Last checked at 27 Jun 2008 07:00
| For Immediate Release | 27 June 2008 |
INDIAN RESTAURANTS GROUP PLC
Interim Results for the Six Months to 31 March 2008
Indian Restaurants Group plc (AIM: IRGP) is pleased to announce its interim results for the six months ended 31 March 2008.
Highlights
Maiden revenues following the acquisition of Mela Group of Indian restaurants in February 2008, shortly before the period end
Strategic initiatives including the refurbishment and rebranding of the 3 Monkeys restaurant and developing its take-away business
Net assets as at 31 March 2008 of £3,039,000 of which £2,267,000 was held in cash
Pre-tax loss of £164,000 for the period (H1 2007: loss of £128,000) with loss per share of 1.62p (H1 2007: 1.35p)
Haresh Kanabar, Chairman of Indian Restaurants Group, said: "We are pleased to report our first revenues following the acquisition of the Mela Group by Indian Restaurants in February this year.
"Trading in the current financial year has started off slowly. However in the medium term lifestyle changes created by modern living coupled with our quality food offering will continue to fuel steady growth as more and more people have less time, resources, and inclination to cook for themselves. Consumer confidence however is currently low and is likely to adversely impact the business in the short term."
For further information please contact:
| Indian Restaurants Group plc | 020 7297 0012 |
| Amit Pau, Chief Executive | |
| www.indianrestaurantsgroup.com | |
| W. H. Ireland Limited | 0121 265 6330 |
| Tim Cofman-Nicoresti / Katy Birkin | |
| Buchanan Communications | 020 7466 5000 |
| Mark Court |
CHAIRMAN'S STATEMENT
I am pleased to report Indian Restaurant Group's interim results for the six month period ended 31 March 2008. These interim statements are the first financial results that the Company has prepared under International Financial Reporting Standards ('IFRS'). There has been no material impact as a result of the introduction of IFRS other than in respect of presentation.
The Company has recorded a loss before tax of £164,000 compared with £128,000 in the previous corresponding period. As at 31 March 2008, the net assets of the Company stood at £3,039,000 of which £2,267,000 was held in cash. The loss per share in the period amounted to 1.62p per share compared with 1.35p in the same period last year. We are reporting revenues for the first time since the creation of the enlarged group and all the revenue is attributable to the restaurants that we acquired on 26 February 2008. Whilst it is early days, as we have only recently acquired the business, it is fair to say that our customers are being impacted by the current economic climate resulting in an adverse impact on our sales, which are marginally down on a year on year basis.
We are currently also experiencing an unprecedented level of inflation in the cost of the high quality food produce and materials that we purchase. This has had a negative impact on our gross margin as we are not able to fully pass on the cost increases in the form of higher selling prices to our customers. Over time we anticipate being able to adjust our selling prices to reflect higher costs.
The drop off in sales is somewhat steeper in the 3 Monkeys restaurant based in Herne Hill, London, compared with the two restaurants that we have in West End of London as these restaurants are cushioned somewhat due to the patronage of tourists visiting London. We are constantly looking at our offering and tailoring it to our customers accordingly. As stated in our admission document dated 28 January 2008, we have decided to refurbish, upgrade and convert the 3 Monkeys restaurant to the Mela brand. This process is already underway and is scheduled to be completed by the end of July 2008. We would expect an upturn in sales following the refurbishment and will be monitoring the performance closely.
We have also introduced some short term tactical promotions to help us build revenues. We are also developing the takeaway business at 3 Monkeys as there is customer demand for home dining and this segment of the market is expected to grow. There is an opportunity to increase our lunchtime trade and we are looking to offer a faster and lighter menu in all restaurants with special price options to our time-constrained customers. Additionally, staff are being trained to provide our customers with a superior experience and build loyalty. Each of our restaurants operates as an independent unit with its own management supported by a small team at the Group level.
As part of our strategy, we have made investments into the business, and will continue to, so that we create a scaleable business. In particular, we are focusing on evolving the core products, developing the brand so that we can attract new customers, training especially with a view to up-selling, plus developing a range of promotional activities which reward existing customers and attract new clients.
The strategy of the Group is to create a branded chain of Indian restaurants providing quality authentic, home style Indian food cooked by well trained and experienced Indian chefs at good value coupled friendly service. We believe that branding combined with our key strength of quality food will attract more customers and better reflect our offering as consumers of Indian food are increasingly looking for more authentic food. The goal is to embark upon a realistic rollout programme predominately focused in the London/M25 geography in areas where there is a good footfall subject to market conditions and site profitability.
