Final Results and Notice of AGM

Richoux Group plc

Final results for the 53 weeks ended 3 December 2017

Richoux Group plc, the owner and operator of 18 restaurants under the Richoux, Dean's Diner, Villagio, Friendly Phil's and Zintino brands, today announces its audited final results for the year ended 31 December 2017.

Key points:

· Turnover decreased 17.4% to £11 million

(2016: £13.32 million).

· Adjusted* EBITDA decreased to a loss of £0.8 million

(2016: £0.20 million).

· Currently seventeen restaurants trading

· Cash of £1.74 million at year end

(2015: £3.86 million)

* excluding pre-opening costs, impairment, reorganisation costs and onerous lease provision.

Enquiries:

Chairman's Review

Results

Revenue for the 53 week period ended 31 December 2017 decreased 17.4 per cent on the 52 week period ended 25 December 2016 to £11.00 million (2016: £13.32 million). Adjusted EBITDA before pre-opening costs, impairment, reorganisation costs and onerous lease provision decreased to a loss of £0.8 million (2016: £0.20 million). The adjusted operating loss before pre-opening costs, impairment, reorganisation costs and onerous lease provision was £1.34 million (2016: £0.63 million). The net loss for the period was £4.5 million (2016: £6.7 million).

The Board, led by Jonathan Kaye, undertook a strategic review of all restaurants and operations of the Group. As part of this review certain restaurants were rebranded or closed which contributed to the significant impairment charge and onerous lease provision.

The Directors are not recommending the payment of a dividend.

Operations

The Group currently has seventeen restaurants which operate under the Richoux, Villagio, Friendly Phil's and The Broadwick brands. Further details on each of the brands are set out below.

Richoux

Richoux is an all day cafe and brasserie established in London in 1909.

The Group currently five Richoux restaurants in Knightsbridge, Mayfair, Piccadilly, Gloucester Arcade and Port Solent. The Port Solent and Chislehurst restaurants were previously Villagio restaurants, and were converted into Richoux restaurants in February and March 2017 respectively. The restaurant in St John's Wood closed in May 2017 when the restaurant lease ended. The restaurants in Gloucester Arcade, Knightsbridge and Piccadilly were refurbished in May, June and July 2017 respectively. Since the year end the Chislehurst Richoux restaurant has been rebranded as The Broadwick, a new brand being introduced by the Group in appropriate locations.

Friendly Phil's

Friendly Phil's is a vintage American Diner.

The Group currently has six Friendly Phil's restaurants, in Hempstead Valley which opened in March 2017, Port Solent, which opened in April 2017, Chatham which opened in May 2017, Braintree which opened in May 2017, Canterbury which opened in May 2017 and Fareham which opened in June 2017. These restaurants were previously Dean's Diner restaurants apart from Canterbury which was a Zintino restaurant.

The restaurant in Bicester was sold in January 2017, the lease for the restaurant in Orpington was surrendered in April 2017, the restaurant in Trowbridge was sold in September 2017 and the lease for the restaurant in Yate was surrendered in September 2017.

Italian Restaurants

The Group currently has four Italian style restaurants in Andover, Basildon, Hammersmith, and Chatham operating under Villagio or Zintino brand. The restaurant in High Wycombe was sold at the end of January 2017.

As with Richoux, Chislehurst, since the year ended our Zippers restaurant in Chatham has been rebranded as The Broadwick.

The Broadwick

The Broadwick is a restaurant and bar offering popular global food, homemade on the premises. Portions are hearty and the drink offer is extensive. The restaurants are bright, vibrant, and individual in their design.

We currently have two restaurants (Chislehurst and Chatham) operating under this new format and early signs are encouraging.

Cash flow and capital expenditure

At 31 December 2017 the Group held cash of £1.74 million (2016: £3.86 million).

Capital expenditure of £4.05 million was incurred in the period; on the rebranding and refurbishment of the existing restaurants.

Team

As noted above, and in line with the Group's revised growth strategy, during 2017 we began to reposition a number of our restaurants by converting them to Richoux or Friendly Phil's restaurants, as well as disposing of or closing certain other restaurants and this process currently continues. The successful delivery of our plans depends upon our team and I would like to take the opportunity to thank all of them for the continued commitment and enthusiasm during what, for many of them, has been a period of significant change.

Annual General Meeting and additional General Meeting

The Company will hold its Annual General Meeting at 10:00 am on 25 June 2018 at Dechert LLP, 160 Queen Victoria Street, London, EC4V 4QQ.

Due to a number of factors, including in particular the making of a provision against loans previously made by the Company to certain of its subsidiary undertakings, the Company's net assets now represent less than half of its called up share capital. Accordingly, in accordance with section 656 Companies Act 2006, the Board is required to call a General Meeting to consider whether any, and if so what, steps should be taken to address the situation. Accordingly, immediately following the Annual General Meeting for 2018, a further General Meeting will be held to discuss this matter.

