21st Sep 2005 07:00
Restaurant Group PLC21 September 2005 The Restaurant Group plcInterim results for the six months ended 30 June 2005 The Restaurant Group plc operates 279 restaurants across the UK predominantly inleisure locations and airports. Its primary brands are Frankie & Benny's,Chiquito, Caffe Uno, Garfunkel's and most recently Blubeckers. 2005 2004 % changeTurnover (£m) 130.8 118.0 +10.8IFRS EBITDA (£m) 21.4 18.5 +15.6UK GAAP EBITDA (£m) 21.4 18.3 +16.7IFRS Profit before tax (£m) 11.6 9.6 +20.4UK GAAP Profit before tax (£m) 11.9 9.8 +21.8IFRS Adjusted earnings per share (p) 3.59 3.01 +19.3UK GAAP Adjusted earnings per share (p) 3.68 3.05 +20.7Interim dividend (p) 0.91 0.825 +10.3 Results are stated before non-trading items and DPP (as detailed below) Key financial • Profit before tax and non-trading items up over 20% • EPS (excluding non-trading items and DPP) up over 19% • Cash generated from operations up 37% • Underlying net debt before acquisitions reduced by £2 million • Leisure and Concessions now contribute over 80% of brand profit Key operational Leisure • Frankie & Benny's enjoyed another superb half with strong like-for-likes and excellent returns - EBITDA and profit increased significantly - Four new sites opened • Chiquito - Good growth in turnover, EBITDA and profit - Four new units opened Concessions • Excellent first half• Four new units opened - three at Luton and one at Heathrow• Awarded concession to operate three brands at Birmingham International Airport• Shopping centre concessions also performing well High Streets • Almost £6m EBITDA and satisfactory returns• Market conditions remain challenging Blubeckers • Acquired end of June 2005• Exciting future potential Current Trading • Continued good trading; like for like sales for 37 weeks to 18 September 2005 at 3% Commenting on these results, Alan Jackson, the Executive Chairman, said: "TRG has made an excellent start to the year, with earnings up 20%. Our strategyfor profitable growth, implemented at the end of 2001, continues to deliverexcellent results and we are well placed to build further upon this performance. In each of our two key divisions, Leisure and Concessions, we occupy marketleading positions with strong brands offering good value. We have an outstandingteam which ensures that we consistently deliver the right product, in the rightplace at the right price. I view TRG's future with confidence." 21 September 2005 Enquiries:The Restaurant Group plc Alan Jackson, Executive Chairman 020 7457 2020 (today) Andrew Page, Group Managing Director 020 7747 7750 (thereafter) Stephen Critoph, Finance Director College Hill Matthew Smallwood 020 7457 2020 Executive Chairman's Statement The Group has performed strongly for the first half of 2005 and since June hascontinued to make good progress. Overall, trading has been extremely buoyantwith the Group enjoying strong underlying like-for-like growth of 3% in theprincipal brands and also benefiting from new openings. This is our fourthsuccessive year of posting increased profits and cash generation and I am verypleased that the efforts of the team at TRG continue to deliver such goodresults. The first half has also seen activity on the corporate front with the disposalof Est Est Est to Living Ventures Limited ("Living Ventures") and thesimultaneous acquisition of a 40% shareholding in Living Ventures. At the end ofJune we purchased Blubeckers Limited for £27 million in cash and we aredelighted with this acquisition, which we believe has significant future potential. Introduction Building on a strong performance in 2004 the Group has continued its progressand we have remained focused on our core strategy. We have invested in new unitdevelopments in our Leisure and Concessions divisions and during the period weacquired an exciting new restaurant business, Blubeckers, which is locatedpredominantly in rural and semi-rural locations away from the High Street. During the first six months of the year our strongest trading has been withinour Leisure and Concessions divisions which, as we enter the second half, nowaccount for about 80% of the Group's revenues. Each of these divisions has seenan increase in profit of more than 30% and against a challenging market backdropthis is an outstanding performance. Our Leisure businesses, (Frankie & Benny's, Chiquito and Blubeckers) are wellplaced to benefit from an increasing demand from customers to eat out atrestaurants offering good value for money, in locations which are readilyaccessible, have good car parking facilities and are safe, trouble-freeenvironments. Both Frankie & Benny's and Chiquito enjoyed good growth in turnover, EBITDA andprofits during the first half year, with EBITDA and profit margins also growingstrongly. It is very satisfying to see us building on the turnaround at Chiquitoand during the first half we opened 4 new restaurants under this brand. Our Concessions business has also enjoyed a very successful first halfbenefiting both from the new unit openings and also strong underlyinglike-for-like growth. During the first half turnover grew by 26% and profits by37%, with EBITDA and profit margins also showing good progress. It is particularly pleasing to note that we have recently opened