Interim Results
Restaurant Group PLC
12 September 2007
The Restaurant Group plc
Interim results for the 26 weeks ending 1 July 2007
12 September 2007
The Restaurant Group plc operates 294 branded restaurants predominantly in
leisure locations and airports. Its primary brands are Frankie and Benny's,
Chiquito, Garfunkel's and Blubeckers.
• The Company has continued to trade very strongly during the first six
months of the year:
- 6.5% growth in like for like sales
- EBITDA up 26% to £30.3m
- Adjusted profit before tax increased by 30% to £17.6m
- Adjusted EPS rose 37% to 5.87p
- Statutory profit before tax increased by 71% to £17.2m
- Statutory EPS rose 50% to 6.10p
- Interim dividend of 1.26p, up 20%
• Both divisions continued to grow revenue and operating margins:
Frankie and Benny's
- Trading strongly, eight new sites opened in the period and a further 8-12
to open in HY2.
- Potential for over 250 sites (currently 147 units)
Chiquito
- Excellent performance driven by expansion and tight operational
control
- One new restaurant during HY1, three new restaurants since June and
expect to open 6-8 units in the full year
Blubeckers
- Good results and management team strengthened
- Three opened during the first half year and a further two opened since
Garfunkel's
- Nine units were closed for refurbishment during the period, strong growth
in like-for-like sales post refurbishment
Concessions
- Traded well in a demanding environment. Exciting opportunity in Heathrow
T5, opening four new units in 2008
- One new unit during the period and between one and three to open in HY2
• Strongly cash generative and self-funded rollout:
- £28.1m of cash generated during the period
- £19.1m of capital expenditure
• Current trading is strong:
- like for like sales for the 36 weeks to 9 September 2007 are 7% ahead of
last year
Andrew Page, Chief Executive, said:
'Our focus on the Leisure and Concessions markets continues to deliver great
results for The Restaurant Group. Our business performed superbly during the
first half with both divisions delivering significant increases in turnover and
profits. Against a more demanding background for consumer-facing businesses,
this is a credit to our team. with a strong start to the second half and an
impressive pipeline of new sites, we are looking forward to another year of good
progress.'
12 September 2007
Enquiries:
The Restaurant Group
Andrew Page, Chief Executive 020 7457 2020 (today)
Stephen Critoph, Group Finance Director 0845 612 5001 (thereafter)
College Hill
Matthew Smallwood 020 7457 2020
Chairman's Statement
I am pleased to report that the Group traded well for the first six months of
the year, delivering 6.5% growth in like-for-like sales and increasing revenue,
earnings and margins. Against a background of rising interest rates and more
demanding conditions for customer-facing businesses this represents a superb
performance, reflecting the robust and resilient positioning of The Restaurant
Group's businesses. Since the end of the first half this positive trading
pattern has continued with like-for-like sales currently 7% ahead of the prior
year for the 36 weeks up until 9 September 2007.
This is the sixth successive set of interim accounts showing increased profits
and, notwithstanding the ever more demanding comparatives - 2006 saw adjusted
earnings per share increase by 27% - we have again significantly outperformed
both our sector and market in terms of earnings growth. Additionally, there has
been a very healthy conversion of those increased earnings into cash. Strong
cashflows during the first six months resulted in net debt falling to £35.6m at
1 July 2007 (£47.5m at 31 December 2006). These strong cashflows enable us to
invest in our business, both in terms of maintaining the existing estate to a
high standard and also adding new restaurants to our portfolio. We have also
returned significant amounts of cash to shareholders through increasing our
payments of ordinary dividends.
During the first six months of 2007 both of our divisions performed well
increasing revenue, profits and profit margins. Our Leisure division produced a
24% increase in operating profits and a 30 basis point increase in operating
profit margin. Our Concessions division also performed well delivering a 15%
increase in operating profits and a 20 basis point increase in operating profit
margin.
During the first half we opened a total of 13 new restaurants and I am delighted
to report that they are all trading well. Since the end of the first half we
have opened a further seven new units and we expect to open a total of 30 to 35
new restaurants for 2007 as a whole. We are also pleased to report that our
pipeline of new sites has been further strengthened since our last statement
with good visibility for 2008, 2009 and beyond.
Results*
*Results marked as adjusted are stated excluding non-trading items (refer to
note 2)
The Group has made further good progress during the first half. Revenue grew by
17% to £171.9m (2006: £147.4m), EBITDA increased by 26% to £30.3m (2006:
£24.1m), adjusted operating profit grew by 31% to £20.1m (2006: £15.4m),
adjusted profit before tax increased by 30% to £17.6m (2006: £13.5m) and
adjusted earnings per share increased by 37% to 5.87p (2006: 4.29p). Statutory
profit before tax increased by 71% to £17.2m (2006: £10.1m) and statutory
earnings per share increased by 50% to 6.10p (2006: 4.08p).
