12th Sep 2007 07:01
Restaurant Group PLC12 September 2007 The Restaurant Group plcInterim results for the 26 weeks ending 1 July 200712 September 2007 The Restaurant Group plc operates 294 branded restaurants predominantly inleisure locations and airports. Its primary brands are Frankie and Benny's,Chiquito, Garfunkel's and Blubeckers. • The Company has continued to trade very strongly during the first six months of the year: - 6.5% growth in like for like sales - EBITDA up 26% to £30.3m - Adjusted profit before tax increased by 30% to £17.6m - Adjusted EPS rose 37% to 5.87p - Statutory profit before tax increased by 71% to £17.2m - Statutory EPS rose 50% to 6.10p - Interim dividend of 1.26p, up 20% • Both divisions continued to grow revenue and operating margins: Frankie and Benny's - Trading strongly, eight new sites opened in the period and a further 8-12 to open in HY2. - Potential for over 250 sites (currently 147 units) Chiquito - Excellent performance driven by expansion and tight operational control - One new restaurant during HY1, three new restaurants since June and expect to open 6-8 units in the full year Blubeckers - Good results and management team strengthened - Three opened during the first half year and a further two opened since Garfunkel's - Nine units were closed for refurbishment during the period, strong growth in like-for-like sales post refurbishment Concessions - Traded well in a demanding environment. Exciting opportunity in Heathrow T5, opening four new units in 2008 - One new unit during the period and between one and three to open in HY2 • Strongly cash generative and self-funded rollout: - £28.1m of cash generated during the period - £19.1m of capital expenditure • Current trading is strong: - like for like sales for the 36 weeks to 9 September 2007 are 7% ahead of last year Andrew Page, Chief Executive, said: "Our focus on the Leisure and Concessions markets continues to deliver greatresults for The Restaurant Group. Our business performed superbly during thefirst half with both divisions delivering significant increases in turnover andprofits. Against a more demanding background for consumer-facing businesses,this is a credit to our team. with a strong start to the second half and animpressive pipeline of new sites, we are looking forward to another year of goodprogress." 12 September 2007 Enquiries: The Restaurant Group Andrew Page, Chief Executive 020 7457 2020 (today)Stephen Critoph, Group Finance Director 0845 612 5001 (thereafter) College HillMatthew Smallwood 020 7457 2020 Chairman's Statement I am pleased to report that the Group traded well for the first six months ofthe year, delivering 6.5% growth in like-for-like sales and increasing revenue,earnings and margins. Against a background of rising interest rates and moredemanding conditions for customer-facing businesses this represents a superbperformance, reflecting the robust and resilient positioning of The RestaurantGroup's businesses. Since the end of the first half this positive tradingpattern has continued with like-for-like sales currently 7% ahead of the prioryear for the 36 weeks up until 9 September 2007. This is the sixth successive set of interim accounts showing increased profitsand, notwithstanding the ever more demanding comparatives - 2006 saw adjustedearnings per share increase by 27% - we have again significantly outperformedboth our sector and market in terms of earnings growth. Additionally, there hasbeen a very healthy conversion of those increased earnings into cash. Strongcashflows during the first six months resulted in net debt falling to £35.6m at1 July 2007 (£47.5m at 31 December 2006). These strong cashflows enable us toinvest in our business, both in terms of maintaining the existing estate to ahigh standard and also adding new restaurants to our portfolio. We have alsoreturned significant amounts of cash to shareholders through increasing ourpayments of ordinary dividends. During the first six months of 2007 both of our divisions performed wellincreasing revenue, profits and profit margins. Our Leisure division produced a24% increase in operating profits and a 30 basis point increase in operatingprofit margin. Our Concessions division also performed well delivering a 15%increase in operating profits and a 20 basis point increase in operating profitmargin. During the first half we opened a total of 13 new restaurants and I am delightedto report that they are all trading well. Since the end of the first half wehave opened a further seven new units and we expect to open a total of 30 to 35new restaurants for 2007 as a whole. We are also pleased to report that ourpipeline of new sites has been further strengthened since our last statementwith good visibility for 2008, 2009 and beyond. Results* *Results marked as adjusted are stated excluding non-trading items (refer tonote 2) The Group has made further good progress during the first half. Revenue grew by17% to £171.9m (2006: £147.4m), EBITDA increased by 26% to £30.3m (2006:£24.1m), adjusted