13th Sep 2006 07:01
Restaurant Group PLC13 September 2006 The Restaurant Group plc Interim results for the 26 weeks ending 2 July 2006 Continued strong underlying growth The Restaurant Group plc ("the Group" or "TRG") operates over 260 brandedrestaurants across the UK, predominantly in leisure and airport locations. Itsprimary brands are Frankie & Benny's, Chiquito, Garfunkel's and Blubeckers. All figures are stated on an adjusted basis (excludes non-trading 2006 2005 % changeitems and the 2005 result of DPP, as detailed in note 2)Revenue (£m) 147.4 130.8 +12.7EBITDA (£m) 24.1 21.4 +12.9Operating profit (£m) 15.4 12.4 +23.5Profit before tax (£m) 13.5 11.6 +16.5Earnings per share (p) 4.29 3.59 +19.5Interim dividend (p) 1.05 0.91 +15.4 Highlights Key financial • Significant increases in both profits and earnings per share• Like-for-like sales growth of +3% for the first half, currently +4% year-to-date• Operating cashflow remains strong with £26.1m generated during the period and sustains £17.9m in capital expenditure• Net debt £45.1m Key operational features • Very buoyant trade during the first half demonstrating the strength of our business and its ability to generate sustainable increases in revenue and profit. Leisure • Frankie & Benny's enjoyed another superb half with strong like-for-likes, excellent returns and increased margins - Opening programme continues with 4 new restaurants in first half year - Introduction of smaller format, Little Frankie's; 7 opened in first half year • Chiquito returned the strongest like-for-like sales growth in the Group. All financial metrics increased significantly - 60% increase in profits - 4 new units opened in first half year • Blubeckers had a strong first half - Business fully integrated with strong like-for-like sales - 2 new sites opened in first half year • Garfunkel's had a solid first half - Steady performance in the first half year with uplifts seen since half year Concessions • Excellent first half - Revenue, EBITDA and profits all increased by 25% despite cost pressures - 4 new units opened in first half year Current Trading and Outlook • Strong start to second half year with like-for-like sales returning to 4% year to date • Opening programme - on track to open between 40 and 45 new restaurants in 2006 (including DPP conversions) Commenting on these results, Andrew Page, Chief Executive, said: "TRG has made an excellent start to 2006 and has begun the second half strongly.Year to date, our like-for-like sales are +4% ahead of 2005. Both the existing estate and our new developments continue to deliver highreturns and we are on track to deliver our opening programme across bothdivisions. The Group is in excellent shape and we look forward to reportingfurther good progress for the full year." 13 September 2006 Enquiries:The Restaurant Group plc Alan Jackson, Chairman 020 7457 2020 (today) Andrew Page, Chief Executive Officer 020 7747 7750 (thereafter) Stephen Critoph, Group Finance Director College Hill Matthew Smallwood 020 7457 2020 Chairman's Statement The Group has made a good start to 2006 with significant increases in revenue,profits and earnings per share and, since the half year, we have continued tomake strong progress. We enjoyed very buoyant trade during the first half year. From January until theend of May our like-for-like sales were 4% ahead of 2005. As anticipated,June's trade was impacted by the World Cup and this resulted in the Group'slike-for-like sales being 3% ahead of the comparable period for the 26 weeks to2 July. However, for the 36 weeks to 10 September our like-for-like sales havereturned to a level of 4% ahead of the comparable period for last year. Overall this is a very satisfactory result and demonstrates the strength of ourbusiness and its capacity to generate sustainable increases in revenue andprofits. This is our fifth successive year of posting increased profits and it isparticularly pleasing to see, yet again, the very healthy rate of conversion ofthose profits into cash. Cashflow was strong during the first six months and,notwithstanding the payment of a special dividend of £34.8 million and £17.9million in capital expenditure, we finished the first half with net debt of£45.1 million. As reported in my previous Chairman's Statement, since the end of 2005 our Grouphas been focused on two core divisions - Leisure and Concessions. Both of thesedivisions are, we believe, capable of generating sustainable and growing profitand cashflows. 