FUL.L Regulatory News (FUL)

The Fulham Shore plc

("Fulham Shore", the "Company" or "Group")

Final Results

The Directors of Fulham Shore are pleased to announce the Company's audited results for the year ended 26 March 2017.

Highlights

• Revenues for the year ended 26 March 2017 of £41,274,000 (2016: £29,251,000)

• Headline EBITDA for the year ended 26 March 2017 of £7,118,000 (2016: £5,232,000)

• Headline Operating Profit for the year ended 26 March 2017 of £4,670,000 (2016: £3,280,000)

• Operating Profit for the year ended 26 March 2017 of £1,278,000 (2016: £507,000)

• Profit after taxation for the year ended 26 March 2017 of £969,000 (2016: £76,000)

• Net debt as at 26 March 2017 of £5,909,000 (27 March 2016: £3,283,000)

• Opened 13 new Franco Manca pizzeria and 3 new The Real Greek during the year ended 26 March 2017 (2016: 7 Franco Manca pizzeria and 1 The Real Greek)

• Launched click and collect takeaway service in both Franco Manca and The Real Greek

• Since the year end:

o the opening of a further 6 Franco Manca restaurants in the UK;

o the opening of the first franchised Franco Manca pizzeria in Salina; and

o the opening of a further 2 The Real Greek restaurants.

Contact:

THE FULHAM SHORE PLC

CHAIRMAN'S STATEMENT

Introduction

Fulham Shore delivered a continued strong performance in the financial year ended 26 March 2017 with further growth across both of the Group's key brands. As a result, we are pleased to report a 41.1% increase in revenue to £41.3m, a 36.0% increase in Headline EBITDA to £7.1m and a 170.4% increase in profit before taxation to £1.1m.

We see the financial success of this year as a sound base upon which to build the expansion of Franco Manca, The Real Greek and the Group over the coming years.

Strategic vision and progress

Fulham Shore was established in 2012 to discover, develop and expand one or more restaurant concepts with significant growth potential in the dynamic UK dining out market.

To date we have identified and are developing two great restaurant brands. The first is Franco Manca, which was started in Brixton, London in 2009 by Giuseppe Mascoli. This brand has experienced strong growth since it was acquired by the Group in 2015 and we are now expanding outside London by opening and looking for new sites in cities such as Bristol, Oxford, Cambridge and Edinburgh.

The second brand that has great prospects is The Real Greek. As we expand outside London, these new The Real Greek restaurants are performing as well if not better than a number of their London siblings.

Both of these brands are very popular with customers and their food receives critical and social media acclaim. Both brands have scalable business models that combine great quality, high volumes and good value price points (typically £9 to £15 per head).

The Group's strategy is aimed at the long-term development of these brands and, by achieving their nationwide potential, we aim to deliver long term, sustainable returns for our shareholders.

The UK restaurant market

I have been in the restaurant industry since 1976 and, during that time, the UK 'eating out-of-home' market has grown and continues to grow significantly. Nabil Mankarious, our Managing Director, has been operating UK restaurants since 1986, so we have both witnessed the expansion of the 'eating out-of-home' market and the UK restaurant industry.

Recent years have seen unprecedented amounts of capital invested in the UK restaurant sector and, in recent months, more restaurant space has appeared on the market than for many a year. This is largely a function of larger businesses trying to sell poor performing locations, newly created developments and administrators selling sites for broken companies.

Restaurant supply and demand often have a fractious relationship and, however quickly demand for eating out grows, there will always be a risk that restaurant supply may sometimes grow faster, either nationally or locally. In addition, we are entering a difficult forecasting period due to Brexit. Against this backdrop, some restaurant businesses will make the grade and others will not. We believe that operators with "me-too" offerings, over-rented sites, tails of unprofitable sites, dated menus, too much debt, poor concepts and unincentivised staff (or all of the above) will struggle.

