Due to technical issues, the Customer Support line is currently unavailable. Please use the live chat or email communication.

Buy
Sell
Share Name Share Symbol Market Type Share ISIN Share Description
Restaurant Gp 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
  +1.30p +0.98% 134.30p 134.20p 134.50p 134.80p 132.50p 132.50p 354,155 10:59:47
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Travel & Leisure 686.0 13.9 2.4 55.5 660.08

Restaurant Group PLC Final Results

15/03/2019 7:01am

UK Regulatory (RNS & others)


Restaurant Group (LSE:RTN)
Historical Stock Chart

2 Months : From Feb 2019 to Apr 2019

Click Here for more Restaurant Group Charts.

TIDMRTN

RNS Number : 9598S

Restaurant Group PLC

15 March 2019

The Restaurant Group plc

Final results for the 52 weeks ended 30 December 2018

Strategic highlights

-- Acquisition of high quality business in Wagamama which has continued to outperform the sector

   --     Concessions business opened 21 new units and entered four new airports 
   --     Pubs increasingly outperformed the market and opened a record 21 pubs 
   --     Leisure business improved like-for-like sales momentum in every quarter in 2018 
   --     Group delivered like-for-like sales growth since the World Cup 
   --     Enlarged group now strongly orientated towards growth 

Financial highlights

   --     Like-for-like sales down 2.0%, with total sales up 1.0% to GBP686.0m (2017: GBP679.3m) 

-- Adjusted(1) profit before tax of GBP53.2m(2) (2017(3) : GBP57.8m(2) ). Statutory profit before tax of GBP13.9m (2017(3) : GBP28.2m)

   --     Exceptional pre-tax charge of GBP39.2m (2017(3) : GBP29.7m) 
   --     Adjusted(1) EBITDA of GBP87.9m (2017: GBP95.8m) 

-- Adjusted(1) EPS(4) of 14.7p (2017(3) : 16.7p). Statutory EPS of 2.4p (2017(3) : 6.7p per share)

   --     Operating cash flow of GBP88.3m (2017: GBP107.8m) 

-- Net debt of GBP291.1m at year-end (2017(3) : GBP23.1m) following Wagamama acquisition, with proforma net debt/EBITDA at 2.2x

-- The Board proposes a final dividend of 1.47p(5) , reflecting the Board's policy of paying a dividend covered two times by adjusted(1) profit after tax

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

2 Includes a GBP2.2m benefit (2017: GBP0.7m) from lower depreciation following a prior year adjustment to the impairment provision

3 As restated, refer to Note 2 of the financial statements for details

4 Earnings per share adjusted for bonus element following the rights issue in both financial years

5 Full year dividend per share of 8.27p calculated such that the total cash paid out in dividends for the full year is covered twice by adjusted profit after tax. This is stated on the basis of dividends declared and paid not adjusted for the impact of the rights issue

Current trading

Current trading is in line with our expectations with like-for-like sales up 2.8% for the ten weeks to 10 March 2019.

Andy McCue, Chief Executive Officer, commented:

"We have made significant progress in 2018, acquiring a differentiated, high growth business in Wagamama, opening a record number of new sites in both our Pubs and Concessions businesses, and driving improved like-for-like sales momentum in the Leisure business throughout 2018. We now have a business that is orientated strongly towards growth and we continue to focus on delivering shareholder value."

Enquiries:

 
 The Restaurant Group plc 
  Andy McCue, Chief Executive 
  Officer 
  Kirk Davis, Chief Financial 
  Officer                        020 3117 5001 
 MHP Communications 
  Oliver Hughes 
  Simon Hockridge 
  Alistair de Kare-Silver        020 3128 8742 
 

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 10:00am. 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 9:45am from the Company's website https://www.trgplc.com/investors/reports-and-presentations

Notes:

1. At the year-end The Restaurant Group plc operated over 650 restaurants and pub restaurants throughout the UK. Its principal trading brands are Wagamama, Frankie & Benny's, Chiquito and Brunning & Price. It also operates a multi-brand Concessions business which trades principally in UK airports. In addition the Wagamama business had 5 restaurants in the US and over 50 franchise restaurants operating across a number of territories.

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.

4. The main factors that could affect the business and the financial results are described in the "Senior management Risk Committee" section in The Restaurant Group plc 2018 Annual Report, which will be available to shareholders in April 2019.

Chairman's statement

2018 was a pivotal year for the Group. The acquisition of Wagamama and the development of our Pubs and Concessions businesses have accelerated our progress into growth sectors and we continue to make improvements to the customer proposition and our execution across our Leisure business.

Total revenues were up 1% to GBP686m, with like-for-like sales for the 52 weeks ended 30 December 2018 down 2%, representing an improvement on the decline in 2017. The group delivered like-for-like sales growth since the World Cup, with our Pubs business continuing to consistently trade ahead of the pub restaurant sector and our Concessions business trading strongly. Our Leisure business exhibited improved like-for-like sales momentum through 2018.

We opened a record 21 new pubs (inclusive of acquisitions) and a record 21 new concessions units during the year.

Adjusted(1) profit before tax was down 8.1% to GBP53.2m and Adjusted(1) EPS was down 11.9% to 14.7p per share. Statutory profit before tax was GBP13.9m (2017(3) : GBP28.2m) including exceptional charges of GBP39.2m (2017(3) : GBP29.7m) which are explained further in the Financial review section. Statutory EPS was 2.4p (2017(3) : 6.7p).

The acquisition of Wagamama formally completed on 24 December 2018. The business has a differentiated, high growth, pan-Asian proposition which has significantly and consistently outperformed its core UK market. It is well aligned to the key structural trends in our sector and addresses customer demand for speed of service, delivery and healthy options. We continue to believe that the acquisition will be transformative for the Group, allowing us to accelerate Wagamama's UK roll-out with selected TRG site conversions, expand the UK concessions presence leveraging our existing relationships, address delivery opportunities via restaurants and delivery kitchens, pilot pan-Asian cuisine 'food-to-go' offerings, explore international growth options and deliver at least GBP22m of synergies.

The enlarged Group now derives c.70 per cent. of outlet EBITDA (on a full-year 2018 pro-forma basis) from high growth segments (Wagamama, Concessions and Pubs) and is well equipped to address compelling growth avenues.

We were appreciative of the engagement of all of our investors during the process of acquiring Wagamama and the support provided for the rights issue that was undertaken to raise GBP315m in order to fund the acquisition.

The Group has continued to face external cost pressures throughout 2018, including increases in the national living wage and national minimum wage, 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.

On 14 February 2019, we announced that Andy McCue, CEO, had informed the Board of his decision to leave the Company due to extenuating personal circumstances. Whilst the Board is clearly disappointed that Andy will not be able to provide the long-term leadership for the business, we recognise that his decision to step down is the right one for him and his family. The Board anticipates that Andy will remain in position while his successor is being recruited. An extensive search is well underway to recruit the new CEO. An announcement regarding the appointment will be made in due course.

Other Board changes during the year included the resignation of Paul May as Non-Executive Director in October 2018 and the appointment of Allan Leighton, who joined as a Non-Executive Director in December 2018, at the completion of the Wagamama transaction. Allan is currently Chairman of Co-operative Group Limited and Entertainment One Limited, among others, and has previously been Chief Executive Officer of ASDA Group Limited and Pandora A/S and Chairman of Pace plc and Royal Mail. He knows the Wagamama team well and has extensive experience of managing public and private companies in the retail and hospitality sectors and a wealth of experience in growing consumer businesses.

Simon Cloke, non-executive Director, will step down as Senior Independent Director at the AGM in May 2019 and will be replaced as Senior Independent Director by Allan Leighton.

Although a search had commenced to recruit an additional Non-Executive Director with digital credentials during 2019, the Board decided that it was sensible to postpone this search until such time as the new CEO is recruited. Simon Cloke has agreed to remain on the Board as a non-executive Director for a period of up to a year, to ensure continuity whilst the new CEO is recruited. The Board will then re-commence its search to recruit an additional non-executive Director with technology and digital credentials and at that point Simon Cloke will step down from the Board.

We have also added to the strength of the senior leadership team, with the appointment of Lisa Hillier as Chief People Officer, joining us from Just Eat plc.

The business continues to generate strong free cash flow, with GBP59.6m in 2018 (2017(3) : GBP85.1m). As announced at the time of the acquisition, we will adopt a policy of paying a dividend covered two times by adjusted(1) profit after tax, with this policy reflected in the final dividend that the Board has proposed for 2018 of 1.47 pence per share. The total dividend for the year is, therefore, 8.27 pence per share. The Board believes that this funding structure and dividend policy reflects an appropriate balance between delivering shareholder returns, enabling the Company to invest in further growth and enabling the Company to achieve an appropriate deleveraging profile.

The enlarged Group now employs over 22,000 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.

This has been a pivotal year for the Group, with progress on our strategic initiatives, improved like-for-like sales momentum in our Leisure business, growth in our Pubs and Concessions business, and a transformational acquisition that accelerates our momentum in growth segments. We continue to benefit from strong cash generation and a healthy balance sheet. The Board is confident that we have a robust plan and the focus and rigour to deliver value for shareholders in what is a challenging consumer environment.

Debbie Hewitt MBE

Chairman

15 March 2019

Business review

Introduction

Following the acquisition of Wagamama, the enlarged group is now strongly orientated towards growth with Wagamama and our Concessions and Pubs businesses contributing c. 70% of Group outlet EBITDA in the period (on a full-year 2018 pro-forma basis).

Wagamama is a differentiated, high growth pan-Asian proposition that has consistently and significantly outperformed its core UK market. That outperformance is driven by excellent operational standards, as well as being exceptionally well aligned to structural growth drivers as customers demand more convenient, faster, and healthier options.

Our Concessions business is a market leader in UK airports. Our strength in capability to develop and operate a broad range of formats in a wide range of infrastructure types has resulted in a strong track record of like-for-like sales growth, winning new sites and renewing existing space.

Our Pubs business is well positioned in the market with a premium, differentiated food-led offer that is increasingly outperforming the pub restaurant sector. The business benefits from operating and often owning differentiated assets and delivering an exceptional experience. There continues to be opportunities to expand this business and we have a healthy organic pipeline in place.

In our Leisure business we operate multi-brand casual dining restaurants across the UK. While the business is not inherently well exposed to structural growth drivers as a function of either location or proposition form, we are focused on optimising the propositions to maximise profitability. We will also be disciplined in our approach to capital allocation.

Our Group priorities are to:

   -     Deliver the benefits of the Wagamama acquisition; 
   -     Grow our Concessions and Pubs businesses; and 
   -     Optimise our Leisure brands 
   1.   Deliver the benefits of the Wagamama acquisition 

Wagamama

Wagamama has a strong competitive advantage as the only UK pan-Asian brand concept of scale.

The business is well aligned to key structural trends, consistently outperforming the market average on experience ratings(6) in healthiness of food, convenience and speed.

Wagamama benefits from a high quality leadership team which operates the business as a standalone entity and has the freedom to cultivate its unique cohesive culture.