2005 was a year of considerable change for the Group with the sale of the highstreet businesses Est Est Est and Caffe Uno. During 2006 we have been - andwill be - concentrating on growing the Group organically by increasing profitsfrom the existing estate and rolling out new restaurants. During the first six months of 2006 both of our divisions enjoyed good trade.Our Leisure division produced an increase of 33% in profits and also saw animprovement in margins. Our Concessions division also enjoyed a good first halfwith profits up 25% and margins maintained. Against a background of costpressures (particularly in our airports business), this is a very creditableperformance. During the first half we have opened a total of 21 new units and this includes atotal of nine conversions of former Deep Pan Pizza ("DPP") sites. I am delightedto report that the initial performance of all of our first half openings hasbeen good. In the full year we expect to open between 40 and 45 new unitsincluding DPP conversions. These results represent an excellent first half performance and reflect theefforts and hard work of our management team and staff. Results * * The adjusted results set out below exclude non-trading items. The 2005comparative figures also exclude the results of the DPP business which was notdirectly managed by the Group in that year. These adjusted results are set outin detail in note 2 ("Additional Information"). The Group has made further good progress during the first six months. Revenuegrew by 12.7% to £147.4m (2005: £130.8m), EBITDA increased by 12.9% to £24.1m(2005: £21.4m), operating profit excluding exceptional items increased by 23.5%to £15.4m (2005: £12.4m), profit before tax and exceptional items (and beforethe negative contribution from Living Ventures) increased by 20.7% to £14.3m(2005: £11.9m) and earnings per share were 19.5% higher at 4.29p (2005: 3.59p). In the light of this strong performance the Board is declaring an interimdividend of 1.05p per share (2005: 0.91p) representing an increase of 15.4%. Thedividend will be paid on 19 October 2006 to shareholders on the register on 22September 2006 and the shares will be marked ex-dividend on 20 September 2006. During the first half we paid a special dividend of £34.8m and our balance sheetcontinues to be strong. At the end of June our net debt stood at £45.1m (2005:£40.1m) and net gearing was 77% (2005: 52%). The increase in profit was the product of three principal components: - like-for-like profit increases from the existing estate;- profitable contribution from new units; and- further cost savings from purchasing initiatives and operational efficiencies. This combination provides a very healthy basis from which the Group can continueits profitable development. Non-trading Items The first half year results include a net non-trading charge (before tax) of£1.5m. This consists of the following items: • As indicated at the time of the Group's preliminary results announcement earlier this year, a loss of £3.8m related to the integration and rationalisation of the DPP business. • A further £1.9m profit related to the disposal of Caffe Uno. This relates to cost and potential warranty accruals no longer required, and the completion of better than anticipated deals on disposal of some of the residual Caffe Uno sites not sold to Paramount. • A £0.4m credit on revaluations of the Group's interest rate swaps. Cash Flow and Balance Sheet The Group continues to be strongly cash generative and during the first halfoperating cash flow increased to £26.1m (2005: £25.4m). This is a particularlyimpressive performance in the light of the sale of the Est Est Est and Caffe Unobusinesses which, in the first six months of 2005 contributed approximately£3.5m towards the total operating cashflow of £25.4m for the comparable period. We continue to see