REG - Restaurant Group PLC - Full Year Results
16/03/2022 07:00
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RNS Number : 8958E Restaurant Group PLC 16 March 2022
The Restaurant Group plc ("TRG" or "The Group")
FY21 Financial summary (for the 53 weeks ended 2 January 2022)
· Total sales of £636.6m (2020: £459.8m)
· Adjusted EBITDA profit of £81.2m on a pre IFRS 16 basis (2020:
£8.7m)
· Adjusted Profit before tax of £16.6m on a pre IFRS 16 basis (2020:
loss of £47.9m)
· Statutory loss before tax of £32.9m on an IFRS 16 basis (2020: loss
of £132.9m)
· Net debt of £171.6m on a pre IFRS 16 basis (2020: £340.4m). IFRS
16 net debt was £582.0m (2020: £824.2m)
Key highlights
The Group is making good progress against its four strategic priorities:
· Maintain like-for-like sales outperformance versus market
o Strong like-for-like sales ("LFL") outperformance versus market since
re-opening for dine-in on 17 May 2021:
LFL sales (%) vs 2019 comparable for the 33 weeks from 17 May 2021 to 2
January 2022
TRG Division TRG LFL sales Market* LFL sales Outperformance vs market*
Wagamama +15% +7% +8%
Pubs +9% (2)% +11%
Leisure +14% +7% +7%
Concessions** (41)% (59)% +18%
· Deliver against key financial targets
o Recent Wagamama and Pub openings (2019 & 2020) delivering good returns
o Good progress made towards medium term net debt/EBITDA("leverage")***
target with FY21 year-end leverage*** at 2.1x
· Accelerate selective expansion opportunities
o Healthy FY22 pipeline of new Wagamama and Pubs openings
· Drive forward our ESG agenda
o Carbon neutral on scopes 1 and 2 in FY22
o Developing scope 3 emissions reduction plan
Current trading and outlook
· The Group will continue to report like-for-like sales for FY22 versus
2019 comparables (representing the last full year of comparisons without
Covid-related disruptions)
· Current trading for the Group has continued to be strong,
outperforming the market for the first two months of FY22:
LFL sales (%) vs 2019 comparable for the 8 weeks from 3 January to 27 February
2022
TRG Division TRG LFL sales Market* LFL sales Outperformance vs market*
Wagamama +21% +8% +13%
Pubs +11% (3)% +14%
Leisure +11% +8% +3%
Concessions** (35)% (48)% +13%
· c.95% of electricity and gas volume hedged for 2022
o c.75% of electricity and gas volume hedged for 2023 and 2024
· Management's current expectations for FY22 remain unchanged, although
we are mindful about the consequential inflationary impacts arising from the
conflict in Ukraine
Andy Hornby, Chief Executive Officer, commented:
"2021 was a year of substantial progress at TRG. The recapitalisation of the
balance sheet and strong trading performance have allowed us to deliver a
robust set of financial results despite the various restrictions that have
impacted the sector.
I'd like to thank every single one of our teams who have gone the extra mile
on so many occasions during 2021 and delivered a market outperformance across
all our brands".
*Market refers to Coffer Peach tracker for restaurants (Wagamama and Leisure
benchmark) and Coffer Peach tracker for pub restaurants (TRG Pubs
benchmark). Coffer peach LFL sales represent the weighted average of weekly
LFL sales reported (internal calculation)
** UK air passenger growth used as market benchmark for Concessions
*** Pre IFRS 16 Adjustment and exceptional charges
Enquiries:
The Restaurant Group plc 020 3117 5001
Andy Hornby, Chief Executive Officer
Kirk Davis, Chief Financial Officer
Umer Usman, Investor Relations
MHP Communications 020 3128 8789/8742
Oliver Hughes
Simon Hockridge
Investor and analyst conference call facility
In conjunction with today's presentation to analysts, a live conference call
and webcast facility will be available starting at 8:45am (UK time). If you
would like to register, please contact Robert Clark at MHP Communications for
details on 020 3128 8826 or email TRG@mhpc.com.
The presentation slides will be available to download from 7:30am (UK time)
from the Company's website
https://www.trgplc.com/investors/reports-presentations
Notes:
1. As at 2 January 2022, The Restaurant Group plc operated approximately
400 restaurants and pub restaurants throughout the UK. Its principal trading
brands are Wagamama, Frankie & Benny's and Brunning & Price. It also
operates a multi-brand Concessions business which trades principally in UK
airports. In addition the Wagamama business has a 20% stake in a JV
operating five Wagamama restaurants in the US and over 50 franchise
restaurants across a number of territories. The Group employs approximately
16,000 people in the UK.
2. Statements made in this announcement that look forward in time or
that express management's beliefs, expectations or estimates regarding future
occurrences are "forward-looking statements" within the meaning of the United
States federal securities laws. These forward-looking statements reflect the
Group's current expectations concerning future events and actual results may
differ materially from current expectations or historical results.
3. The Group's Adjusted performance metrics ('APMs') such as
like-for-like sales, Adjusted measures, pre-IFRS 16 basis measures and free
cash flow are defined within the glossary at the end of this report.
Chairman's statement
I am delighted to have been given the opportunity to join the Board of TRG as
Chair, a role which commenced on 1 January 2022. I would like to take this
opportunity to thank our former Chair, Debbie Hewitt, for her work with the
Board and TRG over the last five years.
During my first few months in the post, I have spent time with fellow Board
members and other colleagues familiarising myself with our business. I have
been very impressed with what I have seen thus far, affirming my view that TRG
has a dynamic and experienced management team operating an excellent range of
brands.
TRG has made substantial progress in the last year with the successful
recapitalisation of the Group and strong trading performance since reopening
for dine-in trade. This positions the Group well despite the inflationary
pressures that continue to impact the sector.
The trading results for the year were obviously impacted by the ongoing
effects of the Covid pandemic, and the resulting government restrictions, with
dine-in trading only possible from 17 May 2021. We welcomed the essential
government support received through these periods of restrictions,
particularly the Coronavirus Job Retention Scheme, which enabled us to protect
the employment of our employees whilst our restaurants and pubs were closed.
I would also like to thank all of my new colleagues at TRG, at our Head Office
and in our restaurants and pubs nationwide, for their continued hard work and
commitment during a very challenging year.
While we have no direct exposure to either Ukraine or Russia, it remains too
early to assess the impact on supply chain costs and customer behaviour. We
are however doing everything we can to offer support and assistance to our UK
based Ukrainian and Russian employees.
Ken Hanna
Chairman
15 March 2022
Business review
Introduction
2021 was a year in which the whole TRG team demonstrated remarkable resilience
in the face of ongoing disruption from the pandemic and government
restrictions. It is their dedication to serving our customers which allowed
us to bounce back strongly when we could open fully for dine-in trade from the
middle of May and deliver a very strong recovery in sales, outperforming the
wider market in each of our divisions.
A significant achievement during the year was securing the refinancing and
recapitalisation of TRG and in the first quarter we agreed new long-term debt
facilities providing the Group with significant financial flexibility over the
next four to five years. We received excellent support from our shareholders
in raising net proceeds of £166.8 million of new equity capital.
This stronger long-term capital structure provides us with the ability and
increased flexibility to execute our four strategic priorities:
· Maintain like-for-like sales outperformance versus the market: Making
selective investments in our existing estate to enhance our customer offer, as
well as supporting our colleagues with increased development opportunities and
well-being tools to aid recruitment and retention
· Deliver against key financial targets: Driving good sustainable
returns on invested capital and remaining firmly on track to achieve our
medium-term leverage 1 (#_ftn1) target of below 1.5x
· Accelerate selective expansion opportunities: From new Wagamama and
Pubs sites and selectively considering inorganic opportunities that may arise
· Drive forward our ESG Agenda: Developing and implementing a
detailed plan to deliver on our 2035 carbon net zero ambition and continuing
to make positive contributions to our colleagues, customers and communities
The Board has confidence in the Group's ability to perform against these
strategic objectives and deliver long-term sustainable growth for all
stakeholders, given the strength of our brands, substantially reduced net debt
and trading outperformance versus the market.
We provide more detailed updates on our strategic priorities, below:
1) FY21 Trading performance since the recommencement of dine-in on 17
May 2021
2) Making good progress towards bringing medium-term leverage target
below 1.5x
3) Targeted organic growth plans for FY22
4) Driving forward our ESG agenda
1. FY21 Trading performance since the recommencement of dine-in (LFL sales
% vs 2019 comparable for the 33 weeks from 17 May 2021 to 2 January 2022)
Wagamama
Since re-opening for dine-in on 17 May 2021, we have seen strong trading with
LFL sales growth of 15%, representing an 8% outperformance versus the market.
Customer ratings have remained strong with the December 2021 external NPS
scores (as measured by BrandVue) positioning Wagamama as the number two brand
within the top casual dining chains in the UK.
The key customer initiatives driving the performance have been:
- Food innovation: At the beginning of the year in support of
Veganuary, Wagamama made a brand commitment that 50% of its menu would be
plant-based (vegan or vegetarian) before the end of the year. In October we
achieved this goal with the launch of a new menu incorporating new plant-based
dishes such as our vegan ramens and vegan takes on some of our most popular
items including "vegan chilli squid". Vegan participation has increased by
+5% to >20% since introducing our plant pledge. Looking forward to 2022,
we're excited to be introducing new plant-based dishes and ingredients with
the launch of our summer menu
- Marketing: We are continually evolving our marketing tactics with
purpose-led campaigns and initiatives to ensure we stay relevant and current.
We have worked with celebrities in order to tap into complementary passion
points (i.e. football and music) for our gen-z and eco-millennial audience,
continuing to build relevancy and brand equity. Regional and local activation
plans remain a crucial part of our plan, and we continue to encourage sites to
'own their mile' and have a positive presence in their local communities
- Delivery and takeaway: Given trading restrictions through the
pandemic, we have seen an acceleration of the structural shift of both new and
existing customers enjoying delivery and takeaway with our sales mix from
these two channels combined increasing from 16% in 2019 to 28% in 2021. LFL
delivery sales were up 114% and LFL takeaway sales up 76% in the period (33
week period ending 2 January 2022). This strong performance was aided by
dedicated operations resource, insight tools and ensuring over 90% of our menu
is offered on delivery. We will continue to make investment to improve
operational efficiency and reconfigure sites to improve the delivery operation
where possible
Pubs
We have seen a consistent outperformance versus the market and continued
strong trading with LFL sales growth of 9%, representing a 11% outperformance
versus the market. Customer sentiment remains strong with social media scores
(consolidation of Google, Facebook and Tripadvisor scores) averaging 4.51/5
for 2021, our highest rating over the past five years.
