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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Restaurant Group Plc | LSE:RTN | London | Ordinary Share | GB00B0YG1K06 | ORD 28 1/8P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 64.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMRTN
RNS Number : 8983G
Restaurant Group PLC
07 March 2018
The Restaurant Group plc
Final results for the 52 weeks ended 31 December 2017
Strategic highlights
-- Proposition enhancements in Frankie & Benny's are driving improving volume momentum -- Good progress across other Leisure brands
-- Pubs business continues to outperform the market and pipeline of new opportunities further strengthened
-- Concessions business expanding into new infrastructure hubs, and with relevant new brands
-- Cost reduction programme of GBP10m delivered ahead of plan, enabling reinvestment in Leisure business
-- Enhanced senior leadership team in place
Financial highlights
-- Like-for-like sales down 3.0% -- Total sales down 1.8% on a 52 week comparable basis; down 4.4% on a statutory basis
-- Adjusted(1) profit before tax of GBP56.7m (2016: GBP77.1m). Statutory profit before tax of GBP43.6m (2016(2) : loss of GBP49.3m)
-- Exceptional pre-tax charge of GBP13.2m (2016(2) : GBP126.5m) -- Adjusted(1) EBITDA of GBP95.1m (2016: GBP121.0m)
-- Adjusted(1) EPS of 22.3p (2016: 30.0p). Statutory EPS of 16.4p (2016(2) : 24.0p loss per share)
-- Continued strong free cash flow of GBP84.9m (2016: GBP78.9m) -- Operating cash flow of GBP107.6m (2016: GBP122.1m) -- Net bank debt of GBP21.6m at year-end (2016: GBP28.3m)
-- Total full year dividend maintained at 17.4p per share, reflecting the Board's confidence in delivery of the plan
The highlights reflect the statutory 52 week year in 2017 versus the statutory 53 week year in 2016 unless stated otherwise
(1) Adjusted reflects pre-exceptional costs and is further defined in the glossary at the end of this report
(2) As restated, refer to note 1 for details
Andy McCue, Chief Executive Officer, commented:
"As expected, 2017 was a transitional year for the Group, with significant investments made in price and proposition within our Leisure business, which is driving improving volume momentum. We start 2018 with a significantly more competitive offering in our Leisure business, a strengthened pipeline of growth opportunities in both our Pubs and Concessions businesses, and a leaner, faster and more focused organisation. I'd like to thank our colleagues for embracing the change agenda and for their contribution to stabilising the business."
Enquiries:
The Restaurant Group plc Andy McCue, Chief Executive Officer Kirk Davis, Chief Financial Officer 020 3117 5001 Instinctif Partners Matthew Smallwood Guy Scarborough 020 7457 2020
Investor and analyst conference call facility
In conjunction with today's management presentation meeting, a live conference call facility will be available starting at 8:45am. If you would like to participate, please call Harshita Nandni at Instinctif Partners for dial-in details on 0207 427 1445 or email harshita.nandni@instinctif.com.
The presentation slides will be available to download from 8:30am from the Company's website https://www.trgplc.com/investors/reports-and-presentations
Notes:
1. The Restaurant Group plc currently operates 498 restaurants and pub restaurants throughout the UK. Its principal trading brands are Frankie & Benny's, Chiquito, Coast to Coast and Brunning & Price. It also operates a multi-brand Concessions business which trades principally in UK airports.
2. Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect the Group's current expectations concerning future events and actual results may differ materially from current expectations or historical results.
3. The Group's Adjusted performance metrics ('APMS') such as like-for-like sales, Adjusted measures and free cash flow are defined within the glossary at the end of this report.
Chairman's statement
2017 has been a transitional year for the Group, with a test and learn approach allowing us to develop the proposition of our brands. Despite the challenging market context, we have continued to make good progress against the four key elements of our strategy:
-- Re-establishing the competitiveness of our Leisure brands; -- Serving our customers better and more efficiently; -- Growing our Pubs and Concessions businesses; and -- Building a leaner, faster and more focused organisation.
Total revenues were down 4.4% to GBP679.3m, with like-for-like sales for the 52 weeks ended 31 December 2017 down 3.0%, representing an improvement on the decline in 2016. Adjusted(1) profit before tax was down 26.4% to GBP56.7m and Adjusted(1) EPS was down 25.7% to 22.3p per share. Statutory profit before tax was GBP43.6m and the statutory earnings per share were 16.4p.
Our investments in price, food quality and marketing drove progressively improved volume momentum in our Leisure businesses. Pubs and Concessions both performed well, with the pipeline of new opportunities in both continuing to grow.
We took a low-key approach to marketing our key brands while the changes to the proposition were at an early stage. The latter part of the year has seen us test different media and we are gaining confidence in our ability to segment and target the customers of each of our brands. Investment in digital and social media is beginning to show cut through, with more targeted marketing.
The Group has faced well documented external cost pressures throughout 2017, from the increases in the national living wage and national minimum wage, the introduction of the apprenticeship levy, the revaluation of business rates, higher energy taxes and increased purchasing costs due to the combined effects of a devalued pound and commodity inflation. As we seek to mitigate these cost pressures, our initiatives to improve the effectiveness of our labour scheduling and to exploit new technologies are on track and continue to drive efficiencies.
We have proactively managed Board succession throughout the year and added new and relevant skills. Barry Nightingale stepped down as Chief Finance Officer in April 2017 and Kirk Davis replaced him in February 2018. Kirk has extensive finance experience within listed leisure and retail businesses and joins from Greene King plc where he has spent the past three years as Chief Financial Officer. Sally Cowdry stepped down from the Board as a Non-Executive Director in August 2017 and Paul May joined as a Non-Executive Director in July 2017. Paul has been the Chief Executive Officer of Patisserie Holdings plc since 2006. He has extensive experience of managing public and private companies in the retail and hospitality sectors. We are looking to recruit a further Non-Executive Director during 2018, with digital credentials.
We have also added to the strength and depth of the senior leadership team, with the appointment of Murray McGowan as Managing Director of our Leisure Businesses, joining us from Costa Express and Michael Healy as Chief Marketing Officer, joining us from Paddy Power Betfair plc.
The Board continues to ensure that we have a rigorous and disciplined approach to the allocation of capital, and that the Group's brand and location strategy is robust. As a consequence, we have taken action to close underperforming sites which we do not believe are capable of generating adequate returns.
The business continues to generate strong free cash flow, with GBP84.9m in 2017. Given our continued confidence in our plan, the Board is proposing the payment of a final dividend of 10.6 pence per share to be paid on 5 July 2018 to all shareholders on the register on 8 June 2018 (ex-dividend date 7 June 2018). The total dividend for the year is, therefore, maintained at 17.4 pence per share. The Board will continue to assess the dividend based on progress against our plan.
