RNS Number : 6090F
Fulham Shore PLC (The)
16 July 2019
The Fulham Shore plc
("Fulham Shore", the "Company" or "Group")
Final Results
The Directors of Fulham Shore are pleased to announce the Company's audited results for the year ended 31 March 2019.
Highlights - Year ended 31 March 2019
• Revenue growth of 17% to £64.0m (2018: £54.7m) driven primarily by good trading in the Company's existing restaurant estate
• Headline EBITDA* of £7.8m (2018: £7.4m)
• EBITDA* of £7.1m (2018: £5.5m)
• Headline Operating Profit of £3.5m (2018: £3.7m)
• Impairment charge on property, plant and equipment of £0.2m (2018: £0.9m)
• Operating Profit of £1.8m (2018: £0.1m)
• Profit before tax of £1.4m (2018: loss of £0.1m)
• Profit after tax of £0.7m (2018: loss of £0.2m)
• Reduced net debt as at 31 March 2019 of £9.4m (2018: £12.0m)
• 4 new Franco Manca pizzeria were opened and 1 closed during the year ended 31 March 2019 in the UK (2018: 9 Franco Manca pizzeria and 4 The Real Greek)
• Since the year end:
o 3 further Franco Manca pizzeria opened in Greenwich, Birmingham and Exeter
o 2 further Franco Manca pizzeria being built in Leeds and Edinburgh
The above numbers are for continuing operations.
* as defined in the Financial Review
For further information, please contact:
The Fulham Shore PLC
www.fulhamshore.com
David Page / Nick Wong
Tel: 020 3026 8129
Allenby Capital Limited Nick Naylor / Jeremy Porter / James Reeve
Tel: 020 3328 5656
Hudson Sandler - Financial PR Alex Brennan / Lucy Wollam
.
CHAIRMAN'S STATEMENT
Introduction
During the year ended 31 March 2019, Fulham Shore achieved a 17% increase in revenue to £64.0m (2018: £54.7m), an increase in Headline EBITDA to £7.8m (2018: £7.4m) and a profit before taxation from continuing operations of £1.4m (2018: loss of £0.1m).
These increases in revenue and Headline EBITDA, together with the improved PBT performance by the Group, were achieved against a backdrop of political uncertainty impacting consumer sentiment and the well-publicised issues being faced by other UK restaurant businesses.
Both The Real Greek and Franco Manca traded well over the year and we are pleased to report that the number of customers visiting our existing restaurants increased during the year.
Market overview
Much of the capital invested in the UK restaurant sector over the past five years has not been spent wisely. However, a number of restaurant businesses have succeeded and expanded over this period, The Real Greek and Franco Manca amongst them.
Successful restaurant businesses continue to be those that offer consistent, delicious and reasonably priced food made with quality ingredients. These businesses are likely to be operating from a well-chosen modern estate, avoiding the demise of the old prime high street and instead favouring restored markets, destination locations and unpretentious interiors.
As long as successful restaurant operators keep their menu pricing right and their financial structure stable, they will continue to succeed where some larger operators have failed. There are many disrupters in the casual dining market that are competing well with the incumbents.
A good restaurant can still open in a difficult, secondary or 'brave' tertiary location if the offer is good enough and time is invested. Not only will the public find it but other restaurant operators will follow it and the location can grow organically into a popular destination.
This is the natural evolution of a new area of restaurant excellence in a town, as opposed to an engineered environment created by a planner or a developer which sometimes misses the mark.
Rising costs, such as goods purchased following the fall in the value of the pound, rent and labour will present issues if sales cannot mitigate these increases. If sales are a problem because of a lack of demand for a restaurant operator's menu, or there is a resistance to the restaurant's pricing policy, then that operator is in trouble.
Against the background of the capital lavished on the UK restaurant sector over the last five years, we at Fulham Shore have improved Headline EBITDA in every reporting period since our admission to AIM in 2014.
We are pleased to report the demand for both of our businesses continues to grow. We will continue to open new restaurants in carefully chosen locations, conscious of the property pitfalls that others have fallen into.
Strategic vision and progress
Whilst the four new pizzeria we opened during the year contributed to our reported revenue increase, the Group's growth was primarily driven by improved trading and increased customer numbers within our existing restaurant estate.
With this sound platform of continued sales growth and increasing customer numbers, the Board has taken the decision to increase the Group's restaurant opening programme with a target of between eight and ten new restaurants in the financial year to March 2020. Each of these new sites will be as compact as possible, with appropriate rent levels for its location.
Our mission to create delicious food at reasonable prices has been supported throughout the year by continued menu innovation delivered through the hard work and dedication of both The Real Greek and Franco Manca operating teams, who are constantly focussed on improving their menus whilst keeping prices affordable. During the period we introduced highly popular new menu items including the seasonal pizza number 7 in Franco Manca and the vegan menu in The Real Greek.
We aim to attract and retain the best and most committed staff in our industry and to offer them long and rewarding careers. We have invested in our people ahead of our expansion plans and we pay the government's National Living Wage to all our staff, including those under the age of 25.
We do not interfere in any way with the tips our team members may receive from customers and many of our staff are shareholders in Fulham Shore.
Franco Manca
As we predicted, the sales erosion in our London suburban branches that had been caused by opening new Franco Manca pizzeria in close proximity has reduced.
During the year we opened four new Franco Manca pizzeria, in the cities of Bath and Cambridge and in London, off the Aldwych and opposite St Paul's Cathedral. All of these new restaurants have started brightly. The two new openings in London had a negligible effect on our existing restaurants nearby.
We now have 36 Central London Franco Manca locations. We have queues at peak times in many of our Central London pizzeria and in other major cities where we are located around the UK, reflecting the popularity of our sourdough pizza. As a result, this year, we will continue to search for new sites both within London and throughout the UK.
We continue to serve made to order sourdough pizza with dough freshly made every day at each location.
The Real Greek
The Real Greek is an established business that has been trading for 20 years. During that time, it has evolved to be the successful and popular business that it is today. The average The Real Greek restaurant serves more than 2,000 customers a week.
It is very popular with families, office lunches and evening candle-lit dinners. The vegan and vegetarian menu innovations which we launched in Spring 2018 have proved extremely popular. The Real Greek has continued to perform well especially with the good weather through the summer of 2018. We plan to open further restaurants in the new financial year.
Property
Landlords are facing falling retail and restaurant demand for their sites, due in part to the continued move to internet shopping, the contraction of some large restaurant chains, and the challenging economic backdrop over the past three years.
Many of these landlords and their commercial agents continue to suggest we are at the bottom of the cycle. However, we believe there is a way to go. Consequently, we feel the longer we wait for properties the better value we can achieve.
Holding out for lower rents feeds through to continued low prices on our menus, which is excellent for our customers. We have sometimes seen as much as a 30% fall in rent where an existing tenant ceases trading and the landlord re-lets the property. We believe this decline will continue. This has happened only once before in my 46 years of restaurant and property experience - during the 1989-93 UK recession.
I believe we are due for a longer period of rental decline this time around. Commercial agents, who have historically been aligned with institutional landlords' interests, should realise the boot is now firmly on the other foot. These agents should start to truly represent successful tenants' interests as that is where the power and their interest now lies.
Dividend policy
In parallel with our expansion programme, and subject to sufficient cash generation within the business, we will consider a dividend policy over the current financial year, reflecting the Board's continued confidence in the outlook for Fulham Shore. No dividend is being proposed for the year ended 31 March 2019.
Current trading and outlook
The current financial year to March 2020 has started well in both Franco Manca and The Real Greek.
Since the year end, we have opened three new Franco Manca: in Greenwich in South East London, Birmingham and Exeter, bringing our restaurant numbers to 47 Franco Manca and 16 The Real Greek. We are currently building new Franco Manca in Leeds and Edinburgh, have committed to a further Franco Manca in Manchester and are in final stages of negotiation on two new The Real Greek sites. This takes us well on the way to our target of eight to ten new restaurants by the end of the financial year, which would result in a group total of more than 68 restaurants by March 2020.
The opening of our Greenwich Franco Manca in April 2019 was one of our busiest yet, serving more than 3,000 customers a week in its opening weeks. Franco Manca also took £1m net revenue in a week for the first time in early July 2019.
Both our businesses are building customer numbers and they both continue to have significant growth potential. We are confident that the Group will perform well this year and we look forward to further financial and operational progress.
DM Page
Chairman
15 July 2019
FINANCIAL REVIEW
Fulham Shore's performance in the year ended 31 March 2019 is summarised in the table below:
Year ended 31 March 2019
Year ended 25 March 2018
Change
For continuing operations
£m
£m
%
Revenue
64.0
54.7
+17.0%
Headline EBITDA*
7.8
7.4
+5.2%
Headline operating profit
3.5
3.7
-5.9%
Headline profit before tax
3.1
3.5
-10.6%
EBITDA
7.1
5.5
+27.3%
Operating profit
1.8
0.1
1135%
Profit/(loss) before taxation
1.4
(0.1)
Profit/(loss) for the year
0.7
(0.2)
Basic earnings per share
0.1p
(0.1p)
Diluted earnings per share
0.1p
(0.0p)
Headline basic earnings per share
0.4p
0.6p
Headline diluted earnings per share
0.4p
0.6p
-24.5%
Cash flow from operating activities
6.1
4.5
+35.6%
Development capital expenditure
3.5
10.0
-65.6%
Net Debt
9.4
12.0
-21.6%
Number of restaurants operated in the UK
No.
No.
Franco Manca
44
41
+7.3%
The Real Greek
16
16
+0.0%
60
57
+5.3%
* Reconciliation of profit before taxation to Headline EBITDA for continuing operations:
Year ended 31 March 2019
Year ended 25 March 2018
£m
£m
Profit/(loss) before taxation
1.4
(0.1)
Finance costs
0.3
0.2
Depreciation and amortisation
4.3
3.7
Amortisation of brand
0.8
0.8
Exceptional costs - impairment of investments
0.1
-
Exceptional costs - impairment of property, plant and equipment
0.2
0.9
EBITDA
7.1
5.5
Share based payments
0.1
0.6
Pre-opening costs
0.4
1.2
Exceptional costs - loss on disposal
0.2
0.1
Headline EBITDA
7.8
7.4
This year ended 31 March 2019 comprised of 53 full weeks of trading compared to the previous financial year ended 25 March 2018, which comprised 52 full weeks of trading.
Total Group revenue from continuing operations grew, for the year ended 31 March 2019, by 17.0%. This was driven by full year revenues from restaurants opened in the previous year, new openings during the year, and improved trading for many existing restaurants. During the year, we opened four new Franco Manca pizzeria in the UK and closed our Franco Manca Brighton Marina restaurant which was handed back to the landlord during the year. This takes the total restaurants operated by the Group in the UK to 60 (2018: 57) at year end. During the year, our franchisee in Italy again opened the Franco Manca pizzeria on the island of Salina to trade through the busy summer season.
Summer of 2018 was much stronger than the previous summer especially with a significant number of days benefiting from warm weather and sunshine. Some of our pre-2017 restaurants, particularly in the London suburbs, that experienced tougher trading the year before, have seen improvements and have benefited from no cannibalisation from our new restaurants in nearby locations.
Group Headline EBITDA (as reconciled above) from continuing operations continues to be a key measure for the Group as well as industry analysts as it is indicative of ongoing EBITDA of the businesses. Headline EBITDA from continuing operations for the year was £7.8m (2018: £7.4m), an increase of 5.2% on the prior year while the Group's EBITDA increased 27.3% to £7.1m (2018: £5.5m). During the year, with fewer openings, the management teams of each of our two businesses focussed on a number of projects that contributed towards the improved trading in the businesses.