The key operational initiatives driving the performance have been:
- Maximising opportunities from external trading: Developed more
than 30 covered outside areas using stretch tents and marquees to facilitate
external dining all year round. The installation of stretch tents gives more
scope to extend our drinks festivals throughout the year and explore
non-summer events such as Oktoberfest and Christmas markets
- Enhancements to food and drink offer: There has been a refocus
post Covid on increased localisation and premiumisation on our menus. Within
each section we have trialled providing more premium options and "when they're
gone, they're gone!" blackboards to encourage increased participation and
spend
Leisure
The business has delivered an encouraging trading performance, achieving LFL
sales growth of +14%, outperforming the market by 7%. Our partnership with
Yumpingo has provided greater customer insight on both customer service
standards and dish feedback, and we have seen an improving trend on NPS scores
(as measured on the Yumpingo platform) for both Frankie & Benny's and
Chiquito.
The key customer initiatives driving the performance have been:
- Significant investment in food quality: Our focus has been on
improving food quality with new menus launched across all of our brands in
May. We made investments across our range including fresh burger patties,
better-quality steaks and ribs and a new pizza dough. Additionally we reduced
the menu content by c.20% to help improve operational execution and reduce
complexity
- Delivery and takeaway: The delivery business has been
transformed over the past 18 months due to a combination of customer habits
changing due to Covid and the investment in our online delivery brands which
represent c.55% of the delivery sales mix. Delivery and takeaway sales now
account for 17% of sales (for the 33-week period ending 2 January 2022)
compared to only 5% in 2019. LFL delivery sales were up 389% and LFL
takeaway sales up 31% in this period
We will also look to trial some targeted capital refurbishments across 10-15
sites in our Frankie & Benny's estate. The sites selected will be based
on a number of factors including market capacity, delivery mix, competition
and age of the current fit out. The focus of the refresh will be on external
works to improve kerb appeal, customer facing areas such as seating & bar
areas with targeted replacement of kitchen equipment as required. We expect
to spend approximately £250,000 per site. If the trial sites generate a
good return on capital, we will explore further opportunities to invest in the
estate.
Concessions
The international travel sector had an incredibly challenging year due to
ongoing changes in Government restrictions and the associated cost of Covid
testing.
Our focus in the year was on a measured re-opening programme, only opening in
locations with sufficient passenger volumes to support a positive commercial
outcome. We also achieved more flexible terms with the vast majority of
airport partners with regards to minimum guaranteed rents (MGRs) and
mothballing fees. In addition, we have flexed our operating hours to match
departing flight times in order to minimise costs whilst ensuring we offer a
great service.
LFL sales declined by 41%, 18% ahead of the passenger volume decline in the
period (for the 33-week period ending 2 January 2022). Sales have benefitted
from a higher average spend per passenger (due to longer dwell times and the
benefit of a reduced VAT rate) and reduced competition as other food and
beverage operators manage their re-opening profile. We expect the level of
out-performance to reduce as competitors reopen more sites and VAT reverts to
20%.
We currently have 27 sites open, representing c.60% of our total estate.
Our opening plans for the remaining estate is dependent on passenger volume
recovery and discussions with airport partners on terminal reopening's. With
the recent encouraging news that restrictions and testing requirements are
being relaxed, we currently expect to open the majority of the remaining
estate over the summer in FY22.
2. Making good progress towards bringing medium-term leverage target below
1.5x
The Group made good progress during the year towards its medium-term leverage
target with FY21 year-end leverage 2 (#_ftn2) (net debt/EBITDA) standing at
2.1x.
The equity capital raise, strong EBITDA recovery in the second half of the
year and disciplined capital investment all contributing to the significant
reduction in net debt in the year.
With the good progress made, the Group has repaid £45m of term loan on 15
March 2022, maintaining further flexibility to pay a further £44m at par
before November 2022.
There is further detail in the financial review section on other key movements
in the cashflow.
3. Targeted organic growth plans for FY22
The strength of trading of our Wagamama and Pubs businesses since re-opening
has strengthened our belief on the site roll-out potential for both
businesses.
We continue to apply a highly selective approach to opening new sites, based
on a methodical, data-driven approach and a capital expenditure investment
appraisal that carefully evaluates and scores its key selection criteria,
including demographic and competitive dynamics.
Recent openings in 2019 and 2020 have delivered good returns with:
· Wagamama UK restaurants (excluding delivery kitchens) having
delivered over 45% return on invested capital 3 (#_ftn3) (consisting of 10
new openings)
· Wagamama UK delivery kitchens having delivered over 60% return on
invested capital (consisting of five new openings)
· Pub restaurants having delivered over 20% return on invested
capital 4 (#_ftn4) (consisting of three new openings)
We continue to make good progress and our expansion plans for our UK openings
in FY22 are outlined in the table below:
Existing estate New openings target annual run-rate 2022 planned openings
Wagamama UK restaurants 148 5-7 7-9
Wagamama UK Delivery kitchens 8 4-5 4-5
Pubs 79 3-5 3
With regard to the Wagamama International business we expect to open three to
four new US sites under our JV partnership with the first two sites expected
to be in Atlanta and Tampa. We also expect to open five to eight new
international franchise sites predominantly in Italy and the Middle East.
We will remain disciplined in the way that we grow the estate, focusing on
delivering good sustainable returns for our shareholders.
4. Driving forward our ESG agenda
'Preserving The Future' is TRG's programme that shapes and drives our
Environmental, Social and Governance (ESG) agenda. We are committed to
operating ethically and sustainably and the programme focuses on continuously
finding ways to reduce our carbon footprint, improve our packaging, to further
contribute to our communities and to improve the health and wellbeing of our
colleagues and customers, all of which is underpinned by a strong governance
framework.
Environmental initiatives overview
After having spent considerable time in the year assessing and compiling the
appropriate data, in collaboration with the Zero Carbon Forum for Hospitality,
we now have visibility of our emissions across all scopes allowing us to build
a programme of activity focussed on short, medium and long term
decarbonisation, in order to achieve our ambition of being Net Zero carbon
emissions by 2035.
We recognise the significant challenge of reaching net-zero and are focussed
on a number of environmental initiatives to reduce our impact, including:
· On 1 October 2021, we completed the move of all 5 (#_ftn5) our
directly controlled supplies of electricity, gas and LPG used in our Wagamama,
Pubs and Leisure divisions to renewable sources and all residual emissions
from this particular scope will be offset by carbon removal reforestation
projects from FY22. Carbon emissions from these scopes (i.e. scope 1 and 2)
represent c.15% of our total carbon emission footprint
· Reducing energy consumption through ongoing activities that baseline
usage per site, sets targets and drives ongoing consumption reduction through
operational best practice and with the adoption of monitoring technologies
that drive efficiency
· Reducing plate waste through a partnership with the Sustainable
Restaurant Association that identifies menu ingredients that contribute most
food waste so we can adapt menu design accordingly
· We have a new waste framework with our partners, that over the next
three years aims to increase waste recycling by 16% to 71%, with an ambition
to increase it by 6% in 2022
· Continuing to evolve our packaging with a new lower plastic packaging
content range launching in 2022 for Wagamama with the ambition of reducing
plastic packaging by at least 30%
· Our 'Bowl Return Scheme' trial in Brighton Wagamama that encourages
recycling has been well received by our customers and we are looking at
rolling it out more widely this year
We have worked with the Zero Carbon Forum to develop the high-level industry
roadmap to net zero for Scope 3 and are using this as a starting point to
develop our own specific roadmap and plan. Their sectoral guidance suggests a
70% reduction in emissions is possible with the residual 30% of emissions
being offset. It should not be under-estimated though that this is a
multi-year programme through to 2035 and that residual emissions will need to
be off-set from 2035.
Social initiatives overview
Our charity partners are 'Mind' and 'Young Minds' (Mental Health Charities)
and 'Only a Pavement Away' (A Homelessness Charity). We support our charities
through a variety of fundraising activities and are donating profits from our
retail range in Wagamama. We are also supporting our homelessness charity by
providing employment opportunities and a skills hub that offers hospitality
training. Through a combination of colleague led fundraising, company
matched programmes, and contributions from our retail product range we are
aiming to raise up to £500,000 in 2022.
In 2021 our Apprenticeship programme provided practical skills, experience and
qualifications for over 240 apprentices across front of house, back of house,
management and commercial roles and we are aiming to double the number of
apprenticeships to over 500 apprentices in total in 2022. This will equip
our graduates from the Apprenticeship programme with the equivalent
qualifications ranging from 5 GCSEs right up to degree level.
Our role to provide a diverse and inclusive environment with a strong sense of
purpose has never been more important. We have launched a range of engagement
initiatives, led by colleague groups, which provide information, awareness and
learning sessions to promote an inclusive workplace with appropriate
recruitment, leadership and behaviours. Additionally, we partner with The
Burnt Chef Project, a not-for-profit organisation who specialise in improving
the wellbeing of those within the hospitality profession and challenging the
stigma of mental health. We work with them to deliver mental health training
to our managers and to put in place effective practices which improve
wellbeing.
Reflecting the progress we have made in 2021, the Sustainable Restaurant
Association awarded a three-star rating to each of our divisions, representing
the highest rating attainable. The assessment areas focus on sourcing,
society and the environment reflecting the importance of sourcing and serving
food well. This is a significant progression on our 2019 ratings where we
achieved a three-star rating for our Pubs division, two-star for our Leisure
and Concessions division and one star for Wagamama.
We acknowledge the important role TRG plays in global climate and societal
change. Our "Preserving The Future" programme is a continuous journey to
establish environmental, social and governance best practice in everything we
do.
Financial Review
The impact of Covid continued to have a significant impact on performance with
the business operating only on delivery and takeaway in our Wagamama and
Leisure businesses, through to 'outside dining' trade and full trading from 17
May 2021. The results for this year therefore represent only seven months of
unrestricted trading when also allowing for the effect of the Omicron variant
in December 2021. In addition, international air travel volumes have been
significantly depressed throughout the whole period.
From full reopening, the business has traded very strongly, and we have been
delighted with the performance of all our divisions outperforming their
respective markets, which gives us confidence in our ability to trade
relatively well into 2022.
We welcomed the invaluable government support through this period in the form
of the reduced VAT rate, the business rates holiday and property grants. In
a period where our team members, operations and financial performance were
significantly impacted by the pandemic, these measures, along with the
Coronavirus Job Retention Scheme, enabled us to protect the employment of our
employees.
Statutory Results
The key statutory financial measures (IFRS 16) are summarised below and are
stated after the impact of exceptional costs:
STATUTORY RESULTS
(IFRS 16)
53 weeks ended 2 Jan 2022 52 weeks ended 27 Dec 2020*
£m
£m
Revenue 636.6 459.8
Operating profit/(loss) 14.1 (95.1)
Operating margin 2.2% (20.7%)
Loss before tax (32.9) (132.9)
Loss after tax (38.4) (124.2)
Statutory EPS (pence) (5.3)p (22.1)p
(*)Restated
Revenue for the year was £636.6m (2020: £459.8m) which represents an
increase of 38% on the prior year. The comparison between the two periods is
complicated by the impacts of the pandemic and various Government restrictions
in place across the hospitality sector during both years, with the increased
ability to trade in 2021 the primary driver for the increase year-on-year.
Following the removal of restrictions in May to early December, we are
particularly pleased to have delivered strong LFL sales growth across our
Wagamama, Pubs and Leisure businesses with all our businesses (including
Concessions) outperforming their respective markets.