The Group employs over 15,000 people and they are the lifeblood of our business. The Board would like to record our thanks and appreciation for their hard work and commitment.
We have made solid progress on our strategic initiatives in 2017, resulting in improved volume momentum in our Leisure business, growth in our Pubs and Concessions business, a lower cost base across the business and a more focused growth plan. We continue to benefit from strong cash generation and a healthy balance sheet. While the market has softened, the Board is confident that we have a robust plan and the team and resources in place to deliver.
Debbie Hewitt MBE
Chairman
7 March 2018
Business review
Introduction
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.
We've made significant proposition improvements in our Leisure business focusing on giving our customers better value and improved food quality along with retrained service standards, all of which are driving improving volume momentum.
We start 2018 with a significantly more competitive and improved offering across our Leisure business, an established expansion programme across our Pubs and Concessions businesses, an enhanced leadership team and a more efficient and focused business.
1. Re-establish competitiveness of our Leisure brands
Frankie & Benny's (259 units)
Our focus has been on enhancing our offer by restoring our value credentials, deepening the distinctiveness of our offer to our core family audience and launching a refocused and refreshed brand nationwide to attract back lapsed customers.
Following the discovery in 2016 that the brand had lost significant value credentials, we made significant investments in price in 2017. In January we re-introduced a GBP9.95 two-course fixed price menu, our cheapest fixed price menu for six years. We trialled and subsequently launched our new, significantly better value core menu in two waves in March and May. Drawing on customer insight, we launched an optimised version of this menu in October with main course entry prices 26% lower than the menu we started the year with, and like-for-like dish prices reduced by 7% on average, positioning our offering as highly competitively priced relative to our peers. We have also struck new and extended partnerships with value-focused affiliates and intensified our promotional activity to ensure we remain competitive and to encourage re-trial of the brand.
We have deepened the distinctiveness of our offer by investing in the quality of ingredients, upgrading our menus to align with our core family audience and introducing new dishes which have proved popular such as our new hot dog range and a steakhouse salad which is now our best-selling salad. In the summer we launched our new kids' menu, which is differentiated in the sector and was recently rated the best in customer satisfaction across our peer set. Our new breakfast menu has a broader range of healthy options and a tailored kids offering.
Towards the end of the year, we commenced roll-out of a refreshed, more contemporary brand look and feel which will be represented across all brand touchpoints. This month we complete the rollout of an upgraded website and app, improving their ease of use for core functions such as bookings. We have also improved our digital search listings and we continue to refine and improve our return from media spend with encouraging activation rates from digital media investment through our new 'Parents win at Frankie & Benny's' campaign. We are currently building a new CRM platform which will enable better segmentation of customers and more targeted communication.
Our customers are recognising the proposition improvements we've made, with the latest external market data showing a continuing improvement in value for money ratings, net promoter score and the largest positive movement in revisit intention scores across our peers.
The proposition changes are driving improving volume momentum. Our performance suggests that we are taking volume share, with market data showing declining restaurant like-for-like sales over the last six months, in spite of significant price increases by our competitors.
Whilst we are pleased with our progress, we are not complacent. In the current year we will be launching an extended range of healthy dishes across our menus, upgrading our vegetarian and vegan options and introducing a redesigned desserts range. Alongside these initiatives, we will continue to improve the quality of our ingredients.
We are trialling a pilot 'capital refresh' across 10 of our sites which we will learn from and optimise before making a decision on whether to roll-out more widely.
Chiquito (85 units)
Our focus on Chiquito has been to broaden the brand appeal, making it more accessible and frequented more often by our customers.
We trialled two versions of a fundamentally changed menu in the year which showed an improving covers trend versus the old menu. On the back of this we launched our new menu nationwide in January 2018. This new menu builds on the trials and allows greater customisation of dishes with, for example, 'build your own' tortillas with options to vary the spiciness of the dishes. We have also invested in the quality of the ingredients whilst at the same time making the menu more competitively priced with main course entry prices reduced by 10%, and like-for-like dish prices reduced on average by 6%. The menu is simpler and easier to navigate, benefitting from a 30% reduction in the number of main dishes. This simplicity has also reduced the number of back-of-house processes involved in preparation and improved the consistency and speed of service. We are also making the brand more accessible through new affiliate partnerships with the likes of Tastecard and Gourmet Society.
In the current year we will accelerate our pace of change in this brand. We plan to trial a series of new and exciting product innovations, which if successful will be rolled out more broadly.
Coast to Coast (19 units)
Coast to Coast's like-for-like trading performance remains challenging, albeit the trading trajectory continues to improve driven, in part, by our competitive discounts. The focus remains on further developing our new proposition, Firejacks, which offers high quality flame-grilled steaks and burgers at highly competitive prices. The first Firejacks was a conversion of the Coast to Coast in Northampton and opened in August 2017. We are encouraged by its ongoing trading performance and plan to convert at least three more Coast to Coast sites to Firejacks in the coming months.
2. Serve our customers better and more efficiently
During the course of the year we completed the upgrade of our technology in restaurants in our Leisure and Concessions businesses. We've introduced hand-held terminals enabling faster ordering and payment processing for our customers. The terminals also provide our restaurant staff with automated prompts of, for example, side dishes, which has increased attachment rates of these items. The new labour management software solution has led to improved sales forecasting accuracy and more effective deployment of our teams, ensuring our labour is increased for peak times to provide the right level of customer service, and minimised during quieter periods. We have also improved the flexibility of our workforce to help better align with our trading patterns. These initiatives combined have contributed to the labour cost per cover in our Leisure business declining by 7% in the second half of 2017 compared to the second half of 2016.
Our new simplified service standards have been introduced across our Leisure front-of-house teams to serve our customers better and more consistently. We've moved from an overly complex 'rules-based' service approach to a simplified approach of putting the customer experience at the forefront of everything we do, for example, through a more natural and warmer welcome upon arrival and greater encouragement for our restaurant teams to show their passion for our food and brands.
We continue to invest in new technology to remove customer pain points and improve the overall customer experience. Our 'pay with app' and 'click and collect' trials have been positively received by our customers and we will roll these out across our Leisure business in the first half of this year. We are in the process of developing a mobile order and pay application, allowing guests to be in control of their service and even order in advance of arriving at the restaurant. We have also increased the frequency and accuracy of bookings via an integrated system of online, telephone and in-restaurant reservations, and entered a partnership for the first time with OpenTable. We have trialled and are soon to be launching a new approach to obtaining guest feedback, moving away from an online post-meal survey which generated unrepresentative samples to an 'at-table' system where we can collect real-time feedback in volume, enabling us to respond to issues much more quickly.
We have increased our penetration of delivery with Deliveroo, growing the number of sites that offer this service from 37 at the start of 2017 to 130 in February 2018. We are trialling delivery services with UberEats and Just Eat which we expect will further increase our delivery reach and penetration. In addition, we see opportunities to extend brand reach by offering multiple delivery brands from an individual restaurant and will trial a new delivery-only brand in the coming weeks.