However, I am confident that Fulham Shore is well placed as a dynamic operator with strong brands and a good portfolio of sites. We believe that our businesses have significant growth potential across the UK underpinned, first and foremost, by the quality and value of their customer offerings. As a result, and despite the challenging backdrop, we are confident that the Group will continue to perform well in the fast-growing casual dining market.

Franco Manca - growth

Since acquiring Franco Manca in 2015, we have more than trebled the number of our pizzeria in the UK from 12 to 38 (32 at the year-end). This has resulted in growing to serving over 60,000 pizzas per week, up from 25,000 just over two years ago.

Core to the success and appeal of the Franco Manca brand is its continued emphasis on ingredients with proven provenance. We continue to source from the best UK and Italian producers and purchasing organic ingredients wherever possible. It is more important than ever to know your suppliers personally in these uncertain times and we pride ourselves on such relationships.

Franco Manca further strengthened its ties with Italy by joining its founder, Giuseppe Mascoli, in opening a seasonal Franco Manca pizzeria by the sea, located on the island of Salina, north of Sicily, since the year end.

Franco Manca's growth to date has primarily been in London where we have focused on establishing the positive reputation of this young brand's business. We have been building Franco Manca's awareness by expanding in London 'villages' (e.g. in Richmond, Hackney and Bermondsey) but we also opened new restaurants in close proximity to established Franco Manca pizzeria, thereby strengthening the brand and giving customers their own local Franco Manca. Whilst this can have a near term impact on sales in the original pizzeria, we are confident that the increased brand recognition and the business the new restaurants generate will benefit overall sales in the longer term.

We know from past experience that sales at the original pizzeria gravitate back to original levels after a period of time and this is demonstrated by the continued strong performances of the 12 Franco Manca pizzeria that the Group originally acquired in 2015.

In London, where the quality of our sourdough pizzas and great value prices are well known, our new pizzeria are busy straight away. However, as we open in other towns and cities throughout the UK, we expect that sales are more likely to build to capacity over the first three or four years of each restaurant's life as the Franco Manca brand becomes better known regionally.

We are encouraged by our expansion outside of London so far, in particular the openings in central Brighton and Reading, which are serving more customers per week than our average London pizzeria. This gives us confidence that the Franco Manca concept will continue to grow and flourish outside of the capital.

The Real Greek - growth

The Real Greek has delivered steady growth over recent years, generating good profits to support both its own expansion and that of the Group. The Real Greek presents an exciting opportunity for Fulham Shore as it shapes and defines the market for Greek food: it has little direct competition, serving delicious, good value sharing dishes and enjoying a very loyal customer base.

The brand's good performance and the availability of good sites encouraged us to open three new restaurants in the last year (including our first, smaller, Greek on the Street concept) which was more than we had originally planned. As a result, as at the year-end we operated 12 The Real Greek restaurants, with a further two opening since the year end, taking the total to 14.

During the year, we opened The Real Greek in three towns outside of London in Southampton, Bournemouth and Reading. We are encouraged by their performances so far. Our recent opening in Bournemouth, combining a great location, a beautiful restaurant with a large outside terrace and all a short walk from the sea, deserves special mention as it recorded an exceptional 3,000 customers in its first week.

On-line

We continue to see growth in the sales of take out, delivery and ordering on-line. Both The Real Greek and Franco Manca offer these services to our customers. 'Click and collect', where customers order on-line and then collect their order themselves from the restaurant, is proving particularly popular at the moment.

Investment

We continue to invest in our central functions, teams and infrastructure to support the long term growth potential of the Group. We will continue to add to the Franco Manca support team structure and, as we approach and pass 50 pizzeria, we are increasing the use of central commissaries to bring further efficiencies to the business and consistency.

We have seen excellent results from our new The Real Greek openings and we are looking to step up our opening programme from March 2019 onwards. We will, as we have at Franco Manca, bolster The Real Greek's central team over the next 18 months to support this increased pace of growth.

People and team

One of the Group's greatest attributes is our fantastic team of people across the business who bring amazing passion, skill and personality to our brands. I would like to thank each of my colleagues for their hard work during the year.