a very healthy rate of conversion of our profits intocashflow and this reflects the disciplined manner in which we run the business.Capital expenditure for the first six months amounted to £17.9m of which £5.2mrepresented maintenance capital expenditure, £10.7m represented the cost ofopening new units and of conversions of former DPP units and £2.0m representedspend on new offices. The Group's new offices are nearly complete and theconsolidation into one office is underway. We expect that this exercise willhave concluded by mid-October when all of our operations and support serviceswill function out of a single location. This will yield considerable benefitsin terms of efficiency and improved communication. We anticipate rolling out between 40 and 45 new restaurants during 2006(including the conversion of former Deep Pan Pizza sites). Our strong balancesheet and cashflows mean that we are able to fund this level of rollout frominternally generated funds. Leisure Total revenue: £109.5m Profit: £22.1m Operating margin: 20.2% Frankie & Benny's (125 units) Frankie & Benny's had an excellent first half with strong like-for-like growth.During the first six months revenue, EBITDA, profit and margins all increased.We opened four new restaurants during the first six months and this included theconversion of two former DPP sites. We are delighted with the performance of thenew openings. Since June we have opened two new restaurants and anticipateopening between 15 and 20 new Frankie & Benny's in total during 2006. Duringthe first half year the Group converted seven former DPP sites to LittleFrankie's, a derivative concept of Frankie & Benny's. This concept comprises asmaller footprint and its menu caters for the smaller unit space whilstretaining the traditional Frankie & Benny's favourites. The average cost ofconversion is approximately one third of an average Frankie & Benny's capitalspend. A further two units have been converted since the half year and it isanticipated that the conversion of the former DPP estate will be completed byyear end. Frankie & Benny's has, we believe, the potential to grow into an estatenumbering in excess of 200 units. The concept performs strongly in bothmultiplex cinema Leisure sites as well as non-cinema retail sites. Ourdevelopments are usually located in edge and out of town locations and we haveidentified a significant number of future opportunities for this brand in thesetypes of locations. Chiquito (38 units) Chiquito performed superbly, with a 60% increase in profit and the strongestlike-for-like sales growth in the Group. Revenue, EBITDA, profit and margins allincreased significantly. Chiquito's profits and margins continue to improve andwe believe that there is scope to develop this business further. During thefirst half we opened four new units and we expect to open a total of six to tenin the full year. Returns from our new Chiquito units are good. Blubeckers (19 units) Blubeckers performed strongly with good like-for-like growth in sales. Thebusiness is now fully integrated into TRG and we opened our first two new sitesduring June. Since June we have opened another new site and we anticipateopening four to six in total in 2006. The trading at our new Blubeckers units is ahead of expectations and we areexpecting these sites to generate good levels of return on investment. The performance of the original Blubeckers business continues to be strong.This, combined with our plans to accelerate the roll out of new units as we moveinto 2007 and beyond, indicates the potential of this business. Garfunkel's (29 units) Garfunkel's enjoyed a solid first half benefiting from a recovery in centralLondon trade following the tragedy of last July's bombings. Revenue, EBITDA andprofits were at similar levels to 2005 although prior to June these were aheadof the previous year. Since the end of June we have seen a strong performancefrom Garfunkel's (both against 2005 and 2004). Recently, we have trialled arefreshed version of this popular brand at our Northumberland Avenue site andthe initial results are very encouraging. We plan to carry out a refurbishmentof several of the other Garfunkel's