3. Grow our Pubs and Concessions businesses
Our Pubs business is well positioned in the market with a compelling, differentiated food-led offer that consistently outperforms the pub restaurant sector. Strong operational execution, along with locally sourced produce, has attracted a loyal and increasing customer base who rate the offering highly, relative to competitors.
The Pubs business delivers consistently good and growing returns, with recent openings consistently delivering EBITDA returns in excess of 20% (on an assumed leasehold cost base). Our estate is largely freehold asset backed with a book value in excess of GBP80m and requires, relative to fast-changing casual dining formats, relatively modest levels of ongoing maintenance capital spend.
We see opportunities to increase like-for-like sales through optimising our menu pricing architecture and developing better offerings for previously considered non-core occasions such as breakfast and afternoon tea. We will continue to look for ways we can maximise the use of technology, building on the success we've had in driving bookings. We are finding new ways to maximise available space in our sites by creating private dining areas and will, later this year, make our first foray into accommodation.
Our pipeline of new pub opportunities has strengthened over the past year as we have dedicated more resources to site finding, widened our geographic reach, and embraced new formats such as town pubs. We expect to open between five and 10 new pubs in 2018 and more again in 2019.
Our Concessions business operates in an attractive market segment supported by historically strong levels of passenger growth and with airport operators who are increasingly willing to invest in terminal capacity and breadth of food and beverage offer.
Our trading continues to be strong and we seek further ways of increasing returns from our existing estate through greater use of technology to increase through-put of passengers and menu optimisation to align with customer trends towards quality branded experiences.
Our unique and market leading capabilities of consistently delivering high operational standards at high volume and peak-load intensity, along with our format development and partnering skills, have enabled us to successfully retain and win new sites. We expect to open around 10 units this year, including our first unit in Edinburgh airport, and including sites with new franchise partners we have recently signed up, such as Brewdog and Spuntino.
4. Build a leaner, faster, more focused organisation
We have delivered ahead of our original timescale and reduced the cost base of the business by GBP10m in 2017, all of which has supported our reinvestment in price, product and marketing. We've achieved this through restructuring both our head office and field operations teams, centralising our purchasing and consolidating our supply base to leverage the Group's scale and by closer management of overheads.
We have enhanced our leadership team, which now reflects a balance of hospitality and other consumer sector experience, and brings significantly improved analytical and customer insight capabilities, enabling us to react more swiftly in a fast changing market.
We remain focused on cost efficiencies and see further opportunities to leverage scale economies and consolidate suppliers. Our planned transition to a new logistics provider in 2019 will allow us to unlock further supply chain opportunities, such as cost savings via collection of restaurant waste and recycling.
Current trading and outlook
Current trading is broadly in line with our expectations.
The trading performance of the business in the first half of 2018 will reflect the significant price investments made in the middle of last year. We expect to benefit from our strategic initiatives gaining further traction as the year progresses.
Financial review
Results
2017 financial year is a 52 week year compared to a 53 week year in 2016 financial year. The comparatives set out in this section reflect the business's performance versus the statutory 53 week period in 2016 unless otherwise stated.
Like-for-like sales declined by 3.0% for the year, with total revenue down 1.8% on a comparable 52 versus 52 week basis. On a statutory basis, revenue decreased by 4.4% to GBP679.3m (2016: GBP710.7m). The like-for-like sales decline reflects the investments we made in price and proposition across our Leisure brands, particularly in the second half of the year, which were partially offset by a strong like-for-like sales performance from our Pubs and Concessions businesses.
With declining like-for-like sales, investments made in more competitive pricing, marketing and product quality and significant inflationary cost pressures that were only partially offset by the cost saving initiatives, the Group's Adjusted(1) operating profit (EBIT) fell by 26.0% to GBP58.6m (2016: GBP79.2m) with the Adjusted(1) operating margin falling from 11.1% to 8.6%. On a statutory basis, the Group's operating profit (EBIT) was GBP45.4m (2016(2) : loss of GBP47.3m).
Net interest costs remain broadly in line with 2016, reflecting the modest levels of net debt within the business. This resulted in adjusted(1) profit before tax for the year of GBP56.7m (2016: GBP77.1m), with Adjusted(1) profit after tax of GBP44.7m (2016: GBP60.1m). The Adjusted(1) effective tax rate for the Group reduced to 21.3% (2016: 22.1%), in line with the reduction to the main rate of corporation tax. On a statutory basis, the effective tax rate of 24.4% (2016(2) : tax credit 2.7%) reflects the lower exceptional charges in the year. Adjusted(1) earnings per share were 22.3p (2016: 30.0p). On a statutory basis, profit before tax was GBP43.6m (2016(2) : loss before tax of GBP49.3m) and EPS was 16.4p (2016(2) : loss per share 24.0p).
The adjusted measures are summarised below:
Hot Features
Premium
52 weeks 53 weeks
ended 31 ended
December 1 January
2017 2017
GBPm GBPm % change
------------------------- ---------- ----------- ---------
Revenue 679.3 710.7 (4.4%)
Adjusted(1) EBITDA 95.1 121.0 (21.4%)
Adjusted(1) operating
profit 58.6 79.2 (26.0%)
Adjusted(1) operating
margin 8.6% 11.1%
Adjusted(1) profit
before tax 56.7 77.1 (26.4%)
Tax (12.1) (17.0)
Adjusted(1) profit
after tax 44.7 60.1 (25.7%)
Adjusted(1) EPS (pence) 22.3 30.0 (25.7%)
------------------------- ---------- ----------- ---------
(1) Adjusted measures are stated before exceptional items and are as defined within the glossary.
(2) As restated, refer to note 1 for details
Cash flow and net debt
Operating cash flows remained very strong with free cash flow of GBP84.9m in the year (2016: GBP78.9m). This improvement in free cash flow reflects the lower operating profit offset by a reduction in maintenance capital expenditure, an improvement in working capital and lower tax payments in the year, the latter as a result of the statutory loss for the year ended 2016. The Group's net debt at the year-end was GBP21.6m, a decrease of GBP6.7m on the prior year net debt of GBP28.3m.
Summary cash flow for the year is set out below:
2017 2016
GBPm GBPm
------- -------
Adjusted(1) operating profit 58.6 79.2
Working capital and non-cash adjustments 12.5 1.1
Depreciation 36.5 41.8
Operating cash flow 107.6 122.1
Net interest paid (0.7) (0.8)
Tax paid (7.1) (16.2)
Maintenance capital expenditure (14.9) (26.2)
------------------------------------------ ------- -------
Free cash flow 84.9 78.9
Development capital expenditure (18.4) (28.8)
Movement in capital creditors (5.9) (10.3)
Dividends (34.9) (34.9)
Utilisation of onerous lease provisions (12.7) (3.3)
Exceptional restructuring costs (6.8) (3.8)
Other items 0.5 2.3
------------------------------------------ ------- -------
Net cash flow 6.7 0.1
Net bank debt brought forward (28.3) (28.4)
------------------------------------------ ------- -------
Net bank debt carried forward (21.6) (28.3)
------------------------------------------ ------- -------
The Group continues to maintain considerable headroom on the covenants relating to our GBP140m revolving credit facility, which is in place until June 2020.
