7th Mar 2007 07:01
Restaurant Group PLC07 March 2007 The Restaurant Group plc Full year results for the year ended 31 December 2006 The Restaurant Group plc operates 284 branded restaurants predominantly inleisure locations and airports. Its primary brands are Frankie & Benny's,Chiquito, Garfunkel's and Blubeckers. 2006 2005 % changeTurnover (£m) * 314.7 287.3 +9.6%EBITDA (£m) * 55.6 50.0 +11.3%Adjusted profit before tax (£m) * 35.0 29.5 +18.5%Adjusted earnings per share (p) * 11.50 9.08 +26.6%Profit before tax, after non-trading items and DPP (£m) 21.6 26.5 -18.4%Earnings per share, after non-trading items and DPP (p) 7.26 10.78 -32.6%Proposed full year ordinary dividend (p) 6.00 4.75 +26.3% * Results are stated excluding non-trading items and excluding the results ofDeep Pan Pizza in the prior year comparatives. Further information is providedin note 2(a). These results reflect the first full 12 months of the Group trading in its newform after a year of considerable corporate activity in 2005 which has focusedthe Group in the out of town segments of the eating-out market • Incorporating strong 2nd half year sales, total like-for-like sales were +5% for 2006 • Further good progress in margin growth with adjusted operating profit margin increasing 140 basis points to 12.5% • Cash generated from operations up 14% to £63m All our businesses and brands performed well Leisure • Frankie & Benny's (139 units) - EBITDA and profit grew more than 20% - 25 new units opened during 2006 - Returns from new units compare favourably with earlier years' openings - Strong pipeline with 15 - 20 to open in 2007 • Chiquito (45 units) - Highest like-for-like sales and operating profit growth in the Group - EBITDA +38%, profit +44%, operating profit margin up 120 basis points - 11 new restaurants opened during 2006 - 5 - 10 new restaurants to open in 2007 • Garfunkel's (29 units) - Strong like-for-like sales; operating profits up 15% - Operating profit margins up 140 basis points - Refurbishment programme delivering strong sales growth • Blubeckers (22 units) - Strong like-for-like growth - Five units opened in 2006, including one conversion - Pipeline building with 5-10 new units to open in 2007 Concessions (49 units) - Very pleasing performance - Solid like-for-like performance and six new openings increased sales 21% - EBITDA +23%, profit +24%, operating profit margin up 40 basis points - Between two and five new concessions for 2007, building work for Terminal 5 to commence in 2007 Current Trading - Like-for-like sales for the first nine weeks +5% Commenting on these results, Andrew Page, Chief Executive said: "2006 was a very satisfactory year for The Restaurant Group with earningsincreasing by 27% on the previous year. Our strategy is designed to deliversustainable and growing cash flows combined with consistently high returns oninvestment and these results relect that. Our marketplace remains buoyant and 2007 has started well with like-for-likesales 5% ahead of last year. We occupy leading positions in our chosen marketsegments and we intend to continue to build on this. We will open between 30and 35 new restaurants in 2007 and we look forward to making further goodprogress during the coming year." 7 March 2007 Enquiries: The Restaurant Group plc 020 7457 2020 (today) Andrew Page, Chief Executive 0845 612 5001 (thereafter) Stephen Critoph, Group Finance Director College Hill Matthew Smallwood 020 7457 2020 Chairman's statement * Results are stated excluding non-trading items and excluding the results ofDeep Pan Pizza in the prior year comparatives. Further information is providedin note 2(a). I am delighted to report that the Group has enjoyed another successful year ofprofitable growth. 2006 was, in many ways, a watershed year for The RestaurantGroup - the first full twelve months of trading in its new form. You will recallthat 2005 was a year of considerable change for the Group on the corporatefront, as we continued to direct our focus away from the increasingly crowdedhigh street marketplace and positioned our business firmly in the out of townsegments of the eating out market. This was in line with our strategy offocusing on markets with distinct barriers to entry, good growth prospects andhigh returns on investment. The impact of these changes is clear to see in thisset of results. For 2006 we delivered a like-for-like sales increase of 5% which was a fantasticperformance. As a result, our adjusted profit before tax grew by 19% on theprior year. In addition, our strong cash generation enabled the Group to add 47new restaurants (including rebranding former DPP units) to its portfolio duringthe year, taking the total number of outlets to 284. Building on a strong first half performance we made further good progress duringthe second six months to produce excellent full year results. Full year adjustedpre-tax profit increased by 19% to £35.0m (2005: £29.5m) with turnover from ourprincipal trading brands increasing by 24% to £308.7m (2005: £248.8m). Adjustedearnings per share increased by 27% to 11.50p (2005: 9.08p). As a result of this excellent performance the Board is recommending an increasedfinal dividend of 4.95p per share (2005: 3.84p), an increase of 29%, giving atotal dividend for the year of 6.00p (2005: 4.75p) per share. Subject toapproval at the Annual General Meeting, the final dividend will be payable on 4July 2007 to shareholders on the register on 8 June 2007 and the shares will bemarked ex-dividend on 6 June 2007. As detailed in my interim statement, we alsopaid a special dividend of £34.8m during the first half of the year. Our Leisure Division which incorporates Frankie & Benny's, Chiquito, Blubeckersand Garfunkel's enjoyed another excellent year, recording a 27% increase inoperating profit. All of the brands delivered strong like-for-like growth during2006 and we look forward to a continuation of this trend in 2007. During theyear we opened 41 new restaurants in this division and we expect to openapproximately 30 more units in the