Group depreciation and amortisation, excluding amortisation of the Franco Manca brand, increased 16.4% to £4.3m (2018: £3.7m) following the number of new restaurants opened during the year and the previous year. The Group incurred one off costs in the year of £0.2m (2018: £0.9m) from impairment charges for 3 restaurants (2018: 3) which are underperforming management's expectations. All three restaurants continue to trade. Together with the improved EBITDA, these have led to an increase of operating profit by 1135% to £1.8m (2018: £0.1m).
With our new openings, we have invested £0.4m (2018: £1.2m) in pre-opening costs. Finance costs have increased 28.7% to £0.3m as the Group had higher drawn down balances on its revolving credit facilities brought forward at the beginning of the financial year. As net debt levels reduce, the finance costs should stabilise. Overall this has resulted in a profit before taxation of £1.4m (2018: £0.1m loss before tax).
The Group's tax rate has increased to 46.5% (2018: 36.4% of loss before tax) of profit before tax due to a number of factors including the increase of £0.1m in the deferred tax charge on share based payments. The Group's profit after tax from continuing and discontinued operations was £0.7m (2018: £0.6m loss after tax).
Our basic and diluted earnings per share from continuing operations increased from 0.0p to 0.1p while Headline diluted earnings per share reduced by 24.5% to 0.4p, mainly as a result of increased depreciation from new shorter leases or concessions during the year.
Cost inflation
During the year, weakness of Sterling against both the Euro and the US Dollar from uncertainty over Brexit has continued to put pressure on food cost inflation. Where possible, we have benefited from additional volume discounts due to our opening programme and changes in suppliers which have helped to mitigate some of the cost pressures.
We also saw 4.4% (2018: 4.2%) increase in the Government's National Living Wage at the beginning of the financial year for employees over 25 years old. Both of our businesses have chosen to treat all staff members the same irrespective of age and have therefore paid at least the National Living Wage to all employees.
Our other two material cost items are rent and utility costs. Rental inflation of our estate continues to increase modestly. Utility cost inflation continues to be volatile as the wholesale cost of energy has been impacted by the movement of Sterling and global economic adjustments.
Cash flows and balance sheets
The Group's cash flow from operating activities has increased 35.6% to £6.1m (2018: £4.5m) as the benefit from improved cash generation from restaurants and better cash management flowed through. This was also after an additional £0.2m (2018: £Nil) in operating cash flow being applied to increased stock holding at year end as part of risk mitigation planning for Brexit.
We invested £3.5m (2018: £10.0m) in development capital primarily in new restaurants but also including investment in IT systems to introduce advanced customer relationship management facilities to both businesses. The Group will continue to invest in technology in the new financial year to bring further efficiencies in operations and further improved customer experiences, including the launch of a new loyalty programme for Franco Manca in the autumn of 2019.
Resultant net debt from our activities at 31 March 2019 was £9.4m (2018: £12.0m). This is financed by our facilities with HSBC Bank PLC, made up of a £14.25m revolving credit facility and a £0.75m overdraft.
At the beginning of the financial year, the Group reduced its opening programme to take account of market uncertainty. As a result, the Group funded its openings largely through existing operational cash flow. The excess operational cash flow has reduced the Group's net debt during the year. It is the Group's intention, in the new financial year, to ensure its openings continue to be largely funded through operational cash flow.
People
During the year, the Group's key operations were within the UK. With our opening programme, the Group continued to create more new jobs in its new restaurants. We continue to invest in our staff through training, incentives and personal development as well as investing in a stronger people and human resource team.
Post balance sheet event
On 15 July 2019, the Company entered into a conditional sale and purchase agreement for the purchase of the approximately 1% minority interests in its two subsidiaries: Kefi Limited ("Kefi"), which owns the subsidiary that owns and operates The Real Greek; and Franco Manca Holdings Limited (formerly Rocca Limited) ("FM Holdings"), which owns the subsidiary that owns and operates Franco Manca, for a maximum total consideration of up to £650,658, payable in cash. The purchase of the minority interests is subject to the approval of shareholders at the Company's 2019 annual general meeting. Further details are contained in the Company's announcement dated 16 July 2019.
Accounting standards update
The Group will be required to adopt IFRS16, a new lease accounting standard, for the year ending 29 March 2020. The new standard will have no material economic impact on the business and will not change the way the business is run. It will, however, have a significant impact on the presentation of the financial statements including reported Headline EBITDA, reported profit before and after taxation, balance sheet treatment of leasehold obligations and cash flow from operating activities as well as from financing activities. As at 1 April 2019, the initial application date, fixed assets representing right in use relating leasehold obligations will increase by approximately £71.2m while liabilities representing the discounted value of future committed lease payments will increase by £70.3m. Further details of expected changes can be found in the Accounting Policies.
Principal risks and uncertainties
The Directors consider the following to be the principal risks faced by the Group:
Economic conditions
The Group's performance depends to a large degree on economic conditions and consumer confidence in the UK. Over recent months, the UK economy has seen reducing levels of unemployment but weaker consumer spending. However, there continue to be rapid changes to the UK economy, with the result of the EU Referendum creating considerable political and economic uncertainty. The Group's existing restaurants offer an exceptional customer value experience which the Directors believe positions the business well in dealing with continued volatility in the UK economy.
Development programme
The Group's development programme is dependent on securing the requisite number of new properties at sensible rents. The UK restaurant property market remaining competitive at the right locations and rents. To mitigate these issues, the Group has an experienced property team concentrating on securing new sites for the Group.
Supply chain
The Group focuses on the freshness and quality of the produce used in its restaurants. It is exposed to potential supply chain disruptions due to the delay or losses of inventory in transit. The Group seeks to mitigate this risk through effective supplier selection and an appropriate back-up supply chain. To help mitigate potential delays as a result of Brexit, the Group is building up stock, where possible, to allow for longer transit times.
Employees
The Group's performance depends largely on its management team and its restaurant teams. The inability to recruit people with the right experience and skills could adversely affect the Group's results. The result of the EU Referendum has created considerable uncertainty over the immigration status of EU nationals. To mitigate these issues the Group has invested in its human resources team and has implemented a number of incentive schemes designed to retain key individuals.
Brexit
Brexit may have an adverse impact on the wider economic environment in the UK and across the EU, resulting in weaker consumer spending in the travel food and beverage markets. The potential further depreciation of Sterling could lead to cost inflation pressures, particularly in the food commodity markets. Any interruption to cross border trading with the EU could lead to delays in deliveries of some raw ingredients. Potential restrictions on mobility of EU nationals post-Brexit may limit the availability of labour resource in the UK. These risks are discussed separately above.
Competition
The Group operates in a competitive and fragmented market which regularly sees new concepts come to the market. However, the Directors believe that the strength of the Group's existing restaurant brands, value offer and constant strive towards delivering the best product and service will help the business to mitigate competitive risk.
Landlords
The Group operates four restaurants within the Debenhams estate. The existing restaurants may be at risk from any possible future structural changes in Debenhams, including financial restructures. The Directors have therefore not committed the Group to further restaurants with Debenhams in the short term and to mitigate the risk, in part, have ensured that the four restaurants have separate street entrances.
Cyber security
The Group has been operating an online "click and collect" service and various customer relationship management tools which rely on online systems that may experience cyber security failure leading to loss of revenue or reputation loss. The Group utilises robust supplier selection processes and third party reviews and testing on a regular basis to identify weaknesses and improve on existing protection and processes.
Regulatory compliance
The Group is growing quickly and the government is increasing the number of areas requiring additional regulatory compliance including GDPR. This may increase the Group's expenditure to ensure compliance and the Group may experience a failure to comply thus leading to significant fines. The Group reviews regulatory changes on a regular basis.
Risks are formally reviewed by the Board and appropriate processes are put in place to monitor and mitigate them.
Financial risk management
The Board regularly reviews the financial requirements of the Group and the risks associated therewith. The Group does not use complicated financial instruments, and where financial instruments are used it is for reducing interest rate risk. The Group does not trade in financial instruments. Group operations are primarily financed from equity funds raised, bank borrowings and retained earnings. In addition to the financial instruments described above, the Group also has other financial instruments such as receivables, trade payables and accruals that arise directly from the Group's operations. Further information is provided in note 15 to the financial statements.
