RTN.L Regulatory News (RTN)

The Restaurant Group plc

Interim results for the 26 weeks ended 1 July 2018

Strategic highlights

· Continued improvements to the customer proposition in the Leisure business:

o further progress to increase competitiveness of our brands;

o optimising digital channels; and

o developing new 'off-trade' channels.

· Pubs business outperforming the market and accelerated growth on track:

o organic pipeline further strengthened; and

o expansion accelerated through complementary acquisitions.

· Concessions sales outpacing growth in passengers. Further success in winning new space as well as renewing existing space.

· Progressing well on cost efficiencies.

Financial highlights

· Like-for-like sales down 3.7%, with total sales down 2.1% to £326.1m (2017: £333.1m).

· Adjusted1 profit before tax of £20.1m (2017: £25.5m). Statutory profit before tax of £11.7m (20172: £12.6m).

· Exceptional pre-tax charge of £8.4m (20172: £12.9m).

· Adjusted1 EBITDA of £38.1m (2017: £44.3m).

· Adjusted1 EPS of 7.8p (2017: 10.0p). Statutory EPS of 4.0p (20172: 4.5p).

· Operating cash flow of £25.6m (2017: £46.0m).

· Net bank debt of £22.8m (2017: £19.3m).

· Interim dividend maintained at 6.8p per share, reflecting the Board's continued confidence in progress against the plan.

Current trading and outlook

· Good momentum post the end of the World Cup with like-for-like sales up 2.4% for the six weeks to 26 August 2018.

· Post period acquisition of Food & Fuel Ltd consisting of 11 premium leasehold pubs in affluent London locations for £14.9m.

· We expect to deliver an adjusted PBT outcome for the full year broadly in-line with current market expectations given the impact of adverse weather and the World Cup.

1 Adjusted reflects pre-exceptional items and is further defined in the glossary at the end of this report

2 As restated, refer to note 14 of the interim financial statements for details

The Group's Adjusted performance metrics such as like-for-like sales, Adjusted measures and free cash flow are defined within the glossary at the end of this report.

Andy McCue, Chief Executive Officer, commented:

"Over the last six months we have delivered against our strategy, creating a more competitive and balanced business, more closely aligned to the growth segments of our market.

The turnaround of our Leisure division continues to plan and shows further progress. This was despite the headwinds facing the sector as a whole and the adverse effects of extreme weather and the World Cup.

Meanwhile our Pubs and Concessions businesses have traded strongly, with both businesses expected to deliver significant total sales growth this year. Our recent acquisition of Food & Fuel Ltd will further accelerate our growth at the premium end of the pub market.

We remain focused on developing our offering to meet consumers' evolving demands and behaviours. Over the last six months we have rolled out delivery and 'Click-and-Collect' across most of our Leisure estate and successfully trialled two delivery-only brands, 'Burger Burger' and 'Kick-Ass Burrito', both of which have been well received.

Following a positive like-for-like sales performance in recent weeks, we remain on track to deliver an adjusted PBT outcome broadly in line with current market expectations for the full year."

Enquiries:

Investor and analyst conference call facility

In conjunction with today's management presentation meeting, a live conference call and webcast facility will be available starting at 9:30am. If you would like to register, please contact Robert Collett-Creedy at MHP Communications for details on 020 3128 8147 or email TRG@mhpc.com.

The presentation slides will be available to download from 9:30am from the Company's website https://www.trgplc.com/investors/reports-and-presentations

Business review

Introduction

The balance of the Group continues to evolve with our Pubs and Concessions businesses now contributing 51% of Group outlet EBITDA in the period.

Our Pub restaurants benefit from being in strong locations with attractive market dynamics, coupled with a market leading proposition and operational capability. Our healthy organic pipeline is now being supplemented with bolt-on acquisitions in the premium end of the market.

Concessions continues to benefit from passenger growth and we are exploiting opportunities for new space as airports further invest in terminals, capacity and food and beverage offer. Furthermore, given our strength in capability to develop and operate a broad range of formats, we see potential over the medium term for growth into international airports, as well as UK concessions outside of airports.