three new unitsat Luton airport and that we have been selected to operate three brands atBirmingham International Airport which will open in 2006. This furtherdemonstrates the successful development of this important division within TRGand re-enforces our position as a market leader in catering at UK airports. Weare also looking forward to some exciting new openings at shopping centres inNorwich, Gateshead and Manchester during the second half of the year. Our High Streets division had a difficult first half and has recorded a declineof almost 19% in profits. Garfunkels' profits were just ahead of the previousyear's levels, but Caffe Uno's profits fell and its performance reflects anincreasingly competitive marketplace with several new competitors' offeringsopening alongside our restaurants which contributed to significant pressure onthe top line. Overall, we are expecting the second half to be as difficult as the first, as animproving trend in Caffe Uno outside of London is likely to be offset by adifficult Central London market impacting both Caffe Uno and Garfunkel's. I am very pleased to report that our purchase of Blubeckers is both an excellentstrategic fit and rather timely. Likewise, our disposal of Est Est Est, toLiving Ventures and the acquisition of a 40% shareholding in the enlarged LivingVentures is expected to yield benefits for the Group. Overall, this is a very good performance from the Group and is a testament tothe hard work and dedication of the management team and staff. Results * *Results are stated excluding non trading items and DPP. The Group has made good progress during the first six months. On a UK GAAPbasis, turnover grew by 10.8% to £130.8m (2004:£118.0m), EBITDA increased by16.7% to £21.4m (2004: £18.3m) and profit before tax and non trading itemsincreased by 21.8% to £11.9m (2004: £9.8m). Earnings per share were 20.7% higherat 3.68p (2004: 3.05p). In the light of this strong performance, the Board isdeclaring an interim dividend of 0.91p per share (2004: 0.825p), representing anincrease of 10.3%. The dividend will be paid on 27 October 2005 to shareholderson the register on 30 September 2005 and the shares will be marked ex-dividendon 28 September 2005. On an IFRS basis the figures were as follows: EBITDA £21.4m, (up 15.6%) profitbefore tax and non trading items £11.6m (up 20.4%) and earnings per share 3.59p(up 19.3%). A reconciliation between UK GAAP and IFRS is included in theappendices. All subsequent numbers in this statement are on an IFRS basis. Cash generation was strong and, stripping out the impact of the Blubeckersacquisition and Living Ventures transaction, we reduced net debt by a further£2m, notwithstanding a significantly higher level of first half capitalexpenditure of £19.0m (2004: £10.2m). Our Balance Sheet continues to be strong with a net debt level of £40.1m (2004:£18.6m) and net gearing of 52% (2004: 27%). The increase in profit was again generated from four sources: - strong like-for-like growth from the existing estate; - consistently strong profit performance from new units; - cost savings from purchasing initiatives and operational efficiencies; and - lower interest charges Non Trading Items The non trading profit amounts to £1.2m. This includes a profit on the disposalof Est Est Est of £1.6m, a loss of £0.2m on the disposal of a number of poorperforming sites and an unrealised loss on swap instruments used to hedgeinterest rate exposure. The full year results will include a one offnon-trading charge in connection with the reorganisation and integration of theBlubeckers business. Cash flow and Balance Sheet The Group continues to be strongly cash generative and during the first halfoperating cash flow increased by 37% to £25.4m (2004: £18.5m). The high rate of conversion of profit into cash is particularly noteworthy anddemonstrates the rigorous discipline applied across our business. Capital expenditure during the period amounted to £19.0m (2004: £10.2m). Thisincludes £5m relating to the acquisition of freehold office premises. Followingfurther investment in development and refurbishment this will enable allcorporate and brand management functions to be consolidated into one building bylate 2006. Consolidation into one office will yield significant benefits interms of efficiency and improved internal communication. Net debt (on apro-forma basis and excluding the impact of the acquisition of Blubeckers andthe Living Ventures transaction) fell by £2m. Following the acquisition ofBlubeckers, net debt at 30 June 2005 stood at £40.1m. We have a strong balance sheet with sufficient capacity to finance ouraccelerated roll out programme at Frankie & Benny's and to continue growingChiquito and Concessions at an annual rate at least equivalent to that recordedover the past twelve months. Additionally, once we have integrated Blubeckers,we anticipate adding up to six new units to this brand in 2006. Review of Operations Leisure Total revenue: £70.5m Profit: £14.7m Operating Margin: 20.9% Frankie & Benny's (105 units) Frankie & Benny's enjoyed a superb first half with strong like-for-like growth.During the period, turnover, EBITDA, profit and margins increased significantly.We opened 4 new restaurants during the first half