Statutory operating profit increased substantially to £14.1m compared to an
operating loss of £95.1m in 2020. These figures include the impact of
exceptional items which significantly reduced from £45.4m to £24.9m. The
remainder of the increase was due to the increased ability to trade across the
business in 2021, disciplined cost control and the benefit of Government
assistance noted above.
Interest costs (including the impact of IFRS 16) rose to £47.0m from £37.8m
due to an increase in the effective interest rate, a higher gross debt, and an
exceptional write off of fees on the prior facilities of £1.9m.
Alternative Performance Measures
TRG uses a number of non-statutory measures to monitor business performance
which are referred to within the Annual Report, but primarily relate to
Adjusted and pre-IFRS 16 profit metrics. This is because the pre-IFRS 16
profit is consistent with the financial information used in the management
accounts to inform business decisions and investment appraisals. It is our
view that presenting the information on a pre-IFRS 16 basis will provide a
useful basis for understanding the Group's results to all stakeholders.
Specifically, the measures mainly relate to three adjustments:
- The main profit measure used is Adjusted EBITDA. This is not a
statutory measure but closely represents the Group's ability to make cash
trading profits as it excludes key non-cash elements of the Income Statement
such as depreciation and amortisation.
- The adjusted profit and debt measures are based on the IAS 17
approach to lease accounting and does not include the impact of IFRS 16.
This is used as it more closely represents the cash profit of the business,
and the debt as measured by our banks.
- The adjusted profit measures are quoted excluding the impact of
items that management have deemed as exceptional as they are material and not
related to underlying trading.
As these measures are not defined by accounting standards, they may not be
comparable across companies. The adjusted results may exclude significant
costs (such as restructuring or impairments) and so may not be a complete
picture of the Group's financial performance, which is presented in the
statutory results. Full definitions of the APMs are included in the Glossary
to the Annual Report.
The key alternative performance measures (APM) are summarised below. Both pre
IFRS 16 and IFRS 16 figures are shown and are stated before the impact of
exceptional costs:
APM (Pre-IFRS 16) APM (IFRS
16)
53 weeks ended 2 Jan 2022 52 weeks ended 27 Dec 2020* 53 weeks ended 2 Jan 2022 52 weeks ended 27 Dec 2020*
PRE IFRS 16
PRE IFRS 16
IFRS 16
IFRS 16
£m
£m
£m
£m
Revenue 636.6 459.8 636.6 459.8
Adjusted(1) EBITDA 81.2 8.7 115.2 53.4
Adjusted(1) operating profit/(loss) 42.8 (30.5) 37.1 (49.7)
Adjusted(1) operating margin 6.7% (6.6%) 5.8% (10.8%)
Adjusted(1) profit/(loss) before tax 16.6 (47.9) (8.0) (87.5)
(1)The Group's adjusted performance metrics are defined within the glossary at
the end of this report. All such adjusted measures are stated pre-exceptional
items
(*)Restated
Adjusted EBITDA (pre-IFRS 16) for 2021 is £81.2m (2020: £8.7m). The Group
generated an Adjusted EBITDA loss (pre-IFRS 16) of £18.1m in the first
quarter, whilst in lockdown and only being able to trade for delivery and
takeaway. As mentioned above, we saw strong LFL sales growth and EBITDA
delivery across our Wagamama, Pubs and Leisure businesses once we were able to
reopen for dine-in.
The Group made a profit before tax (pre-IFRS 16) for the year of £16.6m
(2020: loss £47.9m).
Refinancing and Equity Raise
During February 2021, the Group successfully agreed a £500m debt package
which consisted of a 5 year £380m term loan through to 2026, and a four year
£120m super senior revolving credit facility through to 2025.
In March 2021, the Group successfully raised net proceeds of £166.8m of
equity from its supportive shareholder base through a placing and open offer
with the aim to give us the liquidity needed to withstand further trading
restrictions, to invest in growing the business over the medium term and to
deliver good sustainable shareholder returns.
In May 2021, the Group drew down £330m of the term loan facility which
reduced the total available facilities to £450m. Given the strong recovery
of EBITDA and lower net debt, the Group has repaid £45m of the term loan on
15 March 2022. The Group currently has £405m of available debt facilities.
Capital allocation framework
The Group remains disciplined in its approach to capital allocation with the
overriding objective being to enhance shareholder value. The Group's capital
allocation framework prioritises:
Priorities Parameters
(1) Investment in customer offer Refurbishment and maintenance capex within a range of £25m to £35m
(2) Maintain a strong balance sheet Target leverage
6 (#_ftn6)
below 1.5x in the medium term
(3) Wagamama and Pubs new site expansion Deliver against targeted returns criteria:
o Wagamama >40% ROIC
o Pubs >20% ROIC
(4) Selectively consider inorganic growth opportunities Deliver long-term shareholder value
Cash flow and net debt
Net debt on an IFRS 16 basis has fallen from £824.2m to £582.0m in the year,
a fall of £242.2m. The key driver of this reduction has been the injection
of £166.8m of equity from the capital raise in March 2021. Secondly, the
reduction in lease liabilities of £73.4m is due to both the renegotiations of
existing airport rent deals to remove minimum payments and making them more
flexible in line with passenger numbers, and payments of lease liabilities in
the year.
Pre-IFRS 16 net debt has decreased from £340.4m to £171.6m, a reduction of
£168.8m. As mentioned above this is due primarily to the capital raise.
Free cash flow increased to £44.7m (2020: outflow £50.6m) following an
increase in Adjusted EBITDA to £81.2m (2020: £8.7m), and a reduction in
maintenance and refurbishment capex to £19.0m (2020: £21.9m), offset by an
increase in interest costs to £20.6m (2020: £15.5m).
Development expenditure of £15.1m (2020: £17.9m) related primarily to
opening five new Wagamama restaurants, two Wagamama delivery kitchens, and one
freehold pub. There were also some costs relating to the completion of four
new Concession sites in the redeveloped Manchester Airport terminal.
Summary cash flow for the year (on a pre-IFRS 16 basis) is set out below:
2021 2020
£m
£m
Adjusted EBITDA (Pre-IFRS 16 basis) (1) 81.2 8.7
Working capital and non-cash adjustments 5.7 (27.0)
Operating cash flow** 86.9 (18.3)
Net interest paid (20.6) (15.5)
Tax (paid)/received (2.6) 5.1
Refurbishment and maintenance expenditure (19.0) (21.9)
Free cash flow 44.7 (50.6)
Development expenditure (15.1) (17.9)
Utilisation of onerous property cost provisions (13.4) (9.3)
Exceptional costs (7.4) (34.9)
Proceeds from issue of share capital 166.8 54.6
Other items (1.6) 3.3
Cash movement 174.0 (54.8)
Net Debt (Pre IFRS 16 basis)
Group net debt brought forward (340.4) (286.6)
Derecognition of finance lease liability (IFRS 16 transition) - 2.6
Non-cash movements in net debt (5.2) (1.6)
Group net debt carried forward (Pre IFRS 16 basis) (171.6) (340.4)
Incremental lease liabilities (IFRS 16) (410.4) (483.8)
Group net debt carried forward (IFRS 16 basis) (582.0) (824.2)
(1)The Group's adjusted performance metrics are defined within the glossary at
the end of this report. All such adjusted measures are stated
pre-exceptional items
**Operating cash flow excludes certain exceptional costs and includes payments
made against lease obligations
At year-end, the Group had cash headroom of £258.1m (2020: £118.7m)
consisting of £111.6m of undrawn revolving credit facilities (2020: £78.0m)
and a cash balance of £146.5m (2020: £40.7m) which provides the Group with
significant liquidity to fund both the operations of the Group and future new
openings for both our Wagamama and Pubs businesses.
Exceptional items
An exceptional pre-tax charge of £24.9m has been recorded in the year (2020:
£45.4m).
Exceptional items consist of:
- Impairment of assets of £25.9m (2020: £142.9m). The impairment
charges relate to:
o £19.6m due to trading in certain locations, primarily relating to sites
in our Concessions business
o A charge of £6.3m relating to the write down of assets on closed sites
- A credit of £4.5m (2020: credit of £100.7m). The key elements are
rent concessions achieved of £15.1m, lease liabilities exited totalling a net
credit of £4.9m, partially offset by onerous property cost provisions of
£8.6m, payments to exit sites of £2.7m, staff redundancies of £2.7m, and
other costs of £1.5m
- A cost of £1.9m (2020: nil) for loan facility fees relating to the
prior debt facilities written off on refinancing
- Professional fees of £1.6m (2020: £3.2m) relating to corporate
financing and restructuring activity.
The tax credit relating to these exceptional charges was £2.6m (2020:
£1.5m).
Cash expenditure associated with the above exceptional charges was £7.4m in
the year (2020: £33.7m) relating principally to the staff restructuring,
closure costs, and professional fees as discussed above. The remainder of
the exceptional items were non-cash in nature.
Tax
The tax charge for the year was £5.5m (2020: credit of £8.7m), summarised as
follows:
2021 2020
Trading Exceptional Total Trading Exceptional Total
£m
£m
£m
£m
£m
£m
Corporation tax 0.7 (0.7) - (9.5) - (9.5)
Deferred tax (2.6) 10.3 7.7 (2.3) 3.3 1.0
Total current year tax (1.9) 9.6 7.7 (11.8) 3.3 (8.5)
Adjustments in respect of prior years (2.4) 0.2 (2.2) (0.2) - (0.2)
Total tax (credit) / charge (4.3) 9.8 5.5 (12.0) 3.3 (8.7)
Effective tax rate (excl prior years adjustments) 23.8% (38.6%) (23.4%) 13.5% (8.2%) 6.7%
Effective tax rate 53.8% (39.4%) (16.7%) 13.7% (8.2%) 6.8%
Given that the Group has made a statutory loss in both the current and prior
periods, the effective tax rate is not indicative of future expected tax
rates. It is also worth noting that the Group has further statutory losses
and interest restrictions worth £19.8m which will reduce future cash tax
payments over the next two to three years.
The effective adjusted tax rate for the year was 53.8% compared to the 13.7%
in the prior year. In the current year, we have had an increase in the tax
credit following a review of the tax treatment for corporate activities
undertaken and an updated capital allowances claim, resulting in a lower tax
charge for prior years which has been reflected in these accounts. Excluding
these benefits, the effective tax rate is 23.8% (2020: 13.5%). Consistent
with prior years, the tax rate is higher than the UK corporation tax rate due
to non-deductible expenses primarily relating to depreciation on
non-qualifying assets.
The current year exceptional tax charge of £9.6m consists of a £12.2m charge
relating to the change in the tax rate from 19% to 25% in April 2023 which
increases the value of the deferred tax liability, offset by £2.6m of tax
credits from the exceptional costs.
Key inflationary themes FY22
There are some well-documented sector wide cost challenges for the year ahead,
as outlined below:
All inflation figures below are stated as their incremental impact in FY22 vs
FY21 post mitigating activities
- Labour market pressures: as widely reported the economy is at
near full employment and there is well over 1 million vacancies in the UK.