Key performance indicators
The Board receives a range of management information delivered in a timely fashion. The principal measures of progress, both financial and non-financial, that are reviewed on a regular basis to monitor the development of the Company and the Group are shown in the table at the beginning of this section.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2019
Year ended 31 March 2019
Year ended 25 March 2018
Notes
£'000
£'000
Revenue
1
63,985
54,695
Cost of sales
(38,237)
(32,039)
Gross profit
25,748
22,656
Administrative expenses
(22,253)
(18,940)
Headline operating profit
3,495
3,716
Share based payments
18
(138)
(616)
Pre-opening costs
2
(386)
(1,209)
Amortisation of brand
7
(821)
(821)
Exceptional costs - impairment of property, plant and equipment
(130)
(867)
Exceptional costs - impairment of investment
(80)
-
Exceptional costs - loss on disposal of property, plant and equipment
(187)
(61)
Operating profit
2
1,753
142
Finance income
8
2
Finance costs
4
(327)
(254)
Profit/(loss) before taxation
1,434
(110)
Income tax expense - current year
5
(714)
(258)
Income tax expense - prior year
-
218
Profit/(loss) for the year from continuing operations
720
(150)
Loss for the year from discontinued operations
24
-
(415)
Profit/(loss) for the year
720
(565)
Profit/(loss) for the year attributable to:
Owners of the company
698
(576)
Non-controlling interests
22
11
720
(565)
Earnings per share
Continuing and discontinued operations
Basic
6
0.1p
(0.1p)
Diluted
6
0.1p
(0.1p)
Continuing operations
Basic
6
0.1p
(0.0p)
Diluted
6
0.1p
(0.0p)
Headline Basic
6
0.4p
0.6p
Headline Diluted
6
0.4p
0.6p
CONSOLIDATED AND COMPANY BALANCE SHEETS
31 March 2019
Group
Parent company
Notes
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Non-current assets
Intangible assets
7
25,767
26,550
-
-
Property, plant and equipment
8
30,806
31,768
173
203
Investments
9
201
281
43,563
43,439
Trade and other receivables
11
1,020
943
11,863
11,724
Deferred tax assets
16
301
193
287
185
58,095
59,735
55,886
55,551
Current assets
Inventories
10
1,764
1,490
-
-
Trade and other receivables
11
3,597
3,325
118
135
Cash and cash equivalents
12
1,835
359
22
7
Assets classified as held for sale
23
-
329
-
-
7,196
5,503
140
142
Total assets
65,291
65,238
56,026
55,693
Current liabilities
Trade and other payables
13
(11,881)
(11,521)
(1,312)
(888)
Income tax payable
(93)
(486)
-
-
(11,974)
(12,007)
(1,312)
(888)
Net current liabilities
(4,778)
(6,504)
(1,172)
(746)
Non-current liabilities
Trade and other payables
13
(1,601)
(1,470)
-
-
Borrowings
14
(11,240)
(12,350)
(13,721)
(13,325)
Deferred tax liabilities
16
(1,733)
(1,779)
-
-
(14,574)
(15,599)
(13,721)
(13,325)
Total liabilities
(26,548)
(27,606)
(15,033)
(14,213)
Net assets
38,743
37,632
40,993
41,480
Equity
Share capital
17
5,714
5,714
5,714
5,714
Share premium
6,889
6,889
6,889
6,889
Merger relief reserve
30,459
30,459
30,459
30,459
Reverse acquisition reserve
(9,469)
(9,469)
-
-
Retained earnings
5,025
3,936
(2,069)
(1,582)
Equity attributable to owners of the company
38,618
37,529
40,993
41,480
Non-controlling interest
125
103
-
-
Total Equity
38,743
37,632
40,993
41,480
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
Attributable to owners of the Company
Share Capital £'000
Share Premium £'000
Merger Relief Reserve £'000
Reverse Acq- uisition Reserve £'000
Retained Earnings £'000
Equity Share- holders ' Funds £'000
Non- Control- ling Interests £'000
Total Equity £'000
At 26 March 2017
5,714
6,889
30,459
(9,469)
4,963
38,556
92
38,648
(Loss)/profit for the year
-
-
-
-
(576)
(576)
11
(565)
Total comprehensive income
-
-
-
-
(576)
(576)
11
(565)
Transactions with owners
Share based payments
-
-
-
-
616
616
-
616
Deferred tax on share based payments
-
-
-
-
(1,067)
(1,067)
-
(1,067)
Total transactions with owners
-
-
-
-
(451)
(451)
-
(451)
At 25 March 2018
5,714
6,889
30,459
(9,469)
3,936
37,529
103
37,632
Profit for the year
-
-
-
-
698
698
22
720
Total comprehensive income
-
-
-
-
698
698
22
720
Transactions with owners
Share based payments
-
-
-
-
138
138
-
138
Deferred tax on share based payments
-
-
-
-
253
253
-
253
Total transactions with owners
-
-
-
-
391
391
-
391
At 31 March 2019
5,714
6,889
30,459
(9,469)
5,025
38,618
125
38,743
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
Share Capital £'000
Share Premium £'000
Merger Relief Reserve £'000
Retained Earnings £'000
Total Equity £'000
At 26 March 2017
5,714
6,889
30,459
359
43,421
Loss for the year
-
-
-
(1,566)
(1,566)
Total comprehensive income for the year
-
-
-
(1,566)
(1,566)
Transactions with owners
Share based payments
-
-
-
616
616
Deferred tax on share based payments
-
-
-
(991)
(991)
Total transactions with owners
-
-
-
(375)
(375)
At 25 March 2018
5,714
6,889
30,459
(1,582)
41,480
Loss for the year
-
-
-
(878)
(878)
Total comprehensive income for the year
-
-
-
(878)
(878)
Transactions with owners
Share based payments
-
-
-
138
138
Deferred tax on share based payments
-
-
-
253
253
Total transactions with owners
-
-
-
391
391
At 31 March 2019
5,714
6,889
30,459
(2,069)
40,993
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
for the year ended 31 March 2019
Group
Parent
Notes
Year ended 31 March 2019
Year ended 25 March 2018
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
£'000
£'000
Net cash flow from/(used in) operating activities
19
6,132
4,522
(313)
(509)
Investing activities
Acquisition of property, plant and equipment
(3,457)
(10,044)
(4)
(7)
Acquisition of intangible assets
(99)
(27)
-
-
Acquisition of investments
-
(281)
-
-
Disposal of discontinued operations
329
-
-
-
Loan to subsidiary undertakings
-
-
-
(5,969)
Loan repaid by subsidiary undertakings
-
-
1,366
-
Net cash flow (used in)/from investing activities
(3,227)
(10,352)
1,362
(5,976)
Financing activities
Capital received from bank borrowings
-
6,350
-
6,350
Capital repaid on bank borrowings
(1,110)
-
(1,110)
-
Interest received
8
2
468
465
Interest paid
(327)
(254)
(392)
(311)
Net cash flow (used in)/from financing activities
(1,429)
6,098
(1,034)
6,504
Net increase in cash and cash equivalents
1,476
268
15
19
Cash and cash equivalents at the beginning of the year
12
359
91
7
(12)
Cash and cash equivalents at the end of the year
12
1,835
359
22
7
ACCOUNTING POLICIES
GENERAL INFORMATION
The Fulham Shore PLC is a public company limited by shares incorporated and domiciled in England and Wales with registration number 07973930 and registered office at 1st Floor, 50-51 Berwick Street, London, W1F 8SJ, United Kingdom. The Company's ordinary shares are traded on the AIM Market.
BASIS OF PREPARATION
The above audited financial information does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The above figures for the period ended 31 March 2019 have been extracted from the Group's financial statements which have been reported on by the Group's auditors and received an audit opinion which was unqualified. The Group's statutory financial statements for the year ended 25 March 2018 have been lodged with the Registrar of Companies. These financial statements received an audit report which was unqualified and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying their report or a statement under section 498(2) or section 498(3) of the Companies Act 2006. The financial statements for the year ended 31 March 2019 will be dispatched to the shareholders and filed with the Registrar of Companies. The preliminary announcement was approved by the Board and authorised for issue on 15 July 2019.
The financial statements for the years ended 31 March 2019 and 25 March 2018 have been prepared under the historical cost convention and, as permitted by EU Law, the Financial Statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"). This financial information has been prepared on a basis consistent with the accounting policies adopted in the financial statement but does not contain all the information required to be disclosed in financial statements prepared in accordance with IFRS.
The accounting year runs to a Sunday within seven days of 31 March each year which will be a 52 or 53 week period. The year ended 31 March 2019 was a 53 week period, with the comparative year to 25 March 2018 being a 52 week period.
The financial statements for the year ended 31 March 2019 are presented in Sterling because that is the primary currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.
The parent company has not presented its own income statement, statement of total comprehensive income and related notes as permitted by section 408 of the Companies Act 2006.
NEW STANDARDS
The following new accounting standards are effective for the year ended 31 March 2019 and have been adopted in these financial statements:
IFRS 9 Financial instruments
IFRS 15 Revenue from contracts with customers
Both standards were adopted on 26 March 2018.
The Group adopted IFRS 9 on 26 March 2018, the date of initial application. The Group has applied IFRS 9 retrospectively. IFRS 9 has not had a material impact on the Group.
The Group adopted IFRS 15 using the cumulative effect method, with the effect of adopting this standard, if any, recognised on 26 March 2018, the date of initial application. Accordingly, the information presented for the financial year ended 25 March 2018 has not been restated. The adoption of IFRS 15 has not had a material impact on the Group.
NEW STANDARDS THAT ARE NOT YET EFFECTIVE
At the date of authorisation of these financial statements, the following Standards and Interpretations relevant to the Group operations that have not been applied in these financial statements were in issue but not yet effective:
IFRS 16 Leases
IFRIC 23 Uncertainty over income tax treatments
IAS 28 (Amendment) Investments in Associates and Joint Ventures
Annual Improvements to IFRS Standards 2015-2017 Cycle
The Directors anticipate that the adoption of these Standards and Interpretations as appropriate in future years will have no material impact on the financial statements of the Group other than the new IFRS 16 Leases which will be mandatory for accounting periods beginning on or after 1 January 2019. This new standard will significantly change how restaurant leases will be accounted for but will not change the way the business is run.
IFRS 16 will materially increase the Group's recognised assets and liabilities in the Consolidated Balance Sheet introducing right-of-use assets and lease liabilities calculated based on discounted future committed lease payments. It will also materially change the presentation and timing of recognition of charges in the Consolidated Income Statement. The operating lease expense currently reported under IAS17, typically on a straight line basis, within Headline EBITDA and EBITDA, will be replaced by depreciation of the right-of-use asset and notional financing costs on the lease liability. This will result in increased "lease-related expenses" being charged to the Consolidated Income Statement in the early years of a lease due to the front- loaded notional financing costs, significantly reducing reported profit or loss before taxation.
The presentation of the Consolidated Cash Flow Statement will also be affected. Actual rent payments, which are currently part of the net cash flow from operating activities will now be split into a notional repayment of principal lease liability and a notional interest payment within financing activities. This increases the net cash flow from operating activities and increases the cash outflow from financing activities by the same amount. Actual net increase in cash and cash equivalents will not be affected.
In adopting IFRS 16, the Group is permitted to follow one of two approaches: the full retrospective approach or the modified retrospective approach. This is a choice that must be made at transition and applied to all leases within the group at the initial application date. The Group has chosen to adopt the modified retrospective approach, which does not require restatement of comparative periods. Instead the cumulative impact of applying IFRS16 is accounted for as an adjustment to equity at the start of the accounting period in which it is first applied. Discount rates applicable at the time of initial application and estimates of future rent review adjustments to future committed lease payments are areas of significant judgement and estimation in calculating the lease liability, particularly given the term of the Group's leases.
The likely estimated balance sheet impact is analysed below:
£'000
Right-of-use asset
71,177
Lease liability in respect of leases previously classified as operating leases
(70,256)
Deferred tax asset/(liability)
157
Adjustment for prepayments and accruals
(921)
Adjustment to deferred income
1,993
2,150
The above estimate is based on property leases in existence as at 1 April 2019, with a calculated weighted average discount rate of 3.3% and an assumed rent increase of an equivalent annual rate of 2.4% at each future rent review. The Group estimates that the reported profit before tax for the year ending 29 March 2020 will be reduced by between £1,500,000 and £2,000,000 as a result of adopting the new rules.
The group generates rent receivable from sub-leases of some of its properties. Its activities as a sub-lessor are predominantly based on leases with terms under 12 months and therefore is not material.
GOING CONCERN
The consolidated financial statements have been prepared on a going concern basis. Given the risk analysis set out in the Financial Review and after reviewing the Group's net current liabilities position as at 31 March 2019, the budget for the next financial year, other longer term plans and financial resources including undrawn but available short term and long term facilities described in note 14 and operational cash flow where cash from revenues are received within 3 days, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore the Board is satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate those of The Fulham Shore PLC and all of its subsidiary undertakings for the period. Subsidiaries acquired are consolidated from the date that the Group has the power to control, exposure or rights to variable returns, and the ability to use its power over the returns and will continue to be consolidated until the date that such control ceases.
Although the legal form of the transaction during the period ended 29 June 2015 was an acquisition of Kefi Limited by The Fulham Shore PLC, the substance is the reverse of this. Accordingly the business combination has been prepared using reverse acquisition accounting.
The acquisition of other subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are expensed to the Statement of Comprehensive Income. The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.
INTANGIBLE ASSETS
Goodwill
Goodwill arising on the acquisition of an entity represents the excess of the cost of an acquisition over the Group's interest in the fair value attributed to the net assets at acquisition. Goodwill is not subject to amortisation but is tested for impairment at least annually. After initial recognition, goodwill is stated at cost less any accumulated impairment losses. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Goodwill is allocated to an associated operating segment made up of a group of cash generating units for the purpose of impairment testing. Each of these groups of cash generating units represents the Group's investment in a subsidiary which is equivalent to an operating segment of the Group. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Trademarks and licences
The fair value of the intangible assets acquired through the reverse acquisition was determined using discounted cash flow models. The key assumptions for the valuation method are those regarding future cash flows, tax rates and discount rates. The cash flow projections were based on management forecasts for the subsequent four years period. The estimated useful lives range from 4 to 20 years on a straight-line basis.
Brand
The fair value of the brand intangible assets acquired through an acquisition of a subsidiary was determined using discounted royalty relief models. The key assumptions for the valuation method are those regarding future cash flows, tax rates and discount rates. The cash flow projections were based on management forecasts for the subsequent ten year period.
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of brand from the beginning of the financial year that they are available for use. The estimated useful lives are 10 years on a straight-line basis.