including 2 sites which werepreviously trading as Deep Pan Pizza (DPP) units. It is worth noting that theearly indications from these DPP conversions are very encouraging with weeklyturnover increases averaging in excess of 100%. During the second half weanticipate opening a further 10 to 13 new units including converting some moreDPP units. The returns being generated from new units continue to be at levels consistentwith both recent years' openings and those delivered by the older Frankie &Benny's units. This year Frankie & Benny's is celebrating its tenth anniversary and, during thefirst half, we opened the 100th UK restaurant. The brand goes from strength tostrength and it occupies a leading market position in multiplex cinema leisuresites and is becoming increasingly dominant in non-multiplex cinema, LeisureRetail, sites. We are confident that this business can continue its profitablegrowth under its experienced and very able management team. Chiquito (29 units) Chiquito has performed very well during the first six months with stronglike-for-like growth. Building on the foundations we put in place during 2004 wehave seen good growth in turnover, EBITDA and profit. During the first half weopened 4 new units, including converting 1 ex DPP site - again the earlyindications for this converted site are every bit as encouraging as thoseconverted into Frankie & Benny's, referred to above. During the second half wewill open between 2 and 4 new Chiquito restaurants, including some further DPPconversions. We are delighted that the turnaround at Chiquito is virtually complete, therefreshed format has been well received by both existing and new customers andwe look forward to adding new units to the portfolio. The team at Chiquito aredoing an excellent job! Concessions (40 units) Total revenue: £26.6m Profit: £3.9m Operating Margin: 14.5% Our Concessions business had an excellent first half and this is likely tocontinue for the rest of the year. We have an exciting programme of new openingsfor 2005 and during the first half four new units opened; three at Luton and a "Giraffe" restaurant concept (which we operate under a franchise agreement) atHeathrow Terminal 1. Early indications from the new openings are veryencouraging. During the first half turnover grew by 26% to £26.6m (2004:£21.1m), EBITDA grewby 29% to £5.4m (2004: £4.2m) and profit grew by 37% to £3.9m (2004: £2.8m).Margins also grew strongly. During the second half we anticipate opening further units including three atshopping centres. Shopping centres are a relatively new area of growth for theConcessions division - we opened our first at the Trafford Centre in Manchesterlast year and it is delivering superb returns. We are delighted that our representation at UK airports continues to increase.During the first half we opened three new concession sites at Luton airport andwe have recently been awarded a seven year concession to operate three brands atBirmingham International Airport, which is likely to open in 2006. This furtherstrengthens our position as a leading operator of catering outlets in UKairports. High Street (88 units) Total revenue: £30.1m Profit: £3.8m Operating Margin: 12.4% The first six months was very challenging with an increasing amount ofcompetitor activity impacting several of our High Street units. Garfunkel's (30 units) Garfunkel's had a steady first half and was able to deliver profits slightlyahead of last year. However, in light of the London bombings in July, we areadopting a cautious stance for the remainder of 2005. In 2004, approximatelytwo-thirds of Garfunkel's turnover was generated in Central London and we expectit to be some time before trading returns to previous levels. In the meantime,we are embarking on a number of marketing initiatives to secure as much of theCentral London trade as possible and we continue to be vigilant on costs. Garfunkel's has a great portfolio of sites many of which are in the most populartourist areas. The resilience of this business is as good as any of itscompetitors and, longer term, it will continue to deliver good profits andcashflow. Caffe Uno (58 units) Caffe Uno has faced a significant amount of new competition in several locationsover the past 12 months and this has adversely impacted turnover. In turn thishas had a detrimental impact upon profit. Recent months have seen an improvementin the trend of business outside of Central London and we expect to see thistrend continuing during the balance of the second half. As with Garfunkel's, wehave embarked on a number of marketing initiatives, including a loyalty scheme,to drive topline growth and we are encouraged by the early results of these. Blubeckers (17 units) We acquired Blubeckers at the end of June 2005, for a cash consideration of£27m. We believe that there are good opportunities to create higherprofitability from the existing units and to grow this business by expanding theconcept into new locations. The integration of the business is well underway andthe integration of the Finance, IT, Purchasing and support functions will beconcluded shortly. On an ongoing basis, this will yield good cost savings.There will be a one-off cost associated with the integration of Blubeckers,which will be