurant Group
Andrew Page, Chief Executive	020 7457 2020 (today)
Stephen Critoph, Group Finance Director	020 3117 5001 (thereafter)
College Hill
Matthew Smallwood	020 7457 2020

Chairman's statement

The Group has traded well during the first six months of 2012, delivering growth in both revenues and profits. Like-for-like sales grew by 3.25% and total sales were up 7.5%. This strong sales growth, combined with close attention to costs and carefully targeted promotional activity, has enabled the Group to maintain operating profit margins at the same level as the previous year.

Our promotional activity has followed a similar pattern to 2011 - we have continued to channel activities via digital media whilst eschewing the deep discounting that has become commonplace in our sector. Our local marketing initiatives have also been particularly effective in attracting customers into our restaurants. Overall, this has helped to drive footfall whilst also maintaining good margins.

During the first six months we opened eight new restaurants and since June we have opened a further five restaurants. Our new openings are performing strongly and we anticipate opening between 25 and 30 new restaurants during the year.

Results*

*Results marked as adjusted are stated excluding non-trading items.

During the first half the Group delivered increases in revenue, profits and earnings per share. Operating margins at 10.8% were in line with the previous year and this reflected the strong sales performance which, combined with close attention to costs, offset inflationary cost pressures. Revenue increased by 7.5% to £252m (2011: £234m), adjusted EBITDA increased by 5% to £41.6m (2011: £39.7m), adjusted operating profit increased by 8% to £27.3m (2011: £25.2m), adjusted profit before tax increased by 7% to £26.1m (2011: £24.4m) and adjusted earnings per share increased by 10.3% to 9.6p (2011: 8.7p). Statutory profit before tax increased by 52% to £26.1m (2011: £17.2m). Again, profits have converted into cash at a very healthy rate and, for the first half year, adjusted operating cashflow was £38.5m (2011: £38.7m).

As a result of this strong performance the Board is declaring an interim dividend of 4.5p (2011: 4.0p) per share. The interim dividend will be paid on 10 October 2012 to shareholders on the register on 14 September 2012 and the shares will be marked ex-dividend on 12 September 2012.

Frankie & Benny's (209 units)

Frankie & Benny's traded strongly during the first half of the year delivering excellent results. Our focus on offering a broad range of choice across all day parts at a variety of price points has continued to attract an increasing number of customers into our restaurants. This, combined with careful control of costs, has helped to deliver a strong performance and a modest improvement in margins. We opened two new restaurants during the first half and have opened a further two restaurants since the half year. These are trading well and are set to deliver strong returns. During 2012 we expect to open a total of between 11 and 14 Frankie & Benny's restaurants.

Chiquito (69 units)

Chiquito delivered a good first half performance with increased revenue and profits. Considerable focus has been directed towards consistency of service and standards and this, combined with careful control of costs, has yielded good results.

Pub Restaurants (42 units)

Our Pub Restaurants business has traded well during the first six months delivering good levels of sales and profits. The conversion of the ex-Blubeckers estate into the Brunning & Price model was completed during 2011 and this has yielded good results. During the first half year we opened one new Pub Restaurant and have subsequently opened a second Pub Restaurant and we expect to open 4-5 during 2012. The new openings are performing considerably ahead of our expectations and are expected to deliver strong returns.

Garfunkel's (25 units)

Garfunkel's traded well during the first half producing good levels of sales and profits. During the first half we opened two new Garfunkel's restaurants - Burleigh House at the eastern end of the Strand and at St. Martin's Lane in the West End of London and we expect to generate strong returns from the new openings. Trade during July and August has been reasonably solid, largely reflecting the visitor patterns and traffic impact of the Olympic Games.

Coast to Coast (1 unit)

In November 2011 we opened our first Coast to Coast restaurant at Brighton Marina, positioned adjacent to our Frankie & Benny's restaurant. This was the product of a two year project to devise and develop a new, third, leisure brand that was scaleable and suitable for rollout alongside new and existing Frankie & Benny's and Chiquito restaurants. Coast to Coast is designed and themed as an American restaurant and bar, taking inspiration from the journey along the Lincoln Highway. It has broad appeal across the age ranges and is designed to sit at a price point which will yield a £mid-teen average spend per head. We are delighted with the performance of our Brighton restaurant which has traded strongly over the past ten months. Equally pleasing is the very limited negative impact which it has had on the adjacent Frankie & Benny's restaurant which also continues to trade strongly. Since the half year we have opened a second Coast to Coast restaurant at The Gate in Newcastle and, during October, a third restaurant will open in Stevenage alongside an existing Frankie & Benny's and Chiquito. We believe that this brand has good potential, is scaleable and capable of delivering strong returns.