In the light of this excellent performance the Board is declaring an interim
dividend of 1.26p per share (2006: 1.05p) representing an increase of 20%. The
dividend will be paid on 18 October 2007 to shareholders on the register on 21
September 2007 and the shares will be marked ex-dividend on 19 September 2007.
Again, the increase in profit was the product of three principal components:
- Like-for-like profit increases from the existing estate;
- Profitable contributions from new openings; and
- Cost savings from purchasing initiatives and operational
efficiencies.
This represents a very healthy basis from which the Group can continue its
further profitable growth.
Leisure
Total revenue: £134m Operating profit: £27.5m Operating margin: 20.5%
Frankie & Benny's (147 units)
Frankie & Benny's has traded superbly during the first half of 2007 with
revenues and operating profits increasing. We opened eight new restaurants
during the first half, all of which are trading strongly and are set to deliver
returns at least consistent with those of the portfolio as a whole. Since June
we have opened a further two new units and we anticipate opening between 16 and
20 Frankie & Benny's restaurants in total this year.
Of these 16-20 new units, approximately half will be located on sites without
cinemas. Over the last few years we have opened an increasing number of
restaurants at non-cinema sites, and we have been very encouraged by the
opportunity to trade these restaurants during a greater range of day parts
combined with the increasing propensity for these restaurants to become
destinations in their own right (due, inter alia, to the widespread appeal of
Frankie & Benny's offering, ease of access, safe environment and good car
parking facilities). This has meant that these types of sites have consistently
delivered very high levels of return on investment. Consequently, we have been
able to further refine our site selection criteria and are confident that
Frankie & Benny's has the potential to grow to at least 250 sites in the UK over
the next 5-8 years.
Chiquito (46 units)
Chiquito also performed admirably with a 54% increase in operating profit. This
excellent performance is a result of strong operational controls combined with
the incremental benefits arising from the expansion of the business.
One new restaurant was opened during the first half and we are pleased with its
performance. Since the half year we have opened three new restaurants and, for
the year as a whole, we expect to open a total of six to eight new units. We are
confident that we can maintain this rate of openings for the foreseeable future.
Blubeckers (25 units)
We are pleased with the performance of Blubeckers and regard it as a business
with significant growth potential. During the first six months revenue and
operating profits both showed good growth and we have opened three new
restaurants. Since June we have opened a further two new restaurants and we
expect to open between five and seven new units in total during 2007.
In anticipation of accelerating the rate of rollout of Blubeckers in 2008 and
beyond we have, during the first half of 2007, taken steps to strengthen the
management team at Blubeckers. We now have in place a senior management team
that has a proven track record within The Restaurant Group of successfully
executing rollouts and developing scaleable businesses. This augurs well for the
future growth of Blubeckers.
Garfunkel's (27 units)
During the first half we completed our refurbishment programme for Garfunkel's.
This involved the temporary closure of nine restaurants, representing a loss of
approximately 19 weeks trade. Post refurbishment, the Garfunkel's estate has
performed very strongly with significant growth in like-for-like sales leading
to increased profits at these units.
Concessions (49 units)
Total revenue: £38m Operating profit: £5.6m Operating margin: 14.7%
Our Concessions business has had an excellent first half with revenue, operating
profit and operating profit margins all improving. Against a very demanding
operating background these are outstanding results. During the first half we
opened one new unit and this is trading well. For the year as a whole, we expect
to open between two and four new sites.
Work is underway at Heathrow Terminal 5 where we have secured four new sites.
These are scheduled to open at the end of the first quarter in 2008. This is one
of the most exciting airport developments with which we have been involved and
it leaves us very well positioned for the future. Following the opening of
Terminal 5 we anticipate that there will be some changes to the pattern of trade
at the other terminals in Heathrow with Terminal 2, where we have just one unit,
slated for closure in 2008.
Elsewhere within our Concessions business we expect to continue to benefit from
the on-going growth in air travel (in particular low cost flying) and the more
rigorous security environment at UK airports which is tending to result in an
increase in dwell times. These positive macro trends and structural
characteristics, combined with low supply-side risk and our high levels of
expertise, intellectual capital and significant UK scale, augur well for the
continuing profitable development of this division.
Cash flow and balance sheet
The Group continues to be strongly cash generative and during the first half
cash flows from operations increased to £28.1m (2006: £26.1m). The Group
continues to convert its increasing profits into cash at a very healthy rate and
this reflects the disciplined manner in which we run the business. Our
touchstones, and the core bases behind our decision-making, continue to be cash
flow and returns on investment. This approach has served the Group well over the
past six years and I am confident that this will continue.