Wagamama has demonstrated an outstanding track record of like-for-like revenue growth. In its quarter three results (12 weeks up to 3 February) Wagamama increased like-for-like sales(7) by 9.1%; resulting in like-for-like sales7 of 9.7% for its financial year to date (quarters one-to-three). The Wagamama team have identified clear opportunities to grow like-for-like sales further in 2019, including:

   -      Development of the drinks range to help drive higher participation 

- Investment in local marketing and events to drive greater awareness, using new data sources to more effectively target audiences and win share

- Further expansion of the vegan range, including new collaboration hero dish 'Avant Gard'n', which features a vegan 'egg', being launched in partnership with vegan chef Gaz Oakley

- Increased delivery growth via greater reach of aggregators and technology integration both within and between restaurants

- Six major refurbishments planned for this year which will add 300 additional covers (equivalent to two new restaurants)

6 Source: Morar/BrandVue Q4 customer ratings

(7) Like-for-like sales as per Wagamama Q3 bond report

The business is also progressing well on driving future growth via the levers identified at the time of the transaction:

UK Casual Dining: We expect to open between three to four new restaurants this year in the UK, as well as converting eight Leisure sites to Wagamama.

UK Concessions: The business has won a tender for a site in Heathrow Terminal 3 which is due to open in the second half of this year. A site has also been secured in the planned redevelopment of Manchester airport and is due to open in the first half of 2020. The business is also exploring a variety of other airport opportunities.

Delivery: The delivery kitchen in Battersea has been successfully trialled and we will be rolling out further delivery kitchens in the year.

International: We opened a new restaurant in Murray Hill, NYC earlier this year and will open in Midtown Manhattan in the Summer. A strategic review of our options for the US business has commenced and we will update investors on our plans later in the year.

Food to go formats: The business has developed a new grab and go concept which is to be branded "Mamago". The concept will offer a newly developed Asian menu to capitalise on increased customer demand for convenience. The initial pilot is planned for launch in the second half of this year.

Synergies

We will convert eight Leisure sites to Wagamama restaurants this year, with a similar number expected next year. Teams across the business have well developed people, marketing and design and build plans to ensure the new restaurants launch successfully. The eight sites are in locations which align well with the Wagamama customer demographic, and in competitive markets where we have high confidence that we can take share from less differentiated offerings. The eight TRG sites collectively make a modest profit today and we expect them to generate incremental EBITDA returns in excess of 50% of the cost of capital to convert. The converted sites will open between August and November 2019. We have continued confidence in delivering an incremental EBITDA benefit of at least GBP7m per annum at maturity in 2021 from our site conversion programme. We are progressing well with our cost synergy plans and collaborative cross-functional working groups across the business have been established. We have continued confidence in delivering at least GBP15m of cost synergies per annum in 2021. Synergies will be achieved through leveraging scale and consolidating spend across the following cost categories:

   -      Procurement and logistics 
   -      Site level overheads 
   -      Central costs 
   2.   Grow our Concessions and Pubs businesses 

Concessions

Our Concessions business operates a wide variety of food and beverage formats, across over 35 brands, primarily in UK airports. This includes bespoke concepts designed with airport partners, The TRG Group's own leisure brands, and well-known third-party brands, which operate under franchise arrangements.

Our trading continues to be strong and we continued our strong track record of retaining sites with c.85% having received contract renewals beyond the term of the initial contract. In particular during 2018 we successfully renewed contracts for existing large spaces at both Gatwick and Heathrow airports. On average our contracts have been extended for 90% of the original concession term.

Our unique capabilities enabling us to consistently deliver high operational standards at high volume and peak-load intensity, along with our format development and partnering skills, position us well for further contract wins in the future.

In 2018 we have been successful in winning 21 new units and adding five new clients in UK travel hubs as well as four new brand partnerships. These new openings were a mix of multiple formats and categories showcasing our operational capability strength and ability to provide full solutions to airport partners. This included a "Spuntino" restaurant in Heathrow, the first "Brewdog" bar in a UK airport in Edinburgh, two outlets for "Barburrito" and our first "Crepeaffaire" franchise unit. We also developed several in-house concepts such as the "Hawker Bar" in Luton and "Distilling House" pub in Aberdeen.

We expect to open at least 5 to 10 Concessions units in 2019. In addition to this we have secured a contract to operate a number of significant sites for the planned redevelopment at Manchester airport, due to trade in 2020.

Plans to grow our business outside of UK airports are progressing well. We have developed two new brands, "Mezze Box" and "Grains and Greens" with Sainsbury's. The initial trial has commenced with five counters opened so far this year. We are also building a team to support our longer term plans for growth into international airports.

Pubs

Our Pubs business is well positioned in the market with a premium offering tailored to local markets. The business continued to outperform the pub restaurant sector in 2018, with the extent of outperformance increasing year-on-year.

During the year we optimised our menu pricing architecture and developed a more flexible approach to our menus, with an expansion of the nibbles and sharing sections, and smaller plate options on some of the core dishes. In the year ahead we will be launching a gluten-free menu in all our pubs. We continue to refine our drinks range to ensure we cater for an increasing trend in craft beer and low alcohol/no alcohol drinks.

We continue to look at opportunities to leverage the existing space in our estate. Benefitting from the warm weather over the summer we ran an increased number of events such as our gin and prosecco festivals as well as live music events which are proving increasingly popular. During the year we opened three new private dining rooms and our first separate function space at the Red Fox pub which has been used for larger functions, including weddings. Following the successful opening of our first pub with accommodation in September, we opened another in February 2019. We anticipate additional revenue opportunities by continuing to leverage our existing space in the year ahead with further function space, private dining rooms and all-weather external terraces currently under consideration.

Our estate expansion plans are progressing well. We opened 21 new pubs in the year including the acquisitions of Ribble Valley Inns Ltd (consisting of four leasehold pubs) and Food & Fuel Ltd (consisting of 11 leasehold pubs and café-bars predominately situated in affluent London neighbourhoods). We have now refurbished three of the Ribble Valley sites and these are delivering a sales uplift in excess of 30% post refurbishment. The Food & Fuel Ltd sites are trading in line with expectations and plans are in place to further develop these propositions through 2019. Our single site Brunning and Price acquisitions are trading well and we expect to open at least seven more pubs in the coming year.

   3.   Optimise our Leisure business 

The market backdrop for our Leisure business is challenging with a 27% increase in the number of branded restaurants over the past five years. This has been accompanied with a dramatic decrease in the growth rates of both total sales and like-for-like sales every year since 2014. Structural trends including declining retail footfall, the rapid rise of the delivery sector and fast changing customer preferences towards convenience and healthy options all create challenges for long established multi-site operators of scale. Profitability has been further challenged by the pressure of rising costs, with the bulk of our restaurant wage bill inflating by around 4%, electricity costs at eight year highs, and rent and rates costs remaining at high levels despite the decreasing consumer demand. In response, we are focused on ensuring our brands are competitively differentiated, increasing our exposure to healthy and convenient options and capitalising on 'off-trade' delivery and collection sales. However, given the market backdrop, we are acutely disciplined in how we allocate capital and highly discerning as to lease renewal commitments and the flexibility inherent within them.

Our Leisure estate is disproportionately highly exposed to these pressures. 56% of our estate directly neighbours retail, most of which are in out-of-town locations. As a result of our discipline over recent years, the vast majority of our Leisure portfolio remains EBITDA positive. 41% of our Leisure portfolio also has a lease end or break option within the next five years.

In order to ensure we make the correct property decisions, we have analysed every restaurant in our Leisure estate to determine its potential performance versus its actual performance. In the case of Frankie and Benny's, 31% of sites are in structurally unattractive locations, and as such, we will seek to exit these locations in future years. Of the remaining Frankie and Benny's locations, 60% are outperforming or in-line with their local markets; in 40% we believe there is scope for operational improvement.

Frankie and Benny's

The brand has seen considerable activity over the last twelve months, progressing well on a number of initiatives.

In May, we saw the launch of our new Feel Good Range, offering our customers increased and improved healthier options. The range has proved popular with penetration at c.10% of sales, with the top performers in this range being the Nashville Chicken Skewers and Skinny Chicken Pizza.

We launched on Comparethemarket's 'Meerkat Meals' partner platform in June and have seen really strong engagement with it becoming one of our most popular promotions.

We launched our squishies campaign in October through to November where we gave away a free Squishie toy with every kids meal. This proved successful in driving repeat visits.

Our payment at table feature, "pay my bill", is improving in popularity with customers, with over five percent of transactions being made through this channel.

Our customers are responding to these initiatives, and this has resulted in an improvement in our social review scores throughout the year as well as improved sales momentum.

We are currently trialling "order ahead" functionality in 25 sites. This gives our customers the ability to order and pay for their meal in advance, alongside a booked table, and have it ready for them when they arrive at the restaurant. Initial feedback from customers has been positive and we will look to roll out more broadly later in the year.

Upcoming activity includes continued improvement in the core proposition via new menus. We will shortly trial a simplified core menu with a large reduction in the number of dishes to help our teams improve operational consistency. Our marketing campaigns will become increasingly targeted to specific occasions and highlight new food development via limited time offers. We will invest in service and operational improvements in underperforming sites and actively manage the structurally disadvantaged tail.

Chiquito

The brand has evolved its offering over the course of the year with a number of initiatives employed. In January 2018 we launched a new core menu aimed at reinstating value, improving choice, simplifying navigation and focusing on more authentic Mexican dishes such as our 'build your own' tortillas option.

We invested in a stronger senior operational team throughout the year. This in turn allowed us to focus on the quality of our General Managers and drive standards up through peer group benchmarking.

Our promotional strategy has become more centred around Mexican favourites, generating a very encouraging take-up from customers.

We also launched a virtual brand "Kick-ass Burrito" which, across all delivery aggregators now has 131 points of sale.

Our customers are recognising these improvements with a notable increase in our social review scores throughout the year as well as improved trading momentum, with like-for-like sales improving in every quarter.

Our plans for the year ahead include the launch of a new menu in April which will feature a strong range of dishes catering for people with dietary restrictions as well as improving our vegan and vegetarian offer with dishes such as our jackfruit burrito with benefits, beetroot and feta lettuce wrap and bean and red chilli burger. We will also offer exciting trade-up options with premium ingredients such as our Picanha surf & turf dish and Barabacoa beef build your own option.

Summary and current trading

In summary:

   -      The enlarged group is now strongly orientated towards growth 

- Wagamama like-for-like sales momentum is strong and we are progressing well on the growth avenues unlocked by the acquisition

   -      Strong growth continues in Concessions and Pubs 
   -      We remain focused on optimising our Leisure brands and property portfolio 

- Current trading for first 10 weeks of the year in line with our expectations with like-for-like sales up 2.8%

Financial review

Trading results

Like-for-like sales declined by 2.0% for the year, with total revenue up 1.0% to GBP686.0m (2017: GBP679.3m). The like-for-like sales decline reflected the annualisation of the investments we made in price and proposition across our Leisure brands in 2017, along with the impact of the adverse weather and the World Cup in 2018, which were partially offset by a strong like-for-like sales performance from both our Pubs and Concessions businesses. The Group delivered like-for-like sales growth since the World Cup with our Leisure business exhibiting improved like-for-like sales momentum through 2018.

With declining like-for-like sales and the well-known sector specific inflationary cost pressures, the Group's Adjusted(1) operating profit (EBIT) fell by 6.9% to GBP55.4m (2017(3) : GBP59.5m) with the Adjusted(1) operating margin falling from 8.8% to 8.1%. On a statutory basis, the Group's operating profit (EBIT) was GBP16.6m (2017(3) GBP29.8m). Adjusted(1) operating profit (EBIT) includes a GBP2.2m (2017: GBP0.7m) benefit from lower depreciation following a prior year adjustment to the impairment provision. The prior year adjustment reflects the appropriate allocation of central costs to individual restaurants following a reassessment of our impairment methodology.