Computer software
Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised on a straight line basis over their estimated useful lives, being between 3 and 5 years. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development, employee costs and directly attributable overheads. Software integral to a related item of hardware equipment is accounted for as property, plant and equipment. Costs associated with maintaining computer software programmes are recognised as an expense when they are incurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at historical cost less depreciation and any recognised impairment loss. The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.
Depreciation is provided on property, plant and equipment at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life, as follows:-
Leasehold properties and improvements over lease term or renewal term
Plant and equipment 20% to 33% straight line
Furniture, fixtures and fittings 10% to 20% straight line
Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.
Residual values, useful lives and methods of depreciation are reviewed and adjusted if appropriate on an annual basis. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.
IMPAIRMENT OF ASSETS
Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is an indication that the asset may be impaired. For the purpose of impairment testing, assets which have separately identifiable cash flows, known as cash generating units, are grouped into their operating segment. If the recoverable amount of a group of cash generating units is less than the carrying amount of that group's assets, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the group of cash generating units and then to the other assets of the group pro-rata on the basis of the carrying amount of each asset in the group. Impairment losses recognised for goodwill are not reversed in a subsequent period. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit, predominantly an individual restaurant for the purposes of property, plant and equipment, to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement.
OTHER INVESTMENTS
Other investments comprising debt and equity instruments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe and are initially measured at fair value, including transaction costs and subsequently measured at fair value through profit and loss.
Debt securities that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost using the effective interest method, less any impairment. Debt securities that do not meet the criteria for amortised cost are measured at fair value through profit and loss.
Equity securities are classified and measured at fair value through other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following derecognition of the investment.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities, in respect of financial instruments, are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument.
INVENTORIES
Inventories are valued at the lower of cost and net realisable value. Cost is determined on a first in, first out basis. Net realisable value is based upon estimated selling price less further costs expected to be incurred to completion and disposal. Provision is made for obsolete and slow-moving items.
TRADE AND OTHER RECEIVABLES
Trade receivables represent amounts owed by customers where the right to payment is conditional only on the passage of time and are recorded at amortised cost. The carrying value of all trade receivables recorded at amortised cost is reduced by allowances for lifetime estimated credit losses. Estimated future credit losses are first recorded on the initial recognition of a receivable and are based on the ageing of the receivable balances, historical experience and forward looking considerations. Individual balances are written off when management deems them not to be collectible.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash in hand and call deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
TRADE AND OTHER PAYABLES
Payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
SHARE CAPITAL
Share capital represents the nominal value of ordinary shares issued.
SHARE PREMIUM
Share premium represents the amounts subscribed for share capital in excess of nominal value less the related costs of share issue.
MERGER RELIEF RESERVE
In accordance with Companies Act 2006 S.612 'Merger Relief', the company issuing shares as consideration for a business combination, accounted at fair value, is obliged, once the necessary conditions are satisfied, to record the excess of the consideration received over the nominal value of the shares issued to the merger relief reserve.
REVERSE ACQUISITION RESERVE
Reverse accounting under IFRS 3 'Business Combinations' requires the difference between the equity of the legal parent and the issued equity instruments of the legal subsidiary pre-combination to be recognised as a separate component of equity.
RETAINED EARNINGS
Retained earnings represents the cumulative profit and loss net of distributions.
NON-CONTROLLING INTERESTS
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder's share of changes in equity since the date of the combination. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
FOREIGN CURRENCIES
Assets and liabilities denominated in foreign currencies are translated into sterling, the presentational and functional currency of the Group, at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to the income statement.
FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS
Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities and includes no obligation to deliver cash or other financial assets. Interest bearing loans and overdrafts are initially measured at fair value (which is equal to cost at inception), and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowing. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
TAXATION
Income tax expense represents the sum of the current tax payable and deferred tax.
Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because some items of income or expense are taxable or deductible in different years or may not be taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit or the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis.
Tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the tax is also recognised directly in equity.
LEASES
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement.
Rentals payable under operating leases are charged to the income statement on a straight line basis or other systematic basis if representative of the time pattern of the user's benefit over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.
PROVISIONS
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the effect is material.
RETIREMENT BENEFITS
The amount charged to the income statement in respect of pension costs is the contributions payable to money purchase schemes in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.
REVENUE RECOGNITION
Revenue represents the fair value of the consideration received or receivable, net of Value Added Tax, for goods sold and services provided to customers outside the Group after deducting discounts. Revenue is recognised when the significant risks and rewards of ownership are transferred.
INTEREST INCOME
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
SHARE BASED PAYMENTS
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.
Fair value is measured using a Black-Scholes valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Non-current assets (disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale.
A discontinued operation is a component of an entity that either has been disposed of, or that is classified as held for sale, and (a) represents a separate line of business or geographical area of operations; and (b) is a part of a single coordinated plan to dispose of a separate line of business or geographical area of operations; or (c) is a subsidiary acquired exclusively with a view to sell.
Non-current assets held for sale and discontinued operations are carried at the lower of carrying amount or fair value less cost to sell. Any gain or loss from disposal, together with the results of these operations until the date of disposal, is reported separately as discontinued operations. The financial information of discontinued operations is excluded from the respective captions in the Consolidated financial statements and related notes for all periods presented. Comparatives in the balance sheet are not re-presented when a non-current asset or disposal group is classified as held for sale. Comparatives are re-presented for presentation of discontinued operations in the Statement of cash flow and Statement of comprehensive income.
Adjustments in the current period to amounts previously presented in discontinued operations that are directly related to the disposal of a discontinued operation in a prior period are classified separately in discontinued operations. Circumstances to which these adjustments may relate include resolution of uncertainties that arise from the terms of the disposal transaction, such as the resolution of purchase price adjustments and indemnifications, resolution of uncertainties that arise from and are directly related to the operations of the component before its disposal, such as environmental and product warranty obligations retained by the Company, or the settlement of employee benefit plan obligations provided that the settlement is directly related to the disposal transaction.
ACCOUNTING PERIOD
The consolidated group accounts have been prepared for the year to 31 March 2019 with the comparative year to 25 March 2018.
The Company accounts have been prepared for the same periods as the Group.
ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of the Group's accounting policies, described above, with respect to the carrying amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting year. These judgements, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, including current and expected economic conditions. Although these judgements, estimates and associated assumptions are based on management's best knowledge of current events and circumstances, the actual results may differ. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future years affected.
The judgements, estimates and assumptions which are of most significance to the Group are detailed below:
Assessment of the recoverable amounts in respect of assets tested for impairment
The Group tests goodwill for impairment on an annual basis or more frequently if there are indications that amounts may be impaired. For property, plant and equipment and intangible assets, other than goodwill, the Group tests for impairment when there is an indication of impairment.
The impairment analysis for such assets is principally based upon discounted estimated future cash flows from the use and eventual disposal of the assets (see notes 7 and 8). Such an analysis includes an estimation of the future anticipated results and cash flows, annual growth rates, whether short term or long term, future capital expenditures and the appropriate discount rates (see notes 7 and 8 for key assumptions). Changes in the estimates which underpin the Group's forecasts and selection of appropriate discount rate could have an impact on the value in use of the cash generating units and group of cash generating units being tested.
Valuation of share based payments
The charge for share based payments is calculated in accordance with the methodology described in note 18. The model requires highly subjective assumptions to be made including the future volatility of the Company's share price, expected dividend yield, risk-free interest rates, expected time of exercise and employee attrition rates. Changes in such estimates may have a significant impact on the original fair value calculation at the date of grant and the employee attrition rate will impact the judgement relating to the number of share based incentives that would vest and therefore the share based payments charge.
Deferred taxation
The recognition of deferred taxation assets or liabilities are further described in note 16.
Recognition of deferred tax assets on tax losses, is based upon whether management judge that it is probable that there will be sufficient and suitable taxable profits in the relevant legal entity or tax group against which to utilise the assets in the future. Judgement is required when determining probable future taxable profits. The Group assesses the availability of future taxable profits using the same cash flow forecasts for the Group's operations as are used in the Group's value in use calculations for impairment testing purposes. Where tax losses are forecast to be recovered beyond the five year period, the availability of taxable profits is assessed using the cash flows and long‑term growth rates used for the value in use calculations.
Changes in the estimates which underpin the Group's forecasts could have an impact on the amount of future taxable profits and could have a significant impact on the period over which the deferred tax asset would be recovered and whether the deferred tax assets should have been recognised.
Deferred taxation assets on share based payments are calculated based on the intrinsic value of the share based incentives at the year end, Company's share price, availability of tax deduction on exercise of the share based incentives and employee leave rates. Changes in the number of share based incentives that are expected to vest (as described above), availability of tax deduction and other assumptions will have an impact on the value of deferred taxation assets.
Deferred tax liabilities on capital allowances are calculated using estimates of the proportion of property, plant and equipment acquired during the year that qualifies for capital allowances and the appropriate rates of allowances and estimates of tax rates applicable in the future. Management make such estimates based on experience with similar historic property, plant and equipment acquired. Changes in the make-up of the building components in one of these assets may have an impact on capital allowances claimable and therefore the quantum of the deferred tax liabilities.
The Group only considers substantively enacted tax laws when assessing the amount and availability of tax losses to offset against the future taxable profits and availability of capital allowances.
Finite lived intangible assets
Intangible assets include amounts spent by the Group acquiring brands and the costs of purchasing and/or developing computer software.
Where intangible assets are acquired through business combinations and no active market for the assets exists, the fair value of these assets is determined by discounting estimated future net cash flows generated by the asset. Estimates relating to the future cash flows and discount rates used may have a material effect on the reported amounts of finite lived intangible assets.
The useful life over which intangible assets are amortised depends on management's estimate of the period over which economic benefit will be derived from the asset. Reducing the useful life will increase the amortisation charge in the consolidated income statement. Useful lives are periodically reviewed to ensure that they remain appropriate.
Property, plant and equipment
Property, plant and equipment represents 47.2% (2018: 48.7%) of the Group's total assets; estimates and assumptions made may have a material impact on their carrying value and related depreciation charge. The depreciation charge for an asset is derived using estimates of its expected useful life and expected residual value, which are reviewed periodically. Increasing an asset's expected life or residual value would result in a reduced depreciation charge in the consolidated income statement. Management determines the useful lives and residual values for assets when they are acquired, based on experience with similar assets and taking into account other relevant factors such as any expected changes in technology. The useful life of equipment is assumed not to exceed the duration of restaurant property lease unless there is a reasonable expectation of renewal or ability for the equipment to be transferred for use in another restaurant.
Accounting treatment of other investments
Investments are recognised at fair value at the time of acquisition. Management judgement is used to determine whether the Group has significant influence or control over the investment which would give rise to different accounting methodology being applied as an associate or subsidiary.
OPERATING SEGMENTS
The Group considers itself to have two key operating segments, being the management and operation of The Real Greek restaurants and the management and operation of Franco Manca restaurants. The Group operates in only one geographical segment, being the United Kingdom.
DEFINITIONS
OPERATING PROFIT
Operating profit is defined as profit before taxation, finance income and finance costs.
HEADLINE OPERATING PROFIT
Headline operating profit is defined as operating profit before amortisation of brand, impairment of property, plant and equipment, impairment of goodwill and intangible assets, impairment of investments, onerous lease costs, restructuring costs, costs of reverse acquisition, cost of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.
HEADLINE PROFIT BEFORE TAXATION
Headline profit before taxation is defined as profit/loss before taxation before amortisation of brand, impairment of property, plant and equipment, impairment of goodwill and intangible assets, impairment of investments, onerous lease costs, restructuring costs, costs of reverse acquisition, costs of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.