Over the last two years we have made significant progress in our Leisure brands with clearly defined and improved brand propositions. However, we are exposed to the well documented retail structural decline (with 57% of our Leisure sites directly neighbouring retail), whilst also competing in saturated local markets, and bearing property costs which are out of kilter with market conditions. 

Given this context, we recognise that differentiated propositions are critical to success. We are also focused on increasing our propositions' exposure to healthy and convenient choices. We expect the delivery market to continue to grow quickly, and, while a disruptive force to physical formats, it also creates strategic opportunities for the Group. 

Against this backdrop we continue to make good progress on the four key elements of our strategy that we set out at the beginning of 2017, to:

- Re-establish the competitiveness of our Leisure brands;

- Serve our customers better and more efficiently;

- Grow our Pubs and Concessions businesses; and

- Build a leaner, faster and more focused organisation.

1. Re-establish competitiveness of our Leisure brands

Frankie & Benny's

The brand has undergone considerable change over the last two years, to re-establish its competitiveness. We have focussed on improving our value, product, brand and service proposition and the overall restaurant environment.

In value, we invested significantly in price reductions in 2017 and remain cheaper than our peers. We also continue to extend our affiliate presence with, for example, Meerkat Meals, available through the brand.

We have upgraded every menu in the brand, amplifying our core offering such as the kids menu which continues to be rated best in class in the market, as well as introducing a much improved range of healthier, vegan and vegetarian options via our 'Feel Good' range.

Our people are core to our brand proposition and we have re-energised and retrained the team. Alongside this we have a new brand look and feel which is being delivered consistently through the business.

That new brand appeal is best illustrated via our environment. In 2018, we have been trialling a capital refresh programme in 10 sites. Early results are encouraging and we are currently investing in a further 10 sites. We remain disciplined in selecting sites, testing and learning and measuring progress. 

Chiquito

Building on the success of the new simplified core menu rolled out in January, we have continued to evolve our Chiquito offering through further menu developments, exciting value offers and investment in a stronger operational team.

Our new core menu is delivering better value to our customers, supported by the latest external market data showing an improvement in value for money ratings against a competitor peer set. We rolled out a substantially improved kids menu this summer, a range of fresh and healthy summer specials, and introduced £1 Taco Tuesdays which have proven so popular, that we have replicated them on Thursdays!

All of this has been underpinned by a focus on operational excellence, leveraging insights from our new at table feedback app. Our customers are recognising these improvements with the latest external market data showing improvement in quality of service scores against a competitor peer set.

Other Leisure brands

The focus here remains on further developing our new proposition, Firejacks, which offers high quality flame-grilled steaks and burgers at highly competitive prices. Encouraged by the performance of the pilot site in Northampton, we have converted a further four Coast-to-Coast sites to Firejacks in recent weeks.

These sites, in Solihull, Stevenage, Chester and Basildon, have all opened very strongly with promising early uplift in covers. Importantly the feedback from guests has been very positive with every one of the new sites delivering strong ratings on social media. We will continue to monitor the performance of these sites to determine the longer term scale of opportunity for the Firejacks brand. 

2. Serve our customers better and more efficiently

We are focused on building a digital platform which enables customers to order, pay and feedback digitally, at home, en route to, or in restaurant, making the customer experience faster, easier and more intuitive. 

We launched and rolled out pay with app functionality across our Leisure business in April, allowing customers to pay on their mobile phone using their credit card, debit card, PayPal or Apple Pay. The take-up so far has been very encouraging.

In May we launched and rolled out a new "real-time" guest-feedback app to allow us to better understand and respond to customer needs. This feedback is being used to drive menu innovation, employee training and operational improvements. By the end of the year, this data will feed into our CRM system.

Later this year we will launch mobile functionality to facilitate ordering ahead of visiting the restaurant. Digital ordering will also enable customers to digitally add to their orders during their meal. We are also developing kiosk functionality which will be particularly helpful to our Concessions business.

Our customer communications are increasingly targeted, via media channels as well as CRM. In June we broadcast our first ever TV advert via Sky Adsmart, enabling us to target specific households which align to our target demographic. Having built and launched our CRM platform in the first half, we are now running campaigns to test our effectiveness at converting lapsed customers, driving incremental customer visits and occasions, and more efficiently targeting and testing promotional mechanics. 

