REG - Hostmore PLC - Audited Annual Results and Notice of AGM
03/05/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240503:nRSC0917Na&default-theme=true
RNS Number : 0917N Hostmore PLC 03 May 2024
NOT FOR RELEASE, PUBLICATION, OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY IN, INTO, OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of MAR
3 May 2024
Hostmore plc
AUDITED ANNUAL RESULTS AND NOTICE OF AGM
Transitional year with turnaround successfully implemented in H1, benefitting
results in H2
Announced proposed transformational acquisition of TGI Fridays, Inc.
subsequent to period end
Hostmore plc ("Hostmore" or the "Company" and, together with its subsidiaries,
the "Group"), the hospitality business focused on 'TGI Fridays' and 'Fridays
and Go', is pleased to announce its audited annual results for the 52 week
period ended 31 December 2023 ("FY23").
Key highlights of FY23
· Transitional year included appointment of new senior leadership,
implementation of operating turnaround, and introduction of revised capital
allocation policy
· Total revenue of £190.7 million in comparison to £195.7 million in
2022
· Cost reductions achieved in line with forecast, benefitting FY23 by
£6.2 million, principally in H2
· Full year annualised expense savings of £8.4 million on track to be
achieved in FY24
· Confirms H2 2023 EBITDA (FRS102) of £5.6 million, with an EBITDA
profit being realised in each of the six months of the H2 2023 period
· Loss from operations £11.1 million, greatly improved from £95.8
million in 2022
· Basic loss per share of 22.0p (2022: 81.0p)
· Closing FY23 net debt FRS102 of £25.1 million, improved from £31.3
million at end of H1 2023 ahead of forecast
· New store openings deferred for FY23 to end FY24, saving approximately
£15 million in cash expenditure
· Successful operational and portfolio management of loss-making stores
reducing annual EBITDA losses of £4.2 million to <£0.5 million run rate
at end of 2023
· Continued improvement in Guest Opinion Score and Net Promoter Score
resulting from renewed focus on guest experience
Events subsequent to period end
· In addition to new store opening deferrals referred to above, further
extended deferral of requirement for new store openings under franchise
agreement until FY26, saving a further £4.5 million of cash expenditure in
FY25
· Reached agreement to exit two stores which contributed an aggregate
EBITDA loss of £0.5 million in FY23
· Maturity of borrowing facilities with existing lenders extended from
1 January 2025 to 1 January 2026
· Announced proposed all-share acquisition of TGI Fridays, Inc., with
anticipated completion in Q3 2024
Financial summary
The Group's trading results for the 52 week period ended and at 31 December
2023 are summarised below.
52 weeks ended / and at 31 December 2023 * Restated
52 weeks ended /and at
1 January 2023
Total revenue £190.7m £195.7m
Gross profit £147.7m £150.6m
Loss from operations (£11.1m) (£95.8m)
Group EBITDA ⁽¹⁾ £22.2m £31.1m
Group EBITDA FRS102 £1.6m £11.3m
Basic loss per share (22.0p) (81.0p)
Adjusted basic (loss)/earnings per share ⁽²⁾ (7.7p) 3.4p
Net debt IFRS16 (£166.0m) (£178.4m)
Net bank debt FRS102 ⁽³⁾ (£25.1m) (£27.7m)
Cashflows from operating activities £22.2m £28.8m
Notes
⁽¹⁾ Group EBITDA reflects the underlying trade of the overall
business. It is calculated as statutory operating profit/(loss) adjusted for
net interest and bank arrangement fees, tax, depreciation, net impairments,
dilapidations, gain on disposal of property, plant and equipment and right of
use assets and share based charges.
⁽²⁾ Adjusted basic (loss)/earnings per share represents the net
(loss)/profit after tax before net impairments and exceptional items, divided
by the number of shares in issue.
⁽³⁾ Net bank debt FRS102 is borrowings from bank facilities,
excluding the unamortised portion of loan arrangement fees and leases, less
cash and cash equivalents.
* Refer to note 5. In the 52 week period ended 1 January 2023, basic loss per
share has been increased by 3.2p from previously reported 77.8p to 81.0p,
adjusted basic earnings per share has been decreased by 0.2p from previously
reported 3.6p to 3.4p. At 1 January 2023, total liabilities have increased by
£4.0m from previously reported £209.8m to £213.8m, and net debt has
increased by £2.1m from previously reported £176.3m to £178.4m.
Operational highlights
2023 was a year in which the whole Hostmore team demonstrated remarkable
resilience with the macro-economic uncertainty and fluctuating consumer
behaviour. The year was one of two halves with the first half (H1) being a
transitional period focusing on senior leadership changes and full operational
turnaround, with the second half (H2) showing a significant profit improvement
over H1. Our positive 2023 Christmas trading period was a further improvement
on this trend with like-for-like revenue +4% compared to December 2022.
Cash and Debt financing
On 26 April 2024, the Group entered into a bank facility amendment agreement
with its lending banks. Under the terms of this agreement, amongst other
matters, certain covenants in the previous facility agreement were relaxed and
amended to align with the Group's updated business plan. The term of the
facility was also extended a further year to 1 January 2026.
Continued focus on improving customer and staff proposition
Guest scores for TGI Fridays progressed throughout the year and ended
extremely positively. We were consistently ranked within the top two casual
dining brands in the UK for food and drink quality, coupled with outstanding
service (Source: CGA research and insights company). Our Net Promoter Score
continued this and ended the year at 48 - a significant increase from the 2022
score of 30. This is a superb result. We also finished the 2023 year with a
Trip Advisor score for TGI Fridays of 4.5, maintaining our 2022 rating, with
guests notably scoring TGI Fridays highly on 'value for money'.
Current trading and outlook
· Revenue in Q1 2024, on a like-for-like ("LFL") basis versus Q1 2023,
declined by 7%, due principally to reduced consumer demand across the sector
· Q1 2024 EBITDA (FRS102) was £0.3 million, representing an
improvement of £3.2 million on Q1 2023. Each month of the quarter showed
increased improvement versus prior year, with March 2024 being £1.8 million
ahead of the same period in FY23
· Consolidated net bank debt at the end of Q1 2024 was £26.1 million,
in line with expected seasonality and consistent with the forecasted position
for the end of FY24
Stephen Welker, Chair of Hostmore, said: "2023 was a transitional year for
Hostmore during which we successfully implemented a turnaround of the
business. The turnaround reduced costs, deferred cash outlays for new store
openings, and improved the operations of our existing stores, while
introducing a revised capital allocation policy to focus on high ROI organic
growth initiatives and prioritising the full repayment of our borrowings and
initiating shareholder distributions. I would like to thank Julie McEwan our
CEO, Matthew Bibby our CFO, and their colleagues both in store and at
executive levels, for their continued commitment to Hostmore.
"Following the period end, we announced a proposed all-share acquisition of
TGI Fridays, Inc., the Company's franchisor which operates through franchising
and licensing agreements in 44 markets and a network of company-owned stores
in the US. Subject to completion, the transaction will give the Group
increased scale, flexibility and re-rating potential that will allow us to
accelerate our existing strategy of prioritising debt reduction and enhancing
the scope for shareholder returns."
Results presentation
The Company will publish an informational presentation to the Investor
Relations page of the Hostmore website later today.
The abridged financial statements are not the Company's statutory financial
statements. All statutory financial statements of the Company in previous
years had unqualified audit reports and have been delivered to the registrar
of companies. In the Group's base case forecasts, the Group has sufficient
liquidity from its restated facilities to finance its operations for the next
fifteen months to the end of July 2025, including the requisite compliance by
the Group with its banking covenants and debt repayments as they come due
under those facilities. The Directors are confident that the business will
continue to trade for a period of at least 15 months following the signing of
these financial statements and therefore that it is appropriate to prepare the
financial statements on a going concern basis. The audit report for the period
ended 31 December 2023 contains an emphasis of matter section relating to the
Group's forecasts, highlighting a material uncertainty under a severe but
plausible downside scenario, the group would breach the quarterly cumulative
EBITDA covenant and the Net debt to EBITDA covenants in Quarter 4 FY 2024. In
addition, in the severe but plausible model, there is uncertainty over the
adequacy of liquidity from Quarter 4 FY 2024. The audit report is not
qualified. Full detail of the going concern basis of preparation is provided
in note 4.1 to the non-statutory financial statements.
Hostmore has also published the following documents:
· Annual Report and Financial Statements for the 52 week period ended
31 December 2023 (the "Annual Report and Financial Statements 2023").
· Notice of 2024 Annual General Meeting (the "Notice of AGM").