PRE-OPENING COSTS
The restaurant pre-opening costs represent costs incurred up to the date of opening a new restaurant that are written off to the profit and loss account in the period in which they are incurred.
EBITDA
EBITDA is defined as operating profit before depreciation, amortisation and impairment.
HEADLINE EBITDA
Headline EBITDA is defined as EBITDA before onerous lease costs, restructuring costs, costs of reverse acquisition, cost of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.
HEADLINE EPS
Headline basic EPS and Headline diluted EPS are defined in note 6.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2019
1
SEGMENT INFORMATION
For management purposes, the Group was organised into two operating divisions during the year ended 31 March 2019. These divisions, The Real Greek and Franco Manca, are the basis on which the Group reports its primary segment information as identified by the chief operating decision maker which is the Group's board of directors.
For the year ended 31 March 2019:
The Real Greek segment £'000
Franco Manca segment £'000
Other unallocated £'000
Total £'000
Revenue
21,950
43,285
-
65,235
Headline EBITDA
2,746
5,814
(742)
7,818
Depreciation and amortisation
(1,048)
(3,242)
(33)
(4,323)
Headline operating profit
1,698
2,572
(775)
3,495
Pre-opening costs
-
(386)
-
(386)
Impairment investments
-
(80)
-
(80)
Impairment property, plant and equipment
(29)
(101)
-
(130)
Operating profit
1,617
924
(788)
1,753
Finance income
3
5
-
8
Finance costs
-
-
(327)
(327)
Segment profit/(loss) before taxation
1,620
929
(1,115)
1,434
Income tax expense
(714)
(714)
Profit for the year from continuing operations
(1,829)
720
Assets
11,408
53,281
602
65,291
Liabilities
(3,814)
(10,177)
(12,557)
(26,548)
Net assets
7,594
43,104
(11,955)
38,743
Capital expenditure
407
3,046
4
3,457
Head office costs are not related to the Group's two business segments and are therefore included in other unallocated and are not part of a business segment. The Group's two business segments primarily operate in one geographical area which is the United Kingdom.
Segmental revenue shown above is higher than Consolidated Group revenue shown in the Consolidated Statement of Comprehensive Income as included in The Real Greek segment is revenue of £1,250,000 (2018: £Nil) that has been eliminated on consolidation. The Real Greek revenue from external customers would have been £20,700,000 (2018: £18,139,000).
1
SEGMENT INFORMATION (continued)
For the year ended 25 March 2018:
The Real Greek segment £'000
Franco Manca segment £'000
Other unallocated £'000
Total £'000
Revenue
18,139
36,556
-
54,695
Headline EBITDA
2,436
5,427
(433)
7,430
Depreciation and amortisation
(931)
(2,751)
(32)
(3,714)
Headline operating profit
1,505
2,676
(465)
3,716
Pre-opening costs
(375)
(834)
-
(1,209)
Impairment property, plant and equipment
(214)
(653)
-
(897)
Operating profit
718
78
(654)
142
Finance income
-
2
-
2
Finance costs
-
-
(254)
(254)
Segment profit/(loss) before taxation
718
80
(908)
(110)
Income tax expense
(40)
(40)
Profit for the year from continuing operations
(948)
(150)
Assets
11,585
52,757
896
65,238
Liabilities
(3,969)
(10,208)
(13,429)
(27,606)
Net assets
7,616
42,549
(12,533)
37,632
Capital expenditure
2,874
6,741
26
9,641
Head office and PLC costs are not related to the Group's two business segments and are therefore included in other unallocated and are not part of a business segment. The Group's two business segments primarily operate in one geographical area which is the United Kingdom.
2
OPERATING PROFIT
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Operating profit is stated after charging:
Staff costs (note 3)
23,956
20,882
Depreciation of property, plant and equipment
4,261
3,684
Amortisation of intangible assets
882
851
Operating lease rentals:
Land and buildings
6,361
5,514
Inventories - amounts charged as an expense
12,371
10,489
Auditor's remuneration:
- for statutory audit services
111
83
- for other assurance services
13
20
- for tax services
24
33
- for transactional services
11
-
Share based payments
138
616
Pre-opening costs
386
1,209
Exceptional costs -impairment of investments
80
-
Exceptional costs - impairment of property, plant and equipment
130
867
Exceptional costs - loss on disposal
187
61
3
EMPLOYEES
Year ended 31 March 2019
Year ended 25 March 2018
No.
No.
The average monthly number of persons (including Directors) employed by the Group during the year was:
Administration and management
26
29
Restaurants
1,075
1,086
1,101
1,115
The average monthly number of persons (including Directors) employed by the Company during the year was:
Administration and management
6
6
6
6
3
EMPLOYEES (continued)
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Staff costs for above persons
Salaries and fees
21,959
19,317
Social security costs
1,734
1,453
Share based payments
138
616
Defined contribution pension costs
263
112
24,094
21,498
DIRECTORS' REMUNERATION
The remuneration of Directors, who are the key management personnel of the company, is set out in aggregate and on a paid basis below. Further details of directors' emoluments can be found in the tables of directors' remuneration in the Report on Directors' Remuneration.
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Salaries, fees and other short term employee benefits
897
918*
Social security costs
116
72*
Share based payments
31
448
Defined contribution pension costs
3
3
1,047
1,441
* Salaries, fees and other short-term employee benefits for the year ended 25 March 2018 included £278,000 bonuses and £38,000 social security costs paid in relation to bonuses earned from the bonus scheme for the year ended 26 March 2017. No bonuses and related social security costs were earnt or paid for the year ended 25 March 2018.
Included above are fees paid to related parties for the provision of directors' services which are further described in note 22.
The Directors are the only employees of the Company. The Directors' remuneration above represents the only staff costs for the Company.
3 Directors received pension contributions during the year (2018: 3).
No Directors serving during the year exercised share options in the year ended 31 March 2019 (2018: Nil).
4
FINANCE COSTS
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Interest expenses on bank loans and overdrafts
327
254
327
254
5
INCOME TAX EXPENSE
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Income tax expense on continuing operations
Based on the result for the year:
UK corporation tax at 19% (2018: 19%)
669
432
Adjustment in respect of prior periods
(54)
(65)
Total current taxation
615
367
Deferred taxation:
Origination and reversal of temporary timing differences
Current year
99
(109)
Prior year
-
(218)
Total deferred tax
99
(327)
Total tax expense on profit on continuing operations
714
40
The above is disclosed as
Income tax expense - current year
714
258
Income tax expense - prior year
-
(218)
714
40
5
INCOME TAX EXPENSE (continued)
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Income tax expense on discontinued operations
Deferred taxation:
-
(13)
Total tax expense on profit on discontinued operations
-
(13)
Further information on the movement on deferred taxation is given in note 16.
Factors affecting tax charge for year:
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Profit/(loss) before taxation from continuing operations
1,434
(110)
Taxation at UK corporation tax rate of 19% (2018: 19%)
272
(21)
Expenses not deductible for tax purposes
31
6
Depreciation/impairment on non-qualifying fixed assets
290
214
Share based payments
171
162
Rate change on deferred tax liability
-
(38)
Tax effect of utilisation of tax losses not previously recognised
4
-
Adjustment to previously recognised deferred tax
-
(218)
Adjustment to tax charge in respect of previous periods
(54)
(65)
Total income tax expense in the income statement
714
40
Factors that may affect deferred tax charges are disclosed in note 16 including a breakdown of the adjustment to previously recognised deferred tax.
Note 23 provides additional details with regards to current and deferred tax on discontinued operations as well as the aggregate current and deferred tax relating to items that are charged or credited directly to equity.
6 EARNINGS PER SHARE
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
Profit/(loss) for the purposes of basic and diluted earnings per share:
698
(576)
Add back loss for the purposes of basic and diluted earnings per share (discontinued operations):
-
415
Profit/(loss) for the purposes of basic and diluted earnings per share (continuing operations):
698
(161)
Share based payments
138
616
Deferred tax on share based payments
146
146
Pre-opening costs
386
1,209
Amortisation of brand
821
821
Deferred tax on amortisation of brand
(137)
(137)
Exceptional costs - impairment of investment
80
-
Exceptional costs - impairment of property, plant and equipment
130
867
Deferred tax on impairment of property, plant and equipment
-
(98)
Exceptional costs - loss on disposal
187
61
Headline profit for the year for the purposes of headline basic and diluted earnings per share:
2,449
3,324
Year ended 31 March 2019
Year ended 25 March 2018
No. '000
No. '000
Weighted average number of ordinary shares in issue for the purposes of basic earnings per share
571,385
571,385
Effect of dilutive potential ordinary shares from share options
10,230
24,495
Weighted average number of ordinary shares in issue for the purposes of diluted earnings per share
581,615
595,880
6
EARNINGS PER SHARE (continued)
Further details of the share options that could potentially dilute basic earnings per share in the future are provided in note 18.
Year ended 31 March 2019
Year ended 25 March 2018
Earnings per share:
Basic
From continuing operations
0.1p
(0.0p)
From discontinued operations
0.0p
(0.1p)
Total basic earnings per share
0.1p
(0.1p)
Diluted
From continuing operations
0.1p
(0.0p)
From discontinued operations
0.0p
(0.1p)
Total basic earnings per share
0.1p
(0.1p)
Headline Basic
0.4p
0.6p
Headline Diluted
0.4p
0.6p
7
INTANGIBLE ASSETS
Group
Trademarks, License and franchises £'000
Software £'000
Brand £'000
Goodwill £'000
Total £'000
Cost
26 March 2017
58
76
8,211
20,705
29,050
Additions
-
27
-
-
27
25 March 2018
58
103
8,211
20,705
29,077
Additions
5
94
-
-
99
31 March 2019
63
197
8,211
20,705
29,176
Accumulated amortisation
26 March 2017
23
11
1,642
-
1,676
Charge in the year
8
22
821
-
851
25 March 2018
31
33
2,463
-
2,527
Charge in the year
6
55
821
-
882
31 March 2019
37
88
3,284
-
3,409
Net book value
31 March 2019
26
109
4,927
20,705
25,767
25 March 2018
27
70
5,748
20,705
26,550
The amortisation charges for trademarks, license and franchises and software for the year are recognised within administrative expenses.
As at 31 March 2019 brand intangible assets which relates to Franco Manca has a remaining amortisation period of 6 years (2018: 7 years).
Goodwill of £1,774,000 relates to the The Real Greek and is attributable to its group of cash generating units.
Goodwill of £18,931,000 relates to the acquisition of Franco Manca Holdings Limited ("Franco Manca Holdings"). The goodwill is attributable to the cash generating units held within Franco Manca 2 UK Limited.
7
INTANGIBLE ASSETS (continued)
For the purposes of impairment testing, the Directors consider each of Franco Manca and The Real Greek, operating segments of the Group, as the lowest level within the Group at which the goodwill is monitored for internal management purposes. Each of these segments is made up of a group of separate restaurants which are cash generating units (CGUs) in their own right.
The recoverable amount for each segment and group of CGUs was determined using a value in use calculation based upon management forecasts for the trading results for that segment. Value in use calculations are based on:
· cash flow forecasts derived from the most recent approved financial budgets for the 2020 financial year for the sites open at the end of March 2019;
· extrapolated cash flow over twenty five years, an appropriate timeframe for branded restaurant businesses, using forecast growth rates based on past and current run-rates for the initial five years that then reduce to the industry growth rate of 2%;
· less estimated annual capital expenditure required to maintain the existing restaurants' look and feel in each segment based on historic refurbishment programmes and investments in IT systems;
· applied pre-tax discount rate to cash flow projections of 12.4% (2018: 12.4%) which is the rate believed by the Directors to reflect the risks associated with the group of CGUs using a WACC model with comparison to other available restaurant businesses. During the year, the Group's capital structure had a reduced portion of debt than the year ended 25 March 2018.