Concessions (60 units)

Our Concessions business traded strongly during the first half delivering excellent results. Growth in revenues combined with careful cost control produced a good uplift in profits. During the first half we opened two new sites in Glasgow Airport (replacing one restaurant which closed) and a new bar at Manchester's Piccadilly station and, since the half year, we have opened a new site at Terminal 4 in Heathrow. Our new openings are trading well and are set to deliver strong returns. We expect to open at least one more site before the end of the year.

Cash flow and balance sheet

Set out below is the summary cash flow statement for the first half. This once again clearly demonstrates the strong cash flow generation characteristics of the Group's business and the transparent conversion of operating profits into cash.

	26 weeks to 1 July 2012	26 weeks to 3 July 2011
	£m	£m
Operating profit	27.3	25.2
Working capital & non cash adjustments	(3.2)	(1.0)
Depreciation	14.4	14.5
Net cash flow from operations	38.5	38.7
Net interest paid	(0.7)	(0.7)
Tax paid	(7.8)	(7.5)
Maintenance capital expenditure	(8.6)	(6.7)
Free cash flow	21.4	23.8
Development capital expenditure	(16.1)	(9.5)
Dividends	-	(14.5)
Normalised net cash flow	5.3	(0.2)
Disposals	0.7	(1.3)
Net cash flow from share issues	-	0.9
SWAP termination payment	-	(0.4)
Purchase of shares	(2.9)	(3.1)
Financing costs offset against bank debt	0.1	(0.1)
Change in net debt	3.2	(4.2)
Net bank debt at start of period	(41.6)	(46.9)
Net bank debt at end of period	(38.4)	(51.1)

During the first half of 2012 the Group entered into a new five year supply chain contract which has involved a shortening of the number of days credit taken and this resulted in a £4.1m negative impact upon the Group's working capital.

During the first half total capital additions were £24.7m (2011: £16.2m). £8.6m of this represented maintenance capex with the balance of £16.1m being investment in new developments and freehold acquisitions (including a number of new site developments which will open in the second half of the year). In the full year we expect to spend between £45m and £50m on capital expenditure.

In the light of the continued opaque economic backdrop, TRG has maintained its very prudent approach to the capital structure and the Group continues to be in a very strong financial position. We have banking facilities of £140m in place, committed until October 2016 and we continue to have substantial head room against our bank facility covenants. On a rolling 12 month basis to the half year end date, our key metrics on bank covenants are as follows:

	Covenant	HY 2012	HY 2011
EBITDA / interest ratio	>4x	44.0x	38.5x
Net debt / EBITDA ratio	<3x	0.4x	0.6x

Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.  These have not materially changed from the information on the principal risks and uncertainties of the Group which are set out on pages 21 and 22 of our latest Annual Report and Accounts⁽²⁾. The key risks and uncertainties facing the Group in the second half of the year include adverse economic conditions, increased competitive supply, a failure of suppliers delivering to the Group and increased raw material and other costs.

Outlook

The results for the first half are strong, particularly so against the backdrop for consumer-facing businesses. TRG benefits from operating in market segments which have proved more resilient than the high streets and this, combined with its portfolio of brands which have very wide appeal, has enabled the Group to continue to grow revenues and profits.

The second half of the year has started well - year to date, total turnover is up 7.5% and like-for-like sales are up 3.25%. We expect trading conditions during the second half to be similar to those we experienced during the first half of the year and I am confident that the Group is well placed to deliver further good progress.

Alan Jackson

Non-executive Chairman

31 August 2012

Notes to the Chairman's Statement

⁽¹⁾ A summarised income statement is set out below:

	26 weeks ended 1 July 2012	26 weeks ended 3 July 2011
	£m	£m	% change
Revenue	251.6	234.2	+7.5%
Cost of sales	(209.4)	(195.0)
Pre-opening costs	(0.8)	(0.6)
Gross profit	41.4	38.6	+7.5%
Administration costs	(14.1)	(13.4)
Adjusted operating profit	27.3	25.2	+8.1%
Adjusted operating margin	10.8%	10.8%
Net interest	(1.2)	(0.8)
Adjusted profit before tax	26.1	24.4	+6.9%
Tax	(6.8)	(7.0)
Adjusted profit after tax	19.3	17.4	+10.6%
Adjusted EPS (pence)	9.63	8.73	+10.3%