Clearly, with the widely publicised pressure on the UK economy and subsequent impact on consumer spending our view is take to a cautious approach on expansion, with a strong focus on not just the site viability but also potential site premiums and rent. The Board would like to reduce the pay back period for new site expansion. It is however important for shareholders to note that we cannot predict the success or timing of site selection.
Following the acquisition of the Mela Group, the focus has been to:
Review the strategic positioning of both the Mela and Chowki restaurants, taking account of customer feedback so that we can refine the concepts with respect to a number of areas. The goal of this review is to build upon the success of both concepts, so that we can establish a leadership position in a very large but highly fragmented sector. The review should be completed and changes implemented by October 2008 for inclusion in our expansion plans.
Develop a range of promotional campaigns that drive additional revenue into the existing units. We are attaching a stronger focus on this aspect as clearly the UK consumer is facing probably the most demanding period since the 1990s. For Mela and Chowki we are also building specific promotional campaigns with leading retailers, hotels, theatres and cinemas in order to deliver more value to our customers.
Focus on the core restaurant business, thus reducing event catering only to those that are clearly profitable.
Compile a shortlist of potential sites for expansion. Initially this will be focused to the London/M25 area. We will seek to optimise our negotiation position with respect to new site openings (i.e. goodwill, rent and refurbishment costs). As the economic climate has rapidly deteriorated since the acquisition, we are applying further rigour to the financial aspects of potential site expansion. This cautious approach will help improve the payback period and profitability of any potential new sites acquired.
Our staff have played and continue to play a very crucial role in our development and I would like to take the opportunity on behalf of the Board to thank all staff and management for their hard work and dedication to the business and their commitment to deliver high customer service standards.
Outlook
Trading in the current financial year has started off slowly. However in the medium term lifestyle changes created by modern living coupled with our quality food offering will continue to fuel steady growth as more and more people have less time, resources, and inclination to cook for themselves. Consumer confidence however is currently low and is likely to adversely impact the business in the short term.
CONSOLIDATED INTERIM INCOME STATEMENT (Unaudited)
| Six months ended 31 March | Six months ended 31 March | Year ended 30 Sept | ||
| Note | 2008 | 2007 | 2007 | |
| (unaudited) | (unaudited) | (audited) | ||
| £'000 | £'000 | £'000 | ||
| Revenue | 196 | - | - | |
| Cost of sales | (60) | - | - | |
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| gross profit | 136 | |||
| Administrative expenses | 369 | 196 | 407 | |
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| Operating loss | (233) | (196) | (407) | |
| Interest receivable | 71 | 68 | 144 | |
| Interest payable | (2) | - | - | |
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| Loss on ordinary activities before tax | (164) | (128) | (263) | |
| Tax expense | - | - | - | |
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| Loss for the period | (164) | (128) | (263) | |
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| Loss per share | 3 | |||
| Basic and diluted | (1.62p) | (1.35p) | (2.8p) | |
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CONSOLIDATED INTERIM Balance Sheet (unaudited)
| As at 31 March | As at 31 March | As at 30 Sept | ||
| 2008 | 2007 | 2007 | ||
| (unaudited) | (unaudited) | (audited) | ||
| Note | ||||
| £'000 | £'000 | £'000 | ||
| ASSETS | ||||
| Non-current assets | ||||
| Goodwill | 4 | 2,803 | - | - |
| Property, plant and equipment | 497 | - | - | |
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| 3,300 | - | - | ||
| Current assets | - | - | ||
| Inventories | 24 | - | - | |
| Trade and other receivables | 374 | 28 | 29 | |
| Cash and cash equivalents | 2,267 | 2,625 | 2,537 | |
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| 2,665 | 2,653 | 2,566 | ||
| LIABILITIES | ||||
| Current liabilities | ||||
| Trade and other payables | (2,871) | (142) | (142) | |
| Obligations under finance leases | (55) | - | - | |
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| 2,926 | (142) | (142) | ||
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| Net current assets | 3,039 | 2,511 | 2,424 | |
| Non-current liabilities | ||||
| Obligations under finance leases | - | - | - | |
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| NET ASSETS | 3,039 | 2,511 | 2,424 | |
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| SHAREHOLDERS' EQUITY | ||||
| Called up share capital - equity | 5 | 1,308 | 948 | 948 |
| Share premium account | 5 | 3,396 | 2,991 | 2,991 |
| Retained earnings | 5 | (1,665) | (1,428) | (1,515) |
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| TOTAL EQUITY | 3,039 | 2,511 | 2,424 | |
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CONSOLIDATED INTERIM Cash Flow Statement (unaudited)
| Six months ended 31 March | Six months ended 31 March | Year ended 30 Sept | ||
| 2008 | 2007 | 2007 | ||
| (unaudited) | (unaudited) | (audited) | ||
| 2004 | 2005 | 2007 | ||
| £'000 | £'000 | £'000 | ||
| Cash flows from operating activities | ||||
| Cash generated from operations | (59) | (206) | (369) | |
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| Net cash from operating activities | (59) | (206) | (369) | |
| Cash flows from investing activities | ||||
| Acquisition of subsidiary, including overdraft acquired | (323) | - | - | |
| Interest received | 71 | 68 | 144 | |
| Interest paid | (2) | - | - | |
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| Net cash (used in)/from investing activities | (254) | 68 | (225) | |
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| Cash flows from financing activities | ||||
| Share issue | (184) | - | - | |
| Repayment of finance leases | (2) | - | - | |
| Repayment of bank loans | (11) | |||
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| Net cash (used in)/from financing activities | (197) | - | - | |
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| (Decrease) in cash and cash equivalents | (510) | (138) | (225) | |
| Cash and cash equivalents at start of period | 2,538 | 2,763 | 2,763 | |
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| Cash and cash equivalents at end of period | 2,028 | 2,625 | 2,538 | |
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Notes to the UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 March 2008
The principal activity of Indian Restaurants Group Plc is to operate a chain of Indian restaurants.