Leisure Division during 2007. Our newopenings are performing well and we continue to enjoy high levels of return oninvestment. The performance of our co-located units (Frankie & Benny's andChiquito) has been particularly pleasing and we believe that there is scope tocontinue this pattern of dual roll-out. Our Concessions Division delivered a terrific set of results with operatingprofits for this division increasing by 24%. Against a very challenging backdropfor parts of 2006, this was an outstanding performance. We opened six new unitsduring the year and we are pleased with the initial performance. This year weexpect to open a further 2-5 new units in the Concessions Division. During 2006 we concluded the conversion programme for 13 of the DPP sites whichwe acquired in early 2006 and the results from these have been pleasing. Theremaining sites have been, or will be, sold or closed. Although the performanceof our associate company, Living Ventures, was disappointing we are encouragedthat the actions being taken by their management are beginning to impactpositively on performance. Notwithstanding this, we have made a provision of£9.5m against our carrying value of the loan note, which has no cash impact,following an impairment review of our investment and loan note. Overall, this is an outstanding set of results and demonstrates both thestrength and potential of our business and its brands. However, none of thiswould have been possible without the hard work and dedication of our seniormanagement team and staff. We have a fantastic team at The Restaurant Group andon behalf of the Board I would like to thank them all for their valuedcontribution over the past year. We have started the current year well, with like-for-like sales for the firstnine weeks 5% ahead. This year our target will be to open 30-35 new restaurants,we will be seeking to deliver further improvement in margins and our people willbe looking to match or exceed the expectations of our customers andshareholders. I am confident that we will continue to make further good progress during thecoming year. Alan M. JacksonChairman7 March 2007 Chief Executive's review of operations * Results are stated excluding non-trading items and excluding the results ofDeep Pan Pizza in the prior year comparatives. Further information is providedin note 2(a). Introduction The Restaurant Group ("TRG") performed strongly throughout 2006 with thebenefits from the strategic repositioning undertaken during the previous yearevident in all of our key performance metrics. All of our businesses performedwell, delivering a 19% increase in adjusted profit before tax. We have also madefurther good progress in terms of margin growth with a 140 basis point increasein our operating profit margin. This improvement resulted from, inter alia,increased trading levels, driving further economies through scale, enhancedoperating practices and other Group initiatives to improve efficiency. Our core objective continues to be growth in shareholder value and the strategywe have deployed to achieve this is to build a business capable of deliveringlong-term, sustainable and growing cashflows. Cash generation is a key area offocus for the team at TRG and I am delighted that we have, again, converted ourprofits into cash at a very healthy rate and that both earnings and operatingcashflow per share have grown strongly. Our model for generating value is straightforward and robust. It has five keycomponents, as follows: 1. Strong underlying like-for-like profit growth from our existing estate through focusing on our customers and as a result of initiatives to secure further operational improvements and efficiencies; 2. Incremental profit improvements through economies of scale; 3. Clear and sustainable conversion of those growing profits into cash; 4. A new unit rollout programme funded from those internally generated cashflows; and 5. Consistently high returns from those new openings, significantly ahead of our cost of capital, to generate further growth in profits and cashflow. This virtuous circle enables the Group to continue its growth in a predominantlyorganic and value-accretive way. The quality of our cashflow is a distinctivefeature of TRG's model, with our businesses occupying leading positions withinour chosen market segments. Since the beginning of 2006 our focus has been onmarkets away from the high streets, concentrating on edge of town, out of town,rural, semi-rural and concessions locations. We believe that these segments havedistinct barriers to entry, offer the opportunity for significant further growthand enable us to generate high returns. Going forward we intend to continue ourdevelopment along these lines. All of the key performance metrics improved during 2006: • A 5% increase in like-for-like sales - the bulk of which was as a result of more customers using our restaurants as opposed to price or spend increases - combined with our new openings resulted in turnover increasing by 10%; • Adjusted EBITDA increasing by 11% and adjusted operating profit increasing by 23%; and • Margins improved at both divisional and group levels with our Group operating profit margin rising by 140 basis points to 12.5% - a very satisfactory result particularly against the background of a 90 basis point operating profit margin improvement in the previous year. Again, the increase in profit was the product of three principal components -like-for-like profit increases from the existing estate, profitable contributionfrom new openings and further cost savings from purchasing initiatives andoperational improvements and efficiencies. This combination represents a healthybackground to our continuing profitable development. Leisure Total turnover: £236.3m Profit: £50.7m Operating margin: 21.5% Frankie & Benny's (139 units) Frankie & Benny's had an excellent year with both EBITDA and profit growing bymore than 20%. The brand delivered strong growth in like-for-like sales and yetagain produced further growth in both EBITDA and operating