The Restaurant Group plc

Interim results for the 26 weeks ending 29 June 2014

The Restaurant Group plc ("TRG" or "the Group") operates over 450 restaurants and pub restaurants.  Its principal trading brands are Frankie & Benny's, Chiquito, Coast to Coast and Garfunkel's. In addition it operates a Pub Restaurant businesses and a Concessions business which trades principally at UK airports.

·      Another strong financial performance:

* all results are stated excluding non-trading items

·      Interim dividend increased by 16% to 6.1p per share (2013: 5.25p)

·      Acceleration of new site development:

·      Continued strong trading with year to date like-for-like sales for the 34 weeks to 24 August 2014 at 3.5%

·      Board is confident of another year of good progress in 2014

Andrew Page, Chief Executive of The Restaurant Group plc commented as follows:

"The Restaurant Group has delivered another record set of results, with double digit growth in earnings, dividends and cashflow.

These results reflect the hard work and efforts of all of the TRG team and I would like to record my thanks to them for delivering another outstanding performance.

The Restaurant Group is in great shape, I am confident that it will continue to prosper and I wish Danny and the TRG team well as they take the business forwards."

Danny Breithaupt, incoming Chief Executive, added:

"I am delighted to be taking on the leadership of TRG with the business in such great shape. TRG has a clear strategy, successful brands and a great team of people. This is a terrific platform for the further growth of the business, and I am looking forward to building on this and leading the Company through its next phase of development."

29 August 2014

Enquiries:

Chairman's Statement

I am pleased to report that the Group has traded well during the first six months of the year, delivering strong growth across all of the key metrics, with sales, margins and profits all increasing.  Total sales grew by 10%, like-for-like sales were 2.5% ahead of the previous year (against tough comparatives), operating profit margins increased by 20bps and profits were 12.3% ahead.  This represents another strong performance from the Group.

Like-for-like sales grew in each of the first five months but were slightly negative for June, essentially as a result of the impact of the football World Cup.  Since the half year, like-for-like sales have grown strongly in July and August so that, for the 34 weeks to 24 August, the Group's like-for-like sales are 3.5% ahead of the prior year, which bodes well for a strong second half performance.

During the first six months of the year we opened 17 new restaurants and since June we have opened a further three restaurants.  Our new openings are performing strongly and we anticipate opening between 38 and 43 new restaurants during the year.

Trading results

During the first half the Group delivered increases in revenue, margins, profits and earnings per share.  Revenue increased by 10% to £308m, (2013: £280m), EBITDA increased by 13.5% to £53.2m (2013: £46.9m), operating profit increased by 12% to £34.9m (2013: £31.1m) and operating margins increased by 20bps to 11.3% (2013: 11.1%) reflecting strong sales, tight cost controls and a modest level of promotional activity.  Profit before tax increased by 12.3% to £33.7m (2013: £30.0m) and earnings per share increased by 15% to 12.8p (2013: 11.2p).  Again, profits have been converted into cash at a very healthy rate and, for the first half, operating cash flow was £55.9m (2013: £49.4m) with free cash flow of £35.8m (2013: £30.2m).

As a result of this good performance the Board is declaring an interim dividend of 6.1p per share (2013: 5.25p), an increase of 16%.  The interim dividend will be paid on 9 October 2014 to shareholders on the register on 12 September 2014 and the shares will be marked ex-dividend on 10 September 2014.

Frankie & Benny's (240 units)

Frankie & Benny's traded strongly during the first half to deliver a sizeable uplift in revenues and profits.  Frankie & Benny's enjoys a loyal and growing customer base as a result of its wide range of offerings, with great value for money and high levels of customer service.  As was the case last year, we have continued to experience an ongoing increase in the number of breakfasts sold and this additional trade is particularly helpful in terms of enhancing bottom-line profits.  We opened nine new restaurants during the first half and another one since the end of the first half.  The new openings are trading well and are set to deliver strong returns.  During 2014 we expect to open a total of between 18 and 21 new Frankie & Benny's restaurants.

Chiquito (74 units)

Chiquito performed well during the first half recording strong increases in both revenues and profits.  With the growing popularity of Tex-Mex cuisine and our focus on variety, authenticity, service and customer engagement, Chiquito continues to deliver good results.  During the first half we opened one new restaurant; it is trading strongly and is set to deliver high returns.  We have opened one further restaurant since the half year end, and expect to open a total of between seven and nine in the full year.