In accordance with Listing Rule 9.6.1, a copy of each of these documents has
been uploaded to the National Storage Mechanism and is available for viewing
shortly at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fdata.fca.org.uk%2F%23%2Fnsm%2Fnationalstoragemechanism&data=05%7C02%7CAndrew.Blurton%40hostmoregroup.com%7Cfd622c140af549c2014708dc69a73378%7C86ae7907026b4c0ea860bb91e4fc901d%7C0%7C0%7C638501414067117456%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=lgLyePJtdXUoB3r7l4J8%2B7LRzSRjmZgFe8H4iep0Hok%3D&reserved=0)
The Annual Report and Financial Statements 2023 and the Notice of AGM are also
available on the Company's website:
https://www.hostmoregroup.com/results-reports-presentations
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.hostmoregroup.com%2Fresults-reports-presentations&data=05%7C02%7CAndrew.Blurton%40hostmoregroup.com%7C7daab53c8d1a40d89a2208dc6880d35c%7C86ae7907026b4c0ea860bb91e4fc901d%7C0%7C0%7C638500149704051297%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=0oKYlwqaeoW4UKWG1Q77E6%2BBl6lnNknPB0TjLbr7lBQ%3D&reserved=0)
The 2024 Annual General Meeting of the Company (the 'AGM') will be held on
Monday 3 June 2024 at 10.30 am. at the offices of Herbert Smith Freehills LLP,
Exchange House, 12 Primrose Street, London, EC2A 2EG. Full details of the AGM
(including how to participate in the AGM) and the resolutions that will be put
to shareholders are set out in the Notice of AGM.
In conformity with DTR 6.3.5(1A), the regulated information required under DTR
6.3.5 is available in unedited full text within the Annual Report and
Financial Statements 2023 as uploaded and available on the National Storage
Mechanism and on the Company's website as noted above.
ENDS
Enquiries
Hostmore plc
Matthew Bibby, Chief Financial
Officer Email:
enquiries@hostmoregroup.com (mailto:enquiries@hostmoregroup.com)
Dentons Global Advisors
Jonathon Brill, James
Styles
Tel: +44 (0)20 7664 5095
Email: Hostmore@dentonsglobaladvisors.com
(mailto:Hostmore@dentonsglobaladvisors.com)
CHIEF EXECUTIVE'S STATEMENT
Overview
2023 was a year in which the whole Hostmore team demonstrated remarkable
resilience with the macro-economic uncertainty and fluctuating consumer
behaviour, as headwinds continued. The year was one of two halves for
Hostmore. Half year one (H1) was a transitional period focusing on senior
leadership changes, including me joining the board as CEO. It also saw the
implementation of a full operating turnaround, after a drop in revenue,
supported by a revised capital allocation policy.
Half year two (H2) saw revenue flat vs 2022, representing a significant
improvement vs H1, with H1 2023 revenue of £93.6m and H2 2023 revenue of
£97.0m. Our positive 2023 Christmas trading period was a further improvement
on this trend with like-for-like revenue +4% compared to December 2022. This
was the best Christmas trading for Hostmore since 2019.
Strategy
Our strategic business measures are yielding promising results, with each
month of H2 FY23 producing positive EBITDA returns. We have consolidated our
approach, building on the evolution of our journey outlined in the FY22
results. The progress includes organic growth and cost reduction initiatives,
menu price increases and revised capital allocation strategies, all
contributing to our improved performance across the TGI estate.
Our Dine-In experience was our primary focus for 2023 and is continuing to be
so in 2024. This has produced further menu evolution, underpinned by quality,
relevance and simplicity. 2023 saw the iconic "TGI" put back into Fridays,
regaining our brand equity. TGI Fridays has always been associated as a place
of fun and celebrations where delicious food and drinks can be enjoyed. It is
pleasing that these elements of investment in our menus and service
improvements have delivered a positive impact on the overall guest experience
as evidenced by our guests' feedback. We have sought to achieve this by
maintaining pricing discipline, as demonstrated by the roll out of our value
proposition 'Kids Eat Free' which acknowledges the pressures on our core
family disposable income. This has been received extremely positively and
continues to be a component of our offering. To complement this and widen our
appeal to new audiences, we continue to embed our 'Raising the Bar' strategy.
This has been a headline initiative for TGI Fridays as we seek to build on
Fridays' heritage and values. This has included introducing fun and innovative
offers and concepts, such as TGI Fridays Bottomless Brunches, Cocktail
Masterclasses, and new celebration packages, showcasing the very best of our
brand. This has attracted many new guests
Dine out remains an important channel to our consumers. As consumer spending
tightened during 2023, we maintained our market share of delivery by
partnering with three delivery companies: Deliveroo, Just Eat and Uber Eats.
The alignment of our dine out platform during 2023 has enabled us to acquire
new guests through a strategic approach. Our delivery metrics have
significantly improved, meaning we now have more of our restaurants being able
to advertise on our aggregators' main carousel, meaning our exposure has
increased in the delivery market.
Our brand vision is to regain our position in the UK as the Original American
cocktail bar and restaurant famous for everyday celebrations.
Our brand objective is to grow this perception with our core target of
families aged 25-44. We are working on engaging with a new younger audience of
18-24s to underpin our long term sales growth. We leverage our guest
touchpoints through digital, store, social and PR to market our brand
externally and engage with existing and new audiences.
We believe in putting the guest at the heart of our brand experience. Our
loyalty strategy is embedded in our marketing and guest experience. Our
'Rewards Stripes' programme delivers exclusivity to our guests through
valuable offers and experiences. We see high guest engagement and continue to
see significant growth.
In 2023 we launched a new website experience which significantly improved the
quality of the guest journey. Our digital platforms via online, social media
and the rewards app gives guests the opportunity
to interact with us across multiple platforms before, during and after their
visit to our restaurants. In 2024 we are continuing to develop this experience
with the aim of a seamless end-to-end journey and giving us a single customer
view of our guests.
This has included a focus on trialled, scalable, low- risk organic growth
initiatives with promotional activities, upselling efforts, with strategic
partnerships to enhance bookings. The success of initiatives such as our
2-for-1 cocktail offer under the 'Raising the Bar' project highlights our
commitment to providing a compelling guest experience and driving revenue and
margin growth.
Digital transformation
Considering the existing UK economic pressures, securing consumer spend is
increasingly challenging across the casual dining sector. TGI Fridays is no
exception to this. By taking a data-led approach, we are seeking to enhance
the guest experience by leveraging the power of digital to establish a
competitive advantage. This is part of our strategy to head towards a single
guest view that informs, enhances, and grows our guest proposition. I look
forward to reporting further during this year on the progress of this digital
transformation programme, accompanied by highly focused marketing activity
around our refreshed TGI Friday's brand. This is leveraging our existing
heritage and loyalty with guests, all of which consolidates the brand and the
TGI Friday's experience more effectively.
Guest feedback
While trading during 2023 remained challenging, our guest sentiment continued
to improve with engaged and motivated restaurant teams, fully committed to
delivering those truly memorable TGI Fridays experiences. Guest scores for TGI
Fridays progressed throughout the year and ended extremely positively. We were
consistently ranked within the top two casual dining brands in the UK for food
and drink quality, coupled with outstanding service (Source: CGA research and
insights company). Our Net Promoter Score continued this and ended the year at
48 - a significant increase from the 2022 score of 30. This is a superb
result.
We also finished the 2023 year with a Trip Advisor score for TGI Fridays of 4.5, maintaining our 2022 rating, with guests notably scoring TGI Fridays highly on 'value for money'. This was as we also achieved significant improvements around speed of service, food quality and guest interaction, as well as confirming that our promotions were well received. We recognised throughout 2023 that our guests were looking for more experiential occasions, as well as personalisation, while they keep an eye on costs as they continued to expect value for their money.
People and Culture
Improving as an employer of choice, the Hostmore business continues to be
significantly underpinned by a strong family culture where every team member
plays a part in our recipe for success. Again, I pay tribute to all our team
members, in both our support centre and every one of our restaurants. Being an
employer of choice in the hospitality sector is vitally important to us and we
offer every team member the opportunity to grow and develop.
Our refreshed career pathway provides team members structured development
opportunities at every level, from apprenticeships, Head Chef certifications,
through to our General Manager 'Aspire' development programme. In 2023, 45
team members enrolled on our development programmes and a further 42 team
members started apprenticeship schemes. The focus on further intensive bar
training to certify Master Bartenders continues to support our "Raising the
Bar" strategy. Also, our Deputy General Manager 'Inspire' development
programme has a cohort of 14. This ensures that succession planning is a key
part of our culture of retaining and motivating the best people within our
business and rewarding by promoting from within.
We remain committed to building a leaner and more focused organisation. Cost base efficiencies have been achieved throughout 2023, with both our operations teams and support centre being restructured during the year. We are continuing to progress this during 2024.