profit margins. Thisbrand forms a key part of TRG's future plans for growth and it is encouragingthat we were able to open 25 new units during 2006. Of these, 11 wereconversions of former Deep Pan Pizza sites, nine of which are branded as "LittleFrankie's", a derivative concept of Frankie & Benny's designed to operate on asmaller footprint than a standard Frankie & Benny's restaurant. The performanceof the new openings has been very good and it is particularly encouraging to seethat the returns from the new Frankie & Benny's are consistently high both inabsolute terms and also, very importantly, in comparison with the returnsderived from earlier years' openings. This gives us much confidence for thefuture as we look to continue our rollout at a rate of 15-20 new Frankie &Benny's restaurants per annum. Our pipeline of new sites is strong with goodvisibility on rollout to the end of the decade. Chiquito (45 units) 2006 was another good year for Chiquito with the highest like-for-like sales andoperating profit growth within the Group. EBITDA increased by 38% and operatingprofit was up 44%. Margins also improved significantly with the EBITDA margin up90 basis points and profit margin up 120 basis points. Against a background ofsignificant profit growth and margin enhancement in 2005 this is a terrificperformance and one that the Chiquito team are keen to build on in 2007. Duringthe year we opened 11 new restaurants and we are expecting to open 5-10 newrestaurants in the current year, a rate which we expect to maintain for the nextfew years. Returns from the new openings are good and this gives us confidenceas we grow this brand. We are particularly encouraged by the performance of ourrestaurants co-located with Frankie & Benny's and we will continue to pursuedual roll-out opportunities. Blubeckers (22 units) 2006 was the first full year of operating Blubeckers within TRG and we areencouraged with the results. Blubeckers delivered strong growth in like-for-likesales and delivered a very good level of EBITDA and operating profit. During2006 Blubeckers became fully integrated into TRG and since June we have begun toroll out new Blubeckers restaurants. We added five new units during 2006, one ofwhich was a conversion of a Garfunkel's restaurant in Cambridge. We are encouraged by the performance of these new sites where typically thebuild-up in trade takes longer (approximately two to three years) than it doesfor our other brands. We expect to earn good returns from these new openings andthis has encouraged us to step up the openings programme in 2007 to 5-10 newrestaurants. Blubeckers is well placed to benefit from the trends towardsincreased eating out and its widespread appeal across most socio-economic andage groups makes it particularly attractive to much of the UK population. Garfunkel's (29 units) Garfunkel's produced a very solid performance during 2006 with operating profitsup by 15%. It enjoyed strong like-for-like sales growth and deliveredsignificant improvements in margins with the operating profit margin increasingby 140 basis points. During the second half of 2006 we commenced a refreshment and refurbishmentprogramme within Garfunkel's. The first site to undergo these changes was ourrestaurant at Northumberland Avenue followed by the unit at Irving Street. Theresults have been extremely pleasing with strong growth in sales and a wideningof the customer base. We are currently planning to refresh and refurbishapproximately 10 sites during 2007 and we anticipate that this will deliver asignificant level of incremental cashflow at each site to generate verysatisfactory levels of return on investment. In December 2006 a former Deep PanPizza site on Oxford Street was converted into a Garfunkel's and we are pleasedwith its performance since opening. Concessions (49 units) Total turnover: £72.5m Profit: £11.1m Operating margin: 15.3% Our Concessions business faced some very challenging operating conditions forparts of 2006. The increasing focus on airport security initiated by theDepartment of Transport during the first quarter followed by further disruptionduring the summer meant that our Concessions team at the major UK airports facedsome demanding conditions. Our team responded superbly to produce a verysatisfactory set of results. Solid like-for-like sales growth together with a contribution from the six newopenings delivered a 21% increase in turnover and EBITDA and operating profitgrowth of 23% and 24% respectively. It is particularly pleasing to report thatboth EBITDA and profit margins grew, by 20 and 40 basis points respectively. Our six new openings included three sites at Birmingham airport and a new unitat Victoria Station. We are pleased with the performance of these new sites andwe anticipate opening between two and five new concessions units in 2007. Werecently announced that we have won concessions for four new units at the newTerminal 5 at Heathrow; building work will commence during 2007 and the unitsare scheduled to open in March 2008. We are delighted to have secured thesesites and to be able to participate in this landmark UK airport project. Non-core brands and associate During the year losses from non-core activities increased from £0.9m to £2.0m.This largely reflects the workout from the old Deep Pan Pizza estate. Weanticipate a significant reduction in these losses going forward. Losses from our investment in Living Ventures amounted to £0.9m and the returnsfrom this investment have fallen below our expectations at the time theinvestment was made in March 2005. However, we are encouraged that the actionsinitiated by their management during 2006 are now starting to yield somebenefits and we are looking for further improvement during 2007. Nevertheless,in the light of the recent poor performance of this investment we have carriedout an assessment of its Balance Sheet carrying value and concluded that it isappropriate to make an impairment provision for the amount of £9.5m. Furtherdetails are contained in the