The delivery market is rapidly growing, fuelled by online and investment by aggregators. We have rolled out our delivery offering extensively across our Leisure brands in every site where we sit in an UberEats, Deliveroo or Just Eat zone, with some individual sites delivering across all three platforms. In addition, we have successfully trialled 'delivery-only' brands, initially with 'Burger Burger', targeting locations where a gourmet burger offering is not represented, and followed by 'Kick-Ass Burrito', targeting more casual delivery occasions.

We also rolled out a 'Click and Collect' functionality across our main Leisure brands in June making it easier for our customers to order takeaway and addressing off-trade demand in regions where there is no delivery coverage.

3. Grow our Pubs and Concessions businesses

Pubs

Our Pubs business continued to outperform the pub restaurant sector in the current year. A combination of a stable and attractive customer base and demographics, defensible and well-invested locations and a localised business model with strong operational execution leads to the business being fundamentally robust.

During the year we broadened further our bespoke events such as our gin and prosecco festivals and optimised existing trading space via private dining rooms, function spaces and improved the amenities in some of our gardens and terraces. We anticipate additional revenue opportunities via accommodation and we are opening our first pub with accommodation in September. 

In May we acquired Ribble Valley Inns Ltd which consisted of four leasehold pubs, providing a good opportunity to expand further into the north-west of England, and we see clear scope for investment to enhance their performance.

We have also recently completed the acquisition of Food & Fuel Ltd for £14.9m; consisting of 11 leasehold pubs and café-bars predominately situated in affluent London neighbourhoods and providing a premium offering tailored to local markets. The 11 sites generated EBITDA of £1.9m in their last full financial year. We expect there to be synergies from areas such as purchasing and central costs and an opportunity to continue to grow the business via data driven customer insights and sharing experience and learnings from the existing Brunning and Price operation. We expect to generate a mature company EBITDA run-rate of £2.3m for the 11 sites. With this scale of operation in London, we expect to exploit further expansion opportunities within London, including the possible conversion of some of our existing sites. 

Concessions

Our Concessions business primarily operates in UK airports, an attractive market segment supported by strong levels of passenger growth in recent years, and where airport operators have increasingly invested in additional food and beverage capacity providing an increasingly diverse range of propositions.

We are a market leader in this space having built a distinctive capability to develop and operate multiple formats and brands delivering high quality guest experiences while simultaneously managing the complexity of operating at high volumes with peak and seasonal load bursts.

We have a strong track record of retention with 85% of our legacy sites having received a contract extension and the average extension adding 75% of the original concession term.

So far in 2018 we have been successful in winning 17 new units and expect to add five new partners in UK travel hubs in FY18. These new openings are a mix of multiple brands and multiple categories showcasing our market-leading capability in introducing new brands alongside existing attractive propositions to our evolving market.

As the new Concessions launched this year reach maturity in 2019 we expect total sales to grow by over 10% next year.

4. Build a leaner, faster, more focused organisation

We continue to focus on opportunities to make the cost base leaner and more efficient given the significant cost headwinds that are impacting the sector. 

We have made further progress in leveraging the purchasing power of the Group to ensure we are delivering economies of scale on our food and drink input costs. We continue to achieve improved labour efficiency through the deployment of labour scheduling tools, more flexible staff structures and more responsive deployment. We have further consolidated our supply base on general overhead costs and have made investments in more energy efficient devices. We have also seen success in negotiating with landlords on rent reviews and with local authorities in challenging the business rate increases that have been levied.

We remain focused on cost efficiencies and see some further opportunities to leverage scale economies and consolidate suppliers. 

Current trading and outlook

Recent trading has been encouraging, with like-for-like sales up 2.4% for the six week period since the end of the World Cup. Year to date like-for-like sales for the 34 weeks to 26 August are down 2.8% with like-for-like sales for the first eight weeks of the second half flat compared to last year. 

We have continued to make good progress on our cost efficiency plans and expect to mitigate around 50% of the gross cost headwinds of £18m. We expect to deliver an adjusted PBT outcome for the full year broadly in-line with current market expectations, given the impact of adverse weather and the World Cup.