This shortage of labour across the UK is leading to upward pressure on wage
rates in addition to the above inflationary increase in the National Living
Wage (NLW) from April 2022 of 6.6%
- General food & drink inflation: is driven by global commodity
markets and supply chain pressures that are expected to continue into 2023.
This is expected to result in cost inflation of 5%+ for FY22 before any
consequential inflationary impacts arising from the conflict in Ukraine
- Utilities inflation: Material market-driven increases in
electricity and gas will cost the Group an additional £6m to £7m in FY22
There are a number of actions the Group is taking to mitigate the significant
effects from the elevated levels of cost inflation expected for the current
year:
• Revised labour deployment model to manage the evolving sales mix
across dine-in and delivery sales
• Continuing to work with our supply chain partners to leverage the
scale of the business based on both volume growth and new site openings
• c.95% of electricity and gas volume hedged for 2022
• c.75% of electricity and gas volume hedged for 2023 and 2024
Selected FY22 Guidance
· Proactive negotiations with landlords and airport partners on
renewing Leisure and Concession sites approaching lease expiry/break:
o Achieved extensions/renewals on 32 sites representing 60% of sites at risk
of expiry
o Potential remaining exposure of £2m-£3m EBITDA on nine sites
· Total capital expenditure approximately £55m-£60m:
o Maintenance and IT investment of c.£20m
o Refurbishment capex of c.£10m includes:
- 3-5 Wagamama transformational refurbishments
- 10-15 targeted capital refreshes in Frankie & Benny's estate
o Expansionary capex of £25m-£30m
· IFRS 16 EBITDA add-backs (i.e., rent & other property non-cash
charges):
o Net add-back £47m to £53m
- £55m to £60m for fixed rent
- (£7m) to (£8m) for non-cash property charges
· Depreciation and interest detailed in table below:
Pre-IFRS 16 £'m IFRS 16 £'m Total £'m
P&L Depreciation 42-43 35-37 77-80
P&L Interest 24-25 17-18 41-43
· The Group continues to monitor the Russia/Ukraine situation and its
impact on the supply chain and is working on contingency planning where
appropriate
· Management's current expectations for FY22 remain unchanged, although
we are mindful about the consequential inflationary impacts arising from the
conflict in Ukraine
Viability Statement
In accordance with provision 31 of the UK Corporate Governance Code (July
2018) (the 'Code'), the Directors have assessed the viability of the Group
over a three-year period to December 2024.
The Directors believe that three years is the appropriate time-period over
which to evaluate long term viability, and this is consistent with the Group's
current strategic planning process. Management have prepared, and the Board
has considered two key scenarios:
- A 'base case' where the business is allowed to trade normally
throughout the period without further trading restrictions, specifically the
Group has forecast sales like-for-like performance to be broadly in line with
the levels seen in the 33 weeks since trading resumed on the 17 May 2021, and
cost inflation of c.5%. The Concessions business is forecast to return to
pre-pandemic levels in 2024 in line with current air passenger forecasts.
- A 'stress case' whereby the company is impacted by further
variants of the COVID-19 in winter 2022, 2023 and 2024 to the same severity as
the recent Omicron strain, sales are further reduced by 5% across the entire
period (outside of variant impact), and cost inflation is higher than in the
base case by 1%.
As detailed in the Risk Committee report, the Board has conducted a robust
assessment of the principal risks facing the business. The resilience of the
Group to the impact of these risks has been assessed by the creation of the
'stress case' which management believe to be a severe but plausible scenario
based on past experience.
Taking account of the company's current position, principal risks facing the
business and the sensitivity analysis discussed above, as well as the
potential mitigating actions that the company could take, and the experience
that the company has in adapting the business to change, the Board expects
that the company will be able to continue in operation and meet its
liabilities as they fall due over the three-year period of assessment.
Further details on the forecast process and assumptions can be found in Note 1
to the accounts.
The Restaurant Group plc
Consolidated income statement
53 weeks ended 2 January 2022
Trading Exceptional items
business (Note 7) Total
Note £m £m £m
Revenue 636.6 - 636.6
Cost of sales (548.2) (21.4) (569.6)
Gross profit/(loss) 5 88.4 (21.4) 67.0
Share of results of associate (0.3) - (0.3)
Administration costs (51.0) (1.6) (52.6)
Operating profit/(loss) 37.1 (23.0) 14.1
Interest payable 8 (45.7) (1.9) (47.6)
Interest receivable 8 0.6 - 0.6
Loss on ordinary activities before tax (8.0) (24.9) (32.9)
Tax on profit/(loss) from ordinary activities 9 4.3 (9.8) (5.5)
Loss for the year (3.7) (34.7) (38.4)
Other comprehensive income
Foreign exchange differences arising on consolidation 0.1 - 0.1
Total comprehensive loss (3.6) (34.7) (38.3)
Loss per share (pence)
Rights adjusted basic 10 (0.5) - (5.3)
Rights adjusted diluted 10 (0.5) - (5.3)
EBITDA 115.2 2.9 118.1
Depreciation, amortisation and impairment (78.1) (25.9) (104.0)
Operating profit/(loss) for the year 37.1 (23.0) 14.1
The Restaurant Group plc
Consolidated income statement
52 weeks ended 27 December 2020
Trading Exceptional items*
business (Note 7) Total
Note £m £m £m
Revenue ( ) 459.8 - 459.8
( ) ( )
Cost of sales ( ) (470.6) (37.8) (508.4)
( ) ( )
Gross profit/(loss) 5 (10.8) (37.8) (48.6)
( ) ( )
Share of results of associate ( ) (0.6) - (0.6)
Administration costs ( ) (38.3) (7.6) (45.9)
( ) ( )
Operating profit/(loss) ( ) (49.7) (45.4) (95.1)
( ) ( )
Interest payable 8 (38.2) - (38.2)
Interest receivable 8 0.4 - 0.4
( ) ( )
Loss on ordinary activities before tax ( ) (87.5) (45.4) (132.9)
( ) ( )
Tax on profit/(loss) from ordinary activities 9 12.0 (3.3) 8.7
( ) ( )
Loss for the year ( ) (75.5) (48.7) (124.2)
( ) ( )
Other comprehensive income ( )
Foreign exchange differences arising on consolidation 0.1 - 0.1
Total comprehensive loss ( ) (75.4) (48.7) (124.1)
( ) ( )
Loss per share (pence) ( )
Rights adjusted basic* 10 (13.4) - (22.1)
Rights adjusted diluted* 10 (13.4) - (22.1)
( ) ( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( )
( ) ( ) ( ) ( ) ( )
EBITDA ( ) 53.4 97.5 150.9
Depreciation, amortisation and impairment ( ) (103.1) (142.9) (246.0)
Operating profit/(loss) for the year ( ) (49.7) (45.4) (95.1)
*Restated - refer to Note 2
The Restaurant Group plc At 2 January 2022 At 27 December 2020*
Consolidated balance sheet Note £m £m
Non-current assets
Intangible assets 11 599.9 599.5
Right of use assets 12 289.4 368.9
Property, plant and equipment 13 285.1 300.3
Derivative financial instruments 18 2.1 -
Trade and other receivables 4.7 3.0
1,181.2 1,271.7
Current assets
Inventory 6.0 5.1
Trade and other receivables 13.9 16.1
Prepayments 6.1 8.8
Corporation tax debtor - 0.1
Cash and cash equivalents 18 146.5 40.7
172.5 70.8
Total assets 1,353.7 1,342.5
Current liabilities
Trade and other payables (128.3) (116.7)
Provisions 15 (6.0) (4.3)
Lease liabilities 16 (73.1) (91.5)
(207.4) (212.5)
Net current liabilities (34.9) (141.7)
Long-term borrowings 18 (318.1) (381.1)
Other payables - (1.3)
Deferred tax liabilities (41.9) (39.7)
Provisions 15 (9.3) (8.3)
Lease liabilities 16 (337.3) (392.3)
(706.6) (822.7)
Total liabilities (914.0) (1,035.2)
Net assets 439.7 307.3
Equity
Share capital 215.2 165.9
Share premium 394.1 276.6
Other reserves 0.1 (3.9)
Retained earnings (169.7) (131.3)
Total equity 439.7 307.3
*Restated - refer to Note 2
*Restated - refer to Note 2
The Restaurant Group plc
Consolidated statement of changes in equity
Share Share Other Retained Total
capital premium reserves earnings
Note £m £m £m £m £m
Balance at 29 December 2019 138.2 249.7 (5.9) 19.9 401.9
Adjustment for IFRS 16 transition - - - (27.0) (27.0)
Balance at 30 December 2019 (revised) 138.2 249.7 (5.9) (7.1) 374.9
Loss for the year* - - - (124.2) (124.2)
Other comprehensive income - - 0.1 - 0.1
Total comprehensive income/(loss) - - 0.1 (124.2) (124.1)
Gross proceeds from share issue 27.7 29.3 - - 57.0
Share issue transaction costs - (2.4) - - (2.4)
Share-based payments - - 2.0 - 2.0
Deferred tax on share-based payments taken directly to other reserves - - (0.1) - (0.1)
Balance at 27 December 2020 165.9 276.6 (3.9) (131.3) 307.3
Loss for the year - - - (38.4) (38.4)
Other comprehensive income - - 0.1 - 0.1
Total comprehensive income/(loss) - - 0.1 (38.4) (38.3)
Gross proceeds from share issue 49.3 125.9 - - 175.2
Share issue transaction costs - (8.4) - - (8.4)
Share-based payments - - 3.4 - 3.4
Deferred tax on share-based payments taken directly to other reserves - - 0.5 - 0.5
Balance at 2 January 2022 215.2 394.1 0.1 (169.7) 439.7
*Restated - refer to Note 2
Other reserves represents the Group's share-based payment transactions,
foreign currency translation reserve and shares held by the employee benefit
trust.
The Restaurant Group plc
Consolidated cash flow statement
53 weeks ended 2 January 2022 52 weeks ended 27 December 2020
Note £m £m
Operating activities
Cash generated from operations 17 128.1 3.2
Interest received - 0.2
Interest paid (20.6) (15.7)
Corporation tax (paid)/repayment (2.6) 5.1
Payment against provisions 15 (5.9) -
Payment of exceptional costs 7 (7.4) (34.9)
Net cash flows from operating activities 91.6 (42.1)
Investing activities
Purchase of property, plant and equipment 13 (31.1) (37.3)
Purchase of intangible assets 11 (2.7) (1.9)
Proceeds from disposal of property, plant and equipment - 3.3
Investment in associate (0.3) (0.6)
Net cash flows from investing activities (34.1) (36.5)
Financing activities
Net proceeds from issue of ordinary share capital 166.8 54.6
Repayment of obligations under leases 16 (48.7) (30.8)
Repayment of overdraft 18 - (10.0)
Repayment of borrowings 18 (383.6) (24.0)
Drawdown of borrowings 18 330.0 80.6
Upfront loan facility fee paid 18 (14.6) (0.9)
Derivative financial instruments fees paid 18 (1.6) -
Net cash flows used in financing activities 48.3 69.5
Net increase/(decrease) in cash and cash equivalents 105.8 (9.1)
Cash and cash equivalents at the beginning of the year 18 40.7 49.8
Cash and cash equivalents at the end of the year 18 146.5 40.7
1 General Information
Corporate information
The Restaurant Group plc (the 'Company') is a public listed company
incorporated and registered in Scotland. The consolidated financial
statements of the Group for the year ended 2 January 2022 comprise the Company
and its subsidiaries (together referred to as the 'Group'). The principal
activity of the Group during the period continued to be the operation of pubs
and restaurants.