sites over the next 18 months. Concessions (49 units) Total revenue: £33.4m Profit: £4.8m Operating margin: 14.5% Our Concessions business had an excellent first half, with revenue, EBITDA andprofits all increasing by over 25%. Like-for-like sales increased and marginswere held at last year's level. Against a background of cost pressure in ourairport business we are very pleased with this performance. We opened four new units in the first half of which three were in airports (atBirmingham International Airport) and one shopping centre site. Non-core and Discontinued The Group's results include a loss of £1.2m from non-core brands and a loss of£0.2m from discontinued operations. The discontinued business consists ofresidual Caffe Uno sites which were not sold to Paramount at the end of 2005.The disposal of these residual sites is very well advanced and we expect thatany outstanding transactions will have been completed within the currentfinancial year. The non-core result includes the losses of a number of the DPP sites for theperiod up until either disposal or conversion to The Restaurant Group brands.This process is now largely completed and in 2007 we anticipate that thenon-core result will be broadly in line with the figures reported in 2005. Living Ventures The Group has a 40% shareholding in Living Ventures ("LV") which was acquired atthe time of the sale of Est Est Est to LV. During the first six months, our 40% share of Living Ventures' losses amountedto £0.8m, although Living Ventures' trade tends to be more skewed towards thesecond half of the year. The Living Ventures' management team are taking stepsto improve conversion from top to bottom line by overhead cost control andfurther margin improvement and as a result we anticipate that they will makebetter progress during the next 12 months. Board changes On 8 September 2006 the Company announced the resignation of Robert Ivell fromthe Board and I would like to thank him for his contribution to the Group overthe past two and a half years. Outlook We have had a good first half of the year and the second half has started well.Since the end of June our trade has been buoyant with our like-for-like salesfor the 36 weeks to 10 September running 4% ahead of last year. Both of ourdivisions continue to perform strongly, our new openings are trading well and wehave a strong site pipeline for the remainder of 2006 and well into futureyears. As always, our management team is focused on driving returns oninvestment and on growing profits and cashflow. I look forward to reportingfurther good progress for the full year. Alan M JacksonNon-executive Chairman13 September 2006 Consolidated income statement Six months to 2 July 2006 Six months to 30 June 2005 Continuing Discontinued Total Continuing Discontinued Total (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Notes £000 £000 £000 £000 £000 £000 Revenue 146,900 538 147,438 117,839 21,175 139,014 Cost of sales (121,807) (724) (122,531) (98,988) (19,524) (118,512) Gross profit 25,093 (186) 24,907 18,851 1,651 20,502 Administration costs (9,536) (10) (9,546) (8,415) (616) (9,031)Release of accrual for - - - - - -property exit costsProfit on sale of business 4 - 1,927 1,927 - 1,582 1,582DPP integration costs 4 (3,818) - (3,818) - - -Loss and provision for loss - - - (221) - (221)on disposal of fixed assets Operating profit 11,739 1,731 13,470 10,215 2,617 12,832 Interest payable (1,373) - (1,373) (1,140) - (1,140)Interest receivable 674 - 674 331 - 331 Profit before share of 11,040 1,731 12,771 9,406 2,617 12,023associate and tax Share of post tax result in (790) - (790) (245) - (245)associated undertaking Profit before tax 10,250 1,731 11,981 9,161 2,617 11,778 Profit before tax, analysedas:Trading business - managed 13,714 (196) 13,518 10,573 1,035 11,608DPP Restaurants Limited - - - (996) - (996)trading result - not managedNon-trading items 4 (3,464) 1,927 (1,537) (416) 1,582 1,166Profit made on disposal of - - - - - -business by Living Ventures 10,250 1,731 11,981 9,161 2,617 11,778 Tax on profit from ordinary 5 (4,700) 920 (3,780) (3,392) (349) (3,741)activities Profit for the financial period/ 5,550 