disclosed as a non-trading item in the full year results. The Blubeckers team has vast experience of the business and many of the staffhave been there for ten years or more. We are delighted to welcome them to TRGand are very encouraged by the enthusiasm and energy which they havedemonstrated since the acquisition. Non-Core Brands This category includes the results of Est Est Est for the first three months ofthis year (prior to its sale to Living Ventures at the end of March) and duringthis time it recorded a loss. We continue to take steps to minimise losses from our non-core units and we arepleased with the progress in this area during the first half with a reduction innon-core losses (excluding Est Est Est). Deep Pan Pizza As announced previously the Group has an option to take full control of DPP,which became exercisable on 31 December 2004. To date this option has not beenexercised and our shareholding remains at 20%. However, as highlighted in theGroup's IFRS statement in June, we are required to consolidate 100% of DPP, eventhough the option has not been exercised. This treatment is reflected in theGroup's IFRS financial statements. During the first half we took over a number of underperforming DPP restaurantsand converted them into Frankie & Benny's and Chiquito formats. The subsequentturnaround in performance has been remarkable, with the converted units enjoyingweekly increases in turnover averaging approximately 100% and in one case over200%. It is likely that we will look to take on additional DPP units and then convertthem into our successful formats during the next 12 months. In the meantime, we are closely monitoring the performance of DPP. DPP isprofitable at the core restaurant EBITDA level but is loss making afterdepreciation, closed branch and head office costs. Recently the management ofDPP has taken steps to reduce its head office costs and this combined with thedisposal of several of their underperforming units is having a positive impact. However, these actions occurred at the end of the first half and have thereforenot had any impact on the current results. The first half is typically a muchweaker trading period than the second half, and this is reflected in the lossincurred in the period. DPP is also heavily dependent on its Central Londonbusiness, which in common with many other businesses, has been affected by theLondon bombings in July. Living Ventures Following the transaction announced on 31 March 2005, Living Ventures acquiredthe Est Est Est ("Est") business and the Group has a 40% share of the enlargedLiving Ventures group. In the Group consolidated financial statements this 40%interest is accounted for using the equity accounting method. The Living Ventures management team have now largely completed the process ofintegrating Est and have embarked on implementing their business plan for theenlarged LV Group. Initial results are encouraging: there are clear improvementsin the underlying sales trends in the Est business; the first Est refurbishmentand relaunch has been very successful with sales more than doubling in the firstfew weeks; the Living Room opening programme is continuing with a new site inOxford recently opening, and further openings planned over the next six months.The result for Living Ventures is in line with expectations and reflects thenormal seasonal nature of the business. Properties The Group regularly reviews its property portfolio to ensure that it ismaximising opportunities in its estate. During the period 3 units were sold withnet cash proceeds of £0.6m raised. IFRS This is the first set of Group accounts to be prepared on an IFRS basis. Forcomparison purposes we are showing the consolidated income statement on bothIFRS and proforma UK GAAP bases. The notes include a reconciliation between theIFRS and proforma UK GAAP figures. Board At the end of this year, I will have served as the Company's executive Chairmanfor almost five years. During that time, the Company has been transformed froman unfocused and poorly performing business with fragile finances, into asuccessful and highly profitable operator of popular dining restaurants. Todaywe have a company occupying leading market positions, producing prodigiousgrowth in earnings and cash flows, with strong finances and a robust strategygeared to achieving our core objective of continuing to grow shareholder value. We also have in place a very able executive management team committed toachieving our core objective. Therefore, I believe that it is now appropriatefor me to assume the role of non-executive Chairman, which I will be doingeffective from the start of 2006, reducing my time commitment to about two daysper week. At the same time Andrew Page, who for the past two years has been theCompany's Group Managing Director, will be appointed as Chief Executive. Andrewjoined the Company in 2001 and has played a major role in restoring the businessto a sound financial position, devising and implementing a strategy forprofitable growth and building a strong team. As non-executive Chairman I will continue to be responsible for the leadershipof the board of directors and I confidently look forward to a continuation ofthe success enjoyed over the past four years. Outlook We