The 2022 AGM will be held on 24 May 2022. The notice convening this meeting is
expected to be sent to shareholders in mid-April, along with details regarding
proxy voting, and will be made available at the same time at
www.trgplc.com/investors/reports-presentations/
(http://www.trgplc.com/investors/reports-presentations/) .
Accounting policies
Basis of preparation
The information included in this preliminary announcement has been prepared in
accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in
the European Union ("IFRS").
The consolidated financial statements are presented in pounds sterling and all
values are rounded to the nearest hundred thousand except when otherwise
indicated.
Going concern basis
The directors have adopted the going concern basis in preparing the Annual
Report and Accounts after assessing the Group's principal risks including the
risks arising from Covid-19.
The principal risks and uncertainties are disclosed in the Risk Committee
Report. These have been considered by Directors in forming their opinion. The
Directors have reviewed financial projections to 31 March 2023 (the review
period), containing both a 'base case' and a 'stress case'. In the 'base
case', the business is allowed to trade normally throughout the period without
further trading restrictions, specifically the Group has forecast sales
like-for-like performance to be broadly in line with the levels seen in the 33
weeks since trading resumed on the 17 May 2021, and cost inflation of c. 5%.
However, in the 'stress case' a further reduction in sales relating to a
further variant of Covid-19 is expected in Winter 2022, plus sensitivities
have been included for a 5% reduction in sales, and an additional 1% of cost
inflation. In addition, the Group has performed a reverse stress case which
has shown that the Group could withstand a further 6% fall in sales compared
to the stress case before the covenant levels would be exceeded on 31 March
2023, which in the context of the above the Directors consider remote.
The projections assume that tranches of the Term Loan facility will be repaid
to improve balance sheet efficiency, subject to a governance process managed
by the Board to ensure that appropriate liquidity is maintained throughout the
review period.
In both base and stress case forecasts, the Group has sufficient liquidity and
passes all relevant covenants within the review period. These covenants
consist of a minimum liquidity covenant of £40.0m until the end of December
2022, and a leverage covenant test in December 2022, and March 2023. Further
details of the covenants are in Note 18 to the Financial Statements.
Following a review of the forecasts above, the Board has concluded that the
going concern basis remains appropriate throughout the review period.
2 Restatement of comparatives
As a result of an FRC review of the 2020 Annual Report, the Directors
reconsidered the accounting for capitalised right of use asset depreciation of
£9.4m that arose during the fit-out period for four new Concessions sites.
Part of that amount (£5.3m pre-tax) should have been considered as abnormal
wastage and expensed in the prior year income statement as an exceptional item
given that it related to a period during which the fit-out was interrupted by
the pandemic. The impact of correcting this error is shown below.
As originally disclosed Adjustment As restated
£m £m £m
Consolidated income statement for the 52 weeks ended 27 December 2020
Exceptional cost of sales (32.5) (5.3) (37.8)
Exceptional tax on profit/(loss) from ordinary activities (4.3) 1.0 (3.3)
Exceptional loss for the year (44.4) (4.3) (48.7)
Loss for the year (119.9) (4.3) (124.2)
Consolidated balance sheet at 27 December 2020
Property, plant and equipment 305.6 (5.3) 300.3
Deferred tax liabilities (40.7) 1.0 (39.7)
Retained earnings (127.0) (4.3) (131.3)
The above restatement has no effect on the 2020 pre-exceptional measures of
Loss for the year (before or after tax) and EBITDA.
3 Segmental analysis
Operating Segments
IFRS 8 Operating Segments requires operating segments to be based on the
Group's internal reporting to its Chief Operating Decision Maker (CODM). The
CODM is regarded as the combined Executive team of the Chief Executive Officer
and the Chief Financial Officer. The Group has four segments of:
- Wagamama
- Pubs
- Leisure
- Concessions
The economic characteristics of these businesses, including Gross Margin, Net
Margin, EBITDA and Sales trajectory, have been reviewed by the Directors along
with the non-financial criteria of IFRS 8. It is the Directors' judgment
that all of the segments meet the requirements for aggregation under IFRS 8.
Geographical Segments
The Group trades primarily within the United Kingdom and generates revenue
from the operation of restaurants, with substantially all revenue generated
within the United Kingdom. The Group generates some revenue from franchise
royalties primarily in Europe and the Middle East. The segmentation between
geographical location does not meet the quantitative thresholds and so has not
been disclosed.
4 Reconciliation to underlying profit
The results used by the Directors to monitor and review the performance of the
Group continue to reflect the IAS 17 approach to accounting and a number of
the key metrics used in this report are prepared on that basis. A
reconciliation is provided below of the key differences between results under
IFRS 16 and the basis used for management reporting.
2021 Trading Adjustments for IFRS 16 2021 Trading IFRS 16 Exceptional Items (Note 7) 2021 Total IFRS 16 2020 Total IFRS 16*
IAS17
£m £m £m £m £m £m
Revenue 636.6 - 636.6 - 636.6 459.8
Cost of sales (542.5) (5.7) (548.2) (21.4) (569.6) (508.4)
Gross profit/(loss) 94.1 (5.7) 88.4 (21.4) 67.0 (48.6)
Share of result of associate (0.3) - (0.3) - (0.3) (0.6)
Administration costs (51.0) - (51.0) (1.6) (52.6) (45.9)
Operating profit/(loss) 42.8 (5.7) 37.1 (23.0) 14.1 (95.1)
Interest payable (26.7) (19.0) (45.7) (1.9) (47.6) (38.2)
Interest receivable 0.5 0.1 0.6 - 0.6 0.4
Profit/(loss) before tax 16.6 (24.6) (8.0) (24.9) (32.9) (132.9)
EBITDA 81.2 34.0 115.2 2.9 118.1 150.9
Depreciation, amortisation and impairment (38.4) (39.7) (78.1) (25.9) (104.0) (246.0)
Operating profit/(loss) 42.8 (5.7) 37.1 (23.0) 14.1 (95.1)
*Restated- refer to Note 2
The "Adjustments for IFRS 16" summarised above can be seen in the below
reconciliation of trading profit before tax (excluding exceptional items) from
the 'Underlying' basis to the IFRS 16 basis of accounting:
2021 2020
£m £m
Underlying Trading profit/(loss) before tax 16.6 (47.9)
Removal of rent expense 34.0 44.7
Net change in depreciation (39.7) (63.9)
Net change in net interest payable (19.0) (20.6)
Interest receivable on net investments in subleases 0.1 0.2
Trading loss before tax under IFRS 16 (8.0) (87.5)
5 Profit for the year 2021 2020
£m £m
Profit for the year after exceptional items has been arrived at after
charging/(crediting):
Amortisation (Note 11) 2.3 2.5
Depreciation on right of use asset (Note 12) 39.9 64.1
Depreciation on property, plant and equipment (Note 13) 35.9 36.5
Loss on sale of property, plant and equipment 2.4 -
Impairment of property, plant and equipment and software (Note 13) 12.6 21.2
Impairment of right of use asset (Note 12) 13.3 121.7
Impairment on net investments in subleases 0.1 6.6
Purchases of food, beverages and consumables 121.0 99.5
Inventory write downs 0.5 3.6
Staff costs (Note 6) 248.3 202.9
Covid-19 government grants 10.9 -
Variable rents 17.6 3.3
Rental income (0.2) (0.7)
Net rental costs 17.4 2.6
6 Staff costs
a) Average staff numbers during the year (including Directors) 2021 2020
Restaurant staff 14,415 15,843
Administration staff 356 425
14,771 16,268
2021 2020
b) Staff costs (including Directors) comprise:* £m £m
Wages and salaries 220.5 163.5
Social security costs 17.9 17.8
Share-based payments 3.4 2.0
Pension costs and salary supplements 3.8 4.4
245.6 187.7
2021 2020
c) Exceptional Staff Costs £m £m
Severance pay 2.7 15.2
2021 2020
d) Directors' remuneration £m £m
Emoluments 2.3 1.3
Salary supplements 0.1 0.1
2.4 1.4
Charge in respect of share-based payments 0.9 0.5
3.3 1.9
*This is a net amount after Coronavirus Job Retention Scheme payments of
£43.2m (2020: £123.5m).
7 Exceptional items
2021 2020*
£m £m
Included within cost of sales:
- Impairment charges relating to trading sites 19.6 37.0
- Abnormal wastage (Note 2) - 5.3
- Estate closure 0.6 5.5
- Disposal of assets in administration - 9.9
- Estate restructuring 1.2 (19.0)
- Remeasurement of other provision - (0.9)
21.4 37.8
Included within administration costs:
- Integration costs - 3.2
- Professional fees 1.6 3.2
- Disposal of US operation - 1.2
1.6 7.6
( )
Included within interest payable :
- Refinancing costs 1.9 -
Exceptional items before tax 24.9 45.4
Impact of tax change 12.2 4.8
Tax effect of exceptional Items (2.4) (1.5)
Net exceptional items for the year 34.7 48.7
*Restated - refer to Note 2
Impairment of assets
An impairment charge has been recorded against certain assets to reflect
forecast results at several trading sites. This £19.6m charge comprises of an
impairment of right of use assets of £9.5m (Note 12) and an impairment of
property, plant and equipment of £10.1m (Note 13).
Further details on the impairment of non-current assets are given in Note 14.
Estate restructuring
The Group has permanently closed a significant number of sites, following the
impact of the coronavirus pandemic. As a result of these closures, the Group
has recognised a number of material and non-recurring charges and credits
amounting to £1.2m.
The key elements are onerous property cost provisions of £8.6m, payments to
exit sites of £2.7m, staff redundancies of £2.7m, Impairment of non-trading
sites of £6.3m and other costs of £0.9m.
This has been partially offset by lease liabilities exited amounting to a net
credit of £4.9m, as well as rent concessions achieved of £15.1m.
Professional fees
During the year, the Group incurred material one-off costs relating to
corporate financing and restructuring activity. Since these costs are
material, irregular and unrelated to underlying or ongoing trading, they are
presented as exceptional items.
Refinancing costs
An exceptional charge of £1.9m has been recognised during the year as a
result of the write off of capitalised loan fees on the previous
facilities.
Tax rate change
The 2021 Budget in March 2021 announced an increase in the UK corporation tax
rate to 25% with effect from 1 April 2023. This was substantively enacted on
24 May 2021. The total impact of the increase in tax rate on deferred tax was
£12.2m, of which £14.8m related to the deferred tax asset associated with
intangibles on the Wagamama trademark. This has been recognised as an
exceptional item in the tax charge for the year as it is unrelated to
underlying
trading.
