TIDMRTN
RNS Number : 6900Y
Restaurant Group PLC
08 September 2022
The Restaurant Group plc ("TRG" or "The Group") Interim results
for the 26 weeks ended 3 July 2022 ("H1")
Group portfolio outperforming in a challenging market
Financial summary
-- Total sales of GBP423.4m (2021: GBP216.8m)
-- Adjusted EBITDA of GBP41.7m on a pre IFRS 16 basis (2021: GBP11.2m)
-- Adjusted Profit before tax of GBP10.2m on a pre IFRS 16 basis (2021: loss of GBP19.9m)
-- Robust cash generation in H1; net debt reduced to GBP158.4m
on a pre IFRS 16 basis (FY 2021 year-end: GBP171.6m)
-- Statutory loss before tax of GBP28.5m on an IFRS 16 basis
(2021: loss of GBP57.6m), includes exceptional charges of GBP42.4m
predominately relating to non-cash impairment charges
-- IFRS 16 net debt of GBP560.8m (FY 2021 year-end: GBP582.0m)
Highlights
- Wagamama, Pubs and Concessions deliver continued like-for-like
("LFL") sales outperformance versus the market :
YTD LFL sales (%) vs 2019 comparable for the 33 weeks to 21
August 2022
TRG Division TRG LFL Market* Performance
sales LFL sales vs market*
Wagamama +11% +5% +6%
-------- ----------- ------------
Pubs +9% (2)% +11%
-------- ----------- ------------
Leisure +2% +5% (3)%
-------- ----------- ------------
Concessions** (17)% (26)% +9%
-------- ----------- ------------
-- Further improvements in customer offer; customer ratings remain very positive
-- Ongoing significant cost pressures; partially mitigated by decisive management actions:
o 100% of utilities now hedged*** for FY22, FY23 & FY24 to
provide future certainty on the cost base
o Interest rate cap on GBP125m of gross debt; effective from
November 2022 through to November 2025
-- Disciplined approach to targeted expansion opportunities,
organic and inorganic, to drive longer-term value creation:
o Strong pipeline of new UK Wagamama restaurants with improved
commercial lease terms
o Barburrito acquisition [1] : Continuing to trade ahead of the
market (outperformance of 13% for the 33 weeks to 21 August
2022)
Andy Hornby, Chief Executive Officer, commented:
"We have made good progress in the past six months, delivering a
robust financial performance in a challenging market, with
continued LFL sales outperformance. I'd like to thank each and
every member of our teams for their phenomenal efforts in
delivering these results.
We have taken decisive management actions to reduce the impact
of the industry cost pressures including fully hedging our
utilities until December 2024 and reducing our interest rate
exposure through interest rate caps.
Whilst the uncertain consumer environment presents challenges
for the hospitality sector, the Group is well positioned to further
develop our brands to deliver long-term growth for all stakeholders
underpinned by our strong balance sheet."
* Market refers to Coffer Peach tracker for restaurants
(Wagamama and Leisure benchmark) and Coffer Peach tracker for pub
restaurants (TRG Pubs benchmark). Coffer peach LFL sales represent
the weighted average of weekly LFL sales reported (internal
calculation)
** UK air passenger growth used as market benchmark for
Concessions
*** Utilities relate to electricity and gas. This relates to own
billed and managed sites and excludes landlord billed sites at
shopping centres and airport concession sites
Enquiries:
The Restaurant Group plc
Andy Hornby, Chief Executive
Officer
Kirk Davis, Chief Financial
Officer
Umer Usman, Investor Relations 020 3117 5001
MHP Communications
Oliver Hughes
Simon Hockridge 020 3128 8789/8742
Investor and analyst conference call facility
In conjunction with today's presentation to analysts, a live
conference call and webcast facility will be available starting at
9:00am (UK time). If you would like to register, please contact MHP
Communications for details on 020 3128 8826 or email
TRG@mhpc.com.
The presentation slides will be available to download from
7:30am (UK time) from the Company's website
https://www.trgplc.com/investors/reports-presentations
Notes:
1. The Restaurant Group plc had 423 restaurants and pub
restaurants throughout the UK as at 7 September 2022. Its principal
trading brands are Wagamama, Frankie & Benny's and Brunning
& Price. It also operates a multi-brand Concessions business
which trades principally in UK airports. In addition the Wagamama
business has a 20% stake in a JV operating five Wagamama
restaurants in the US and 60 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" and reflect the Group's current expectations concerning
future events. 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, pre-IFRS 16 basis measures
and free cash flow are defined within the glossary at the end of
this report.
Business review
Introduction
Our performance in the year so far gives us further confidence
in the strength of our business model and our ability to navigate
the near-term sector challenges.
We update on four key areas below:
1) Trading update by business division for the year-to-date (33 weeks to 21 August 2022)
2) Current trading (covering the period post the Group's AGM trading update on 24 May 2022)
3) Navigating near-term sector cost challenges
4) Our disciplined approach to targeted long-term growth
1. Trading update (LFL sales % vs 2019 comparable for the year
to date ("YTD") covering 33 weeks to 21 August 2022)
Wagamama
Wagamama achieved LFL sales growth of 11% in the YTD,
representing a 6% outperformance versus the market. Customer
ratings have remained strong with the June 2022 external NPS scores
(as measured by BrandVue) positioning Wagamama as the number one
brand amongst casual dining chains in the UK.
The key drivers of our consistent market out-performance are as
follows:
- Continuous menu innovation: We began 2022 with a new vegan
menu launch which was well received and saw our overall total
plant-based (vegan and vegetarian) participation rise to its
highest level. The business continues to innovate in anticipation
of future food trends with a focus on maintaining our 50%
plant-based commitment whilst also protecting other iconic Wagamama
dishes
- Unique colleague culture: the Wagamama business continues to
be underpinned by our unique culture and ethos. In 2022 we have
taken this further and supported our teams through the introduction
of mental health and well-being initiatives along with mental
health training for team members
- Purpose-led marketing activity: Throughout 2022 we have
continued to work with Young Minds to drive awareness of mental
health in young people and we continue to invest in supporting
students through our student platform, the Noodle Union
- Well-invested estate: Wagamama's estates review process has
ensured we have continued to regularly invest in our sites through
selective transformational and refresh refurbishments
Pubs
We have seen continued strong trading with LFL sales growth of
9%, representing a 11% outperformance versus the market. Customer
sentiment remains strong with social media scores (consolidation of
Google, Facebook and Tripadvisor scores) averaging 4.5/5 for the
last 12 months to June 2022, maintaining our highest rating over
the past five years.
The key drivers of this strong out-performance:
- Targeting good customer demographics with limited competition
nearby: We remain disciplined in our proven approach to new pub
site selection and do not compromise on our requirements on
population and demographics within defined drive times of our pub
locations. We regularly take on large scale renovation projects,
over many months and years, to ensure we have a unique property in
the right location
- Expansive buildings and grounds providing multiple ancillary
trading opportunities: Examples include the "The Red Fox" on The
Wirral which has function space as well as outdoor covered garden
areas and "The Architect" in Chester with a fully-fitted outside
bar and stretch tent
- Continuous evolution of food and drink menu with local
flexibility: The business can be nimble with menu changes both
regionally and locally and a full appraisal of the core menu
content and architecture has led to improvements in the quality of
many dishes
The business also benefits from strong asset backing with
approximately 50% of our pubs being freehold. In August 2022, our
freehold pub estate was valued at GBP160 million according to a
third-party valuation commissioned by the Group.
Leisure
The business has achieved LFL sales growth of +2%, just behind
the market. Our partnership with Yumpingo has provided greater
customer insight on both customer service standards and dish
feedback, and we have seen an improving trend on NPS scores over
the last six months (as measured on the Yumpingo platform) for both
Frankie & Benny's and Chiquito.
The key drivers of performance have been:
- Ongoing investment in food quality, menu simplification and
our virtual brands: Further quality changes to the Frankie's main
menu focussed on pasta dishes combined with significant
improvements to our drinks menu across all brands. Core menu items
will reduce by a further 15% to 20% in our winter menu launch to
support improved dish execution and mitigate some of the
inflationary pressures we are experiencing
- Improved colleague engagement through our 'Raise the Roof"
programme: Over 20% of our Leisure teams have now graduated through
the programme driving a strong improvement in customer NPS and team
engagement scores
- Selective refurbishments: Over 20% of the Frankie and Benny's estate has had a capital light refurbishment over the past 12 months which has been very well received by customers and our teams, and we will selectively explore further opportunities to invest in the estate
Concessions
We currently have our entire estate of 43 sites open. LFL sales
declined by 17%, 9% ahead of the passenger volume decline in the
period. Sales have benefitted from a better than anticipated
recovery in passenger volumes as well as higher average spend per
passenger.
Recruitment and retention have been well-publicised issues since
the Spring but our teams have performed heroically against a tough
backdrop to reopen our sites and be ready for the busy summer
trading period.
Whilst we are pleased with progress, the Concessions sales
recovery profile has been tempered by reduced peak summer flight
schedules announced by various airlines following operational
challenges at major UK airports.
The Concessions team are well positioned to maintain this
momentum if passenger volumes continue to improve through 2023 and
2024.
2. Current Trading update (LFL sales % vs 2019 comparable for
the period post the Group's last trading update in May)
YTD LFL sales (%) vs 2019 comparable post AGM trading statement
update in May
AGM trading AGM trading Trading
statement statement since AGM
"Excl. VAT trading
benefit" statement
(illustrative)
---------------- -------------
19 weeks 19 weeks 14 weeks
to 15(th) to 15(th) to 21st
May 2022 May 2022 August 2022
---------------- -------------
Wagamama +15% +11% +5%
------------ ---------------- -------------
Pubs +10% +6% +8%
------------ ---------------- -------------
Leisure +6% +2% (4%)
------------ ---------------- -------------
Concessions (20%) (22%) (14%)
------------ ---------------- -------------
- Further good momentum across the portfolio, despite recent
trading being impacted by three factors:
o In-line with the wider market, both Wagamama and Leisure's
delivery-related sales have moderated in recent months
o Wagamama and Leisure sales adversely impacted by heatwaves in
July and August; with our Pubs business benefitting from the
heatwaves
o Concessions sales recovery profile impacted by airlines
reducing planned summer flight schedules
3. Navigating near-term sector challenges
There are a number of well-documented sector challenges that the
Group is navigating, and management have developed a series of
actions to help mitigate the impact.
