23rd Nov 2005 07:33
Restaurant Group PLC23 November 2005 NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTOTHE US, CANADA, AUSTRALIA OR JAPAN The Restaurant Group Plc(the "Company") Sale of the business and assets of Caffe Uno for £33million in cash Intention to return up to £35 million to shareholders Introduction The Restaurant Group is pleased to announce that it has agreed to sell thebusiness and assets of Caffe Uno to Craftbutton (trading as ParamountRestaurants Ltd) for a gross consideration of £33 million pounds in cash.Completion is expected on 12 December 2005. For the past four years, The Restaurant Group's strategy has been to focus ontrading areas that have distinctive barriers to entry, good growth prospects andhigh returns. Caffe Uno has historically provided satisfactory returns andcashflows. However, the Directors believe that the High Street, where Caffe Unooperates, has become a more competitive environment and that spending patternshave become more focused on out of town locations with easy parking and access.The Directors believe that it is becoming increasingly difficult for CaffeUno to produce the levels of sustainable growth in profits and cashflows thatwould, when set against The Restaurant Group's key objective of growingshareholder value, justify continuing and further developing the Caffe Unobusiness. Details of the transaction Caffe Uno operates 58 High Street Italian restaurants. The Restaurant Group hasagreed to sell 53 of these units to Craftbutton for a gross cash considerationof £33 million. Craftbutton is jointly owned by JOHCM Private Equity and DawnayDay Group, and currently operates restaurants under the Chez Gerard, Cafe Fish,Livebait and Bertorelli's brands. In connection with the sale certain usualwarranties and indemnities have been given which are subject to conditions bothin respect of quantum and period. The remaining five Caffe Uno units arealready part of The Restaurant Group's active site management programme and willeither be sold or rebranded. Additionally, The Restaurant Group operates threeCaffe Uno derivatives within its airports business, under its Concessionsdivision; these will continue to be run by the Company under licence fromParamount Restaurants Ltd. In the year ended 31 December 2004 the Caffe Uno business being sold hadturnover of £36.2 million, EBIT of £4.9 million and gross assets of £24.8million. For the half year ended 30 June 2005 the business had EBIT of £1.5million compared to £2.3 million in the corresponding period for 2004 (allfigures calculated under IFRS). Benefits of the transaction The sale of Caffe Uno will allow the Group to focus on its core activities inLeisure and Concessions, both of which the Directors believe have good growthprospects, and to reduce significantly its exposure to the challenging andhighly competitive UK High Street environment. It will also allow the Group todirect further capital expenditure to the ongoing brands in its Leisure andConcessions divisions. The Directors believe that a key factor in continuing to grow shareholder valueis the delivery of growing and sustainable profits and cashflows from TheRestaurant Group's businesses. The quality of earnings produced from itsLeisure and Concessions business is, the Directors believe, superior to thoseproduced by the High Street businesses. Subsequent to the transaction TheRestaurant Group will operate 164 restaurants in its Leisure division, 41restaurants in Concessions, 29 Garfunkels and retain its 40% shareholding inLiving Ventures. Use of Proceeds As at 30 June 2005 The Restaurant Group had net assets of £77.1 million and netborrowings of £40.1 million. The net proceeds will, initially, be used toreduce group indebtedness. Having considered the capital requirements of the ongoing group, the Boardintends to return up to £35 million cash to shareholders. Any return isexpected to be accompanied by a share consolidation, in order to assistcomparability of share price, EPS and dividends. Relevant documents toshareholders will be despatched in due course, with the return of value expectedto be made by the second quarter of 2006, subject to necessary approvals beingreceived. As part of this transaction, The Restaurant Group has increased itsbanking facility by £10 million to £80 million. Financial Effects The Directors estimate that the net impact of the sale and return of capitalwill be broadly earnings neutral in the year ending 31 December 2006, based onthe current share price. The sale is expected to give rise to a profit on saleof approximately £1.0 million (under IFRS). The above statements regardingearnings and profit on sale should not be construed as profit forecasts andshareholders should not assume that earnings per share of the Group willnecessarily be higher or lower than in the previous year. Current trading Trading has continued in line with the Board's expectations with Group like forlike sales for the year to date being +3%. Alan Jackson, Chairman of The Restaurant Group plc, said: "Consistent with the strategy set out in 2002, the sale of Caffe Uno will leavethe Group streamlined and focused on businesses that have demonstrated goodgrowth. Non-High Street and well situated locations, with higher barriers to entry, arewhere the opportunity for future growth lies. The composition of The Restaurant Group's business means that we are now wellplaced to continue to deliver good growth in the future." 23 November 2005 There will be a conference call for analysts at 8.45am. The dial-in detailsare: 020 7784 1015. Enquiries: The Restaurant Group plc 020 7747 7750 Alan Jackson, Executive Chairman Andrew Page, Group Managing Director Stephen Critoph, Finance Director College Hill Matthew Smallwood 020 7457 2020 Important Notice 1) The information in this announcement including, without limitation,references to the expected effect of the sale and intended return of value onthe Company's future earnings per share should not be interpreted as a profitforecast nor should any information contained herein be interpreted to mean thatthe future earnings per share of the Company following the sale and intendedreturn of value will necessarily match or exceed the historical publishedearnings per share. This announcement includes "forward-looking statements". All statements otherthan statements of historical facts included in this announcement, including,without limitation, those regarding the Company's financial position, businessstrategy, plans and objectives of management for future operations (includingdevelopment plans and objectives relating to the Company's products andservices), are forward-looking statements. Such forward-looking statementsinvolve known and unknown risks, uncertainties and other important factors whichcould cause the actual results, performance or achievements of the Company orthose markets and economies to be materially different from future results,performance or achievements expressed or implied by such forward-lookingstatements. Such forward-looking statements are based on numerous assumptionsregarding the Company's present and future business strategies and theenvironment in which the Company will operate in the future and such assumptionsmay or may not prove to be correct. These forward-looking statements speak onlyas at the date of this announcement. The Company expressly disclaims anyobligation (other than pursuant to the Listing Rules of the UKLA) or undertakingto disseminate any updates or revisions to any forward-looking statementscontained herein to reflect any change in the Company's expectations with regardthereto or any change in events, conditions or circumstances on which any suchstatement is based. 2) Prices and value of, and income from, shares may go down as well as up and aninvestor may not get back the amount invested. It should be noted that pastperformance is no guide to future performance. Persons needing advice shouldcontact an independent financial adviser. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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