operating profit grew by 31% to £20.1m (2006: £15.4m),adjusted profit before tax increased by 30% to £17.6m (2006: £13.5m) andadjusted earnings per share increased by 37% to 5.87p (2006: 4.29p). Statutoryprofit before tax increased by 71% to £17.2m (2006: £10.1m) and statutoryearnings per share increased by 50% to 6.10p (2006: 4.08p). In the light of this excellent performance the Board is declaring an interimdividend of 1.26p per share (2006: 1.05p) representing an increase of 20%. Thedividend will be paid on 18 October 2007 to shareholders on the register on 21September 2007 and the shares will be marked ex-dividend on 19 September 2007. Again, the increase in profit was the product of three principal components: - Like-for-like profit increases from the existing estate; - Profitable contributions from new openings; and - Cost savings from purchasing initiatives and operational efficiencies. This represents a very healthy basis from which the Group can continue itsfurther profitable growth. Leisure Total revenue: £134m Operating profit: £27.5m Operating margin: 20.5% Frankie & Benny's (147 units) Frankie & Benny's has traded superbly during the first half of 2007 withrevenues and operating profits increasing. We opened eight new restaurantsduring the first half, all of which are trading strongly and are set to deliverreturns at least consistent with those of the portfolio as a whole. Since Junewe have opened a further two new units and we anticipate opening between 16 and20 Frankie & Benny's restaurants in total this year. Of these 16-20 new units, approximately half will be located on sites withoutcinemas. Over the last few years we have opened an increasing number ofrestaurants at non-cinema sites, and we have been very encouraged by theopportunity to trade these restaurants during a greater range of day partscombined with the increasing propensity for these restaurants to becomedestinations in their own right (due, inter alia, to the widespread appeal ofFrankie & Benny's offering, ease of access, safe environment and good carparking facilities). This has meant that these types of sites have consistentlydelivered very high levels of return on investment. Consequently, we have beenable to further refine our site selection criteria and are confident thatFrankie & Benny's has the potential to grow to at least 250 sites in the UK overthe next 5-8 years. Chiquito (46 units) Chiquito also performed admirably with a 54% increase in operating profit. Thisexcellent performance is a result of strong operational controls combined withthe incremental benefits arising from the expansion of the business. One new restaurant was opened during the first half and we are pleased with itsperformance. Since the half year we have opened three new restaurants and, forthe year as a whole, we expect to open a total of six to eight new units. We areconfident that we can maintain this rate of openings for the foreseeable future. Blubeckers (25 units) We are pleased with the performance of Blubeckers and regard it as a businesswith significant growth potential. During the first six months revenue andoperating profits both showed good growth and we have opened three newrestaurants. Since June we have opened a further two new restaurants and weexpect to open between five and seven new units in total during 2007. In anticipation of accelerating the rate of rollout of Blubeckers in 2008 andbeyond we have, during the first half of 2007, taken steps to strengthen themanagement team at Blubeckers. We now have in place a senior management teamthat has a proven track record within The Restaurant Group of successfullyexecuting rollouts and developing scaleable businesses. This augurs well for thefuture growth of Blubeckers. Garfunkel's (27 units) During the first half we completed our refurbishment programme for Garfunkel's.This involved the temporary closure of nine restaurants, representing a loss ofapproximately 19 weeks trade. Post refurbishment, the Garfunkel's estate hasperformed very strongly with significant growth in like-for-like sales leadingto increased profits at these units. Concessions (49 units) Total revenue: £38m Operating profit: £5.6m Operating margin: 14.7% Our Concessions business has had an excellent first half with revenue, operatingprofit and operating profit margins all improving. Against a very demandingoperating background these are outstanding results. During the first half weopened one new unit and this is trading well. For the year as a whole, we expectto open between two and four new sites. Work is underway at Heathrow Terminal 5 where we have secured four new sites.These are scheduled to open at the end of the first quarter in 2008. This is oneof the most exciting airport developments with which we have been involved andit leaves us very well positioned for the future. Following the opening ofTerminal 5 we anticipate that there will be some changes to the pattern of tradeat the other terminals in Heathrow with Terminal 2, where we have