Other than as disclosed below, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of any segment to materially exceed its recoverable amount. The estimated recoverable amount of The Real Greek and Franco Manca segments exceed their carrying values by £30,388,000 and £21,118,000 respectively. The changes in the following table to assumptions used in the impairment review would, in isolation, lead to an impairment loss being recognised for the year ended 31 March 2019:
The Real Greek %
Franco Manca %
Reduction in long term growth rate
(4.7%)
(3.2%)
Increase in pre-tax discount rate
32.2%
8.8%
8
PROPERTY, PLANT AND EQUIPMENT
Group
Leasehold improvements £'000
Plant and equipment £'000
Furniture, fixtures and fittings £'000
Assets under construction £'000
Total £'000
Cost
26 March 2017
25,161
4,223
1,591
1,310
32,285
Additions
6,908
1,694
660
379
9,641
Reclassification
1,168
51
189
(1,408)
-
Reclassification as held for sale
(552)
(75)
(17)
-
(644)
Disposals
-
(6)
-
(61)
(67)
25 March 2018
32,685
5,887
2,423
220
41,215
Additions
2,020
605
166
666
3,457
Reclassification
24
8
65
(97)
-
Disposals
(438)
(139)
(40)
(5)
(622)
31 March 2019
34,291
6,361
2,614
784
44,050
Accumulated depreciation and impairment
26 March 2017
3,356
1,196
427
-
4,979
Charge in the year
2,339
1,052
334
-
3,725
Reclassification as held for sale
(264)
(41)
(10)
-
(315)
Impairment
949
83
30
-
1,062
Disposals
-
(4)
-
-
(4)
25 March 2018
6,380
2,286
781
-
9,447
Charge in the year
2,656
1,198
407
-
4,261
Impairment
130
-
-
-
130
Disposals
(438)
(120)
(36)
-
(594)
31 March 2019
8,728
3,364
1,152
-
13,244
Net book value
31 March 2019
25,563
2,997
1,462
784
30,806
25 March 2018
26,305
3,601
1,642
220
31,768
.
8
PROPERTY, PLANT AND EQUIPMENT (continued)
Impairment review of property, plant and equipment is reviewed when there is indication of impairment. For the purposes of impairment testing of property, plant and equipment, the Directors consider each restaurant unit as a separate cash generating units (CGUs). The recoverable amount for each CGU was determined using a value in use calculation based upon management forecasts for the trading results for those restaurants. Value in use calculations are based on:
· cash flow forecasts derived from the most recent approved financial budgets for the 2020 financial year for the sites open at the end of March 2019;
· extrapolated cash flow over the remaining unexpired length of the lease years using forecast growth rates based on run rate expectations for the initial five years that then reduce to the industry growth rate of 2%;
· less estimated annual capital expenditure required to maintain the existing restaurants' look and feel in each segment based on historic refurbishment programmes;
· applied pre-tax discount rate to cash flow projections of 12.4% (2018: 12.4%) which is the rate believed by the Directors to reflect the risks associated with the CGU using a WACC model with comparison to other available restaurant businesses.
The Group has also conducted a sensitivity analysis on the impairment test of the CGU carrying value including reducing sales level by reducing long term growth rate by 1 % and there is no reasonably expected change that would give rise to an impairment charge other than in relation to The Real Greek restaurant 1 where an additional impairment charge of £43,000 may be necessary. This has not been recognised as plans to improve trading in this restaurant is being implemented.
The following impairment charges have been recognised in the Statement of Comprehensive Income as exceptional costs - impairment of property, plant and equipment.
31 March 2019 £'000
31 March 2019 £'000
25 March 2018 £'000
25 March 2018 £'000
Impairment charge
Recoverable amount
Impairment charge
Recoverable amount
For continuing operations
Franco Manca Brighton Marina
-
-
505
-
Franco Manca restaurant 1
-
-
148
437
Franco Manca restaurant 2
75
487
-
-
Franco Manca restaurant 3
26
838
-
-
Total for Franco Manca operating segment
101
1,325
653
437
The Real Greek restaurant 1
-
-
214
299
The Real Greek restaurant 2
29
87
-
-
Total for The Real Greek operating segment
29
87
214
299
Total for the Group
130
1,412
867
736
For discontinued operations
Bukowski Soho
-
-
195
-
8
PROPERTY, PLANT AND EQUIPMENT (continued)
During the year ended 31 March 2019, the Group impaired the short term leasehold improvements in relation to two properties trading as Franco Manca, which are trading financially below management expectations, and one property trading as The Real Greek, which has just over two years left on the lease and the lease has not yet been extended or renewed. During the year ended 25 March 2018, the Group impaired the short term leasehold improvements in relation to the property at D'Arblay Street, Soho, London which was sold during the year ended 31 March 2019 (see Note 23 as the recoverable amount was reclassified to Asset held for sale) and a further two properties trading as Franco Manca and one property trading as The Real Greek which are trading financially below management expectation. The trading of Franco Manca restaurant 1 has improved in the year ended 31 March 2019.
Parent Company
Leasehold improvements £'000
Plant and equipment £'000
Furniture, fixtures and fittings £'000
Total £'000
Cost
26 March 2017
205
48
25
278
Additions
-
7
-
7
25 March 2018
205
55
25
285
Additions
-
4
-
4
31 March 2019
205
59
25
289
Accumulated depreciation
26 March 2017
16
30
5
51
Charge in the year
21
8
2
31
25 March 2018
37
38
7
82
Charge in the year
22
9
3
34
31 March 2019
59
47
10
116
Net book value
31 March 2019
146
12
15
173
25 March 2018
168
17
18
203
All depreciation charges have been recognised in administrative expenses in the income statement.
All non-current assets are located in the United Kingdom.
9
INVESTMENTS
31 March 2019 £'000
25 March 2018 £'000
Group
Unlisted shares at cost
201
201
Loans at cost
80
80
Impairment of loans
(80)
-
Carrying amount
201
281
Investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, including transaction costs and subsequently measured.
During the year ended 25 March 2018 the Group made an investment in Made of Dough Limited subscribing for 25% of the equity. Although the investment is for more than 20% of the investee and includes one board representation, the structure of the investee board, the shareholder agreement and the start up nature of the business operations has led the Group to conclude that the Group does not have significant influence over its operations and therefore not an associate.
Other investments classified as finance assets are stated at amortised cost using the effective interest method, less any impairment. During the year ended 31 March 2019, the Group recognised impairment of the loan investment based on estimated future credit loss.
31 March 2019 £'000
25 March 2018 £'000
Parent Company
Cost and net book value
Opening position
43,439
43,011
Investment in subsidiaries
124
428
Closing position
43,563
43,439
9
INVESTMENTS (continued)
As at 31 March 2019, the Company had the following subsidiary undertakings which are all registered at 1st Floor, 50-51 Berwick Street, London W1F 8SJ:
Name of subsidiary
Class of Holding
Proportion of shares held, ownership interest and voting power
Nature of business
Incorporated in England and Wales
FM98 LTD Limited*
Ordinary
99%
Operation of restaurants
10DAS Limited
Ordinary
100%
Operation of restaurants
Café Pitfield Limited
Ordinary
100%
Dormant
Kefi Limited
Ordinary
99%
Dormant
The Real Greek Food Company Limited*
Ordinary
99%
Operation of restaurants
The Real Greek Wine Company Limited*
Ordinary
99%
Dormant
Souvlaki & Bar Limited*
Ordinary
99%
Dormant
CHG Brands Limited*
Ordinary
99%
Dormant
The Real Greek International Limited*
Ordinary
99%
Dormant
Franco Manca Holdings Limited
Ordinary
99%
Dormant
Franco Manca 2 UK Limited*
Ordinary
99%
Operation of restaurants
FM6 Limited*
Ordinary
99%
Restaurant property
FM111 Limited*
Ordinary
99%
Restaurant property
FM Catherine The Great Limited*
Ordinary
99%
Restaurant property
Franco Manca International Limited*
Ordinary
99%
Dormant
* Held by subsidiary undertaking
10
INVENTORIES
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Raw materials and consumables
656
449
-
-
Consumables
1,108
1,041
-
-
1,764
1,490
-
-
Inventories are charged to cost of sales in the consolidated comprehensive statement of income.
11
TRADE AND OTHER RECEIVABLES
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Included within non-current assets:
Amounts receivable from subsidiaries
-
-
11,863
11,724
Other receivables
1,020
943
-
-
1,020
943
11,863
11,724
Included within current assets:
Trade receivables
1,470
1,095
-
3
Other receivables
176
319
-
-
Other taxation and social security costs
-
-
-
-
Prepayments and accrued income
1,951
1,911
118
132
3,597
3,325
118
135
4,617
4,268
11,981
11,859
Other receivables due after more than one year relate to rent deposits.
Receivables are denominated in sterling.
The Group and Company hold no collateral against these receivables at the balance sheet date. The Directors consider that the carrying amount of receivables are recoverable in full and approximates to their fair value.
12
CASH AND CASH EQUIVALENTS
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Cash at bank and in hand
1,835
359
22
7
Cash and cash equivalents as presented in the balance sheet
1,835
359
22
7
Bank overdraft
-
-
-
-
1,835
359
22
7
Bank balances comprise cash held by the company on a short term basis with maturity of three months or less. The carrying amount of these assets approximates to their fair value.
13
TRADE AND OTHER PAYABLES
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Included in current liabilities:
Trade payables
4,202
5,622
67
113
Other taxation and social security payable
1,600
1,350
88
117
Other payables
843
208
1
29
Accruals
4,844
4,206
1,156
629
Deferred income
392
135
-
-
11,881
11,521
1,312
888
Included in non-current liabilities:
Deferred income
1,601
1,470
-
-
1,601
1,470
-
-
Trade payables were all denominated in sterling and comprise amounts outstanding for trade purchases and ongoing costs and are non-interest bearing.
The Directors consider that the carrying amount of trade payables approximate to their fair value.
Deferred income relates to lease incentives received by the Group on restaurant leases acquired.
14
BORROWINGS
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Short term borrowings:
Bank overdraft
-
-
-
-
Long term borrowings:
Bank loans
11,240
12,350
11,240
12,350
Amounts owed to subsidiary undertakings
-
-
2,481
975
11,240
12,350
13,721
13,325
11,240
12,350
13,721
13,325
As at 31 March 2019, the Group's committed Sterling borrowing facilities comprises a revolving credit facility of £14,250,000 (2018: £14,250,000) expiring between two and five years and a bank overdraft facility from HSBC Bank PLC which is secured by a mortgage debenture in favour of HSBC Bank PLC representing fixed or floating charges over all assets of the Group. The interest rate applicable on this bank loan is 2.50% above LIBOR.
The bank overdraft is repayable on demand with interest being charged at 2.5% over base rate and is secured by a debenture giving fixed and floating charges over all assets of the Group.
Amounts owed to subsidiary undertakings are amounts borrowed from The Real Greek Food Company Limited, a subsidiary of the Company and are repayable on 31 March 2021. The interest rate applicable on the amounts owed to subsidiary undertakings is 3.5%.
15
CAPITAL AND FINANCIAL MANAGEMENT
The Group is exposed to financial risks which could affect the Group's future financial performance.