During the first half of 2007 £19.1m of our cash was applied to capital
expenditure of which £5.9m represented maintenance capital expenditure and
£13.2m represented investment in opening new restaurants. For the full year we
anticipate spending between £33m and £37m on opening new restaurants. The
efficacy of our business model enables us to fund all of this capital
expenditure from internally generated funds.
Non-trading items
The first half results include a net non-trading charge (before taxation) of
£0.4m. This consists of the following items:
- A provision of £1.7m against the carrying value of the Group's
investment in Living Ventures; we have now provided in full against the carrying
value of this investment;
- A credit of £1.0m recognised in respect of outstanding loan note
interest received from Living Ventures at the time of the sale of the Living
Room business in June 2007; and
- A positive revaluation of £0.3m in respect of our interest rate swap.
On 29 June 2007 The Restaurant Group plc Employee Benefit Trust acquired 1.5m
Company shares at a price of 327.05p per share for satisfaction of future
vesting of share awards under the Long Term Incentive Plan. The cash settlement
of this took place on 3 July 2007 for a total consideration of £5.0m.
Living Ventures
The Group continues to hold a minority shareholding in Living Ventures and
during the first six months this resulted in a trading loss to the Group of
£0.75m. In June we announced that Living Ventures had disposed of the whole of
its Living Room business for £28m. As a result of the sale the Group received
cash proceeds, including accrued loan note interest, to the amount of £7.8m.
Following the disposal of the Living Room, the Group's ongoing interest in the
residual business comprises a 38% shareholding in Blackhouse Grill Ltd, which
owns and operates restaurants trading under the brands Est Est Est, Blackhouse
Grill, and Bar and Grill. As part of this transaction we have made full
provision against the residual carrying value of this investment.
Board changes
As announced earlier in the year, David Richardson joined the Board as a
non-Executive Director in February 2007.
Outlook
The Group has performed well during the first half and this pattern of trade has
continued to date. Our like-for-like sales for the 36 weeks to 9 September 2007
are running 7% ahead of last year. Whilst recognising that we have some
demanding comparatives for the second half of 2007, the robustness of our
business model and the commitment and enthusiasm of our management team should
ensure that we enjoy another successful year. I am confident of reporting
further good progress for the full year.
Alan M. Jackson
Non-executive Chairman
12 September 2007
The Restaurant Group plc
Consolidated income statement
Six months to 1 July 2007 Six months to 2 July 2006
Continuing Discontinued Total Continuing Discontinued Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 171,935 - 171,935 146,900 538 147,438
Cost of sales (140,695) - (140,695) (121,807) (724) (122,531)
_________________________________________________________________________________
Gross profit/ (loss) 31,240 - 31,240 25,093 (186) 24,907
Administration costs (11,118) - (11,118) (9,536) (10) (9,546)
Provision against 5 (1,656) - (1,656) - - -
carrying value of
associate
Loss on integration of 4 - - - (3,818) - (3,818)
DPP
_________________________________________________________________________________
Operating profit/ (loss) 18,466 - 18,466 11,739 (196) 11,543
Interest payable (1,800) - (1,800) (1,373) - (1,373)
Interest receivable 1,261 - 1,261 674 - 674
_________________________________________________________________________________
Profit/ (loss) before 17,927 - 17,927 11,040 (196) 10,844
share of associate and
tax
Share of post tax result (749) - (749) (790) - (790)
in associated
undertaking
Profit/ (loss) before 17,178 - 17,178 10,250 (196) 10,054
tax
Profit/ (loss) before
tax, analysed as:
Trading business 17,589 - 17,589 13,714 (196) 13,518
Non-trading items 4,5 (411) - (411) (3,464) - (3,464)
17,178 - 17,178 10,250 (196) 10,054
_________________________________________________________________________________
Tax on profit/ (loss) on 6 (5,237) - (5,237) (4,700) 66 (4,634)
ordinary activities
_________________________________________________________________________________
Profit/ (loss) on 11,941 - 11,941 5,550 (130) 5,420
ordinary activities
after tax
Profit on sale of - - - - 2,781 2,781
businesses net of tax
_________________________________________________________________________________
Profit/ (loss) for the 11,941 - 11,941 5,550 2,651 8,201
financial period / year
attributable to equity
shareholders
_________________________________________________________________________________
Earnings per share (pence)
Basic 7 6.10 - 6.10 2.76 1.32 4.08
Diluted 7 6.09 - 6.09 2.75 1.32 4.07
_________________________________________________________________________________
Dividend per share (pence)
