Strong trading performance across all brands with good growth in turnover, profit and margins:

·      Interim dividend increased by 11.5% to 6.8p per share (2014: 6.1p)

·      Accelerating new site development:

·      Year to date like-for-like sales for the 34 weeks to 23 August 2015 up 2%

·      Board is confident of another year of good progress in 2015

Danny Breithaupt, Chief Executive of The Restaurant Group plc commented as follows:

"The Restaurant Group has delivered another strong set of results, with good growth across all key performance measures and excellent progress on our strategy of increasing the pace of roll out in a more balanced way between our brands.

These results reflect the hard work that has gone in to driving the continued evolution of the Group and I would like to record my thanks to our teams across the country for delivering another excellent performance.

The strengthening UK economy, increasing wages and disposable incomes, combined with the secular trends driving ongoing expansion of the eating out market, give me great confidence that TRG is well set for continued strong growth this year and beyond."

28 August 2015

Enquiries:

Chairman's statement 

Introduction 

I am pleased to report that the Group has traded strongly during the first six months of the year with good growth in turnover, profits and margins. Total sales in the first half grew by 8.4%, like-for-like sales were 2.5% ahead of the prior year and Group profit before tax was up 10%. 

For the 34 weeks to 23 August like-for-like sales are up 2%. We are pleased with performance over the last two months, set against a period of very strong trading during July and August last year.

During the first six months of the year we opened 12 new restaurants. In July and August we opened a further nine bringing the total number of new sites opened so far this year to 21. The programme for the balance of the year is very well advanced and we expect to open a total of between 43 and 48 restaurants for the year as a whole. 

Trading results  

During the first half of the year the Group made good progress on all the key metrics. Total revenue was up by 8.4% to £333.8m, EBITDA grew by 7.9% to £57.4m, operating profit rose by 9.3% to £38.1m and profit before tax increased by 9.6% to £36.9m. Earnings per share were up 11.7% to 14.3p, benefitting from a lower tax rate. There is no doubt that trading conditions in the year so far have been tough but these results once again demonstrate the resilience of the Group's business.

During the first half we made further progress on margins, with Group operating margin for the first half increasing by 10 basis points to 11.4%.  Since the autumn of 2014 we have seen higher levels of wage cost inflation and we have also increased investment in the Head Office structure to support our growth. However these cost pressures have been more than offset by the benefits of operational efficiencies and minimal food cost inflation, resulting in the margin expansion referred to above.

We note the recently announced Government plans to introduce the Living Wage from April 2016, effectively a new tier of National Minimum Wage for those aged 25 and over. Whilst this will clearly have some cost implications, we are actively taking steps to mitigate the impact with our continued focus on operational efficiencies.

Interim dividend

As a result of the strong financial performance the Board is declaring an interim dividend of 6.8p per share, an increase of 11.5% on the prior year. The interim dividend will be paid on 8 October 2015 to shareholders on the register on 11 September 2015 and shares will be marked ex dividend on 10 September 2015.  

Frankie & Benny's (251 units)

Frankie & Benny's traded well during the first half delivering good growth in turnover and profits combined with some margin improvements. During the first half we opened four new Frankie & Benny's restaurants, with a further two opening since the end of June. These new sites are all performing well and are set to deliver strong returns. We expect to open a total of 13 to 15 new Frankie & Benny's restaurants in the full year. 

Frankie and Benny's has broad appeal, particularly among families. Service and value are important drivers within this market and we have worked hard in 2015 to ensure we remain ahead of the competition on these issues. The 'Family Matters' program, which represents a step change in service culture, launched across all sites at the beginning of the year. Both this and our Red Sauce Revolution menu implemented in August have been designed to deliver further long-term improvements in performance. We believe that both of these significant developments will ensure this brand is well positioned for growth both now and long into the future. 

Chiquito (79 units)

The rejuvenation of the Chiquito brand, which started some two years ago, has continued apace. During H1 Chiquito recorded the strongest growth in both sales and profits of all our brands. We opened one new Chiquito during the first half, have opened three subsequently and expect to open a total of 8 to 10 in the full year. We are extremely pleased with the performance of recent openings, all of which are set to deliver strong returns.   Major recent areas of focus include the development of the breakfast, dessert and cocktail offerings, all of which are contributing to strong sales growth. We are confident that Chiquito will become an increasingly important part of TRG's success going forward and that it will further strengthen its position as a market leader in its sector.