Supply Chain
With food supply improving during 2023, we worked closely with our business
partners to ensure we secured quality products whilst proactively managing
inflationary factors. Our multiple sourcing strategies proved to be very
successful, as we limited our supply chain risk. As a result, we incurred food
inflation of just 3% over the year to December 2023, when our sector saw food
inflation of 13.8% by December (Prestige Purchasing 2023 Foodservice
Inflation, published December 2023). The value of these mitigation strategies
against the market norm delivered a saving of £3.5m to the Group.
Inflation in the beverage category increased significantly over 2023 and
resulted in our costs increasing by 9%, against a sector forecast of 12%. Half
of our increases occurred in our soft drinks, with significant increases due
to soaring prices on energy, glass, sugar, fruit juices and commodities. We
also experienced increases in the price of spirits and beers, as the industry
grappled with increased costs for packaging, transport, glass and CO2
management.
The Group's procurement team progressed our 2022 strategy to reduce complexity across the Group. Significant cost pressures in the logistics market saw our logistics spend increase by 30% from September 2023. These increased costs were in line with market rates, confirming that we had benefited from rates significantly below market norms for 2022 and the majority of 2023.
New restaurant openings and the creation of Fridays and Go
We set a clear strategy for 2023 to focus on delivering improved performance
across the existing TGI Fridays estate, following a previous management focus
on expansion during 2022. As a management team we committed to deferring new
site openings until 2026.
This strategy remains as we continue with a more sustainable approach of organically growing the existing business. In H1 2023 and extended in H1 2024, in contrast to prior year requirements, our Franchisor agreed for Hostmore to not increase its restaurant portfolio for 2024 and 2025. Our 'Fridays & Go' quick service restaurant (QSR) offering is an exciting proposition still in trial stage, with the potential to offer valuable diversification for future growth.
Conclusion
I am confident in our ability to drive growth and profitability. This will be
achieved by accelerating the many strategic initiatives that have underpinned
Hostmore's resilience, fuelled by a strong leadership team and a relentless
focus on delivering value for our guests. As we navigate challenges and
capitalise on opportunities, we remain committed to achieving long- term
success and creating value for all stakeholders in 2024 and beyond.
Julie McEwan
Chief Executive Officer
3 May 2024
Calculation of key financial performance indicators and alternative performance measures
The Board uses several key performance indicators ("KPIs") to track the
financial and operating performance of its business. These measures are
derived from the Group's internal systems. Some of the KPIs are alternative
performance measures ("APMs") that are not defined or recognised under IFRS.
They may not be comparable to similarly titled measures used by other
companies and should not be considered in isolation or as a substitute for
analysis of the Group's operating results reported under IFRS. The following
information on KPIs and APMs includes reconciliations to the nearest IFRS
measures where relevant.
Sales
Like-for-like ("LFL") sales measure the performance of the Group on a
consistent year-on-year basis. The table below includes sites that were open
for all of 2022 for comparability and separately includes sites opened since
2022 or subsequently disposed of.
52 weeks 52 weeks
ended ended
31 December 1 January
2023 2023
£'000 £'000
LFL gross of VAT benefit in 2022 185,989 192,311
Less VAT benefit in 2022 - (2,664)
Net LFL 185,989 189,647
Additions since January 2022 4,294 2,064
Disposals since January 2022 606 1,453
Deferred revenue provisions (227) (108)
Total net of VAT benefit in 2022 190,662 193,056
Add VAT benefit in 2022 - 2,664
Total 190,662 195,720
In Q1 2022 the VAT rate was lowered in restaurants such as those operated by
the Group to 12.5% before returning to 20% in Q2 2022. The VAT benefit
adjustment reflects the benefit received in H1 2022 to provide fair
comparability with 2023 LFL sales. This is calculated from the net sales
across the period in FY22 when VAT was 12.5% and calculating what the net
sales would have been if VAT had been 20%. The difference is shown as the VAT
benefit.
EBITDA
EBITDA is the Group's earnings before net interest and bank arrangement fees,
tax, depreciation, and other non-cash items.
*Restated
52 weeks 52 weeks
ended ended
31 December 1 January
2023 2023
£'000 £'000
Loss before tax (25,529) (108,346)
Net interest payable and bank arrangement fees 14,396 12,584
Depreciation 17,964 20,504
Net impairment of property, plant and equipment and right of use assets 17,768 30,601
Impairment of goodwill - 75,166
Release of dilapidations provision (465) -
Gain on disposal of property, plant and equipment (133) -
Gain on lease modification (1,951) -
Share based payment charge 141 581
EBITDA 22,191 31,090
* Refer to note 5. In the 52 week period ended 1 January 2023 loss before tax
has been increased by £4,001k from previously reported £104,345k to
£108,346k, net interest payable and bank arrangement fees have been increased
by £106k from previously reported £12,478k to £12,584k, depreciation has
been increased by £165k from previously reported £20,339k to £20,504k, net
impairment of property, plant and equipment and right of use assets has been
decreased by £578k from previously reported £31,179k to £30,601k and
impairment of goodwill has been increased by £4,308k from previously reported
£70,858k to £75,166k. This has had no net effect on EBITDA for the 52 weeks
ended 1 January 2023 as previously reported of £31,090k.
EBITDA FRS102
EBITDA FRS102 is the Group's EBITDA under IFRS, adjusted for rent paid to
lessors and rent received from subleases.
52 weeks 52 weeks
ended ended
31 December 1 January
2023 2023
£'000 £'000
EBITDA 22,191 31,090
Less rent paid to lessors (20,644) (19,931)
Add rent received from subleases 37 101
EBITDA FRS102 1,584 11,260
Free cash flow
In the prior period, a table of Free cash flow was included in key performance
indicators and alternative performance measures calculations. A more detailed
KPI analysis of movement in Cashflow and Net debt is included in the Chief
Financial Officer's Review in the Annual Report published today and
therefore the Free cash flow table has not been included here
Net debt
Net debt is the Group's long-term borrowings (excluding issue costs) and lease
liabilities less cash and cash equivalents at each period end.
*Restated
31 December 1 January
2023 2023
£'000 £'000
Gross bank loans and borrowings (36,100) (36,800)
Lease liabilities (140,925) (150,658)
Cash & cash equivalents 10,989 9,091
Net debt (166,036) (178,367)
* Refer to note 5. In the 52 week period ended 1 January 2023 lease
liabilities have been increased by £2,103k from previously reported
£148,555k to £150,658k and net debt has been increased by £2,103k from
previously reported £176,264k to £178,367k.
Net debt FRS102
Net debt calculated in accordance with FRS102, is the Group's long-term
borrowings (excluding issue costs) less cash and cash equivalents at each
period end.
31 December 1 January
2023 2023
£'000 £'000
Gross bank loans and borrowings (36,100) (36,800)
Cash & cash equivalents 10,989 9,091
Net debt (25,111) (27,709)
% Cash conversion
In the prior period, a table of % Cash conversion was included in key
performance indicators and alternative performance measures calculations. A
more detailed analysis of movements in Cashflow and Net debt is included in
the Chief Financial Officer's Review in the Annual Report published today and
therefore the % Cash conversion table has not been included here.
Return on capital employed (ROCE)
ROCE is calculated as EBITDA divided by total assets less current liabilities.
*Restated
31 December 1 January
2023 2023
£'000 £'000
EBITDA 22,191 31,090
Total assets less current liabilities 140,112 186,064
ROCE 16% 17%
* Refer to note 5. In the 52 week period ended 1 January 2023 total assets
less current liabilities have been decreased by £2,049k from previously
reported £188,113k to £186,064k.
Consolidated statement of comprehensive income for the 52 week period ended 31 December 2023
*Restated
52 weeks 52 weeks
ended ended
31 December 1 January
2023 2023
Note £'000 £'000
Revenue 190,662 195,720
Cost of sales (42,959) (45,103)
Gross profit 147,703 150,617
Underlying administrative expenses* (141,173) (141,317)
Exceptional items - impairment of goodwill* - (75,166)
Administrative expenses (141,173) (216,483)
Impairment reversal of property, plant and equipment and right of use assets
11 5,570 5,712
Impairment of property, plant and equipment and right of use assets*
11 (23,338) (36,313)
Other operating income 105 705
Loss from operations (11,133) (95,762)
Finance income 219 78
Finance expense* 6 (14,615) (12,662)
Loss before tax (25,529) (108,346)
Tax (charge)/credit 7.1 (1,893) 6,801
Loss for the period (27,422) (101,545)
Total comprehensive expense (27,422) (101,545)
* Refer to note 5.
All operations are continuing operations.
There are no amounts recognised within other comprehensive income in the
current or prior period.
*Restated
52 weeks 52 weeks
ended ended
31 December 1 January
(Loss)/earnings per share in pence Note 2023 2023
Basic loss per share* 8 (22.0) (81.0)
Diluted loss per share* 8 (22.0) (81.0)
Adjusted basic (loss)/earnings per share* 8 (7.7) 3.4
Adjusted diluted (loss)/earnings per share* 8 (7.7) 3.3
* Refer to note 5. Adjusted basic and diluted loss per share excludes
impairments and exceptional items.