Adjusted(1) profit before tax for the period was GBP53.2m (2017(3) : GBP57.8m). Adjusted(1) profit after tax was GBP41.8m (2017(3) : GBP45.8m). The Adjusted(1) effective tax rate for the Group increased to 21.4% (2017(3) : 20.9%). On a statutory basis, the effective tax rate of 50.6% (2017(3) : 34.9%) reflects the higher exceptional charges in the year. Adjusted(1) earnings per share were 14.7p (2017: 16.7p). On a statutory basis, profit before tax was GBP13.9m (2017(3) : GBP28.2m) and EPS was 2.4p (2017(3) : 6.7p).

The adjusted measures are summarised below:

 
                                 52 weeks ended    52 weeks 
                                    30 December    ended 31 
                                           2018    December 
                                                    2017(3) 
                                           GBPm        GBPm   % change 
------------------------------  ---------------  ----------  --------- 
 Revenue                                  686.0       679.3       1.0% 
 
 Adjusted(1) EBITDA                        87.9        95.8     (8.3%) 
 
 Adjusted(1) operating profit              55.4        59.5     (6.9%) 
 Adjusted(1) operating margin              8.1%        8.8% 
 
 Adjusted(1) profit before 
  tax                                      53.2        57.8     (8.1%) 
 Adjusted(1) tax                         (11.4)      (12.1) 
 
 Adjusted(1) profit after 
  tax                                      41.8        45.8     (8.6%) 
 
 Adjusted(1) EPS (pence)                   14.7        16.7    (11.9%) 
------------------------------  ---------------  ----------  --------- 
 

Cash flow and net debt

Operating cash flows remain strong with free cash flow of GBP59.6m in the year (2017: GBP85.1m). Free cash flow in the year reflects the lower EBITDA and higher refurbishment and maintenance capital expenditure. The Group's net debt at the year-end was GBP291.1m, an increase of GBP268.0m on the prior year net debt of GBP23.1m(3) following the acquisition of Wagamama and significant capital investment for the strategic development of our Concessions and Pubs businesses.

Summary cash flow for the year is set out below:

 
                                                    2018        2017(3) 
                                                    GBPm           GBPm 
                                                --------  ------------- 
 
 Adjusted(1) operating profit                       55.4           59.5 
 Working capital and non-cash adjustments            0.4           12.0 
 Depreciation                                       32.5           36.3 
 Operating cash flow                                88.3          107.8 
 Net interest paid                                 (1.0)          (0.7) 
 Tax paid                                          (7.4)          (7.1) 
 Refurbishment and maintenance expenditure        (20.3)         (14.9) 
----------------------------------------------  --------  ------------- 
 Free cash flow                                     59.6           85.1 
 Development expenditure                          (33.0)         (18.4) 
 Acquisitions of RVI and Food and Fuel            (14.8)              - 
  net of cash acquired 
 Movement in capital creditors                       5.8          (5.9) 
 Dividends                                        (34.9)         (34.9) 
 Utilisation of onerous lease provisions          (11.2)         (12.7) 
 Exceptional restructuring costs                       -          (6.8) 
 Acquisition of Wagamama net of cash acquired    (310.1)              - 
 Debt acquired on acquisition of Wagamama        (225.0)              - 
 Acquisition and refinancing exceptional          (10.1)              - 
  costs 
 Proceeds from issue of share capital              305.8              - 
 Other items                                       (0.1)            0.5 
----------------------------------------------  --------  ------------- 
 Net cash flow                                   (268.0)            6.9 
 Net debt brought forward                         (23.1)         (30.0) 
----------------------------------------------  --------  ------------- 
 Net debt carried forward                        (291.1)         (23.1) 
----------------------------------------------  --------  ------------- 
 

In December 2018 the Group refinanced its borrowings and now has GBP220m of revolving credit facilities that expire in December 2021 and a GBP10m overdraft facility. In addition the GBP225m Wagamama Bond matures in July 2022. At the year-end we had GBP161.9m of cash headroom and significant headroom against our banking covenants.

 
                              Group banking    2018    2017 
                                   covenant 
                            ---------------  ------  ------ 
 Banking covenant ratios: 
 EBITDA / Interest cover                >4x     47x     66x 
 Net debt / EBITDA(8)                 <3.5x    2.2x    0.2x 
 Other ratios: 
 Fixed charge cover                     n/a    2.0x    2.1x 
 Balance sheet gearing                  n/a     63%     11% 
                            ---------------  ------  ------ 
 

(8) On a full-year 2018 pro-forma basis

Capital expenditure

During the year the Group invested GBP68.5m (2017: GBP33.3m) in capital expenditure (excluding the acquisition of Wagamama). Our investment in refurbishment and maintenance capital expenditure increased to GBP20.3m (2017: GBP14.9m) reflecting the Frankie and Benny's capital refreshes on 16 sites and the conversions of four Coast to Coast units to Firejacks. Our investment in new site expenditure increased to GBP47.8m (2017: GBP18.4m) reflecting the higher number of new site openings across our Pubs and Concessions businesses in 2018 compared to 2017.

This expenditure included the acquisitions of "Ribble Valley Inns Ltd" and "Food & Fuel Ltd" which added 15 pubs to our portfolio.

During the year we closed 20 sites, comprising 15 sites from Leisure and five sites from Concessions. Within Concessions two of the sites had reached the end of their contractual life and the other three sites are currently undergoing redevelopments into new Concession units. In the year we also closed 15 Leisure sites, five of which had reached the end of their contractual life and the remainder were 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 
                               2017                                     2018 
                                     -------  -------  ----------  --------- 
 
 Frankie & Benny's              259        1     (12)           -        248 
 Chiquito                        85        -      (2)           -         83 
 Coast to Coast/Filling 
  Station                        25        -      (1)         (4)         20 
 Firejacks                        1        -        -           4          5 
 Garfunkel's                      8        -        -           -          8 
 Joe's Kitchen                    4        -        -           -          4 
 Pub restaurants                 60       21        -           -         81 
 Concessions                     55       21      (5)           -         71 
                                     -------  -------  ----------  --------- 
 Wagamama                         -      140        -           -        140 
 Total                          497      183     (20)           -        660 
                                     -------  -------  ----------  --------- 
 

We expect to spend GBP55m to GBP60m on development expenditure in 2019; comprising:

   -      At least seven new pubs 

- Between 5 to 10 new Concessions sites in 2019, including the initial expenditure relating to Manchester terminal redevelopment

   -      At least six new Wagamama sites 
   -      Eight Leisure site conversions to Wagamama 

- Roll-out of delivery kitchens across the enlarged group and pilot of Wagamama Grab and Go concept

Refurbishment and maintenance capital expenditure will range between GBP30m to GBP35m. This will include six transformational refurbishments of Wagamama UK sites and several large-scale Concessions redevelopment projects.

Restructuring and exceptional charge

An exceptional pre-tax charge of GBP39.2m has been recorded in the year (2017(3) : GBP29.7m, including the prior year restatement of GBP16.5m), which includes the following:

- Onerous lease review resulted in a charge of GBP10.0m in the year (2017: GBP4.2m). This comprises:

-- A GBP5.2m credit in respect of unutilised provisions following the successful exit of 28 sites ahead of expectations; and

-- A further charge of GBP15.2m was provided for in the year. This comprised a charge of GBP11.1m in respect of newly identified onerous leases and a charge of GBP4.1m in respect of sites previously provided for

- A net impairment charge of GBP14.0m (2017(3) : GBP20.7m, including the prior year restatement of GBP16.5m) was made against the carrying value of specific restaurant assets due to recent changes in certain markets. This comprises an impairment charge of GBP17.1m partially offset by reversals of previously recognised impairment losses of GBP3.1m

- An exceptional charge of GBP14.8m has been recorded in the year in relation to the acquisitions of Wagamama, Food and Fuel Ltd and Ribble Valley Inns Ltd. Acquisition related costs are items of one-off expenditure, including legal and professional fees, incurred in connection with the acquisitions

- Restructuring and strategic review costs of GBPnil (2017: GBP4.8m) relating to costs incurred in the restructuring projects that were initiated in 2017 to implement the new strategy and cost initiatives; and

- An exceptional charge of GBP0.5m has been recognised in the year as a result of the refinancing which took place to fund the acquisition of Wagamama. The charge relates to the write off of unamortised finance costs connected to the old debt facility

The tax credit relating to these exceptional charges was GBP4.3m (2017(3) : GBP2.2m).

Cash expenditure associated with the exceptional charges was GBP21.3m in the year (2017: GBP19.5m). Cash costs relate to onerous leases of GBP11.2m (2017: GBP12.7m), acquisitions and refinancing costs of GBP10.1m (2017:GBPnil) and costs associated with the implementation of the new business strategy of GBPnil (2017: GBP6.8m)

Tax

The Adjusted(1) tax charge for the year was GBP11.4m (2017: GBP12.1m), summarised as follows:

 
                                 2018    2017 
                                 GBPm    GBPm 
                               ------  ------ 
 
 Corporation tax                 10.4    10.8 
 Deferred tax                     1.0     1.3 
                               ------  ------ 
 Total                           11.4    12.1 
                               ------  ------ 
 Effective adjusted tax rate    21.4%   20.9% 
 

The effective Adjusted(1) tax rate for the year was 21.4% compared to 20.9% in the prior year. 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 50.6%, which increased from the 2017(3) rate of 34.9% due to the increase in exceptional charges in the year.

 
 The Restaurant 
 Group plc 
 Consolidated 
 income 
 statement 
 
                                 52 weeks ended 30 December                 52 weeks ended 31 December 
                                            2018                                        2017 
                                                                                 Restated (Note 2) 
                                                                    ------------------------------------------ 
                                           Exceptional                                 Exceptional 
                               Trading           items                       Trading         items 
                                                 (Note                                       (Note 
                              business              6)       Total          business            6)       Total 
                   Note        GBP'000         GBP'000     GBP'000           GBP'000       GBP'000     GBP'000 
 
 Revenue            4          686,047               -     686,047           679,282             -     679,282 
 
 Cost of sales      5        (603,332)        (23,997)   (627,329)         (588,594)      (24,894)   (613,488) 
                         -------------  --------------  ----------  ----------------  ------------  ---------- 
 
 Gross 
  profit/(loss)                 82,715        (23,997)      58,718            90,688      (24,894)      65,794 
 
 Administration 
  costs                       (27,313)        (14,775)    (42,088)          (31,188)       (4,772)    (35,960) 
                         -------------  --------------  ---------- 
 
 Operating 
  profit/(loss)                 55,402        (38,772)      16,630            59,500      (29,666)      29,834 
 
 Interest 
  payable           7          (2,233)           (467)     (2,700)           (1,712)             -     (1,712) 
 Interest 
  receivable        7                1               -           1                51             -          51 
                         -------------  --------------  ----------  ----------------  ------------  ---------- 
 
 Profit/(loss) 
  on ordinary 
  activities 
  before tax                    53,170        (39,239)      13,931            57,839      (29,666)      28,173 
 