⁽²⁾ The latest Annual Report and Accounts for The Restaurant Group plc can be found at www.trgplc.com

The Restaurant Group plc Interim report 2012
Condensed financial statements
Consolidated income statement
		26 weeks ended 1 July 2012				26 weeks ended 3 July 2011
		Trading	Non-			Trading	Non-
		business	trading	Total		business	trading	Total
		(unaudited)	(unaudited)	(unaudited)		(unaudited)	(unaudited)	(unaudited)
	Note	£'000	£'000	£'000		£'000	£'000	£'000
Revenue		251,641	-	251,641		234,191	-	234,191
Cost of sales:
Excluding pre-opening costs	2	(209,380)	-	(209,380)		(194,992)	(5,358)	(200,350)
Pre-opening costs		(819)	-	(819)		(645)	-	(645)
		(210,199)	-	(210,199)		(195,637)	(5,358)	(200,995)
Gross profit/ (loss)		41,442	-	41,442		38,554	(5,358)	33,196
Administration costs		(14,179)	-	(14,179)		(13,340)	-	(13,340)
Trading profit/ (loss)		27,263	-	27,263		25,214	(5,358)	19,856
Loss on disposal of fixed assets	2	-	-	-		-	(2,071)	(2,071)
Earnings before interest, tax, depreciation and amortisation:		41,639	-	41,639		39,695	(4,468)	35,227
Depreciation		(14,376)	-	(14,376)		(14,481)	(2,961)	(17,442)
Operating profit/ (loss)		27,263	-	27,263		25,214	(7,429)	17,785
Interest payable		(1,313)	-	(1,313)		(830)	230	(600)
Interest receivable		114	-	114		8	-	8
Profit/ (loss) on ordinary activities before tax		26,064	-	26,064		24,392	(7,199)	17,193
Tax on profit/ (loss) from ordinary activities	3	(6,778)	-	(6,778)		(6,952)	992	(5,960)
Profit/ (loss) for the period		19,286	-	19,286		17,440	(6,207)	11,233
Earnings per share (pence)
Basic	4	9.63		9.63		8.73		5.63
Diluted	4	9.62		9.62		8.72		5.62
Dividend per share (pence) 1	5			4.50				4.00
1 The dividend per share of 4.50p (2011: 4.00p) is the interim dividend in respect of 2012 and the dividend per share of 10.50p is the interim and final dividend in respect of 2011.

The Restaurant Group plc Interim report 2012
Condensed financial statements
Consolidated income statement
		52 weeks ended 1 January 2012
		Trading	Non-
		business	trading	Total
		(audited)	(audited)	(audited)
	Note	£'000	£'000	£'000
Revenue		487,114	-	487,114
Cost of sales:
Excluding pre-opening costs	2	(397,782)	(7,544)	(405,326)
Pre-opening costs		(1,948)	-	(1,948)
		(399,730)	(7,544)	(407,274)
Gross profit/ (loss)		87,384	(7,544)	79,840
Administration costs		(26,199)	(192)	(26,391)
Trading profit/ (loss)		61,185	(7,736)	53,449
Loss on disposal of fixed assets	2	-	(4,169)	(4,169)
Earnings before interest, tax, depreciation and amortisation:		89,741	(8,405)	81,336
Depreciation		(28,556)	(3,500)	(32,056)
Operating profit/ (loss)		61,185	(11,905)	49,280
Interest payable		(1,818)	230	(1,588)
Interest receivable		916	-	916
Profit/ (loss) on ordinary activities before tax		60,283	(11,675)	48,608
Tax on profit/ (loss) from ordinary activities	3	(16,575)	2,344	(14,231)
Profit/ (loss) for the period		43,708	(9,331)	34,377
Earnings per share (pence)
Basic	4	21.86		17.19
Diluted	4	21.84		17.18
Dividend per share (pence)	5			10.50

The Restaurant Group plc Interim report 2012
Condensed financial statements
Consolidated statement of comprehensive income
	26 weeks ended 1 July 2012	26 weeks ended 3 July 2011	52 weeks ended 1 January 2012
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Profit for the period	19,286	11,233	34,377
Exchange differences on translation of foreign operations	-	24	(488)
Total comprehensive income for the period	19,286	11,257	33,889