have made an excellent start to the year with a 20% increase in profits inthe first half and are well placed to build further on this performance. We havestarted the second half well with like for like sales growth for the 37 weeks to18 September 2005 of 3%. We have a very strong business, the majority of whichnow operates in areas where we occupy market leading positions. We have, and will, continue to stick to the strategy that has served us wellover recent years, building on our strong market positions, investing in newunit developments in the Leisure and Concessions divisions, and drivingincreased levels of profit and cash flow. Our core objective remains the same -to grow shareholder value - and the whole of our team is committed to achievingthis. I am confident that we will continue to produce good returns and I lookforward to reporting continued progress for the full year. Alan M Jackson Executive Chairman 21 September 2005 Consolidated income statement for the six months ended 30 June 2005 (unaudited)International Financial Reporting Standards Six months to 30 June 2005 Six months to 30 June 2004 Year to 31 December 2004 Trading Non Deep Total Trading Non Deep Total Trading Non Deep Total business trading Pan business trading Pan business trading Pan Pizza Pizza Pizza £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Revenue 130,838 - 8,176 139,014 118,036 - - 118,036 255,446 - - 255,446 Cost of salesExcluding (109,292) - (8,578) (117,870) (99,279) - - (99,279) (212,001) - - (212,001)pre-openingcostsPre-opening (642) - - (642) (320) - - (320) (948) - - (948)costs (109,934) - (8,578) (118,512) (99,599) - - (99,599) (212,949) - - (212,949) Gross profit 20,904 - (402) 20,502 18,437 - - 18,437 42,497 - - 42,497 AdministrationcostsExcluding (8,463) - (568) (9,031) (7,755) - - (7,755) (16,427) - - (16,427)one-off itemsRecovered - - - - - 357 - 357 - 457 - 457aborted bidcosts (8,463) - (568) (9,031) (7,755) 357 - (7,398) (16,427) 457 - (15,970) Trading profit 12,441 - (970) 11,471 10,682 357 - 11,039 26,070 457 - 26,527Profit on sale - 1,582 - 1,582 - - - - - (500) - (500)of businessImpairment of - - - - - - - - - (793) - (793)goodwillLoss and - (243) 22 (221) - (1,097) - (1,097) - (2,554) - (2,554)provision forloss on disposalof tangiblefixed assets Operating 12,441 1,339 (948) 12,832 10,682 (740) - 9,942 26,070 (3,390) - 22,680profitNet finance (588) (173) (48) (809) (1,042) - - (1,042) (1,667) - - (1,667)chargesShare of post (245) - - (245) - - - - - - - -tax result inassociatedundertaking Profit before 11,608 1,166 (996) 11,778 9,640 (740) - 8,900 24,403 (3,390) - 21,013taxTax on profit (3,843) 102 - (3,741) (3,257) 182 - (3,075) (7,650) 708 - (6,942)on ordinaryactivities - Profit for the 7,765 1,268 (996) 8,037 6,383 (558) - 5,825 16,753 (2,682) - 14,071financialperiodAttributableto:Equity 7,765 1,268 (996) 8,037 6,383 (558) - 5,825 16,753 (2,682) - 14,071shareholdersMinority - - - - - - - - - - - -interests 7,765 1,268 (996) 8,037 6,383 (558) - 5,825 16,753 (2,682) - 14,071 Earnings pershare (pence)Basic 3.59 0.59 (0.46) 3.71 3.01 (0.26) - 2.75 7.84 (1.26) - 6.59Diluted 3.71 2.73 6.58 Dividends per 0.91p 0.825p 4.20pshare (pence) Consolidated balance sheet at 30 June 2005 (unaudited)International Financial Reporting Standards As at As at As at 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000Non-current assetsIntangible assets 11,388 - -Property, plant and equipment 169,455 148,981 154,678Investment in associates 8,926 - -Trade and other receivables 10,375 - - 200,144 148,981 154,678Current assetsStocks 2,301 1,991 2,599Trade and other receivables 1,832 4,084 3,731Prepayments 14,769 14,146 10,612Cash and cash equivalents 1,520 505 482 20,422 20,726 17,424 Total assets 220,566 169,707 172,102 Current liabilitiesShort-term borrowings (1,147) (6,552) (5,134)Income tax liabilities (5,407) (4,547) (5,531)Financial liabilities - derivative financial (46) - -instrumentsTrade and other payables (75,489) (58,589) (57,773)Provisions - - - (82,089) (69,688) (68,438) Net current liabilities (61,667) (48,962) (51,014) Non-current liabilitiesLong-term borrowings (40,500) (12,000) (7,000)Other payables (4,005) (4,398) (4,431)Deferred tax liabilities (16,226) (16,646) (15,725)Provisions (625) (614) (625) (61,356) (33,658) (27,781) Net assets 77,121 66,361 75,883 EquityShare capital 54,120 53,494 54,087Share premium 19,465 18,848 19,422Foreign currency reserve 79 141 245Other reserves 487 133 256Retained earnings 2,970 (6,255) 1,873Total equity shareholders' interests 77,121 66,361 75,883Minority interests - - -Total equity 77,121 66,361 75,883 Consolidated cash flow statement for the six months ended 30 June 2005(unaudited)International Financial Reporting Standards Six months to 30 Six months to Year to 31 June 2005 30 June 2004 December 2004 £000 £000 £000 Cash flow from operating activitiesCash generated from operations (see note 1) 25,363 18,463 49,538Interest received 96 63 98Interest paid (617) (878) (1,476)Tax paid (3,914) (3,042) (6,753)Net cash from operating activities 20,928 14,606 41,407 Cash flows from investing activititesAcquisition of associate (10,027) - -Acquisition of subsidiary; net of cash acquired (26,797) - (358)Disposal of subsidiary, net of