 Tax on 
  profit/(loss) 
  from 
  ordinary 
  activities        8         (11,361)           4,312     (7,049)          (12,076)         2,249     (9,827) 
                         -------------  --------------  ----------  ----------------  ------------  ---------- 
 
 Profit/(loss) 
  for the year                  41,809        (34,927)       6,882            45,763      (27,417)      18,346 
                         -------------  --------------  ----------  ----------------  ------------  ---------- 
 
 
 Earnings per 
 share (pence) 
 Rights adjusted 
  basic             9            14.67                        2.42             16.66                      6.68 
 Rights adjusted 
  diluted           9            14.63                        2.41             16.58                      6.65 
                         -------------                  ----------  ----------------                ---------- 
 
 
 The table below is provided to give additional information to shareholders 
  on a key performance indicator: 
 
 EBITDA                         87,855        (24,802)      63,053            95,755       (8,973)      86,782 
 Depreciation, 
  amortisation 
  and impairment              (32,453)        (13,970)    (46,423)          (36,255)      (20,693)    (56,948) 
                         -------------  --------------  ----------  ----------------  ------------  ---------- 
 
 Operating 
  profit/(loss)                 55,402        (38,772)      16,630            59,500      (29,666)      29,834 
                         -------------  --------------  ----------  ----------------  ------------  ---------- 
 
 
 
 
 The Restaurant Group 
  plc 
 Consolidated balance 
  sheet 
 
                                          At 30 December   At 31 December 
                                                    2018             2017 
                                                                 Restated 
                                                                 (Note 2) 
                                 Note            GBP'000          GBP'000 
 
 Non-current assets 
 Intangible assets                11             613,685           26,433 
 Property, plant and 
  equipment                       12             434,298          327,320 
 Fair value lease assets                           1,361                - 
                                       -----------------  --------------- 
                                               1,049,344          353,753 
                                       -----------------  --------------- 
 
 Current assets 
 Inventory                                         8,678            5,930 
 Other receivables                                22,912           14,949 
 Prepayments                                      31,096           17,473 
 Cash and cash equivalents                        65,903            9,611 
                                                 128,589           47,963 
                                       -----------------  --------------- 
 
 Total assets                                  1,177,933          401,716 
                                       -----------------  --------------- 
 
 Current liabilities 
 Corporation tax liabilities                     (2,702)          (2,129) 
 Trade and other payables                      (211,705)        (114,841) 
 Other payables                                    (272)            (164) 
 Provisions                       13             (9,377)         (10,408) 
                                       -----------------  --------------- 
                                               (224,056)        (127,542) 
                                       -----------------  --------------- 
 
 Net current liabilities                        (95,467)         (79,579) 
                                       -----------------  --------------- 
 
 Non-current liabilities 
 Long-term borrowings                          (354,420)         (31,223) 
 Other payables                                 (27,521)         (24,596) 
 Fair value lease liabilities                   (10,426)                - 
 Deferred tax liabilities                       (52,674)          (4,301) 
 Provisions                       13            (50,244)         (33,888) 
                                       -----------------  --------------- 
                                               (495,285)         (94,008) 
                                       -----------------  --------------- 
 
 Total liabilities                             (719,341)        (221,550) 
                                       -----------------  --------------- 
 
 Net assets                                      458,592          180,166 
                                       -----------------  --------------- 
 
 
 Equity 
 Share capital                                   138,234           56,551 
 Share premium                                   249,686           25,554 
 Other reserves                                  (7,158)          (7,753) 
 Retained earnings                                77,830          105,814 
                                       -----------------  --------------- 
 Total equity                                    458,592          180,166 
                                       -----------------  --------------- 
 
 
 
 
   The Restaurant Group plc 
   Consolidated statement of changes in equity 
 
 
                                                   Share        Share      Other       Retained        Total 
                                                 capital      premium   reserves       earnings 
                                                 GBP'000      GBP'000    GBP'000        GBP'000      GBP'000 
                                              ----------  -----------  ---------  -------------  ----------- 
     Balance at 2 January 
      2017 (Restated)                             56,550       25,542    (9,987)        122,334      194,439 
 
     Profit for the year 
      (Restated)                                       -            -          -         18,346       18,346 
     Issue of new shares                               1           12          -              -           13 
     Dividends                                         -            -          -       (34,866)     (34,866) 
     Share-based payments- 
      credit to equity                                 -            -      2,158              -        2,158 
     Deferred tax on share-based 
      payments taken directly 
      to equity                                              -      -   76                    -           76 
 
     Balance at 31 December 
      2017 
      Restated (Note 2)                           56,551      25,554     (7,753)        105,814      180,166 
                                              ----------  ----------  ----------  -------------  ----------- 
 
 
     Balance at 1 January 
      2018                                        56,551      25,554     (7,753)        105,814      180,166 
 
     Profit for the year                               -           -           -          6,882        6,882 
     Rights issue of new 
      shares                                      81,683     224,132           -              -      305,815 
     Dividends                                         -           -           -       (34,866)     (34,866) 
     Share-based payments 
      - credit to equity                               -           -         761              -          761 
     Deferred tax on share-based 
      payments taken directly 
      to equity                                        -           -        (42)              -         (42) 
     Purchase of treasury 
      shares                                           -           -       (124)              -        (124) 
 
     Balance at 30 December 
      2018                                       138,234     249,686     (7,158)         77,830      458,592 
                                              ----------  ----------  ----------  -------------  ----------- 
 
 
 
    There is no comprehensive income other than the profit for the 
    year in the year ended 30 December 2018 or the year ended 31 December 
    2017. 
 
    Other reserves represents the Group's share-based payment transactions, 
    shares held by the Employee Benefit Trust and treasury shares 
    held by the Group. 
 
 
 Consolidated cash flow statement 
                                                            52 weeks       52 weeks 
                                                               ended          ended 
                                                         30 December    31 December 
                                                                2018           2017 
                                                                           Restated 
                                                                           (Note 2) 
                                                 Note        GBP'000        GBP'000 
 
 
 Operating activities 
 Cash generated from operations                   14          88,307        107,819 
 Interest received                                                10             55 
 Interest paid                                               (1,013)          (751) 
 Tax paid                                                    (7,364)        (7,068) 
 Cash outflows from exceptional onerous 
  lease provisions                                6         (11,183)       (12,738) 
 Cash outflows from exceptional restructuring 
  costs                                           6                -        (6,792) 
 Cash outflows from exceptional acquisition 
  and refinancing costs                                     (10,103)              - 
                                                       -------------  ------------- 
 Net cash flows from operating activities                     58,654         80,525 
                                                       -------------  ------------- 
 
 Investing activities 
 Purchase of property, plant and equipment                  (47,514)       (39,275) 
 Purchase of intangible assets                               (1,532)              - 
 Proceeds from disposal of property, 
  plant and equipment                                            370            828 
 Purchase of subsidiaries                                  (364,197)              - 
 Cash acquired on acquisition of subsidiaries                 39,270              - 
 Net cash flows used in investing activities               (373,603)       (38,447) 
                                                       -------------  ------------- 
 
 Financing activities 
 Net proceeds from issue of ordinary 
  share capital                                              305,815             13 
 Repayments of borrowings                                  (170,000)      (106,500) 
 Drawdown of borrowings                                      272,000         99,500 
 Upfront loan facility fee paid                              (1,500)              - 
 Dividends paid to shareholders                   10        (34,866)       (34,866) 
 Finance lease principal payments                              (208)          (182) 
                                                       -------------  ------------- 
 Net cash flows used in financing activities                 371,241       (42,035) 
                                                       -------------  ------------- 
 
 Net increase in cash and cash equivalents                    56,292             43 
 
 Cash and cash equivalents at the beginning 
  of the year                                                  9,611          9,568 
 
 Cash and cash equivalents at the end 
  of the year                                                 65,903          9,611 
                                                       -------------  ------------- 
 
 

1. General information

Corporate information

The Restaurant Group plc (the "Company") is a public listed company incorporated and registered in Scotland. The consolidated preliminary results of the Company as at and for the year ended 30 December 2018 comprise the Company and its subsidiaries (together referred to as the "Group").

The consolidated preliminary results of the Group for the year ended 30 December 2018 were approved by the directors on 14 March 2019. The Annual General Meeting of The Restaurant Group plc will be held at 9:30am on Friday 17 May 2019 at the offices of MHP Communications at 6 Agar Street, London WC2N 4HN.

Accounting policies

Basis of preparation

Whilst the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRSs.

The consolidated financial statements comprise the financial statements of the Group as at 30 December 2018 and are presented in UK Sterling and all values are rounded to the nearest thousand (UK GBP'000), except when otherwise indicated.

Going concern

The financial statements have been prepared on a going concern basis as, after making appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future at the time of approving the financial statements.

Nature of financial information

The financial information contained within this preliminary announcement for the 52 weeks to 30 December 2018 and 52 weeks to 31 December 2017 do not comprise statutory financial statements for the purpose of the Companies Act 2006, but are derived from those statements. The statutory accounts for The Restaurant Group plc for the 52 weeks to 31 December 2017 have been filed with the Registrar of Companies and those for the 52 weeks to 30 December 2018 will be filed following the Company's Annual General Meeting.

The auditor's reports on the accounts for both the 52 weeks to 30 December 2018 and 52 weeks to 31 December 2017 were unqualified and did not include a statement under Section 498 (2) or (3) of the Companies Act 2006.

The Annual Report will be available for Shareholders in April 2019.

New accounting standards, interpretations and amendments adopted by the Group

The accounting policies adopted in the preparation of the consolidated preliminary results are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 30 December 2018.

 
 The Restaurant Group plc 
 Notes to the accounts 
 For the year ended 30 December 2018 
 

2 Restatement of comparatives

 
                                                             Rent                             Impairment 
                                               Capital       Free   Finance   Dilapidations    & onerous 
                        As originally    contributions    periods     lease       provision       leases 
                            disclosed              (i)       (ii)     (iii)            (iv)          (v)   As restated 
                              GBP'000          GBP'000    GBP'000   GBP'000         GBP'000      GBP'000       GBP'000 
---------------------  --------------  ---------------  ---------  --------  --------------  -----------  ------------ 
 Consolidated income 
  statement for the 
  52 weeks ended 
  31 December 2017 
 Cost of sales before 
  exceptional items         (589,490)              387          -     (199)               -          708     (588,594) 
 Exceptional cost 
  of sales                    (8,386)                -          -         -               -     (16,508)      (24,894) 
 Interest payable             (1,911)                -          -       199               -            -       (1,712) 
 Trading tax on 
  profit from 
  ordinary 
  activities                 (12,076)                -          -         -               -            -      (12,076) 
 Exceptional tax 
  credit                        1,423                -          -         -               -          826         2,249 
 Profit after tax              32,933              387          -         -               -     (14,974)        18,346 
 
 Adjusted EBITDA               95,118              842          -     (205)               -            -        95,755 
 Depreciation and 
  amortisation               (36,514)            (455)          -         6               -          708      (36,255) 
 
 Consolidated balance 
 sheet at 31 December 
 2017 
 Property, plant 
  and equipment               335,029           16,460          -        84               -     (24,253)       327,320 
 Trade and other 
  payables - current        (124,238)            (841)      8,038         -           2,200            -     (114,841) 
 Other payables 
  - non-current               (2,548)         (15,232)    (8,038)     1,222               -            -      (24,596) 
 Deferred tax 
  liabilities                 (5,127)                -          -         -               -          826       (4,301) 
 Provisions - 
  non-current                (31,688)                -          -         -         (2,200)            -      (33,888) 
 Retained earnings            127,548              387          -     1,306               -     (23,427)       105,814 
 
 Consolidated 
 statement 
 of changes in equity 
 Retained earnings 
  as at 1 January 
  2017                        129,481                -          -     1,306               -      (8,453)       122,334 
---------------------  --------------  ---------------  ---------  --------  --------------  -----------  ------------ 
 
 Basic and diluted 
  earnings per share 
 Weighted average 
  ordinary shares 
  for the purposes 
  of basic earnings 
  per share               200,376,258                -          -         -               -            -   200,376,258 
 Weighted average 
  ordinary shares 
  for the purposes 
  of diluted earnings 
  per share               201,344,618                -          -         -               -            -   201,344,618 
 Total profit for 
  the year (GBP'000)           32,933              387          -         -               -     (14,974)        18,346 
 
 Basic profit/ (loss) 
  per share for the 
  year (pence)                  16.44             0.19          -         -               -       (7.47)          9.16 
 Diluted profit/ 
  (loss) per share 
  (pence)                       16.36             0.19          -         -               -       (7.44)          9.12 
 
 Adjusted basic 
  profit per share 
  for the year 
  (pence)                       22.29             0.19          -         -               -            -         22.48 
 Adjusted diluted 
  profit per share 
  (pence)                       22.18             0.19          -         -               -            -         22.37 
---------------------  --------------  ---------------  ---------  --------  --------------  -----------  ------------ 
 

During the year, management have identified five items for which we have retrospectively amended the financial statements.