Finance Director's report. Corporate During 2006 we completed the transfer of all of our operations andadministrative functions into one site in Borough, London. This exercise ranvery smoothly and was carried out in a highly professional manner by our people.The positive impact of bringing everyone together as one team is already veryevident and I am confident that we will continue to derive further benefits inthe future. Market dynamics and economic backdrop The prospects for the UK eating out market look favourable on both short andmedium term bases. Socio-economic factors such as an ageing population, morefemales in work and levels of disposable income significantly higher than forprevious generations augur well for our industry. Lifestyle changes are alsopositive with an increasing level of consumer spending on leisure activities.Projections for future growth in eating out spend indicate a continuation ofrecent trends for a rate of growth ahead of GDP growth. We believe that interest rates and employment levels are two key drivers ofconsumer spend which can potentially impact our marketplace. We have seeninterest rates rise three times in the past eight months and whilst we areencouraged by the resilience of our business in the face of such rises, weremain vigilant to the potential impact of significant further increases in thecost of borrowing. In terms of the outlook for employment we are encouraged bythe high levels of employment and believe that the increases seen in recentyears have provided some underpinning for consumer-facing businesses such asourselves. Cost inflation in our sector has been an issue for the past twelve toeighteen months and TRG has clearly demonstrated its ability to cope with this.On balance, we believe that the macro-economic backdrop remains broadlyfavourable for our sector. Against a backdrop of positive demand-side dynamics, a key concern for some timehas been supply-side risk. In this regard we believe that we have positioned TRGin market segments which afford some protection from supply-side risk whilstbenefiting significantly from the positive demand trends in our marketplace.This has resulted in a more resilient business with the potential to deliverhigher-quality, long-term, sustainable and growing cash flows. Future prospects 2006 was another good year for the Group but our attention is now focused on2007 and beyond. We have a superb portfolio of brands, good visibility onrollout of new restaurants, occupy leading market positions in our chosensegments and have a fantastic team of people. The year has started well withlike-for-like sales for the first nine weeks 5% ahead of last year and we areconfident of continuing our progress in 2007. Andrew Page Chief Executive Officer 7 March 2007 Group Finance Director's review Results * Results are stated excluding non-trading items and excluding the results ofDeep Pan Pizza in the prior year comparatives. Further information is providedin note 2(a). As described in the Chairman's report the Group has had another excellent year.Total Group turnover increased by 9.6% to £314.7m and turnover of the principaltrading brands increased by 24.1% to £308.7m. This strong level of turnovergrowth reflects an impressive level of 5% like-for-like sales growth in theprincipal brands, a full year impact of new openings in 2005 and a part yearimpact of openings during 2006. Group EBITDA increased by 11.3% to £55.6m, andGroup adjusted operating profit increased by 22.6% to £39.2m. These levels ofgrowth would have been even stronger had it not been for a higher level oflosses in non-core brands and discontinued operations (relating respectively toDeep Pan Pizza and the Caffe Uno sites not sold to Paramount at the end of2005). Total adjusted profit before tax excluding Living Ventures was £35.9m, anincrease of 19.2% on the prior year. After accounting for our share of thelosses of Living Ventures, which amounted to £0.9m, total reported Group profitbefore tax and non-trading items amounted to £35.0m, an increase of 18.5% on theprior year. Non-trading items The Group results include a net charge before taxation of £13.4m in respect ofnon-trading items. This is made up of the following items: 2006 2005 £m £m Impairment of loan note due from Living Ventures (9.5) -DPP integration and rationalisation (4.6) -Interest rate swap impact 0.7 (0.1)Other items (net) - (1.2) ------ ------ (13.4) (1.3) ------ ------ In the light of the continuing poor performance of the Living Ventures businesswe have conducted a detailed review of the current carrying value of thisinvestment. As a result of this review we have concluded that it is appropriateto make a provision of £9.5m against the loan note due to be settled in 2008.Going forward we will continue to encourage the executive management of LivingVentures to improve the financial performance of the business. It continues tobe our very firm intention to maximise the value of our investment in thisbusiness. The one-off charge relating to the Deep Pan Pizza rationalisation process is alittle higher than the initial estimate of up to £4m. We have adopted a prudentapproach regarding provision for onerous lease conditions for certain Deep PanPizza properties. Non-trading items also include a credit relating to the Group's interest rateswap arrangements. New swap arrangements were put in place in January 2006.Under IFRS this swap is re-valued at each accounting date. The upward movementof interest rates over the course of the last twelve months has resulted in thispositive revaluation. Profit on disposal of businesses We are pleased to report further profits relating to the Caffe Uno disposal inDecember 2005. The additional profit after taxation of £3.8m (profit beforetaxation of £2.7m), which is in addition to the profit after taxation of £3.5mreported in 2005 (profit before taxation of £3.7m) relates to cost and potentialwarranty accruals no longer required and the completion of significantly betterthan anticipated deals on disposal of the