2,651 8,201 5,769 2,268 8,037year attributable to equity holders Earnings per share (pence)Basic 6 2.76 1.32 4.08 2.66 1.05 3.71Diluted 6 2.75 1.32 4.07 2.66 1.05 3.71 Dividend per share (pence) 7 1.05 0.91 The Restaurant Group plcConsolidated income statement Year ended 1 January 2006 Continuing Discontinued Total (audited) (audited) (audited) Notes £000 £000 £000 Revenue 263,878 38,450 302,328 Cost of sales (218,049) (34,528) (252,577) Gross profit 45,829 3,922 49,751 Administration costs (19,019) (777) (19,796)Release of accrual for property exit costs 1,700 - 1,700Profit on sale of business 4 - 5,274 5,274DPP integration costs 4 - - -Loss and provision for loss on disposal of (2,594) - (2,594)fixed assets Operating profit 25,916 8,419 34,335 Interest payable (2,692) - (2,692)Interest receivable 689 - 689 Profit before share of associate and tax 23,913 8,419 32,332 Share of post tax result in associated (600) 400 (200)undertaking Profit before tax 23,313 8,819 32,132 Profit before tax, analysed as:Trading business - managed 26,394 3,145 29,539DPP Restaurants Limited trading result - (1,733) - (1,733)not managedNon-trading items 4 (1,348) 5,274 3,926Profit made on disposal of business by - 400 400Living Ventures 23,313 8,819 32,132 Tax on profit from ordinary activities 5 (7,567) (1,220) (8,787) Profit for the financial period/ year attributable to 15,746 7,599 23,345equity holders Earnings per share (pence)Basic 6 7.27 3.51 10.78Diluted 6 7.22 3.48 10.70 Dividend per share (pence) 7 4.75 Consolidated statement of changes in equity Six months to 2 Six months to 30 Year to 1 July 2006 June 2005 January 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Opening reserves (IFRS, excluding IAS 32 91,436 75,883 75,883and IAS 39) Adjustment to opening reserves for inclusion ofswapsunder IAS 32 and IAS 39 - 127 127 Opening reserves (IFRS, including IAS 32 91,436 76,010 76,010and IAS 39) Profit for the period 8,201 8,037 23,345Foreign exchange translation differences 48 (166) (165)Deferred tax credit on share based paymentstakendirectly to reserves 519 239 411 Total recognised income and expense for the 8,768 8,110 23,591year Dividends - ordinary (7,442) (7,306) (9,277)Dividends - special (34,794) - -Issue of new shares 250 76 604Share based payments - credit to equity 563 231 508 Total changes in equity in the year (32,655) 1,111 15,426 Closing reserves 58,781 77,121 91,436 Consolidated balance sheet At 2 July At 30 June 2005 At 1 January 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Non-current assetsIntangible assets 11,275 11,388 11,275Property, plant and equipment 158,907 169,455 151,337Investment in associate 7,936 8,926 8,727Trade and other receivables 10,375 10,375 10,375 188,493 200,144 181,714 Current assetsStock 2,345 2,301 2,763Financial assets - derivative financial 361 - 7instrumentsTrade and other receivables 3,620 1,832 5,498Prepayments 16,529 14,769 11,094Cash and cash equivalents 3,942 1,520 426 26,797 20,422 19,788 Total assets 215,290 220,566 201,502 Current liabilitiesShort-term borrowings - (1,147) (1,845)Income tax liabilities (6,527) (5,407) (8,315)Financial liabilities - derivative financial - (46) -instrumentsTrade and other payables (81,258) (75,489) (71,476) (87,785) (82,089) (81,636) Net current liabilities (60,988) (61,667) (61,848) Non-current liabilitiesLong-term borrowings (49,000) (40,500) (11,000)Other payables (2,717) (4,005) (2,696)Deferred tax liabilities (14,274) (16,226) (13,971)Provisions (2,733) (625) (763) (68,724) (61,356) (28,430) Net assets 58,781 77,121 91,436 EquityShare capital 54,510 54,120 54,366Share premium 19,853 19,465 19,747Foreign currency reserve 128 79 80Other reserves 1,846 487 764Retained earnings (17,556) 2,970 16,479Total equity shareholders' interests 58,781 77,121 91,436 Consolidated cash flow statement Six months to 2 Six months to Year to 1 July 2006 30 June 2005 January 2006 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 Cash flow from operating activitiesCash generated from operations 3 26,081 25,363 55,484Interest received 19 96 219Interest paid (1,163) (617) (2,076)Tax paid (4,746) (3,914) (8,199)Net cash flow from operating