(i) Lease incentives - capital contributions

The Group has historically recognised contributions received from landlords to offset against the cost of fitting out a restaurant as a reduction in Property, plant and equipment. Management has identified this error in the year, and reclassified to Trade and other payables, split between current and non-current. Whereas these have previously been depreciated each year, over the lease life, all lease incentives are now recognised, within Cost of sales in the income statement. The prior year credit was also reclassified from Depreciation into Cost of sales. This has resulted in:

- An increase in the Property, plant and equipment as at 1 January 2017 of GBP16.9m, representing the reversal of prior incentives, with a corresponding increase in the Trade and other payables balance for the remaining incentives to recognise over the lease life.

- An increase in the Depreciation charge for 2017 of GBP0.5m and a decrease in rent of GBP0.8m.

(ii) Lease incentives - rent free periods

The Group has previously accounted for rent free lease incentives as a current liability, despite them being recognised in the income statement over the life of the lease. The Group has reclassified amounts that will be unwound to the income statement after one year to non-current Other payables. This has resulted in:

- An GBP8.0m increase in non-current Other payables as at 1 January 2017, and a corresponding decrease in current Trade and Other payables.

- There is no impact on the 2017 income statement as the incentive was released appropriately.

(iii) Finance lease

The historical accounting for finance leases on a number of sites was incorrect. A mechanical calculation error had led to the future cash outflows being overstated. This has resulted in:

- A GBP1.7m reduction in non-current Other payables, and a corresponding reduction in Retained earnings as at 1 January 2017. There is less than a GBP0.1m impact on Property, plant and equipment as these sites have been fully impaired.

- The impact on the income statement for 2017 is considered immaterial, and has not been adjusted.

(iv) Dilapidations provision

The Group historically recorded dilapidation provisions within current Trade and other payables. The Group has corrected the reclassification of dilapidations to non-current Provisions. This has resulted in:

- A GBP2.2m increase in non-current Provisions, and a corresponding decrease in current Trade and other payables as at 1 January 2017.

- No impact on the income statement for 2017 as these were recognised prior to 1 January 2017.

(v) Impairment and onerous lease

As part of the year-end process, management reviewed and re-assessed the method by which central costs are allocated to the individual CGUs for the purposes of impairment testing. As a result, an appropriate portion of the central costs were allocated to the CGUs to more accurately determine their future cash flows. This change has been applied retrospectively to the 1 January 2017 balance sheet. This has resulted in:

- A write down of the 1 January 2017 Property, plant and equipment values of GBP8.5m and corresponding reduction in opening Retained earnings; and

- An additional 2017 Exceptional impairment charge of GBP16.5m and a reduction in Depreciation of GBP0.7m, totalling a GBP15.8m impact on Profit before tax.

3 Segmental analysis

The Group trades in one business segment (that of operating restaurants) primarily within the United Kingdom. In addition, the Group operates restaurants in the United States and generates revenues from franchise royalties primarily in the Middle East and Europe. The segmentation between geographical location and restaurant operations and royalty revenues are not considered significant to be reportable segments under IFRS 8.

4 Revenue

Revenue has been generated from the operation of restaurants, with approximately 99% of revenue generated within the United Kingdom. The remainder is attributable to restaurants within the United States and from franchise royalties primarily in the Middle East and Europe.

 
 5 Profit for the year                              2018        2017 
                                                            Restated 
                                                            (Note 2) 
                                                 GBP'000     GBP'000 
 Cost of sales consists of the following: 
 
 Continuing business excluding pre-opening 
  costs                                          601,928     586,451 
 Pre-opening costs                                 1,404       2,143 
                                                --------  ---------- 
 Trading cost of sales                           603,332     588,594 
 
 Exceptional items (Note 6)                       23,997      24,894 
 
 Total cost of sales for the year                627,329     613,488 
                                                --------  ---------- 
 
 
                                                    2018        2017 
                                                            Restated 
                                                            (Note 2) 
 Profit for the year has been arrived at 
  after charging /(crediting):                   GBP'000     GBP'000 
 
 Amortisation (Note 11)                              342           - 
 Depreciation (Note 12)                           32,111      36,255 
 Impairment of property, plant and equipment 
  (Note 12)                                       13,970      20,693 
 Purchases of food, beverages and consumables    149,586     147,079 
 Staff costs                                     242,375     236,981 
 
 Minimum lease payments                           78,182      73,063 
 Contingent rents                                 12,515      10,093 
                                                --------  ---------- 
 Total operating lease rentals of land and 
  buildings                                       90,697      83,156 
 Rental income                                   (2,300)     (2,007) 
                                                --------  ---------- 
 Net rental costs                                 88,397      81,149 
                                                --------  ---------- 
 
 
 6 Exceptional items                                                   2018                2017 
                                                                              Restated (Note 2) 
                                                                    GBP'000             GBP'000 
 Included within cost of sales: 
 Onerous lease provision in respect of closed and other sites        10,027               4,201 
 Impairment of property, plant and equipment                         13,970              20,693 
                                                                   --------  ------------------ 
                                                                     23,997              24,894 
 Included within administration costs: 
 Acquisition related costs                                           14,775                   - 
 Restructuring and strategic review costs                                 -               4,772 
                                                                     14,775               4,772 
 Included within interest payable: 
 Refinancing costs                                                      467                   - 
                                                                   --------  ------------------ 
 Exceptional items before tax                                        39,239              29,666 
 
 
 
 Credit in respect of tax rate change           219       176 
 Tax effect of exceptional Items            (4,531)   (2,425) 
                                           --------  -------- 
                                            (4,312)   (2,249) 
 
 
 Net exceptional items for the year       34,927   27,417 
                                         -------  ------- 
 

An exceptional pre-tax charge of GBP39.2m has been recorded in the year (2017 Restated: GBP29.7m), which includes the following:

- Onerous lease provisions resulted in a charge of GBP10.0m in the year (2017: GBP4.2m). This comprises:

-- A GBP5.2m credit in respect of unutilised provisions following the successful exit of 28 sites ahead of expectations;

-- A further charge totalling GBP15.2m was provided for in the year. This comprised a charge of GBP11.1m in respect of newly identified onerous leases and a charge of GBP4.1m in respect of sites previously provided for.

- A net impairment charge of GBP14.0m (2017 Restated: GBP20.7m) was made against the carrying value of specific restaurant assets due to continuing challenging trading conditions in the markets in which the Group's restaurants operate as well as a challenging outlook, and has had a significant impact on the Group and the wider casual dining market. There has been an improvement in trading conditions and outlook at certain of the Group's restaurants which has resulted in the reversal of some previous historic impairment charges. The net charge comprises an impairment charge of GBP17.1m partially offset by reversals of previously recognised impairment losses of GBP3.1m.

- An exceptional charge of GBP14.8m has been recorded in the year in relation to the acquisitions of Wagamama, Food and Fuel and Ribble Valley Inns. Refer to Note 17 for further details.

- Restructuring and strategic review costs of GBPnil (2017: GBP4.8m) relating to costs incurred in the restructuring projects that were initiated in 2017 to implement the new strategy and cost initiatives.

- An exceptional charge of GBP0.5m has been recognised in the year as a result of the refinancing which took place to fund the acquisition of Wagamama.

The tax credit relating to these exceptional charges was GBP4.3m (2017 Restated: GBP2.2m).

Cash expenditure associated with the above exceptional charges was GBP21.3m in the year (2017: GBP19.5m) relating to the cash cost of the onerous leases of GBP11.2m (2017: GBP12.7m), the cash cost of the acquisitions and refinancing of GBP10.1m (2017: GBPnil), and costs associated with the implementation of the new business strategy of GBPnil (2017: GBP6.8m).

 
 7 Net finance charges                                                                                   2018                     2017 
                                                                                                                              Restated 
                                                                                                                              (Note 2) 
                                                                                                      GBP'000                  GBP'000 
 
 Bank interest payable                                                                                  1,355                      746 
 Onerous lease interest                                                                                   375                      409 
 Amortisation of facility fees                                                                            333                      365 
 Interest on obligations under finance 
  leases                                                                                                  170                      192 
                                                                                      -----------------------  ----------------------- 
 Trading borrowing costs                                                                                2,233                    1,712 
 
 Exceptional refinancing costs (Note 6)                                                                   467                        - 
 Total borrowing costs                                                                                  2,700                    1,712 
 
 Other interest receivable                                                                                (1)                      (2) 
 Loan note interest receivable                                                                              -                     (49) 
                                                                                      -----------------------  ----------------------- 
 Total interest receivable                                                                                (1)                     (51) 
 
 Trading net finance charges                                                                            2,232                    1,661 
 Total net finance charges                                                                              2,699                    1,661 
                                                                                      -----------------------  ----------------------- 
 
 8 Tax                                              Trading              Exceptional                    Total                    Total 
                                                       2018                     2018                     2018                     2017 
                                                                                                                              Restated 
                                                                                                                              (Note 2) 
 a) The tax charge comprises:                       GBP'000                  GBP'000                  GBP'000                  GBP'000 
                                      ---------------------  -----------------------  -----------------------  ----------------------- 
 
 Current tax 
     UK corporation tax at 19% 
      (2017: 19.25%)                                 10,183                  (2,447)                    7,736                   10,568 
     Adjustments in respect of 
      previous years                                    191                        -                      191                    (683) 
                                      ---------------------  -----------------------  -----------------------  ----------------------- 
                                                     10,374                  (2,447)                    7,927                    9,885 
                                      ---------------------  -----------------------  -----------------------  ----------------------- 
 Deferred tax 
     Origination and reversal 
      of temporary differences                        1,832                        -                    1,832                       94 
     Adjustments in respect of 
      previous years                                  (634)                        -                    (634)                    1,190 
     Charge/(credit) in respect 
      of rate change on deferred 
      tax liability                                   (211)                      219                        8                      165 
     Credit in respect of fixed 
      asset impairment                                    -                  (2,084)                  (2,084)                  (1,507) 
                                      ---------------------  -----------------------  -----------------------  ----------------------- 
                                                        987                  (1,865)                    (878)                     (58) 
 