Consolidated statement of financial position at 31 December 2023
31 December *Restated
2023 1 January
£'000 2023
Note £'000
Assets
Non-current assets
Property, plant and equipment* 9 25,432 37,973
Right of use assets* 10 79,138 97,043
Goodwill* 13 70,813 70,813
Net investment in subleases 735 95
Deferred tax assets 7.2 9,981 12,801
Total non-current assets 186,099 218,725
Current assets
Inventories 1,390 1,464
Trade and other receivables 3,355 6,285
Current tax assets 918 740
Net investment in subleases 61 12
Cash and cash equivalents 10,989 9,091
Total current assets 16,713 17,592
Total assets 202,812 236,317
Liabilities
Non-current liabilities
Loans and borrowings 14 15,414 23,146
Lease liabilities* 12 124,442 135,213
Provisions 4,975 5,143
Total non-current liabilities 144,831 163,502
Current liabilities
Trade and other payables* 24,991 20,034
Contract liabilities 1,075 1,004
Loans and borrowings 14 20,019 13,295
Lease liabilities* 12 16,483 15,445
Provisions 132 475
Total current liabilities 62,700 50,253
Total liabilities 207,531 213,755
Net current liabilities (45,987) (32,661)
Net (liabilities)/assets (4,719) 22,562
* Refer to note 5.
31 December *Restated
2023 1 January
£'000 2023
£'000
Issued capital and reserves attributable to owners of the Company
Share capital 25,225 25,225
Share premium reserve 14,583 14,583
Merger reserve (181,180) (181,180)
Share based payment reserve 775 634
Retained earnings* 135,878 163,300
Total (accumulated losses)/equity (4,719) 22,562
* Refer to note 5.
Consolidated statement of changes in equity for the 52 week period ended 31 December 2023
Share premium reserve Share based
Share capital £'000 Merger reserve payment reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 3 January 2022 Comprehensive expense 25,225 14,583 (181,180) 53 265,345 124,026
for the 52 week period ended 1 January 2023
Loss for the period - - - - (97,544) (97,544)
Total comprehensive
expense for the 52 week period ended 1 January 2023
- - - - (97,544) (97,544)
Correction of error* - - - - (4,001) (4,001)
Total comprehensive expense for the 52 week period ended 1 January 2023
(restated)
- - - - (101,545) (101,545)
Contributions by and distributions to owners
Share purchases by Employee Benefit Trust
- - - - (500) (500)
Share based payment charge - - - 581 - 581
Total contributions by and distributions to owners
- - - 581 (500) 81
At 1 January 2023 25,225 14,583 (181,180) 634 163,300 22,562
* Refer to note 5.
Share capital Share premium reserve Merger reserve Share based Retained earnings Total accumulated losses
£'000 £'000 £'000 payment reserve £'000 £'000
£'000
At 2 January 2023 25,225 14,583 (181,180) 634 163,300 22,562
Comprehensive expense for the 52 week period ended 31 December 2023
Loss for the period - - - - (27,422) (27,422)
Total comprehensive expense for the 52 week period ended 31 December
2023
- - - - (27,422) (27,422)
Contributions by and distributions to owners
Share based payment charge - - - 141 - 141
Total contributions by and distributions to owners
- - - 141 - 141
At 31 December 2023 25,225 14,583 (181,180) 775 135,878 (4,719)
Consolidated statement of cash flows for the 52 week period ended 31 December
2023
Note 52 weeks ended 52 weeks
31 December 2023 ended
£'000 1 January
2023
£'000
Cash flows from operating activities 15 22,191 28,800
Movements in working capital:
Decrease/(increase) in trade and other receivables
2,961 (2,415)
Decrease in inventories 75 25
Increase/(decrease) in trade and other payables 5,561 (8,071)
(Decrease)/increase in provisions (49) 2,391
Cash generated from operations 30,739 20,730
Corporation taxes recovered/(paid) 748 (857)
Rental income from subleases 20 105
Net cash from operating activities 31,507 19,978
Cash flows from investing activities
Purchases of property, plant and equipment (4,721) (10,311)
Proceeds from sale of property, plant and equipment 121 -
Interest received 200 70
Net cash used in investing activities (4,400) (10,241)
Cash flows from financing activities
Repayment of bank borrowings (27,100) (18,000)
Payment of loan arrangement fees (954) -
Receipt of bank borrowings 26,400 10,500
Interest paid on bank borrowings (3,297) (2,291)
Share purchases by Employee Benefit Trust - (500)
Payment of lease liabilities (20,258) (22,435)
Net cash used in financing activities (25,209) (32,726)
Net cash increase/(decrease) in cash and cash equivalents 1,898 (22,989)
Cash and cash equivalents at the beginning of period 9,091 32,080
Cash and cash equivalents at the end of the period 10,989 9,091
Notes to the consolidated financial statements for the 52 weeks ended 31
December 2023
1. Reporting entity
Hostmore plc (the 'Company') is a public limited company incorporated and
domiciled in the United Kingdom. The Company's registered office is at
Highdown House, Yeoman Way, Worthing, West Sussex, BN99 3HH and the Company's
registered number is 13334853. These consolidated financial statements
comprise the Company and its subsidiaries (collectively the 'Group' and
individually 'Group companies'). The Group is primarily involved in the
development and operation of branded restaurants and bars and ancillary
activities.
2. Basis of preparation
The Group's consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standards and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards.
On 31 December 2020 EU-adopted IFRS was brought into UK law and became
UK-adopted international accounting standards, with future changes to IFRS
being subject to endorsement by the UK Endorsement Board. The consolidated
financial statements of the Group transitioned to UK-adopted international
accounting standards with effect from 3 January 2022.
The Group reports its results for the 52 week or 53 week period ending on the
nearest Sunday to 31 December. The results for 2023 are for the 52 weeks that
ended 31 December 2023 and those for the comparative period are for the 52
weeks ended 1 January 2023.
Details of the Group's accounting policies are included in the Hostmore plc
Annual Report and financial statements for the 52 week period ended 31
December 2023.
In preparing these financial statements, management has made judgements,
estimates and assumptions that affect the application of the Group accounting
policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognised prospectively.
3. Functional and presentation currency
These consolidated financial statements are presented in pounds sterling,
which is the Group's functional currency. All amounts have been rounded to the
nearest thousand pounds ("£'000"), unless otherwise indicated.
4. Selected accounting policies
4.1 Going concern
The financial statements for the 52 weeks ended 31 December 2023 have been
prepared on a going concern basis.
The banking facilities available to the Group were amended and restated on 28
April 2023, amended on 28 September 2023 and further amended on 26 April 2024.
The latest amendments included, amongst other elements, the waiver of the
cumulative EBITDA covenant and the Adjusted Leverage covenant for Q2 and Q3
2024 and a revision of subsequent covenant levels to 1 January 2026 in line
with the Group's business plan. The maturity of the facility was also extended
from 1 January 2025 to 1 January 2026. In addition, if the proposed
combination referred to below does not proceed, the Group would be required,
on 7 March 2025, to make a part repayment of the bank facility. This would be
the lower of, the lowest amount of liquidity that the Group is forecasting for
12 months forward from 28 February 2025 that exceeds £2.5m, and £5m. In that
scenario, there is also the requirement for the Directors to commence a sale
process and to appoint an additional Non-Executive Director acceptable to them
and to the banks. The Liquidity covenant requiring a minimum liquidity level
of £1.5m remains in place. These amendments are referred to in more detail in
note 14 to the non-statutory financial statements.
The Group has prepared forecasts of the expected cash flows up to 31 December
2025, which includes a severe but plausible downside scenario. The base case
scenario broadly assumes that the trading performance in the second half of
2023 continues throughout 2024, with moderate growth in 2025. It is based on
the position before taking account of the proposed combination referred to
below, given its early stage of negotiation. Under the base case scenario, the
revised covenants are met and the Group has adequate liquidity throughout the
going concern assessment period. This scenario assumes that if the proposed
combination referred to below does not proceed, the part repayment of the
facility due on 7 March 2025 would be financed by pausing expansion capital
expenditure.
The severe but plausible downside scenario assesses the cash flows in a
depressed trading environment with reduced recovery in H2 2024 and the whole
of FY 2025, despite the cost saving initiatives that saw an improvement in
EBITDA in the second half of 2023. The model calculates the impact that this
scenario would have on the amended covenants of the Group. Under this severe
but plausible scenario, the Group would breach the quarterly cumulative EBITDA
covenant and the Net debt to EBITDA covenants in Q4 FY 2024 and the monthly
minimum liquidity covenant of £1.5m in Q1 FY 2025, which would make the loans
repayable on demand. In addition, in the severe but plausible scenario, there
is uncertainty over the adequacy of liquidity within the 12 months from the
date of approval of the financial statements. In this scenario, management
would take steps to manage the Group's liquidity position.