residual Caffe Uno sites not sold toParamount in December 2005. Including the profit before taxation of £3.7mrecognised last year, this brings the cumulative profit on disposal beforetaxation of the Caffe Uno business to £6.4m. Capital expenditure During 2006 the Group invested a total of £40.8m (2005: £40.9m) in capitaladditions. This consisted of the following: • £28.6m invested in 47 new units (16 Frankie & Benny's and nine Little Frankie's, 11 Chiquito's, six Concession outlets, four Blubeckers and one Garfunkel's). This includes an amount of £3.7m spent on converting 13 ex Deep Pan Pizza sites, with the balance spent on 34 brand new locations. • £8.5m on refurbishment and maintenance expenditure. • £3.7m on completing the new head office development referred to in last year's report. The Group continues to be focused on optimising financial returns from ourcapital investments. As we have described in previous reports the Group operatesa rigorous investment appraisal process with the financial viability of all newdevelopments being subject to a detailed review. This review covers all aspectsof proposed new developments including financial projections, socio-economic anddemographic analysis, and local competitor and market analysis. All significantprojects are approved by the Group Board and we conduct post-completionappraisals which confirm that we are consistently achieving the expected levelsof financial return. Cash flow The Group continues to be strongly cash generative with a very healthy andtransparent conversion of operating profits into cash flow. Net cash flow fromoperations of £63.4m grew by 14% compared to the previous year. Free cash flow(defined as cash flow from operating activities less interest, tax andmaintenance capital expenditure) was £42.4m, an increase of 19% compared to theprior year (2005: £35.7m). Once again, the Group's substantial new site development programme, as well asthe ordinary dividend, has been entirely financed out of internally generatedcash flow. Balance sheet & key financial ratios Total Group net assets in the year reduced from £91.4m to £65.2m. This reductionis due to the special dividend of £34.8m paid in March. Total non-current assetsincreased from £181.7m to £194.0m, reflecting the Group's strong capitalexpenditure programme net of depreciation charges. The key financial ratios for the year were as follows: 2006 2005 Interest cover 12.0x 17.5x Fixed charge cover 2.3x 2.3x Balance Sheet gearing 73% 14% Interest cover has reduced significantly as a result of the much higher levelsof average net debt during 2006 compared to 2005. For TRG, given that this is aprimarily lease based business model, fixed charge cover is the key financialratio that we focus on. For 2006 the Group's fixed charge cover was 2.3 times,in line with 2005. Taxation The total taxation charge (excluding the impact of disposal of businesses) forthe year is £11.2m compared with £8.6m in the prior year. The taxation chargeon the trading business reflects a normalised tax rate in 2006 of 34% (2005:33%). The total taxation charge of £11.2m (2005: £8.6m) consists of acorporation tax charge of £8.5m (2005: £9.0m) and a deferred tax charge of £2.7m(2005: £0.4m credit). Stephen M. A. Critoph Group Finance Director 7 March 2007 The Restaurant Group plcConsolidated income statement Year ended 31 December 2006 Year ended 1 January 2006 Continuing Discontinued Total Continuing Discontinued Total Note £'000 £'000 £'000 £'000 £'000 £'000 Revenue 3 314,018 730 314,748 263,878 38,450 302,328 Cost of sales 4 (256,060) (1,026) (257,086) (218,049) (34,528) (252,577) Gross profit/(loss) 57,958 (296) 57,662 45,829 3,922 49,751 Administration costs 4 (18,475) - (18,475) (19,019) (777) (19,796)Release of accrual for property exit costs 5 - - - 1,700 - 1,700Provision against 5 (9,500) - (9,500) - - -carrying value of loannote from associateLoss on integration of DPP 5 (4,582) - (4,582) - - -Loss and provision for loss on disposal offixed assets 5 - - - (2,594) - (2,594) Operating profit 25,401 (296) 25,105 25,916 3,145 29,061 Interest payable (3,308) - (3,308) (2,692) - (2,692)Interest receivable 699 - 699 689 - 689 Profit before share of 22,792 (296) 22,496 23,913 3,145 27,058associate and tax Share of post tax result in associatedundertaking (917) - (917) (600) - (600) Profit before tax 21,875 (296) 21,579 23,313 3,145 26,458 Profit before tax,analysed as:Trading business -managed 35,312 (296) 35,016 26,394 3,145 29,539 DPP Restaurants Limited trading result - notmanaged - - - (1,733) - (1,733)Non-trading items 5 (13,437) - (13,437) (1,348) - (1,348) 21,875 (296) 21,579 23,313 3,145 26,458 Tax on profit from ordinary activities 6 (11,264) 101 (11,163) (7,567) (1,050) (8,617) Profit on ordinary activities after tax 10,611 (195) 10,416 15,746 2,095 17,841 Profit on sale of business after tax 5 - 3,950 3,950 - 5,504 5,504 Profit for the financial year attributable toequity shareholders 10,611 3,755 14,366 15,746 7,599 23,345 Earnings per share(pence)Basic 8 5.36 1.90 7.26 7.27 3.51 10.78Diluted 8 5.34 1.89 7.23 7.22 3.48 10.70 Dividend per share(pence) - ordinary 7 6.00 4.75- special 7 16.00 - The Restaurant Group plcConsolidated statement of changes in equity Year ended 31 Year ended 1 January December 2006 2006 £'000 £'000 Opening equity (IFRS, excluding IAS 32 and IAS 39) 91,436 75,883 Adjustment to opening equity for inclusion of swaps underIAS 32 and IAS 39 - 127 Opening equity (IFRS, including IAS 32 and IAS 39) 91,436 76,010 Profit for the year 14,366 23,345Foreign exchange translation differences 1 (165)Deferred tax credit on share based payments takendirectly to equity 1,529 411 Total recognised income and expense for the year 15,896 23,591 Dividends - ordinary (9,490) (9,277)Dividends - special (34,793) -Issue of new shares 1,096 604Share based payments - credit to equity 1,059 508 Total changes in equity in the year (26,232) 15,426 Closing equity 65,204 91,436 The Restaurant Group plcConsolidated balance sheet At 31 December 2006 At 1 