At every stage of the Group's development we have encouraged employees at all levels, from Directors to restaurant staff, to participate as shareholders by gifting shares and granting share options. We feel this employee ownership approach is crucial to supporting and developing a strong culture that is at the heart of a growing and successful restaurant business.

Current trading and outlook

Both Franco Manca and The Real Greek have performed well over the last year. We believe we will see this continuing, underpinned by great ambience, food quality and value of their customer offerings. We will be reviewing the progress of our third business, which is a single franchise of the Bukowski Grill brand in Soho, over the next few months.

We believe that both of our key brands have significant further growth potential. We have a pipeline of locations where we would like to open either or both The Real Greek and/or a Franco Manca. We anticipate opening approximately 15 new locations in the current financial year.

However, much of this will depend on our ability to secure sites that meet our return on capital criteria. This is critical to our success and we will not open new sites just to chase expansion numbers. We believe it is far better to wait for the right sites at the right rents than to chase short term targets.

Trading during the current financial year has so far remained in line with our expectations. However, there are many uncertainties out there: another General Election would be unhelpful, terrorist incidents have always reduced London public confidence (and therefore restaurant visits) and the long-term Brexit impact is unknown; it is, however, already affecting the availability of skilled European restaurant staff. In addition, food costs are currently on the increase and there is some evidence of reducing consumer expenditure.

Despite this, the UK dining out market continues to grow and as a nimble and agile operator with great restaurant brands we are confident of another year of good progress.

THE FULHAM SHORE PLC

FINANCIAL REVIEW

Fulham Shore performed strongly in the year ended 26 March 2017, summarised in the table below:

Total Group revenue grew by 41.1%, driven mainly by new openings within the UK during the year. We opened 3 The Real Greek and 13 Franco Manca pizzeria, taking the total restaurants operated by the Group to 45 (2016: 29) at year end.

Group Headline EBITDA for the year was £7.1m, an increase of 36.0% on the prior year while operating profit grew 152.7% to £1.3m. During the year, the Group invested in a broader management team in Franco Manca to support the opening program. With our new openings, we have invested over £1.9m (2016: £0.9m) in pre-opening costs.

Group operating profit for the year was £1.3m, up from £0.5m. Finance costs have increased 53.4% to £0.1m as the Group drew down on its revolving credit facilities to support the increased opening program for both Franco Manca and The Real Greek.

The Group's tax rate has reduced significantly to 15.3% of profit before tax due to our work on capital allowances on the capital expenditure over the past two years. This is expected to return to normal levels in the coming year.

Our diluted earnings per share has increased from 0.0p to 0.2p while Headline diluted earnings per share has increased by 50.8% to 0.7p.

Cost Inflation

During the year, the weakness of Sterling against the Euro and the US Dollar following the Brexit vote, has put pressure on food cost inflation. Where possible we have benefited from additional volume discounts due to our significant opening program which has helped to mitigate some of the cost pressures.

We also saw the implementation of the government's National Living Wage for over 25 year old employees at the beginning of the financial year. However all our businesses have chosen to treat all staff members the same irrespective of age.

Our other two material cost items are rent and utility costs. Rental inflation continues to increase modestly. Utility cost inflation continues to be volatile as wholesale cost of energy has been impacted by the movement of sterling and global economic adjustments.

Cash flows and balance sheets

The Group's cash flow from operating activities has grown 176.3% to £10.3m (2016: £3.7m).

We invested £12.4m (2016: £7.1m) in development capital including investment in IT systems to deliver the online Click and Collect takeaway service in both Franco Manca and The Real Greek.

Resultant net debt from our activities at 26 March 2017 was £5.9m (2016: £3.3m).

At the year end, we took advantage of short term supplier trading credit facilities as we had several restaurants in build around year end. These are expected to reverse in the coming year.