Banking covenant 2017 2016
------------------ ----- -----
Banking covenant
ratios:
EBITDA / Interest
cover >4x 66x 60x
Net debt / EBITDA <3x 0.2x 0.2x
Other ratios:
Fixed charge cover n/a 2.1x 2.4x
Balance sheet gearing n/a 11% 14%
------------------ ----- -----
Capital expenditure
During the year the Group invested GBP33.3m (2016: GBP55.0m) in capital expenditure. Our investment in maintenance capital expenditure reduced to GBP14.9m (2016: GBP26.2m) given the one-off spend in 2016 of GBP7.0m relating to the Frankie & Benny's bar reduction programme and the re-phasing of major refurbishment projects into 2018. Our investment in new site expenditure reduced to GBP18.4m (2016: GBP28.8m) reflecting the lower number of new site openings in 2017 versus 2016.
During the year we closed 13 sites, including five concessions which had reached the end of their contractual life and eight leisure sites which no longer generated acceptable cash returns. The table below summarises openings and closures during the year.
Year-end Opened Closed Transfers Year-end
2016 2017
------- ------- ---------- ---------
Frankie & Benny's 258 7 (6) - 259
Chiquito 79 6 - - 85
Coast to Coast/Filling
Station 28 - (2) - 26
Garfunkel's 8 - - - 8
Joe's Kitchen 4 - - - 4
Pub restaurants 57 3 - - 60
Concessions 59 1 (5) - 55
------- ------- ---------- ---------
Total 493 17 (13) - 497
------- ------- ---------- ---------
The Group benefits from a strong freehold and long leasehold property asset base which has been externally valued by Savills at the year-end at GBP148.2m compared to the carrying value of GBP110.9m.
We expect to open between 16 to 20 units in 2018 which will be predominantly within our Pubs and Concessions businesses with associated capital expenditure of between GBP24m to GBP30m. Refurbishment and maintenance capital expenditure will range from GBP20m to GBP25m.
Restructuring and exceptional charge
An exceptional pre-tax charge of GBP13.2m has been recorded in the year (2016(2) : GBP126.5m), which includes the following:
-- Onerous lease provisions resulted in a charge of GBP4.2m in the year (2016(2) : GBP51.5m, including the prior year restatement of GBP9.8m). This comprises:
- A GBP7.3m credit in respect of unutilised provisions following the successful exit of 21 sites ahead of expectations; and
- A further charge totalling GBP11.5m was provided for in the year. This comprised a release of GBP4.5m in respect of certain sites where performance was better than expected, GBP5.7m in respect of newly identified onerous leases and a charge of GBP10.3m in respect of sites previously provided for.
-- A net impairment charge of GBP4.2m (2016: GBP68.1m) was made against the carrying value of specific restaurant assets due to recent changes in certain markets. This comprises an impairment charge of GBP5.3m partially offset by reversals of previously recognised impairment losses of GBP1.1m; and
-- A GBP4.8m charge (2016: GBP6.9m) relating to costs incurred in the restructuring projects that were initiated in 2017 to implement the new business strategy and cost saving initiatives.
Cash expenditure associated with the above exceptional charges was GBP19.5m in the year (2016: GBP7.1m) relating to the costs associated with the implementation of the new business strategy GBP6.8m and the cash cost of the onerous leases of GBP12.7m. The tax credit relating to these exceptional charges was GBP1.4m (2016: GBP18.4m).
Prior year restatement
During the year, we identified two historical elements of the mechanical calculations of the onerous lease provisions that were either not in line with recent industry practice or using incorrect data. This resulted in a net movement in the provision of GBP9.8m and there was no cash impact (refer to note 1 for more details).
These were initially accounted for as exceptional items within the 2017 half year results. Following the publication of the Group's Interim Report the Financial Reporting Council ('FRC') wrote to the Company to determine whether the amendment should be accounted for within the prior year as the correction of a prior year error. As a result of this request, the Company has reviewed the accounting treatment again and taken the decision to restate the 2016 year-end financial statements and record these two amendments as corrections of prior year errors.
This has increased the prior year exceptional onerous lease charge within the income statement and the provision for onerous leases by GBP9.8m. This has also increased the tax credit on exceptional costs from GBP16.4m to GBP18.4m, resulting in a net impact on statutory profit after tax of GBP7.8m.
Review of distributable reserves and rectification of prior dividends
In December 2017, we became aware of a technical matter relating to the levels of distributable reserves and the payment of interim and final dividends to our shareholders during the period from 2006 to 2017 ('the Relevant Dividends'). Throughout this period, the Group had adequate reserves in subsidiary companies to enable payment of the Relevant Dividends, and each year payment of the final dividends was approved by the Company's shareholders at its annual general meeting. However, a review of historical intra-group transactions revealed that internal dividends paid up through the Group structure in the period from 2006 to 2017 did not, due to a technicality, create distributable reserves in the manner that had been intended. As a consequence, the Relevant Dividends were not paid out of distributable reserves and were therefore not paid in accordance with the Companies Act 2006.
We are undertaking a series of administrative steps in order to rectify this issue and put the Company and its subsidiaries, insofar as possible, in the position that was originally intended with respect to the creation of distributable reserves. The majority of these steps were implemented prior to 31 December 2017. In addition, we will in due course put a resolution to shareholders which, if passed, would put all potentially affected parties, insofar as possible, in the position they would be had the Relevant Dividends been paid in accordance with the requirements of the Companies Act 2006. Full details will be included in the circular and notice of general meeting to be sent to shareholders. It is anticipated that the general meeting to consider the resolution will be held on the same day as the 2018 AGM.
Tax
The Adjusted(1) tax charge for the year was GBP12.1m (2016: GBP17.0m), summarised as follows:
2017 2016
GBPm GBPm
------ ------
Corporation tax 10.8 16.9
Deferred tax 1.3 0.1
------ ------
Total 12.1 17.0
------ ------
Effective adjusted
tax rate 21.3% 22.1%
The effective Adjusted(1) tax rate for the year was 21.3% compared to 22.1% in the prior year. This decrease in rate reflects the ongoing reduction in the main rate of corporation tax. The Group's effective tax rate will continue to track above the headline UK tax rate primarily due to our capital expenditure programme and the significant levels of disallowable capital expenditure therein. The statutory effective tax rate for the year was 24.4%, which increased from the 2016(2) rate of 2.7% credit due to the reduction in exceptional charges in the year.