This note describes the objectives, policies and processes of the Group for managing those risks and the methods used to measure them.
The Group finances its operations through equity, borrowings and cash generated from operations. For borrowings, the Group's policy is to borrow centrally using a mixture of long-term and short-term borrowing facilities to meet anticipated funding requirements. These borrowings, together with cash generated from operations, are loaned internally or contributed as equity to certain subsidiaries.
Financial Assets and Liabilities
The Group and Company had the following financial assets and liabilities:
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Non-current financial assets
Other investments
201
281
-
-
Amounts owed by subsidiary undertakings
-
-
11,863
11,724
Other receivables
1,020
943
-
-
Current financial assets
Cash at bank and in hand
1,835
359
22
7
Trade and other receivables*
1,646
1,414
-
3
4,702
2,997
11,885
11,734
Current financial liabilities
At amortised cost - borrowings
-
-
-
-
At amortised cost - payables**
9,889
10,036
1,224
771
Non-current financial liabilities
At amortised cost - borrowings
11,240
12,350
11,240
12,350
At amortised cost - payables
-
-
2,481
975
21,129
22,386
14,945
14,096
* excludes other taxation and social security receivable and prepayments included in trade and other receivables in note 11.
** excludes other taxation and social security and deferred income included in trade and other payables in note 13.
15
CAPITAL AND FINANCIAL MANAGEMENT (continued)
The maturity analysis table below analyses the Group's financial assets and liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are contractual undiscounted cash flows.
For the year ended 31 March 2019
Less than 1 year £'000
Between 1 and 5 years £'000
More than 5 years £'000
Total £'000
Other investments
-
-
201
201
Cash at bank and in hand
1,835
-
-
1,835
Trade and other receivables
1,646
57
963
2,666
Bank loans and overdrafts
-
(11,240)
-
(11,240)
Trade and other payables
(9,889)
-
-
(9,889)
(6,408)
(11,183)
1,164
(16,427)
For the year ended 25 March 2018
Less than 1 year £'000
Between 1 and 5 years £'000
More than 5 years £'000
Total £'000
Other investments
-
80
201
281
Cash at bank and in hand
359
-
-
359
Trade and other receivables
1,414
43
900
2,357
Bank loans
-
(12,350)
-
(12,350)
Trade and other payables
(10,036)
-
-
(10,036)
(8,263)
(12,227)
1,101
(19,389)
The financial instruments recognised on the balance sheets and shown above are all loans and receivables and financial liabilities at amortised cost.
15
CAPITAL AND FINANCIAL MANAGEMENT (continued)
The maturity analysis table below analyses the Company's financial assets and liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are contractual undiscounted cash flows.
For the year ended 31 March 2019
Less than 1 year £'000
Between 1 and 5 years £'000
Total £'000
Trade and other receivables
-
11,863
11,863
Bank loans and overdrafts
-
(11,240)
(11,240)
Trade and other payables
(1,224)
(2,481)
(3,705)
(1,224)
(1,858)
(3,082)
For the year ended 25 March 2018
Less than 1 year £'000
Between 1 and 5 years £'000
Total £'000
Trade and other receivables
3
11,724
11,727
Bank loans and overdrafts
-
(12,350)
(12,350)
Trade and other payables
(771)
(975)
(1,746)
(768)
(1,601)
(2,369)
The financial instruments recognised on the balance sheets and shown above are all loans and receivables and financial liabilities at amortised cost.
Liquidity Risks
The Group and Company had a committed long term revolving credit facility of £14,250,000 (2018: £14,250,000) and short term bank overdraft facilities available to manage its liquidity as at 31 March 2019 of £750,000 (2018: £750,000).
15
CAPITAL AND FINANCIAL MANAGEMENT (continued)
Market Risks
The Group's market risk exposure arises mainly from its floating interest rate interest bearing borrowings. Only the following financial assets and liabilities were interest bearing:
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Floating rate
Other investments
-
80
-
-
Cash at bank and in hand
1,835
359
22
7
Bank overdraft
-
-
-
-
Bank loans
(11,240)
(12,350)
(11,240)
(12,350)
(9,405)
(11,911)
(11,218)
(12,343)
Trade and other receivables and trade and other payables are all non-interest bearing.
Weighted average interest rates paid for bank loans during the year ended 31 March 2019 were 1.9% and year ended 25 March 2018 were 1.9% and the weighted average interest rates paid for bank overdrafts during the year ended 31 March 2019 were 2.5% and year ended 25 March 2018 were 2.5%.
The Group has derived a sensitivity analysis based on a 0.5% variance in LIBOR element of floating interest rates. The annualised impact of an increase in LIBOR by 0.5% applied to the balance of floating rate bank loans at the year end would be £56,200 (2018: £61,750).
Foreign Exchange Risks
During the years ended 31 March 2019 and 25 March 2018, the Group did not receive or pay significant amounts denominated in foreign currencies. As purchasing from foreign franchised territories that is not denominated or agreed in Sterling increase to a significant level, the Group will implement a foreign exchange management policy.
15
CAPITAL AND FINANCIAL MANAGEMENT (continued)
Credit Risks
The Group's exposure to credit risk arises mainly from as follows:
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Other investments
-
80
-
-
Cash at bank and in hand
1,835
359
22
7
Trade receivables and other receivables
1,646
1,414
11,863
11,727
3,481
1,853
11,885
11,734
The Group estimated that a future credit loss was likely in relation to the other investments held by the Group. Therefore the Group has recognised impairment of £80,000 during the year ended 31 March 2019. The carrying amounts of the other financial assets above are considered to be recoverable in full and approximate to their fair value. They are neither past due nor impaired:
The majority of the Group's cash balances have been held in current accounts at HSBC Bank PLC during the years ended 31 March 2019 and 25 March 2018 and did not earn any significant interest.
The majority of the Group's trade receivables are due for maturity within 7 days and largely comprise amounts receivable from credit and debit card clearing houses. As the Group has no material credit facilities granted to customers no credit losses have been estimated.
The Company's trade and other receivables are made up of loans to its subsidiary undertaking, Franco Manca 2 UK Limited. The Company has undertaken to determine whether there has been a significant increase in credit risk. Where these procedures identify a significant increase in credit risk, the loss allowance is measured based on the risk of a default occurring over the expected life of the instrument. No increase in credit risk has been identified.
Fair Values of Financial Assets and Financial Liabilities
The fair value amounts of the Group's and Company's financial assets and liabilities as at 31 March 2019 and 25 March 2018 did not materially vary from the carrying value amounts.
16
DEFERRED TAXATION
Analysis of movements in net deferred tax balance during the period:
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Opening position
(1,586)
(859)
185
1,238
Adjustment in relation to prior year cumulative deferred tax on share based payments error
-
(484)
-
(498)
Tax on share based payments
253
(583)
253
(493)
Transfer from/(to) reserves
253
(1,067)
253
(991)
Adjustment in relation to brought forward deferred tax errors
-
218
-
-
Movement in accelerated capital Allowances - continuing - discontinued
(90)
17 13
- -
- -
Tax on share based payments
(146)
(45)
(151)
(62)
Tax on intangible assets
137
137
-
-
Transfer from/(to) profit and loss
(99)
340
(151)
(62)
Net deferred tax (liability)/asset
(1,432)
(1,586)
287
185
During the year ended 31 March 2019, the Group transferred £253,000 deferred tax charge from reserves (2018: £1,067,000 to reserves) in relation to deferred tax on share based payments which included £Nil (2018: £484,000) error relating to the year ended 26 March 2017 and before.
16
DEFERRED TAXATION (continued)
The Group's deferred taxation liability disclosed above relates to the following:
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Deferred tax assets
Share options
301
193
287
185
Deferred taxation assets
301
193
287
185
Deferred tax liabilities
Accelerated capital allowances
912
829
-
-
Intangible assets
821
950
-
-
Deferred taxation liabilities
1,733
1,779
-
-
The Company has losses of £283,000 (2018: £283,000) which, subject to agreement with HM Revenue & Customs, are available to offset against the Company's future profits. A deferred taxation asset in respect of these losses of £51,000 (2018: £51,000) has not been recognised in the financial statements. Although the directors are confident that the Company will achieve future profitability in line with current expectations, the timing of such profits is uncertain and therefore the directors have not recognised the entire deferred tax asset. The Directors have recognised deferred tax assets in relation to the share based payment charge recognised in the year as such deferred tax asset may be used against future group tax relief.
17
SHARE CAPITAL
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Allotted, issued called up and fully paid:
571,385,237 (2018: 571,385,237)ordinary shares of 1p each
5,714
5,714
5,714
5,714
The Company has one class of ordinary share which carries no rights to fixed income.
18
SHARE BASED PAYMENTS
The Group currently uses a number of equity settled share plans to incentivise to its Directors and employees.
The Group operates four share plans:
· The Fulham Shore Enterprise Management Incentive ("EMI") Share Option Plan;
· The Fulham Shore Unapproved Share Option Plan ("Unapproved Plan");
· The Fulham Shore Company Share Option Plan ("CSOP"); and
· The Fulham Shore Share Incentive Plan ("SIP")
The Group's Share Plans provide for a grant price equal to the market price of the Company shares on the date of grant. The vesting period on all Share Plans except the SIP is 3 years with an expiration date 7 to 10 years from the date of grant. Furthermore, share options are forfeited if the employee leaves the Group before the options vest unless forfeiture is waived at the discretion of the Remuneration Committee. For the SIP, the vesting period ranges from 1 day to 3 years with an expiration date 10 years from the date of grant. For the initial grant under the SIP, the shares are not forfeited if the employee leaves the Group before vesting. On all schemes, there are no other material vesting conditions.
The charge recorded in the financial statements of the Group in respect of share-based payments is £138,000 (2018: £616,000).
The Fulham Shore EMI, Unapproved Plan and CSOP
Outstanding share options under The Fulham Shore EMI, The Fulham Shore Unapproved Share Option Plan and The Fulham Shore CSOP to acquire ordinary shares of 1 pence each as at 31 March 2019 are as follows:
Year ended 31 March 2019 '000
Year ended 25 March 2018 '000
At the beginning of the year
62,633
60,608
Granted during the year
3,800
2,950
Lapsed during the year
(2,625)
(925)
At the end of the year
63,808
62,633
18
SHARE BASED PAYMENTS (continued)
Weighted average exercise price
Year ended 31 March 2019 £
Year ended 25 March 2018 £
At the beginning of the year
0.10
0.09
Granted during the year
0.10
0.18
Lapsed during the year
(0.16)
(0.18)
At the end of the year
0.09
0.10
Outstanding and exercisable share options to acquire ordinary shares of 1 pence each as at 31 March 2019 under various Group share plans are as follows:
For the year ended 31 March 2019
Options outstanding
Options exercisable
Range of exercise prices
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
EMI
£0.02
2,232
0.0200
11
2,232
0.0200
11
£0.05
2,779
0.0500
23
2,779
0.0500
23
£0.06
9,440
0.0600
31
9,440
0.0600
31
14,451
0.0519
26
5,011
0.0519
26
Unapproved
£0.05
554
0.0500
23
554
0.0500
23
£0.06
13,805
0.0600
31
13,805
0.0600
31
£0.1015
1,792
0.1015
111
£0.11
24,023
0.1100
37
24,023
0.1100
37
£0.17625
1,185
0.1763
99
£0.1775
162
0.1775
95
-
-
-
£0.1825
1,692
0.1825
87
-
-
-
43,213
0.0988
42
38,382
0.0596
35
CSOP
£0.1015
1,808
0.1015
111
£0.17625
1,065
0.1763
99
£0.1775
638
0.1775
95
-
-
-
£0.1825
2,633
0.1825
87
-
-
-
6,144
0.1802
97
-
-
-
18
SHARE BASED PAYMENTS (continued)
For the year ended 25 March 2018
Options outstanding
Options exercisable
Range of exercise prices
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
EMI
£0.02
2,232
0.0200
23
2,232
0.0200
23
£0.05
2,779
0.0500
35
2,779
0.0500
35
£0.06
9,440
0.0600
43
9,440
0.0600
43
14,451
0.0519
38
5,011
0.0519
38
Unapproved
£0.05
554
0.0500
35
554
0.0500
35
£0.06
13,805
0.0600
43
13,805
0.0600
43
£0.11
24,673
0.1100
49
-
-
-
£0.17625
1,285
0.1763
111
£0.1775
162
0.1775
107
-
-
-
£0.1825
2,064
0.1825
99
-
-
-
42,543
0.0988
50
14,359
0.0596
35
CSOP
£0.17625
1,465
0.1763
111
£0.1775
738
0.1775
107
-
-
-
£0.1825
3,436
0.1825
99
-
-
-
5,639
0.1802
103
-
-
-
During the year ended 31 March 2019, the market price of ordinary shares in the Company ranged from £0.0910 (2018: £0.0900) to £0.1288 (2018: £0.2238). The share price as at 31 March 2019 was £0.1125 (2018: £0.0935).