8 Net finance charges
2021 2020
£m £m
Bank interest payable 22.3 15.6
Unwinding of discount on lease liabilities 19.6 21.0
Amortisation of facility fees 3.3 1.6
Other interest payable 0.5 -
Exceptional refinancing cost (Note 7) 1.9 -
Trading borrowing costs 47.6 38.2
Unwinding of discounts on investments in subleases (0.1) (0.2)
Gain on derivative financial instrument (0.5) -
Other interest receivable - (0.2)
Total interest receivable (0.6) (0.4)
Total net finance charges 47.0 37.8
9 Tax
Trading Exceptional Total Total
2021 2021 2021 2020*
a) The tax charge comprises: £m £m £m £m
Current tax
UK corporation tax 0.7 (0.7) - (9.5)
Adjustments in respect of previous years 2.8 - 2.8 0.7
3.5 (0.7) 2.8 (8.8)
Deferred tax
Current year (2.6) (1.9) (4.5) (1.0)
Origination and reversal of temporary differences - - - (5.4)
Adjustments in respect of previous years (5.2) 0.2 (5.0) (0.9)
Charge in respect of rate change on deferred tax liability - 12.2 12.2 4.5
Charge in respect of fixed asset impairment - - - 2.9
(7.8) 10.5 2.7 0.1
Total tax (credit)/charge for the year (4.3) 9.8 5.5 (8.7)
b) Factors affecting the tax charge for the year
The tax charged for the year varies from the standard UK corporation tax rate
of 19% (2020: 19%) due to the following factors:
Trading Exceptional Total Total
2021 2021 2021 2020*
£m £m £m £m
Loss on ordinary activities before tax (8.0) (24.9) (32.9) (132.9)
Loss on ordinary activities before tax multiplied
by the standard UK corporation tax rate of 19% (2020: 19%) (1.5) (4.7) (6.2) (25.3)
Effects of:
Depreciation/impairment on non-qualifying assets 1.3 0.6 1.9 4.9
Expenses not deductible for tax purposes 0.5 1.0 1.5 0.7
Movement on unrecognised deferred tax asset (2.2) 0.6 (1.6) 2.4
Charge in respect of rate change on deferred tax liability - 12.2 12.2 4.6
Effect of overseas tax rates - (0.1) (0.1) -
Adjustment in respect of previous years (2.4) 0.2 (2.2) (0.2)
Balances eliminated on entering administration - - - 3.9
Share options - - - 0.4
Movement in capital loss - - - (0.1)
Total tax (credit)/charge for the year (4.3) 9.8 5.5 (8.7)
*Restated - refer to Note 2
The 2021 Budget in March this year announced an increase in the UK corporation
tax rate to 25% with effect from 1 April 2023. This was substantively enacted
on 24 May 2021.
10 Earnings per share
2021 2020*
Weighted average ordinary shares for the purposes of basic earnings per share 722,182,407 562,652,429
Effect of dilution - share options - -
Diluted weighted average number of shares 722,182,407 562,652,429
2021 2020
£m £m
Loss for the year after tax (38.4) (124.2)
Effect of exceptional items on earnings for the year 34.7 48.7
Adjusted loss for the year after tax (3.7) (75.5)
2021 2020
pence pence
Basic loss per share for the year (5.3) (22.1)
Effect of exceptional items on earnings for the year per share 4.8 8.7
Adjusted loss per share (0.5) (13.4)
Diluted earnings per share on loss for the year (5.3) (22.1)
Diluted earnings per share on adjusted loss for the year (0.5) (13.4)
Diluted earnings per share information is based on adjusting the weighted
average number of shares for the purpose of basic earnings per share in
respect of notional share awards made to employees in regards of share option
schemes and the shares held by the employee benefit trust.
The diluted earnings per share figures allow for the dilutive effect of the
conversion into ordinary shares of the weighted average number of options
outstanding during the year. Anti-dilutive shares that reduce the loss per
share have been excluded from this calculation. There are 267,076 (2020:
84,176) share options excluded from the diluted earnings per share calculation
because they would be anti-dilutive.
* The adjusted diluted earnings per share for the 52 weeks ended 27 December
2020 has been re-presented to take account of a correction in the calculation
of dilutive shares for that period and a change in the presented loss after
tax (refer to Note 2). No other measures have been affected.
Trademarks and Franchise Software and IT
11 Intangible assets
Goodwill licences agreements development Total
£m £m £m £m £m
Cost
At 29 December 2019 357.1 236.0 21.9 4.8 619.8
Additions - - - 1.9 1.9
Disposals (14.5) - - (0.3) (14.8)
Reclassifications - - - (1.1) (1.1)
At 27 December 2020 342.6 236.0 21.9 5.3 605.8
Accumulated amortisation and impairment
At 29 December 2019 - - 1.5 1.5 3.0
Charged during the year - - 1.4 1.1 2.5
Reclassifications - - - 1.1 1.1
Disposals - - - (0.3) (0.3)
At 27 December 2020 - - 2.9 3.4 6.3
Cost
At 27 December 2020 342.6 236.0 21.9 5.3 605.8
Additions - - - 2.7 2.7
Disposals - - - (0.2) (0.2)
At 2 January 2022 342.6 236.0 21.9 7.8 608.3
Accumulated amortisation and impairment
At 27 December 2020 - - 2.9 3.4 6.3
Charged during the year - - 1.5 0.8 2.3
Disposals - - - (0.2) (0.2)
At 2 January 2022 - - 4.4 4.0 8.4
Net book value as at 27 December 2020 342.6 236.0 19.0 1.9 599.5
Net book value as at 2 January 2022 342.6 236.0 17.5 3.8 599.9
The recoverable amount of the goodwill and trademark CGUs is £1,337.6m as at
2 January 2022 (£1,589.0m as at 27 December 2020). The recoverable amount has
been based on value in use estimates using forecasts approved by the Board.
The projected cash flows have been discounted using a rate based on the
Group's pre-tax weighted average cost of capital of 10.6% (2020: 8.7%) that
reflects the risk of these assets. Cash flows are extrapolated in perpetuity
with an annual growth rate of 2-3% (2020: 2-3%). It was concluded that the
value in use for each CGU is higher than its carrying value and therefore did
not require impairment.
The carrying amount of goodwill and indefinite life intangible assets
allocated to groups of CGUs is presented below along with the group of CGU's
recoverable amounts.
Goodwill Total intangibles Recoverable Amount
Trademarks & Licenses
£m £m £m £m
Wagamama 236.0 315.5 551.5 1,079.7
Brunning & Price - 15.2 15.2 213.5
Blubeckers - 11.3 11.3 42.6
Ribble Valley Inns - 0.6 0.6 1.8
236.0 342.6 578.6 1,337.6
The Group has conducted a sensitivity analysis taking into consideration the
impact on key impairment test assumptions arising from a range of possible
trading and economic scenarios as outlined in the stress case scenario at Note
1 as well as risk weightings applied to cash flows, discount rates used and
terminal growth rates as outlined in Note 14. The sensitivity analysis show
that no reasonably possible movements in these assumptions would lead to an
impairment.
The Company has assessed that the Wagamama trademark of £236.0m (2020:
£236.0m) has an indefinite useful life, and therefore is not amortising this
asset. If the trademark was amortised on a straight line basis over a period
of 25 years, an additional £9.4m (2020: £9.4m) of depreciation would be
recognised.
12 Right of use assets
Set out below are the right of use assets recognised in the Group's balance
sheet and movements therein during the year. All assets relate to access to
and use of property and there is, therefore, no analysis of assets into
different classes of use.
2021 2020
£m £m
Right of use assets at beginning of year 368.9 819.5
Additions 18.4 18.0
Disposals (4.6) (167.8)
Depreciation (39.9) (73.5)
Remeasurements (40.1) (105.6)
Impairment (Note 7) (13.3) (121.7)
Right of use assets at reporting date 289.4 368.9
When indicators of impairment exist, right of use assets are assessed for
impairment. As described in Note 14, all non-current assets were assessed at
the end of
2021.
13 Property, plant and equipment Fixtures,
Land and equipment
buildings and vehicles Total
£m £m £m
Cost
At 29 December 2019 647.3 265.3 912.6
Adjustment on transition to IFRS 16 (3.2) - (3.2)
At 30 December 2019 (Restated) 644.1 265.3 909.4
Additions* 22.6 17.9 40.5
Disposals (96.3) (46.6) (142.9)
Reclassifications - 1.1 1.1
At 27 December 2020* 570.4 237.7 808.1
Accumulated depreciation and impairment
At 29 December 2019 380.7 196.2 576.9
Adjustment on transition to IFRS 16 (1.3) - (1.3)
At 30 December 2019 (Restated) 379.4 196.2 575.6
Provided during the year 16.4 20.1 36.5
Impairment 23.0 8.1 31.1
Impairment reversals (7.7) (2.2) (9.9)
Disposals (81.7) (42.7) (124.4)
Reclassifications - (1.1) (1.1)
At 27 December 2020 329.4 178.4 507.8
Cost
At 27 December 2020 570.4 237.7 808.1
Additions 19.3 16.4 35.7
Disposals (41.0) (82.3) (123.3)
At 2 January 2022 548.7 171.8 720.5
Accumulated depreciation and impairment
At 27 December 2020 329.4 178.4 507.8
Provided during the year 14.1 21.8 35.9
Impairment (Note 7) 13.0 11.1 24.1
Impairment reversals (Note 7) (3.7) (7.8) (11.5)
Disposals (39.5) (81.4) (120.9)
At 2 January 2022 313.3 122.1 435.4
Net book value as At 27 December 2020* 241.0 59.3 300.3
Net book value as At 2 January 2022 235.4 49.7 285.1
*Restated- refer to Note 2
The Group has carried out impairment testing of property, plant and equipment
as described in Note 14.
The difference between the purchase of property plant and equipment in the
cash flow statement and the additions to property plant and equipment in Note
13 relates entirely to fixed asset accruals.
2021 2020
Net book value of land and buildings: £m £m
Freehold 103.2 98.8
Long leasehold (leasehold improvements) 3.7 3.7
Short leasehold (leasehold improvements) 128.5 138.5
235.4 241.0
Capital commitments
At 2 January 2022, the Group had commitments of £Nil (2020: £Nil).
14 Impairment reviews
The significant trading disruption in the period is judged to be an indicator
of potential impairment of assets and, accordingly, the Directors have chosen
to assess all non-financial assets for impairment in accordance with IAS 36.
Approach and assumptions
Our approach to impairment reviews is unchanged from that applied in previous
periods and relies primarily upon "value in use" tests, although for freehold
sites an independent estimate of market value by site has also been obtained
as at 27 December 2020 and, where this is higher than the value in use, we
rely on freehold values in our impairment reviews. These valuations are not
expected to have materially moved in the period and therefore have been used
for the 2021 impairment
calculation.
Discount rates used in the value in use calculations are estimated with
reference to our Group weighted average cost of capital. For 2021, we have
applied the discount rate of 10.6% to all assets (2020: 8.7%). The higher
discount rate used in 2021, reflects that a greater proportion of the capital
structure is equity following the capital raise which requires a higher rate
of return.
