RTN.L Regulatory News (RTN)

9 Mar 2005 07:01

Restaurant Group PLC09 March 2005 The Restaurant Group plc Record results for the year ended 31 December 2004 The Restaurant Group plc operates 272 restaurants in Leisure, Concessions andHigh Street sites. Its primary brands are Frankie & Benny's, Chiquito, CaffeUno, Garfunkel's and Est Est Est 2004 2003 % changeTurnover (£m) 255.4 227.4 +12.3Adjusted pre-tax profit (£m)* 24.7 19.3 +28.4Earnings per share (p)* 7.64 6.50 +17.5Full Year Dividend (p) 4.20 3.65 +15.1 * Results are stated excluding exceptional items Key financial points • Strong performance across the estate giving rise to record results • Turnover rise driven by +5% like for like sales increases and 29 new restaurant openings • Group operating margin rose to over 10% • Cash generation of £50m has enabled self funding opening programme and contributed to reduction in net debt to £11m (2003: £38m) • Full year dividend up 15% Key operational points • Market leading positions in Leisure & Concessions • Leisure continues to perform superbly with sales and margins growing strongly • Concessions improved turnover by 25% with 11 new units opened • All High Street brands improved profits except Est Est Est 2005 • 25-30 new openings planned for 2005 • Current trading very encouraging with like for like sales of +3% • Discussions with Living Ventures continue Commenting on these results, Alan Jackson, the Executive Chairman, said: "The Restaurant Group has delivered another excellent set of results. We'veachieved this through focusing our business in the growing and more robustsegments of the popular dining out market. We offer our wide customer base ahigh quality product at the right price and in the right location. 2005 hasstarted well and I am confident that we will continue to deliver strong returns" 9 March 2005 Enquiries:The Restaurant Group plc Alan Jackson, Executive Chairman 020 7457 2020 (today) Andrew Page, Group Managing Director 020 7747 7750 (thereafter) Stephen Critoph, Finance Director College Hill Matthew Smallwood 020 7457 2020 Executive Chairman's Statement It gives me great pleasure to report that The Restaurant Group plc has againdelivered record results for 2004. An excellent top line performance, driven bya like for like sales increase of 5% resulted in our profit before taxincreasing by one-third on the prior year. The business was strongly cashgenerative with net debt reducing by £27m to £11m and our balance sheet is nowstronger than at any time in the Group's recent history. Against a competitivebackground and some uncertainty regarding the sustainability of consumer spend,these results represent a very creditable performance. Building on an excellent first half performance, the Group continued itsprofitable development during the second half of 2004. Adjusted pre-tax profitsincreased by 28% to £24.7m* (2003: £19.3m) with turnover increasing by 12.3% to£255.4m (2003:£227.4m). Adjusted earnings per share increased by 17.5% to 7.64p*(2003: 6.5p). In light of this strong performance, the Board is recommending anincreased final dividend of 3.375p per share (2003: 2.9p), an increase of 16.4%,giving a total dividend for 2004 of 4.2p per share; an increase of 15% (2003:3.65p). Subject to approval at the Annual General Meeting, the final dividendwill be payable on 6 July 2005 to shareholders on the register on 10 June 2005and will be marked ex-dividend on 8 June 2005. *Results are stated excluding exceptional items The increased profit was the product of strong like-for-like growth from ourexisting estate, excellent returns from new restaurants, cost savings frompurchasing initiatives and operational efficiencies and lower interest charges.This combination represents a very healthy background to our continuingprofitable development. Throughout 2004 we continued to adhere to our strategy for growth with asignificant amount of capital investment in new restaurant units in both ourLeisure and Concessions divisions. During the year we opened a total of 29 newunits and I am pleased to report that we are generating excellent returns fromthese restaurants. Our rigorous approach to investment appraisal has ensuredthat we consistently generate strong returns and cashflow from new unitdevelopment. I have previously mentioned the leading positions which we occupy in two of ourthree chosen markets, namely Leisure and Concessions. This has enabled us tocontinue to deliver higher profits in each of these segments. Group wide, allbut one of our brands made higher profits than last year. Our Leisure division had an extremely good year which saw operating profitsincrease by 29%. Fifteen new Frankie & Benny's restaurants were opened duringthe year and two new Chiquito's. The turnaround of our Chiquito business hasbeen dramatic and the steady build up of like-for-like sales growth which wereported at the half year stage accelerated during the second half. Chiquito'soperating profits increased by almost 40% in 2004. Our Concessions business underwent a significant amount of new unit developmentduring the second half of 2004. This has put the division into a very strongposition to drive sales, profit and cashflow growth going forward. The divisionproduced good results for the year with profits increasing by 22%. Against a very competitive landscape most of our High Street business tradedwell during 2004. Profits in both Garfunkel's and Caffe Uno were higher than theprevious year. However, Est Est Est continued to suffer severe competitivepressures in a handful of its 19 locations and this had an adverse impact on itsperformance. As a result Est Est Est's profits were