cash disposed 5,797 - -Proceeds from sale of property, plant and equipment 598 2,118 4,719Purchase of property, plant and equipment (19,049) (10,182) (26,021)Net cash used in investing activities (49,478) (8,064) (21,660) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 76 13,574 14,741Net proceeds from issue of new bank loan 33,500 - -Repayment of borrowings - (23,000) (28,000)Dividends paid to shareholders - - (7,977)Net cash used in financing activities 33,576 (9,426) (21,236) Net increase / (decrease) in cash and cash 5,026 (2,884) (1,489)equivalents Cash and cash equivalents at 1 January (4,652) (3,163) (3,163) Cash and cash equivalents at period end 374 (6,047) (4,652) Consolidated statement of changes in equity at 30 June 2005 (unaudited)International Financial Reporting Standards As at As at As at 30 June 2005 30 June 2004 31 December 2004 £000 £000 £000 Opening reserves (IAS, excluding IAS 32 and IAS 39) 75,883 54,835 54,835Adjustment to opening reserves for inclusion of Swaps 127 - -under IAS 39 Opening reserves (IAS, including IAS 32 and IAS 39) 76,010 54,835 54,835 Profit for the period 8,037 5,825 14,071Foreign exchange translation differences (166) (140) (36)Pre-acquisition losses of DPP taken directly to reserves - - (197)Deferred tax credit on share based payments taken 239 162 256directly to equityTotal of recognised income and expense for the period 8,110 5,847 14,094Dividends (7,306) (7,963) (7,977)Issue of new shares 76 13,574 14,741Share based payments - credit to equity 231 68 190Total changes in equity in the period 1,111 11,526 21,048 Closing reserves 77,121 66,361 75,883 Segmental analysis for the six months ended 30 June 2005 (unaudited)International Financial Reporting Standards 2005 2004 Revenue EBITDA EBITDA Profit Profit Revenue EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure 70,474 18,503 26.3% 14,732 20.9% 57,469 14,077 24.5% 11,156 19.4% Concessions 26,553 5,449 20.5% 3,859 14.5% 21,128 4,222 20.0% 2,820 13.3% High Street 30,138 5,933 19.7% 3,751 12.4% 30,838 6,770 22.0% 4,617 15.0%Restaurants Principal Trading 127,165 29,885 23.5% 22,342 17.6% 109,435 25,069 22.9% 18,593 17.0%Brands Non core Brands 3,673 (262) (7.1%) (796) (21.7%) 8,601 1,095 12.7% 164 1.9% Total all Brands 130,838 29,623 22.6% 21,546 16.5% 118,036 26,164 22.2% 18,757 15.9% Pre opening Costs (642) (0.5%) (642) (0.5%) (320) (0.3%) (320) (0.3%)Administration (7,396) (5.7%) (8,232) (6.3%) (7,302) (6.2%) (7,688) (6.5%)Share based payments (231) (0.2%) (231) (0.2%) (67) (0.1%) (67) (0.1%) EBITDA / Operating 21,354 16.3% 12,441 9.5% 18,475 15.7% 10,682 9.0%Profit Interest Charges (593) (798)Interest receivable 230 -from Living VenturesLimitedFinance lease interest (225) (244) TOTAL interest (588) (1,042) Profit before Taxation 11,853 9,640and Exceptional Itemsof wholly ownedoperations Share of profits of (245) -Associated companies Profit before Taxation 11,608 9,640and Exceptional Items Tax (3,843) (3,257) Profit after taxation 7,765 6,383 Earnings per share 3.59 3.01(pence) Notes to the interim financial statements (unaudited)International Financial Reporting Standards 1) Reconciliation of profit before tax to net cash inflow from operating activities Six months to 30 Six months to 30 Year to 31 June 2005 June 2004 December 2004 (unaudited) (unaudited) (unaudited) £000 £000 £000 Profit before tax 11,778 8,900 21,013Net finance charges 809 1,042 1,667Exceptional item ((profit) / loss on sale of (1,582) - 500business)Exceptional item (impairment of goodwill on - - 793acquisition of DPP)Exceptional item (loss on sale of tangible fixed 243 1,097 2,554assets)Depreciation 9,204 7,793 17,304Decrease in stocks 313 517 70Decrease/ (increase) in debtors (3,165) (2,231) 975Increase in creditors 7,763 1,345 4,662 Cash generated from operations 25,363 18,463 49,538 2) Non-trading items The Group has recognised a profit of £1.6 million following the disposal of EstEst Est Restaurants Limited to Living Ventures Limited on 31 March 2005. As theGroup has taken a 40% stake in Living Ventures Limited, the profit recognised onthe disposal of Est Est Est Restaurants Limited has been reduced by 40% toreflect the unrealised element of the profit. A loss on disposal of fixed assets of £0.2 million (2004: £1.1 million) has beencharged in the six months to 30 June 2005 in respect of property disposals. In addition, the Group has incurred a charge of £0.2 million in respect of thefair value of swap instruments, following the adoption of IAS 39. 