For the current period, value in use estimates have been prepared on the basis
of the forecast described above in Note 1 under the heading "Going concern
basis". The most significant assumptions and estimates relate to revenue
recovery forecast on site-by-site cash flows. It is assumed that our
businesses, with the exception of Concessions, maintain a steady recovery in
revenues, with Wagamama being the quickest to recover. Concessions is assumed
to recover more slowly, however passenger numbers are forecast to return to
2019 levels in 2024.
Results of impairment review
Impairment has been recorded in a number of specific CGUs, as well as
impairment reversals. A net impairment charge of £25.9m (2020: £142.9m) has
been recognised, of which £12.6m was recorded against Property, Plant &
Equipment ("PPE") and a further £13.3m against right of use assets. This is a
gross impairment charge of £49.2m offset by impairment reversals of £23.3m.
No impairment was recorded against the Group's intangible assets (including
goodwill).
Sensitivity to further impairment charges
The key assumptions used in the recoverable amount estimates are the discount
rates applied and the forecast cash flows. The key assumptions used in the
recoverable amount estimates are the discount rates applied and the forecast
cash flows. The Group has conducted a sensitivity analysis taking into
consideration the impact on key impairment test assumptions arising from a
range of possible trading and economic scenarios as well as discount rates
used as outlined the going concern basis in Note 1(b).
The sensitivity analysis of forecast cash flows with a 5% reduction in sales
would give rise to an additional Group impairment of approximately £44.6m
across PPE and right of use assets, made up of an increase in impairment of
£33.5m and a reduction in impairment reversals of £11.1m. Furthermore, this
reduction in sales would also give rise to an impairment to the Goodwill in
Blubeckers Limited and Ribble Valley Inns Limited of £10.1m, and £1.6m
respectively. An increase in inflation rate of 2% would give rise to
additional impairment of £27.9m, made up of an increase in the impairment
expense of £20.6m and a reduction in the impairment reversals of £7.3m. A
decrease in inflation rate of 2% would give rise to a reduction in impairment
of £19.1m, made up of a reduction in the impairment expense of £11.3m and a
increase in the impairment reversals of £7.8m. An increase in discount rate
of 1% would give rise to additional impairment of approximately £2.5m, made
up of an increase in the impairment expense of £1.6m and a reduction in the
impairment reversals of £0.9m.
Additionally, we have conducted sensitivity assessments on terminal growth
rate, freehold valuations, and risk factors but a reasonably possible change
was not material to the impairment charge.
15 Provisions
2021 2020
£m £m
Property cost provisions 12.9 11.3
Other provisions 2.4 1.3
Balance at the end of the year 15.3 12.6
Analysed as:
Amount due for settlement within one year 6.0 4.3
Amount due for settlement after one year 9.3 8.3
15.3 12.6
Property cost provisions Other Total
£m £m £m
At 27 December 2020 11.3 1.3 12.6
Remeasurement 6.2 6.2 2.4
Amounts utilised (4.6) (1.3) (5.9)
Unwinding of discount - - -
At 2 January 2022 12.9 2.4 15.3
Property cost provisions
A provision is made for property-related costs for the period that a sublet or
assignment of the lease is not expected to be possible. The amount and timing
of the cash outflows are subject to uncertainty. The average period over which
the provision is expected to be utilised is 2.3 years which is a key
assumption in the valuation of the provision. An increase of one year in the
expected period over which a sublet or assignment is not expected to be
possible would result in an increase in the provision of £3.4m, whilst a
decrease would result in a reduction on the provision of £3.5m amount.
Onerous contract and other property provisions are discounted using a discount
rate of 1.0% (2020: 1.0%) based on an approximation for the time value of
money.
Other provisions
Other provisions includes a best estimate of the liability in respect of a
constructive obligation to meet certain lease payments of a restaurant
operated by an associate, the liability for which is considered probable on
the closure of that restaurant, most likely within a year.
16 Lease liabilities and net investments in subleases
The Group is both a lessee and lessor of property.
(a) Group as lessee
Set out below are the movements in the carrying amount of lease liabilities
during the period. All leases relate to access to and use of property.
2021 2020
£m £m
At 27 December 2020 483.8 933.4
Additions 18.4 18.0
Unwinding of discount on lease liabilities 19.6 21.0
Cash payments made (48.7) (30.8)
Liabilities extinguished in disposals (9.5) (335.7)
Remeasurements (53.2) (122.1)
At 2 January 2022 410.4 483.8
Analysed as:
Amount due for settlement within one year 73.1 91.5
Amount due for settlement after one year 337.3 392.3
410.4 483.8
The Group leases various buildings which are used for the purpose of operating
pubs and restaurants. The leases are non-cancellable operating leases with
varying terms and renewal rights, and include variable payments that are not
fixed in amount but based upon a percentage of sales.
The total value of expense relating to low value leases in 2021 was £7,793
(2020: £61,588).
In addition to the unwinding of discount on lease liabilities noted in the
above table and depreciation on right of use assets, the Group is exposed to
leases where future cash outflows are not reflected in the lease liabilities
because the agreements are based on variable lease payments in the form of
turnover rent. The Group also incurred £0.6m (2020: £2.3m) of costs relating
to short term leases.
As at 2 January 2022, the Group was not committed to any leases with future
cash outflows which had not yet commenced.
Sensitivity to changes in assumptions
Termination Options
Some leases contain termination options exercisable by group before the end of
the non-cancellable period. These extension and termination options held are
exercisable only by the group and not by the lessors. The group assesses at
lease commencement whether it is reasonably certain to exercise the extension
or termination options. The group reassesses whether it is reasonably certain
to exercise the options if there is a significant event or significant change
in circumstances within its control.
The group has estimated that the potential future lease payments, should it
exercise the termination options, would result in a decrease in cash outflows
of £105.0m.
Discount Rate
Lease liabilities under IFRS 16 are initially recorded at the present value of
future lease payments discounted using the Group's incremental borrowing rate,
which we estimate with reference to our debt facilities and observed bond
yields, calculated on a lease by lease basis. Lease liabilities are
subsequently unwound using the same discount rate and included in finance
expense in the Group Profit and Loss. Increasing the discount rate by 1% would
lead to an increased interest expense of £0.5m, while decreasing by 1% would
lead to a decrease of £0.6m.
(b) Group as lessor
All income relates to fixed rental receipts. Movements in the net investment
in lease assets included income of £0.9m and an expected credit loss
provision of £2.8m. There was no income from leases classified as operating
leases.
Finance leases
Undiscounted lease receipts relating to finance leases for future years are
set out in the table below. The total in the table for Finance Leases is
greater than the balance sheet amount due to the effects of discounting and
provisions for expected credit losses. There is no undiscounted unguaranteed
residual value within the amounts
recognised.
2021 2020
£m £m
Amounts receivable in the next year 1.1 0.8
Amounts receivable in 1-2 years 0.9 0.6
Amounts receivable in 2-3 years 0.9 0.4
Amounts receivable in 3-4 years 0.9 0.4
Amounts receivable in 4-5 years 0.8 0.4
Amounts receivable after 5 years from the balance sheet date 6.5 4.0
Total 11.1 6.6
Operating leases
2021 2020
£m £m
Amounts receivable in the next year 0.4 0.4
Amounts receivable in 1-2 years 0.4 0.3
Amounts receivable in 2-3 years 0.3 0.2
Amounts receivable in 3-4 years 0.3 0.1
Amounts receivable in 4-5 years 0.3 0.1
Amounts receivable after 5 years from the balance sheet date 3.9 0.8
Total 5.6 1.9
17 Reconciliation of profit before tax to cash generated from operations
2021 2020
£m £m
Loss on ordinary activities before tax (32.9) (132.9)
Net interest payable 45.1 37.8
Exceptional items (Note 7)* 24.9 45.4
Share of results of associate 0.3 0.6
Share-based payments 3.4 2.0
Depreciation and amortisation 78.1 103.1
(Increase)/decrease in inventory (0.9) 3.6
Decrease in receivables 5.1 15.9
Increase/(decrease) in creditors 5.0 (72.3)
Cash generated from operations 128.1 3.2
*Restated- refer to Note 2
Of the cash and cash equivalents at 2 January 2022, £40.0m is maintained in
support of minimum liquidity requirements under borrowing covenants.
2021 2020
Reconciliation of net cash from operating activities to free cash flow £m £m
Net cash flows from operating activities 91.6 (42.1)
Payment on exceptionals 7.4 34.9
Payment of obligations under leases (48.7) (30.8)
Refurbishment and maintenance expenditure (19.0) (21.9)
Payment against provisions 13.4 9.3
Free cash flow 44.7 (50.6)
18 Financial instruments and derivatives
Financial assets
The financial assets of the Group, which are classified at amortised cost and
fair value through profit and loss, comprise:
2021 2020*
£m £m
Cash and cash equivalents 146.5 40.7
Other receivables 18.6 19.1
Financial assets at amortised cost 165.1 59.8
Derivative financial instrument 2.1 -
Financial assets at fair value through profit and loss 2.1 -
Total financial assets 167.2 59.8
*Restated to include long term other receivables
Cash and cash equivalents are comprised of cash at bank and cash floats held
on site. The cash and cash equivalents balance includes £5.4m (2020: £0.7m)
of credit card receipts that were cleared post year end.
Cash and cash equivalents also include £0.9m (2020: £0.8m) held on account
in respect of deposits paid by tenants under the terms of their rental
agreement.
During the period, the Group entered into a derivative in the form of an
interest rate cap which is measured at fair value through the profit and loss.
The interest rate cap has an effective date of November 2022 to November 2025,
for a value of £100.0m. The strike price of the interest rate cap is 0.75%.
Net gains or losses associated to the movement in the fair value of the
interest rate cap do not include any interest paid relating to the interest
rate cap.
2021 2020
£m £m
Trade and other payables 128.3 116.7
Lease liabilities 73.1 91.5
Short-term financial liabilities 201.4 208.2
Long-term borrowings - at fixed interest rates - 225.0
Long-term borrowings - at floating interest rates(1) 330.0 158.6
Bank fees (11.9) (2.5)
Lease liabilities 337.3 392.3
Other payables - 1.3
Long-term financial liabilities 655.4 774.7
Total financial liabilities 856.8 982.9
(1)Total financial liabilities attracting interest were £330.0m (2020:
£383.6m). Interest is payable at floating interest rates which fluctuate and
are dependent on LIBOR and base rate. The average rate of interest charged
during the year on the Group's debt was 5.70% (2020: 3.50%).
On 2021 results, net interest was covered 2.5 times (2020: 1.4 times) by
earnings before interest, tax, depreciation and exceptional items. Based on
year-end debt and earnings for 2021, a 1% rise in interest rates would reduce
interest cover to 2.3 times (2020: 1.4 times).
At 2 January 2022, the interest rate on the Term Loan is 6.5% above LIBOR. A
commitment fee of 1.2% is charged on the undrawn Revolving Credit Facility.