January 2006 £'000 £'000 Non-current assetsIntangible assets 11,275 11,275Property, plant and equipment 174,035 151,337Investment in associate 7,810 8,727Trade and other receivables 875 10,375 193,995 181,714 Current assetsStock 2,992 2,763Financial assets - derivative financial instruments 652 7Trade and other receivables 5,170 5,498Prepayments 12,138 11,094Cash and cash equivalents 683 426 21,635 19,788 Total assets 215,630 201,502 Current liabilitiesShort-term borrowings (1,165) (1,845)Income tax liabilities (4,947) (8,315)Trade and other payables (74,864) (71,476) (80,976) (81,636) Net current liabilities (59,341) (61,848) Non-current liabilitiesLong-term borrowings (47,000) (11,000)Other payables (2,737) (2,696)Deferred tax liabilities (16,247) (13,971)Provisions (3,466) (763) (69,450) (28,430) Net assets 65,204 91,436 EquityShare capital 54,863 54,366Share premium 20,346 19,747Foreign currency reserve 81 80Other reserves 1,823 764Retained earnings (11,909) 16,479Total equity shareholders' interests 65,204 91,436 The Restaurant Group plcConsolidated cash flow statement Year ended 31 Year ended December 2006 1 January 2006 Note £'000 £'000 Cash flows from operating activitiesCash generated from operations 9 63,374 55,484Interest received 68 219Interest paid (2,906) (2,076)Tax paid (9,656) (8,199)Net cash flows from operating activities 50,880 45,428 Cash flows from investing activitiesAcquisition of associate - (10,186)Acquisition of subsidiary, net of cash acquired - (26,889)Disposal of business, net of cash disposed (1,455) 32,982Disposal of subsidiary, net of cash disposed - 5,630Integration of business (584) -Purchase of property, plant and equipment (40,775) (39,767)Proceeds from sale of property, plant and equipment 58 708Net cash used in investing activities (42,756) (37,522) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 1,096 604Net proceeds from issue of bank loan 36,000 4,000Dividends paid to shareholders (44,283) (9,277)Net cash used in financing activities (7,187) (4,673) Net increase in cash and cash equivalents 937 3,233 Cash and cash equivalents at start of year 10 (1,419) (4,652) Cash and cash equivalents at end of year 10 (482) (1,419) The Restaurant Group plcNotes to the accounts1) Segmental analysis Year ended 31 December 2006 Year ended 1 January 2006 Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure 236,258 62,703 26.5% 50,745 21.5% 189,009 49,541 26.2% 39,974 21.1% Concessions 72,479 15,154 20.9% 11,088 15.3% 59,771 12,360 20.7% 8,919 14.9% Principal trading brands 308,737 77,857 25.2% 61,833 20.0% 248,780 61,901 24.9% 48,893 19.7% Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%) 15,098 (785) (5.2%) (1,553) (10.3%) Continuing operations 314,018 76,068 24.2% 59,834 19.1% 263,878 61,116 23.2% 47,340 17.9% Discontinued operations 730 (296) (40.6%) (296) (40.6%) 38,450 6,977 18.1% 3,922 10.2% Total all brands 314,748 75,772 24.1% 59,538 18.9% 302,328 68,093 22.5% 51,262 17.0% Pre-opening costs (included in costof sales) (1,876) (0.6%) (1,876) (0.6%) (1,511) (0.5%) (1,511) (0.5%)Administration (17,192) (5.5%) (17,416) (5.5%) (17,179) (5.7%) (18,954) (6.3%)Share based payments (1,059) (0.3%) (1,059) (0.3%) (508) (0.2%) (508) (0.2%) EBITDA / operating profit 314,748 55,645 17.7% 39,187 12.5% 302,328 48,895 16.2% 30,289 10.0%Release of accrual forproperty exitcosts - 1,700Loss on integration ofDPP (4,582) -Provision against carrying value ofloan note fromassociate (9,500) -Restructuring costs - (334)Loss and provision forloss on disposalof fixed assets - (2,594) Operating profit 25,105 29,061 No geographical segment analysis has been provided as the Directors do notconsider there to be materially significant geographical segments. The Groupcurrently operates three restaurants outside of the United Kingdom. The Restaurant Group plcNote 2 - Additional income statement Additional income statement information is provided as a useful guide tounderlying trading performance. The adjustments from the statutory incomestatement are to aid understanding of the income statement and should be read inconjunction with, rather than as a substitute for, the reported information. DPP Restaurants Ltd ("DPP") was consolidated as a subsidiary under IAS 27throughout 2005 even though The Restaurant Group plc ("TRG" or "The Group")legally only held 19.9% of the issued share capital due to the existence of anoption to take full control of DPP which became exercisable on 31 December 2004.The additional income statement segregates the results of DPP in 2005 when thebusiness was not under the direct control of the Board. TRG acquired fullcontrol of DPP on 12 January 2006 for a nominal sum and therefore the Groupresults include those of DPP in 2006. The 2006 and 2005 results include a number of items which are of a one-offnature and not representative of the underlying trading performance of thebusiness. These have been separately identified in the additional incomestatement as non-trading items. For the purposes of the additional income statement, a normalised tax rate of34% has been applied to the trading business to reflect the underlying effectivetax rate. The Restaurant Group plcNote 2(a) - Additional income statement Year ended 31 December 2006 Continuing Discontinued Trading Non- DPP business operations business trading trading Total £'000 £'000 £'000 £'000 £'000 £'000 Revenue 314,018 730 314,748 - - 314,748Cost of sales:Excluding pre-opening costs (254,184) (1,026) (255,210) - - (255,210)Pre-opening costs (1,876) - (1,876) - - (1,876) (256,060) (1,026) (257,086) - - (257,086) Gross profit / (loss) 57,958 (296) 57,662 - - 57,662 Administration costs:Excluding one-off costs (18,475) - (18,475) - - (18,475)Restructuring costs - - - - - - (18,475) - (18,475) - - (18,475) Trading profit / (loss) 39,483 (296) 39,187 - - 39,187 Release of accrual for property exit costs - - - - - -Provision against carrying value of loan note from associate - - - (9,500) - (9,500)Loss on integration of DPP - - - (4,582) - (4,582)Loss and provision