3) Taxation The taxation charge has been calculated by reference to the expected effectivecorporation tax and deferred tax rates for the full financial year to end on 31December 2005 applied against the profit before tax for the period ended 30 June2005. The underlying effective full year tax charge including deferred tax isestimated to be 34% for the year. 4) Dividends Following approval at the Annual General Meeting on 25 May 2005, the proposeddividend in respect of 2004 of 3.375p per share has been recognised throughreserves in the interim statements of 2005. This is in accordance with IAS 10.Under UK GAAP this proposed dividend had been recognised in reserves in 2004.This dividend was paid to shareholders on 6 July 2005. The Directors have declared an interim dividend in respect of 0.91p per sharewhich will be paid on 27 October 2005 to ordinary shareholders on the registerat the close of business on 30 September 2005. This will be recognised in thereserves of the Group in the second half of the year. 5) Acquisition of Blubeckers Limited On 21 June 2005 The Restaurant Group plc completed the acquisition of 100% ofthe ordinary share capital of Blubeckers Limited for £22.75m, and a furtherpayment of £4.3 million for the repayment of intercompany debt. BlubeckersLimited operates two restaurant brands, "Blubeckers" and "Edwinns", and at thedate of acquisition had 17 restaurants in the south of England. In the ninedays that Blubeckers was a subsidiary of the Group it contributed £0.0m to netprofit. If the acquisition had occurred on 1 January 2005, Group revenue wouldhave been £147.5m and profit before tax would have been £12.2m. The acquisition had the following effect on the Group's assets and liabilities: Preliminary Recognised fair value Carrying values adjustments amounts (unaudited) (unaudited) (unaudited) £000 £000 £000 Property, plant and equipment 19,884 (36) 19,848Inventories 287 (115) 172Trade and other receivables 200 (45) 155Cash and cash equivalents 938 - 938Trade and other payables (2,138) (52) (2,190)Deferred tax (226) (2,350) (2,576)Net identifiable assets and liabilities 18,945 (2,598) 16,347Goodwill on acquisition 11,388Consideration paid, satisfied in cash * 27,735 Cash (acquired) (938)Net cash outflow 26,797 * Includes stamp duty and professional fees amounting to £689,000. 6) Earnings per share International Financial Reporting Standards 6 months to 30 June 2005 6 months to 30 June 2004 Year to 31 December 2004 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 EPSEarnings attributable 8,037 216.4 3.71 5,825 212.2 2.75 14,071 213.6 6.59to shareholders Effect of dilutivesecuritiesOptions - 0.2 0.8 0.4 Diluted earnings per 8,037 216.6 3.71 5,825 213.0 2.73 14,071 214.0 6.58share Supplementaryearnings per shareTrading business 7,765 216.4 3.59 6,383 212.2 3.01 16,753 213.6 7.84 Deep Pan Pizza (996) 216.4 (0.46) - 212.2 - - 213.6 - Trading business and 6,769 216.4 3.13 6,383 212.2 3.01 16,753 213.6 7.84DPP Non-trading items 1,268 216.4 0.59 (558) 212.2 (0.26) (2,682) 213.6 (1.26) Basic earnings 8,037 216.4 3.71 5,825 212.2 2.75 14,071 213.6 6.59 7) Basis of preparation The interim financial statements have been prepared in accordance with theaccounting policies and presentation required by those International FinancialReporting Standards, incorporating International Accounting Standards ("IASs")and Interpretations (collectively "IFRS"), which are expected to be endorsed bythe EC and applicable for use in the company's annual financial statements forthe year ended 31 December 2005. Comparative information for the six months ended 30 June 2004 and for the yearended 31 December 2004 has been restated on an IFRS basis. The endorsed IFRSthat will be effective (or available for early adoption) in the annual financialstatements for the year ended 31 December 2005 are still subject to change andto additional interpretations and therefore cannot be determined with certainty.Accordingly, the accounting policies for the period will only be determinedfinally when the annual consolidated financial statements are prepared for theyear ended 31 December 2005. The comparatives for the full year ended 31 December 2004 are not the Company'sfull statutory accounts for that year. These have been restated following theimplementation of IFRS. A copy of the statutory accounts for that year,prepared on a UK GAAP basis, has been delivered to the Registrar of Companies.The auditors' report on those accounts was unqualified and did not contain astatement under section 237(2)-(3) of the Companies Act 1985. The comparative numbers are in accordance with those announced to the LondonStock Exchange on 27 June 2005 save for certain consolidated entries in respectof DPP Restaurants Limited (the company which is required to be consolidatedunder IAS 27) following the finalisation of that company's financial statementsfor the period to 31 December 2004. These entries are, in effect, adjustmentson acquisition and the associated goodwill has been written off to reserves inDecember 2004. The net reduction in consolidated reserves of the Group at 31December 2004 as a result of these entries was £256,000. The treatment isconsistent with that adopted for the acquisition of DPP Restaurants Limited asdisclosed in the announcement of 27 June 2005 made by The Restaurant Group plc. The proforma UK GAAP information contained in the appendices reflects applicableaccounting standards as at 31 December 2004, as disclosed in the Group'sstatutory accounts at that date. Appendix 1 Consolidated income statement for the six months ended 30 June 2005 underproforma UK GAAP (unaudited) Six months to 30 June 2005 Six months to 30 June 2004 Year to 31 December 2004 Trading Non Total Trading Non Total Trading Non Total business trading business trading business trading £000 £000 £000 £000 £000 £000 £000 £000 £000 Revenue 130,838 - 130,838 118,036 - 118,036 255,446 255,446 Cost of salesExcluding pre-opening (109,453) - (109,453) (99,457) - (99,457) (212,357) (212,357)costsPre-opening