- Firstly, the UK consumer will become under greater pressure
given the cost-of-living squeeze. The Group will remain focused on
delivering value for money to customers across all its brands while
continuing to develop our menus through ongoing product
innovation
- Secondly, we expect a continuation of the inflationary
pressure on each of our labour, food and drink
purchases and utility cost lines. Mitigating actions taken by the Group include:
o Continuing to develop our employee proposition in order to aid
retention and attract new colleagues to our businesses
o Working across our long-term supply base to mitigate the
inflationary pressures that are impacting food and drink
supply;
o Fully hedging [2] our utilities volume for FY22, FY23 and FY24
to provide certainty on cost whilst we continue to work on reducing
our utilities consumption as part of our ESG agenda
Our FY22 inflation expectations for labour and food and drink
purchases are in line with the group's previous guidance, with
early indications being that FY23 inflationary pressures are
expected to be broadly-in-line with FY22, as laid out in the table
below:
Themes Inflationary impact Inflationary impact
(FY22 vs FY21) (FY23 vs FY22)
---------------------------- --------------------------
Labour market pressures 6%+ Inflation expected
to be at broadly similar
levels to FY22 inflation
(6%+)
------------------------ ---------------------------- --------------------------
General food and drink 9 to 10% Inflation expected
inflation to be at broadly similar
levels to FY22 inflation
(10%+)
------------------------ ---------------------------- --------------------------
Note: All inflation figures are stated as their incremental
impact in each year post mitigating activities
On our utilities cost exposure, the Group took the following
decisive action to hedge volumes for both gas and electricity for
FY23 and FY24:
-- Hedged c. 50% of volume in November 2021
-- Hedged a further c. 25% of volume in March 2022 (cumulatively c.75% hedged)
-- Hedged a further c. 10% of volume in July 2022 (cumulatively c.85% hedged)
-- Finally hedged the remaining 15% of volume in August 2022
As a consequence, TRG is 100% hedged for FY22, FY23 and FY24. In
addition, we are 80% hedged for the first three quarters of
FY25.
The table below shows the inflationary impact on our utilities
balance post this hedging activity:
Inflationary impact Inflationary impact Inflationary impact
post hedging (FY22 post hedging (FY23 post hedging (FY24
vs FY21) vs FY22) vs FY23)
---------------------- --------------------
Costs expected to Costs expected to Costs expected to
be c.GBP9m higher be c. GBP12m higher be c. GBP7m lower
in 2022 vs 2021 in 2023 vs 2022 in 2024 vs 2023
-------------------- ---------------------- --------------------
If the Group had not adopted this proactive hedging strategy,
and needed to hedge its entire utilities volume at current spot
prices (i.e. early September) TRG would have been faced with
incremental inflation as follows:
-- 2023 inflationary cost would have been GBP25m to GBP40m higher than our fixed contract
-- 2024 inflationary cost would have been GBP15m to GBP30m higher than our fixed contract
- Thirdly, interest rates have increased significantly and are
expected to increase further in the Autumn of 2022 and into 2023.
Given the good cash flow generation of the business and significant
liquidity the Group has:
-- Repaid GBP89m of term loan facility. Based on current
interest rates the repayment will save at least GBP7m in interest
cost on an annualised basis and improves balance sheet
efficiency
-- Purchased interest rate caps limiting the SONIA bank rate to
0.75% on GBP125m of gross debt through to November 2025, reducing
exposure to future interest rate increase
4. Disciplined approach to targeted long-term growth
Given the near-term market dynamics outlined above we are
adapting our targeted capital investment plans in 2023. Our
Wagamama and Pubs businesses have a track record of delivering
strong returns on new sites and despite the near-term cost
challenges we plan to selectively grow both businesses. Key
developments include:
o Securing improved commercial terms for new UK Wagamama
restaurant leases
o Ceasing the roll-out of our Wagamama delivery kitchens in
light of the Delivery market softening and an increase in capital
investment required
o Reduced Pub openings for FY23 in light of current valuations
for high quality UK pub assets
o Maintaining Barburrito roll-out plans given lower per unit
capital requirement and limited market penetration
Based on the above our refocused expansion pipeline over the
course of FY22 and FY23 is as follows:
2022 planned 2023
openings planned Average
openings capex investment
------------- ---------- -------------------
Wagamama UK
restaurants 8 6-8 GBP1.2m-GBP1.5m
-------------------- ------------- ---------- -------------------
Wagamama UK
Delivery kitchens 3 0 GBP0.4m-GBP0.5m
-------------------- ------------- ---------- -------------------
Pubs(1) 2 2 GBP1.8m-GBP4.5m
-------------------- ------------- ---------- -------------------
Barburrito n/a 3-4 GBP0.4m-GBP0.5m
-------------------- ------------- ---------- -------------------
(1) Range relates to both leasehold and freehold pubs (i.e.
GBP4.5m capex investment relates to a freehold pub)
Whilst there are near-term sector challenges to navigate, we
remain focused on longer term trends and opportunities for
sustainable growth.
The table below illustrates the opportunity to grow our business
and deliver good shareholder returns over the next five years
across:
Expected Dec 2027 Average
estate as estate potential new site Target
at Dec 2022 EBITDA(1) ROIC(2)
------------------ ----------
Wagamama UK
restaurants 154 c.190 GBP400k-GBP600k >40%
------------- ------------------ ------------------ ----------
Pubs 80 c.90 GBP350k-GBP600k >20%
------------- ------------------ ------------------ ----------
Barburrito 16 c.30 GBP120k-GBP180k >30%
------------- ------------------ ------------------ ----------
Wagamama US
JV (20% share) 9 c.30 GBP80k-GBP120k(3) >25%
------------- ------------------ ------------------ ----------
(1) Based on a combination of actual returns from 2019 &
2020 openings where applicable and feasibility returns for future
pipeline sites
(2) ROIC refers to return on invested capital defined by
pre-IFRS 16 outlet EBITDA/initial capex invested
(3) Represents TRG's 20% share of each sites EBITDA
Wagamama International franchise: We have made very good
progress in our expansion plans this year and now expect to open
eight to 10 new sites in FY22 predominately in Italy and the Middle
East. We expect to end the year with c. 65 sites operating across
our Wagamama international franchise business. Going forward we
expect to open five to eight new restaurants per year, representing
a capital efficient way to expand the Wagamama brand
internationally.
Outlook
Since the Group's AGM update in May 2022:
-- Utilities inflation is GBP2m higher than previous guidance
due to unhedged volumes on landlord billed sites and new
openings
-- Wagamama and Leisure sales were adversely impacted by
heatwaves in July and August (whilst our Pubs sales benefitted from
the heatwaves)
For the avoidance of doubt, today's update does not include the
impact of any potential Government intervention.
Summary
Despite the well-documented pressures facing the sector, TRG is
confident in our ability to continue to outperform the sector and
deliver long-term sustainable growth for our stakeholders:
-- We have a strong portfolio of brands consistently out-performing the market
-- We have taken decisive action to hedge our utility costs and
reduce our interest rate exposure
-- We benefit from a strong balance sheet with substantial liquidity
Driving forward our ESG agenda
Environmental initiatives
Through our 'Preserving the Future' steering Group we are
mobilising the organisation behind our ambitious target of net zero
by 2035.
Having moved all [3] of our directly controlled supplies of
electricity, gas and LPG to renewable sources in Q4 last year, we
have invested in carbon removal reforestation projects to offset
our scope 1 and 2 residual emissions from FY 2022.
We continue to focus on operational energy efficiency and are
making good progress through a combination of behavioural change,
sharing best practice across our estate, and piloting new
technologies to drive further efficiencies.
In the period we increased our focus on our scope 3 emissions,
which account for the bulk of our carbon footprint. With the
support of a specialist sustainability consultancy "Engie Impact",
we have identified a scope 3 roadmap and decarbonisation levers
specific to our business. We are now building out a detailed plan
to implement the actions identified in the short, medium and long
term. This will involve close co-operation and engagement with our
suppliers and distribution partners. We will offset remaining
emissions from 2035 onwards, to meet our net zero target.
With regard to packaging, we have developed a new packaging
solution for Wagamama, which will eliminate up to 330 tonnes of
virgin plastic per year and reduces the carbon intensity of the
packaging for our most popular dish, Katsu curry, by 62%. We are
rolling this out across the Wagamama business, alongside our Bowl
Bank bowl return scheme. At present, c.50% of our total Wagamama
restaurant estate have the new packaging.
On our Reduce Waste priority, we continue to work with the
Sustainable Restaurant Association on their Plate Waste Project.
Audits following implementation of initial recommendations on test
sites across our divisions have shown an average reduction in plate
waste per cover of c.20%. In the second half of this year and into
2023 we will work to implement these and other SRA recommendations
to reduce waste across our business.
Social initiatives
On the social side, our role to support our colleagues and
communities, and to create a representative, diverse and inclusive
environment has never been more critical.
In a very challenging recruiting environment for the sector, we
are on track to increase the number of apprentices on our
programmes or graduating this year to around 450 - an increase of
c.200 vs 2021.
We have launched a range of wellbeing and engagement initiatives
for colleagues across our divisions in the period, including a new
rewards and recognition platform in our Leisure and Concessions
division, mental health training and mental health first aid boxes
in Wagamama to ensure our restaurant teams have access to guidance
and resources to look after their mental health & wellbeing,
and a new wellbeing initiative in our pubs division, which has
initially seen 90 Wellbeing Ambassadors across our pubs receiving
mental health awareness training through our partnership with The
Burnt Chef Project, a not-for-profit organisation who focus on
improving the wellbeing of those within the hospitality profession
and challenging the stigma of mental health.
Aligned with our focus on mental health and wellbeing, our key
charity partners are 'Mind' and 'Young Minds' (Mental Health
Charities), and we also support a large number of charities through
our pubs and restaurants locally with a variety of fundraising
activities. Through a combination of colleague led fundraising,
company matched programmes, and charity partnerships we have raised
over GBP200,000 for charity in the first half of the year.
We also placed a particular emphasis on diversity and inclusion,
with a range of interactive training programmes and learning
resources developed and launched across our divisions, and
initiatives and celebrations aligned with campaigns going on in the
wider world to encourage inclusion.
Financial Review
The 26 weeks to 3(rd) July 2022 is the first Interim period
since 2019 which has not been significantly impacted by
restrictions related to COVID and we are pleased to be reporting an
Adjusted profit before tax and exceptional items (on an IFRS 16
basis) of GBP13.9m (2021: loss of GBP39.5m). The first 27 weeks of
2021 were significantly impacted by Covid restrictions with the
Group only being able to trade fully for seven weeks and as such
all financial measures for the first half of 2022 are significantly
stronger.