Outlook

Like many restaurant groups in the casual dining sector, trading during 2017 has been difficult. In addition, during this period trading in some of our restaurants was interrupted whilst we converted or refurbished them. The impact of temporary closures will continue during 2018.

The cost of converting or refurbishing restaurants and of closing underperforming restaurants, the reduction of income due to temporary closures and the current trading climate all have had an impact on the Group's cash balances. We continue to focus on cost reduction and, where necessary, will continue refining our portfolio. We are also conscious that, in this trading environment, opportunities may also arise for companies like ourselves which are ungeared. The Board has had informal discussions with some of the Company's key stakeholders, who have indicated that, if during the course of the year the Board concludes that further funds are required, it would be their intention to support such a fund raising. We propose to seek the necessary authorities to allot shares in connection with such a fundraising at our 2018 Annual General Meeting.

Simon Morgan

Chairman

25 May 2018 

Strategic Report

Business review and key performance indicators

Revenue has decreased to £11.00 million (2016: £13.32 million) and adjusted EBITDA has decreased to loss £0.8 million (2016: £0.20 million). This decrease largely reflects the strategic review of all the restaurants and operations of the Group which resulted in a number of restaurants being closed or rebranded with pre-opening costs increasing to £0.44 million (2016: £0.10 million). The net loss for the period was £4.5 million (2016: £6.7 million).

The Directors utilise a number of detailed performance indicators to manage the business. The focus in the Income Statement is on sales and operating profit compared to budget and the prior year. In the Statement of Financial Position the focus is on managing working capital.

The Directors recognise the importance of customer relations and food quality, and the team are trained extensively in this regard. Performance is monitored by our area managers as well as by regular mystery diner visits and food quality audits. Restaurant managers are bonused on a combination of achieving standards as well as sales growth and costs control.

Principal uncertainties and risks

Economic conditions

Deterioration in consumer confidence due to future economic conditions could have a detrimental impact on the Group in terms of sales and footfall. This risk is mitigated by the positioning the Group's brands in the affordable casual dining market, constantly reviewing pricing to ensure it is competitive, and continued focus on customers with targeted and adaptable marketing. There is also uncertainty following the EU referendum in June 2016 and the decision to leave the EU.

Cost inflation

The Group's key variable costs are the costs of food and labour both of which face inflationary pressures in the medium term. The Group monitors its food supply chain closely, regularly reviewing food costs and implementing a variety of strategies to mitigate the impact of price increases. The Group closely monitors labour costs and uses a number of initiatives to control costs. There are also labour cost pressures which are outside the control of the Group such as the recently introduced living wage and minimum wage increases which are suffered by both the Group and its competitors.

Strategic risks

There are a number of inherent risks in developing new brands. However, the Group has a strong team with a proven track record in developing new brands.

Future development

The Group is putting expansion on hold while we work to repair the existing estate unless an attractive opportunity presents itself. This involves closing and disposing of underperforming restaurants as well as refurbishing or rebranding others. To that end, we have closed four restaurants towards end of 2016 and two restaurants during 2017, of which we have disposed of one restaurant. We have also rebranded an additional eight restaurants. In the immediate future, we intend to concentrate on continuing to develop the new Friendly Phil's and Richoux formats, alongside overhauling our Italian concept, Villagio.

The motivation and engagement of the team will remain a priority. We have so far replaced all of the multi-unit restaurant managers in the business and introduced a team of area chefs who continually monitor food standards across the estate. This process of internal auditing will only be strengthened as the new brands continue to develop.

On behalf of the Board

Jonathan Kaye

Chief Executive Officer

25 May 2018 

Richoux Group plc

Consolidated statement of comprehensive income

for the 53 week period ended 31 December 2017

Richoux Group plc

Consolidated statement of changes in equity

for the 53 week period ended 31 December 2017

Richoux Group plc

Consolidated statements of financial position

at 31 December 2017

Richoux Group plc

Consolidated and Company statement of cash flows

for the 53 week period ended 31 December 2017

Notes

1. The consolidated financial statements have been prepared in compliance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements have been prepared on the historical cost basis.

2. The financial information set out above does not constitute the Company's statutory accounts for the periods ended 27 December 2015 or 25 December 2016 but it is derived from those accounts. Statutory accounts for 27 December 2015 have been delivered to the Registrar of Companies and those for 25 December 2016 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

3. Business segments

Based on the financial information which is monitored by the board, which comprises the chief operating decision maker as defined in IFRS 8, the Group has three reportable business segments based around its core restaurant brands, Dean's Diner, Villagio and Richoux. All brands are engaged in the restaurant trade so derive their revenues and results from similar products and services. There are no geographical segments and there are no major customers.

Occasionally the Group also receives franchise income, however this is not considered to be a significant business segment and the Group has no control over the timing of this income. Franchise income is reported under other operating income.