Coast to Coast (13 units)

Coast to Coast is now a well-established part of the TRG brand portfolio and has delivered a strong financial performance. Although we did not open any new Coast to Coast restaurants during the first half of the year, we have subsequently opened in three new locations. Two of these sites (Aberdeen and Northampton) sit alongside existing successful TRG units. The third new Coast to Coast opening is in Chester city centre. We believe Coast to Coast has the diversity of appeal to operate in multiple location types, as evidenced by the successful Birmingham city centre opening last year. The strong performance of our openings gives us great confidence in the future of this brand and that Coast to Coast will become an increasingly significant part of The Restaurant Group's success and diversification over time.

Pubs (53 units)  

Our Pub restaurant business had an excellent first half with strong growth in turnover and profitability. In the first half we opened one new pub and we expect to open a total of 3 to 4 in the full year. We have a well-established model for our Pub business which is scalable and capable of delivering sustained high levels of return on investment. Over the last nine months we have deliberately strengthened the team in several areas to support the acceleration of new pub openings. The Pub business has now reached the scale at which it helps with diversification, trading well through hot summer months and providing good balance to the TRG portfolio. This business will only get better going forward as we accelerate the pace of new openings over the next few years. 

Concessions (60 units)

The Concessions business traded strongly during the first half with good growth in turnover, margins and profits. During the first half we opened five new units, including a very strong roster of three outlets in the re-developed Stansted departures lounge, and our first airside unit at Birmingham Airport. We expect to open at least two more units in the balance of the year, making a total of at least seven new openings for the full year. This business continues to be a real success story for TRG. Our focus on concept development and customer service levels continues to generate levels of sales growth ahead of UK passenger growth numbers and excellent returns on investment. With a stronger economic outlook we expect to see travel hubs become busier in the coming years and we are well positioned to take advantage of this going forward.

Cash flow & balance sheet

Cash generation during the first half was once again extremely strong with net cash flow from operations of £60m. Free cash flow (after interest, tax and maintenance expenditure) of £44m represents an increase of over 20% on the comparable period last year. The strong conversion of operating profits into cash, combined with high returns on investment from new site openings, means that we can open an increasing number of new sites while at the same time continuing to increase the level of dividend payment each year. As will be noted from the cash flow of the Group over recent years, the increasing levels of new site openings and dividend have been entirely financed out of internally generated cash flow.

During the first, half total capital expenditure was £21.2m. This comprised £14.4m of development expenditure on new sites and £6.8m on maintenance and refurbishment investment. The total level of capex during the first half was somewhat lower than during the comparable period last year, primarily due to the slightly lower level of new openings. However, by the year end, we expect total capital expenditure to be higher than the prior year, in the range of £75m to £80m, reflecting an increase in the number of new restaurants we will have opened by the end of the year.

In June we finalised a five year extension of our £140m debt facility, so that we now have secure funding in place until June 2020.

Outlook

Danny Breithaupt has now completed his first full year as CEO of the Group. I am delighted with the progress that has been made under his leadership both financially and culturally within the business, as clearly evidenced by these results which represent an outperformance against our sector.

The Group benefits from operating in market segments with barriers to entry and excellent growth prospects which have proved to be resilient over many years. We have a strong portfolio of complementary brands and an impressive pipeline of new sites in terms of both quality and quantity. We also have a focussed senior management team which has been strengthened and reenergised over the last 12 months. All of these factors mean that the Group is now well positioned to deliver on the strategy of doubling in size with a more balanced portfolio over the next 8 to 10 years. 

With continuing improvements in the UK economy, a strong pipeline of new sites and an exciting cinema release schedule, I am confident that the Group will continue to make excellent and profitable progress both in this year and future years. 

Alan Jackson

Chairman

28 August 2015

Notes to the Chairman's statement

1.   The Restaurant Group plc ("TRG" or "the Group") operates over 480 restaurants and pub restaurants across the UK.  Its principal trading brands are Frankie & Benny's, Chiquito and Coast to Coast. In addition it operates a Pub restaurant business and a Concessions business which trades principally at UK airports.

2.   There are a number of potential risks and uncertainties which could have an impact on the Group's performance over the remaining six months of the financial year and which could cause actual results to differ materially from expected and historical results. These have not materially changed from those set out on page 25 of our latest Annual Report and Accounts which can be found on the Group website: www.trgplc.com/recent-announcements.

3.   Summary trading income statement:

4.   Summary cash flow statement

Responsibility Statement

We confirm that to the best of our knowledge:

(a)  the condensed set of financial statements has been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting';

(b)  the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 26 weeks and description of principal risks and uncertainties for the remaining 26 weeks of the year); and

(c)  the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Accounting policies

Basis of preparation

The annual financial statements of The Restaurant Group plc are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union.  The accounting policies and methods of computation used are consistent with those used in the Group's latest annual audited financial statements.