for loss on disposal of fixed assets - - - - - - Operating profit / (loss) 39,483 (296) 39,187 (14,082) - 25,105 Interest payable (3,308) - (3,308) - - (3,308)Interest receivable 54 - 54 645 - 699 Profit/(loss) before share of associate and tax 36,229 (296) 35,933 (13,437) - 22,496 Share of post tax result in associated undertaking (917) - (917) - - (917) Profit / (loss) on ordinary activities before tax 35,312 (296) 35,016 (13,437) - 21,579Tax on profit / (loss) from ordinary activities (12,364) 101 (12,263) 1,100 - (11,163) Profit / (loss) on ordinary activities after tax 22,948 (195) 22,753 (12,337) - 10,416Profit on sale of business after tax - - - 3,950 - 3,950 Profit / (loss) for the year 22,948 (195) 22,753 (8,387) - 14,366 Earnings per share (pence)Basic 11.50 7.26Diluted 7.23Dividend per share (pence)- ordinary 6.00- special 16.00 The Restaurant Group plcNote 2(a) - Additional incomestatement Year ended 1 January 2006 Continuing Discontinued Trading Non DPP business operations business trading trading Total £'000 £'000 £'000 £'000 £'000 £'000 Revenue 248,843 38,450 287,293 - 15,035 302,328 Cost of sales:Excluding pre-opening costs (200,851) (34,528) (235,379) - (15,687) (251,066)Pre-opening costs (1,511) - (1,511) - - (1,511) (202,362) (34,528) (236,890) - (15,687) (252,577) Gross profit / (loss) 46,481 3,922 50,403 - (652) 49,751 Administration costs:Excluding one-off costs (17,664) (777) (18,441) - (1,021) (19,462)Restructuring costs - - - (334) - (334) (17,664) (777) (18,441) (334) (1,021) (19,796) Trading profit / (loss) 28,817 3,145 31,962 (334) (1,673) 29,955 Release of accrual for property exit costs - - - 1,700 - 1,700Provision against carrying value of loan note from associate - - - - - -Loss on integration of DPP - - - - - -Loss and provision for loss on disposal of fixed assets - - - (2,594) - (2,594) Operating profit / (loss) 28,817 3,145 31,962 (1,228) (1,673) 29,061 Interest payable (2,512) - (2,512) (120) (60) (2,692)Interest receivable 689 - 689 - - 689 Profit / (loss) before share of associate and tax 26,994 3,145 30,139 (1,348) (1,733) 27,058 Share of post tax result in associated undertaking (600) - (600) - - (600) Profit / (loss) before tax 26,394 3,145 29,539 (1,348) (1,733) 26,458 Tax on profit / (loss) from ordinary activities (8,817) (1,050) (9,867) 470 780 (8,617) Profit / (loss) on ordinary activities after tax 17,577 2,095 19,672 (878) (953) 17,841 Profit on sale of business after tax - - - 5,504 - 5,504 Profit / (loss) for the year 17,577 2,095 19,672 4,626 (953) 23,345 Earnings per share (pence)Basic 9.08 10.78Diluted 10.70Dividend per share (pence) - ordinary 4.75 - special - The Restaurant Group plcNote 2b - Additional Information Year ended 31 December 2006 Year ended 1 January 2006 Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure 236,258 62,703 26.5% 50,745 21.5% 189,009 49,541 26.2% 39,974 21.1% Concessions 72,479 15,154 20.9% 11,088 15.3% 59,771 12,360 20.7% 8,919 14.9% Principal trading brands 308,737 77,857 25.2% 61,833 20.0% 248,780 61,901 24.9% 48,893 19.7% Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%) 63 (691) - (901) - Continuing operations 314,018 76,068 24.2% 59,834 19.1% 248,843 61,210 24.6% 47,992 19.3% Discontinued operations 730 (296) (40.6%) (296) (40.6%) 38,450 6,977 18.1% 3,922 10.2% Total all brands 314,748 75,772 24.1% 59,538 18.9% 287,293 68,187 23.7% 51,914 18.1% Pre-opening costs (included incost of sales) (1,876) (0.6%) (1,876) (0.6%) (1,511) (0.5%) (1,511) (0.5%)Administration (17,192) (5.5%) (17,416) (5.5%) (16,158) (5.6%) (17,933) (6.2%)Share based payments (1,059) (0.3%) (1,059) (0.3%) (508) (0.2%) (508) (0.2%) EBITDA / operatingprofit 314,748 55,645 17.7% 39,187 12.5% 287,293 50,010 17.4% 31,962 11.1% Total net interest charges (3,254) (1,823) Profit before taxation and share of associate's result 35,933 30,139 Share of losses of associated company (917) (600) Profit before taxation 35,016 29,539 Taxation (12,263) (9,867) Profit after taxation 22,753 19,672 Earnings per share (pence) - Trading businessBasic 11.50 9.08Diluted 11.45 9.01 No geographical segment analysis has been provided as the Directors do notconsider there to be materially significant geographical segments. The Groupcurrently operates three restaurants outside of the United Kingdom. The Restaurant Group plcNotes to the accountsFor the year ended 31 December 2006 3) Revenue 2006 2005 £'000 £'000Revenue consists of the following: Continuing business - owned and managed during the year 314,018 248,843DPP Restaurants Limited - 15,035 Continuing operations 314,018 263,878Discontinued operations 730 38,450 Total revenue for the year 314,748 302,328 4) Operating expenses 2006 2005 £'000 £'000Included in cost of sales are the following: Continuing business - owned and managed during the year 254,184 200,851Pre-opening costs 1,876 1,511DPP Restaurants Limited - 15,687 Continuing operations 256,060 218,049Discontinued operations 1,026 34,528 Total cost of sales for the year 257,086 252,577 Included in administration costs are the following:Continuing business - owned and managed during the year 18,475 17,664Restructuring costs - 334DPP Restaurants Limited - 1,021 Continuing operations 18,475 19,019Discontinued operations - 777 Total administration costs for the year 18,475 19,796 5) Non-trading items 2006 2005 £'000 £'000Items classified as non-trading are as follows:a) Included within continuing operations:Provision against carrying value of loan note from associate (9,500) -Loss on integration of DPP (4,582) -Finance gain / (charge) arising from remeasurement of interest rate swap 645 (120)Release of accrual for property exit costs - 1,700Loss and provision for loss on disposal of fixed assets - (2,594)Restructuring costs - (334) (13,437) (1,348) Following a detailed review of the carrying value of Living Ventures, and in light of currenttrading performance, the Board have concluded that it is appropriate to make a provision of £9.5magainst the loan note repayable in 2008. The loss on