Including the acquisitions of Ribble Valley Inns Ltd and Food & Fuel Ltd we now expect to open at least 39 new sites in 2018 with associated capital expenditure of between £45m and £50m. Refurbishment and maintenance capital expenditure in 2018 is expected to be £20m to £25m. 

We currently anticipate opening between 10 and 15 units in 2019 which will be predominately within our Pubs and Concessions businesses.

Financial review

Trading results

Like-for-like sales declined by 3.7% in the first half of the year with total turnover down 2.1% to £326.1m (2017: £333.1m). The like-for-like sales decline reflected the investments we made in price and proposition across our Leisure brands in 2017, adverse weather and the World Cup, which were partially offset by a strong like-for-like performance from both our Pubs and Concessions businesses.

With declining like-for-like sales, the well-known sector specific inflationary cost pressures and investments made in price, adjusted1 operating profit fell by 21.0% to £20.9m (2017: £26.5m) with the adjusted1 operating margin falling from 7.9% to 6.4%. On a statutory basis, the Group's operating profit was £12.5m (20172: £13.6m).

Adjusted1 profit before tax for the period was £20.1m (2017: £25.5m), with adjusted1 profit after tax of £15.6m (2017: £20.0m). Adjusted1 earnings per share were 7.8p (2017: 10.0p). On a statutory basis, our profit before tax was £11.7m (20172: £12.6m) and statutory earnings per share were 4.0p (20172: 4.5p).

The Group recognises the continued headwinds on food and drink input costs, labour costs, utilities and occupancy costs. These inflationary cost pressures are anticipated to continue through the second half of the year and into next year at a broadly similar level. We will continue to be vigilant on cost and target efficiencies in order to partially mitigate these increases.

The Group remains cash generative with free cash flow of £14.2m in the period (2017: £35.3m); the reduction in free cash flow reflects the lower operating profit in the period and an adverse working capital movement of £12.5m, a portion of which reflects the timing of certain payments to suppliers which is anticipated to reverse in the second half. On a full year basis it is expected that there will be a working capital outflow in the region of £5.0m due to a reduction in trade creditors and non-cash movements. Net bank debt at the end of the period was £22.8m (2017: £19.3m).

In the period we opened 16 new sites and expect to open at least 39 sites in 2018 (2017: 17 sites).

Restructuring and exceptional charge

An exceptional charge of £8.4m has been recorded in the period (20172: £12.9m), which comprises:

1. An onerous lease provision of £2.3m (2017: £4.3m) recognising the successful exit of 12 sites, the reassessment of the remaining closed sites and a further review of our existing estate;

2. Impairment charge of £6.2m (2017: £4.3m) made against the carrying value of specific restaurant assets due to trading conditions in certain local markets; and

3. Restructuring and strategic review costs of £nil (2017: £4.2m) relating to costs incurred in the restructuring projects that were initiated in 2017 to implement the new strategy and cost saving initiatives.

1 Adjusted reflects pre-exceptional items and is further defined in the glossary at the end of this report

2 As restated, refer to note 14 of the interim financial statements for details

Interim dividend

Given the Board's confidence in progress against the plan and the strength of our balance sheet, we are declaring an interim dividend of 6.8 pence per share, unchanged from last year. The interim dividend will be paid on 11 October 2018 to shareholders on the register on 14 September 2018 and shares will be marked ex-dividend on 13 September 2018. The Board will continue to assess the dividend based on progress against the plan. 

Notes

1. The estate at 1 July 2018 comprised 258 Frankie & Benny's, 85 Chiquito, 16 Coast-to-Coast, 8 Garfunkel's, 7 Filling Station, 4 Joe's Kitchen, 3 Firejacks, 66 Pub restaurants and 62 Concessions.

2. There are a number of potential risks and uncertainties which could have an impact on the Group's performance over the remaining six months of the financial year and which could cause actual results to differ materially from expected and historical results. These have not materially changed from those set out on page 60 of our latest Annual Report and Accounts which can be found on the Group website:  http://www.trgplc.com/investors/regulatory-announcements.

3. Statements contained in this interim report are based on the knowledge and information available to the Company's Directors at the date it was prepared and therefore the facts stated and views expressed may change after that date. By their nature, the statements concerning the risks and uncertainties facing the Company in this interim report involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. To the extent that this interim report contains any statement dealing with any time after the date of its preparation such statement is merely predictive and speculative as it relates to events and circumstances which are yet to occur. The Company undertakes no obligation to update these forward looking statements.