Financing

Following our year end, the Group has secured an amended revolving credit facility with our bankers, HSBC Bank PLC, increasing the facilities to £14.25m and extending for a term of four years. At the same time our overdraft facilities were increased to £0.75m. The new facilities are on similar terms as our previous facilities and, alongside internally generated cash flow, will support our existing planned opening programme for the next three years.

People

During the year, the Group's operations were entirely within the UK. With our opening program, the Group created over 350 new jobs during the year. We continue to invest in our staff through training, incentives and personal development.

Principal risks and uncertainties

The Directors consider the following to be the principal risks faced by the Group:

Economic conditions

The Group's performance depends to a large degree on the economic conditions and consumer confidence in the UK. Over recent months, the UK economy has seen reducing levels of unemployment but weaker consumer spending. However, there continue to be rapid changes to the UK economy, with the result of the EU Referendum creating considerable political and economic uncertainty. The Group's existing restaurants offer an exceptional customer value experience which the Directors believe positions the business well in dealing with continued volatility in the UK economy.

Development programme

The Group's development programme is dependent on securing the requisite number of new properties. The UK restaurant property market is competitive. To mitigate these issues, the Group has an experienced property team concentrating on securing new sites for the Group.

Supply chain

The Group focuses on the freshness and quality of the produce used in its restaurants. It is exposed to potential supply chain disruptions due to the delay or losses of inventory in transit. The Group seeks to mitigate this risk through effective supplier selection and an appropriate back-up supply chain.

Employees

The Group's performance depends largely on its management team and its restaurant teams. The inability to recruit people with the right experience and skills could adversely affect the Group's results. The result of the EU Referendum has created considerable uncertainty of immigration status of EU nationals. To mitigate these issues the Group has invested in its human resources teams and has implemented a number of incentive schemes designed to retain key individuals.

Competition

The Group operates in a competitive and fragmented market which regularly sees new concepts come to the market. However, the Directors believe that the strength of the existing restaurant brands, value offer and constant strive towards delivering the best product and service will help the business to mitigate competitive risk.

Investment programme

The Group's investment programme is dependent on securing suitable acquisition targets.

Cyber security

The Group has introduced online click and collect service during the year which relies on online systems that may experience cyber security failure leading to loss of revenue or reputation loss. The Group utilises robust supplier selection processes and third party reviews and testing on a regular basis to identify weaknesses and improve on existing protection and processes.

Risks are formally reviewed by the Board and appropriate processes put in place to monitor and mitigate them.

Financial risk management

The Board regularly reviews the financial requirements of the Group and the risks associated therewith. The Group does not use complicated financial instruments, and where financial instruments are used it is for reducing interest rate risk. The Group does not trade in financial instruments. Group operations are primarily financed from equity funds raised, bank borrowings and retained earnings. In addition to the financial instruments described above, the Group also has other financial instruments such as receivables, trade payables and accruals that arise directly from the Group's operations. Further information is provided in note 15 to the financial statements.

Key performance indicators

The Board receives a range of management information delivered in a timely fashion. The principal measures of progress, both financial and non-financial, that are reviewed on a regular basis to monitor the development of the Company and the Group are shown in the table at the beginning of this section.

THE FULHAM SHORE PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 26 March 2017

There were no other comprehensive income items.

All operating gains and losses relate to continuing activities.

THE FULHAM SHORE PLC

CONSOLIDATED AND COMPANY BALANCE SHEETS

The loss for the financial year dealt with in the financial statements of the Company is £436,000 (2016: £694,000).

THE FULHAM SHORE PLC

CONSOLIDATED STATEMENT OF CHANGE IN EQUITY

THE FULHAM SHORE PLC

COMPANY STATEMENT OF CHANGE IN EQUITY

THE FULHAM SHORE PLC

CONSOLIDATED AND COMPANY CASH FLOW STATEMENT

THE FULHAM SHORE PLC

ACCOUNTING POLICIES

GENERAL INFORMATION

The Fulham Shore PLC is a public limited company incorporated and domiciled in England and Wales with registration number 07973930 and registered office at 1st Floor, 50-51 Berwick Street, London, W1F 8SJ, United Kindom. The Company's ordinary shares are traded on the AIM Market.