The Restaurant Group plc Interim report 2012
Condensed financial statements
Consolidated statement of changes in equity
						Foreign
						currency
		Share		Share		translation		Other		Retained		Total
		capital		premium		reserve		reserves		earnings
		£'000		£'000		£'000		£'000		£'000		£'000
Balance at 2 January 2012		56,319		23,982		-		(7,115)		84,096		157,282
Profit for the period		-		-		-		-		19,286		19,286
Exchange differences on translation of foreign operations		-		-		-		-		-		-
Total comprehensive income for the period		-		-		-		-		19,286		19,286
Issue of new shares		2		7		-		-		-		9
Dividends		-		-		-		-		-		-
Share-based payments - credit to equity		-		-		-		950		-		950
Employee benefit trust - purchase of shares		-		-		-		(2,855)		-		(2,855)
Current tax on share-based payments taken directly to equity		-		-		-		-		1,328		1,328
Deferred tax on share-based payments taken directly to equity		-		-		-		-		(923)		(923)
Balance at 1 July 2012 (unaudited)		56,321		23,989		-		(9,020)		103,787		175,077
Balance at 3 January 2011		56,101		23,234		488		(6,302)		71,192		144,713
Profit for the period		-		-		-		-		11,233		11,233
Exchange differences on translation of foreign operations		-		-		24		-		-		24
Total comprehensive income for the period		-		-		24		-		11,233		11,257
Issue of new shares		199		682		-		-		-		881
Dividends		-		-		-		-		(14,525)		(14,525)
Share-based payments - credit to equity		-		-		-		1,340		-		1,340
Employee benefit trust - purchase of shares		-		-		-		(3,050)		-		(3,050)
Current tax on share-based payments taken directly to equity		-		-		-		-		1,127		1,127
Deferred tax on share-based payments taken directly to equity		-		-		-		-		(398)		(398)
Balance at 3 July 2011 (unaudited)		56,300		23,916		512		(8,012)		68,629		141,345

The Restaurant Group plc Interim report 2012
Condensed financial statements
Consolidated statement of changes in equity
				Foreign
				currency
		Share	Share	translation	Other	Retained	Total
		capital	premium	reserve	reserves	earnings
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 3 January 2011		56,101	23,234	488	(6,302)	71,192	144,713
Profit for the year		-	-	-	-	34,377	34,377
Exchange differences on translation of foreign operations		-	-	(488)	-	-	(488)
Total comprehensive income for the year		-	-	(488)	-	34,377	33,889
Issue of new shares		218	748	-	-	-	966
Dividends		-	-	-	-	(22,337)	(22,337)
Share-based payments - credit to equity		-	-	-	2,237	-	2,237
Employee benefit trust - purchase of shares		-	-	-	(3,050)	-	(3,050)
Current tax on share-based payments taken directly to equity		-	-	-	-	1,178	1,178
Deferred tax on share-based payments taken directly to equity		-	-	-	-	(314)	(314)
Balance at 1 January 2012		56,319	23,982	-	(7,115)	84,096	157,282

The Restaurant Group plc Interim report 2012
Condensed financial statements
Consolidated balance sheet
		At 1 July 2012	At 3 July  2011	At 1 January 2012
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Non-current assets
Intangible assets		26,433	26,433	26,433
Property, plant and equipment		278,349	257,663	269,141
		304,782	284,096	295,574
Current assets
Stock		3,884	3,479	3,925
Trade and other receivables		5,771	4,287	7,382
Prepayments		13,837	12,687	15,158
Cash and cash equivalents		5,309	1,086	10,242
		28,801	21,539	36,707
Total assets		333,583	305,635	332,281
Current liabilities
Short-term borrowings		-	(405)	-
Corporation tax liabilities		(6,323)	(6,133)	(8,542)
Trade and other payables		(80,691)	(77,588)	(87,198)
Other payables - finance lease obligations		(327)	(311)	(326)
Provisions		(3,118)	(2,452)	(3,282)
		(90,459)	(86,889)	(99,348)
Net current liabilities		(61,658)	(65,350)	(62,641)
Non-current liabilities
Long-term borrowings		(43,716)	(51,750)	(51,835)
Other payables - finance lease obligations		(2,825)	(2,788)	(2,806)
Deferred tax liabilities		(17,484)	(19,206)	(16,733)
Provisions		(4,022)	(3,657)	(4,277)
		(68,047)	(77,401)	(75,651)
Total liabilities		(158,506)	(164,290)	(174,999)
Net assets		175,077	141,345	157,282
Equity
Share capital		56,321	56,300	56,319
Share premium		23,989	23,916	23,982
Foreign currency translation reserve		-	512	-
Other reserves		(9,020)	(8,012)	(7,115)
Retained earnings		103,787	68,629	84,096
Total equity		175,077	141,345	157,282