The Restaurant Group
plc
Consolidated income
statement
52 weeks ended 53 weeks ended
31 December 1 January
2017 2017
Trading Exceptional Trading Exceptional
(note (note
business 5) Total business 5) Total
Restated Restated
(note (note
1) 1)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3 679,282 - 679,282 710,712 - 710,712
Cost of sales 4 (589,490) (8,386) (597,876) (598,136) (119,546) (717,682)
---------- ------------ ---------- --------------- ------------ ----------
Gross profit/(loss) 89,792 (8,386) 81,406 112,576 (119,546) (6,970)
Administration costs (31,188) (4,772) (35,960) (33,420) (6,944) (40,364)
---------- ------------ ----------
Operating
profit/(loss) 58,604 (13,158) 45,446 79,156 (126,490) (47,334)
Interest payable 6 (1,911) - (1,911) (2,073) - (2,073)
Interest receivable 6 51 - 51 66 - 66
---------- ------------ ---------- --------------- ------------ ----------
Profit/(loss) on
ordinary
activities before
tax 56,744 (13,158) 43,586 77,149 (126,490) (49,341)
Tax on profit/(loss)
from ordinary
activities 7 (12,076) 1,423 (10,653) (17,043) 18,368 1,325
---------- ------------ ---------- --------------- ------------ ----------
Profit/(loss) for
the year 44,668 (11,735) 32,933 60,106 (108,122) (48,016)
---------- ------------ ---------- --------------- ------------ ----------
Earnings/(loss) per
share (pence)
Basic 8 22.29 16.44 30.02 (23.98)
Diluted 8 22.18 16.36 29.84 (23.98)
---------- ---------- --------------- ----------
The table below is provided to give additional information
to shareholders on a key performance indicator:
Earnings before
interest,
tax, depreciation
and amortisation 95,118 (8,973) 86,145 120,965 (58,440) 62,525
Depreciation and
impairment (36,514) (4,185) (40,699) (41,809) (68,050) (109,859)
---------- ------------ ---------- --------------- ------------ ----------
Operating
profit/(loss) 58,604 (13,158) 45,446 79,156 (126,490) (47,334)
---------- ------------ ---------- --------------- ------------ ----------
The Restaurant Group
plc
Consolidated balance
sheet
At 31 December At 1 January
2017 2017
Restated
(note 1)
Note GBP'000 GBP'000
Non-current assets
Intangible assets 26,433 26,433
Property, plant and
equipment 10 335,029 345,952
--------------- -------------
361,462 372,385
--------------- -------------
Current assets
Stock 5,930 5,632
Other receivables 14,949 18,782
Prepayments 17,473 15,824
Cash and cash equivalents 9,611 9,568
Corporation tax receivable - 688
--------------- -------------
47,963 50,494
--------------- -------------
Total assets 409,425 422,879
--------------- -------------
Current liabilities
Overdraft - -
Corporation tax liabilities (2,129) -
Trade and other payables (124,238) (121,850)
Other payables - finance
lease obligations (164) (393)
Provisions 11 (10,408) (15,415)
--------------- -------------
(136,939) (137,658)
--------------- -------------
Net current liabilities (88,976) (87,164)
--------------- -------------
Non-current liabilities
Long-term borrowings (31,223) (37,882)
Other payables - finance
lease obligations (2,548) (2,950)
Deferred tax liabilities (5,127) (4,434)
Provisions 11 (31,688) (38,369)
--------------- -------------
(70,586) (83,635)
--------------- -------------
Total liabilities (207,525) (221,293)
--------------- -------------
Net assets 201,900 201,586
--------------- -------------
Equity
Share capital 56,551 56,550
Share premium 25,554 25,542
Other reserves (7,753) (9,987)
Retained earnings 127,548 129,481
--------------- -------------
Total equity 201,900 201,586
--------------- -------------
The Restaurant Group plc
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserves earnings
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 28 December
2015 56,518 25,255 (11,080) 212,867 283,560
Loss for the year
(Restated) - - - (48,016) (48,016)
Issue of new shares 32 287 - - 319
Dividends - - - (34,862) (34,862)
Share-based payments
- credited to equity - - 1,323 - 1,323
Other reserve movements - - (230) - (230)
Current tax on
share-based payments
taken directly
to equity - - - 73 73
Deferred tax on
share-based payments
taken directly
to equity - - - (581) (581)
Balance at 1 January
2017 Restated (note
1) 56,550 25,542 (9,987) 129,481 201,586
-------- -------- --------- --------- ---------
Balance at 2 January 56,
2017 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 56,551 25,554 (7,753) 127,548 201,900
-------- -------- --------- --------- ---------
There is no comprehensive income other than the
profit/loss for the year in the year ended 31
December 2017 or the year ended 1 January 2017.
Other reserves represents the Group's share-based
payment transactions and the shares held by the
Employee Benefit Trust.
The Restaurant Group plc
Consolidated cash flow statement
52 weeks 53 weeks
ended 31 ended 01
December January
2017 2017
Restated
(note 1)
Note GBP'000 GBP'000
Operating activities
Cash generated from operations 12 107,637 122,148
Interest received 55 41
Interest paid (751) (865)
Tax paid (7,068) (16,223)
---------------------------------- ----- ---------- ----------
Cash outflows from exceptional
property provisions 5 (12,738) (3,315)
Cash outflows from exceptional
restructuring costs 5 (6,792) (3,759)
---------- ----------
Net cash flows from operating
activities 80,343 98,027
---------- ----------
Investing activities
Purchase of property, plant
and equipment (39,275) (65,280)
Proceeds from disposal of
property, plant and equipment 828 2,219
Net cash flows used in investing
activities (38,447) (63,061)
---------- ----------
Financing activities
Net proceeds from issue of
ordinary share capital 13 319
Net (repayments)/withdrawals
of loan draw-downs (7,000) 7,000
Dividends paid to shareholders 9 (34,866) (34,862)
---------- ----------
Net cash flows used in financing
activities (41,853) (27,543)
---------- ----------
Net increase in cash and
cash equivalents 43 7,423
Cash and cash equivalents
at the beginning of the year 9,568 2,145
Cash and cash equivalents
at the end of the year 9,611 9,568
---------- ----------
The Restaurant Group plc
Notes to the accounts
For the year ended 31 December 2017
1 Restatement of comparatives
During the year, management identified two historical elements of the mechanical calculations of the onerous lease provisions that were either not in line with recent industry practice or using incorrect data. This resulted in a net movement in the provision of GBP9.8m, which can be split across these two areas as follows:
-- GBP19.1m charge to the Income Statement as a result of changing the discount rate applied to the provisions from the Group's WACC of 10.6% to a risk free rate; and
-- GBP9.3m credit to the Income Statement as a result of correcting certain lease end dates used in the calculation of the provision to the break clause date.