activities 20,191 20,928 45,428 Cash flows from investing activitiesAcquisition of associate - (10,027) (10,186)Acquisition of subsidiary, net of cash - (26,797) (26,889)acquiredDisposal of business, net of cash disposed (478) 5,797 32,982Disposal of subsidiary, net of cash disposed - - 5,630Purchase of property, plant and equipment (17,884) (19,049) (39,767)Proceeds from sale of property, plant and 76 598 708equipmentNet cash used in investing activities (18,286) (49,478) (37,522) Cash flows from financing activitiesNet proceeds from issue of ordinary share 250 76 604capitalNet proceeds from issue of bank loan 38,000 33,500 4,000Dividends paid to shareholders 7 (34,794) - (9,277)Net cash from/ (used in) financing 3,456 33,576 (4,673)activities Net increase in cash and cash equivalents 5,361 5,026 3,233 Cash and cash equivalents at start of period (1,419) (4,652) (4,652)/ year Cash and cash equivalents at end of period/ 3,942 374 (1,419)year Notes to theinterim accounts1) Segmental Six months to 2 July 2006 Six months to 30 June 2005analysis Revenue EBITDA EBITDA Profit Profit Revenue EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure 109,498 28,341 25.9% 22,133 20.2% 83,078 21,226 25.5% 16,652 20.0% Concessions 33,387 6,931 20.8% 4,830 14.5% 26,553 5,449 20.5% 3,859 14.5% Principal trading 142,885 35,272 24.7% 26,963 18.9% 109,631 26,675 24.3% 20,511 18.7%brands Non-core brands 4,015 (1,079) (26.9%) (1,178) (29.3%) 8,208 (620) (7.6%) (1,018) (12.4%) Continuing 146,900 34,193 23.3% 25,785 17.6% 117,839 26,055 22.1% 19,493 16.5%operations Discontinued 538 (186) (34.6%) (186) (34.6%) 21,175 3,457 16.3% 1,651 7.8%operations Total all brands 147,438 34,007 23.1% 25,599 17.4% 139,014 29,512 21.2% 21,144 15.2% Pre-opening costs (692) (0.5%) (692) (0.5%) (642) (0.5%) (642) (0.5%)(included in costof sales)Administration (8,635) (5.9%) (8,983) (6.1%) (7,964) (5.7%) (8,800) (6.3%)Share based (563) (0.4%) (563) (0.4%) (231) (0.2%) (231) (0.2%)payments EBITDA / 147,438 24,117 16.4% 15,361 10.4% 139,014 20,675 14.9% 11,471 8.3%operating profit Release of - -accrual forproperty exitcosts Profit on sale of 1,927 1,582business Termination costs (3,818) - Loss and provision for loss - (221)on disposal of fixed assets Operating 13,470 12,832profit 1) Segmental analysis Year ended 1 January 2006 Revenue EBITDA EBITDA Profit Profit Margin Margin £'000 £'000 % £'000 % Leisure 189,009 49,541 26.2% 39,974 21.1% Concessions 59,771 12,360 20.7% 8,919 14.9% Principal trading 248,780 61,901 24.9% 48,893 19.7%brands Non-core brands 15,098 (785) (5.2%) (1,553) (10.3%) Continuing operations 263,878 61,116 23.2% 47,340 17.9% Discontinued 38,450 6,977 18.1% 3,922 10.2%operations Total all brands 302,328 68,093 22.5% 51,262 17.0% Pre-opening costs (1,511) (0.5%) (1,511) (0.5%)(included in cost ofsales)Administration (17,179) (5.7%) (18,954) (6.3%)Share based payments (508) (0.2%) (508) (0.2%) EBITDA / operating 302,328 48,895 16.2% 30,289 10.0%profit Release of accrual for 1,700property exit costs Profit on sale of 5,274business Termination costs (334) Loss and provision for (2,594)loss on disposal offixed assets Operating profit 34,335 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. Information disclosed as "discontinued" relates to the Caffe Uno and Est Est Estbrands, which were disposed in 2005. 2) Additional Six months to 2 July 2006 Six months to 30 June 2005information Revenue EBITDA EBITDA Profit Profit Revenue EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure 109,498 28,341 25.9% 22,133 20.2% 83,078 21,226 25.5% 16,652 20.0% Concessions 33,387 6,931 20.8% 4,830 14.5% 26,553 5,449 20.5% 3,859 14.5% Principal trading 142,885 35,272 24.7% 26,963 18.9% 109,631 26,675 24.3% 20,511 18.7%brands Non-core brands 4,015 (1,079) (26.9%) (1,178) (29.3%) 32 (509) (1,590.6%) (616) (1,925.0%) Continuing 146,900 34,193 23.3% 25,785 17.6% 109,663 26,166 23.9% 19,895 18.1%operations Discontinued 538 (186) (34.6%) (186) (34.6%) 21,175 3,457 16.3% 1,651 7.8%operations Total all brands 147,438 34,007 23.1% 25,599 17.4% 130,838 29,623 22.6% 21,546 16.5% Pre-opening costs (692) (0.5%) (692) (0.5%) (642) (0.5%) (642) (0.5%)(included