The Restaurant Group plc Interim report 2012
Condensed financial statements
Consolidated cash flow statement
		26 weeks ended 1 July 2012	26 weeks ended 3 July 2011	52 weeks ended 1 January 2012
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Operating activities
Cash generated from operations	6	38,475	38,733	91,745
Interest received		114	8	916
Interest paid		(816)	(1,119)	(1,612)
Tax paid		(7,841)	(7,521)	(15,722)
Net cash flows from operating activities		29,932	30,101	75,327
Investing activities
Purchase of property, plant and equipment		(24,749)	(16,206)	(43,648)
Disposal of fixed assets	2	730	(1,258)	(2,754)
Net cash flows used in investing activities		(24,019)	(17,464)	(46,402)
Financing activities
Net proceeds from issue of ordinary share capital		9	881	966
Employee benefit trust - purchase of shares		(2,855)	(3,050)	(3,050)
Net (repayments of) / proceeds from loan draw downs	7	(8,000)	2,000	3,000
Dividends paid to shareholders		-	(14,525)	(22,337)
Net cash flows used in financing activities		(10,846)	(14,694)	(21,421)
Net (decrease) / increase in cash and cash equivalents		(4,933)	(2,057)	7,504
Cash and cash equivalents at the beginning of the period		10,242	2,738	2,738
Cash and cash equivalents at the end of the period		5,309	681	10,242

The Restaurant Group plc Interim report 2012

Condensed financial statements

Responsibility Statement                                           

We confirm that to the best of our knowledge:                                         

(a)  the condensed set of financial statements has been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting';                                          

(b)  the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 26 weeks and description of principal risks and uncertainties for the remaining 26 weeks of the year); and                                               

(c)  the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).                                              

By order of the Board,                                        

Alan Jackson                                                              Stephen Critoph ACA

Non-executive Chairman                                           Group Finance Director

31 August 2012                                                          31 August 2012

Accounting policies                                        

Basis of preparation                                           

The annual financial statements of The Restaurant Group plc are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union.  The accounting policies and methods of computation used are consistent with those used in the Group's latest annual audited financial statements.                                          

General information                                       

The comparatives for the full year ended 1 January 2012 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditor's report on these accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.                                              

Going concern                                    

As referred to in the Chairman's statement there are continued significant economic uncertainties facing the United Kingdom and consumer-facing industries in particular.  Potential other risk factors and uncertainties that could affect the business are also discussed in the Chairman's statement.  The Group enjoys negative working capital as, due to the nature of the business, it generally does not provide credit facilities to its customers.  The Group has a debt facility of £140m which matures in October 2016 and had net debt at 1 July 2012 of £38.4m.  Based on the Group's plans for the next 12 months and after making enquiries (including preparation of reasonable trading forecasts, consideration of current financing arrangements and current headroom for liquidity and covenant compliance), the Directors have a reasonable expectation that the Group has adequate resources to continue operations for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the condensed financial statements.                                     

Changes in accounting policies                                              

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.                                   

The Restaurant Group plc Interim report 2012                                             

Condensed financial statements                                           

Notes to the condensed financial statements                                              

1 Segmental analysis                                     

The Group trades in one business segment (that of operating restaurants) and one geographical segment (being the United Kingdom).                                             

2 Non-trading items                                       

The Group has not reported any non-trading items for the 26 weeks ended 1 July 2012 (26 weeks ended 3 July 2011:  £7.2m pre-tax loss, 52 weeks ended 1 January 2012: £11.7m pre-tax loss).                                       

3 Tax                                       

The tax charge has been calculated by reference to the expected effective current and deferred tax rates for the full financial year to 30 December 2012 applied against the profit before tax for the period ended 1 July 2012.  The full year effective tax charge on the underlying trading profit is estimated to be 26% (2011: 28.5%).                                              

The Budget 2012 introduced a reduction in the main rate of corporation tax from 1 April 2012 from 26% to 24%.  This was substantively enacted on 26 March 2012 and the impact of this reduction has therefore been reflected in the interim statement.                                               

The Finance Act 2012, which provides for a reduction in the main rate of corporation tax from 24% to 23% effective from 1 April 2013, was substantively enacted on 17 July 2012.  As it was not substantively enacted at the balance sheet date, in accordance with IAS 10 the rate reduction is not yet reflected in these financial statements, as it is a non-adjusting event occurring after the reporting period.  The impact of the rate reduction, which will be reflected in the next reporting period, is estimated to reduce the UK deferred tax liability provided at 1 July 2012 by £0.7m, however the actual impact will be dependent on the Group's deferred tax position at the time.                                     