These were initially accounted for as exceptional items within the 2017 half year results. Following the publication of the Group's Interim Report the Financial Reporting Council ('FRC') wrote to the Company to ask for reconsideration of whether this should be accounted for within the prior year as the correction of a prior year error. As a result of this request, the Company has reviewed the accounting treatment again and taken the decision to restate the 2016 year-end financial statements and record these two elements as corrections of prior year errors.
This has increased the prior year exceptional onerous lease charge within the income statement and the provision for onerous leases by GBP9.8m. This has also increased the tax credit on exceptional costs from GBP16.4m to GBP18.4m, resulting in a net impact on statutory loss after tax of GBP7.8m.
The amount of correction for each financial line item affected and for basic and diluted earnings per share is as follows:
As originally Restatement As restated
disclosed
Consolidated income statement GBP'000 GBP'000 GBP'000
-------------- ------------ ------------
Exceptional cost of sales (109,732) (9,814) (119,546)
Cost of sales (707,868) (9,814) (717,682)
Exceptional tax credit 16,405 1,963 18,368
Tax on loss from ordinary
activities (638) 1,963 1,325
Loss for the year (40,165) (7,851) (48,016)
Consolidated balance sheet
Corporation tax (liabilities)/receivable (1,275) 1,963 688
Provisions - current (16,391) 976 (15,415)
Provisions - non-current (27,579) (10,790) (38,369)
Retained earnings 137,332 (7,851) 129,481
Basic and diluted earnings
per share
Weighted average ordinary shares
for the purposes of basic earnings
per share 200,230,299 - 200,230,299
Total loss for the year (GBP'000) (40,165) (7,851) (48,016)
Basic loss per share for
the year (pence) (20.06) (3.92) (23.98)
Diluted loss per share (pence) (20.06) (3.92) (23.98)
The retained earnings balance as at 28 December 2015 has not been restated, as the impact is considered immaterial.
The FRC also asked the Company to review the classification of the net cash flows relating to exceptional items within the cash flow statement of GBP7.1m in the year ended 1 January 2017. The Company reconsidered the underlying cash flows and concluded that these would be more appropriately classified as operating cash flows. As a result, the prior year cash flow has been restated to reflect this change in presentation.
2 Segmental analysis
The Group trades in one business segment (that of operating restaurants) and one geographical segment (being the United Kingdom). The Group's brands meet the aggregation criteria set out in paragraph 22 of IFRS 8 "Operating Segments" and as such the Group reports the business as one reportable segment.
3 Revenue
All revenue has been generated from principal trade activities within the United Kingdom.
4 Profit/(loss) for the year 2017 2016
Restated
(note
1)
GBP'000 GBP'000
Cost of sales consists of the following:
Continuing business excluding pre-opening
costs 587,347 594,756
Pre-opening costs 2,143 3,380
-------- ---------
Trading cost of sales 589,490 598,136
Exceptional charge 8,386 119,546
Total cost of sales for the year 597,876 717,682
-------- ---------
2017 2016
Profit/(loss) for the year has
been arrived at after charging
/ (crediting): GBP'000 GBP'000
Depreciation (see note 10) 36,514 41,809
Impairment of property, plant and
equipment 4,185 68,050
Purchases of food, beverages and
consumables 147,079 144,467
Staff costs 236,981 239,297
Minimum lease payments 73,905 74,616
Contingent rents 10,093 10,906
-------- ---------
Total operating lease rentals of
land and buildings 83,998 85,522
Rental income (2,007) (2,260)
-------- ---------
Net rental costs 81,991 83,262
-------- ---------
5 Exceptional items 2017 2016
Restated (note 1)
GBP'000 GBP'000
Release of onerous lease provision in respect of closed sites now disposed (7,299) -
Onerous lease provision in respect of distressed and other sites 11,500 51,496
Impairment of property, plant and equipment 4,185 68,050
Restructuring and strategic review costs 4,772 6,944
---------
Exceptional cost before tax 13,158 126,490
Credit in respect of tax rate change 67 (261)
Tax effect of exceptional Items (1,490) (18,107)
--------- ------------------
(1,423) (18,368)
Net exceptional cost for the year 11,735 108,122
--------- ------------------
An exceptional pre-tax charge of GBP13.2m has been recorded in the year (2016: GBP126.5m), which includes the following:
-- Onerous lease provisions resulted in a charge of GBP4.2m in the year (2016: GBP51.5m, including the prior year restatement of GBP9.8m). This comprises:
- A GBP7.3m credit in respect of unutilised provisions following the successful exit of 21 sites ahead of expectations; and
- A further charge totalling GBP11.5m was provided for in the year. This comprised a release of GBP4.5m in respect of certain sites where performance was better than expected, GBP5.7m in respect of newly identified onerous leases and a charge of GBP10.3m in respect of sites previously provided for.
-- A net impairment charge of GBP4.2m (2016: GBP68.1m) was made against the carrying value of specific restaurant assets due to recent changes in certain markets. This comprises an impairment charge of GBP5.3m partially offset by reversals of previously recognised impairment losses of GBP1.1m; and
-- A GBP4.8m charge (2016: GBP6.9m) relating to costs incurred in the restructuring projects that were initiated in 2017 to implement the new business strategy and cost saving initiatives.
Cash expenditure associated with the above exceptional charges was GBP19.5m in the year (2016: GBP7.1m) relating to the costs associated with the implementation of the new business strategy GBP6.8m and the cash cost of the onerous leases of GBP12.7m. The tax credit relating to these exceptional charges was GBP1.4m (2016: GBP18.4m).