Statutory Results
The key statutory financial measures (IFRS 16) are summarised
below and are stated after the impact of exceptional costs:
STATUTORY RESULTS
(IFRS 16)
------------------------
26 weeks 27 weeks
ended 3 ended 4
July 2022 July 2021
GBPm GBPm
-------------------------- ----------- -----------
Revenue 423.4 216.8
Operating(loss)* (12.2) (34.9)
Loss before tax* (28.5) (57.6)
-------------------------- ----------- -----------
Loss after tax* (26.1) (55.0)
-------------------------- ----------- -----------
Statutory loss per share
(pence)* (3.4)p (7.8)p
-------------------------- ----------- -----------
(*) Restated
Revenue for the period was GBP423.4m (2021: GBP216.8m) which
represents an increase of 95% on the prior year, with strong
trading across our Wagamama, Pubs and Leisure businesses. The
Concessions business was impacted in Q1 with limited International
travel but has seen a better than expected recovery through Q2
2022.
As outlined in the business review, in the current year we were
particularly pleased to have delivered a continued strong LFL sales
outperformance versus the market across our Wagamama, Pubs and
Concessions businesses, illustrating the strength of our customer
propositions and ability to outperform in all market conditions.
Our Leisure business achieved LFL sales growth behind the market,
with the business impacted to some degree by the increased
inflationary pressures on the UK consumer.
The operating loss of GBP12.2m (2021: GBP34.9m) is due to the
impact of significant exceptional items of GBP47.7m (2021:
GBP16.2m) which are explained further below. These exceptional
items are primarily due to a non-cash impairment charge, as a
consequence of the expected inflationary pressures and challenging
macro-economic environment in the near-term, which has meant a
reduction in our future trading expectations for certain sites.
Net interest costs of GBP16.3m (2021: GBP22.7m) are
significantly lower than the prior year due to the recognition of
an exceptional gain in the period of GBP5.3m on our interest rate
caps. The interest rate caps limit SONIA rates to 0.75% until
November 2025 on GBP125m of gross debt, and until November 2026 on
GBP100m of gross debt. The interest cost prior to this exceptional
gain is GBP21.6m compared to GBP20.8m in the prior year, the
increase in underlying cost of debt is due to the refinancing
completed in May 2021.
Alternative Performance Measures
TRG uses a number of non-statutory measures to monitor business
performance which are referred to within the Interim Report, but
primarily relate to Adjusted and pre-IFRS 16 profit metrics. This
is because the pre-IFRS 16 profit is consistent with the financial
information used in the management accounts to inform business
decisions and investment appraisals. It is TRG's view that
presenting the information on a pre-IFRS 16 basis will provide a
useful basis for understanding the Group's results to all
stakeholders. Specifically, the measures mainly relate to three
adjustments:
- The main profit measure used is Adjusted EBITDA. This is not a
statutory measure but closely represents the Group's ability to
make cash trading profits as it excludes key non-cash elements of
the Income Statement such as depreciation and amortisation
- The adjusted profit and debt measures are based on the IAS 17
approach to lease accounting and does not include the impact of
IFRS 16. This is used as it more closely represents the cash profit
of the business, and debt as measured by our banks
- The adjusted profit measures are quoted excluding the impact
of items that management have deemed as exceptional as they are
material and not related to underlying trading
As these measures are not defined by accounting standards, they
may not be comparable across companies. The adjusted results may
exclude significant costs (such as restructuring or impairments)
and so may not be a complete picture of the Group's financial
performance, which is presented in the statutory results.
The key alternative performance measures (APM) are summarised
below. Both pre IFRS 16 and IFRS 16 figures are shown and are
stated before the impact of exceptional costs:
APM (Pre-IFRS 16) APM (IFRS 16)
26 weeks 27 weeks 26 weeks 27 weeks
ended 3 ended 4 ended ended 4
July 2022 July 2021 3 July July 2021
Pre-IFRS Pre-IFRS 2022 IFRS 16
16 16 IFRS GBPm
GBPm GBPm 16
GBPm
------------------------------ ----------- ----------- --------- -----------
Revenue 423.4 216.8 423.4 216.8
Adjusted(1) EBITDA 41.7 11.2 72.2 23.6
Adjusted(1) operating
profit/(loss) 22.9 (8.6) 35.5 (18.7)
Adjusted(1) operating margin 5.4% (4.0%) 8.4% (8.6%)
Adjusted(1) profit/(loss)
before tax 10.2 (19.9) 13.9 (39.5)
------------------------------ ----------- ----------- --------- -----------
(1) The Group's adjusted performance metrics are defined within
the glossary at the end of this report. All such adjusted measures
are stated pre-exceptional items
Adjusted EBITDA (on a pre-IFRS 16 basis) for the 26 weeks is
GBP41.7m (2021: GBP11.2m). As mentioned above and outlined in the
business review, the main driver of this increase is due to the
unrestricted trading in our restaurants and the LFL sales
outperformance of our Wagamama, Pubs and Concessions business
against their respective markets, and the management actions taken
to partially mitigate the impact of the inflationary pressures.
The Group made an adjusted profit before tax (on a pre-IFRS 16
basis) for the period of GBP10.2m (2021: loss GBP19.9m).
Cash flow and net debt
The Group ended the first half with net debt on an IFRS 16 basis
of GBP560.8m (2021: GBP635.0m). The key driver of this reduction
has been as a result of the cash generated by the business with pre
IFRS 16 net debt being reduced by GBP41.8m to GBP158.4m.
Operating cash flow in the period improved significantly to
GBP57.6m from GBP14.3m due to improved Adjusted EBITDA of GBP41.7m
(2021: GBP11.2m), and a recovery in the Group's working capital
position following unrestricted trading, which provided an inflow
of GBP15.9m (2021: GBP3.2m).
We restarted our targeted capital expenditure programme with an
increased spend of GBP22.0m (2021: GBP12.0m) as we grew both our
Wagamama and Pubs businesses off the back of our strong balance
sheet and selective opportunities within the property market. We
expect to open eight Wagamama restaurants and two new pubs before
the end of the financial year.
Summary cash flow for the year (on a pre-IFRS 16 basis) is set
out below:
HY 2022 HY 2021
GBPm GBPm
------------------------------------------- -------- --------
Adjusted EBITDA (Pre-IFRS 16 basis)
(1) 41.7 11.2
Working capital and non-cash adjustments 15.9 3.2
Operating cash flow(2) 57.6 14.3
Net interest paid (11.0) (14.3)
Tax paid (2.0) (0.2)
Refurbishment and maintenance expenditure (15.6) (6.7)
------------------------------------------- -------- --------
Free cash flow 29.0 (6.8)
Development expenditure (6.4) (5.3)
Movement in capital creditor 1.0 -
Utilisation of onerous property cost
provisions (3.9) (3.6)
Exceptional costs (3.1) (7.8)
Proceeds from issue of share capital - 166.8
Other items (1.4) -
------------------------------------------- -------- --------
Cash movement 15.2 143.2
------------------------------------------- -------- --------
Net Debt (Pre IFRS 16 basis)
Group net debt brought forward (171.6) (340.4)
Non-cash movements in net debt (2.0) (3.1)
------------------------------------------- -------- --------
Group net debt carried forward (Pre
IFRS 16 basis) (158.4) (200.2)
------------------------------------------- -------- --------
Incremental lease liabilities (IFRS
16) (402.4) (434.8)
------------------------------------------- -------- --------
Group net debt carried forward (IFRS
16 basis) (560.8) (635.0)
------------------------------------------- -------- --------
(1) The Group's adjusted performance metrics are defined within
the glossary at the end of this report. All such adjusted measures
are stated pre-exceptional items
(2) Operating cash flow excludes certain exceptional costs and
includes payments made against lease obligations
Given the Group's significant cash headroom and confidence in
the underlying cash generation across our businesses, TRG has
repaid GBP89.1m of its term loan during the period reducing the
current facility from GBP330.0m to GBP240.9m and so reducing future
interest costs. Cash headroom was GBP184.2m as at the half-year
period end (2021: GBP227.4m).
The Group continues to target net debt/EBITDA [4] below 1.5x in
the medium term.
This strong financial position and substantial liquidity enables
the Group to navigate the near-term sector challenges with a good
degree of cash flow flexibility in its operating model as laid out
in the table below:
FY22 expected FY23 guidance
out-turn
---------------- ---------------
Disciplined GBP55m to GBP45m to
and flexible GBP60m GBP50m
capex programme
----------------- ---------------- ---------------
Cash interest GBP21m to GBP18m to
costs GBP22m GBP19m
----------------- ---------------- ---------------
Reduced onerous GBP9m to GBP10m GBP6m to GBP7m
lease exposure
----------------- ---------------- ---------------
Exceptional items
An exceptional pre-tax charge of GBP42.4m has been recorded in
the period (2021: GBP18.1m). The key driver of this charge has been
the impairment of certain assets due to the near-term inflationary
pressures and economic outlook reducing management's expectations
for 2023 and 2024. An impairment charge of GBP45.4m has been
provided in the period (2021: GBP1.3m).
The other significant exceptional item is a gain of GBP5.3m on
the interest rate caps which have appreciated in value since the
year end due to the increase in interest rates actioned by the Bank
of England, and expectation of further interest rate rises.
Additionally, GBP2.3m has been spent on projects to transform
our head office efficiency and to carry on the process of
restructuring our estate.
The tax credit relating to these exceptional charges was GBP6.0m
(2021: GBP3.5m charge).
Cash expenditure associated with the above exceptional charges
was only GBP3.1m (2021: GBP7.8m).