4. The Group's Adjusted performance metrics such as like-for-like sales, Adjusted measures and free cash flow are defined within the glossary at the end of this report.

5. Summary adjusted trading income statement (26 weeks vs 26 weeks):

1Adjusted measures are stated before exceptional items and are as defined within the glossary

6. Summary cash flow statement

The Restaurant Group plc Interim Report 2018

Condensed financial statements

Consolidated income statement

26 weeks ended 1 July 2018

Exceptional

Trading

items

business

(Note 3)

Total

(unaudited)

(unaudited)

(unaudited)

Note

£'000

£'000

£'000

Revenue

326,078

-

326,078

Cost of sales 

 2

(291,473)

(8,444)

(299,917)

Gross profit/(loss)

34,605

(8,444)

26,161

Administration costs

(13,708)

-

(13,708)

Operating profit/(loss)

20,897

(8,444)

12,453

Interest payable

(756)

-

(756)

Interest receivable

1

-

1

Profit/(loss) on ordinary activities before tax

20,142

(8,444)

11,698

Tax on profit/(loss) from ordinary activities

4

(4,517)

861

(3,656)

Profit/(loss) for the period

15,625

(7,583)

8,042

Earnings per share (pence)

Basic

5

7.80

4.01

Diluted

5

7.77

4.00

Earnings before interest, tax, depreciation and amortisation (EBITDA)

38,060

(2,266)

35,794

Depreciation and impairment

(17,163)

(6,178)

(23,341)

Operating profit

20,897

(8,444)

12,453

The Restaurant Group plc Interim Report 2018

Condensed financial statements

Consolidated income statement

26 weeks ended 2 July 2017

Exceptional

items

(Note 3)

Total

Trading

Restated

Restated

business

(Note 14)

(Note 14)

(unaudited)

(unaudited)

(unaudited)

Note

£'000

£'000

£'000

Revenue

333,107

-

333,107

Cost of sales 

 2

(289,505)

(8,625)

(298,130)

Gross profit/(loss)

43,602

(8,625)

34,977

Administration costs

(17,136)

(4,238)

(21,374)

Operating profit/(loss)

26,466

(12,863)

13,603

Interest payable

(968)

-

(968)

Interest receivable

2

-

2

Profit/(loss) on ordinary activities before tax

25,500

(12,863)

12,637

Tax on profit/(loss) from ordinary activities

4

(5,496)

1,945

(3,551)

Profit/(loss) for the period

20,004

(10,918)

9,086

Earnings per share (pence)

Basic

5

9.98

4.53

Diluted

5

9.94

4.52

Earnings before interest, tax, depreciation and amortisation (EBITDA)

44,257

(8,584)

35,673

Depreciation and impairment

(17,791)

(4,279)

(22,070)

Operating profit

26,466

(12,863)

13,603

The Restaurant Group plc Interim Report 2018

Condensed financial statements

Consolidated income statement

52 weeks ended 31 December 2017

Exceptional

Trading

items

business

(Note 3)

Total

(audited)

(audited)

(audited)

Note

£'000

£'000

£'000

Revenue

679,282

-

679,282

Cost of sales

 2

(589,490)

(8,386)

(597,876)

Gross profit/(loss)

89,792

(8,386)

81,406

Administration costs

(31,188)

(4,772)

(35,960)

Operating profit/(loss)

58,604

(13,158)

45,446

Interest payable

(1,911)

-

(1,911)

Interest receivable

51

-

51

Profit/(loss) on ordinary activities before tax

56,744

(13,158)

43,586

Tax on profit/(loss) from ordinary activities

4

(12,076)

1,423

(10,653)

Profit/(loss) for the period

44,668

(11,735)

32,933

Earnings per share (pence)

Basic

5

22.29

16.44

Diluted

5

22.18

16.36

Earnings before interest, tax, depreciation and amortisation (EBITDA)

95,118

(8,973)

86,145

Depreciation and impairment

(36,514)

(4,185)

(40,699)

Operating profit

58,604

(13,158)