6 Net interest charges 2017 2016
GBP'000 GBP'000
Bank interest payable 746 834
Other interest payable 409 465
Facility fees 365 387
Interest on obligations under
finance leases 391 387
------------ ------------
Total interest payable 1,911 2,073
------------ ------------
Bank interest receivable - (5)
Other interest receivable (2) (8)
Loan note interest receivable (49) (53)
------------ ------------
Total interest receivable (51) (66)
Net interest charges 1,860 2,007
------------ ------------
7 Tax Trading Exceptional Total Total
2017 2017 2017 2016
Restated
(note
1)
a) The tax charge comprises: GBP'000 GBP'000 GBP'000 GBP'000
Current tax
UK corporation tax at 19.25%
(2016: 20.00%) 12,266 (1,698) 10,568 7,034
Adjustments in respect of
previous years (1,463) 780 (683) (116)
-------- ------------ ------------ ---------
10,803 (918) 9,885 6,918
-------- ------------ ------------ ---------
Deferred tax
Origination and reversal
of temporary differences 94 - 94 27
Adjustments in respect of
previous years 1,190 - 1,190 121
Charge/(credit) in respect
of rate change on deferred
tax liability (11) 67 56 (261)
Credit in respect of property,
plant and equipment write
downs and disposals - (572) (572) (8,130)
-------- ------------ ------------ ---------
1,273 (505) 768 (8,243)
Total tax charge for the
year 12,076 (1,423) 10,653 (1,325)
-------- ------------ ------------ ---------
b) Factors affecting the tax charge for
the year
The tax charged for the year varies from the standard
UK corporation tax rate of 19.25% (2016: 20.00%)
due to the following factors:
Trading Exceptional Total
2017 2017 2017 2016
Restated
(note
1)
GBP'000 GBP'000 GBP'000 GBP'000
Profit/(loss) on ordinary
activities before tax 56,744 (13,158) 43,586 (49,341)
-------- ------------ ------------ ---------
Profit/(loss) on ordinary
activities before tax multiplied
by the standard UK corporation
tax rate of 19.25% (2016:
20.0%) 10,923 (2,533) 8,390 (9,868)
Effects of:
Depreciation/impairment on
non-qualifying assets 1,454 234 1,688 6,633
Expenses/(income) not deductible
for tax purposes 446 29 475 3,237
Charge/(credit) in respect
of rate change on deferred
tax liability (11) 67 56 (261)
Release of tax provisions (478) - (478) -
Business combinations (182) - (182) -
Share options 197 - 197 -
Adjustment in respect of
previous years (273) 780 507 (1,066)
-------- ------------ ------------ ---------
Total tax charge for the
year 12,076 (1,423) 10,653 (1,325)
-------- ------------ ------------ ---------
The Finance (No.2) Act 2015 introduced a reduction
in the main rate of corporation tax from 20% to
19% from April 2017 and from 19% to 18% from April
2020. These reductions were substantively enacted
on 26 October 2015. This resulted in a blended rate
of 19.25% being used to calculate the tax liability
for the 52 weeks ended 31 December 2017 (20% for
the 53 weeks to 1 January 2017).
The Finance Act 2016 introduced a further reduction
in the main rate of corporation tax to 17% from
April 2020. This was substantively enacted on 6
September 2016. The deferred tax provision at the
balance sheet date has been calculated at this rate,
resulting in a GBP0.1m tax charge.
8 Earnings per share (EPS) 2017 2016
Restated
(note
1)
a) Basic earnings per share:
Weighted average ordinary shares
for the purposes of basic earnings
per share 200,376,258 200,230,299
Profit/(loss) for the year after
tax (GBP'000) 32,933 (48,016)
Basic earnings per share for the
year (pence) 16.44 (23.98)
------------ ------------
Total profit/(loss) for the year
(GBP'000) 32,933 (48,016)
Effect of exceptional items on earnings
for the year (GBP'000) 11,735 108,122
------------ ------------
Earnings excluding exceptional items
(GBP'000) 44,668 60,106
Adjusted earnings per share (pence) 22.29 30.02
------------ ------------
b) Diluted earnings per share:
Weighted average ordinary shares
for the purposes of basic earnings
per share 200,376,258 200,230,299
Effect of dilutive potential ordinary
shares:
Dilutive shares to be issued in respect
of options granted under the share
option schemes 280,084 404,829
Shares held by employee benefit trust 688,276 814,855
201,344,618 201,449,983
------------ ------------
Diluted earnings per share (pence) 16.36 (23.98)
Adjusted diluted earnings per share
(pence) 22.18 29.84
Diluted earnings per share information is based
on adjusting the weighted average number of shares
for the purposes of basic earnings per share in
respect of notional share awards made to employees
in regards of share option schemes and the shares
held by the employee benefit trust. The calculation
of diluted earnings per share does not assume conversion,
exercise or other issue of potential ordinary shares
that would have an antidilutive effect on earnings
per share.
9 Dividend 2017 2016
GBP'000 GBP'000
Amounts recognised as distributions
to equity holders during the year:
Final dividend for the 53 weeks ended
1 January 2017 of 10.60p (2015: 10.6p)
per share 21,240 21,237
Interim dividend for the 52 weeks ended
31 December 2017 of 6.80p (2016: 6.80p)
per share 13,626 13,625
--------- --------
Total dividends paid in the year 34,866 34,862
--------- --------
Proposed final dividend for the 52
weeks ended 31 December 2017 of 10.6p
(2016 actual proposed and paid: 10.60p)
per share 21,240 21,240
--------- --------
The proposed final dividend is subject to approval
by shareholders at the Annual General Meeting to
be held on 23 May 2018 and is not recognised as
a liability in these financial statements. The proposed
final dividend reflects the number of shares in
issue on 31 December 2017, adjusted for the 0.7m
shares owned by the employee benefit trust for which
dividends have been waived.
10 Property, plant
and equipment
Fixtures,
Land and equipment
buildings and vehicles Total
GBP'000 GBP'000 GBP'000
Cost
At 28 December 2015 489,885 181,836 671,721
Additions 38,445 16,558 55,003
Disposals (6,536) (6,801) (13,337)
At 1 January 2017 521,794 191,593 713,387
----------- -------------- ---------
Accumulated depreciation
and impairment
At 28 December 2015 154,526 113,555 268,081
Charged during the
year 22,533 19,276 41,809
Impairment 54,807 13,243 68,050
Disposals (3,991) (6,514) (10,505)
At 1 January 2017 227,875 139,560 367,435
----------- -------------- ---------
Cost
At 2 January 2017 521,794 191,593 713,387
Additions 16,192 17,146 33,337
Disposals (17,459) (8,440) (25,899)
Transfers to provisions 500 - 500
At 31 December 2017 521,027 200,298 721,325
----------- -------------- ---------
Accumulated depreciation
and impairment
At 2 January 2017 227,875 139,560 367,435
Charged during the
year 20,609 15,905 36,514
Impairment 3,322 863 4,185
Disposals (14,177) (7,661) (21,838)
At 31 December 2017 237,629 148,667 386,296
----------- -------------- ---------
Net book value as at
2 January 2017 293,919 52,033 345,952
Net book value as at
31 December 2017 283,398 51,631 335,029
----------- -------------- ---------
The impairment charge comprises a charge of GBP5.3m partially offset by reversals of previously recognised impairment losses of GBP1.1m. Included within the book value of property, plant and equipment are assets under construction of GBP0.7m (2016: GBP2.3m) which are not depreciated.