just one unit,slated for closure in 2008. Elsewhere within our Concessions business we expect to continue to benefit fromthe on-going growth in air travel (in particular low cost flying) and the morerigorous security environment at UK airports which is tending to result in anincrease in dwell times. These positive macro trends and structuralcharacteristics, combined with low supply-side risk and our high levels ofexpertise, intellectual capital and significant UK scale, augur well for thecontinuing profitable development of this division. Cash flow and balance sheet The Group continues to be strongly cash generative and during the first halfcash flows from operations increased to £28.1m (2006: £26.1m). The Groupcontinues to convert its increasing profits into cash at a very healthy rate andthis reflects the disciplined manner in which we run the business. Ourtouchstones, and the core bases behind our decision-making, continue to be cashflow and returns on investment. This approach has served the Group well over thepast six years and I am confident that this will continue. During the first half of 2007 £19.1m of our cash was applied to capitalexpenditure of which £5.9m represented maintenance capital expenditure and£13.2m represented investment in opening new restaurants. For the full year weanticipate spending between £33m and £37m on opening new restaurants. Theefficacy of our business model enables us to fund all of this capitalexpenditure from internally generated funds. Non-trading items The first half results include a net non-trading charge (before taxation) of£0.4m. This consists of the following items: - A provision of £1.7m against the carrying value of the Group'sinvestment in Living Ventures; we have now provided in full against the carryingvalue of this investment; - A credit of £1.0m recognised in respect of outstanding loan noteinterest received from Living Ventures at the time of the sale of the LivingRoom business in June 2007; and - A positive revaluation of £0.3m in respect of our interest rate swap. On 29 June 2007 The Restaurant Group plc Employee Benefit Trust acquired 1.5mCompany shares at a price of 327.05p per share for satisfaction of futurevesting of share awards under the Long Term Incentive Plan. The cash settlementof this took place on 3 July 2007 for a total consideration of £5.0m. Living Ventures The Group continues to hold a minority shareholding in Living Ventures andduring the first six months this resulted in a trading loss to the Group of£0.75m. In June we announced that Living Ventures had disposed of the whole ofits Living Room business for £28m. As a result of the sale the Group receivedcash proceeds, including accrued loan note interest, to the amount of £7.8m.Following the disposal of the Living Room, the Group's ongoing interest in theresidual business comprises a 38% shareholding in Blackhouse Grill Ltd, whichowns and operates restaurants trading under the brands Est Est Est, BlackhouseGrill, and Bar and Grill. As part of this transaction we have made fullprovision against the residual carrying value of this investment. Board changes As announced earlier in the year, David Richardson joined the Board as anon-Executive Director in February 2007. Outlook The Group has performed well during the first half and this pattern of trade hascontinued to date. Our like-for-like sales for the 36 weeks to 9 September 2007are running 7% ahead of last year. Whilst recognising that we have somedemanding comparatives for the second half of 2007, the robustness of ourbusiness model and the commitment and enthusiasm of our management team shouldensure that we enjoy another successful year. I am confident of reportingfurther good progress for the full year. Alan M. JacksonNon-executive Chairman12 September 2007 The Restaurant Group plcConsolidated income statement Six months to 1 July 2007 Six months to 2 July 2006 Continuing Discontinued Total Continuing Discontinued Total (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Note £'000 £'000 £'000 £'000 £'000 £'000 Revenue 171,935 - 171,935 146,900 538 147,438Cost of sales (140,695) - (140,695) (121,807) (724) (122,531) _________________________________________________________________________________Gross profit/ (loss) 31,240 - 31,240 25,093 (186) 24,907Administration costs (11,118) - (11,118) (9,536) (10) (9,546)Provision against 5 (1,656) - (1,656) - - -carrying value ofassociateLoss on integration of 4 - - - (3,818) - (3,818)DPP _________________________________________________________________________________Operating profit/ (loss) 18,466 - 18,466 11,739 (196) 11,543Interest payable (1,800) - (1,800) (1,373) - (1,373)Interest receivable 1,261 - 1,261 674 - 674 _________________________________________________________________________________Profit/ (loss) before 17,927 - 17,927 11,040 (196) 10,844share of associate andtaxShare of post tax result (749) - (749) (790) - (790)in associatedundertaking Profit/ (loss) before 17,178 - 17,178 10,250 (196) 10,054tax Profit/ (loss) beforetax, analysed as:Trading business 17,589 - 17,589 13,714 (196) 13,518Non-trading items 4,5 (411) - (411) (3,464) - (3,464) 17,178 - 17,178 10,250 (196) 10,054 _________________________________________________________________________________Tax on profit/ (loss) on 6 (5,237) - (5,237) (4,700) 66 (4,634)ordinary activities _________________________________________________________________________________Profit/ (loss) on 11,941 - 11,941 5,550 (130) 5,420ordinary activitiesafter taxProfit on sale of - - - - 2,781 2,781businesses net of tax _________________________________________________________________________________Profit/ (loss) for the 11,941 - 11,941 5,550 2,651 8,201financial period / yearattributable to equityshareholders _________________________________________________________________________________Earnings per share (pence)Basic 7 6.10 - 6.10 2.76 1.32 4.08Diluted 7 6.09 - 6.09 2.75 1.32 4.07 _________________________________________________________________________________ Dividend per share (pence)- ordinary 8 1.26 1.05- special 8 - - _________________________________________________________________________________ The Restaurant Group plcConsolidated income statement Year ended 31 December 2006 Continuing Discontinued Total Note (audited) (audited) (audited) £'000 £'000 £'000 Revenue 314,018 730 314,748Cost of sales (256,060) (1,026) (257,086) _____________________________________Gross profit/ (loss) 57,958 (296) 57,662Administration costs (18,475) - (18,475)Provision against 5 (9,500) - (9,500)carrying value ofassociateLoss on integration of 4 (4,582) - (4,582)DPP _____________________________________Operating profit/ (loss) 25,401 (296) 25,105Interest payable (3,308) - (3,308)Interest receivable 699 - 699 _____________________________________Profit/ (loss) before 22,792 (296) 22,496share of associate andtaxShare of post tax result (917) - (917)in associated undertaking _____________________________________Profit/ (loss) before tax 21,875 (296) 21,579 Profit/ (loss) beforetax, analysed as:Trading business 35,312 (296) 35,016Non-trading items 4,5 (13,437) - (13,437) _____________________________________ 21,875 (296) 21,579 _____________________________________Tax on profit/ (loss) on 6 (11,264) 101 (11,163)ordinary activities _____________________________________Profit/ (loss) on 10,611 (195) 10,416ordinary activities aftertaxProfit/ (loss) on sale of - 3,950 3,950businesses net of tax _____________________________________Profit/ (loss) for the 10,611 3,755 14,366financial period / yearattributable to equityshareholders Earnings per share (pence)Basic 7 5.36 1.90 7.26Diluted 7 5.34 1.89 7.23 _____________________________________ Dividend per share (pence)- ordinary 8 6.00- special 8 16.00 _____________________________________ The Restaurant Group plcConsolidated statement of changes in equity Six months to 1 Six months to Year ended 31 July 2007 2 July 2006 December 2006 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000Opening equity 65,204 91,436 91,436 Profit for the period / year 11,941 8,201 14,366Foreign exchange translation differences (51) 48 1Deferred tax (charge) / credit on share (103) 519 1,529based payments taken directly to equity _____________________________________Total recognised income and expense for the 11,787 8,768 15,896period / year Dividends - ordinary 8 (9,702) (7,443) (9,490)Dividends - special 8 - (34,793) (34,793)Issue of new shares 593 250 1,096Share based payments - credit to equity 950 563 1,059Employee benefit trust - purchase of shares (4,955) - - _____________________________________Total changes in equity in the period / year (1,327) (32,655) (26,232) _____________________________________Closing equity 63,877 58,781 65,204 _____________________________________ The Restaurant Group plcConsolidated balance sheet At 1 July At 2 July At 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000Non-current assetsIntangible assets 11,275 11,275 11,275Property, plant and equipment 182,537 158,907 174,035Investment in associate - 7,936 7,810Trade and other receivables - 10,375 875 ____________________________________________ 193,812 188,493 193,995 ____________________________________________Current assetsStock 2,349 2,345 2,992Financial assets - derivative financial instruments 911 361 652Trade and other receivables 1,876 3,620 5,170Prepayments 17,477 16,529 12,138Cash and cash equivalents 6,387 3,942 683 ____________________________________________ 29,000 26,797 21,635 ____________________________________________Total assets 222,812 215,290 215,630 ____________________________________________Current liabilitiesShort-term borrowings 9 (42,000) - (1,165)Income tax liabilities (6,021) (6,527) (4,947)Trade and other payables (88,552) (81,258) (74,864) ____________________________________________ (136,573) (87,785) (80,976) ____________________________________________Net current liabilities (107,573) (60,988) (59,341) ____________________________________________Non-current liabilitiesLong-term borrowings - (49,000) (47,000)Other payables - finance lease debt (2,783) (2,717) (2,737)Deferred tax liabilities (16,185) (14,274) (16,247)Provisions (3,394) (2,733) (3,466) ____________________________________________ (22,362) (68,724) (69,450) ____________________________________________Net assets 63,877 58,781 65,204 ____________________________________________EquityShare capital 55,129 54,510 54,863Share premium 20,673 19,853 20,346Foreign currency reserve 30 128 81Other reserves (2,182) 1,846 1,823Retained earnings (9,773) (17,556) (11,909) ____________________________________________Total equity shareholders' interests 63,877 58,781 65,204 ____________________________________________ The Restaurant Group plcConsolidated cash flow statement Six months to 1 Six months to 2 Year ended 31 July 2007 July 2006 December 2006 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000Cash flows from operating activitiesCash generated from operations 3 28,092 26,081 63,374Interest received 1,524 19 68Interest paid (1,559) (1,163) (2,906)Tax paid (4,328) (4,746) (9,656) ____________________________________________Net cash flows from operating 23,729 20,191 50,880activities ____________________________________________Cash flows from investing activitiesDisposal of business, net of cash - (478) (1,455)disposedNet proceeds from disposal by 5 6,449 - -associateIntegration of business - - (584)Purchase of property, plant and (19,051) (17,884) (40,775)equipmentProceeds from sale of property, plant 149 75 58and equipment ____________________________________________Net cash used in investing activities (12,453) (18,287) (42,756) ____________________________________________Cash flows from financing activitiesNet proceeds from issue of ordinary 593 250 1,096share capital(Repayment of borrowings)/ net proceeds from (5,000) 38,000 36,000issue of bank loanDividends paid to shareholders - (34,793) (44,283) ____________________________________________Net cash used in financing activities (4,407) 3,457 (7,187) ____________________________________________Net increase in cash and cash 6,869 5,361 937equivalents Cash and cash equivalents at start of (482) (1,419) (1,419)period / year ____________________________________________Cash and cash equivalents at end of 6,387 3,942 (482)period / year ____________________________________________ The Restaurant Group plc Notes to the interim accounts 1 Segmental analysis Six months to 1 July 2007 Six months to 2 July 2006 Revenue EBITDA EBITDA Operating Operating Revenue EBITDA EBITDA Operating Operating Profit Profit Margin Profit Margin Margin Profit Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % ______________________________________________________________________________________________________ Leisure 133,928 34,779 26.0% 27,465 20.5% 109,498 28,341 25.9% 22,133 20.2% Concessions 37,722 7,831 20.8% 5,552 14.7% 33,387 6,931 20.8% 4,830 14.5% ______________________________________________________________________________________________________Principal 171,650 42,610 24.8% 33,017 19.2% 142,885 35,272 24.7% 26,963 18.9%trading brands ______________________________________________________________________________________________________Non-core 285 (681) (239.2%) (832) (292.3%) 4,015 (1,079) (26.9%) (1,178) (29.3%)brands ______________________________________________________________________________________________________Continuing 171,935 41,929 24.4% 32,185 18.7% 146,900 34,193 23.3% 25,785 17.6%operations ______________________________________________________________________________________________________Discontinued - - - - - 538 (186) (34.6%) (186) (34.6%)operations ______________________________________________________________________________________________________Total all 171,935 41,929 24.4% 32,185 18.7% 147,438 34,007 23.1% 25,599 17.4%brands ______________________________________________________________________________________________________Pre-opening (945) (0.5%) (945) (0.5%) (692) (0.5%) (692) (0.5%)costs(included incost of sales)Administration (9,720) (5.7%) (10,168) (5.9%) (8,635) (5.9%) (8,983) (6.1%)Share based (950) (0.6%) (950) (0.6%) (563) (0.4%) (563) (0.4%)payments ___________________________________________________________________________________________Total before 30,314 17.6% 20,122 11.7% 24,117 16.4% 15,361 10.4%non-tradingitems ___________________________________________________________________________________________Provision against (1,656) -carrying value ofinvestment in associate Loss on integration of - (3,818)DPP ______ _______ Operating profit 18,466 11,543 ______ _______ No geographical segment analysis has been provided as the Directors do notconsider there to be materially significant geographical segments. The Groupcurrently operates three restaurants outside of the United Kingdom. EBITDA is operating profit before depreciation and non-trading items The Restaurant Group plc Notes to the interim accounts (continued) 1 Segmental analysis (continued) Year ended 31 December 2006 Revenue EBITDA