Hermes Pac. Regulatory News (HPAC)

28 Mar 2008 15:39

Indian Restaurants Group PLC28 March 2008 28 March 2008 Indian Restaurants Group Plc ("Indian Restaurants" or "the Company") Preliminary Results for the year ended 30 September 2007 Indian Restaurants Group Plc (AIM: IRGP), formerly India Outsourcing Servicesplc, is pleased to present its preliminary results for the year ended 30September 2007. Highlights • During the period the Company pursued its strategy of evaluating business process outsourcing opportunities in India • The high valuations of potential targets prompted a change of strategy resulting in the acquisition, post the year end, of the Mela Group of three Indian restaurants in London • The Company's strategy is to roll out the Mela Group's Mela and Chowki restaurant brands to create the UK's first national, branded provider of Indian cuisine • Post-tax loss of £262,797 (2006: post-tax loss of £950,801) and loss per share of 2.8p (2006: 15.3p) • Strong balance sheet - cash at bank and in hand of £2.54 million Haresh Kanabar, Indian Restaurants Group's Chairman, said: "During the period, the Board decided to widen the search for potentialacquisitions, in terms of both geographic location and industry sector, as wewere not prepared to overpay for outsourcing assets in India. In February thisyear we were delighted to announce the acquisition of the Mela Group of Indianrestaurants in London, which we believe provides an ideal basis from which togenerate shareholder value. "The Mela Group's highly acclaimed restaurants offer an outstanding opportunityto roll out the first UK chain of branded Indian restaurants under the MelaGroup's Mela and Chowki brands. Given the large but fragmented Indian restaurantmarket in the UK we believe we are particularly well placed to replicate overtime the success seen in pizza, pasta and tapas chains. "The spend per head at the Mela and Chowki brands is relatively modest offeringsome insulation from current economic conditions, which in many respects providean ideal time during which to begin to build a significant restaurant chain. Welook forward to the future with confidence." For further information: Indian Restaurants Group Plc Tel: 020 7297 0010Haresh Kanabar, ChairmanAmit Pau, Chief Executive W.H. Ireland Limited Tel: 0121 265 6334Tim Cofman/Katy Birkin Buchanan Communications Tel: 020 7466 5000Mark Court EXTRACTS FROM THE CHAIRMAN'S STATEMENT AND THE REPORT OF THE DIRECTORS This year has been a challenging year for our company, primarily due to therising valuations of Indian BPO companies. Valuations of BPO companies in Indiaare continuing at a level where the creation of value for our shareholders frommaking an acquisition at these valuations was somewhat difficult to deliver. As a result the Board, in consultation with its key shareholders, decided towiden the search in terms of both geographic location and industry sectors forpotential acquisitions and investments as we were not prepared to overpay foroutsourcing assets in India. During the year there has been very careful cost control at the Company, eventhough there has been a significant level of activity as a result of ourdecision to broaden the investment search geographically and also to includesectors outside of the BPO market. Despite the challenges and after a long period of negotiations we successfullycompleted our first acquisition, with the purchase of the Mela Group whichcomprises of three Indian restaurants and an outside catering business inFebruary 2008. Following the completion of the acquisition, the Company haschanged its name to Indian Restaurants Group Plc. In addition, we are delightedto welcome Kuldeep Singh and Ashraf Rahman to the Board. Background for the Acquisition The total Consideration for the Acquisition was £1,998,999, satisfied by£100,000 in cash and the issue of the Consideration Shares (valued at 26.37p pershare), of which £949,499 comprises Initial Consideration Shares and £949,500comprises Deferred Consideration Shares, the issue of which is conditional onthe achievement of certain targets. The Initial Consideration Shares represented 27.53 per cent. of the company'senlarged issued Share Capital and the Consideration Shares in total willrepresent 43.17 per cent. of the further enlarged share capital assuming theissue of the Deferred Consideration Shares. The Directors intend to create a chain of restaurants providing authentic, homestyle Indian food on a consistent basis across the Group. The Group willinitially target (i) the mid market (pricing at approximately £25 per head) and(ii) the "fast casual" dining market (pricing at approximately £15 per head).Additionally, based on the facilities of the chain, the Directors intend toextend the Group's brands into, sports catering, lunchtime takeaway menu andevent catering including weddings. The Directors believe that the combination of the Mela Group's business and theCompany's existing cash resources and its access to the equity market, has thepotential for delivering positive returns to shareholders in both the short andmedium term. The Directors believe that this strategy will create shareholdervalue and that the acquisition of the Mela Group satisfies the Company'sinvestment criteria as the Mela Group offers it an experienced management teamwith a track record of building and managing businesses. This team will play anintegral part of the future growth and