2017 2016
Net book value of land and buildings: GBP'000 GBP'000
Freehold 108,418 109,525
Long leasehold 3,640 3,915
Short leasehold 171,340 180,479
283,398 293,919
-------- --------
Assets held under finance leases-
Land and Buildings 2017 2016
GBP'000 GBP'000
Costs at the beginning of the
year 1,961 1,961
Disposals during the year (366) -
-------- --------
Costs at the end of the year 1,595 1,961
-------- --------
Depreciation
At the beginning of the year 1,681 1,249
Provided during the year 25 25
Impairment - 407
Disposals during the year (272) -
-------- --------
At the end of the year 1,434 1,681
-------- --------
Net book value at the end of the
year 161 280
-------- --------
External valuation of freehold properties
All freehold properties of the Group held were valued by Savills (UK) Limited, an independent and qualified professional valuer, in January 2018. The valuation has been performed in accordance with the RICS Red Book using market comparable data to determine fair value. This valued the Group's freehold assets and long leasehold at GBP148.2m versus a book value of GBP110.9m.
11 Provisions 2017 2016
Restated
(note
1)
GBP'000 GBP'000
Provision for onerous leases 41,805 51,054
Other provisions 291 2,730
Balance at the end of the year 42,096 53,784
-------- ---------
Analysed as:
Amount due for settlement within
one year 10,408 15,415
Amount due for settlement after
one year 31,688 38,369
42,096 53,784
-------- ---------
Onerous
lease Other
provisions provisions Total
GBP'000 GBP'000 GBP'000
Balance at 2 January 2017
(Restated - note 1) 51,054 2,730 53,784
Release of onerous lease
provision in respect of
closed sites now disposed (7,299) - (7,299)
Onerous lease provision
in respect of distressed
and other sites 11,785 - 11,785
Provision in respect of
restructuring & strategic
review costs - 4,772 4,772
Amounts utilised (14,138) (7,211) (21,349)
Unwinding of discount 403 - 403
Balance at 31 December
2017 41,805 291 42,096
------------ ------------ ---------
The onerous lease provisions are for onerous
contracts in respect of lease agreements. The
provision comprises the onerous element of expenditure
over the life of those contracts which are considered
onerous, expiring in 1 to 30 years, and exit
costs including the costs of strip out and dilapidations
and the costs expected to be incurred over the
void period until the property is sublet.
* Onerous lease provisions resulted in a charge of
GBP4.5m in the year (2016: GBP57.6m, including the
prior year restatement of GBP9.8m referred to in note
1). This comprises:
* A GBP7.3m credit in respect of unutilised provisions
following the successful exit of 21 sites ahead of
expectations; and
* A further charge totalling GBP11.8m was provided for
in the year. This comprised a release of GBP4.5m in
respect of certain sites where performance was better
than expected, GBP5.7m in respect of newly identified
onerous leases and a charge of GBP10.6m in respect of
sites previously provided for.
Other provisions are for committed costs arising
from the strategic review project. These costs
represent the continuation of the restructuring
and consulting projects that were initiated in
2016.
12 Reconciliation of profit before
tax to cash generated from operations 2017 2016
Restated
(note
1)
GBP'000 GBP'000
Profit/(loss) before tax 43,586 (49,341)
Net interest charges 1,860 2,007
Impairment of property, plant and
equipment 4,185 68,050
Onerous lease and other property
provisions 8,973 56,674
Share-based payments 2,158 1,323
Depreciation 36,514 41,809
(Increase)/decrease in stocks (298) 757
Decrease/(increase) in receivables 2,185 (5,973)
Increase in creditors 8,474 6,842
Cash generated from operations 107,637 122,148
-------- ---------
13 Reconciliation of changes in cash
to the movement in net debt 2017 2016
GBP'000 GBP'000
Net debt:
At the beginning of the year (28,314) (28,382)
Movements in the year:
Net repayments/(withdrawals) of borrowings 7,000 (7,000)
Non-cash movements in the year (341) (355)
Net cash inflow/(outflow) 43 7,423
At the end of the year (21,612) (28,314)
--------- ---------
At
Represented Cash 1 and Cash
by: At 28 flow Non-cash 2 flow Non-cash At 31
December movements movements January movements movements December
in the in the in the in the
2015 year year 2017 year year 2017
--------- ---------- ---------- --------- ---------- ---------- ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and
cash equivalents 2,983 6,585 - 9,568 43 - 9,611
Overdraft (838) 838 - - - - -
Bank loans
falling
due after
one year (30,527) (7,000) (355) (37,882) 7,000 (341) (31,223)
(28,382) 423 (355) (28,314) 7,043 (341) (21,612)
--------- ---------- ---------- --------- ---------- ---------- ---------
Cash and cash equivalents are comprised of cash at bank and cash floats held on site. The non-cash movements in bank loans are in relation to the amortisation of prepaid facility costs. Bank loans falling due after more than one year are the only liabilities arising from financing activities and the cash flows and non-cash changes are shown above.
14 Basis of preparation
The Group's preliminary announcement and statutory accounts in respect of 2017 have been prepared on the going concern basis. The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 December 2017 or 1 January 2017 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting. The 2017 statutory accounts are prepared on the basis of the accounting policies stated in the 2016 statutory accounts. The auditor has reported on those accounts; their reports were unqualified and unmodified and did not contain statements under s498 (2) or (3) of the Companies Act 2006.
Glossary
The directors believe the Adjusted Performance Metrics used within this report, and defined below, provide additional useful information for shareholders to evaluate and compare the performance of the business from period to period. These are also the KPIs used by the directors to assess performance of the business. The adjusted metrics are reconciled to the statutory results for the year on the face of the income statement and the relevant supporting notes.
Trading Represents the performance of the business
business before exceptional costs and is considered
as the key metrics for shareholders to
evaluate and compare the performance of
the business from period to period.
-------------- -------------------------------------------------
Like-for-like This measure provides an indicator of
('LFL') the underlying performance of our existing
sales 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 LFL calculation.
-------------- -------------------------------------------------
Adjusted Earnings before interest, tax, depreciation,
EBITDA amortisation and exceptional items. Calculated
by taking the Trading business operating
profit and adding back depreciation.
-------------- -------------------------------------------------
EBITDA Earnings before interest, tax, depreciation
and amortisation.
-------------- -------------------------------------------------
Net debt Net debt is calculated as the net of the
long-term borrowings less cash and cash
equivalents.
-------------- -------------------------------------------------
Free EBITDA less working capital and non-cash
cash movements (excluding exceptional items),
flow tax payments, interest payments and maintenance
capital expenditure.
-------------- -------------------------------------------------
Adjusted Earnings before interest, tax and exceptional
operating items.
profit
-------------- -------------------------------------------------
Adjusted Calculated by taking the profit after
EPS tax of the business pre-exceptional items
divided by the weighted average number
of shares in issue during the year.
-------------- -------------------------------------------------
Adjusted Calculated by taking the profit after
diluted tax of the business pre-exceptional items
EPS divided by the weighted average number
of shares in issue during the year, including
the effect of dilutive potential ordinary
shares.
-------------- -------------------------------------------------
Adjusted Calculated by taking the profit before
profit tax of the business pre-exceptional items.
before
tax
-------------- -------------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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