 Total tax charge for the 
  year                                               11,361                  (4,312)                    7,049                      9,827 
                                      ---------------------  -----------------------  -----------------------  ------------------------- 
 
  The adjustments in respect of previous years predominantly 
  relates to allocations of property, plant and equipment 
  between qualifying and non-qualifying expenditure. 
 
 
  b) Factors affecting the tax charge for the year 
 
 The tax charged for the year varies from the standard UK corporation 
  tax rate of 19.00% (2017: 19.25%) due to the following factors: 
                                                    Trading              Exceptional                    Total                     2017 
                                                       2018                     2018                     2018                 Restated 
                                                                                                                              (Note 2) 
                                                    GBP'000                  GBP'000                  GBP'000                  GBP'000 
                                      ---------------------  -----------------------  -----------------------  ----------------------- 
 Profit on ordinary activities 
  before tax                                         53,170                 (39,239)                   13,931                   28,173 
                                      ---------------------  -----------------------  -----------------------  ----------------------- 
 
 Profit/(loss) on ordinary 
  activities before tax 
  multiplied by the standard 
  UK 
 corporation tax rate of 
  19.00% (2017: 19.25%)                              10,102                  (7,455)                    2,647                    5,423 
 
 Effects of: 
 Depreciation/impairment 
  on non-qualifying assets                            1,266                      570                    1,836                    3,720 
 Expenses not deductible 
  for tax purposes                                      518                    2,354                    2,872                      475 
 (Credit)/charge in respect 
  of rate change on deferred 
  tax liability                                       (211)                      219                        8                      165 
 Adjustment in respect 
  of previous years                                   (443)                        -                    (443)                      507 
 Release of tax provisions                             (15)                        -                     (15)                    (478) 
 Business combinations                                 (80)                        -                     (80)                    (182) 
 Share options                                          224                        -                      224                      197 
 Total tax charge for the 
  year                                               11,361                  (4,312)                    7,049                    9,827 
                                      ---------------------  -----------------------  -----------------------  ----------------------- 
 
  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. 
  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 GBPnil tax charge (2017 restated: GBP0.2m). 
 
 9 Earnings per share (EPS)                                                                              2018                     2017 
                                                                                                                              Restated 
                                                                                                                                 (Note 
                                                                                                                                    2) 
 a) Basic earnings per share: 
 Weighted average ordinary shares for the 
  purposes of basic earnings per share                                                            284,959,978              274,616,270 
 
 Total profit for the year (GBP'000)                                                                    6,882                   18,346 
 
 Basic earnings per share for the year (pence)                                                           2.42                     6.68 
                                                                                      -----------------------  ----------------------- 
 
 Total profit for the year (GBP'000)                                                                    6,882                   18,346 
 Effect of exceptional items on earnings 
  for the year (GBP'000)                                                                               34,927                   27,417 
                                                                                      -----------------------  ----------------------- 
 Earnings excluding exceptional items (GBP'000)                                                        41,809                   45,763 
 
 Adjusted earnings per share (pence)                                                                    14.67                      16.66 
                                                                                      -----------------------  ------------------------- 
 
 b) Diluted earnings per share: 
 
 Weighted average ordinary shares for the 
  purposes of basic earnings per share                                                            284,959,978              274,616,270 
 
 Effect of dilutive potential ordinary shares: 
 Dilutive shares to be issued in respect 
  of options granted under the share option 
  schemes                                                                                              64,070                  383,856 
 Shares held by employee benefit trust                                                                688,276                  943,284 
                                                                                                  285,712,324              275,943,410 
                                                                                      -----------------------  ----------------------- 
 
 Diluted earnings per share (pence)                                                                      2.41                     6.65 
 Adjusted diluted earnings per share (pence)                                                            14.63                    16.58 
 
 On the 14 December 2018 the group issued 290,428,830 new ordinary 
  shares of 28.125p each through a rights issue. To reflect the 
  rights issue, the number of shares previously used to calculate 
  basic and diluted earnings per share and adjusted earnings per 
  share have been amended in the table above in accordance with 
  IAS 33. 
  A bonus adjustment factor of 1.370 has been applied, based on 
  the ratio of an adjusted closing share price of 200.0p per share 
  on 30 October 2018, the business day before the shares started 
  trading ex rights price at that date of 108.5 pence per share. 
  Prior to this re-presentation, the EPS for the year ended 31 December 
  2017 as restated (Note 2) was 9.16 pence (basic), 9.12 pence (diluted), 
  22.48 pence (adjusted basic) and 22.37 pence (adjusted diluted). 
 
  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. 
 10 Dividend                                                                                                                      2018                  2017 
                                                                                                                               GBP'000               GBP'000 
 Amounts recognised as distributions to equity 
  holders during the year: 
 Final dividend for the 52 weeks ended 31 December 
  2017 of 10.60p (2016: 10.60p) per share                                                                                       21,240                21,240 
 Interim dividend for the 52 weeks ended 30 December 
  2018 of 6.80p (2017: 6.80p) per share                                                                                         13,626                13,626 
                                                                                                               -----------------------  -------------------- 
 Total dividends paid in the year                                                                                               34,866                34,866 
                                                                                                               -----------------------  -------------------- 
 Proposed final dividend for the 52 weeks ended 
  30 December 2018 of 1.47p (2017 actual proposed 
  and paid: 10.60p) per share                                                                                                    7,232                21,240 
                                                                                                               -----------------------  -------------------- 
  The proposed final dividend is subject to approval by shareholders 
  at the Annual General Meeting to be held on 23 May 2019 and is 
  not recognised as a liability in these financial statements. 
  The proposed final dividend payable reflects the number of shares 
  in issue on 30 December 2018, adjusted for the 0.7m shares owned 
  by the employee benefit trust for which dividends have been 
  waived.                                                                   Software 
   11 Intangible assets                 Trademarks    Franchise          & IT 
                                               and 
                             Goodwill     licences   agreements   development     Total 
                              GBP'000      GBP'000      GBP'000       GBP'000   GBP'000 
                          -----------  -----------  -----------  ------------  -------- 
   Cost 
   At 2 January and 31 
    December 
    2017                       26,433            -            -             -    26,433 
                          -----------  -----------  -----------  ------------  -------- 
 
   Accumulated 
   amortisation 
   At 2 January and 31 
   December 
   2017                             -            -            -             -         - 
                          -----------  -----------  -----------  ------------  -------- 
 
   Cost 
   At 1 January 2018           26,433            -            -             -    26,433 
   Additions                        -            -            -         1,532     1,532 
   Additions on 
    acquisition 
    of subsidiaries 
    (Note 
    17)                             -          479            -         1,207     1,686 
   Intangibles 
    recognised 
    on acquisition of 
    subsidiaries 
    (Note 17)                 326,476      236,000       21,900             -   584,376 
   At 30 December 2018        352,909      236,479       21,900         2,739   614,027 
                          -----------  -----------  -----------  ------------  -------- 
 
   Accumulated 
   amortisation 
   At 1 January 2018 
   Charged during the 
    year                            -            -           28           314       342 
   At 30 December 2018              -            -           28           314       342 
                          -----------  -----------  -----------  ------------  -------- 
 
   Net book value as at 
    31 December 2017           26,433            -            -             -    26,433 
                          -----------  -----------  -----------  ------------  -------- 
   Net book value as at 
    30 December 2018          352,909      236,479       21,872         2,425   613,685 
                          -----------  -----------  -----------  ------------  -------- 
 
 
 
  The intangible assets reported on the balance sheet represent 
  goodwill, trademarks and licences, franchise agreements and software 
  and IT development arising on the previous acquisition of Blubeckers 
  Limited and Brunning and Price Limited, which now trade as pub 
  restaurants, and current year acquisitions of Ribble Valley Inns 
  Limited, Food and Fuel Limited and Wagamama. Refer to Note 17 
  for further details of intangible assets recognised on acquisition 
  of subsidiaries. 
 
  Goodwill and trademarks arising on business combinations are 
  not amortised but are subject to an impairment review annually, 
  or more frequently if events or changes in circumstances indicate 
  that they might be impaired. Therefore, goodwill and trademarks 
  arising on acquisition are monitored and an impairment test is 
  carried out which compares the value in use of each cash generating 
  unit (CGU) to its carrying value. 
 
  The recoverable amount of the goodwill and trademark CGU's is 
  GBP352.9m and GBP236.5m as at 30 December 2018 respectively. 
  The recoverable amounts have been based on value in use estimates 
  using cash flow projections based on one year budgets approved 
  by the Board. The value in use estimates differ depending upon 
  the area of the business. The projected cash flows have been 
  discounted using a rate based on the Group's pre-tax Weighted 
  Average Cost of Capital of 9.2% (2017: 10.2%) that reflects the 
  risk of these assets. Cash flows are extrapolated in perpetuity 
  with an annual growth rate of 2%. Perpetuity is believed to be 
  reasonable due to the significant proportion of freeholds in 
  the estate and the nature of the leasehold properties. It was 
  concluded that the value in use for the CGU's is higher than 
  its carrying value and therefore did not require impairment. 
 
 
 
 
 
  The Group has conducted a sensitivity analysis taking into consideration 
  the impact on key impairment test assumptions arising from a 
  range of possible trading and economic scenarios. The scenarios 
  have been summarised as follows: 
  - An increase in the discount rate of 1% 
  - A decrease of 5% on forecast cash flows 
  The sensitivity analysis shows that no impairment would result 
  from either an increase in the discount rate or a decrease in 
  forecast cash flows. 
 12 Property, plant and equipment                                                                   Fixtures, 
                                                   Land and                                         equipment 
                                                  buildings                                      and vehicles                    Total 
                                                    GBP'000                                           GBP'000                  GBP'000 
 Cost 
 At 1 January 2017 - Restated 
  (Note 2)                                          541,655                                           191,593                  733,248 
 Additions                                           16,192                                            17,146                   33,338 
 Disposals                                         (17,459)                                           (8,440)                 (25,899) 
 Transfers to provisions                                500                                                 -                      500 
 
 At 31 December 2017 - Restated 
  (Note 2)                                          540,888                                           200,299                  741,187 
                                      ---------------------  ------------------------------------------------  ----------------------- 
 
 Accumulated depreciation and 
  impairment 
 At 1 January 2017 - Restated 
  (Note 2)                                          239,163                                           139,594                  378,757 
 Provided during the year - Restated 
  (Note 2)                                           20,353                                            15,902                   36,255 
 Impairment - Restated (Note 
  2)                                                 16,249                                             4,444                   20,693 
 Disposals                                         (14,177)                                           (7,661)                 (21,838) 
 
 At 31 December 2017 - Restated 
  (Note 2)                                          261,588                                           152,279                  413,867 
                                      ---------------------  ------------------------------------------------  ----------------------- 
 
 
 Cost 
 At 1 January 2018                                  540,888                                           200,299                  741,187 
 Additions                                           38,374                                            14,913                   53,287 
 Additions on acquisition of 
  subsidiaries                                       67,900                                            32,346                  100,246 
 Disposals                                            (569)                                             (751)                  (1,320) 
 
 At 30 December 2018                                646,593                                           246,807                  893,400 
                                      ---------------------  ------------------------------------------------  ----------------------- 
 
 Accumulated depreciation and 
  impairment 
 At 1 January 2018                                  261,588                                           152,279                  413,867 
 Provided during the year                            18,498                                            13,613                   32,111 
 Impairment                                          14,582                                             (612)                   13,970 
 Disposals                                            (141)                                             (705)                    (846) 
 
 At 30 December 2018                                294,527                                           164,575                  459,102 
                                      ---------------------  ------------------------------------------------  ----------------------- 
 
 
 Net book value as at 31 December 
  2017                                              279,300                                            48,020                  327,320 
 
 Net book value as at 30 December 
  2018                                              352,066                                            82,232                  434,298 
                                      ---------------------  ------------------------------------------------  ----------------------- 
 
 

The impairment charge comprises a charge of GBP17.1m partially offset by reversals of previously recognised impairment losses of GBP3.1m. Refer to Note 6 for further details. Included within the book value of property, plant and equipment are assets under construction of GBP2.8m (2017: GBP0.7m) which are not depreciated.