expansion, an ability to generate revenuestreams and an existing platform from which further growth can be developed. Weintend to build upon the numerous awards received by the Mela Group andnominations including the Evening Standard London Tonight and Tio Pepe ITVLondon Restaurant Awards. The Directors believe that the key features of the Indian restaurant sector arethat, it is well established with market size in excess of £3 billion; it is anextremely fragmented market with over 11,500 restaurants in the UK; and there isno current UK national branded provider and therefore opportunity to consolidatein this niche with the UK's first nationwide chain. The Directors believe that the Indian restaurant sector offers the opportunityfor significant organic growth through the development of a branded chain ofrestaurants offering authentic cuisine consistently cooked to a high standard.The Mela Group, with its highly acclaimed restaurants, offers an outstandingopportunity to roll out the first UK chain of branded Indian restaurants underthe Mela and Chowki brands. In addition, the Directors believe that there are consolidation opportunitieswithin the fragmented Indian restaurant sector and envisage that the Group maybe acquisitive in the future. Financials The Company has contained costs during the period and we are reporting a posttax loss of £262,797 compared to a restated post tax loss of £950,801 in theprevious financial year. The main reason for the reduction in losses was thesubstantial reduction in due diligence costs year on year. The loss per sharefor the year is 2.8p compared to 15.3p for the year ending September 2006. As atthe end of the year the Company had £2.5 million in cash and net assets of £2.4million. The movement in the balance sheet cash and net assets is as a result ofincurring a loss in the year. Outlook We are very excited about the strategy going forward and we look forward to thefuture with confidence. Results and dividends The directors do not recommend the payment of a dividend for the year (2006:£nil). Principal activities, trading review and future developments The principal activity of the company was to capitalise on acquisition andinvestment opportunities within the Business Process Outsourcing sectorprimarily in India. Post the year end following the acquisition of Indianrestaurants the principal activity is to operate a chain of Indian restaurants. Haresh KanabarChairman28 March 2008 Indian Restaurants Group PlcProfit and Loss Account for the year ended 30 September 2007 Notes Year ended 30 Year ended September 2007 30 September 2006 As Restated £ £ Administrative expenses (406,585) (1,035,705) ____________ ____________Operating loss (406,585) (1,035,705) Net interest receivable 143,788 84,904 ____________ ____________Loss on ordinary activities before taxation (262,797) (950,801) Tax on loss on ordinary activities - - ____________ ____________Loss for the financial year (262,797) (950,801) ____________ ____________Loss per share-basic and diluted 2 (2.8)p (15.3p) ____________ ____________ All amounts relate to continuing activities. Indian Restaurants Group PlcStatement of total recognised gains and losses for the year ended 30 September 2007 Year ended Year ended 30 September 2007 30 September 2006 Restated £ £ Loss for the financial year (262,797) (950,801) ____________ ____________Total recognised gains and losses for the financial year (262,797) (950,801) Prior year adjustments- share based payments (as explained in note 1) (75,246) - ____________Total gains and losses recognised since last financial statements (338,043) - Indian Restaurants Group PlcBalance sheet as at 30 September 2007 2007 2006 £ £ Fixed assetsTangible assets - 1,141 ____________ ____________ - 1,141 Current assetsDebtors 28,660 24,404Cash at bank and in hand 2,537,590 2,800,000 ____________ ____________ 2,566,250 2,824,404 Creditors:amounts falling due within one year (142,381) (186,777) ____________ ____________Net current assets 2,423,869 2,637,627 ____________ ____________Net assets 2,423,869 2,638,768 ____________ ____________ Capital and reservesCalled up share capital 947,917 947,917Share premium account 2,990,775 2,990,775Profit and loss account (1,514,823) (1,299,924) ____________ ____________Shareholders' funds 2,423,869 2,638,768 ____________ ____________ The financial statements were approved by the Board of Directors and authorisedfor issue on 28 March 2008 and were signed on its behalf by: HD KanabarDirector Indian Restaurants Group PlcCash Flow Statement for the year ended 30 September 2007 Year ended Year ended 30 September 2007 30 September 2006 £ £ Net cash outflow from operating activities (369,053) (933,272) Returns on investments and servicing of financeInterest received 143,788 84,904 ____________ ____________Net cash inflow from returns on investments and servicing of finance 143,788 84,904 ____________ ____________Net cash outflow before financing (225,265) (848,368) FinancingIssue of ordinary shares - 3,500,000Expenses paid in connection with share issues - (248,572) ____________ ____________Cash inflow from financing - 3,251,428 ____________ ____________(Decrease)/ increase in net cash (225,265) 2,403,060 ____________ ____________ Notes to the financial statements 1 Accounting policies Basis of preparation The results have been prepared using accounting policies consistent with thoseused in the preparation of the statutory