Tax
The tax credit for the period was GBP2.4m (2021: credit of
GBP2.6m), summarised as follows:
HY 2022 HY 2021
Trading Exceptional Total Trading Exceptional* Total*
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------- ------------ ------- -------- ------------- -------
Corporation tax 3.3 - 3.3 - (3.3) (8.3)
Deferred tax 0.3 (6.0) (5.7) 2.5 7.0 9.5
--------------------- -------- ------------ ------- -------- ------------- -------
Total current
year tax 3.6 (6.0) (2.4) (2.5) 3.7 1.2
--------------------- -------- ------------ ------- -------- ------------- -------
Adjustments in
respect of prior
years - - - (3.6) (0.2) (3.8)
--------------------- -------- ------------ ------- -------- ------------- -------
Total tax (credit)
/ charge 3.6 (6.0) 2.4 (6.1) 3.5 (2.6)
--------------------- -------- ------------ ------- -------- ------------- -------
Effective tax
rate (excl prior
years adjustments) 25.9% 14.2% 8.4% 6.3% 20.4% 2.1%
Effective tax
rate 25.9% 14.2% 8.4% 15.4% 19.3% 4.5%
--------------------- -------- ------------ ------- -------- ------------- -------
*Restated for impact of rates provision adjustment, see Note
2
The Group's pre-exceptional effective tax rate is 25.9%
excluding prior period adjustments (2021: pre-exceptional effective
tax rate of 14.2% excluding prior period adjustments). The
effective tax rate exceeds the statutory corporation tax rate of
19.0% primarily as a result of non-qualifying depreciation and a
one-off tax charge relating to share-based payments due to a
reduction in the share price in the year (which accounts for 3.8%
of the differential on the effective tax rate).
The current year exceptional tax credit of GBP6.0m comprises a
corporation tax credit of GBP3.3m relating to the utilisation of
tax losses against the current period corporation charge, as well
as a further GBP2.7m deferred tax credit relating to timing
differences arising on the impairment of fixed assets, right-of-use
assets and intangibles.
Selected FY22 modelling guidance
-- Total capital expenditure approximately GBP55m-GBP60m:
o Maintenance and IT investment of GBP20m-GBP25m
o Refurbishment capex of c.GBP10m
o Expansionary capex of c.GBP25m
-- IFRS 16 EBITDA add-backs (i.e., rent & other property non-cash charges):
o Net add-back GBP54m to GBP58m
- GBP57m to GBP60m for fixed rent
- (GBP2m) to (GBP3m) for non-cash property charges
-- Depreciation and interest detailed in table below:
Pre-IFRS 16 GBP'm IFRS 16 GBP'm Total GBP'm
P&L Depreciation 41-42 35-37 76-79
------------------ -------------- ------------
P&L Interest 24-25 17-18 41-43
------------------ -------------- ------------
Going concern
The directors have adopted the going concern basis in preparing
these interim accounts after assessing the Group's principal risks
including current macroeconomic headwinds, relating to the
cost-of-living crisis, elevated levels of inflation and utility
market volatility.
The Group has substantial liquidity with GBP184.2m in cash and
cash equivalents, or available facilities at the balance sheet
date, and these facilities are committed until at least March 2025.
Further details of the Group's debt facilities are in Note 15 to
the Interim Accounts.
Whilst H1 trading is robust, the Directors are cautious about
the ability for our customers to continue their current level of
spending in our restaurants and pubs whilst the cost-of-living
crisis continues and specifically the unprecedented increases in UK
household energy bills. In preparing the 'base case' forecast for
the period of going concern to 30 September 2023, the Directors
have assumed a lower level of sales growth for the next 12 months
versus 2019, which is also lower than the growth rates achieved in
H1 as reported in our half year results. The 'base case' forecast
is also updated for increased expectations of labour and input
costs inflation as well as the known increase in utilities costs
given the vast majority of the Group's volume is now fixed for 2023
and 2024. In this forecast, available liquidity does not drop below
GBP115m compared to a minimum liquidity covenant of GBP40m, and
Senior Secured Net Leverage does not exceed 2.0x against a covenant
of no more than 4.5x.
In addition, the Board has considered a 'stress case' scenario
where sales levels have been further reduced by 5% across all
divisions, and an additional 2% of food and drink inflation has
been included above the base case. In this 'stress case' scenario,
liquidity falls to a minimum of GBP94m, and Senior Secured Net
Leverage increases to 2.9x but still comfortably within the
covenants of the Group's banking facilities.
The Board have also considered a reverse stress case to
determine the level by which sales would need to fall from the
'base case' on a sustained basis over the next 12 months before
there is any risk of covenant breach in September 2023. Compared to
the 'base case' sales would have to fall by 12% with mitigating
actions taken on both operating and capital expenditure, which are
within the control of the directors, before there is a risk of a
covenant breach. The Board considers that this level of revenue
decline in the reverse stress case is extremely unlikely, given the
strength of business' performance historically and on how our
consumers have reacted in previous recessionary environments.
During the next 12 months if the Group were to experience a
sustained reduction in sales the Group would take broader
mitigating actions to manage any potential risk of a covenant
breach. If it should be required, the directors would proactively
engage with its lending group and are confident that covenant
waivers would be provided as they were in similarly extreme
circumstances during the pandemic. Finally, we have not assumed any
Government intervention in our scenarios although the Board of
Directors has a reasonable expectation that the new Government will
provide significant support for both UK Households and UK Business'
in navigating the near-term challenges presented by both the energy
and cost-of-living crisis.
The Board has a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
period to 30 September 2023, being at least the next twelve months
from the date of approval of the interim accounts. On this basis,
the Directors continue to adopt the going concern basis of
preparation.
Principal Risks and Uncertainties
The Group set out its internal risk management process together
with its formal assessment of its principal risks and uncertainties
as at the date of publication on pages 57 to 58 of its 2021 Annual
Report. Since then, the Group's Risk and Audit Committees have
continued to review and update the main risks likely to impact the
Group while assessing the controls and mitigations being put in
place across the Group and maintaining a watch on emerging risks,
such as the cost-of-living crisis and the significant increase in
inflationary pressures, to ensure that the appropriate steps are
taken at the right time. The Senior Management Risk Committee has
met three times to date during the financial year and reported back
to the Audit Committee and, ultimately, to the Board. The key
material risks and mitigations as currently identified by the
Directors are listed below:
Risk Mitigating Factors
Reduced Consumer Demand
* Risk of reduced consumer demand due to the * Broad portfolio of brands that offer a range of
cost-of-living crisis, significant inflation levels cuisines across various customer demographic
and increases to the UK household energy price cap
* Ongoing focus on ensuring value for money offering
across the brands and day parts with regular price
benchmarking against competitor pricing
* Flexible capital allocation policy to ensure that
plans are adapted to a changing economic environment
* Periodic business review process and weekly trading
meeting to review and assess and adaption to trading
plans required.
------------------------------------------------------------
Inflation
* Risk of significant cost increases across food, drin * Utilities hedging in place for 100% of 2022, 2023 and
k 2024 volume and c. 80% of volume for Q1 to Q3 2025.
and utilities
* Strategic purchasing and category management approach
so that buyers can partially mitigate increases
through negotiation, tender or by alternative
supplier selection
* Streamlined supply base post restructuring in order
to drive economies of scale and better purchasing
power with suppliers.
* Rolling programme of securing either longer- or
shorter-term contracts to mitigate pricing
fluctuations.
------------------------------------------------------------
Talent attraction and retention
* Failure to attract, retain, or develop Chefs, GMs, * Implementation of a new recruitment process to
and senior managers. enhance the quality of team selection.
* Continued improvement of onboarding and induction
process focused on the first 90 days of employment to
improve employee engagement.
* Extension of our apprenticeship schemes across the
brands to further enhance team development with a
particular focus on back of house roles.
* Ongoing review of pay rates to ensure the brands are
competitive within the regions they trade.
------------------------------------------------------------
Allergens
* Risk of guests suffering from the failure to deliver * Clear Allergen policies and procedures established
our allergens policies and procedures, or inaccurate across all business operations.
or insufficient information provided to guests
concerning allergens.
* Detailed database built up by ingredient/supplier and
testing of database including physical verification.
* Allergen training refreshed as part of the reopening
training and is completed on induction by all
restaurant employees across all businesses.
* Allergy advice on menus with daily updates to source
data.
------------------------------------------------------------
Cybersecurity
* Risk of cybersecurity failure or incident leading to * Payment Card Industry Data Security Standard (PCI
data loss, disruption of services, fines and trading DSS) v3.2 annual compliance certification process.
or reputational damage.
* ASV scans and penetration tests with remediation
activities completed where required.
* CyberEssentials certification completed in 2021
------------------------------------------------------------
Supply chain management
* Risk of loss of key supplier, jeopardising supply an * All essential products are dual sourced.
d
availability.
* Regular monitoring of all logistics partners and key
suppliers to monitor performance.
* Risk that the distribution network is unable to meet
the demands of our restaurants.
* Proactive contractor performance management reviews.
* Supply contracts in place with all key suppliers for
a minimum of 24 months.