On 16 April 2024 the Company announced the proposed combination of the Group
with TGI Fridays, Inc (the "Combined Group") with Heads of Terms having been
agreed by both parties. Funding of the Combined Group has not been finalised
at the date of approval of these financial statements. In addition, the
proposal to create the Combined Group will require the approval of
shareholders. For the purposes of conducting the going concern assessment, the
Directors have made the assumption that an appropriate funding structure will
be put in place by both parties before the proposed prospectus and related
circular to shareholders are issued, such that the Company and the Combined
Group will continue to trade and to meet their liabilities as they fall due
from when the combination is effected which is envisaged to be in Q3 2024.
The Directors are confident that the business will continue to trade for a
period of at least fifteen months following the signing of these financial
statements and therefore that it is appropriate to prepare these financial
statements on a going concern basis. The conditions referred to above indicate
the existence of a material uncertainty which may cast significant doubt on
the Group's and the Company's ability to continue as a going concern. The
financial statements do not include adjustments to the carrying amounts or
classification of assets and liabilities that would result if the Company and
Group were unable to continue as a going concern.
4.2 Goodwill
Goodwill arising on an acquisition of a business is carried at cost as
established at the date of acquisition of the business, less any accumulated
impairment losses.
Goodwill does not generate cash flows independently of other assets or groups
of assets and is normally required to be allocated to each CGU or group of
CGUs that benefits from the business combination that gave rise to
the goodwill. The Group does not allocate goodwill to individual CGUs as it
represents the ongoing value of the existing business and brand and it cannot
be allocated to individual restaurants on a non-arbitrary basis. The goodwill
is therefore allocated to all CGUs as a group. The recoverable amount
represents the value-in-use, using discounted forecasted cashflows and each
restaurant's ability to cover its costs, including an allocation of central
overheads, marketing and maintenance standards of assets. The Group tests all
CGUs for impairment at each reporting date on a value-in-use basis. Where a
CGU is considered to be impaired, its carrying value is reduced to its
recoverable amount. The impairment loss is allocated pro-rata between the
assets of the CGU on the basis of the carrying amount of each asset. After
this initial allocation of impairment losses, if the combined carrying amount
of the CGUs and goodwill is higher than the recoverable amount of the group of
all CGUs, the residual impairment losses are allocated to goodwill.
4.3 The Group as a lessee
The principal leasing activity of the Group is the leasing of property for the
operation of restaurants.
● A lease liability is measured at its present value, discounted
using an appropriate incremental borrowing rate for each lease depending on
the lease term at the date of inception. This ranges from 3.1% for leases with
shorter terms to 7.5% for leases with longer terms. Payments included in
initial measurement are all fixed payments. Any variable payments that are
based on an index or a rate, are initially measured using the index or rate at
the commencement date.
● A right-of-use (RoU) asset is measured at an amount equal to
the lease liability, adjusted by any prepaid or accrued lease payments, and
inclusive of any dilapidations and onerous lease provisions.
● The Group does not recognise leases with a term of 12 months
or less or where the underlying asset is considered of low value.
Subsequent to initial measurement, lease liabilities are reduced for lease
payments made and increased as a result of interest charged at a constant rate
on the balance outstanding. Where lease payments depend on an index of an
extended lease, any changes in future lease payments resulting from a change
in the index, lead to a re-assessment of the lease liability using a revised
discount rate. RoU assets are amortised on a straight-line basis over the
remaining term of the lease.
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to be made over the revised term, which are discounted
at a revised discount rate. An equivalent adjustment is made to the carrying
value of the RoU asset, with the revised carrying amount being amortised over
the remaining revised lease term.
4.4 Impairment of tangible assets
At each reporting date, the Group assesses whether an item of property, plant
and equipment and RoU asset is impaired. Each restaurant is considered to be a
separate CGU of property, plant and equipment and RoU asset. The Group tests
all CGUs for impairment on a value-in-use basis. Where a CGU is considered
impaired, its carrying value is reduced to its recoverable amount. The
recoverable amount represents the value-in-use, using discounted forecasted
cashflows and each restaurant's ability to cover its costs, including an
allocation of central overheads, marketing and maintenance standards of
assets. The impairment loss is allocated pro-rata between the assets of the
CGU on the basis of the carrying amount of each asset.
Where there is an indication that an impairment loss recognised in prior
periods no longer exists, the relevant part of the impairment loss is reversed
and credited to the consolidated statement of comprehensive income. The
reversal is allocated to the CGU's assets on a pro-rata basis. The carrying
amount of an individual asset is not increased above the lower of its
recoverable amount and its historical depreciated cost.
5. Prior period restatement
In the prior period to 1 January 2023 there were IFRS 16 lease modifications
that were not accounted for. As a result of the prior period IFRS 16 lease
modifications, property, plant and equipment and right of use asset balances
were primarily affected. The tables in this note set this out in more detail.
This restatement also resulted in a further goodwill impairment charge of
£845k.
A further prior period restatement, related to an error identified in the
prior period impairment model for one store, which resulted in the property,
plant and equipment and right of use assets impairment charge being overstated
by £1,923k and property, plant and equipment and right of use assets balances
being understated by £293k and £1,630k respectively. As a result, the
overall goodwill impairment charge was understated by £1,923k and a goodwill
balance was overstated by the same amount which has been corrected in the
prior period adjustment.
An additional prior period restatement has been made to additions to property,
plant and equipment which had not been accrued at the prior period end. This
has resulted in property, plant and equipment, and trade and other payables,
both being increased by £1,540k in the prior period adjustment. As a result
of this restatement, the impairment charge of goodwill has been increased by
£1,540k and goodwill has decreased by the same amount.
The IFRS 16 lease modifications, impairment model error and under-accrual of
additions to property, plant and equipment have been corrected by restating
each of the relevant financial statement line items for the prior period as
follows:
Previously reported 52 weeks
ended 1 January *Restated
2023 52 weeks
£'000 Property, plant and equipment ended 1 January
IFRS 16 lease modifications Impairment additions 2023
Consolidated statement of comprehensive income (extract) £'000 model £'000 £'000
£'000
Underlying administrative expenses (141,152) (165) - - (141,317)
Exceptional items - impairment of goodwill
(70,858) (845) (1,923) (1,540) (75,166)
Administrative expenses (212,010) (1,010) (1,923) (1,540) (216,483)
Impairment of property, plant and equipment and right of use assets
(36,891) (1,345) 1,923 - (36,313)
Loss from operations (91,867) (2,355) - (1,540) (95,762)
Finance expense (12,556) (106) - - (12,662)
Loss before tax (104,345) (2,461) - (1,540) (108,346)
Loss for the period (97,544) (2,461) - (1,540) (101,545)
Total comprehensive expense (97,544) (2,461) - (1,540) (101,545)
Basic loss per share (pence) (77.8) (2.0) - (1.2) (81.0)
Diluted loss per share (pence) (77.8) (2.0) - (1.2) (81.0)
Adjusted basic earnings per share (pence)
3.6 (0.1) - (0.1) 3.4
Adjusted basic diluted earnings per share (pence)
3.6 (0.2) - (0.1) 3.3
Previously reported 1 January Property, plant and equipment additions
2023 £'000 *Restated
£'000 IFRS 16 lease modification Impairment 1 January
Consolidated statement of financial position (extract) £'000 model 2023
£'000 £'000
Property, plant and equipment 36,140 - 293 1,540 37,973
Right of use assets 94,568 845 1,630 - 97,043
Goodwill 75,121 (845) (1,923) (1,540) 70,813
Non-current lease liabilities 133,261 1,952 - - 135,213
Total non-current liabilities 161,550 1,952 - - 163,502
Trade and other payables 18,136 358 - 1,540 20,034
Current lease liabilities 15,294 151 - - 15,445
Total current liabilities 48,204 509 - 1,540 50,253
Total liabilities 209,754 2,461 - 1,540 213,755
Net current liabilities (30,612) (509) - (1,540) (32,661)
Net assets 26,563 (2,461) - (1,540) 22,562
Retained earnings 167,301 (2,461) - (1,540) 163,300
Total equity 26,563 (2,461) - (1,540) 22,562
6. Finance income and expense
52 weeks 52 weeks
ended 31 December ended 1 January
2023 2023
£'000 £'000
Finance income
219 78
Other interest receivable
52 weeks *Restated
ended 31 December 52 weeks ended 1 January
2023 2023
£'000 £'000
Finance expense
Bank interest payable 4,256 2,393
Amortisation of loan arrangement fees 721 209
Interest on lease liabilities 9,406 9,832
Unwinding of discount on provisions 87 52
Other interest payable 145 176
Total finance expense 14,615 12,662
* Refer to note 5. In the 52 week period ended 1 January 2023, interest on
lease liabilities has been increased by £106k from previously reported
£9,726k to £9,832k.