BASIS OF PREPARATION

The above audited financial information does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The above figures for the period ended 26 March 2017 have been extracted from the Group's financial statements which have been reported on by the Group's auditors and received an audit opinion which was unqualified. The Group's statutory financial statements for the year ended 27 March 2016 have been lodged with the Registrar of Companies. These financial statements received an audit report which was unqualified and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying their report or a statement under section 498(2) or section 498(3) of the Companies Act 2006. These financial statements will be dispatched to the shareholders and filed with the Registrar of Companies. The preliminary announcement was approved by the Board and authorised for issue on 11 July 2017.

The financial statements have been prepared under the historical cost convention and, as permitted by EU Law, the Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS").

The financial statements for the year ended 26 March 2017 are presented in Sterling because that is the primary currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.

The parent company has not presented its own income statement, statement of total comprehensive income and related notes as permitted by section 408 of the Companies Act 2006.

At the date of authorisation of these financial statements, the following Standards and Interpretations relevant to the Group operations that have not been applied in these financial statements were in issue but not yet effective:

IFRS 2 (Amendment) Classification and Measurement of Share Based Payment Transactions

IFRS 9 Financial instruments

IFRS 12 (Amendment) Disclosure of interest in Other Entities

IFRS 15 Revenue from contracts with customers

IFRS 16 Leases

IFRIC 23 Uncertainty over income tax treatments

The Directors anticipate that the adoption of these Standards and Interpretations as appropriate in future years will have no material impact on the financial statements of the Group other than the new IFRS 16 Leases which will be mandatory for accounting periods beginning on or after 1 January 2019. This new standard, which is not currently EU endorsed will significantly change how restaurant leases will be accounted for. The Group is preparing its assessment project to identify the impact of the new lease accounting standard on the Group's existing and future restaurant leases.

GOING CONCERN

The consolidated financial statements have been prepared on a going concern basis. Given the risk analysis undertaken by the Directors and after reviewing the Group's net current liabilities position as at 26 March 2017, the budget for the next financial year, other longer term plans and financial resources including undrawn but available facilities described in note 14 and the extended facilities following the year end as described in note 24, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore the Board is satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate those of The Fulham Shore PLC and all of its subsidiary undertakings for the period. Subsidiaries acquired are consolidated from the date that the Group has the power to control, exposure or rights to variable returns, and the ability to use its power over the returns and will continue to be consolidated until the date that such control ceases.

Although the legal form of the transaction during the period ended 29 June 2015 was an acquisition of Kefi Limited by The Fulham Shore PLC, the substance is the reverse of this. Accordingly the business combination has been prepared using reverse acquisition accounting.

The acquisition of other subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.

INTANGIBLE ASSETS

Goodwill

Goodwill arising on the acquisition of an entity represents the excess of the cost of an acquisition over the Group's interest in the fair value attributed to the net assets at acquisition. Goodwill is not subject to amortisation but is tested for impairment at least annually. After initial recognition, goodwill is stated at cost less any accumulated impairment losses. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Goodwill is allocated to cash generating units for the purpose of impairment testing. Each of these cash generating units represents the Group's investment in a subsidiary. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Trademarks and licenses

The fair value of the intangible assets acquired through the reverse acquisition was determined using discounted cash flow models. The key assumptions for the valuation method are those regarding future cash flows, tax rates and discount rates. The cash flow projections are based on management forecasts for the next four years period. The estimated useful lives range from 4 to 20 years on a straight-line basis.

Brand

The fair value of the brand intangible assets acquired through an acquisition of a subsidiary was determined using discounted royalty relief models. The key assumptions for the valuation method are those regarding future cash flows, tax rates and discount rates. The cash flow projections are based on management forecasts for the next ten year period.