- ordinary 8 1.26 1.05
- special 8 - -
_________________________________________________________________________________
The Restaurant Group plc
Consolidated income statement
Year ended 31 December 2006
Continuing Discontinued Total
Note (audited) (audited) (audited)
£'000 £'000 £'000
Revenue 314,018 730 314,748
Cost of sales (256,060) (1,026) (257,086)
_____________________________________
Gross profit/ (loss) 57,958 (296) 57,662
Administration costs (18,475) - (18,475)
Provision against 5 (9,500) - (9,500)
carrying value of
associate
Loss on integration of 4 (4,582) - (4,582)
DPP
_____________________________________
Operating profit/ (loss) 25,401 (296) 25,105
Interest payable (3,308) - (3,308)
Interest receivable 699 - 699
_____________________________________
Profit/ (loss) before 22,792 (296) 22,496
share of associate and
tax
Share of post tax result (917) - (917)
in associated undertaking
_____________________________________
Profit/ (loss) before tax 21,875 (296) 21,579
Profit/ (loss) before
tax, analysed as:
Trading business 35,312 (296) 35,016
Non-trading items 4,5 (13,437) - (13,437)
_____________________________________
21,875 (296) 21,579
_____________________________________
Tax on profit/ (loss) on 6 (11,264) 101 (11,163)
ordinary activities
_____________________________________
Profit/ (loss) on 10,611 (195) 10,416
ordinary activities after
tax
Profit/ (loss) on sale of - 3,950 3,950
businesses net of tax
_____________________________________
Profit/ (loss) for the 10,611 3,755 14,366
financial period / year
attributable to equity
shareholders
Earnings per share (pence)
Basic 7 5.36 1.90 7.26
Diluted 7 5.34 1.89 7.23
_____________________________________
Dividend per share (pence)
- ordinary 8 6.00
- special 8 16.00
_____________________________________
The Restaurant Group plc
Consolidated statement of changes in equity
Six months to 1 Six months to Year ended 31
July 2007 2 July 2006 December 2006
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Opening equity 65,204 91,436 91,436
Profit for the period / year 11,941 8,201 14,366
Foreign exchange translation differences (51) 48 1
Deferred tax (charge) / credit on share (103) 519 1,529
based payments taken directly to equity
_____________________________________
Total recognised income and expense for the 11,787 8,768 15,896
period / year
Dividends - ordinary 8 (9,702) (7,443) (9,490)
Dividends - special 8 - (34,793) (34,793)
Issue of new shares 593 250 1,096
Share based payments - credit to equity 950 563 1,059
Employee benefit trust - purchase of shares (4,955) - -
_____________________________________
Total changes in equity in the period / year (1,327) (32,655) (26,232)
_____________________________________
Closing equity 63,877 58,781 65,204
_____________________________________
The Restaurant Group plc
Consolidated balance sheet
At 1 July At 2 July At 31 December
2007 2006 2006
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Non-current assets
Intangible assets 11,275 11,275 11,275
Property, plant and equipment 182,537 158,907 174,035
Investment in associate - 7,936 7,810
Trade and other receivables - 10,375 875
____________________________________________
193,812 188,493 193,995
____________________________________________
Current assets
Stock 2,349 2,345 2,992
Financial assets - derivative financial instruments 911 361 652
Trade and other receivables 1,876 3,620 5,170
Prepayments 17,477 16,529 12,138
Cash and cash equivalents 6,387 3,942 683
____________________________________________
29,000 26,797 21,635
____________________________________________
Total assets 222,812 215,290 215,630
____________________________________________
Current liabilities
Short-term borrowings 9 (42,000) - (1,165)
Income tax liabilities (6,021) (6,527) (4,947)
Trade and other payables (88,552) (81,258) (74,864)
____________________________________________
(136,573) (87,785) (80,976)
____________________________________________
Net current liabilities (107,573) (60,988) (59,341)
____________________________________________
Non-current liabilities
Long-term borrowings - (49,000) (47,000)
Other payables - finance lease debt (2,783) (2,717) (2,737)
Deferred tax liabilities (16,185) (14,274) (16,247)
Provisions (3,394) (2,733) (3,466)
____________________________________________
(22,362) (68,724) (69,450)
____________________________________________
Net assets 63,877 58,781 65,204
____________________________________________
Equity
Share capital 55,129 54,510 54,863
Share premium 20,673 19,853 20,346
Foreign currency reserve 30 128 81
Other reserves (2,182) 1,846 1,823
Retained earnings (9,773) (17,556) (11,909)
____________________________________________
Total equity shareholders' interests 63,877 58,781 65,204
____________________________________________
The Restaurant Group plc
Consolidated cash flow statement
Six months to 1 Six months to 2 Year ended 31