7. Tax (charge)/credit
7.1 Tax (charge)/credit recognised in consolidated statement of comprehensive income
52 weeks 52 weeks
ended 31 December ended 1 January
2023 2023
£'000 £'000
Corporation tax credit
927 192
Adjustments in respect of prior periods
Total corporation tax credit 927 192
Deferred tax (charge)/credit
Origination and reversal of temporary timing differences (1,248) 4,842
Adjustments in respect of prior periods (1,572) 27
Change in future tax rate - 1,740
Total deferred tax (charge)/credit (2,820) 6,609
Tax (charge)/credit for the period (1,893) 6,801
7.2 Deferred tax assets
Deferred tax assets in the consolidated statement of financial position arose
as follows:
Recognised in consolidated statement of comprehensive
income
£'000
3 January 1 January
2022 2023
£'000 £'000
Deferred tax assets in relation to:
Property, plant and equipment differences 1,970 1,141 3,111
Other temporary differences 71 5 76
Losses carried forward - 228 228
Deferred tax arising from leases 4,151 5,235 9,386
Total deferred tax assets 6,192 6,609 12,801
Recognised in consolidated statement of comprehensive
income
£'000
2 January 31 December
2023 2023
£'000 £'000
Deferred tax assets in relation to:
Property, plant and equipment differences 3,111 (3,111) -
Other temporary differences 76 18 94
Share based payments - 17 17
Losses carried forward 228 (228) -
Deferred tax arising from leases 9,386 484 9,870
Total deferred tax assets 12,801 (2,820) 9.981
Deferred tax unwinding within 12 months from 31 December 2023 is expected to
be immaterial. Deferred tax not recognised at 31 December 2023 amounted to
£7.5m (2022: £nil). This is based on the more challenging industry-wide
backdrop in which the Group operates and reflects the Group's forecasts of
expected cash flows that have been used in assessing impairments at the period
end.
8. Loss/(earnings) per share
*Restated
52 weeks 52 weeks
ended 31 December ended 1 January
2023 2023
Basic loss per share
Weighted average outstanding number of shares ('000) 124,880 125,427
Loss after tax for the period (£'000) (27,422) (101,545)
Basic loss per share (pence) (22.0) (81.0)
Diluted loss per share
Weighted average outstanding number of shares ('000) 124,880 125,427
Dilutive shares ('000) - -
124,880 125,427
Loss after tax for the period (£'000)
(27,422) (101,545)
Diluted loss per share (pence) (22.0) (81.0)
Adjusted basic earnings per share
Weighted average outstanding number of shares ('000) 124,880 125,427
Loss after tax for the period (£'000) (27,422) (101,545)
Exceptional items - impairment of goodwill (£'000) - 75,166
Net impairment of property, plant and equipment and right of use assets 17,768 30,601
(£'000)
Adjusted (loss)/profit for the period (£'000) (9,654) 4,222
Adjusted basic (loss)/earnings per share (pence) (7.7) 3.4
Adjusted diluted earnings per share
Weighted average outstanding number of shares ('000) 124,880 125,427
Dilutive shares ('000) - 656
124,880 126,083
Loss after tax for the period (£'000) (27,422) (101,545)
Exceptional items (£'000) - 75,166
Net impairment of property, plant and equipment and right of use assets 17,768 30,601
(£'000)
Adjusted (loss)/profit for the period (£'000) (9,654) 4,222
Adjusted diluted (loss)/earnings per share (pence) (7.7) 3.3
* Refer to note 5 to the non-statutory financial statements. In the 52 week
period ended 1 January 2023, loss after tax for the period has been increased
by £4,001k from previously reported £97,544k to £101,545k, basic and
diluted loss per share has been increased by 3.2p from previously reported
77.8p to 81.0p, adjusted basic earnings per share have been decreased by 0.2p
from previously reported 3.6p to 3.4p and adjusted diluted earnings per share
have been decreased by 0.3p from previously reported 3.6p to 3.3p.
As referred to in note 15, on 16 April 2024 the Company announced that it had
reached agreement on a non- binding basis for a proposed all-share acquisition
of TGI Fridays, Inc. This is subject to, among other things, completion of
confirmatory due diligence, the parties entering into binding transaction
documentation and shareholder approval. It is therefore too early to determine
whether this proposed transaction will be undertaken or what impact it might
have on the Earnings per Share of the Group in future periods.
The calculation of adjusted (loss)/profit and the resultant calculation of
adjusted basic (loss)/earnings per share and adjusted diluted (loss)/earnings
per share, excludes the impairment of property, plant and equipment, right of
use assets and exceptional items. The adjusted basic (loss)/earnings per share
and adjusted diluted (loss)/ earnings per share figures have not been adjusted
for the tax effects of adjusting items. This is because the goodwill
impairment recorded for the 52 week period ended 1 January 2023 is not tax
deductible and therefore had no tax effect on the adjusted earnings per share
calculations. The property, plant and equipment and right of use assets
impairments will reverse over time. For the 52 week period ended 31 December
2023, the deferred tax impact on property, plant and equipment was £1.4m
(2022: £1.4m) and right of use assets was £2.3m (2022: £5.7m). Accordingly,
while these are post-tax measures, they have not been adjusted for the tax
effect of adjusting items where there is no current tax impact or where the
tax effect will only reverse over time.
9. Property, plant and equipment
Leasehold property improvements Plant and machinery Fixtures and fittings Total
£'000 £'000 £'000 £'000
Cost
At 3 January 2022 9,874 50,665 90,058 150,597
Additions - 5,138 6,423 11,561
Disposals - (397) (88) (485)
At 1 January 2023 (restated)* 9,874 55,406 96,393 161,673
Accumulated depreciation and impairment
At 3 January 2022 9,874 43,846 54,096 107,816
Depreciation charge for the period - 3,096 5,510 8,606
Impairment reversal for the period - - (757) (757)
Impairment charge for the period - - 8,463 8,463
Disposals - (392) (36) (428)
At 1 January 2023 9,874 46,550 67,276 123,700
Net book value
At 2 January 2022 - 6,819 35,962 42,781
At 1 January 2023 (restated)* - 8,856 29,117 37,973
* Refer to note 5. In the 52 week period ended 1 January 2023, plant and
machinery additions have been increased by £816k from previously reported
£4,322k to £5,138k, fixtures and fittings additions have been increased by
£724k from previously reported £5,699k to £6,423k, fixtures and fittings
impairment charge has been decreased by £293k from previously reported
£8,756k to £8,463k, increasing total net book value by £1,833k from
previously reported £36,140k to £37,973k.
Leasehold property improvements Plant and machinery Fixtures and fittings Total
£'000 £'000 £'000 £'000
Cost
At 2 January 2023 9,874 55,406 96,393 161,673
Additions - 2,800 920 3,720
Disposals - (512) (1,147) (1,659)
At 31 December 2023 9,874 57,694 96,166 163,734
Accumulated depreciation and impairment
At 2 January 2023 9,874 46,550 67,276 123,700
Depreciation charge for the period - 2,942 4,579 7,521
Impairment reversal for the period - - (2,107) (2,107)
Impairment charge for the period - - 10,811 10,811
Disposals - (277) (1,346) (1,623)
At 31 December 2023 9,874 49,215 79,213 138,302
Net book value
At 1 January 2023 - 8,856 29,117 37,973
At 31 December 2023 - 8,479 16,953 25,432
10. Right of use assets
Property Motor vehicles £'000 Total
£'000 £'000
Cost
At 3 January 2022 158,521 262 158,783
Additions and modifications 15,448 - 15,448
At 1 January 2023 (restated)* 173,969 262 174,231
Accumulated depreciation and impairment
At 3 January 2022 42,177 218 42,395
Depreciation charge for the period 11,866 32 11,898
Impairment reversal for the period (4,955) - (4,955)
Impairment charge for the period 27,850 - 27,850
At 1 January 2023 (restated)* 76,938 250 77,188
Net book value
At 2 January 2022 116,344 44 116,388
At 1 January 2023 (restated)* 97,031 12 97,043
* Refer to note 5. In the 52 week period ended 1 January 2023, Right of use
assets additions have been increased by £2,355k from previously reported
£13,093k to £15,448k, Right of use assets depreciation charge for the period
has been increased by £165k from previously reported £11,733k to £11,898k,
Right of use assets impairment charge for the period has been decreased by
£285k from previously reported £28,135k to £27,850k, increasing total net
book value by £2,475k from previously reported £94,568k to £97,043k.