45,446

The Restaurant Group plc Interim Report 2018

Condensed financial statements

Consolidated balance sheet

At 1 July 2018

At 2 July 2017

At 31 December 2017

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Non-current assets

Intangible assets

26,998

26,433

26,433

Property, plant and equipment

331,337

343,304

335,029

358,335

369,737

361,462

Current assets

Stock

5,955

5,750

5,930

Other receivables

17,257

12,719

14,949

Prepayments

19,833

17,064

17,473

Cash and cash equivalents

6,575

8,734

9,611

49,620

44,267

47,963

Total assets

407,955

414,004

409,425

Current liabilities

Corporation tax liabilities

(4,342)

(2,015)

(2,129)

Trade and other payables

(140,164)

(136,810)

(124,238)

Other payables - finance lease obligations

(164)

(330)

(164)

Provisions

(8,189)

(13,252)

(10,408)

(152,859)

(152,407)

(136,939)

Net current liabilities

(103,239)

(108,140)

(88,976)

Non-current liabilities

Long-term borrowings

(29,384)

(28,039)

(31,223)

Other payables - finance lease obligations

(2,488)

(3,013)

(2,548)

Deferred tax liabilities

(4,415)

(3,490)

(5,127)

Provisions

(29,874)

(36,574)

(31,688)

(66,161)

(71,116)

(70,586)

Total liabilities

(219,020)

(223,523)

(207,525)

Net assets

188,935

190,481

201,900

Equity

Share capital

56,551

56,550

56,551

Share premium

25,554

25,542

25,554

Other reserves

(7,520)

(8,938)

(7,753)

Retained earnings

114,350

117,327

127,548

Total equity

188,935

190,481

201,900

The Restaurant Group plc Interim Report 2018

Condensed financial statements

Consolidated statement of changes in equity

Share

Share

Other

Retained

capital

premium

reserves

earnings

Total

£'000

£'000

£'000

£'000

£'000

Balance at 2 January 2017 - Restated (Note 14) (audited)

56,550

25,542

(9,987)

129,481

201,586

Profit for the period - Restated (Note 14)

-

-

-

9,086

9,086

Dividends

-

-

-

(21,240)

(21,240)

Share-based payments - credited to equity

-

-

980

-

980

Deferred tax on share-based payments taken directly to equity

-

-

69

-

69

Balance at 2 July 2017 (unaudited)

56,550

25,542

(8,938)

117,327

190,481

Balance at 2 January 2017 - Restated (Note 14) (audited)

56,550

25,542

(9,987)

129,481

201,586

Profit for the year

-

-

-

32,933

32,933

Issue of new shares

1

12

-

-

13

Dividends

-

-

-

(34,866)

(34,866)

Share-based payments - credited to equity

-

-

2,158

-

2,158

Deferred tax on share-based payments taken directly to equity

-

-

76

-

76

Balance at 31 December 2017 (audited)

56,551

25,554

(7,753)

127,548

201,900

Balance at 1 January 2018 (audited)

56,551

25,554

(7,753)

127,548

201,900

Profit for the period

-

-

-

8,042

8,042

Dividends

-

-

-

(21,240)

(21,240)

Share-based payments - credited to equity

-

-

190

-

190

Deferred tax on share-based payments taken directly to equity

-

-

43

-

43

Balance at 1 July 2018 (unaudited)

56,551

25,554

(7,520)

114,350

188,935

The Restaurant Group plc Interim Report 2018

Condensed financial statements

Consolidated cash flow statement

26 weeks ended1 July 2018

26 weeks ended 2 July 2017

Restated

(Note 14)

52 weeks ended31 December 2017

(unaudited)

(unaudited)

(audited)

Note

£'000

£'000

£'000

Operating activities

Cash generated from operations

7

25,588

46,039

108,030

Interest received

10

3

55

Interest paid

(376)

(320)

(751)

Tax paid

(2,113)

(1,724)

(7,068)

Cash outflows from exceptional onerous lease provisions

(5,650)

(6,970)

(12,738)

Cash outflows from exceptional restructuring costs

-

(5,571)

(6,792)

Net cash flows from operating activities

17,459

31,457

80,736

Investing activities

Purchase of property, plant and equipment

(17,602)