The registered office of the Company is 8-10 New Fetter Lane, London, EC4A 1RS.
The group has historically prepared its audited financial statements on the basis of UK Generally Accepted Accounting Practice ("UK GAAP"). In the current year the group has adopted International Financial Reporting Standards ("IFRS") for the first time as the group is required to present its annual consolidated financial statements in accordance with accounting standards adopted for use in the European Union. As a result these interim accounts, which are unaudited, have been prepared on the basis of the accounting policies which will apply for the financial year to 30 September 2008. These standards remain subject to ongoing amendment and/or interpretation and are therefore still subject to change. Accordingly, information contained in these interim financial statements may need updating for subsequent amendments to IFRS required for first time adoption or for new standards issued post the balance sheet date.
The transition to IFRS has had no effect on the loss, net assets or cash flows previously reported under UK GAAP. The only changes that have been made are presentational.
The interim financial statements are unaudited. The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the year to 30 September 2007 has been extracted from the statutory accounts for that year and adjusted for the conversion to IFRS. The statutory accounts for the year ended 30 September 2007, which were prepared under UK GAAP, received an unqualified audit report and did not contain a statement made under Section 237(2) and (3) of the Companies Act 1985, and have been filed with the Registrar of Companies.
Following the implementation of IFRS, the group's accounting policies have been consistently applied to all the periods presented unless otherwise stated. The principal policies are set out below.
2. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the group's financial statements.
Basis of consolidation
The consolidated financial information for the period to 31 March 2008 include the results of Indian Restaurants Group Plc and its subsidiary undertakings for that period. Subsidiary undertakings are entities over which the group has the power to control the financial and operating policies so as to obtain benefits from the activities. The group obtains and exercises control through voting rights.
The group adopts the purchase method in accounting for the acquisition of subsidiaries. On acquisition the cost is measured at the fair value of the assets given, plus equity instruments issued and liabilities incurred or assumed at the date of exchange plus any costs directly attributable to the acquisition. The assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair value at the date of acquisition. Any excess of the fair value of the consideration over the fair value of the identifiable net assets acquired is recorded as goodwill. Any deficiency of the fair value of the consideration below the fair value of identifiable net assets acquired is credited to the income statement in the period of the acquisition.
The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group. Inter-company transactions and balances between group companies are eliminated.
Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The group makes estimates and assumptions concerning the future. Whilst the directors believe that the estimates and assumptions used in the preparation of the interim financial statements are reasonable, the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
The group tests whether goodwill has suffered any impairment annually or when there is an indication of impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations which require the use of estimates.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the company's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is included in intangible assets and is tested annually for impairment or when there is an indication of impairment. Any impairment is recognised immediately in the income statement and is not subsequently reversed.
On disposal of a subsidiary, the amount of attributable goodwill is included in the determination of the profit and loss on disposal.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
The charge for depreciation is calculated to write down the cost of tangible fixed assets to their estimated residual values by equal annual instalments over their expected useful lives which are as follows:
Fixtures and fittings 15% reducing balance
Motor Vehicles 25% reducing balance Leasehold building Straight line over the remaining the term of the lease
Impairment provisions are made where the carrying value of tangible fixed assets exceeds the recoverable amount.
Revenue recognition
Revenue is recognised on the sale of food and beverages, service charges and gratuities, exclusive of value added tax.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided on the group's taxable profits, at amounts expected to be paid using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.
Deferred taxation is provided in full using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates that have been enacted at or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Leased assets
Expenditure on operating leases is charged to the income statement on a basis representative of the benefit derived from the asset, normally on a straight line basis over the lease period.