integration of the Deep Pan Pizza business is in relation to costs incurred onemployee and contract terminations and a number of property costs including the write down of thecarrying value of the business on integration, provisions for onerous leases and premiums ondisposal of some of the properties. In addition, the Group has taken a credit of £0.645m (2005: £0.1m charge) in respect of theremeasurement of its interest rate swap. In 2005, the Group incurred a net charge of £0.9m in respect of loss and provision for loss ondisposal of assets and a charge of £0.3m on restructuring costs. b) Profit on disposal of businesses:Profit on disposal of Est Est Est Restaurants Limited 184 1,582Profit on disposal of the Caffe Uno business 2,696 3,692Share of profit made on disposal of business by associate - 400 2,880 5,674Tax credit / (charge) on sale of business 1,070 (170) Profit on sale of business after tax 3,950 5,504 The Group has released accruals of £2.7m created on the disposal of the CaffeUno business in December 2005 in respect of dilapidations and warranty claimsthat are no longer required as they have become time lapsed, and following thecompletion of better than anticipated deals on disposal of some of the residualCaffe Uno sites not sold to Paramount. In the year ended 1 January 2006, the Group disposed of Est Est Est and CaffeUno for a profit of £1.6m and £3.7m respectively. The net impact after taxation of the profit on disposal of businesses is £3.9m(2005: £5.5m). 6) Taxation 2006 2005The taxation charge comprises: £'000 £'000 Current taxationUK corporation tax at 30% 8,594 9,202Adjustments in respect of previous periods (115) (187) 8,479 9,015 Deferred taxationOrigination and reversal of timing differences 2,684 15Adjustments in respect of previous periods - (413) 2,684 (398) Taxation charge 11,163 8,617 Taxation (credit) / charge on disposal of businesses (1,070) 170 Total taxation charge for the year, includingimpact of disposal of businesses 10,093 8,787 Current tax consists of £8,568,000 for continuing activities and a credit of£89,000 in respect of discontinued activities. Deferred tax consists of£2,696,000 in respect of continuing activities and a credit of £12,000 inrespect of discontinued activities. 7) Dividend 2006 2005 £'000 £'000Amounts recognised as distributions to equity holders during the year: Final dividend for the year ended 1 January 2006 of 3.84p (2004: 3.375p) per share 7,442 7,306 Interim dividend for the year ended 31 December 2006 of 1.05p (2005: 0.91p) per share 2,048 1,971 9,490 9,277 Special dividend of 16p per share paid on 9 March 2006 34,793 - 44,283 9,277 Proposed final dividend for the year ended 31 December 2006 of 4.95p (2005: 3.84p) per share 9,656 7,442 The proposed final dividend is subject to approval by shareholders at the Annual General Meeting andhas not been included as a liability in these financial statements. 8) Earnings per share 2006 2005 a) Basic earnings per share:Weighted average ordinary shares in 197,790,404 216,576,330issue during the year: Total basic profit for the year 14,366 23,345(£'000): Basic earnings per share for the year (pence) 7.26 10.78 Effect of non-trading items on 8,387 (4,626)earnings for the year (£'000)Effect of consolidation of DPP - 953Restaurants Limited for the year(£'000)Earnings excluding non-trading items (£'000) 22,753 19,672 Adjusted earnings per share (pence) 11.50 9.08 The additional Earnings per Share information (where non-trading items and theperformance of DPP Restaurants Limited, which was not managed by The RestaurantGroup plc for the year ended 1 January 2006 have been added back) has beenprovided as the Directors believe they provide a useful indication as to theunderlying performance of the Group. b) Diluted earnings per share: Weighted average ordinary shares in issue during the year: 197,790,404 216,576,330Dilutive shares to be issued in respect of optionsgranted under the Share Option Scheme: 953,597 1,668,454 198,744,001 218,244,784 Diluted earnings per share (pence) 7.23 10.70 9) Reconciliation of profit before tax to net cash flow from operating activities 2006 2005 £'000 £'000 Profit before tax 21,579 26,458Net finance charges 2,609 2,003Loss and provision of loss on disposal of fixed assets - 2,594Release of accrual for property exit costs - (1,700)Loss on integration of DPP (net of operating cash flow) 4,101 -Provision against carrying value of loan note from associate 9,500 -Share of loss made by associate 917 600Non-cash charge reversed in reserves 1,059 508Depreciation 16,458 18,606Increase in stocks (229) (439)Increase in debtors (1,295) (2,451)Increase in creditors 8,675 9,305 Cash flows from operating activities 63,374 55,484 10) Reconciliation of changes in cash to the movement in net debt 2006 2005 £'000 £'000 At the beginning of the year (12,419) (11,652)Movements in the year:Loans taken out (36,000) (4,000)Cash inflow 937 3,233 At the end of the year (47,482) (12,419) Represented by: At Cash flow At Cash flow At 1 January movements 2 January movements 31 December 2005 in the year 2006 in the year 2006 £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 482 (56) 426 257 683Overdrafts (5,134) 3,289 (1,845) 680 (1,165) 3,233 937 Bank loan due within one year - - - - -Bank loan due after one year (7,000) (4,000) (11,000) (36,000) (47,000) (4,000) (36,000) (11,652) (767) (12,419) (35,063) (47,482) 11) Basis of preliminary statement The financial information included in this document is unaudited and does notcomprise statutory accounts within the meaning of section 240 of the CompaniesAct 1985. The comparative figures for the financial year ended 1 January 2006are the Group's statutory accounts for that financial year. Those accounts,which were prepared under IFRS, have been reported on by the Group's auditorsand delivered to the Registrar of Companies. The report of the auditors wasunqualified and did not contain statements under section 237(2) or (3) of theCompanies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RTN.L