------------------------------------------------------------
INDEPENT REVIEW REPORT TO THE RESTAURANT GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks ended 3 July 2022 which comprises a Condensed Consolidated
Income Statement, Condensed Consolidated Statement of Comprehensive
Income, a Condensed Consolidated Balance Sheet, a Condensed
Consolidated Statement of Changes in Equity, a Condensed
Consolidated Cash Flow Statement and explanatory notes. We have
read the other information contained in the half yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 3 July
2022 is not prepared, in all material respects, in accordance with
UK adopted International Accounting Standard 34 and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
7 September 2022
The Restaurant Group plc
Consolidated income statement
26 weeks ended 3 July 2022
Trading Exceptional items
business (Note 4) Total
(Unaudited) (Unaudited) (Unaudited)
Note GBP'm GBP'm GBP'm
Revenue 3 423.4 - 423.4
Cost of sales (359.6) (46.1) (405.7)
------------ ------------------ ------------
Gross profit/(loss) 63.8 (46.1) 17.7
Share of results of associate - - -
Administration costs (28.3) (1.6) (29.9)
------------ ------------------ ------------
Operating profit/(loss) 35.5 (47.7) (12.2)
Interest payable 6 (22.0) - (22.0)
Interest receivable 6 0.4 5.3 5.7
------------ ------------------ ------------
Profit/(Loss) on ordinary activities before tax 13.9 (42.4) (28.5)
Tax on (loss)/profit from ordinary activities 7 (3.6) 6.0 2.4
------------ ------------------ ------------
Profit/(Loss) for the period 10.3 (36.4) (26.1)
------------ ------------------ ------------
Other comprehensive loss:
Foreign exchange differences arising on
consolidation (0.2) - (0.2)
------------ ------------------ ------------
Total comprehensive profit/loss for the period 10.1 (36.4) (26.3)
------------ ------------------ ------------
Earnings per share (pence) 1.3 (4.8) (3.4)
EBITDA 72.2 (1.4) 70.8
Depreciation, amortisation and impairment (36.7) (46.3) (83.0)
-------------------------------------------------- ----- ------------ ------------------ ------------
Operating Profit/(Loss) 35.5 (47.7) (12.2)
-------------------------------------------------- ----- ------------ ------------------ ------------
Consolidated income statement
53 weeks ended 2 January
27 weeks ended 4 July 2021 2022
Trading Exceptional items*
business (Note 5) Total Total*
(Unaudited) (Unaudited) (Unaudited) (Audited)
Note GBP'm GBP'm GBP'm GBP'm
Revenue 3 216.8 - 216.8 636.8
Cost of sales* (213.6) (14.6) (228.2) (571.9)
------------ ------------------- ------------ -----------------------------
Gross (loss)/profit 3.2 (14.6) (11.4) 64.7
Share of results of
associate (0.1) -- (0.1) (0.3)
Administration costs (21.8) (1.6) (23.4) (52.6)
------------ ------------------- ------------ -----------------------------
Operating (loss)/profit (18.7) (16.2) (34.9) 11.8
Interest payable 6 (20.9) (1.9) (22.8) (47.6)
Interest receivable 6 0.1 -- 0.1 0.6
------------ ------------------- ------------ -----------------------------
Loss on ordinary activities
before tax (39.5) (18.1) (57.6) (35.2)
Tax on loss from ordinary
activities* 7 6.1 (3.5) 2.6 (5.1)
------------ ------------------- ------------ -----------------------------
Loss for the period (33.4) (21.6) (55.0) (40.3)
------------ ------------------- ------------ -----------------------------
Other comprehensive income:
Foreign exchange differences
arising on consolidation 0.1 -- 0.1 0.1
------------ ------------------- ------------ -----------------------------
Total comprehensive loss for
the period (33.3) (21.6) (54.9) (40.2)
------------ ------------------- ------------ -----------------------------
Earnings per share (pence) (4.8) 3.1 (7.8) (5.6)
EBITDA 23.6 (2.5) 21.1 115.8
Depreciation, amortisation
and impairment (42.2) (13.7) (55.9) (104.0)
----------------------------- ----- ------------ ------------------- ------------ -----------------------------
Operating profit/(loss) (18.7) (16.2) (34.9) 11.8
----------------------------- ----- ------------ ------------------- ------------ -----------------------------
*Restated refer to Note 2
Consolidated balance sheet
As at 3 July 2022 As at 4 July 2021* As at 2 January 2022*
(Unaudited) (Unaudited) (Audited)
Note GBP'm GBP'm GBP'm
================================== ===== =================== ==================== =======================
Non-current assets
Intangible assets 9 591.6 599.0 599.9
Right of use assets 10 265.9 302.4 289.4
Property, plant and equipment 11 272.0 292.0 285.1
Derivative financial instruments 8.8 - 2.1
Other receivables 5.4 2.9 4.7
1,143.7 1,196.3 1,181.2
------------------- -------------------- -----------------------
Current assets
Inventory 6.8 5.1 6.0
Trade and other receivables 16.4 12.8 13.9
Prepayments 10.5 4.0 6.1
Corporation tax debtor 7 1.3 12.6 -
Cash and cash equivalents 72.6 115.8 146.5
107.6 150.3 172.5
------------------- -------------------- -----------------------
Total assets 1,251.3 1,346.6 1,353.7
------------------- -------------------- -----------------------
Current liabilities
Trade and other payables (148.6) (110.8) (128.1)
Corporation tax liabilities 7 - - (0.2)
Provisions* (2.5) (1.1) (3.1)
Lease liabilities 10 (61.6) (75.4) (73.1)
(212.7) (187.3) (204.5)
------------------- -------------------- -----------------------
Net current liabilities (105.1) (37.0) (32.0)
------------------- -------------------- -----------------------
Long-term borrowings 15 (231.0) (316.0) (318.1)
Deferred tax liabilities* (41.7) (52.7) (43.6)
Lease liabilities 10 (340.8) (359.4) (337.3)
Provisions* (3.4) (1.4) (3.2)
(616.9) (729.5) (702.2)
------------------- -------------------- -----------------------
Total liabilities (829.6) (916.8) (906.7)
------------------- -------------------- -----------------------
Net assets 421.7 429.8 447.0
=================== ==================== =======================
Equity
Share capital 13 215.2 215.2 215.2
Share premium 394.1 394.1 394.1
Other reserves 0.9 (2.3) 0.1
Retained earnings* (188.5) (177.2) (162.4)
Total equity 421.7 429.8 447.0
=================== ==================== =======================
*Restated refer to Note 2
Consolidated statement of changes in equity
Other Retained
Share Capital Share Premium Reserves Earnings* Total
Note GBP'm GBP'm GBP'm GBP'm GBP'm
----------------------------- ----- ---------------- ---------------- -------------- -------------- -------
Balance at 27 December 2020 165.9 276.6 (3.9) (131.3) 307.3
---------------- ---------------- -------------- -------------- -------
Total comprehensive
income/(loss) for the
period* - - 0.1 (45.9) (45.8)
Share issue 13 49.3 125.9 - - 175.2
Share issue transaction
costs - (8.4) - - (8.4)
Share-based payments - - 1.5 - 1.5
Deferred tax on share-based - - - - -
payments
---------------- ---------------- -------------- -------------- -------
Balance at 4 July 2021
(unaudited) 215.2 394.1 (2.3) (177.2) 429.8
---------------- ---------------- -------------- -------------- -------
Balance at 27 December 2020 165.9 276.6 (3.9) (131.3) 307.3
---------------- ---------------- -------------- -------------- -------
Total comprehensive
income/(loss) for the
period* - - 0.1 (31.1) (31.0)
Share issue 13 49.3 125.9 - - 175.2
Share issue transaction
costs - (8.4) - - (8.4)
Share-based payments - - 3.4 - 3.4
Deferred tax on share-based
payments - - 0.5 - 0.5
---------------- ---------------- -------------- -------------- -------
Balance at 2 January 2022
(audited) 215.2 394.1 0.1 (162.4) 447.0
---------------- ---------------- -------------- -------------- -------
Balance at 2 January 2022
(audited) 215.2 394.1 0.1 (162.4) 447.0
---------------- ---------------- -------------- -------------- -------
Total comprehensive loss for
the period - - (0.2) (26.1) (26.3)
Share-based payments - - 1.5 - 1.5
Deferred tax on share-based
payments - - (0.5) - (0.5)
Balance at 3 July 2022
(unaudited) 215.2 394.1 0.9 (188.5) 421.7
---------------- ---------------- -------------- -------------- -------
* Restated refer to Note 2
The Restaurant Group plc
Consolidated cash flow statement
53 weeks ended
26 weeks ended 3 July 2022 27 weeks ended 4 July 2021 3 January 2022
(Unaudited) (Unaudited) (Audited)
Note GBP'm GBP'm GBP'm
Operating activities
Cash generated from operations* 14 84.7 28.8 128.1
Interest received 0.2 - -
Interest paid (11.2) (14.3) (20.6)
Corporation tax paid (2.0) (0.2) (2.6)
Payment against provisions* (1.1) (0.1) (5.6)
Payment on exceptional items* (3.1) (7.8) (7.7)
Net cash flows from operating
activities 67.5 6.4 91.6
--------------------------- --------------------------- ----------------
Investing activities
Purchase of property, plant and
equipment (20.9) (11.2) (31.1)
Purchase of intangible assets (0.1) (0.7) (2.7)
Investment in associate - (0.1) (0.3)
Net cash flows from investing
activities (21.0) (12.0) (34.1)
--------------------------- --------------------------- ----------------
Financing activities
Net proceeds from issue of
ordinary share capital - 166.8 166.8
Repayment of obligations under
leases 15 (29.9) (17.9) (48.7)
Repayment of borrowings 15 (89.1) (383.6) (383.6)
Drawdown of borrowings 15 - 330.0 330.0
Upfront loan facility fee paid 15 - (14.6) (14.6)
Derivative financial instrument
fees paid (1.4) - (1.6)
--------------------------- --------------------------- ----------------
Net cash flows used in financing
activities (120.4) 80.7 48.3
--------------------------- --------------------------- ----------------
Net (decrease)/increase in cash
and cash equivalents (73.9) 75.1 105.8
Cash and cash equivalents at the
beginning of the period 146.5 40.7 40.7
Foreign exchange movement in cash - - -
Cash and cash equivalents at the
end of the period 72.6 115.8 146.5
----- --------------------------- --------------------------- ----------------
* Restated refer to Note 2
Responsibility statement
-------------------------
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with UK-adopted international Accounting
Standard (IAS) 34 'Interim Financial Reporting';
b) the interim management report includes a fair review of
the information required by DTR 4.2.7R (indication of important
events during the first 26 weeks and description of principal
risks and uncertainties for the remaining 26 weeks of the
year); and
c) the interim management report includes a fair review of
the information required by DTR 4.2.8R (disclosure of related
parties' transactions and changes therein).
By order of the Board,
Andy Hornby Kirk Davis
Chief Executive Officer Chief Financial Officer
7 September 2022 7 September 2022
1 Accounting policies
Basis of preparation
The interim condensed consolidated set of financial statements
included in this interim financial report has been prepared in
accordance with the UK adopted IAS 34 'Interim Financial
Reporting'. The accounting policies and methods of computation used
are consistent with those used in the Group's latest annual audited
financial statements. The interim condensed consolidated financial
statements do not include all the information and disclosures
required in the annual financial statements, and should be read in
conjunction with the Group's latest annual consolidated financial
statements as at 2 January 2022.
General information
The comparatives for the full year ended 2 January 2022 do not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on these accounts was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
The accounting period runs to a Sunday each half year which will
be a 26- or 27-week period. The Directors present their report and
consolidated financial statements for the 26-week period ended 3
July 2022, with the comparative period to 27-week period ended 4
July 2021.
Going concern basis
The directors have adopted the going concern basis in preparing
these interim accounts after assessing the Group's principal risks
including current macroeconomic headwinds, relating to the
cost-of-living crisis, elevated levels of inflation and utility
market volatility.
The Group has substantial liquidity with GBP184.2m in cash and
cash equivalents, or available facilities at the balance sheet
date, and these facilities are committed until at least March 2025.
Further details of the Group's debt facilities are in Note 15 to
the Interim Accounts.