EBITDA Operating Operating Profit Margin Profit Margin £'000 £'000 % £'000 % _______________________________________________________Leisure 236,258 62,703 26.5% 50,745 21.5% Concessions 72,479 15,154 20.9% 11,088 15.3% _______________________________________________________Principal 308,737 77,857 25.2% 61,833 20.0%trading brands _______________________________________________________Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%) _______________________________________________________Continuing 314,018 76,068 24.2% 59,834 19.1%operations _______________________________________________________Discontinued 730 (296) (40.6%) (296) (40.6%)operations _______________________________________________________Total all brands 314,748 75,772 24.1% 59,538 18.9% _______________________________________________________Pre-opening (1,876) (0.6%) (1,876) (0.6%)costs (includedin cost of sales)Administration (17,192) (5.5%) (17,416) (5.5%) ___________________________________________Share based (1,059) (0.3%) (1,059) (0.3%)payments ___________________________________________Total before 55,645 17.7% 39,187 12.5%non-tradingitems Provision against carrying (9,500)value of investment inassociate Loss on (4,582)integration ofDPP _______Operating profit 25,105 _______ The Restaurant Group plcNotes to the interim accounts (continued)2a Additional income statement Six months to 1 July 2007 Six months to 2 July 2006 Continuing Dis-continued Trading Non- Continuing Dis-continued Trading Non- business operations business trading Total business operations business trading Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue 171,935 - 171,935 - 171,935 146,900 538 147,438 - 147,438Cost of sales:Excluding (139,750) - (139,750) - (139,750) (121,115) (724) (121,839) - (121,839)pre-openingcostsPre-opening (945) - (945) - (945) (692) - (692) - (692)costs (140,695) - (140,695) - (140,695) (121,807) (724) (122,531) - (122,531)Gross profit / 31,240 - 31,240 - 31,240 25,093 (186) 24,907 - 24,907(loss)Administration (11,118) - (11,118) - (11,118) (9,536) (10) (9,546) - (9,546)costsTrading profit 20,122 - 20,122 - 20,122 15,557 (196) 15,361 - 15,361/ (loss)Provision - - - (1,656) (1,656) - - - - -againstcarrying valueof associateLoss on - - - - - - - - (3,818) (3,818)integration ofDPPOperating 20,122 - 20,122 (1,656) 18,466 15,557 (196) 15,361 (3,818) 11,543profit /(loss)Interest (1,800) - (1,800) - (1,800) (1,373) - (1,373) (1,373)payableInterest 16 - 16 1,245 1,261 320 - 320 354 674receivableProfit / 18,338 - 18,338 (411) 17,927 14,504 (196) 14,308 (3,464) 10,844(loss) beforeshare ofassociate andtaxShare of post (749) - (749) - (749) (790) - (790) - (790)tax result inassociatedundertakingProfit / 17,589 - 17,589 (411) 17,178 13,714 (196) 13,518 (3,464) 10,054(loss) onordinaryactivitiesbefore taxTax on profit (6,102) - (6,102) 865 (5,237) (4,955) 66 (4,889) 255 (4,634)/ (loss) fromordinaryactivitiesProfit / 11,487 - 11,487 454 11,941 8,759 (130) 8,629 (3,209) 5,420(loss) onordinaryactivitiesafter taxProfit on sale - - - - - - - - 2,781 2,781of businessnet of taxProfit / 11,487 - 11,487 454 11,941 8,759 (130) 8,629 (428) 8,201(loss) for theperiod / year Earnings per share (pence)Basic 5.87 6.10 4.29 4.08Diluted 5.86 6.09 4.28 4.07 Dividend per share (pence)- ordinary 1.26 1.05- special - - The Restaurant Group plcNotes to the interim accounts (continued) 2a Additional income statement (continued) Year ended 31 December 2006 Continuing Discontinued Trading Non- business operations business trading Total £'000 £'000 £'000 £'000 £'000Revenue 314,018 730 314,748 - 314,748Cost of sales: _____________________________________________________________Excluding (254,184) (1,026) (255,210) - (255,210)pre-opening costsPre-opening costs (1,876) - (1,876) - (1,876) _____________________________________________________________ (256,060) (1,026) (257,086) - (257,086) _____________________________________________________________Gross profit / 57,958 (296) 57,662 - 57,662(loss)Administration (18,475) - (18,475) - (18,475)costs _____________________________________________________________Trading profit / 39,483 (296) 39,187 - 39,187(loss)Provision against - - - (9,500) (9,500)carrying value ofassociateLoss on - - - (4,582) (4,582)integration of DPP _____________________________________________________________Operating profit / 39,483 (296) 39,187 (14,082) 25,105(loss)Interest payable (3,308) - (3,308) - (3,308)Interest 54 - 54 645 699receivable _____________________________________________________________Profit / (loss) 36,229 (296) 35,933 (13,437) 22,496before share ofassociate and taxShare of post tax (917) - (917) - (917)result inassociatedundertaking _____________________________________________________________Profit / (loss) on 35,312 (296) 35,016 (13,437) 21,579ordinaryactivities beforetax Tax on profit / (12,364) 101 (12,263) 1,100 (11,163)(loss) fromordinaryactivities _____________________________________________________________Profit / (loss) on 22,948 (195) 22,753 (12,337) 