The Group sublet part of one and the whole of another of its leased properties and receives sublease payments from third parties.

Business segments for the 53 week period ended 31 December 2017:

The unallocated segment loss includes the costs of the restaurant area management; unallocated administrative expenses include the costs of the Group's head office.

4. Earnings per share

The calculation of the basic and diluted loss per share is based on the following data:

5. Intangible fixed assets

Impairment testing of goodwill and intangible fixed assets

Goodwill of £264,000 (2016: £269,000) relates to the acquisition of Richoux Limited in August 2000 and is allocated to the group of cash generating units (CGUs) that comprise the business acquired (as described in note 3) with each restaurant site being treated as a single CGU.

The Group tests annually for impairment or more frequently if there are indications that the goodwill and intangible assets may be impaired. The recoverable amounts of the restaurants are calculated from value in use calculations based on cash flow projections from formally approved budgets to December 2018, and forecasts to future years on a sales growth for the sites. The discount rate applied to cash flow projections is 10 per cent (2016: 10 per cent).

An impairment charge of £83,000 has been recognised in relation to the goodwill of one of the CGUs that comprise the Richoux business (2016: £4,000 was recognised; £3,000 in relation to the unrecoverable elements of the assets of six Dean's Diner restaurants and £1,000 in relation to the unrecoverable elements of the assets of three Villagio restaurants). The value in use of the remaining restaurants is higher than the carrying value.

6. Property, plant and equipment

Impairment testing of property, plant and equipment

The Group considers each trading restaurant to be a cash-generating unit (CGU) and each CGU is reviewed when there are indications of impairment.

The recoverable amounts of the restaurants are calculated from value in use calculations based on cash flow projections from formally approved budgets to December 2018, and forecasts to future years based on a sales growth rate of the sites. The discount rate applied to cash flow projections is 10 per cent (2016: 10 per cent).

An impairment charge of £2,675,000 has been recognised; £927,000 in relation to the unrecoverable elements of the assets of three Richoux restaurants and £1,748,000 in relation to the unrecoverable elements of the assets of six Friendly Phil's restaurants (2016: £5,039,000 was recognised; £2,866,000 in relation to the unrecoverable elements of the assets of nine Dean's Diners restaurants, £1,504,000 in relation to the unrecoverable elements of the assets of five Villagio restaurants and £669,000 in relation to the unrecoverable elements of the assets of one Richoux restaurant). The value in use of the remaining restaurants is higher than the carrying value.

7. Reconciliation of operating loss to operating cash flows

8. Related party transactions

Up to the date of Philip Shotter's resignation the Group paid professional fees for legal services of £16,000 (2016: £29,000) to Glovers Solicitors LLP of which Philip Shotter is a member. As at the end of the period £nil was outstanding (2016: £nil). This is in addition to fees included as Directors' emoluments.

The Group has a group VAT registration and the representative Company, Richoux Group plc, pays the net VAT for the Group.

The Group has a group insurance policy which is paid by Richoux Group plc.

Transactions with Directors

Transactions with Directors are as follows:

During the period Salvatore Diliberto subscribed for 5,273,375 (includes 2,636,687 subscribed for by his wife Irene Diliberto) ordinary shares (2016: 1,054,394), the Hon. Robert Rayne subscribed for 4,103,838 ordinary shares (2016: 1,054,394), Jonathan Kaye subscribed for 3,125,000 ordinary shares (2016: 1,354,395), Simon Morgan subscribed for 125,000 ordinary shares (2016: nil), and Mehdi Gashi subscribed for nil ordinary shares (2016: 400,000) as part of the subscription that took place during the period (see note 24). The price paid per share was 16 pence (2016: 25 pence).

Transactions with substantial shareholders

During the period Phillip Kaye subscribed for 3,121,025 ordinary shares (2016: 451,465), Samuel Kaye subscribed for 1,250,000 ordinary shares (2016: 451,465), Adam Kaye subscribed for 1,250,000 ordinary shares (2016: 451,465), and Michinoko Limited subscribed for 4,216,750 ordinary shares (2016: 1,054,394) as part of the subscription that took place during the period (see note 24). The price paid per share was 16 pence (2016: 25 pence).

On 22 December 2017 the Group entered into an agreement with Amberstar Limited, a Company in which Phillip Kaye is a shareholder, to temporarily suspend the rent of its former Chiswick restaurant, where it retains a liability under an authorised guarantee agreement, for up to six months from 25 December 2017.

9. Subsequent events

There were no significant subsequent events which the directors consider require disclosures within these financial statements.

10. Report and accounts and notice of AGM

The notice of AGM along with the Annual Report and Accounts for the 53 weeks ended 31 December 2017 will shortly be posted to shareholders. An electronic copy of the document can be found following posting on the Investor Relations section of the Company's website at www.richouxgroup.co.uk.

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