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of brand from the beginning of the financial year that they are available for use. The estimated useful lives are 10 years on a straight-line basis.

Computer Software

Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised over their estimated useful lives, being between 3 and 5 years. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development, employee costs and directly attributable overheads. Software integral to a related item of hardware equipment is accounted for as property, plant and equipment. Costs associated with maintaining computer software programmes are recognised as an expense when they are incurred.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at historical cost less depreciation and any recognised impairment loss. The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.

Depreciation is provided on property, plant and equipment at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life, as follows:-

Leasehold properties and improvements over lease term or renewal term

Plant and equipment 20% to 33% straight line

Furniture, fixtures and fittings 10% to 20% straight line

Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.

Residual values, useful lives and methods of depreciation are reviewed and adjusted if appropriate on an annual basis. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

IMPAIRMENT OF ASSETS

Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is an indication that the asset may be impaired. For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash generating units. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognised for goodwill are not reversed in a subsequent period. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement.

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities, in respect of financial instruments, are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument.

INVENTORIES

Inventories are valued at the lower of cost and net realisable value. Cost is determined on a first in, first out basis. Net realisable value is based upon estimated selling price less further costs expected to be incurred to completion and disposal. Provision is made for obsolete and slow-moving items.

TRADE AND OTHER RECEIVABLES

Receivables are classified as loans and receivables and are initially recognised at fair value. They are subsequently measured at their amortised cost using the effective interest method less any provision for impairment. A provision for impairment is made where there is objective evidence (including customers with financial difficulties or in default on payments), that amounts will not be recovered in accordance with original terms of the agreement. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flow, discounted using the original effective interest rate. The carrying value of the receivable is reduced through the use of an allowance account and any impairment loss is recognised in the income statement.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash in hand and call deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

TRADE AND OTHER PAYABLES

Payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

SHARE CAPITAL

Share capital represents the nominal value of ordinary shares issued.

SHARE PREMIUM

Share premium represents the amounts subscribed for share capital in excess of nominal value less the related costs of share issue.

MERGER RELIEF RESERVE

In accordance with Companies Act 2006 S.612 'Merger Relief', the company issuing shares as consideration for a business combination, accounted at fair value, is obliged, once the necessary conditions are satisfied, to record the share premium to the merger relief reserve.

REVERSE ACQUISITION RESERVE

Reverse accounting under IFRS 3 'Business Combinations' requires the difference between the equity of the legal parent and the issued equity instruments of the legal subsidiary pre-combination is to be recognised as a separate component of equity.

RETAINED EARNINGS

Retained earnings represents the cumulative profit and loss net of distributions.

FOREIGN CURRENCIES

Assets and liabilities denominated in foreign currencies are translated into sterling, the presentational and functional currency of the Group, at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to the income statement.

FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities and includes no obligation to deliver cash or other financial assets. Interest bearing loans and overdrafts are initially measured at fair value (which is equal to cost at inception), and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowing. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

TAXATION

Income tax expense represents the sum of the current tax payable and deferred tax.

Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because some items of income or expense are taxable or deductible in different years or may not be taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit or the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis.

Tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the tax is also recognised directly in equity.

LEASES

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement.

Rentals payable under operating leases are charged to the income statement on a straight line basis or other systematic basis if representative of the time pattern of the user's benefit over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.

PROVISIONS

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the effect is material.

RETIREMENT BENEFITS

The amount charged to the income statement in respect of pension costs is the contributions payable to money purchase schemes in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

REVENUE RECOGNITION

Revenue represents the fair value of the consideration received or receivable, net of Value Added Tax, for goods sold and services provided to customers outside the Group after deducting discounts. Revenue is recognised when the significant risks and rewards of ownership are transferred.

INTEREST INCOME

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

SHARE BASED PAYMENTS

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured using a Black-Scholes valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

ACCOUNTING PERIOD

The consolidated group accounts have been prepared for the year to 26 March 2017 with the comparative year to 27 March 2016.