costs (642) - (642) (320) - (320) (948) (948) (110,095) - (110,095) (99,777) - (99,777) (213,305) - (213,305) Gross profit 20,743 - 20,743 18,259 - 18,259 42,141 - 42,141 Administration costsExcluding one-off (8,232) - (8,232) (7,688) - (7,688) (16,237) (16,237)itemsRecovered aborted bid - 357 357 - 457 457costs (8,232) - (8,232) (7,688) 357 (7,331) (16,237) 457 (15,780) Trading profit 12,511 - 12,511 10,571 357 10,928 25,904 457 26,361 Profit on sale of - 1,582 1,582 - - - - (500) (500)businessImpairment of goodwill - - - - - - - - -Loss and provision for - (388) (388) - (1,097) (1,097) - (2,554) (2,554)loss on disposal oftangible fixed assets Operating profit 12,511 1,194 13,705 10,571 (740) 9,831 25,904 (2,597) 23,307 Net finance charges (363) - (363) (798) - (798) (1,179) - (1,179)Share of post tax (245) - (245) - - - - - -result in associatedundertaking Profit before tax 11,903 1,194 13,097 9,773 (740) 9,033 24,725 (2,597) 22,128 Tax on profit on (3,931) 50 (3,881) (3,302) 182 (3,120) (7,747) 708 (7,039)ordinary activities -Profit for the 7,972 1,244 9,216 6,471 (558) 5,913 16,978 (1,889) 15,089financial period Attributable to:Equity shareholders 7,972 1,244 9,216 6,471 (558) 5,913 16,978 (1,889) 15,089Minority interests - - 7,972 1,244 9,216 6,471 (558) 5,913 16,978 (1,889) 15,089 Earnings per share(pence)Basic 3.68 0.57 4.26 3.05 (0.26) 2.79 7.95 (0.88) 7.06 Appendix 2 Segmental analysis for the six months ended 30 June 2005 - under proforma UKGAAP (unaudited) 2005 2004 Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure Parks 70,474 18,444 26.2% 14,683 20.8% 57,469 14,017 24.4% 11,107 19.3% Concessions 26,553 5,449 20.5% 3,859 14.5% 21,128 4,223 20.0% 2,820 13.3% High Street 30,138 5,841 19.4% 3,671 12.2% 30,838 6,656 21.6% 4,519 14.7%Restaurants Principal Trading 127,165 29,734 23.4% 22,213 17.5% 109,435 24,896 22.7% 18,446 16.9%Brands Non core Brands 3,673 (302) (8.2%) (828) (22.5%) 8,601 1,056 12.3% 133 1.5% Total all Brands 130,838 29,432 22.5% 21,385 16.3% 118,036 25,952 22.0% 18,579 15.7% Pre opening Costs (642) (0.5%) (642) (0.5%) (320) (0.3%) (320) (0.3%)Administration (7,396) (5.7%) (8,232) (6.3%) (7,302) (6.2%) (7,688) (6.5%)Share based payments - - - - - - - - EBITDA / Operating 21,394 16.4% 12,511 9.6% 18,330 15.5% 10,571 9.0%Profit Interest Charges (593) (798)Interest receivable 230 -from Living VenturesSWAP Interest - -Lease interest - - TOTAL interest (363) (798) Profit before Taxation 12,148 9,773and Exceptional Itemsof wholly ownedoperations Share of profits of (245) -Associated companies Profit before Taxation 11,903 9,773and Exceptional Items Tax (3,931) (3,302) Profit after taxation 7,972 6,471 Earnings per share 3.68 3.05(pence) Appendix 3Reconciliation of proforma UK GAAP to IFRS Profit Before Tax Tax Profit After TaxSix months ended 30 June 2005Proforma UK GAAP 13,097 (3,881) 9,216 Share based payments (231) 69 (162)Finance leases 81 19 100Consolidation of Deep Pan Pizza (996) - (996)Fair value of interest rate swaps (173) 52 (121) 11,778 (3,741) 8,037 Six months ended 30 June 2004Proforma UK GAAP 9,033 (3,120) 5,913 Share based payments (67) 22 (45)Finance leases (66) 22 (44)Consolidation of Deep Pan Pizza - - -Fair value of interest rate swaps - - - 8,900 (3,076) 5,824 Year ended 31 December 2004Proforma UK GAAP 22,128 (7,039) 15,089 Share based payments (190) 57 (133)Finance leases (132) 40 (92)Impairment of goodwill arising on DPP (793) - (793)Fair value of interest rate swaps - - - 21,013 (6,942) 14,071 Independent Review Report to The Restaurant Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 on pages 10 to 21. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Our report has been prepared in accordance with the terms of our engagement toassist the company in meeting the requirements of the Listing Rules of theFinancial Services Authority and for no other purpose. No person is entitled torely on this report unless such a person is a person entitled to rely upon thisreport by virtue of and for the purpose of our terms of engagement or has beenexpressly authorised to do so by our prior written consent. Save as above, wedo not accept responsibility for this report to any other person or for anyother purpose and we hereby expressly disclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 7, the next annual financial statements of the group willbe prepared in accordance with Accounting Standards adopted for use in theEuropean Union. This interim report has been prepared in accordance with thebasis set out in note 7. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. As explained in note 7, there is,however, a possibility that the directors may determine that some changes arenecessary when preparing the full annual financial statements for the first timein accordance with accounting standards adopted for use in the European Union.The IFRS standards and IFRIC interpretations that will be applicable and adoptedfor use in the European Union at 31 December 2005 are not known with certaintyat the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. BDO Stoy Hayward LLPLondon21 September 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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