July 2007 July 2006 December 2006
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 3 28,092 26,081 63,374
Interest received 1,524 19 68
Interest paid (1,559) (1,163) (2,906)
Tax paid (4,328) (4,746) (9,656)
____________________________________________
Net cash flows from operating 23,729 20,191 50,880
activities
____________________________________________
Cash flows from investing activities
Disposal of business, net of cash - (478) (1,455)
disposed
Net proceeds from disposal by 5 6,449 - -
associate
Integration of business - - (584)
Purchase of property, plant and (19,051) (17,884) (40,775)
equipment
Proceeds from sale of property, plant 149 75 58
and equipment
____________________________________________
Net cash used in investing activities (12,453) (18,287) (42,756)
____________________________________________
Cash flows from financing activities
Net proceeds from issue of ordinary 593 250 1,096
share capital
(Repayment of borrowings)/ net proceeds from (5,000) 38,000 36,000
issue of bank loan
Dividends paid to shareholders - (34,793) (44,283)
____________________________________________
Net cash used in financing activities (4,407) 3,457 (7,187)
____________________________________________
Net increase in cash and cash 6,869 5,361 937
equivalents
Cash and cash equivalents at start of (482) (1,419) (1,419)
period / year
____________________________________________
Cash and cash equivalents at end of 6,387 3,942 (482)
period / year
____________________________________________
The Restaurant Group plc
Notes to the interim accounts
1 Segmental analysis
Six months to 1 July 2007 Six months to 2 July 2006
Revenue EBITDA EBITDA Operating Operating Revenue EBITDA EBITDA Operating Operating
Profit Profit
Margin Profit Margin Margin Profit Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
______________________________________________________________________________________________________
Leisure 133,928 34,779 26.0% 27,465 20.5% 109,498 28,341 25.9% 22,133 20.2%
Concessions 37,722 7,831 20.8% 5,552 14.7% 33,387 6,931 20.8% 4,830 14.5%
______________________________________________________________________________________________________
Principal 171,650 42,610 24.8% 33,017 19.2% 142,885 35,272 24.7% 26,963 18.9%
trading brands
______________________________________________________________________________________________________
Non-core 285 (681) (239.2%) (832) (292.3%) 4,015 (1,079) (26.9%) (1,178) (29.3%)
brands
______________________________________________________________________________________________________
Continuing 171,935 41,929 24.4% 32,185 18.7% 146,900 34,193 23.3% 25,785 17.6%
operations
______________________________________________________________________________________________________
Discontinued - - - - - 538 (186) (34.6%) (186) (34.6%)
operations
______________________________________________________________________________________________________
Total all 171,935 41,929 24.4% 32,185 18.7% 147,438 34,007 23.1% 25,599 17.4%
brands
______________________________________________________________________________________________________
Pre-opening (945) (0.5%) (945) (0.5%) (692) (0.5%) (692) (0.5%)
costs
(included in
cost of sales)
Administration (9,720) (5.7%) (10,168) (5.9%) (8,635) (5.9%) (8,983) (6.1%)
Share based (950) (0.6%) (950) (0.6%) (563) (0.4%) (563) (0.4%)
payments
___________________________________________________________________________________________
Total before 30,314 17.6% 20,122 11.7% 24,117 16.4% 15,361 10.4%
non-trading
items
___________________________________________________________________________________________
Provision against (1,656) -
carrying value of
investment in associate
Loss on integration of - (3,818)
DPP ______ _______
Operating profit 18,466 11,543
______ _______
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.
EBITDA is operating profit before depreciation and non-trading items
The Restaurant Group plc
Notes to the interim accounts (continued)
1 Segmental analysis (continued)
Year ended 31 December 2006
Revenue EBITDA EBITDA Operating Operating
Profit
Margin Profit Margin
£'000 £'000 % £'000 %
_______________________________________________________
Leisure 236,258 62,703 26.5% 50,745 21.5%
Concessions 72,479 15,154 20.9% 11,088 15.3%
_______________________________________________________
Principal 308,737 77,857 25.2% 61,833 20.0%
trading brands
_______________________________________________________
Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%)
_______________________________________________________
Continuing 314,018 76,068 24.2% 59,834 19.1%
operations
_______________________________________________________
Discontinued 730 (296) (40.6%) (296) (40.6%)
operations
_______________________________________________________
Total all brands 314,748 75,772 24.1% 59,538 18.9%
_______________________________________________________
Pre-opening (1,876) (0.6%) (1,876) (0.6%)