10,416ordinaryactivities aftertax Profit on sale of - - - 3,950 3,950business net oftax _____________________________________________________________Profit / (loss) 22,948 (195) 22,753 (8,387) 14,366for the period /year Earnings per share (pence)Basic 11.50 7.26Diluted 11.45 7.23 Dividend per share (pence) - ordinary 6.00 - special 16.00 Additional income statement information is provided as a useful guide tounderlying trading performance. The adjustments from the statutory incomestatement exclude the non-trading items and are to aid understanding of theincome statement and should be read in conjunction with, rather than as asubstitute for, the reported information. The Restaurant Group plcNotes to the interim accounts(continued) 2b Additional information ** Results are stated excluding non-trading items Six months to 1 July 2007 Six months to 2 July 2006 Revenue EBITDA EBITDA Operating Operating Revenue EBITDA EBITDA Operating Operating Profit Profit Margin Profit Margin Margin Profit Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % __________________________________________________________________________________________________Leisure 133,928 34,779 26.0% 27,465 20.5% 109,498 28,341 25.9% 22,133 20.2%Concessions 37,722 7,831 20.8% 5,552 14.7% 33,387 6,931 20.8% 4,830 14.5% Principal 171,650 42,610 24.8% 33,017 19.2% 142,885 35,272 24.7% 26,963 18.9%trading brands Non-core 285 (681) (239.2%) (832) (292.3%) 4,015 (1,079) (26.9%) (1,178) (29.3%)brands Continuing 171,935 41,929 24.4% 32,185 18.7% 146,900 34,193 23.3% 25,785 17.6%operations Discontinued - - - - - 538 (186) (34.6%) (186) (34.6%)operations Total all 171,935 41,929 24.4% 32,185 18.7% 147,438 34,007 23.1% 25,599 17.4%brands Pre-opening (945) (0.5%) (945) (0.5%) (692) (0.5%) (692) (0.5%)costs(included incost of sales)Administration (9,720) (5.7%) (10,168) (5.9%) (8,635) (5.9%) (8,983) (6.1%)Share based (950) (0.6%) (950) (0.6%) (563) (0.4%) (563) (0.4%)payments EBITDA / 30,314 17.6% 20,122 11.7% 24,117 16.4% 15,361 10.4%operatingprofit Total net interest (1,784) (1,053)charges Profit before taxation 18,338 14,308and share of associate'sresultShare of losses of (749) (790)associated company Profit before taxation 17,589 13,518Taxation (6,102) (4,889) Profit after taxation 11,487 8,629 Earnings per share (pence)Trading businessBasic 5.87 4.29Diluted 5.86 4.28 2b Additional information* (continued)* Results are stated excluding non-trading items Year ended 31 December 2006 Revenue EBITDA EBITDA Operating Operating Profit Margin Profit Margin £'000 £'000 % £'000 % Leisure 236,258 62,703 26.5% 50,745 21.5%Concessions 72,479 15,154 20.9% 11,088 15.3% Principal 308,737 77,857 25.2% 61,833 20.0%trading brands Non-core brands 5,281 (1,789) (33.9%) (1,999) (37.8%) Continuing 314,018 76,068 24.2% 59,834 19.1%operations Discontinued 730 (296) (40.6%) (296) (40.6%)operations Total all 314,748 75,772 24.1% 59,538 18.9%brands Pre-opening (1,876) (0.6%) (1,876) (0.6%)costs (includedin cost ofsales)Administration (17,192) (5.5%) (17,416) (5.5%)Share based (1,059) (0.3%) (1,059) (0.3%)payments EBITDA / 55,645 17.7% 39,187 12.5%operatingprofit Total net interest charges (3,254) Profit before taxation and share 35,933of associate's resultShare of losses of associated (917)company Profit before taxation 35,016Taxation (12,263) Profit after taxation 22,753 Earnings per share (pence)Trading businessBasic 11.50Diluted 11.45 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. Additional income statement information is provided as a useful guide tounderlying trading performance. The adjustments from the statutory incomestatement exclude the non-trading items and are to aid understanding of theincome statement and should be read in conjunction with, rather than as asubstitute for, the reported information. EBITDA is operating profit before depreciation and non-trading items 3 Reconciliation of profit before tax to net cash flow from operating activities Six months to 1 Six months to 2 Year ended July 2007 July 2006 31 December 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit before tax 17,178 10,054 21,579Net finance charges 539 699 2,609Loss on integration of DPP (net of - 3,818 4,101operating cash flow)Provision against carrying value of loan 1,656 - 9,500note from associateShare of loss made by associate 749 790 917Share option charge 950 563 1,059Depreciation 10,192 8,756 16,458Decrease / (increase) in stocks 643 418 (229)Increase in debtors (3,201) (3,836) (1,295)(Decrease) / increase in creditors (614) 4,819 8,675 ___________________________________________Cash flows from operating activities 28,092 26,081 63,374 ___________________________________________ 4 Non-trading items The Group has taken a credit of £0.3m (2006: £0.4m) to interest receivable inrespect of the remeasurement of its interest rate swap. In the six months to 2 July 2006, the Group recorded a loss of £3.8m in respectof the integration of the Deep Pan Pizza business. The costs were comprised ofemployee and contract terminations and a number of property costs including thewrite down of the carrying value of the business on integration, provisions foronerous leases and premiums on disposal of some of the properties. As detailed below in note 5, a £1.7m provision has been made against thecarrying value of the Group's associate company, Living Ventures Limited, and acredit of £1.0m has been recorded in respect of accrued loan note interest notpreviously recognised. A non-trading taxation credit of £1.2m has beenrecognised in the income statement due to the impact of the rate change on thedeferred tax liability. 