During the period the Group amended its estimate of residual values for property, plant and equipment by reference to an external valuation.

Impairment testing on the Group's property, plant and equipment has been based on value in use estimates using cash flow projections based on one year budgets approved by the Board. The value in use estimates differ depending on the area of the business. The projected cash flows have been discounted using a rate based on the Group's pre-tax Weighted Average Cost of Capital of 9.2% (2017: 10.2%) that reflects the risk of these assets. Cash flows are extrapolated in perpetuity or to the end of the lease life with an annual growth rate of 2%.

The key assumptions in the value in use estimates are the discount rate applied and the forecast cash flows. An increase of 1% in the discount rate would give rise to an additional impairment charge of approximately GBP1.2m, whilst a decrease of 1% in the discount rate would give rise to a reduction in impairment of approximately GBP0.5m. The forecast cash flows take into account management's experience of the specific sites and its long term expectations of the market. A 10% reduction in these forecast cash flows would result in an additional impairment charge of approximately GBP2.8m.

 
                                                           2018        2017 
                                                                   Restated 
                                                                   (Note 2) 
 Net book value of land and 
  buildings:                                            GBP'000     GBP'000 
 
 Freehold                                               114,919     108,419 
 Long leasehold                                           4,102       3,640 
 Short leasehold                                        233,045     167,241 
 
                                                        352,066     279,300 
                                                       --------  ---------- 
 
 Assets held under finance leases                          2018        2017 
                                                                   Restated 
                                                                   (Note 2) 
 Costs                                                  GBP'000     GBP'000 
 At the beginning of the year                             1,595       1,961 
 Disposals during the year                                    -       (366) 
                                                       --------  ---------- 
 At the end of the year                                   1,595       1,595 
                                                       --------  ---------- 
 
 Depreciation 
 At the beginning of the year                             1,434       1,681 
 Provided during the year                                    11          25 
 Disposals during the year                                    -       (272) 
                                                       --------  ---------- 
 At the end of the year                                   1,445       1,434 
                                                       --------  ---------- 
 
 Net book value at the end of the year                      150         161 
                                                       --------  ---------- 
 
 
 
   13 Provisions 
                                                           2018        2017 
                                                                   Restated 
                                                                   (Note 2) 
                                                        GBP'000     GBP'000 
 
 Provision for onerous leases                            57,421      41,805 
 Other provisions                                         2,200       2,491 
 
 Balance at the end of the year                          59,621      44,296 
                                                       --------  ---------- 
 
 Analysed as: 
 Amount due for settlement within one year                9,377      10,408 
 Amount due for settlement after one year                50,244      33,888 
 
                                                         59,621      44,296 
                                                       --------  ---------- 
 
                                              Onerous 
                                            contracts 
                                              & other 
                                             property 
                                           provisions     Other       Total 
                                              GBP'000   GBP'000     GBP'000 
                                         ------------  --------  ---------- 
 
 Balance at 1 January 2018 - Restated 
  (Note 2)                                     41,805     2,491      44,296 
 Transfer from other provisions                   291     (291)           - 
 Provisions acquired (Note 16)                 16,758         -      16,758 
 Release of onerous lease provision 
  in respect of closed sites now 
  disposed                                    (5,214)         -     (5,214) 
 Onerous lease provision in respect 
  of distressed and other sites                14,669         -      14,669 
 Amounts utilised                            (11,263)         -    (11,263) 
 Unwinding of discount                            375         -         375 
 
 Balance at 30 December 2018                   57,421     2,200      59,621 
                                         ------------  --------  ---------- 
 
 

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, 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 GBP9.5m in the year (2017: GBP4.5m). This comprises:

-- A GBP5.2m credit in respect of unutilised provisions following the successful exit of 28 sites ahead of expectations;

-- A further charge totalling GBP14.7m was provided for in the year. This comprised a charge of GBP11.1m in respect of newly identified onerous leases and a charge of GBP3.6m in respect of sites previously provided for.

During the year GBP16.8m of provisions were acquired through business combinations. Refer to Note 16 for further details.

Included in the opening balance is a GBP2.2m reclassification of dilapidations to other provisions, which are expected to be utilised within three years. Refer to Note 2 for further details.

Changes in the EBITDA performance of each site could impact on the value of the provision. It is estimated that, a 10% decline in the EBITDA performance of the sites included in the provision would generate an additional provision of GBP0.3m. Additionally, it is estimated that, should all leases with more than ten years remaining on the committed lease term be exited two years ahead of expiry, the provision would reduce by GBP1.0m. A 1% increase in the risk free rate would reduce the provision by GBP1.7m while a reduction of similar magnitude would result in an additional provision of GBP1.9m.

 
 14 Reconciliation of profit before tax to cash 
  generated from operations                                                                          2018                   2017 
                                                                                                                        Restated 
                                                                                                                        (Note 2) 
                                                                                                  GBP'000                GBP'000 
 
       Profit before tax                                                                           13,931                 28,173 
       Net interest charges                                                                         2,232                  1,661 
       Impairment of property, plant and equipment                                                 13,970                 20,693 
       Onerous lease and other property provisions                                                 10,027                  4,201 
       Restructuring costs                                                                              -                  4,772 
       Acquisition costs                                                                           14,775                      - 
       Refinancing costs                                                                              467                      - 
       Share-based payments                                                                           761                  2,158 
       Amortisation                                                                                   342                      - 
       Depreciation                                                                                32,111                 36,255 
       Loss on disposal of fixed assets                                                               104                      - 
       Decrease/(increase) in stocks                                                                   83                  (298) 
       (Increase)/decrease in receivables                                                         (3,983)                  2,185 
       Increase in creditors                                                                        3,487                  8,019 
 
       Cash generated from operations                                                              88,307                  107,819 
                                                                                             ------------  ----------------------- 
 
       15 Reconciliation of changes in cash to the movement 
       in net debt                                                                                              2018          2017 
                                                                                                                        Restated 
                                                                                                                        (Note 2) 
                                                                                                             GBP'000     GBP'000 
     Net debt: 
     At the beginning of the year                                                                           (23,102)    (29,966) 
     Movements in the year: 
        Net (withdrawals)/repayments of borrowings                                                         (102,000)       7,000 
        Debt acquired on acquisition of subsidiary                                                         (226,164)           - 
        Unamortised loan fees acquired on acquisition 
         of subsidiary                                                                                         2,493           - 
        Upfront loan facility fee                                                                              1,500           - 
        Finance leases                                                                                           208         182 
        Non-cash movements in the year                                                                         (359)       (361) 
        Net cash inflow                                                                                       56,292          43 
 
     At the end of the year                                                                                (291,132)    (23,102) 
                                                                                             -----------------------  ---------- 
 
 
 
 
 
 
 
 
 
 
       Represented 
       by: 
                                                            At 30 
                                                         December                             Unamortised 
                            At        Cash                   2017        Cash          Debt     loan fees    Upfront 
                             2        flow    Non-cash        & 1        flow      acquired      acquired       loan    Non-cash       At 30 
                       January   movements   movements    January   movements            on            on   facility   movements    December 
                                    in the      in the                 in the                                             in the 
                          2017        year        year       2018        year   acquisition   acquisition        fee        year        2018 
                     ---------  ----------  ----------  ---------  ----------  ------------  ------------  ---------  ----------  ---------- 
                       GBP'000     GBP'000     GBP'000    GBP'000     GBP'000       GBP'000       GBP'000    GBP'000     GBP'000     GBP'000 
 Cash and 
 cash equivalents        9,568          43           -      9,611      56,292             -             -          -           -      65,903 
 Bank loans 
  falling 
  due after 
  one year            (37,882)       7,000       (341)   (31,223)   (102,000)     (225,000)         2,493      1,500       (190)   (354,420) 
 Finance 
  leases               (1,652)         182        (20)    (1,490)         208       (1,164)             -          -       (169)     (2,615) 
 
                      (29,966)       7,225       (361)   (23,102)    (45,500)     (226,164)         2,493      1,500       (359)   (291,132) 
                     ---------  ----------  ----------  ---------  ----------  ------------  ------------  ---------  ----------  ---------- 
 
 

Cash and cash equivalents are comprised of cash at bank and cash floats held on site. The cash and cash equivalents balance includes credit card receipts that were cleared post year end. The non-cash movements in bank loans are in relation to the amortisation of prepaid facility costs.

16 Basis of preparation

The Group's preliminary announcement and statutory accounts in respect of 2018 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 30 December 2018 or 31 December 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the Company's Annual General Meeting. The 2018 statutory accounts are prepared on the basis of the accounting policies stated in the 2017 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.