Property Motor vehicles Total
£'000 £'000 £'000
Cost
At 2 January 2023 173,969 262 174,231
Modifications 1,602 - 1,602
Disposals (770) - (770)
At 31 December 2023 174,801 262 175,063
Accumulated depreciation and impairment
At 2 January 2023 76,938 250 77,188
Depreciation charge for the period 10,432 11 10,443
Impairment reversal for the period (3,463) - (3,463)
Impairment charge for the period 12,527 - 12,527
Disposals (770) - (770)
At 31 December 2023 95,664 261 95,925
Net book value
At 1 January 2023 97,031 12 97,043
At 31 December 2023 78,137 1 79,138
11. Impairment losses recognised in property, plant and equipment and right of use assets
The Group performs an impairment assessment at the end of each reporting
period. For the purposes of impairment of right of use assets, each restaurant
in the Group is considered a separate CGU. An impairment charge is recognised
when the recoverable amount is less than the carrying value of the property,
plant and equipment and right of use assets of the CGU. Where there is an
indication that an impairment loss recognised in prior periods no longer
exists, the impairment loss is reversed and credited to the consolidated
statement of comprehensive income.
The recoverable amount is based on value-in-use calculations, using discounted
forecasted cashflows of each restaurant and its ability to cover its costs,
including an allocation of central overheads, marketing and maintenance
standards of assets.
The value-in-use calculations are based on the Group's base case business plan
for 2024 and 2025, sensitised down from the 2024 budget with cash flow
projections over the lease term of each restaurant, applying a long-term
annual growth rate of 2%.
The discount rate applied in the value-in-use calculations has been calculated
with reference to the Group's weighted average cost of capital and similar
benchmarks in the industry. A pre-tax discount rate of 10.5% (2022: 14.2%) has
been applied in the value-in-use calculations.
During the 52-week period ended 31 December 2023, an impairment charge was
recognised because the recoverable amount of the CGUs as calculated above was
less than the carrying value of property, plant and equipment and right of use
assets. There was also an indication that an impairment loss recognised in
prior periods in respect of two restaurants now no longer existed. In
accordance with the Group's accounting policy, the impairment loss in respect
of these restaurants in prior periods has been reversed and credited to the
consolidated statement of comprehensive income in the 52-week period ended 31
December 2023.
In this assessment, the recoverable amount of property, plant and equipment at
31 December 2023, was £48,850k (2022: £56,320k). The above calculations have
resulted in an impairment charge of £10,811k for the period ended 31 December
2023 (2022: £8,463k) and an impairment reversal of £2,107k (2022: £757k)
against property, plant and equipment. The recoverable amount of right of use
assets at 31 December 2023, was £116,251k (2022: £132,461k). The above
calculations have also resulted in an impairment charge of £12,527k for the
period ended 31 December 2023 (2022: £27,850k) and an impairment reversal of
£3,463k (2022: £4,955k) against right of use assets. In the 52 weeks ended
31 December 2023, the Group recorded the total of the above, being an
impairment charge of £23,338k and a reversal of £5,570k, resulting in a net
impairment of £17,768k for the period (2022: net impairment of £30,601k).
12. Group as a lessee
The Group has entered into a number of leases on properties from which it
operates its restaurants. It has also entered into lease arrangements for
motor vehicles for use by employees. These have all been recognised as right
of use assets in the consolidated statement of financial position. The total
cash outflow for leases for the 52 week period ended 31 December 2023 was
£21,536k (2022: £23,775k).
Lease liabilities are due as follows:
*Restated
31 December 1 January
2023 2023
£'000 £'000
Contractual undiscounted cash flows due
Not later than one year 21,149 21,071
Between one year and five years 80,944 81,948
Between five years and ten years 68,385 79,973
Greater than ten years 16,644 23,253
Total contractual undiscounted cash flows 187,122 206,245
* Refer to note 5. As a result of IFRS 16 lease modifications and dilapidation
charge exclusion, the prior period amounts within the above maturity table
have been restated. 'Not later than one year' balance has increased by £146k
from previously reported £20,925k to £21,071k. 'Between one year and five
years' balance has increased by £1,184k from previously reported £80,764k to
£81,948k. The 'Later than five years' category has been further analysed into
the above categories of 'Between five years and ten years' and 'Greater than
ten years' to provide greater analysis. Further to note 5, both categories
have been decreased by £1,447k from the previously reported total of
£104,673k to £79,973k and £23,253k respectively
*Restated
31 December 1 January
2023 2023
£'000 £'000
Contractual discounted cash flows of lease liabilities
Non-current 124,442 135,213
Current 16,483 15,445
Total lease liabilities 140,925 150,658
* Refer to note 5. At 1 January 2023, non-current lease liabilities have been
increased by £1,952k from previously reported £133,261k to £135,213k and
current lease liabilities have been increased by £151k from previously
reported £15,294k to £15,445k.
The contractual cash flows of lease liabilities have been discounted by
applying an appropriate incremental borrowing rate for each lease depending on
the remaining lease term ranging from 3.1% for leases with shorter terms to
7.5% for leases with longer terms.
The total lease liability at 31 December 2023 decreased by £9,733k (2022:
£336k) from the previous period end. This relates to the payment of lease
liabilities during the year and the exit from the lease of one store during
the period. Following the amendment to the franchise agreement agreed in Q1
2023, no new stores were opened during the 52 week period ended 31 December
2023.
13. Goodwill
*Restated
£'000
Cost
At 3 January 2022 and 1 January 2023 155,284
Accumulated impairment
At 3 January 2022 9,305
Impairment charge for the period 75,166
At 1 January 2023 (restated)* 84,471
Net book value
At 2 January 2022 145,979
At 1 January 2023 (restated)* 70,813
* Refer to note 5. In the 52 week period ended 1 January 2023, goodwill
impairment charge have been increased by £4,308k from previously reported
£70,858k to £75,166k, decreasing the net book value by the same amount from
previously reported £75,121k to £70,813k.
£'000
Cost
At 2 January 2023 and 31 December 2023 155,284
Accumulated impairment
At 2 January 2023 and 31 December 2023 84,471
Net book value
At 1 January 2023 and 31 December 2023 70,813
The Directors consider that the TGI Fridays brand is the sole CGU of goodwill
as it cannot be allocated to individual restaurants on a non-arbitrary basis.
The Group continues to assess goodwill for impairment at each reporting date.
The value-in-use calculations are based on the Group's base case business plan
for 2024 and 2025, sensitised down from the 2024 budget, applying a long-term
annual growth rate of 2%, producing the future projected cashflows of the
operating business, over the lease term of each restaurant, assuming
profitable stores' leases will be extended into perpetuity, discounted back
using a pre-tax discount rate of 13.3% (2022: 15.8%). In the comparative
period ended 1 January 2023, the net book value of all assets, goodwill,
property, plant and equipment and right of use assets were assessed to be
£75,166k higher than the value-in-use calculations and therefore an
impairment charge of £75,166k has been recorded at that date. For the 52 week
period ended 31 December 2023, no further impairment charge was required as
the value-in-use calculations are significantly in excess of the net book
value of all assets, goodwill, property, plant and equipment and right of use
assets inclusive of the prior year impairment charge.
14. Loans and borrowings
31 December 1 January
2023 2023
£'000 £'000
Secured bank loans and borrowings
Non-current 15,414 23,146
Current 20,019 13,295
Total secured bank loans and borrowings 35,433 36,441
31 December 1 January
2023 2023
Movement of loans £'000 £'000
Opening balance 36,441 43,422
Loans drawn down 26,400 10,500
Loans repaid (27,100) (18,000)
Loan arrangement fees incurred in the period (1,029) (15)
Amortisation of loan arrangement fees 721 209
Loan arrangement fees waived - 325
Closing balance 35,433 36,441
On 28 April 2023, the Group signed a bank facility amendment agreement with
its lending banks. This was subsequently amended on 28 September 2023 and the
term facility extended to 1 January 2025. On 26 April 2024 a further amendment
to the facility was agreed, extending the facility to 1 January 2026. Under
this amended facility, there are no cumulative EBITDA covenants for Q2 and Q3
of FY24, with amended covenants set for Q4 FY24 and FY25 in line with the
Group's updated forecasts for FY24 and FY25. The covenants measure cumulative
EBITDA and the ratio of EBITDA to net debt. There is also a minimum liquidity
requirement of £1.5m and loan amortisation of £1.5m per quarter, both of
which remain unchanged. In addition, if the proposed combination referred to
in note 16 to the non-statutory financial statements does not proceed, the
Group would be required, on 7 March 2025, to make a part repayment of the bank
facility. This would be the lower of, the lowest amount of liquidity that the
Group is forecasting for 12 months forward from 28 February 2025 that exceeds
£2.5m, and £5m. In that scenario, there is also the requirement for the
Directors to commence a sale process and to appoint an additional
Non-Executive Director acceptable to them and to the banks.