5 Investment in Living Ventures Limited The 38% investment in Living Ventures Limited is accounted for using the equitymethod. On 22 June 2007, Living Ventures disposed of the Living Rooms business. As a result of this transaction, the Group received a consideration of £6.3million in cash, net of costs. In addition, the outstanding interest on theloan note, amounting to £1.5m, was settled in full. The Directors now concludethat it is appropriate to make a further provision of £1.7 million, whichtogether with the £9.5 million provision made in the year ended 31 December2006, leaves a £nil carrying value of both the investment and the loan note. 6 Taxation The taxation charge has been calculated by reference to the expected effectivecorporation and deferred tax rates for the full financial year to end on 30December 2007 applied against profit before tax for the period ended 1 July2007. The full year effective tax charge on the underlying trading profit isestimated to be 33% (2006: 34%). Finance Act 2007 reduced the rate ofcorporation tax from 30% to 28% from 1 April 2008, and this rate is required tobe used in calculating deferred tax provisions. This has resulted in thereduction in the effective rate and also a one-off credit to the incomestatement of £1.2m. 7 Earnings per share 6 months to 1 July 2007 6 months to 2 July 2006 Year ended 31 December 2006 (unaudited) (unaudited) (audited) Earnings Weighted Per-share Earnings Weighted Per-share Earnings Weighted Per-share average amount average amount average amount number of number of number of shares shares shares £'000 millions pence £'000 millions pence £'000 millions pence __________________________________________________________________________________________________Basic EPSEarnings 11,941 195.6 6.10 8,201 201.0 4.08 14,366 197.8 7.26attributableto shareholders Effect ofdilutivesecuritiesOptions 0.4 0.5 0.9 Diluted 11,941 196.0 6.09 8,201 201.5 4.07 14,366 198.7 7.23earnings pershare Supplementary earnings per share Trading 11,487 195.6 5.87 8,629 201.0 4.29 22,753 197.8 11.50business Non-trading 454 195.6 0.23 (428) 201.0 (0.21) (8,387) 197.8 (4.24)items Basic earnings 11,941 195.6 6.10 8,201 201.0 4.08 14,366 197.8 7.26 8 Dividends Following approval at the Annual General Meeting on 16 May 2007, the proposeddividend in respect of 2006 of 4.95p per share, totalling £9.7 million, is to berecognised through reserves in the interim and final financial statements of2007. This is in accordance with IAS 10 'Events after the Balance Sheet Date'.This dividend was paid to shareholders on 4 July 2007. The Directors have declared an interim dividend of 1.26p per share, amounting to£2.5 million, which will be paid on 18 October 2007 to ordinary shareholders onthe register at close of business on 21 September 2007. In accordance with IAS10, this will be recognised in the reserves of the Group in the second half ofthe year. On 9 March 2006 the Company paid a special dividend of 16p per share,or £34.8 million, following the disposal of Caffe Uno and a share consolidationwhereby each nine existing shares were exchanged for eight new shares. 9 Short-term borrowings The Group has a syndicated loan facility of £80m which is due to expire in April2008. Discussions are currently on-going for renewal of the facility. 10 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 30 December 2007. The accounting policies and method of computationused are consistent with those used in the financial statements for the yearended 31 December 2006. The comparatives for the full year ended 31 December2006 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. The interim financial statements were approved by the Board on 12September 2007. Independent Review Report to The Restaurant Group plc Introduction We have been instructed by the company to review the financial information forthe 26 weeks ended 1 July 2007 which comprise the consolidated income statement,the consolidated statement of changes in equity, the consolidated balance sheet,the consolidated cash flow statement and related notes 1 to 10. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. 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 figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the twenty-sixweeks ended 1 July 2007. Deloitte & Touche LLP Chartered Accountants London 12 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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