in costof sales)Administration (8,635) (5.9%) (8,983) (6.1%) (7,396) (5.7%) (8,232) (6.3%)Share based (563) (0.4%) (563) (0.4%) (231) (0.2%) (231) (0.2%)payments EBITDA / 147,438 24,117 16.4% 15,361 10.4% 130,838 21,354 16.3% 12,441 9.5%operating profit Net interest (1,205) (593)chargesInterest receivable from 301 230Living Ventures LimitedFinance lease (149) (225)interestTotal net (1,053) (588)interest charges Profit before taxation and 14,308 11,853share of associate's result Share of losses (790) (245)of associatedcompany Profit before 13,518 11,608taxation Taxation (4,889) (3,843) Profit after 8,629 7,765taxationEarnings per share (pence)- Trading businessBasic 4.29 3.59Diluted 4.28 3.58 Year ended 1 January 2006 Revenue EBITDA EBITDA Profit Profit2) Additional information Margin Margin £'000 £'000 % £'000 % Leisure 189,009 49,541 26.2% 39,974 21.1% Concessions 59,771 12,360 20.7% 8,919 14.9% Principal trading brands 248,780 61,901 24.9% 48,893 19.7% Non-core brands 63 (691) (2,159.4%) (901) (1,430.6%) Continuing operations 248,843 61,210 24.6% 47,992 19.3% Discontinued operations 38,450 6,977 18.1% 3,922 10.2% Total all brands 287,293 68,187 23.7% 51,914 18.1% Pre-opening costs (included in cost (1,511) (0.5%) (1,511) (0.5%)of sales)Administration (16,158) (5.6%) (17,933) (6.2%)Share based payments (508) (0.2%) (508) (0.2%) EBITDA / operating profit 287,293 50,010 17.4% 31,962 11.1% Net interest charges (1,896)Interest receivable from Living 522Ventures LimitedFinance lease interest (449)Total net interest charges (1,823) Profit before taxation and share of 30,139associate's result Share of losses of associated (600)company Profit before taxation 29,539Taxation (9,867) Profit after taxation 19,672Earnings per share (pence) - TradingbusinessBasic 9.08Diluted 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 additional information is provided as comparative information and excludesthe results of DPP Restaurants Limited for 2005. This is provided as a usefulguide to the underlying trading performance of the Group, and this informationis on the same basis as that information provided in the 2005 interim statementand 2005 Annual Report and Accounts. This additional information should be readin conjunction with, rather than as a substitute for, the reported information. 3) Reconciliation of operating profit to net cash inflow fromoperating activities Six months to 2 Six months to Year to 1 July 2006 30 June 2005 January 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Profit before tax 11,981 11,778 32,132Net finance charges 699 809 2,003Exceptional item (profit on (1,660) (1,582) (5,274)sale of business)Exceptional item ((profit)/ loss (176) 243 2,594on sale of tangible fixed assets)Release of accrual for - - (1,700)property exit costsExceptional item (termination 3,727 - -costs)Loss made by associate 790 245 200Non cash charge reversed in 563 231 508reservesDepreciation 8,756 9,204 18,606Decrease/ (increase) in stocks 418 313 (439)Increase in debtors (3,836) (3,165) (2,451)Increase in creditors 4,819 7,287 9,305 Cash generated from operations 26,081 25,363 55,484 4) Non-trading items The Group has recorded a loss of £3.8m (2005: nil) following the acquisition ofDPP Restaurants Ltd, on 11 January 2006 when the warrant, issued in November2004, to acquire the business was exercised. The loss is in relation to costsincurred on integration and rationalisation of the Deep Pan Pizza business. The Group has released accruals of £1.9m created on the disposal of the CaffeUno business in December 2005 as they are no longer required, and following thecompletion of better than anticipated deals on disposal of some of the residualCaffe Uno sites not sold to Paramount. In addition the Group has taken a creditof £0.4m (2005: £0.2m charge) to finance charges arising from the remeasurementof its interest rate swap. In the six months to 30 June 2005, the Group disposed of Est Est Est for aprofit of £1.6 million, incurred a charge of £0.2 million in respect of loss andprovision for loss on disposal of assets and had a charge of £0.2 million inrespect of the remeasurement of the interest rate swap (as noted above). References