The fair value of the options is estimated at the date of grant using a Black-Scholes valuation model.
Expected life of options used in the model is based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
18
SHARE BASED PAYMENTS (continued)
Expected volatility was determined by calculating the historical 90 days volatility of the Group's share price over the previous 180 days. The inputs to the Black Scholes model were as follows:
Year ended 31 March 2019
Year ended 25 March 2018
Weighted average expected life
3 years
3 years
Weighted average exercise price
10.15 pence
17.625 pence
Risk free rate
0.50%
0.50%
Expected volatility
69.8%
34.1%
Expected dividends
-
-
The Fulham Shore SIP
The Fulham Shore SIP was introduced during the year ended 27 March 2015. Outstanding ordinary shares of 1 pence each granted under The Fulham Shore SIP as at 31 March 2019 are as follows:
Year ended 31 March 2019 '000
Year ended 25 March 2018 '000
At the beginning and end of the year
591
591
For the year ended 31 March 2019
SIP shares outstanding
SIP shares exercisable
Range of exercise prices
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
Nil
591
-
73
591
-
73
591
-
73
591
-
73
18
SHARE BASED PAYMENTS (continued)
For the year ended 25 March 2018
SIP shares outstanding
SIP shares exercisable
Range of exercise prices
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
Number of shares '000
Weighted average exercise price £
Weighted average remaining contractual life months
Nil
591
-
85
591
-
85
591
-
85
591
-
85
The fair value of the SIP shares is estimated at the date of grant using a Black-Scholes valuation model.
19
NOTE TO CASH FLOWS STATEMENTS
Reconciliation of net cash flows from operating activities
Group
Parent
Year ended 31 March 2019
Year ended 25 March 2018
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
£'000
£'000
Profit/(loss) from continuing operations
720
(150)
(878)
(1,566)
Loss from discontinued operations
-
(415)
-
-
Profit/(loss) for the year
720
(565)
(878)
(1,566)
Income tax expense
714
27
150
61
Profit/(loss) before tax
1,434
(538)
(728)
(1,505)
Finance income
(8)
(2)
(468)
(465)
Finance costs
327
254
392
312
Operating profit/(loss) for the year
1,753
(286)
(804)
(1,658)
Adjustments
Depreciation and amortisation
5,144
4,575
34
31
Impairment
210
1,062
-
1,004
Loss on disposal of fixed assets
27
63
-
-
Share based payments expense
138
616
14
188
Cost of acquisition
-
-
-
-
Operating cash flows before movements in working capital
7,272
6,030
(756)
(435)
Increase in inventories
(274)
(438)
-
-
(Increase)/decrease in trade and other receivables
(349)
(719)
18
49
Increase/(decrease) in trade and other payables
491
63
425
(123)
Cash generated from/(used in) operations
7,140
4,936
(313)
(509)
Income taxes paid
(1,008)
(414)
-
-
Net cash flow from operating activities
6,132
4,522
(313)
(509)
19
NOTE TO CASH FLOWS STATEMENTS (continued)
Changes in liabilities from financing activities
Cash and Cash Equivalents
Borrowings due within 1 year
Borrowings due after 1 year
Total
£'000
£'000
£'000
£'000
Net debt as at 26 March 2017
271
(180)
(6,000)
(5,909)
Cash flows
88
180
(6,350)
(6,082)
Net debt as at 25 March 2018
359
-
(12,350)
(11,991)
Cash flows
1,476
-
1,110
2,586
Net debt as at 31 March 2019
1,835
-
(11,240)
(9,405)
20
COMMITMENTS UNDER OPERATING LEASES
The Group had aggregate minimum lease payments under non-cancellable operating leases which fall due as follows:
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Land and buildings
within one year
6,697
6,043
136
136
in two to five years
24,246
22,652
123
261
after five years
47,271
48,711
-
-
78,214
77,406
259
397
Others
within one year
60
21
-
-
60
21
-
-
78,274
77,427
259
397
Included above are certain annual lease commitments relating to a subsidiary company that have been guaranteed by the parent company.
Operating lease payments for land and buildings represent rent payable by the Group for a restaurant property. Leases either negotiated as a new lease or acquired through lease assignment have an average term of 20 years and rentals are fixed for an average of 5 years.
21
CAPITAL COMMITMENTS
The Group capital expenditure contracted for but not provided in the financial statements as follows:
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Committed new restaurant builds
1,040
-
-
-
22 RELATED PARTY DISCLOSURES
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group is provided in the Report on Directors' Remuneration, and in note 3. Details of share options granted to Directors are also shown in the Report on Directors' Remuneration.
Other related party transactions
During the year, the Group provided restaurant management or operation services to the following companies in which DM Page and NAG Mankarious are directors and shareholders:
Amounts invoiced (including VAT)
Group
Parent company
Year ended 31 March 2019
Year ended 25 March 2018
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
£'000
£'000
Wild Food Ideas Limited
1
4
-
-
1
4
-
-
Amounts outstanding at year end
Group
Parent company
31 March 2019 £'000
25 March 2018 £'000
31 March 2019 £'000
25 March 2018 £'000
Wild Food Ideas Limited
-
-
-
-
-
-
-
-
22
RELATED PARTY DISCLOSURES (continued)
During the year, the Group was invoiced £84,000 (2018: £83,000) for the services of NJ Donaldson by London Bridge Capital Partners LLP, a company in which NJ Donaldson is a director, and the balance outstanding at 31 March 2019 was £17,000 (2018: £33,000).
During the year, the Group was invoiced £6,000 (2018: £146,000) for franchise fees and products by Bukowski Limited, a company in which NAG Mankarious is a director and DM Page and NAG Mankarious are shareholders. The balance outstanding at 31 March 2019 was £Nil (2018: £19,000). The Group also acquired equipment of £Nil (2018: £18,000) from Bukowski Limited and the balance owed by the Group outstanding at 31 March 2019 was £Nil (2018: £18,000)
During the year, the Group was invoiced £857,000 (2018: £936,000) for restaurant management services by Room 307 Limited, a company in which NAG Mankarious and NCW Wong are directors and DM Page, NAG Mankarious and NCW Wong are shareholders. The balance outstanding at 31 March 2019 was £249,000 (2018: £266,000).
During the year, the Group was invoiced £132,000 (2018: £171,000) for information technology services by Restaurants IT Limited, a company in which NCW Wong is a director and DM Page, NAG Mankarious and NCW Wong are shareholders. The balance outstanding at 31 March 2019 was £49,000 (2018: £61,000).
During the year, the Group credited £2,000 (2018: invoiced £86,000) in rent relating to a property leased to Fixed Restaurants Limited, a company in which DM Page, NAG Mankarious, NJ Donaldson and NCW Wong are directors and indirect shareholders and MA Chapman is an indirect shareholder. The balance outstanding as at 31 March 2019 owed to Fixed Restaurants Limited was £37,000 (2018: £Nil).
During the year, the Group and Company invoiced £12,000 (2018: £3,000) for desk space provided to and £76,000 (2018: £Nil) in rent relating to a property leased to Meatailer Limited, a company in which DM Page and NAG Mankarious are directors and shareholders and NJ Donaldson and NCW Wong are shareholders. The balance outstanding as at 31 March 2019 was £21,000 (2018: £Nil).
Transactions between the Company and its subsidiaries
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. During the year, the Company provided restaurant management services to the following subsidiaries:
Amounts invoiced (including VAT)
Parent company
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
10DAS Limited
9
57
The Real Greek Food Company Limited
615
603
Franco Manca 2 UK Limited
791
806
1,415
1,466
22
RELATED PARTY DISCLOSURES (continued)
During the year the Company also loaned amounts to the following subsidiaries:
Amounts loaned/(repaid)
Parent company
Year ended 31 March 2019
Year ended 25 March 2018
£'000
£'000
10DAS Limited
(245)
331
The Real Greek Food Company Limited
(1,489)
1,215
Franco Manca 2 UK Limited
368
4,423
(1,366)
5,969
Amounts outstanding at year end
Parent company
31 March 2019 £'000
25 March 2018 £'000
10DAS Limited
(16)
1,233
The Real Greek Food Company Limited
(2,464)
(975)
Franco Manca 2 UK Limited
11,863
11,494
9,383
11,752
The Company was a legal guarantor and a party to an agreement in which 10DAS Limited during the year, a subsidiary company, entered into a lease of a restaurant space. The total potential aggregate minimum lease payments under this guarantee at the end of the year were £Nil (2018: £1,462,000). This commitment is included in the Group disclosure in note 20. Following the year end, the guarantee was released.
23 DISCONTINUED OPERATION AND NON-CURRENT ASSETS CLASSED AS HELD FOR SALE
During the period, the Group disposed of the property and business of the Bukowski franchise at D'Arblay Street, Soho, London. An impairment loss was recognised in the year ended 25 March 2018 on reclassification of the property, plant and equipment as held for sale.
Year ended 25 March 2018
£'000
Revenue
617
Expenses
(850)
Operating loss
(233)
Net finance costs
-
Loss before taxation
(233)
Income taxation expense
13
(220)
Impairment
(195)
Loss from discontinued operations attributable to the owners of the company
(415)
Cash flows from discontinued operations included in the consolidated cash flow statement are as follows:
Net cash used in operating activities
(301)
Net cash used in investing activities
18
(283)
Property, plant and equipment held for sale
329
The impairment charge above related to the impairment of the property, plant and equipment for the D'Arblay Street restaurant business. The Group expected the fair value less costs to be approximately £329,000. There were no liabilities expected to be held for sale. The cash received from the sale during the year was £329,000.
24 SUBSEQUENT EVENTS
On 15 July 2019, the Company entered into a conditional sale and purchase agreement for the purchase of the approximately 1% minority interests in its two subsidiaries: Kefi Limited ("Kefi"), which owns the subsidiary that owns and operates The Real Greek; and Franco Manca Holdings Limited (formerly Rocca Limited) ("FM Holdings"), which owns the subsidiary that owns and operates Franco Manca, for a total maximum consideration of up to £650,658, payable in cash. The purchase of the minority interests is subject to the approval of shareholders at the Company's 2019 annual general meeting.
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