The Group's loans are denominated in pounds sterling. There is no foreign
exchange risk on the Group's loan arrangements. The carrying value of loans
and borrowings classified as financial liabilities are measured at amortised
cost, which approximates to their fair value. The balances at 31 December 2023
are summarised below:
Nominal interest rate 31 December 1 January
Date of maturity Repayment schedule 2023 2023
Loan Facility £'000 £'000
Secured bank loan Margin plus compound reference rate based on SONIA 1 January 2026 £1.5m per quarter, with balance on maturity 21,600 29,300
Revolving credit facility Margin plus compound reference rate based on SONIA 1 January 2026 At end of term 14,500 7,500
Unamortised loan arrangement fees (667) (359)
35,433 36,441
During the 52 week period ended 31 December 2023 the Group complied with all
covenants within its bank facilities as amended. This has continued to the
date of approval of these results.
The amended facility agreement as at the year-end includes the following
covenants:
● Minimum Liquidity covenant tested on a weekly basis, requiring an
aggregate of cash and undrawn commitments under the Revolving Credit Facility
of not less than £1.5m tested by reference to quarterly forward forecasts. At
31 December 2023 the Group complied with the Minimum Liquidity covenant as set
out in the facility agreement in operation for the period ended 31 December
2023 and had liquidity of £12.3m.
● Adjusted Leverage covenant, being Group net debt at the end of each
quarter as a percentage of adjusted EBITDA (calculated in accordance with
FRS102 and as adjusted in the manner set out in the facility agreement as
restated from time to time) which is not tested at 30 June 2023 and 30
September 2023 and then tested in subsequent periods in the amended facility
agreement, with each period to not exceed prescribed ratios set out in the
amended facility agreement. At 31 December 2023 the Group complied with this
Adjusted Leverage covenant of EBITDA as adjusted in the manner set out in the
facility agreement in operation for the period ended 31 December 2023.
● Cumulative Monthly EBITDA covenant (calculated in accordance with
FRS102) covenant tested monthly between 31 October 2023 and 31 March 2024, not
tested at 30 June 2023 and 30 September 2023 and then tested on a latest
twelve months basis each quarter from 31 December 2024 to 31 December 2025.
The covenant requires the Group's cumulative EBITDA for each period to be not
less than prescribed amounts set out in the amended agreement. For the quarter
ended 31 December 2023, the Group complied with this Cumulative Monthly
covenant as set out in the facility agreement in operation for the period
ended 31 December 2023 and had cumulative EBITDA of £4.1m.
● Capital Expenditure covenant that is tested annually on 31 December,
requiring the Group to have incurred capital expenditure of not greater than
prescribed values set out in the restated agreement. For the year ended 31
December 2023 the Group complied with this covenant and incurred Capital
Expenditure of £4.7m.
Interest on the Group's loan facility is payable at the aggregate of a
compound reference rate based on SONIA plus a rachet based on adjusted
leverage of the loan, being ratio of total net debt to adjusted EBITDA,
calculated in accordance with FRS102. The amount of rachet is set out in the
table below, with any increase or decrease in the margin as a result of the
margin rachet applying from the beginning of the next interest quarter.
Margin % per annum
Interest rate margin payable in addition to SONIA
Adjusted leverage
Less than 1.0x 3.25
Greater than or equal to 1.0x but less than 1.5x 3.50
Greater than or equal to 1.5x but less than 2.0x 3.75
Greater than or equal to 2.0x 4.00
In addition, a further interest charge accrues at a rate of 5% per annum on
the amount of bank debt in excess of 2.5x adjusted leverage. This additional
interest will become payable on the earlier of repayment of the loan,
including under a refinancing, or at maturity of the loan on 1 January 2026.
The borrower subsidiary and guarantor Group companies under the facilities
agreement and the Company's subsidiary Hostmore Group Limited have provided
fixed and floating charges over all of their assets in support of the
obligors' obligations under the facilities agreement. Hostmore plc has granted
a debenture to Hostmore Group Limited and the obligor companies under the
facility.
At 31 December 2023, and in accordance with the terms of the facility
agreement, there was £1.5m of interest owed to the lenders which has been
accrued in these financial statements.
Undrawn facilities
The Group had committed undrawn borrowing facilities at floating rates at 31
December 2023 as follows:
31 December 1 January
2023 2023
£'000 £'000
Expiring between one and two years 5,600 22,500
Undrawn loan facilities incur a charge at 40% of the interest rate margin on
the drawn facilities.
15. Cash flows from operating activities
The Group's cashflows from operating activities arose as follows:
*Restated
52 weeks 52 weeks
ended 31 December ended 1 January
2023 2023
£'000 £'000
Loss for the period (27,422) (101,545)
Adjustments for non-cash items and amounts disclosed separately:
Depreciation of property, plant and equipment and right of use assets 17,964 20,504
Impairment reversal of property, plant and equipment and right of use assets (5,570) (5,712)
Impairment of property, plant and equipment and right of use assets 23,338 36,313
Impairment of goodwill - 75,166
Finance income (219) (78)
Finance expense 14,615 12,662
Covid-19 rent concessions - (2,290)
Gain on disposal of property, plant and equipment (133) -
Gain on lease modification (1,951) -
Release of dilapidations provision (465) -
Income tax charge/(credit) 1,893 (6,801)
Share based payment charge 141 581
Cash flows from operating activities 22,191 28,800
* Refer to note 5. In the 52 week period ended 1 January 2023, depreciation of
property, plant and equipment and right of use assets have been increased by
£165k from previously reported £20,339k to £20,504k, impairment of
property, plant and equipment and right of use assets have been decreased by
£578k from previously reported £36,891k to £36,313k, impairment of goodwill
have been increased by £4,308k from previously reported £70,858k to
£75,166k, finance expense has been increased by £106k from previously
reported £12,556k to £12,662k, increasing loss for the period by £4,001k
from previously reported £97,544k to £101,545k. This has had no net effect
on the cash flows from operating activities for the 52 weeks ended 1 January
2023 as previously reported of £28,800k.
16. Subsequent events
On 16 April 2024, the Company announced that it had reached agreement on a
non-binding basis for a proposed all-share acquisition of TGI Fridays, Inc.
("TGI Fridays") (the "Proposed Transaction"). TGI Fridays is the Company's
franchisor and operates primarily through franchising and licensing agreements
in the US and in 43 international markets. It also operates a network of
company-owned stores in the US. The parties agreed that the Proposed
Transaction would result in existing Hostmore shareholders holding a 36%
shareholding in the enlarged business upon completion (the "Combined Group"),
with TGI Fridays shareholders holding a 64% shareholding in the Combined
Group. The Proposed Transaction is being negotiated on an exclusive basis and
is subject to, among other things, completion of confirmatory due diligence
and the parties entering into binding transaction documentation. The Proposed
Transaction would be classified as a Reverse Takeover under the Listing Rules
of the Financial Conduct Authority and therefore would be conditional upon the
approval of an ordinary resolution by existing Hostmore shareholders. Should
the parties enter into binding transaction documentation, a summary of the
material terms and conditions of such documentation will be set out in a
further announcement to the market.
On 26 April 2024, the parties to the facilities agreement referred to in note
14. signed a bank facility amendment agreement. Under the terms of this
agreement, amongst other matters, certain covenants in the previous facility
agreement were amended to align with the Group's updated business plan and the
term of the facility was extended to 1 January 2026.
Information provision
This information is provided by RNS, the news service of the London Stock
Exchange. RNS is approved by the Financial Conduct Authority to act as a
Primary Information Provider in the United Kingdom. Terms and conditions
relating to the use and distribution of this information may apply. For
further information, please contact rns@lseg.com (mailto:rns@lseg.com) or
visit www.rns.com (http://www.rns.com/) .
RNS may use your IP address to confirm compliance with the terms and
conditions, to analyse how you engage with the information contained in this
communication, and to share such analysis on an anonymised basis with others
as part of our commercial services. For further information about how RNS and
the London Stock Exchange use the personal data you provide us, please see
our Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy) .
END
London Stock Exchange plc is not responsible for and does not check content on
this Website. Website users are responsible for checking content. Any news
item (including any prospectus) which is addressed solely to the persons and
countries specified therein should not be relied upon other than by such
persons and/or outside the specified countries. Terms and conditions
(https://www.londonstockexchange.com/disclaimer) , including restrictions on
use and distribution apply.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END ACSQKBBQKBKBKPKRecent news on Hostmore
See all newsREG - Official List Hostmore PLC - Removal - Hostmore plc
AnnouncementREG - Stock Exch Notice Hostmore PLC - Cancellation - Hostmore plc
AnnouncementREG - FTSE Russell Hostmore PLC - Hostmore
AnnouncementREG - Hostmore PLC - Business Update
AnnouncementREG - Official List Hostmore PLC - Suspension - Hostmore plc
Announcement