 
 17 Acquisitions in 
  2018 
 During the year the Group undertook three business combinations. Details of the purchase consideration, 
  the provisional fair value of the identifiable assets the and liabilities acquired and goodwill are as follows: 
 
                                                       Ribble 
                                                       Valley                 Food and 
                                                         Inns                     Fuel          Wagamama                  Total 
 Purchase 
 consideration                                        GBP'000                  GBP'000           GBP'000                GBP'000 
 Cash paid                                                939                   14,263           348,995                364,197 
 Total purchase 
  consideration                                           939                   14,263           348,995                364,197 
                                  ---------------------------  -----------------------  ----------------  --------------------- 
 
 Assets                                               GBP'000                  GBP'000           GBP'000                GBP'000 
 Trademark (Note 11)                                        -                        -           236,000                236,000 
 Franchise agreements 
  (Note 11)                                                 -                        -            21,900                 21,900 
 Intangible assets 
  (Note 11)                                                 -                        -             1,686                  1,686 
 Fair value lease 
  assets                                                    -                      417             1,115                  1,532 
 Property, plant and 
  equipment (Note 12)                                     835                    6,366            93,045                100,246 
 Cash and cash 
  equivalents                                             114                      268            38,888                 39,270 
 Prepayments                                                -                      339            10,265                 10,604 
 Other receivables                                         50                       98             6,834                  6,982 
 Corporation tax 
  receivable                                                -                       37                 -                     37 
 Stock                                                     44                      145             2,641                  2,830 
                                  ---------------------------  -----------------------  ----------------  --------------------- 
                                                        1,043                    7,670           412,374                421,087 
                                  ---------------------------  -----------------------  ----------------  --------------------- 
 
 
 Liabilities 
 Fair value lease 
  liabilities                                               -                  (1,102)          (10,183)               (11,285) 
 Trade payables                                         (284)                    (842)          (27,398)               (28,524) 
 Other payables                                         (202)                        -           (9,226)                (9,428) 
 Accruals                                               (120)                    (518)          (18,479)               (19,117) 
 Other tax and social 
  security                                               (63)                    (455)          (21,760)               (22,278) 
 Corporation tax 
  liability                                                 -                        -              (47)                   (47) 
 Deferred tax 
  liability                                              (28)                    (846)          (48,335)               (49,209) 
 Provisions                                                 -                        -          (16,758)               (16,758) 
 Long term 
  liabilities                                               -                        -           (4,213)                (4,213) 
 Secured loan notes                                         -                        -         (222,507)              (222,507) 
                                                        (697)                  (3,763)         (378,906)              (383,366) 
                                  ---------------------------  -----------------------  ----------------  --------------------- 
 
 Total identifiable net assets 
  at fair value                                           346                    3,907            33,468                 37,721 
                                  ---------------------------  -----------------------  ----------------  --------------------- 
 
 Goodwill arising on acquisition 
  (Note 11)                                               593                   10,356           315,527                326,476 
 Total purchase 
  consideration                                           939                   14,263           348,995                364,197 
                                  ---------------------------  -----------------------  ----------------  --------------------- 
 
 The net cash flow impact of 
  the acquisition is: 
                                                      GBP'000                  GBP'000           GBP'000                GBP'000 
 Cash consideration                                     (939)                 (14,263)         (348,995)              (364,197) 
 Cash acquired                                            114                      268            38,888                 39,270 
                                                        (825)                 (13,995)         (310,107)                (324,927) 
                                  ---------------------------  -----------------------  ----------------  ----------------------- 
 

The Group made fair value adjustments on acquisition in respect of trademarks, franchise agreements, goodwill, property, plant and equipment and lease assets and lease liabilities. The accounting for the acquisitions made in the year is provisional and will be finalised in the window allowed by IFRS 3.

Ribble Valley Inns

On 21 May 2018, Brunning and Price Limited acquired 100% of issued shares in Ribble Valley Inns Limited, a pubs business, for consideration of GBP0.9m. The Group acquired Ribble Valley Inns in order to accelerate its expansion strategy of its pubs division. The goodwill premium on acquisition was paid to allow the Group to quickly expand the successful pubs business through acquisitions.

In the year to 30 December 2018 acquisition related costs of GBP0.2m have been recognised within exceptional acquisition and refinancing related costs totalling GBP15.2m (Note 6). Since 21 May 2018 Ribble Valley Inns Limited has contributed revenue of GBP2.0m, EBITDA loss of GBP0.4m, operating loss of GBP0.5m and loss before tax of GBP0.5m.

If the acquisition of Ribble Valley Inns Limited had taken place at the start of the financial period, the enlarged TRG Group would have recognised revenue of GBP3.2m, EBITDA loss of GBP0.5m, operating loss of GBP0.8m and loss before tax of GBP0.8m. The Group refurbished three out of the four pubs in the period since acquisition with the pubs shut for an extended period during that time. The group also invested in marketing and training to coincide with the relaunch.

Food and Fuel

On 29 August 2018, Brunning and Price Limited acquired 100% of issued shares in Food and Fuel Limited, a premium pubs business, for consideration of GBP14.3m. The Group acquired Food and Fuel in order to accelerate its expansion strategy of its pubs division. The goodwill premium on acquisition was paid to allow the Group to quickly expand the successful pubs business through acquisitions.

The fair value lease assets and liabilities recognised upon acquisition of GBP0.4m and GBP1.1m arose due to current rental on operating leases being favourable or unfavourable to current market terms. The mark to market adjustment on operating leases values the difference between contractual and market rents until that difference is extinguished. The market rents were sourced from external property advisors. An income approach and discounted cash flow methodology was applied to fair value the mark to market lease adjustments. A discount rate of 6% was applied based on average retail property yields in the UK, which implicitly reflect future rental growth expectations. The fair value lease assets and liabilities are being amortised over the life of the leases, which is up to 24 years.

In the year to 30 December 2018 acquisition related costs of GBP0.5m have been recognised within exceptional acquisition and refinancing related costs totalling GBP15.2m (Note 6). Since 29 August 2018 Food and Fuel Limited has contributed revenue of GBP4.2m, EBITDA of GBP0.4m, operating profit of GBP0.2m and profit before tax of GBP0.2m. If the acquisition of Food and Fuel Limited had taken place at the start of the financial period, the enlarged TRG Group would have recognised revenue of GBP12.7m, EBITDA of GBP1.0m, operating profit of GBP0.4m and profit before tax of GBP0.4m.

Wagamama

On 24 December 2018, The Restaurant Group plc acquired 100% of issued shares in Mabel Topco Group, which operates a chain of pan-Asian style noodle bars, trading in the UK through Wagamama Limited, and in the USA through Wagamama Inc. The UK business also operates as a franchisor of the brand in all territories in which Wagamama trades outside of the UK and USA. The consideration paid consists of funding through a rights issue and bank loan.

The acquisition of Wagamama provided the enlarged TRG Group the opportunity to deliver on multi-pronged growth strategies and provide the enlarged group clear scale advantages as Wagamama is a differentiated high growth brand with clear structural advantages.

Goodwill of GBP315.5m represents the buyer specific synergies the Group will be able to achieve from acquiring Wagamama, the potential for future franchise agreements, growth potential in the UK and US through further roll-out and access to a workforce with vast experience in operating a successful pan-Asian restaurant chain.

Trademark intangibles of GBP236.0m have been recognised upon acquisition on the basis that Wagamama is a large and well recognised Casual Dining brand, with high awareness among casual dining chains and is highly advocated, with one of the highest Net Promoter Scores amongst its competitors. The brand is particularly strong with young, affluent consumers who are familiar with international cuisine. A relief-from-royalty valuation approach was used to value the trademark. The trademark is deemed to have an indefinite useful life.

Franchise agreements of GBP21.9m have been recognised upon acquisition following a valuation of the agreements that were in place as at the acquisition date. A multi-period excess earnings method was used in the valuation. Franchise agreements are being amortised over a useful economic life of 15 years.

The valuation of leasehold improvements and fixtures and fittings has resulted in a downward fair value adjustment of GBP19.0m. The depreciated direct replacement cost approach has been applied to value the tangible assets and the replacement cost has been based on the cost of recent fit out projects undertaken for Wagamama. Depreciation has been based on the existing depreciation policies.

The fair value lease assets and liabilities recognised upon acquisition of GBP1.1m and GBP10.2m arose due to current rental on operating leases being favourable or unfavourable to current market terms. The mark to market adjustment on operating leases value the difference between contractual and market rents until that difference is extinguished. The market rents were either sourced from advice provided by external property advisors, current lease negotiations or ongoing monitoring of restaurant rental levels in connection with the day to day management of the lease portfolio. An income approach and discounted cash flow methodology was applied to fair value the mark to market lease adjustments. A discount rate of 5% was applied for locations in London and 7% for locations outside of London based on average retail property yields in those areas, which implicitly reflect future rental growth expectations. The fair value lease assets and liabilities are being amortised over the life of the leases, which is up to 24 years.

In the year to 30 December 2018 acquisition related costs of GBP14.5m have been recognised within exceptional acquisition and refinancing related costs totalling GBP15.2m (Note 6). A further GBP2.1m of upfront loan fees have been capitalised against the new revolving credit debt facility and GBP9.3m of share issue costs have been recognised in share premium.

Since 24 December 2018 the Wagamama Group has contributed revenue of GBP7.0m, adjusted EBITDA of GBP1.1m, operating profit of GBP0.7m and profit before tax of GBP0.5m.

If the acquisition of the Wagamama Group had taken place at the start of the financial period, the enlarged TRG Group would have recognised revenue of GBP328.3m, adjusted EBITDA of GBP44.6m, EBITDA of GBP34.5m, adjusted operating profit of GBP27.5m, operating profit of GBP17.4m, adjusted profit before tax of GBP17.9m and profit before tax of GBP7.8m.

18 Publication of Annual Report

This preliminary statement is not being posted to shareholders. The Annual Report will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company.

Copies of the Annual Report will be available from the Company's website in April 2019.

Responsibility statement of the directors on the Annual Report

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ended 30 December 2018. Certain parts of the annual report are not included within this announcement.

We confirm that, to the best of our knowledge:-

a) the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

b) the Business review includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole.

On behalf of the Board

Andy McCue Kirk Davis

Chief Executive Officer Chief Financial Officer

14 March 2019 14 March 2019

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 before exceptional 
  business        costs and is considered as the key metrics for shareholders 
                  to evaluate and compare the performance of the business 
                  from period to period. 
 Exceptional     Those items that, by virtue of their unusual nature 
  items           or size, warrant separate additional disclosure in 
                  the financial statements in order to fully understand 
                  the performance of the Group. 
                ---------------------------------------------------------------- 
 Like-for-like   This measure provides an indicator of the underlying 
  ('LFL')         performance of our existing restaurants. There is no 
  sales           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, amortisation 
  EBITDA          and exceptional items. Calculated by taking the Trading 
                  business operating profit and adding back depreciation 
                  and amortisation. 
                ---------------------------------------------------------------- 
 EBITDA          Earnings before interest, tax, depreciation, amortisation 
                  and impairment. 
                ---------------------------------------------------------------- 
 Net debt        Net debt is calculated as the net of the long-term 
                  borrowings and finance leases. 
                ---------------------------------------------------------------- 
 Free cash       EBITDA less working capital and non-cash movements 
  flow            (excluding exceptional items), tax payments, interest 
                  payments and maintenance capital expenditure. 
                ---------------------------------------------------------------- 
 Adjusted        Earnings before interest, tax and exceptional items. 
  operating 
  profit 
                ---------------------------------------------------------------- 
 Adjusted        Calculated by taking the profit after tax of the business 
  EPS             pre-exceptional items divided by the weighted average 
                  number of shares in issue during the year. 
                ---------------------------------------------------------------- 
 Adjusted        Calculated by taking the profit after tax of the business 
  diluted         pre-exceptional items divided by the weighted average 
  EPS             number of shares in issue during the year, including 
                  the effect of dilutive potential ordinary shares. 
                ---------------------------------------------------------------- 
 Adjusted        Calculated by taking the profit before tax of the business 
  profit          pre-exceptional items. 
  before 
  tax 
                ---------------------------------------------------------------- 
 Theoretical     This Is the price per Ordinary Share calculated as 
  Ex-Rights       at a date by applying the following formula: Current 
  Price           price * Existing Ordinary Shares) plus (Rights issue 
                  Price * New Ordinary shares) divided by existing Ordinary 
                  Shares plus New Ordinary Shares. 
                ---------------------------------------------------------------- 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR LIFILVVIELIA

(END) Dow Jones Newswires

March 15, 2019 03:01 ET (07:01 GMT)

1 Year Restaurant Group Chart

1 Year Restaurant Group Chart

1 Month Restaurant Group Chart

1 Month Restaurant Group Chart
Your Recent History
LSE
RTN
Restaurant..
Register now to watch these stocks streaming on the ADVFN Monitor.

Monitor lets you view up to 110 of your favourite stocks at once and is completely free to use.

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V:gb D:20190424 10:16:07