Whilst H1 trading is robust, the Directors are cautious about
the ability for our customers to continue their current level of
spending in our restaurants and pubs whilst the cost-of-living
crisis continues and specifically the unprecedented increases in UK
household energy bills. In preparing the 'base case' forecast for
the period of going concern to 30 September 2023, the Directors
have assumed a lower level of sales growth for the next 12 months
versus 2019, which is also lower than the growth rates achieved in
H1 as reported in our half year results. The 'base case' forecast
is also updated for increased expectations of labour and input
costs inflation as well as the known increase in utilities costs
given the vast majority of the Group's volume is now fixed for 2023
and 2024. In this forecast, available liquidity does not drop below
GBP115m compared to a minimum liquidity covenant of GBP40m, and
Senior Secured Net Leverage does not exceed 2.0x against a covenant
of no more than 4.5x.
In addition, the Board has considered a 'stress case' scenario
where sales levels have been further reduced by 5% across all
divisions, and an additional 2% of food and drink inflation has
been included above the base case. In this 'stress case' scenario,
liquidity falls to a minimum of GBP94m, and Senior Secured Net
Leverage increases to 2.9x but still comfortably within the
covenants of the Group's banking facilities.
The Board have also considered a reverse stress case to
determine the level by which sales would need to fall from the
'base case' on a sustained basis over the next 12 months before
there is any risk of covenant breach in September 2023. Compared to
the 'base case' sales would have to fall by 12% with mitigating
actions taken on both operating and capital expenditure, which are
within the control of the directors, before there is a risk of a
covenant breach. The Board considers that this level of revenue
decline in the reverse stress case is extremely unlikely, given the
strength of business' performance historically and on how our
consumers have reacted in previous recessionary environments.
During the next 12 months if the Group were to experience a
sustained reduction in sales the Group would take broader
mitigating actions to manage any potential risk of a covenant
breach. If it should be required, the directors would proactively
engage with its lending group and are confident that covenant
waivers would be provided as they were in similarly extreme
circumstances during the pandemic. Finally, we have not assumed any
Government intervention in our scenarios although the Board of
Directors has a reasonable expectation that the new Government will
provide significant support for both UK Households and UK Business'
in navigating the near-term challenges presented by both the energy
and cost-of-living crisis.
The Board has a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
period to 30 September 2023, being at least the next twelve months
from the date of approval of the interim accounts. On this basis,
the Directors continue to adopt the going concern basis of
preparation.
Changes in accounting policies
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest annual audited
financial statements.
Other standards, interpretations and amendments issued but not
yet effective are not expected to have a material impact on the
Group financial statements.
2 Restatement of comparatives
Where the Group holds a lease for a site that is no longer
trading, a closed site provision is recognised for the costs to be
incurred until the expected exit date. The Group's policy is that
this should be all unavoidable costs which includes utilities,
service charges and insurance, and has also historically included
business rates. As a result of the additional guidance issued in
relation to IFRIC 21 "Levies" in 2022, the Group has reassessed its
policy in this area and concluded that business rates are a
statutory obligation rather than a contractual obligation. As such
prior period comparatives have been restated to remove business
rates from closed site provisions. The resulting restatements are
disclosed below.
As originally Adjustment As restated
disclosed
GBPm GBPm GBPm
-------------------------------- -------------- ----------- ------------
Balance sheet at 2 January
2022
Current provisions (6.0) 2.8 (3.1)
Non-current provisions (9.3) 6.1 (3.2)
Deferred tax liability (41.9) (1.7) (43.6)
Retained earnings (169.7) 7.3 (162.4)
Balance sheet at 4 July
2021
Current provisions (5.1) 4.0 (1.1)
Non-current provisions (9.9) 8.5 (1.4)
Deferred tax liability (50.3) (2.4) (52.7)
Retained earnings (187.3) 10.1 (177.2)
Income statement for the
53 weeks ended 2 January 2022
Exceptional cost of sales (21.4) (2.3) (23.7)
Taxation (5.5) 0.4 (5.1)
Income statement for the
27 weeks ended 4 July 2021
Exceptional cost of sales (15.8) 1.2 (14.6)
Taxation 2.8 (0.2) 2.6
---------------------------------- -------------- ----------- ------------
3 Segment analysis
Operating segments
IFRS 8 Operating segments requires operating segments to be
based on the Group's internal reporting to its Chief Operating
Decision Maker (CODM). The CODM is regarded as the combined
Executive team of the Chief Executive Officer, and the Chief
Financial Officer.
The Group has four segments:
-- Wagamama
-- Pubs
-- Leisure; and
-- Concessions
The economic characteristics of these businesses, including
Gross Margin, Net Margin, EBITDA and Sales trajectory, have been
reviewed by the Directors along with the non--financial criteria of
IFRS 8. It is the Directors' judgement that all of the segments
meet the requirements for aggregation under IFRS 8.
Geographical segments
The Group trades primarily within the United Kingdom and
generates revenue from the operation of restaurants, with
substantially all revenue generated within the United Kingdom. The
Group generates some revenue from franchise royalties primarily in
Europe and the Middle East. The segmentation between geographical
location does not meet the quantitative thresholds and so has not
been disclosed.
4 Reconciliation to underlying trading profit
The results used by the Directors to monitor and review the
performance of the Group continue to reflect the IAS 17 approach to
accounting and a number of the key metrics used in this report are
prepared on that basis. A reconciliation is provided below of the
key differences between results under IFRS 16 and the basis used
for management reporting.
H1 2022 Exceptional H1 2022
Trading Adjustments H1 2022 Trading items Total H1 2021* Total
IAS 17 for IFRS 16 IFRS 16 (Note 4) IFRS 16 IFRS 16
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue 423.4 - 423.4 - 423.4 216.8
Cost of sales (372.1) 12.5 (359.6) (46.1) (405.7) (228.2)
--------- ------------ ----------------- ------------ ----------- -----------------
Gross profit/(loss) 51.3 12.5 63.8 (46.1) 17.7 (11.4)
Share of results of
associate - - - - - (0.1)
Administration costs (28.4) 0.1 (28.3) (1.6) (29.9) (23.4)
--------- ------------ ----------------- ------------ ----------- -----------------
Operating profit/(loss) 22.9 12.6 35.5 (47.7) (12.2) (34.9)
Interest payable (13.0) (9.0) (22.0) - (22.0) (22.8)
Interest receivable 0.3 0.1 0.4 5.3 5.7 0.1
--------- ------------ ----------------- ------------ ----------- -----------------
Profit/(loss) before tax 10.2 3.7 13.9 (42.4) (28.5) (57.6)
------------------------- --------- ------------ ----------------- ------------ ----------- -----------------
EBITDA 41.7 30.5 72.2 (1.4) 70.8 21.1
Depreciation,
amortisation and
impairment (18.8) (17.9) (36.7) (46.3) (83.0) (55.9)
--------- ------------ ----------------- ------------ ----------- -----------------
Operating profit/(loss) 22.9 12.6 35.5 (47.7) (12.2) (34.8)
------------------------- --------- ------------ ----------------- ------------ ----------- -----------------
The "Adjustments for IFRS 16" summarised above can be seen in
the below reconciliation of trading profit before tax (excluding
exceptional items) from the IAS 17 basis to the IFRS 16 basis of
accounting:
H1 2022 H1 2021*
GBP000 GBP000
Underlying trading profit/(loss) before tax 10.2 (19.8)
Removal of rent expenses 30.5 12.3
Net change in depreciation (17.8) (22.4)
Net change in interest payable (9.0) (9.6)
Interest receivable on net investments in subleases - 0.1
------------------------------------------------------------ -------- ---------
Trading profit/(loss) before tax under IFRS 16 13.9 (39.4)
------------------------------------------------------------ -------- ---------
*Restated refer to Note 2
5 Exceptional items
26 weeks ended 27 weeks ended 53 weeks ended
3 July 2022 4 July 2021 2 Jan 2022
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
---------------
Included within cost of sales:
- Impairment charges relating to trading sites 45.4 1.3 19.6
- Estate closure - 0.3 0.6
- Estate restructuring 0.7 13.0 1.4
------------------------------------------------------------------- --------------- --------------- ---------------
46.1 14.6 21.6
Included within administration costs:
- Business Transformation 1.6 - -
- Professional fees - 1.6 1.6
------------------------------------------------------------------- --------------- --------------- ---------------
1.6 1.6 1.6
Included within interest payable:
- Gain made on derivative financial instruments at fair value (5.3) - -
through income statement
- Refinancing costs - 1.9 1.9
Exceptional items before tax 42.4 18.1 25.1
------------------------------------------------------------------- --------------- --------------- ---------------
Impact of tax rate change - - 12.2
Tax effect of exceptional Items (6.0) 3.5 (2.4)
------------------------------------------------------------------- --------------- --------------- ---------------
(6.0) 3.5 9.8
Net exceptional items for the period: 36.4 21.6 34.9
------------------------------------------------------------------- --------------- --------------- ---------------
Impairment charges
An impairment charge has been recorded against certain assets to
reflect forecast results at our trading sites.
This charge comprises the below adjustments:
-- An impairment of right of use assets of GBP24.4m (Note 12)
-- An impairment of property, plant and equipment of GBP15.4m (Note 12)
-- An impairment of goodwill of GBP6.5m (Note 12)
-- Credit gains of GBP0.9m in net investment assets relating to
sublet properties, to reflect changes in estimated recoverability
of amounts receivable from tenants
Further details on the impairment of non-current assets are
given in Note 12.
Estate restructuring
The Group closed sites in 2020 and 2021 following the impact of
the coronavirus pandemic. As a result of these closures, the Group
has recognised a further non-recurring charge of GBP0.7m which
reflects an adjustment to the estimated costs of exiting the sites
following the restructuring programme. This provision for closed
sites relates to service charge, utilities, insurance and exit
costs. Business rates for closed sites are treated as an
exceptional item and expensed as incurred.
Gain made on derivative financial instruments at fair value
through income statement
The company has paid GBP3.1m for interest rate caps that now
have a market value of GBP8.8m. Of this GBP5.7m gain, GBP0.4m was
recognised in 2021 leaving GBP5.3m in H1 2022. The main reason for
this gain is the increasing interest rates in the year, and future
expectations of SONIA rises over the term of the interest rate
caps.
Business Transformation
An exceptional charge of GBP1.6m has been incurred as a result
of the ongoing transformation activity to deliver synergies across
the group. This cost relates to the implementation of a SAAS common
finance platform following the acquisition of Wagamama and includes
software dual running costs and consultancy costs involved in the
configuration and testing on the new system.