to "exceptional items" include the integration and rationalisationcosts in respect of Deep Pan Pizza, and other restructuring costs, the profit ondisposal of Caffe Uno, and profits or losses incurred on disposal of assets andproperty exit costs. "Non-trading items" includes exceptional items and thecharge or credit in respect of the remeasurement of the interest rate swap. 5) 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 2006 applied against the profit before tax for the period ended 2 July2006. The underlying effective full year tax charge including deferred tax isestimated to be 34% (2005: 34%) for the year. 6) Earnings per share 6 months to 2 July 2006 6 months to 30 June 2005 Year to 1 January 2006 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 8,201 201.0 4.08 8,037 216.4 3.71 23,345 216.6 10.78to shareholders Effect of dilutivesecuritiesOptions 0.5 0.2 1.6 Diluted earnings 8,201 201.5 4.07 8,037 216.6 3.71 23,345 218.2 10.70per share Supplementaryearnings per shareTrading business 8,629 201.0 4.29 7,765 216.4 3.59 19,672 216.6 9.08 Deep Pan Pizza (996) 216.4 (0.46) (953) 216.6 (0.44) Trading business 8,629 201.0 4.29 6,769 216.4 3.13 18,719 216.6 8.64and DPP Non-trading items (428) 201.0 (0.21) 1,268 216.4 0.59 4,626 216.6 2.14 Basic earnings 8,201 201.0 4.08 8,037 216.4 3.71 23,345 216.6 10.78 7) Dividends Following approval at the Annual General Meeting on 24 May 2006, the proposeddividend in respect of 2005 of 3.84p per share, totalling £7.4 million, is to berecognised through reserves in the interim and final statements of 2006. Thisis in accordance with IAS 10. This dividend was paid to shareholders on 5 July2006. The Directors have declared an interim dividend of 1.05p per share, amounting to£2.0 million, which will be paid on 19 October 2006 to ordinary shareholders onthe register at the close of business on 22 September 2006. In accordance withIAS 10, this will be recognised in the reserves of the Group in the second halfof the year. On 9 March 2006 the Company paid a special dividend of 16p per share, or £34.8million, following the disposal of Caffe Uno and the share consolidation,detailed in note 8. 8) Share consolidation Following approval by shareholders at an Extraordinary General Meeting held on23 February 2006, The Restaurant Group plc undertook a share consolidationwhereby each nine existing shares were exchanged for eight new shares. Theshare consolidation was accompanied by a special dividend of 16p per share paidto shareholders on 9 March 2006. The share consolidation took effect on 27February 2006. The nominal value of an ordinary share in The Restaurant Groupplc is now 28 1/8p. The authorised share capital is 284,444,444 shares and theallotted, called up and fully paid number of shares was 193,300,064 immediatelyafter the share consolidation. In addition 513,165 shares were allotted, calledup and fully paid following the exercise of share options in the period to 2July 2006. 9) 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 are to be used in the company's annual financial statements for theyear ended 31 December 2006. The comparatives for the full year ended 1 January2006 are from the Company's full consolidated statutory accounts for that year.A copy of the statutory accounts for that year has been delivered to theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain a statement under section 237(2)-(3) of the Companies Act1985. 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 2 July 2006 on pages 7 to 19. 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 which require that the accountingpolicies and presentation applied to the interim financial information should beconsistent with those applied in preparing the preceding annual financialstatements, except where any changes and the reasons for them are disclosed. 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 International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion 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 2 July 2006. BDO Stoy Hayward LLP London 13 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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