(22,095)

(39,275)

Proceeds from disposal of property, plant and equipment

-

-

828

Purchase of subsidiary

(925)

-

-

Cash acquired on acquisition of subsidiary

114

-

-

Net cash flows used in investing activities

(18,413)

(22,095)

(38,447)

Financing activities

Net proceeds from issue of ordinary share capital

-

-

13

Net repayments of borrowings

8

(2,000)

(10,000)

(7,000)

Dividends paid to shareholders

-

-

(34,866)

Decrease in obligations under finance leases

(82)

(196)

(393)

Net cash flows used in financing activities

(2,082)

(10,196)

(42,246)

Net (decrease)/increase in cash and cash equivalents

(3,036)

(834)

43

Cash and cash equivalents at the beginning of the period

9,611

9,568

9,568

Cash and cash equivalents at the end of the period

6,575

8,734

9,611

By order of the Board,

Andrew McCue

Kirk Davis

Chief Executive Officer

Chief Financial Officer

31 August 2018

31 August 2018

26 weeks ended 1 July 2018

26 weeks ended 2 July 2017

Restated

(Note 14)

52 weeks ended 31 December 2017

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Cost of sales consists of the following: 

Continuing business excluding pre-opening costs

290,828

287,936

587,347

Pre-opening costs

645

1,569

2,143

Trading cost of sales

291,473

289,505

589,490

Exceptional charge

8,444

8,625

8,386

Cost of sales for the period/year

299,917

298,130

597,876

26 weeks ended 1 July 2018

26 weeks ended 2 July 2017

Restated

(Note 14)

52 weeks ended 31 December 2017

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Onerous lease provision in respect of closed and other sites

2,266

4,346

4,201

Impairment of property, plant and equipment

6,178

4,279

4,185

Restructuring and strategic review costs

-

4,238

4,772

Exceptional items before tax

8,444

12,863

13,158

Tax effect of exceptional items

(861)

(1,945)

(1,423)

Net exceptional items for the period/year

7,583

10,918

11,735

26 weeks ended 1 July 2018

26 weeks ended 2 July 2017

52 weeks ended 31 December 2017

Earnings

Weighted average number of shares

Per share amount

Earnings

Restated

(Note 14)

Weighted average number of shares

Per share amount

Restated

(Note 14)

Earnings

Weighted average number of shares

Per share amount

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)

(audited)

(audited)

£'000

millions

pence

£'000

millions

pence

£'000

millions

pence

Basic earnings per share

8,042

200.4

4.01

9,086

200.4

4.53

32,933

200.4

16.44

Effect of dilutive options

-

0.1

0.00

-

0.1

(0.00)

-

0.3

(0.02)

Shares held by employee benefit trust

-

0.7

(0.01)

-

0.7

(0.01)

-

0.7

(0.06)

Diluted earnings per share

8,042

201.2

4.00

9,086

201.2

4.52

32,933

201.3

16.36

Basic earnings per share

8,042

200.4

4.01

9,086

200.4

4.53

32,933

200.4

16.44

Effect of exceptional items

7,583

-

3.79

10,918

-

5.45

11,735

-

5.85

Earnings per share - trading business

15,625

200.4

7.80

20,004

200.4

9.98

44,668

200.4

22.29

Effect of dilutive options

-

0.1

(0.00)

-

0.1

(0.01)

-

0.3

(0.03)

Shares held by employee benefit trust

-

0.7

(0.03)

-

0.7

(0.03)

-

0.7

(0.08)

Dilutive earnings per share - trading business

15,625

201.2

7.77

20,004

201.2

9.94

44,668

201.3

22.18

26 weeks ended 1 July 2018

26 weeks ended 2 July 2017

Restated (Note 14)

52 weeks ended 31 December 2017

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Profit before tax

11,698

12,637

43,586

Net interest charges

755

966

1,860

Onerous lease provision in respect of closed and other sites

2,266

4,346

4,201

Impairment of property, plant and equipment

6,178

4,279

4,185

Restructuring and strategic review costs

-

4,238

4,772

Depreciation

17,163

17,791

36,514

Share-based payments

190

980

2,158

Loss on disposal of property, plant and equipment

27

-

-

Decrease/(increase) in stocks

20

(118)