accounts. The financial information isderived from the financial statements for the Years ended 30 September 2006 and2007, and does not constitute full accounts within the meaning of Section 240 ofthe Companies Act 1985. The financial statements on which the auditors havegiven an unqualified report do not contain a statement under Section 237 (2) or(3) of the Companies Act. Statutory Accounts for 2006 have been delivered tothe Registrar of Companies and Accounts for 2007 will be delivered to theRegistrar of Companies in due course. The financial statements have been prepared under the historical cost conventionand in accordance with the United Kingdom, Generally Accepted AccountingPractice. The following principal accounting policies have been applied: Share-based payments The cost of equity-settled transactions with suppliers of goods and services ismeasured by reference to the fair value of the good or service received, unlessthat fair value cannot be estimated reliably. The fair value of the good orservice received is recognised as an expense as the Group receives the good orservice. The cost of equity-settled transactions with employees, andtransactions with suppliers where fair value cannot be estimated reliably, ismeasured by reference to the fair value of the equity instrument. The fair valueof equity-settled transactions with employees is recognised as an expense overthe vesting period. The fair value of the equity instrument is determined at thedate of grant, taking into account market based vesting conditions. The fairvalue is determined using an option pricing using Black Scholes model. No expense is recognised for awards that do not ultimately vest, except forawards where vesting is conditional upon a market condition, which are treatedas vesting irrespective of whether or not the market condition is satisfied,provided that all other performance conditions are satisfied. At each balance sheet date before vesting, the cumulative expense is calculated,representing the extent to which the vesting period has expired and management'sbest estimate of the achievement or otherwise of non-market conditions, thenumber of equity instruments that will ultimately vest, or in the case of aninstrument subject to a market condition, be treated as vesting as describedabove. The movement in cumulative expense since the previous balance sheet dateis recognised in the income statement, with a corresponding entry in equity. Adoption of FRS 20 - Share- Based Payment The Company has adopted Financial Reporting Standard (FRS) 20 'Share-basedPayment' during the year. The adoption of this standard constitutes a change inaccounting policy. Therefore, the impact has been reflected as a prior yearadjustment in accordance with FRS 3 'Reporting Financial Performance'. The standard requires that where shares or rights to shares are granted to thirdparties, including employees, a charge should be recognised in the profit andloss account based on the fair value of the shares at the date the grant ofshares or right to shares is made. The adoption of FRS 20 has resulted in a net increase in the loss for the yearof £47,898 and for the year ended 2006 the net increase in the loss was £75,246. There is no impact on the net assets of the Company. The share-based payments expense has been included in the administrativeexpenses line of the profit and loss account. 2 Loss per share The calculation of loss per share of 2.8 pence (2006: 15.3 pence as restated) isbased on the loss for the year of £262,797 (2006: £950,801 as restated) and onthe weighted average number of ordinary shares in issue during the year of9,479,167 (2006: 6,197,116). Due to the losses incurred during the year a diluted loss per share has not beendisclosed as this would serve to reduce the basic loss per share. There are share options outstanding at the end of the year that couldpotentially dilute basic earnings per share in the future. 3 Post Balance Sheet Events. The Board announced on 29 January 2008 that the Company had conditionally agreedto acquire the Mela Group. The consideration for the acquisition was £1,998,999,to be satisfied by £100,000 in cash and the issue of ordinary shares ("Consideration Shares") (valued at 26.37p per share) conditional, inter alia, onreadmission to AIM and, in the case of the Deferred Consideration Shares, alsoconditional on the achievement of certain targets. The Mela Group, comprises agroup of three companies holding between them three Indian restaurants and anoutside catering business. In conjunction with the Acquisition, the Companyincreased its share capital, changed its name to Indian Restaurants Group Plcand increased its borrowing powers. The transaction took place on 26 February2008. The Initial Consideration Shares represents 27.53 per cent. of the company'senlarged Share Capital and the Consideration Shares in total will represent43.17 per cent. of the further enlarged share capital assuming the issue of theDeferred Consideration Shares. In view of the size of the Mela Group relative tothe Company, the Acquisition constituted a reverse takeover of the Company underthe AIM Rules and therefore required the prior approval of Shareholders at aGeneral Meeting. The Annual Report will be posted shortly to all shareholders. Additional copiesare available from 22 Soho Square, London W1D 4NS. This information is provided by RNS The company news service from the London Stock Exchange