The maturity dates on the Group's debt facilities are as follows: May 2026 for
the Term Loan; and May 2025 for the Revolving Credit Facility.
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a
going concern while looking to maximise returns to shareholders. The capital
structure of the Group consists of equity (comprising issued share capital,
other reserves and retained earnings), borrowings and cash and cash
equivalents. The Group monitors its capital structure on a regular basis
through cash flow projections and consideration of the cost of financing its
capital.
The Group is subject to externally imposed capital requirements in respect of
the Term Loan and Revolving Credit Facility. The Group is required to maintain
a net debt to EBITDA ratio and a minimum liquidity requirement of £40.0m. The
leverage covenants do not take effect until December 2022, subject to
maintaining the £40.0m minimum liquidity requirement.
Secured liabilities and assets pledged as security
The Group has pledged certain assets in order to fulfil the collateral
requirements of the Term Loan and Revolving Credit Facility.
The Term Loan and Revolving Credit Facility are secured by a fixed charge over
the shares and intellectual property of TRG (Holdings) Limited, The Restaurant
Group (UK) Limited, Blubeckers Limited, Brunning and Price Limited, TRG
Concessions Limited, Wagamama Limited and Wagamama Group Limited, as well as a
floating charge on all present and future assets, property, business,
undertaking and uncalled capital.
The maturity profile of anticipated gross future cash flows, including
interest, relating to the Group's non-derivative financial liabilities, on an
undiscounted basis, are set out below:
At 2 January 2022
Trade and other Fixed Floating Lease Total
payables rate loan rate loan liability debt
excluding tax
£m £m £m £m £m
Within one year 128.3 - 24.6 74.6 227.5
Within one to two years - - 24.6 58.4 83.0
Within two to three years - - 24.6 53.4 78.0
Within three to four years - - 23.7 47.8 71.5
Within four to five years - - 353.1 40.2 393.3
After five years - - - 262.7 262.7
128.3 - 450.6 537.1 1,116.0
At 27 December 2020
Trade and other Fixed Floating Lease Total
payables rate loan rate loan liability debt
excluding tax
£m £m £m £m £m
Within one year 116.7 9.6 14.0 94.1 234.4
Within one to two years - 4.6 144.6 65.0 214.2
Within two to three years - 225.2 - 61.1 286.3
Within three to four years - - - 56.1 56.1
Within four to five years - - - 52.0 52.0
After five years - - - 289.9 289.9
116.7 239.4 158.6 618.2 1,132.9
Fair value of financial assets and liabilities
Financial assets at fair value
There were no transfers between Levels 1, 2 and 3 fair value measurements
during the current or prior period.
The Group has no financial assets or liabilities that require measurement
using Level 2 or Level 3 measurement techniques as defined by IFRS 13.
Long-term borrowings
At 2 January 2022 At 27 December 2020
Drawn Available facility Total facility Drawn Available facility Total facility
£m £m £m £m £m £m
High yield bond - - - 225.0 - 225.0
Term loan 330.0 - 330.0 - - -
Revolving credit facilities - 111.6 120.0 108.6 78.0 195.0
CLBILS* - - - 50.0 - 50.0
Total banking facilities 330.0 111.6 450.0 383.6 78.0 470.0
Unamortised loan fees (11.9) (2.5)
Long-term borrowings 318.1 381.1
Cash and cash equivalents 146.5 146.5 40.7 40.7
Pre-lease liability net debt 171.6 340.4
Lease liabilities 410.4 483.8
Net debt 582.0 824.2
Cash headroom 258.1 118.7
The Group has covenants over both the term loan and the revolving credit
facilities (RCF). Until 31 December 2022, both facilities require a minimum
liquidity level of £40.0m which is measured as the total of cash and undrawn
facilities. On the term loan, from 31 December 2022, the covenant requires
total net debt to be no more than 5.0x EBITDA, reducing to 4.5x at June
2023. On the RCF, the Group is required to maintain total net debt to EBITDA
below 5.5x at 31 December 2022, and 4.75x at 30 June 2023. In addition, the
ratio of RCF debt to EBITDA can be no more than 1.5x from June 2022, when the
RCF is drawn.
The available revolving credit facilities are reduced from the total facility
by £8.4m of letters of credit issued to external suppliers
*CLBILS was fully cleared in May 2021.
Cash and cash equivalents Overdraft Bank loans falling due after one year Finance leases Lease liabilities Total
£m £m £m £m £m £m
Balance as at 29 December 2019 49.8 (10.0) (323.8) (2.6) - (286.6)
Adjustment on transition to IFRS 16 - - - 2.6 (933.4) (930.8)
Opening balance as at 30 December 2019 49.8 (10.0) (323.8) - (933.4) (1,217.4)
Net drawdown of borrowings 56.6 - (56.6) - - -
Repayment of overdraft (10.0) 10.0 - - - -
Upfront loan facility fee paid (0.9) - 0.9 - - -
Repayment of obligations under leases (30.8) - - - 30.8 -
Non-cash movements in the year - - (1.6) - 418.8 417.2
Net cash outflow (24.0) - - - - (24.0)
Balance as at 27 December 2020 40.7 - (381.1) - (483.8) (824.2)
Net repayments of borrowings (53.6) - 53.6 - - -
Upfront loan facility fee paid (14.6) - 14.6 - - -
Repayment of obligations under leases (48.7) - - - 48.7 -
Non-cash movements in the year - - (5.2) - 24.7 19.5
Net cash inflow 222.7 - - - - 222.7
Balance as at 2 January 2022 146.5 - (318.1) - (410.4) (582.0)
The non-cash movements in lease liabilities are in relation to the
de-recognition and remeasurement of lease liabilities, while the non-cash
movement in bank loans are in relation to amortisation of prepaid facility
costs.
Publication of Annual Report
This preliminary statement is not being posted to shareholders. The Annual
Report will be posted to shareholders in due course and will be delivered to
the Registrar of Companies following the Annual General Meeting of the
Company. Copies of the Annual Report will be available from the Company's
website in March 2022.
Responsibility statement of the directors on the Annual Report
The responsibility statement below has been prepared in connection with the
Group's full annual report for the year ended 2 January 2022. Certain parts of
the annual report are not included within this announcement.
We confirm that, to the best of our knowledge
• the financial statements, prepared in accordance
with the International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in
the European Union, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
• the strategic report includes a fair review of
the development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face.
On behalf of the Board
Andy Hornby
Kirk Davis
Chief Executive Officer
Chief Financial Officer
15 March
2022
15 March 2022
The directors believe the Adjusted Performance Metrics used within this
report, and defined below, provide additional useful information for
shareholders to evaluate and compare the performance of the business from
period to period. These are also the KPIs used by the directors to assess
performance of the business. The adjusted metrics are reconciled to the
statutory results for the year on the face of the income statement and the
relevant supporting notes.
Measure Description
Adjusted diluted EPS Calculated by taking the profit after tax of the business pre-exceptional
items divided by the weighted average number of shares in issue during the
year, including the effect of dilutive potential ordinary shares.
Adjusted EBITDA Earnings before interest, tax, depreciation, amortisation and exceptional
items. Calculated by taking the Trading business operating profit and adding
back depreciation and amortisation.
Adjusted EPS Calculated by taking the profit after tax of the business pre-exceptional
items divided by the weighted average number of shares in issue during the
year.
Adjusted operating profit Operating profit prior to the impact of Exceptional items.
Adjusted operating margin Calculated as the Operating profit as a percentage of Revenue. For the
'Adjusted' basis this is using the profit and revenue prior to Exceptional
items.
Adjusted profit before tax Calculated by taking the profit before tax of the business pre-Exceptional
items.
Adjusted tax charge Calculated by taking the tax of the business pre-exceptional items.
Effective adjusted tax rate Calculated as the tax expense as a percentage of profit before tax. For the
'Adjusted' basis this is using the tax and profit prior to Exceptional items.
Cash headroom Calculated as the funds available to the business through either its Cash
& cash equivalents balance or through undrawn facilities, less letters of
credit.
Capital expenditure This is calculated as the total of Development capital expenditure and
Refurbishment and maintenance expenditure and is the cash outflow associated
with the acquisition of Property, plant and equipment, intangibles and
investments in the US joint venture.
Development capital expenditure This is the Capital expenditure relating to profit-generating projects upon
which we expect a commercial return in future years.
EBITDA Earnings before interest, tax, depreciation, amortisation and impairment.
Exceptional items Those items that are material, and not related to the underlying trade of the
business.
Free cash flow Adjusted EBITDA (IAS17 basis) less working capital and non-cash adjustments
(excluding exceptional items), tax payments, interest payments and
Refurbishment and maintenance expenditure.
Like-for-like sales This measure provides an indicator of the underlying performance of our
existing restaurants. There is no accounting standard or consistent definition
of 'like-for-like sales' across the industry. Group like-for-like sales are
calculated by comparing the performance of all mature (traded for at least 65
weeks) sites in the current period versus the comparable period in 2019. Sites
that are closed, disposed or disrupted during a financial year are excluded
from the like-for-like sales calculation.
Leverage Net Debt/EBIDTA ratio (pre-IFRS 16 and exceptional charges)
Minimum liquidity The minimum liquidity is a financial covenant required under the terms of our
loans to have a minimum of both available undrawn facilities plus Cash and
cash equivalents of at least £40 million.
Net debt Net debt is calculated as the net of all borrowings less cash and cash
equivalents, plus the IFRS 16 Lease liabilities.
Outlet EBITDA Pre-IFRS 16 and Exceptional EBITDA directly attributable to individual sites
and therefore excluding corporate and central costs.
Pre-lease liability net debt As above Net Debt but excluding the IFRS 16 Lease liabilities.
Refurbishment and maintenance expenditure This is the Capital expenditure relating to projects to maintain and refurbish
our estate. No incremental financial return is expected on this expenditure.
Return on Invested Capital (ROIC) Outlet EBITDA (pre-IFRS 16 and exceptional charges)/initial capital invested.
Trading business Represents the performance of the business before exceptional items.
TSR Total Shareholder Return over a period. Total shareholder return (TSR) is
calculated as the overall appreciation in the share price, plus any dividends
paid, during a period of time; this is then divided by the initial purchase
price of the stock to arrive at the TSR.
1 (#_ftnref1) Pre-IFRS 16 and exceptional charges
2 (#_ftnref2) Pre IFRS 16 Adjustment and exceptional charges
3 (#_ftnref3) Return on invested capital (ROIC) defined by 2021 outlet
EBITDA/initial capex invested grossed up for 12 months. i.e. 2021 outlet
EBITDA is for the 7 month period June to December 2021. Returns have also been
adjusted to take out the VAT benefit and property grants received in the
respective period
4 (#_ftnref4) Pub restaurants returns EBITDA assumed on leasehold basis at
6% interest on freehold component of investment
5 (#_ftnref5) Includes electricity, gas & LPG. Where we control the
specific supply point for contracting. Excludes landlord supplies
6 (#_ftnref6) Net debt to EBITDA ratio (Pre IFRS 16 Adjustment and
exceptional charges)
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