Where fixed assets are financed by financing arrangements which give rights approximating to ownership they are treated as if they had been purchased outright at their fair value and the corresponding commitments are shown in the balance sheet as obligations under finance leases and hire purchase contracts. Depreciation of fixed assets acquired under finance leases and hire purchase contracts is calculated to write off the attributed cost over the shorter of the lease or contract term and their estimated useful lives by equal annual instalments. The excess of the total rentals over the amount capitalised is treated as interest which is charged to the profit and loss account in proportion to the amounts outstanding under the lease and hire purchase contracts.
Share based payments
The cost of equity-settled transaction with suppliers of goods and services is measured by reference to the fair value of the good or service received, unless that fair value cannot be estimated reliably. The fair value of the good or service received is recognised as an expense as the Group receives the good or service. The cost of equity-settled transactions with employees, and transactions with suppliers where fair value cannot be estimated reliably, is measured by reference to the fair value of their equity instrument. The fair value of the equity instrument is determined at the date of grant, taking into account market based vesting conditions. The fair value is determined using the Black Scholes Model.
No expense is recognised for awards that do not ultimately vest, except for awards where the vesting conditions are conditional upon market conditions, which are treated as 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's best estimate of the achievement or otherwise of non-market conditions, the number of equity instruments that will ultimately vest, or in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid funds with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within borrowing in current liabilities on the balance sheet.
Financial instruments
Financial assets and liabilities are recognised in the balance sheet when the Group becomes party to the contractual provisions of the instrument.
Trade and other receivables
Trade receivables are measured at cost less any provision necessary when there is objective evidence that the group will not be able to collect all amounts due.
Trade and other payables
Trade and other payables are not interest bearing and are measured at original invoice amount.
| Six months 31 March | Six months 31 March | Year ended 30 Sept | |
| 2008 | 2007 | 2007 | |
| (unaudited) | (unaudited) | (unaudited) | |
| (as restated) | |||
| £'000 | £'000 | £'000 | |
| Basic | |||
| Loss attributable to ordinary shareholders | 164 | 128 | 263 |
| Weighted average number of shares | 10,079 | 9,479 | 9,479 |
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| Basic loss per share (pence) | 1.62 | 1.35 | 2.8 |
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There was no dilutive effect from the share options outstanding during the year.
On 28 February 2008, the group acquired 100% of the share capital of Chandan Limited and Param Consultancy Limited (together "Mela Group"), a group consisting of three Indian restaurants and a catering business, for a consideration of £1,998,999 satisfied by £100,000 in cash and by the issue of 7,201,365 new ordinary shares at 26.37p per share, some of which are conditional on the achievement of certain targets.
Details of net assets acquired are as follows:
| £'000 | £'000 | ||
| Purchase consideration | |||
| Cash paid | 100 | ||
| Shares issued | 1,899 | ||
| Direct costs relating to the acquisition | 125 | ||
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| Total purchase consideration | 2,124 | ||
| Fair value of identifiable assets acquired | |||
| Property, plant and equipment | 503 | ||
| Inventories | 26 | ||
| Cash and cash equivalents | (199) | ||
| Receivables | 327 | ||
| Payables | (1,336) | ||
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| (679) | |||
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| Goodwill | 2,803 | ||
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Year ended 30 September 2007
| Share capital - equity | Share premium | Retained earnings | Total | ||
| £'000 | £'000 | £'000 | £'000 | ||
| At 1 October 2006 | 948 | 2,991 | (1,300) | 2,639 | |
| Share based payments | - | - | 48 | 48 | |
| Loss for the year | - | - | (263) | (263) | |
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| At 30 September 2007 | 948 | 2,991 | (1,515) | 2,424 | |
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Six months ended 31 March 2007
| Share capital - equity | Share premium | Retained earnings | Total | ||
| £'000 | £'000 | £'000 | £'000 | ||
| At 1 October 2006 | 948 | 2,991 | (1,300) | 2,639 | |
| Loss for the period | - | - | (128) | (128) | |
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| At 31 March 2007 | 948 | 2,991 | (1,428) | 2,511 | |
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Six months ended 31 March 2008
| Share capital - equity | Share premium | Retained earnings | Total | ||
| £'000 | £'000 | £'000 | £'000 | ||
| At 30 September 2007 | 948 | 2,991 | (1,515) | 2,424 | |
| Shares issued in the period | 360 | 405 | - | 765 | |
| Share based payments | - | - | 14 | 14 | |
| Loss for the period | - | - | (164) | (164) | |
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| 1,308 | 3,396 | (1,665) | 3,039 | ||
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