costs (included
in cost of sales)
Administration (17,192) (5.5%) (17,416) (5.5%)
___________________________________________
Share based (1,059) (0.3%) (1,059) (0.3%)
payments
___________________________________________
Total before 55,645 17.7% 39,187 12.5%
non-trading
items
Provision against carrying (9,500)
value of investment in
associate
Loss on (4,582)
integration of
DPP
_______
Operating profit 25,105
_______
The Restaurant Group plc
Notes to the interim accounts (continued)
2a Additional income statement
Six months to 1 July 2007 Six months to 2 July 2006
Continuing Dis-continued Trading Non- Continuing Dis-continued Trading Non-
business operations business trading Total business operations business trading Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 171,935 - 171,935 - 171,935 146,900 538 147,438 - 147,438
Cost of sales:
Excluding (139,750) - (139,750) - (139,750) (121,115) (724) (121,839) - (121,839)
pre-opening
costs
Pre-opening (945) - (945) - (945) (692) - (692) - (692)
costs
(140,695) - (140,695) - (140,695) (121,807) (724) (122,531) - (122,531)
Gross profit / 31,240 - 31,240 - 31,240 25,093 (186) 24,907 - 24,907
(loss)
Administration (11,118) - (11,118) - (11,118) (9,536) (10) (9,546) - (9,546)
costs
Trading profit 20,122 - 20,122 - 20,122 15,557 (196) 15,361 - 15,361
/ (loss)
Provision - - - (1,656) (1,656) - - - - -
against
carrying value
of associate
Loss on - - - - - - - - (3,818) (3,818)
integration of
DPP
Operating 20,122 - 20,122 (1,656) 18,466 15,557 (196) 15,361 (3,818) 11,543
profit /
(loss)
Interest (1,800) - (1,800) - (1,800) (1,373) - (1,373) (1,373)
payable
Interest 16 - 16 1,245 1,261 320 - 320 354 674
receivable
Profit / 18,338 - 18,338 (411) 17,927 14,504 (196) 14,308 (3,464) 10,844
(loss) before
share of
associate and
tax
Share of post (749) - (749) - (749) (790) - (790) - (790)
tax result in
associated
undertaking
Profit / 17,589 - 17,589 (411) 17,178 13,714 (196) 13,518 (3,464) 10,054
(loss) on
ordinary
activities
before tax
Tax on profit (6,102) - (6,102) 865 (5,237) (4,955) 66 (4,889) 255 (4,634)
/ (loss) from
ordinary
activities
Profit / 11,487 - 11,487 454 11,941 8,759 (130) 8,629 (3,209) 5,420
(loss) on
ordinary
activities
after tax
Profit on sale - - - - - - - - 2,781 2,781
of business
net of tax
Profit / 11,487 - 11,487 454 11,941 8,759 (130) 8,629 (428) 8,201
(loss) for the
period / year
Earnings per share (pence)
Basic 5.87 6.10 4.29 4.08
Diluted 5.86 6.09 4.28 4.07
Dividend per share (pence)
- ordinary 1.26 1.05
- special - -
The Restaurant Group plc
Notes to the interim accounts (continued)
2a Additional income statement (continued)
Year ended 31 December 2006
Continuing Discontinued Trading Non-
business operations business trading Total
£'000 £'000 £'000 £'000 £'000
Revenue 314,018 730 314,748 - 314,748
Cost of sales:
_____________________________________________________________
Excluding (254,184) (1,026) (255,210) - (255,210)
pre-opening costs
Pre-opening costs (1,876) - (1,876) - (1,876)
_____________________________________________________________
(256,060) (1,026) (257,086) - (257,086)
_____________________________________________________________
Gross profit / 57,958 (296) 57,662 - 57,662
(loss)
Administration (18,475) - (18,475) - (18,475)
costs
_____________________________________________________________
Trading profit / 39,483 (296) 39,187 - 39,187
(loss)
Provision against - - - (9,500) (9,500)
carrying value of
associate
Loss on - - - (4,582) (4,582)
integration of DPP
_____________________________________________________________
Operating profit / 39,483 (296) 39,187 (14,082) 25,105
(loss)
Interest payable (3,308) - (3,308) - (3,308)
Interest 54 - 54 645 699
receivable
_____________________________________________________________
Profit / (loss) 36,229 (296) 35,933 (13,437) 22,496
before share of
associate and tax
Share of post tax (917) - (917) - (917)
result in
associated
undertaking
_____________________________________________________________
Profit / (loss) on 35,312 (296) 35,016 (13,437) 21,579
ordinary
activities before
tax
Tax on profit / (12,364) 101 (12,263) 1,100 (11,163)
(loss) from
ordinary
activities
_____________________________________________________________
Profit / (loss) on 22,948 (195) 22,753 (12,337) 10,416
ordinary
activities after
tax
Profit on sale of - - - 3,950 3,950
business net of
tax
_____________________________________________________________
Profit / (loss) 22,948 (195) 22,753 (8,387) 14,366
for the period /
year
Earnings per share (pence)
Basic 11.50 7.26
Diluted 11.45 7.23
Dividend per share (pence)
- ordinary 6.00
- special 16.00
Additional income statement information is provided as a useful guide to
underlying trading performance. The adjustments from the statutory income
statement exclude the non-trading items and are to aid understanding of the
income statement and should be read in conjunction with, rather than as a
substitute for, the reported information.