6 Net Interest Payable
26 weeks ended 27 weeks ended 53 weeks ended
3 July 2022 4 July 2021 3 January 2022
(Unaudited) (Unaudited) (Audited)
Bank interest payable 10.8 9.8 22.3
Unwinding of discount on lease liabilities 9.0 9.9 19.6
Amortization of facility fees 2.0 1.2 3.3
Other interest payable 0.2 - 0.5
------------------------------------------------------------ -------------- -------------- --------------
Trading interest payable 22.0 20.9 45.7
Exceptional refinancing costs - 1.9 1.9
------------------------------------------------------------ -------------- -------------- --------------
Interest payable 22.0 22.8 47.6
------------------------------------------------------------ -------------- -------------- --------------
Bank interest receivable (0.1) - -
Interest receivable on loan to joint venture (0.2) - -
Unwinding of discounts on investments in subleases (0.1) (0.1) (0.1)
------------------------------------------------------------ -------------- -------------- --------------
Trading interest receivable (0.4) (0.1) (0.1)
Gain made on derivative financial instruments at fair value
through income statement (5.3) - (0.5)
------------------------------------------------------------ -------------- -------------- --------------
Interest receivable (5.7) (0.1) (0.6)
------------------------------------------------------------ -------------- -------------- --------------
Total net finance charges 16.3 22.7 47.0
============================================================ ============== ============== ==============
7 Tax
The tax net credit of GBP2.4m is composed of a trading current
tax charge of GBP3.3m, as well as a trading deferred tax charge of
GBP0.3m. This is offset by the tax impact on exceptional items,
comprising a current tax credit of GBP3.3m, as well as a deferred
tax credit of GBP2.7m. The effective Corporation tax rate on the
adjusted loss (before exceptional items) is 25.7%. The effective
tax rate is above the corporation tax rate of 19% due principally
to non-deductible share-based incentive costs, and non-qualifying
depreciation and impairment.
8 Earnings per share
26 weeks ended 27 weeks ended 53 weeks ended
3 July 2022 4 July 2021* 3 January 2022*
(Unaudited) (Unaudited) (Audited)
Weighted average ordinary shares for the purposes of basic
earnings per share 764,479,722 702,705,253 722,182,407
Effect of dilution - share options - 448,586 -
Diluted weighted average number of shares 764,479,722 703,153,839 722,182,407
GBPm GBPm GBPm
Profit/(Loss) for the year after tax (26.1) (55.0) (40.3)
Effect of exceptional items on earnings for the year 36.4 21.6 34.9
-------------- -------------- ---------------
Adjusted profit/(loss) for the year after tax 10.3 (33.4) (5.4)
-------------- -------------- ---------------
pence pence pence
Basic profit/(loss) per share for the period (3.4) (7.8) (5.6)
Effect of exceptional items on earnings for the year per share 4.8 3.1 4.8
-------------- -------------- ---------------
Adjusted profit/(loss) per share for the period 1.3 (4.8) (0.7)
-------------- -------------- ---------------
Diluted earnings per share on profit/(loss) for the period (3.4) (7.8) (5.6)
-------------- -------------- ---------------
Diluted earnings per share on adjusted profit/(loss) for the
period 1.3 (4.8) (0.7)
-------------- -------------- ---------------
Diluted earnings per share information is based on adjusting the
weighted average number of shares for the purposes of basic and
diluted earnings per share 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 diluted earnings per share figures allow for the dilutive
effect of the conversion into ordinary shares of the weighted
average number of options outstanding during the year.
*Restated refer to Note 2
9 Intangible assets
Total
GBP'm
Net book value as at 3 Jan 2022 (audited) 599.9
Additions of software 0.9
Disposals of software (1.3)
Amortisation (1.4)
Impairment of intangible assets (Note 12) (6.5)
Net book value as at 3 Jul 2022 (unaudited) 591.6
---------------------------------------------- ------
10 Right-of-use assets and lease liabilities
Movements in the right of use assets during the period are shown
below:
26 weeks ended 27 weeks ended 53 weeks ended
3 July 2022 4 July 2021 3 January 2022
(Unaudited) (Unaudited) (Audited)
GBP'm GBP'm GBP'm
--------------- --------------- ---------------
Brought forward right of use assets 289.4 368.9 368.9
---------------------------------------- --------------- --------------- ---------------
Additions 7.1 12.2 18.4
Disposals - (3.4) (4.6)
Depreciation (17.8) (22.4) (39.9)
Remeasurements 11.6 (40.2) (40.1)
Impairment (Note 12) (24.4) (12.7) (13.3)
Carry forward right of use assets 265.9 302.4 289.4
---------------------------------------- --------------- --------------- ---------------
When indicators of impairment exist, right of use assets may be
assessed for impairment. As described in Note 12, all non-current
assets were assessed at 3rd July 2022.
Movements in lease liabilities during the period are shown
below:
GBP'm GBP'm GBP'm
-------------------------------------------- ------- ------- -------
Brought forward lease liabilities 410.4 483.8 483.8
-------------------------------------------- ------- ------- -------
Additions 7.1 12.2 18.4
Unwinding of discount on lease liabilities 9.0 10.0 19.6
Cash payments made (29.9) (18.0) (48.7)
Liabilities extinguished on disposals (2.3) (6.2) (9.5)
Remeasurements 8.1 (47.0) (53.2)
-------------------------------------------- ------- ------- -------
Carry forward lease liabilities 402.4 434.8 410.4
-------------------------------------------- ------- ------- -------
Analysed as:
Amount due for settlement within one year 61.6 75.4 73.1
Amount due for settlement after one year 340.8 359.4 337.3
-------- ------- --------
Total lease liability 402.4 434.8 410.4
-------- ------- --------
11 Property, Plant and equipment
GBP'm
-------------------------------------------- -------
Net book value at 3 January 2022 (Audited) 285.1
--------------------------------------------- -------
Additions 21.1
Disposals (1.3)
Depreciation (17.5)
Impairment (Note 12) (15.4)
Net book value at 3 July 2022 (Unaudited) 272.0
----------------------------------------------- -------
12 Impairment reviews
Due to the significant inflationary pressures expected to
continue into 2023 and the increasing risk of a recession in the UK
there is a potential impairment of assets and, accordingly, the
Directors have chosen to assess all non-current assets for
impairment in accordance with IAS 36.
Approach and assumptions
Our approach to impairment reviews is unchanged from that
applied in previous periods and relies primarily upon "value in
use" tests, although for freehold sites an independent estimate of
market value by site was obtained as at 9(th) August 2022. Where
this is higher than the value in use, we rely on freehold values in
our impairment reviews.
Discount rates used in the value in use calculations are
estimated with reference to our Group weighted average cost of
capital. For 2022, we have applied the pre-tax discount rate of
11.5% to all assets (2021: 10.6%). The higher discount rate used in
2022, reflects the increasing interest rates in the UK. This is
however partially offset by a change in the financing structure of
the Group to have a relatively greater proportion of lease
liabilities which are discounted at a lower rate than debt and
equity.
For the current period, value in use estimates have been
prepared on the basis of the forecast described above in Note 1
under the heading "Going concern basis". The most significant
assumptions and estimates relate to revenue recovery forecast on
site-by-site cash flows.
Results of impairment review
Impairment has been recorded in a number of specific CGUs, as
well as impairment reversals. A net impairment charge of GBP39.8m
(2021: GBP25.9m) has been recognised, of which GBP15.4m was
recorded against Property, Plant & Equipment ("PPE") and a
further GBP24.4m against Right of Use Assets. This is a gross
impairment charge of GBP45.2m offset by impairment reversals of
GBP5.4m. A further charge of GBP6.5m was recorded as impairment to
the Goodwill of Pubs acquired through Blubeckers Limited and Ribble
Valley Inns Limited.
Sensitivity to further impairment charges
The key assumptions used in the recoverable amount estimates are
the discount rates applied and the forecast cash flows. 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 as well as discount rates
used.
The sensitivity analysis of forecast cash flows with a 5%
reduction in sales would give rise to an additional Group
impairment of approximately GBP49.5m across PPE and Right of Use
Assets, made up of an increase in impairment of GBP48.3m and a
reduction in impairment reversals of GBP1.2m. Furthermore, this
reduction in sales would also give rise to impairment of the
Goodwill in Wagamama and Brunning & Price Limited of GBP77.9m
and GBP51.5m respectively and additional impairment of Goodwill in
Blubeckers Limited of GBP18.6m.
An increase in the inflation rate compared to the forecasted
cash flows of 2% would give rise to additional impairment of
approximately GBP25.4m, made up of an increase in the impairment
expense of GBP24.7m and a reduction in the impairment reversals of
GBP0.7m. Furthermore, this increase in inflation would also give
rise to impairment of the Goodwill in Brunning & Price Limited
of GBP20.2m and additional impairment of Goodwill in Blubeckers
Limited of GBP10.2m.
An increase in discount rate of 1% would give rise to additional
impairment of approximately GBP2.9m, made up of an increase in the
impairment expense of GBP2.7m and a reduction in the impairment
reversals of GBP0.2m. Furthermore, this increase in discount rate
would also give rise to impairment of the Goodwill in Brunning
& Price Limited of GBP0.2m and additional impairment of
Goodwill in Blubeckers Limited of GBP3.4m.
13 Share capital
Share capital at 3 July 2022 amounted to GBP215.2m (2021:
GBP215.2m). The number of shares authorised, used and fully paid
was 765,062,398 (2021: 765,036,713). The shares have a par value of
28.125p (2021: 28.125p).