4 Earnings per share                                                  

	26 weeks ended 3 July 2012 (unaudited)				26 weeks ended 3 July 2011 (unaudited)				52 weeks ended 1 January 2012 (audited)
	Earnings	Weighted average number of shares	Per-share amount		Earnings	Weighted average number of shares	Per-share amount		Earnings	Weighted average number of shares	Per-share amount
	£'000	millions	pence		£'000	millions	pence		£'000	millions	pence
Basic earnings per share	19,286	200.3	9.63		11,233	199.7	5.63		34,377	200.0	17.19
Effect of dilutive options	-	0.1	(0.01)		-	0.2	(0.01)		-	0.2	(0.01)
Diluted earnings per share	19,286	200.4	9.62		11,233	199.9	5.62		34,377	200.2	17.18
Basic earnings per share	19,286	200.3	9.63		11,233	199.7	5.63		34,377	200.0	17.19
Effect of non-trading items	-	-	-		6,207	-	3.10		9,331	-	4.67
Earnings per share - trading business	19,286	200.3	9.63		17,440	199.7	8.73		43,708	200.0	21.86

5 Dividends                                         

Following approval at the Annual General Meeting on 17 May 2012, the final dividend in respect of 2011 of 6.50p per share, totalling £12.8m, was paid to shareholders on 19 July 2012.                                                                                  

The Directors have declared an interim dividend of 4.50p per share which will be paid on 10 October 2012 to ordinary shareholders on the register at close of business on 14 September 2012.  In accordance with IAS 10, this will be recognised in the reserves of the Group in the second half of the year.                                            

6 Reconciliation of profit before tax to cash generated from operations                                        

	26 weeks ended 1 July 2012	26 weeks ended 3 July 2011	52 weeks ended 1 January 2012
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Profit before tax	26,064	17,193	48,608
Net finance charges	1,199	592	672
Loss on disposal of fixed assets	-	2,071	4,169
Share-based payments	950	1,340	2,237
Depreciation	14,376	17,442	32,056
Decrease / (increase) in stocks	41	151	(295)
Decrease / (increase) in debtors	2,932	2,135	(3,426)
(Decrease) / increase in creditors	(7,087)	(2,191)	7,724
Cash generated from operations	38,475	38,733	91,745

7 Bank loans                                       

The Group has a committed bank facility of £140m in place until October 2016.  During the 26 weeks ended 1 July 2012, the Group reduced its draw-down under this facility by £8.0m.                                              

8 Share capital                                               

Share capital at 1 July 2012 amounted to £56.3m.  The number of shares allotted, called up and fully paid increased from 200,245,088 to 200,251,777 in the period following the exercise of share options by employees, amounting to 6,689 shares.                                     

9 Related party transactions                                    

Living Ventures Restaurants Group Limited is a related party to The Restaurant Group plc through the Group's 38% holding.  A loan note of £10.4m is due from LV Finance, a subsidiary of Living Ventures Restaurants Group Limited, which attracts interest at the rate dependent on LIBOR.  During the 26 weeks ended 1 July 2012, £0.1m of interest was receivable and recognised in the income statement (52 weeks ended 1 January 2012:  £0.2m accrued of which the Group recognised £0.1m.  In addition a further £0.8m was received as part payment of the accrued interest, all of which was recognised in the income statement).  Consequently in addition to the loan note of £10.4m, at 1 July 2012 £0.5m of interest receivable was still outstanding, of which, under the terms of the agreement, all was overdue.                                                 

Alan Jackson retired as a non-executive director of Charles Wells Limited in January 2012.  There were no significant changes in the nature and size of related party transactions with Charles Wells Limited for the period to those reported in the Annual Report and Accounts for the 52 weeks ended 1 January 2012.                                          

10 Contingent liabilities                                              

There were no significant changes in the nature and size of contingent liabilities at 1 July 2012 to those reported in the Annual Report and Accounts for the 52 weeks ended 1 January 2012.       

Independent review report to The Restaurant Group plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 1 July 2012 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review 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 formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in the accounting policies, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 1 July 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

31 August 2012

 

END

 

 

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