General information

The comparatives for the full year ended 28 December 2014 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditor's report on these accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Going concern

The Directors believe that the diversified brand offerings should allow the Group to take advantage of the improving economy in the United Kingdom.  Potential risk factors and uncertainties that could affect the business are discussed in the Chairman's statement.  The Group has a debt facility of £140m which was renewed on 8 June 2015 and now matures in June 2020.  As at 28 June 2015 the Group had drawn down £25m of this facility and had net debt of £18m.  Based on the Group's plans for the next 12 months and after making enquiries (including preparation of reasonable trading forecasts, consideration of current financing arrangements and current headroom for liquidity and covenant compliance), the Directors have a reasonable expectation that the Group has adequate resources to continue operations for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the condensed financial statements.

Changes in accounting policies

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

There have been no changes to the accounting standards in the current year that have materially impacted the Group financial statements.

Notes to the condensed financial statements

1 Segmental analysis

The Group trades in one business segment (that of operating restaurants) and one geographical segment (being the United Kingdom).  The Group's brands meet the aggregation criteria set out in paragraph 22 of IFRS 8 "Operating Segments" and as such the Group reports the business as one reportable segment.

2 Non-trading items

There were no non-trading items in the 26 weeks ended 28 June 2015.

On 17 April 2014 The Restaurant Group disposed of part of its interest in The Living Ventures group following the sale of the Gusto business.

The Group received £7m of cash proceeds in respect of this disposal and the resulting profit on disposal of £6.9m, net of costs, was reported as a non-trading item in the 26 weeks ended 29 June 2014. The net proceeds of the disposal were distributed by way of a special dividend of 3.45 pence per share on 9 July 2014.  Following the disposal, TRG's only remaining interest in the residual business is a £3.7m loan note which has been fully provided against as a result of a detailed review of the trading performance of the business.

3 Tax

The tax charge has been calculated by reference to the expected effective current and deferred tax rates for the full financial year to 27 December 2015 applied against the profit before tax for the period ended 28 June 2015.  The full year effective tax charge on the underlying trading profit is estimated to be 22.4% (2014: 23.0%).

The Finance Act 2012 introduced a reduction in the main rate of corporation tax from April 2015 from 21% to 20% resulting in a blended rate of 20.25% being used to calculate the estimated tax liability for the 52 weeks ended 27 December 2015.

4 Earnings per share

5 Dividends

Following approval at the Annual General Meeting on 14 May 2015, the final dividend in respect of 2014 of 9.30p per share, totalling £18.6m, was paid to shareholders on 8 July 2015. 

The Directors have declared an interim dividend of 6.8p per share which will be paid on 8 October 2015 to ordinary shareholders on the register at close of business on 11 September 2015.  In accordance with IAS 10, this will be recognised in the reserves of the Group in the second half of the year.

6 Reconciliation of profit before tax to cash generated from operations

7 Bank loans

The Group has a committed bank facility of £140m in place until June 2020.  During the 26 weeks ended 28 June 2015, the Group reduced its draw down under this facility by £15.0m (26 weeks ended 29 June 2014: reduction of £16.0m, 52 weeks ended 28 December 2014: reduction of £10.0m).

8 Share capital

Share capital at 28 June 2015 amounted to £56.4m.  The number of shares authorised, issued and fully paid increased from 200,648,821 to 200,655,821 in the period following the exercise of share options by employees, amounting to 7,000 shares. 

9 Related party transactions

BH Restaurants Limited (formerly Living Ventures Restaurants Group Limited) was a related party to The Restaurant Group plc through the Group's 37.4% holding until 17 April 2014 when the Group disposed of its interest in the company. The Group received £7m of cash proceeds in respect of this disposal and the resulting profit on disposal of £6.9m, net of costs, was reported as a non-trading item in the 52 weeks ended 28 December 2014. In the 52 weeks ended 28 December 2014, the Group received £0.1m of loan note interest all of which was recognised in the income statement.

10 Contingent liabilities

There were no significant changes in the nature and size of contingent liabilities at 28 June 2015 to those reported in the Annual Report and Accounts for the 52 weeks ended 28 December 2014.

INDEPENDENT REVIEW REPORT TO THE RESTAURANT GROUP PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 28 June 2015 which comprises the consolidated income statement, the consolidated statement of changes in equity, the consolidated balance sheet, the consolidated cash flow statement and related notes 1 to 10. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in the accounting policies, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 28 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

28 August 2015