14 Reconciliation of profit before tax to cash generated from
operations
26 weeks ended 27 weeks ended 53 weeks ended
3 July 2022 4 July 2021 2 January 2022
(Unaudited) (Unaudited) (Audited)
GBP'm GBP'm GBP'm
========================================= =============== =============== ===============
Loss on ordinary activities before tax* (28.5) (57.6) (35.2)
Net interest charges 16.3 20.8 45.1
Exceptional items (Note 5)* 47.6 18.1 27.4
Share of loss of associate - 0.1 0.3
Share-based payments 1.4 1.5 3.4
Depreciation and amortisation 36.7 42.2 78.1
Decrease/(increase) in inventory (0.8) - (0.9)
Decrease/(increase) in receivables (6.9) 8.4 5.1
(Decrease)/increase in creditors 18.8 (4.7) 4.8
Cash generated from operations 84.7 28.8 128.1
----------------------------------------- --------------- --------------- ---------------
Reconciliation of net cash from operating activities to free
cash flow
26 weeks ended 27 weeks ended 53 weeks ended
3 July 2022 4 July 2021 3 January 2022
(Unaudited) (Unaudited) (Audited)
Net cash flows from operating activities 67.5 6.4 91.6
Payment on exceptional items 3.1 7.8 7.4
Payment of obligations under leases (29.9) (17.9) (48.7)
Refurbishment and maintenance expenditure (15.6) (6.7) (19.0)
Payment against onerous lease provision (pre-IFRS 16) 3.9 3.6 13.4
------------------------------------------------------ -------------- -------------- --------------
Free cash flow 29.0 (6.8) 44.7
====================================================== ============== ============== ==============
15 Long-term borrowings
At 3 July 2022 As at 4 July 2021 At 2 January 2022
(Unaudited) (Unaudited) (Audited)
Available Total Available Total Available Total
Drawn facility facility Drawn facility facility Drawn facility facility
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Term loan 240.9 - 240.9 330.0 - 330.0 330.0 - 330.0
Revolving
credit
facilities - 111.6 120.0 - 111.6 120.0 - 111.6 120.0
------ ----------- -----------
Total
banking
facilities 240.9 111.6 360.9 330.0 450.0 330.0 450.0
------------- ------ ----------- ----------- ------- ----------- ----------- ------- ----------- ------------
Unamortised
loan fees (9.9) (14.0) (11.9)
------------- ------ ----------- ----------- ------- ----------- ----------- ------- ----------- ------------
Long-term
borrowings 231.0 316.0 318.1
------------- ------ ----------- ----------- ------- ----------- ----------- ------- ----------- ------------
Cash and
cash
equivalents 72.6 72.6 115.8 115.8 146.5 146.5
------------- ------ ----------- ----------- ------- ----------- ----------- ------- -----------
Pre-lease
liability
net debt 158.4 200.2 171.6
------------- ------ ----------- ----------- ------- -------
Lease
liabilities 402.4 434.8 410.4
------------- ------ ----------- ----------- ------- -------
Net debt 560.8 635.0 582.0
------------- ------ ----------- ----------- ------- ----------- ----------- ------- ----------- ------------
Cash
headroom 184.2 227.4 258.1
------------- ------ ----------- ----------- ------- ----------- ----------- ------- ----------- ------------
The Group made total principal repayments of GBP89.1m against
the term loan in the 26 weeks to 3 July 2022.
The Group has covenants over both the term loan and the
revolving credit facilities (RCF). Until 31 December 2022, both
facilities require a minimum liquidity level of GBP40m which is
measured as the total of cash and undrawn facilities. On the term
loan, from 31 December 2022, the covenant requires total net debt
to be no more than 5.0x EBITDA, reducing to 4.5x at June 2023 and
4.0x at December 2023 and thereafter.
On the RCF, the Group is required to maintain total net debt to
EBITDA below 5.5x at 31 December 2022, and 4.75x at 30 June 2023
and 4.25x at December 2023 and thereafter. In addition, the ratio
of RCF debt to EBITDA can be no more than 1.5x from June 2022, when
the RCF is drawn.
The available revolving credit facilities are reduced from the
total facility by GBP8.4m of letters of credit issued to external
suppliers.
16 Subsequent Events
On 12 July 2022, The Restaurant Group completed the acquisition
of the entire share capital of Barburrito Group Limited for a
consideration of GBP7m, on a cash free basis. This adds sixteen
Mexican style fast-casual sites to the Group's estate in
high-footfall locations across a range of formats
Glossary
Measure Closest GAAP Measure Reconciliation Description
Adjusted diluted EPS Diluted EPS Note 8 Calculated by taking the
profit after tax of the
business pre-exceptional
items divided by
the weighted average number
of shares in issue during
the year, including the
effect of dilutive
potential ordinary shares.
---------------------------- ---------------------------- ----------------------------
Adjusted EBITDA Operating Profit Income Statement Earnings before interest,
tax, depreciation,
amortisation and
exceptional items.
Calculated
by taking the Trading
business operating profit
and adding back
depreciation and
amortisation.
---------------------------- ---------------------------- ----------------------------
Adjusted EPS EPS Note 8 Calculated by taking the
profit after tax of the
business pre-exceptional
items divided by
the weighted average number
of shares in issue during
the year.
---------------------------- ---------------------------- ----------------------------
Adjusted operating profit Operating Profit Income Statement & Note 4 Operating profit prior to
for IAS 17 basis the impact of Exceptional
items.
---------------------------- ---------------------------- ----------------------------
Adjusted operating margin N/A Income Statement & Note 4 Calculated as the Operating
for IAS 17 basis profit as a percentage of
Revenue. For the 'Adjusted'
basis this
is using the profit and
revenue prior to
Exceptional items
---------------------------- ---------------------------- ----------------------------
Adjusted profit before tax Profit before tax Income Statement & Note 4 Calculated by taking the
for IAS 17 basis profit before tax of the
business pre-Exceptional
items.
---------------------------- ---------------------------- ----------------------------
Adjusted tax charge Tax on profit from ordinary Income Statement Calculated by taking the
activities tax of the business
pre-Exceptional items.
---------------------------- ---------------------------- ----------------------------
Effective adjusted tax rate N/A Note 7 & Financial Review Calculated as the tax
expense as a percentage of
profit before tax. For the
'Adjusted' basis
this is using the tax and
profit prior to Exceptional
items.
---------------------------- ---------------------------- ----------------------------
Cash headroom Cash & Cash equivalents Note 15 Calculated as the funds
available to the business
through either its Cash &
cash equivalents
balance or through undrawn
facilities, less letters of
credit.
---------------------------- ---------------------------- ----------------------------
Capital expenditure Net cash flow from N/A This is calculated as the
investing activities total of Development
capital expenditure and
Refurbishment and
maintenance
expenditure and is the cash
outflow associated with the
acquisition of Property,
plant and
equipment, intangibles and
investments in the US joint
venture.
---------------------------- ---------------------------- ----------------------------
Development capital Net cash flow from N/A This is the Capital
expenditure investing activities expenditure relating to
profit-generating projects
upon which we expect
a commercial return in
future years.
---------------------------- ---------------------------- ----------------------------
EBITDA Operating profit Income Statement & Note 4 Earnings before interest,
for IAS 17 basis tax, depreciation,
amortisation and
impairment.
---------------------------- ---------------------------- ----------------------------
Exceptional items N/A Income Statement and Note 5 Those items that are
material, and not related
to the underlying trade of
the business.
---------------------------- ---------------------------- ----------------------------
Free cash flow Net cash flow from Financial Review Adjusted EBITDA (IAS17
operating activities basis) less working capital
and non-cash adjustments
(excluding exceptional
items), tax payments,
interest payments and
Refurbishment and
maintenance expenditure.
---------------------------- ---------------------------- ----------------------------
Like-for-like sales N/A N/A This measure provides an
indicator of the underlying
performance of our existing
restaurants.
There is no accounting
standard or consistent
definition of
'like-for-like sales'
across the
industry. Group
like-for-like sales are
calculated by comparing the
performance of all mature
(traded for at least 65
weeks) sites in the current
period versus the
comparable period in
the prior year. Sites that
are closed, disposed or
disrupted during a
financial year are excluded
from the like-for-like
sales calculation.
---------------------------- ---------------------------- ----------------------------
Minimum liquidity N/A N/A The minimum liquidity is a
financial covenant required
under the terms of our
loans to have
a minimum of both available
undrawn facilities plus
Cash and cash equivalents
of at least
GBP40 million.
---------------------------- ---------------------------- ----------------------------
Net debt Long-term borrowings Financial Review Net debt is calculated as
the net of all borrowings
less cash and cash
equivalents, plus the
IFRS 16 Lease liabilities.
---------------------------- ---------------------------- ----------------------------
Pre-lease liability net Long-term borrowings Financial Review As above Net Debt but
debt excluding the IFRS 16 Lease
liabilities.
---------------------------- ---------------------------- ----------------------------
Refurbishment and Net cash flow from Financial Review This is the Capital
maintenance expenditure investing activities expenditure relating to
projects to maintain and
refurbish our estate.
No incremental financial
return is expected on this
expenditure.
---------------------------- ---------------------------- ----------------------------
Return on Invested Capital N/A N/A Outlet EBITDA (pre-IFRS 16
(ROIC) and exceptional
charges)/initial capital
invested.
---------------------------- ---------------------------- ----------------------------
Trading business N/A N/A Represents the performance
of the business before
exceptional items.
---------------------------- ---------------------------- ----------------------------
TSR N/A N/A Total Shareholder Return
over a period. Total
shareholder return (TSR) is
calculated as the
overall appreciation in the
share price, plus any
dividends paid, during a
period of time;
this is then divided by the
initial purchase price of
the stock to arrive at the
TSR.
---------------------------- ---------------------------- ----------------------------
Shareholder information
Directors Registrar
Ken Hanna Equiniti Limited
Non-executive Chairman Aspect House
Spencer Road
Andy Hornby Lancing
Chief Executive Officer West Sussex BN99 6DA
Kirk Davis Auditor
Chief Financial Officer Ernst & Young LLP
1 More London Place
Graham Clemett London SE1 2AF
Senior Independent non-executive
Director
Solicitors
Alison Digges Slaughter and May
Independent non-executive Director One Bunhill Row
London EC1Y 8YY
Alex Gersh
Independent non-executive Director Goodman Derrick LLP
10 St Bride Street
Zoe Morgan London EC4A 4AD
Independent non-executive Director
Brokers
Citigroup Global Markets
Loraine Woodhouse Limited
Independent non-executive Director Citigroup Centre
33 Canada Square
Company Secretary London E14 5LB
Andrew Eames
Investec Bank plc
Head office 30 Gresham Street
(and address for all correspondence) London EC2V 7QP
5-7 Marshalsea Road
London SE1 1EP
Telephone number
020 3117 5001
Company number
SC030343
Registered office
1 George Square
Glasgow G2 1AL
[1] Barburrito was acquired on the 12(th) of July 2022
[2] This relates to own billed and managed sites and excludes
landlord billed sites at shopping centres and airport concession
sites
[3] Includes electricity, gas & LPG. Where we control the
specific supply point for contracting. Excludes landlord
supplies
[4] Pre-IFRS 16 and exceptional charges
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END
IR BDLLBLKLEBBQ
(END) Dow Jones Newswires
September 08, 2022 02:01 ET (06:01 GMT)
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