Coast to Coast (12 units)

Coast to Coast has performed strongly with a substantial increase in revenues and profits.  We have opened new restaurants in Rochester and Sheffield during the first half, both of which sit alongside existing Frankie & Benny's and Chiquito restaurants.  In each case our new Coast to Coast restaurants are trading superbly and are set to deliver strong returns. This further re-enforces our view that we have developed, with Coast to Coast, a new brand with significant growth prospects and one that complements our existing successful Frankie & Benny's and Chiquito brands. We had expected to open at least five new Coast to Coast restaurants during 2014. However, as a result of landlord and developer delays, at least three sites we had anticipated would open during 2014 will now open in the earlier part of 2015. Notwithstanding these delays we expect to open at least one further restaurant this year, and a substantially higher number in 2015.

Pub restaurants (50 units)

Our Pub restaurant business has delivered an outstanding performance in the first half with significant increases in revenue and profit.  As previously noted, we now have a well-established model for our Pub restaurant business which is scalable and capable of delivering sustained and high levels of return on investment.  During the first half we opened a new pub, the Aspinall Arms, near Clitheroe - its performance since opening has been exceptional and it is set to deliver strong returns.  Since the first half we have opened another new pub, The Red Lion, near Lichfield and we expect to open two more new pubs during the remainder of the year.

Garfunkel's (15 units)

Garfunkel's traded well during the first half and continues to deliver good levels of margins, profits and returns.  Although currently we do not have any new Garfunkel's planned for 2014, we are actively looking for potential new sites which will meet our criteria for returns on investment.

Concessions (62 units)

The Concessions business traded strongly in the first half delivering strong growth in revenues and profits.  UK passenger numbers ("pax") continue to increase, growing by 4.6% in the first six months of the year.  Once again, our Concessions business like-for-like sales growth outperformed UK pax growth over the first six months.  During the first half we opened four units which included taking over all of the catering at Southampton airport and launching our new Wondertree restaurant at the new Terminal 2 in Heathrow.  All of our new restaurants are trading well and are set to deliver strong returns.

It was recently announced that we have won tenders to open two new restaurants and a new bar at the re-developed Stansted airport.  These include a Coast to Coast restaurant (the first in a UK airport) and will open in early 2015.  During the remainder of 2014 we expect to open at least one more Concessions restaurant.

Non-trading item

On 17 April 2014 the Group disposed of part of its interest in the Living Ventures Group.  TRG received £7m of cash proceeds in respect of this disposal and the resulting profit on disposal of £6.9m, net of costs, is reported as a non-trading item in the first half of the year. The net proceeds of the disposal were distributed by way of a special dividend of 3.45p per share on 9 July 2014.  Following the disposal, TRG's only remaining interest in the Living Ventures Group is a £4m loan note which has already been fully provided against.

Cash flow and balance sheet

Cash generation was strong during the first half with net cash flow from operations of £55.9m (2013: £49.4m) and free cash flow (after interest, tax and maintenance capital expenditure) of £35.8m (2013: £30.2m), an increase of 19% on the comparable period last year.  Again, this clearly demonstrates the consistently strong cash flow generated by the Group, with a high rate of conversion of profits into cash.  This, combined with the consistently high returns being achieved on the capital which the Group invests in the new restaurants, enables us to continue to invest in a growing number of new restaurants whilst, at the same time, continuing to grow dividends at a rate significantly ahead of UK inflation and in line with the growth in our earnings per share.

During the first half total capital expenditure was £29.8m (2013: £27.3m).  Of this, £10.3m represented maintenance capital expenditure with the balance of £19.5m being invested in new developments.  In the full year we expect to open 38-43 new restaurants.  Including maintenance capital expenditure of approximately £20m, this will result in full year capital expenditure of £70-75m.

Outlook

These are strong results and reflect an outperformance against our sector.  The Group benefits from operating in market segments with barriers to entry which have proved to be very resilient.  We have a strong portfolio of complementary brands and have an impressive pipeline of new sites, in terms of both quality and quantity. These factors will ensure that the Group remains on track to double in size over the next eight to ten years. 

The second half has started well; year to date after 34 weeks total turnover is up 10.4% and like-for-like sales are up 3.5%.  With an improving economic outlook, lower inflation and higher levels of employment the prospects for TRG continue to look good.  I am confident that the Group is well placed to deliver another year of profitable progress.

Alan Jackson

Non-executive Chairman

29 August 2014

Notes to the Chairman's statement

1.   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 14 of our latest Annual Report and Accounts which can be found on the Group website: www.trgplc.com/recent-announcements.

2.   Summary trading income statement:

3.   Summary cash flow:

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 29 June 2014 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 29 June 2014 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

29 August 2014