(298)

(Increase)/decrease in other receivables

(4,619)

4,824

2,185

(Decrease)/increase in payables

(8,090)

(3,904)

8,867

Cash generated from operations

25,588

46,039

108,030

At 1 July 2018

At 2 July 2017

At 31 December 2017

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Cash and cash equivalents

6,575

8,734

9,611

Other receivables

17,257

12,719

14,949

Total financial assets

23,832

21,453

24,560

At 1 July 2018

At 2 July 2017

At 31 December 2017

(unaudited)

(unaudited)

(audited)

£'000

£'000

£'000

Trade and other payables

120,552

115,868

102,621

Finance lease payable

164

330

164

Short-term financial liabilities

120,716

116,198

102,785

Long-term borrowings - at floating interest rates

30,000

29,000

32,000

Bank fees

(616)

(961)

(777)

Finance lease payable

2,488

3,013

2,548

Long-term financial liabilities

31,872

31,052

33,771

Total financial liabilities

152,588

147,250

136,556

£'000

Purchase consideration 

Cash paid

925

Cash due

14

Total purchase consideration

939

Fair value

£'000

Cash and cash equivalents 

114

Property, plant and equipment

835

Stock

45

Receivables

50

Payables

(670)

Net identifiable assets acquired

374

Add: goodwill

565

939

As originally disclosed

2 July 2017

Restatement

As restated

£'000

£'000

£'000

Consolidated income statement

Exceptional cost of sales

(18,439)

9,814

(8,625)

Cost of sales

(307,944)

9,814

(298,130)

Exceptional tax credit

3,908

(1,963)

1,945

Tax on profit from ordinary activities

(1,588)

(1,963)

(3,551)

Profit for the year

1,235

7,851

9,086

Consolidated statement of changes in equity

Retained earnings as at 2 January 2017

137,332

(7,851)

129,481

Basic and diluted earnings per share

Basic earnings per share (pence)

0.62

3.91

4.53

Diluted earnings per share (pence)

0.61

3.91

4.52

As originally disclosed

2 July 2017

Restatement

As restated

£'000

£'000

£'000

Consolidated cash flow statement

Cash outflows from exceptional onerous lease provisions

-

(6,970)

(6,970)

Cash outflows from exceptional restructuring costs

-

(5,571)

(5,571)

Net cash flows from operating activities

43,802

(12,345)

31,457

Utilisation of property provisions

(6,970)

6,970

-

Cash outflows from exceptional restructuring costs

(5,571)

5,571

-

Net cash flows used in investing activities

(34,636)

12,541

(22,095)

Trading business

Represents the performance of the business before exceptional items and is considered as the key metrics for shareholders to evaluate and compare the performance of the business from period to period.

Exceptional items

Those items that, by virtue of their unusual nature or size, warrant separate additional disclosure in the financial statements in order to fully understand the performance of the Group.

Like-for-like sales

This measure provides an indicator of the underlying performance of our existing restaurants. There is no accounting standard or consistent definition of 'like-for-like sales' across the industry. Group like-for-like sales are calculated by comparing the performance of all mature sites in the current period versus the comparable period in the prior year. Sites that are closed, disposed or disrupted during a financial year are excluded from the like-for-like sales calculation.

EBITDA

Earnings before interest, tax, depreciation and amortisation.

Outlet EBITDA

EBITDA directly attributable to individual sites and therefore excluding corporate and central costs.

Adjusted EBITDA

Earnings before interest, tax, depreciation, amortisation and exceptional items. Calculated by taking the trading business operating profit and adding back depreciation.

Net bank debt

Net bank debt is calculated as the net of the long-term borrowings less cash and cash equivalents.

Free cash flow

EBITDA less working capital and non-cash movements (excluding exceptional items), tax payments, interest payments and maintenance capital expenditure.

Adjusted operating profit

Earnings before interest and tax and exceptional items.

Adjusted EPS

Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year.

Adjusted diluted EPS

Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year, including the effect of dilutive potential ordinary shares.

Adjusted profit before tax

Calculated by taking the profit before tax of the business pre-exceptional items.

Adjusted tax

Calculated by taking the tax of the business pre-exceptional items.