The Company accounts have been prepared for the same periods as the Group.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of the Group's accounting policies, described above, with respect to the carrying amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting year. These judgements, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, including current and expected economic conditions. Although these judgements, estimates and associated assumptions are based on management's best knowledge of current events and circumstances, the actual results may differ. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future years affected.

The judgements, estimates and assumptions which are of most significance to the Group are detailed below:

Valuation of acquired businesses - Acquisition and intangible assets

The Group applied the principles of IFRS 3's acquisition accounting in respect of the acquisition of Franco Manca Holdings Limited during the year ended 27 March 2016. The key judgements involved were the identification and valuation of intangible assets which required the estimation of future cash flows arising from a royal relief model and the selection of a suitable discount rate and the determination that the difference between the fair value of the consideration effectively given and the aggregate of the fair values of the separable net assets acquired effectively represents the cost of acquiring the cash generating units in Franco Manca.

Assessment of the recoverable amounts in respect of assets tested for impairment

The Group tests property, plant and equipment and intangible assets, including goodwill, for impairment on an annual basis or more frequently if there are indications that amounts may be impaired. The impairment analysis for such assets is principally based upon discounted estimated future cash flows from the use and eventual disposal of the assets. Such an analysis includes an estimation of the future anticipated results and cash flows, annual growth rates and the appropriate discount rates.

Valuation of share based payments

The charge for share based payments is calculated in accordance with the methodology described in note 18. The model requires highly subjective assumptions to be made including the future volatility of the Company's share price, expected dividend yield and risk-free interest rates.

OPERATING SEGMENTS

The Group considers itself to have two key operating segments, being the management and operation of The Real Greek restaurants and the management and operation of Franco Manca restaurants. The Group operates in only one geographical segment, being the United Kingdom.

DEFINITIONS

OPERATING PROFIT

Operating profit is defined as profit before taxation, finance income and finance costs.

HEADLINE OPERATING PROFIT

Headline operating profit is defined as operating profit before amortisation of brand, impairment of property, plant and equipment, impairment of goodwill and intangible assets, onerous lease costs, restructuring costs, costs of reverse acquisition, cost of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.

HEADLINE PROFIT BEFORE TAXATION

Headline profit before taxation is defined as profit/loss before taxation before amortisation of brand, impairment of property, plant and equipment, impairment of goodwill and intangible assets, onerous lease costs, restructuring costs, costs of reverse acquisition, costs of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.

PRE-OPENING COSTS

The restaurant pre-opening costs represent costs incurred up to the date of opening a new restaurant that are written off to the profit and loss account in the period in which they are incurred.

EBITDA

EBITDA is defined as operating profit before depreciation and amortisation.

HEADLINE EBITDA

Headline EBITDA is defined as EBITDA before amortisation of brand, impairment of property, plant and equipment, impairment of goodwill and intangible assets, onerous lease costs, restructuring costs, costs of reverse acquisition, cost of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.

HEADLINE EPS

Headline EPS is defined in note 6.

THE FULHAM SHORE PLC

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 26 March 2017

For management purposes, the Group was organised into two operating divisions during the year ended 26 March 2017. These divisions, The Real Greek and Franco Manca, are the basis on which the Group reports its primary segment information. All other segments include the Bukowski Grill franchise and the Fulham Shore head office

For the year ended 26 March 2017:

For the year ended 27 March 2016:

The Group's two business segments primarily operate in one geographical area which is the United Kingdom.

DIRECTORS' REMUNERATION

The remuneration of Directors, who are the key management personnel of the company, is set out in aggregate below.

NJ Donaldson exercised 1,115,972 share options in the period ended 26 March 2017 (2016: Nil) realising a gain of £184,000 (2016: £Nil). No directors received any pension benefits (2016: £Nil).

Included above are fees paid to related parties for the provision of directors' services which are further described in note 22.

The Directors are the only employees of the Company. The Directors' remuneration above is the only staff costs for the Company.