The Restaurant Group plc
Notes to the interim accounts
(continued)
2b Additional information *
* Results are stated excluding non-trading items
Six months to 1 July 2007 Six months to 2 July 2006
Revenue EBITDA EBITDA Operating Operating Revenue EBITDA EBITDA Operating Operating
Profit Profit
Margin Profit Margin Margin Profit Margin
£'000 £'000 % £'000 % £'000 £'000 % £'000 %
__________________________________________________________________________________________________
Leisure 133,928 34,779 26.0% 27,465 20.5% 109,498 28,341 25.9% 22,133 20.2%
Concessions 37,722 7,831 20.8% 5,552 14.7% 33,387 6,931 20.8% 4,830 14.5%
Principal 171,650 42,610 24.8% 33,017 19.2% 142,885 35,272 24.7% 26,963 18.9%
trading brands
Non-core 285 (681) (239.2%) (832) (292.3%) 4,015 (1,079) (26.9%) (1,178) (29.3%)
brands
Continuing 171,935 41,929 24.4% 32,185 18.7% 146,900 34,193 23.3% 25,785 17.6%
operations
Discontinued - - - - - 538 (186) (34.6%) (186) (34.6%)
operations
Total all 171,935 41,929 24.4% 32,185 18.7% 147,438 34,007 23.1% 25,599 17.4%
brands
Pre-opening (945) (0.5%) (945) (0.5%) (692) (0.5%) (692) (0.5%)
costs
(included in
cost of sales)
Administration (9,720) (5.7%) (10,168) (5.9%) (8,635) (5.9%) (8,983) (6.1%)
Share based (950) (0.6%) (950) (0.6%) (563) (0.4%) (563) (0.4%)
payments
EBITDA / 30,314 17.6% 20,122 11.7% 24,117 16.4% 15,361 10.4%
operating
profit
Total net interest (1,784) (1,053)
charges
Profit before taxation 18,338 14,308
and share of associate's
result
Share of losses of (749) (790)
associated company
Profit before taxation 17,589 13,518
Taxation (6,102) (4,889)
Profit after taxation 11,487 8,629
Earnings per share (pence)
Trading business
Basic 5.87 4.29
Diluted 5.86 4.28
2b Additional information* (continued)
* Results are stated excluding non-trading items
Year ended 31 December 2006
Revenue EBITDA EBITDA Operating Operating
Profit
Margin Profit Margin
£'000 £'000 % £'000 %
Leisure 236,258 62,703 26.5% 50,745 21.5%
Concessions 72,479 15,154 20.9% 11,088 15.3%
Principal 308,737 77,857 25.2% 61,833 20.0%
trading brands
Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%)
Continuing 314,018 76,068 24.2% 59,834 19.1%
operations
Discontinued 730 (296) (40.6%) (296) (40.6%)
operations
Total all 314,748 75,772 24.1% 59,538 18.9%
brands
Pre-opening (1,876) (0.6%) (1,876) (0.6%)
costs (included
in cost of
sales)
Administration (17,192) (5.5%) (17,416) (5.5%)
Share based (1,059) (0.3%) (1,059) (0.3%)
payments
EBITDA / 55,645 17.7% 39,187 12.5%
operating
profit
Total net interest charges (3,254)
Profit before taxation and share 35,933
of associate's result
Share of losses of associated (917)
company
Profit before taxation 35,016
Taxation (12,263)
Profit after taxation 22,753
Earnings per share (pence)
Trading business
Basic 11.50
Diluted 11.45
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.
Additional income statement information is provided as a useful guide to
underlying trading performance. The adjustments from the statutory income
statement exclude the non-trading items and are to aid understanding of the
income statement and should be read in conjunction with, rather than as a
substitute for, the reported information.
EBITDA is operating profit before depreciation and non-trading items
3 Reconciliation of profit before tax to net cash flow from operating activities
Six months to 1 Six months to 2 Year ended
July 2007 July 2006 31 December
2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Profit before tax 17,178 10,054 21,579
Net finance charges 539 699 2,609
Loss on integration of DPP (net of - 3,818 4,101
operating cash flow)
Provision against carrying value of loan 1,656 - 9,500
note from associate
Share of loss made by associate 749 790 917
Share option charge 950 563 1,059
Depreciation 10,192 8,756 16,458
Decrease / (increase) in stocks 643 418 (229)
Increase in debtors (3,201) (3,836) (1,295)
(Decrease) / increase in creditors (614) 4,819 8,675
___________________________________________
Cash flows from operating activities 28,092 26,081 63,374
___________________________________________
4 Non-trading items
The Group has taken a credit of £0.3m (2006: £0.4m) to interest receivable in
respect of the remeasurement of its interest rate swap.
In the six months to 2 July 2006, the Group recorded a loss of £3.8m in respect
of the integration of the Deep Pan Pizza business. The costs were comprised of
employee and contract terminations and a number of property costs including the
write down of the carrying value of the business on integration, provisions for
onerous leases and premiums on disposal of some of the properties.
As detailed below in note 5, a £1.7m provision has been made against the
carrying value of the Group's associate company, Living Ventures Limited, and a
credit of £1.0m has been recorded in respect of accrued loan note interest not
previously recognised. A non-trading taxation credit of £1.2m has been
recognised in the income statement due to the impact of the rate change on the
deferred tax liability.
5 Investment in Living Ventures Limited
The 38% investment in Living Ventures Limited is accounted for using the equity
method. On 22 June 2007, Living Ventures disposed of the Living Rooms business.
As a result of this transaction, the Group received a consideration of £6.3
million in cash, net of costs. In addition, the outstanding interest on the
loan note, amounting to £1.5m, was settled in full. The Directors now conclude
that it is appropriate to make a further provision of £1.7 million, which
together with the £9.5 million provision made in the year ended 31 December
2006, leaves a £nil carrying value of both the investment and the loan note.
6 Taxation
The taxation charge has been calculated by reference to the expected effective
corporation and deferred tax rates for the full financial year to end on 30
December 2007 applied against profit before tax for the period ended 1 July
2007. The full year effective tax charge on the underlying trading profit is
estimated to be 33% (2006: 34%). Finance Act 2007 reduced the rate of
corporation tax from 30% to 28% from 1 April 2008, and this rate is required to
be used in calculating deferred tax provisions. This has resulted in the
reduction in the effective rate and also a one-off credit to the income
statement of £1.2m.
7 Earnings per share
6 months to 1 July 2007 6 months to 2 July 2006 Year ended 31 December 2006
(unaudited) (unaudited) (audited)
Earnings Weighted Per-share Earnings Weighted Per-share Earnings Weighted Per-share
average amount average amount average amount
number of number of number of
shares shares shares
£'000 millions pence £'000 millions pence £'000 millions pence
__________________________________________________________________________________________________
Basic EPS
Earnings 11,941 195.6 6.10 8,201 201.0 4.08 14,366 197.8 7.26
attributable
to shareholders
Effect of
dilutive
securities
Options 0.4 0.5 0.9
Diluted 11,941 196.0 6.09 8,201 201.5 4.07 14,366 198.7 7.23
earnings per
share
Supplementary earnings per share
Trading 11,487 195.6 5.87 8,629 201.0 4.29 22,753 197.8 11.50
business
Non-trading 454 195.6 0.23 (428) 201.0 (0.21) (8,387) 197.8 (4.24)
items
Basic earnings 11,941 195.6 6.10 8,201 201.0 4.08 14,366 197.8 7.26
8 Dividends
Following approval at the Annual General Meeting on 16 May 2007, the proposed
dividend in respect of 2006 of 4.95p per share, totalling £9.7 million, is to be
recognised through reserves in the interim and final financial statements of
2007. This is in accordance with IAS 10 'Events after the Balance Sheet Date'.
This dividend was paid to shareholders on 4 July 2007.
The Directors have declared an interim dividend of 1.26p per share, amounting to
£2.5 million, which will be paid on 18 October 2007 to ordinary shareholders on
the register at close of business on 21 September 2007. In accordance with IAS
10, this will be recognised in the reserves of the Group in the second half of
the year. On 9 March 2006 the Company paid a special dividend of 16p per share,
or £34.8 million, following the disposal of Caffe Uno and a share consolidation
whereby each nine existing shares were exchanged for eight new shares.
9 Short-term borrowings
The Group has a syndicated loan facility of £80m which is due to expire in April
2008. Discussions are currently on-going for renewal of the facility.
10 Basis of preparation
The interim financial statements have been prepared in accordance with the
accounting policies and presentation required by those International Financial
Reporting Standards, incorporating International Accounting Standards ('IASs')
and Interpretations (collectively 'IFRS'), which are expected to be endorsed by
the EC and are to be used in the Company's annual financial statements for the
year ended 30 December 2007. The accounting policies and method of computation
used are consistent with those used in the financial statements for the year
ended 31 December 2006. The comparatives for the full year ended 31 December
2006 are from the Company's full consolidated statutory accounts for that year.
A copy of the statutory accounts for that year has been delivered to the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain a statement under section 237(2)-(3) of the Companies Act
1985. The interim financial statements were approved by the Board on 12
September 2007.
Independent Review Report to The Restaurant Group plc
Introduction
We have been instructed by the company to review the financial information for
the 26 weeks ended 1 July 2007 which comprise the consolidated income statement,
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 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 Bulletin 1999/4
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 them 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 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 are 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 the 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 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 International Standards on Auditing (UK and
Ireland) 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 twenty-six
weeks ended 1 July 2007.
Deloitte & Touche LLP
Chartered Accountants
London
12 September 2007
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