significantly down on theprior year. As announced on 11th February we can confirm that we are in discussions withLiving Ventures Limited (Living Ventures) about potentially making an investmentin that company and also to sell Est Est Est to Living Ventures at the sametime. Negotiations are ongoing and we will make a further announcement whenappropriate. The Living Ventures business currently comprises 15 units operatingthree concepts: 11 Living Room restaurants and bars, 2 Prohibition bars and 2Bar & Grill outlets. Living Ventures is a highly successful business with goodpotential for further rollout of all three concepts. Its customer base is quitesimilar to that of Est Est Est. We believe that the Living Ventures team, whichpossesses significant entrepreneurial flair, operational skills and marketingexpertise, will be of great benefit to Est Est Est. 2004 was an exciting and highly profitable year for the Group and I am delightedto report that the start to 2005 has seen a continuation of this trend. Earlysigns are very encouraging with like-for-like sales currently 3% ahead. This,combined with our focus on securing further operational efficiencies and ourplans for rolling out new units in the Leisure and Concession divisions leave uswell placed to further develop our business. These excellent results could not have been achieved without the skill anddedication of our senior management team and the commitment of all of our staff.On behalf of the Board I would like to thank them all for their valuedcontribution over the past twelve months. We have an excellent management team, strong finances, leading brands, anexciting pipeline of new sites and a robust strategy. I am confident that wewill continue to make further progress during the coming year. Alan M. Jackson Executive Chairman 9 March 2005 Group Managing Director's Review of Operations The Group made good progress during 2004 and has produced a strong set ofresults. Operationally we have been able to show significant improvement in mostof our brands and the overall performance of the Group measures up well bothagainst the leisure sector generally and the restaurant sector in particular.Financially the business is in very good shape with a strong balance sheet, veryhealthy conversion of profits into cash and good growth in both earnings andcashflow per share. Throughout 2004 we stuck to our strategy for profitable growth and focused ourcapital expenditure on new unit development in the two areas where we holdleading market positions: Leisure and Concessions. We also ensured that wemaintained the whole of our estate to a high standard and this has resulted inimproved profit delivery from all but one of our brands. In terms of our key performance metrics we showed significant improvement on theprior year with a 12% increase in turnover yielding a 17% increase in EBITDA anda 19% increase in operating profit. I am delighted that for 2004 we exceeded oneof our key medium term targets, set at the beginning of 2003, of achieving anoperating profit margin of 10%. The Group's ability to generate strong cashflow has resulted in a furtherreduction in net debt and an interest charge 54% lower than the previous year. LeisureTotal turnover: £124.6m Profit: £25.7m Operating margin: 20.6% Frankie & Benny'sUnits: 101 Turnover: £97.4m Like-for-like sales: +7.9% Frankie & Benny's performed superbly throughout the year and enjoyed strongsales growth underpinned by an 8% increase in like-for-like sales. Turnover,EBITDA and profits all increased with the EBITDA and operating profit marginsgrowing strongly. During 2004 we opened fifteen new Frankie & Benny's restaurants and these areall trading well. At the end of 2004 we had a total of 101 units tradingincluding three in Spain. Frankie & Benny's continues to deliver excellentreturns and these remain consistently good across the whole estate with the morerecent years' openings delivering strong returns just as the older unitscontinue to do. We are particularly pleased with the results of our units which do not occupysites alongside multi-plex cinemas. Typically these "non-cinema" units arelocated in out of town sites with adjacent leisure retail activities. Theexcellent results being achieved by these sites give us confidence that we canfurther accelerate the growth of Frankie & Benny's at other "non-cinema"locations. During 2005 we are aiming to open approximately 20 new Frankie & Benny'srestaurants. Early this year we will open our 100th restaurant in the UK and wewill also celebrate the tenth anniversary of Frankie & Benny's. We are markingthis important event by joining with the BBC's Children in Need Appeal withrestaurants organising fund raising activities in their locality. ChiquitoUnits: 25 Turnover: £27.2m Like-for-like sales: +5.8% Chiquito has performed exceptionally well during 2004 with profits increasing bynearly 40%. In mid-2003 we put a new management team into this brand. After aninitial period of stabilising the business the team began, in early 2004, toembark on a refocusing and refurbishment programme for the brand. By the end of2004 approximately one half of the units had been refurbished in a softer, morecontemporary and more female and family friendly style. Changes to the menu offering with a sharper focus on quality, freshness andauthenticity were also implemented. Staff and employee motivation was enhancedthrough a combination of training and reward and incentive programmes. By the half year stage it was apparent that this brand had not only beenstabilised but that it represented a real growth opportunity. During the secondhalf we opened two new Chiquito restaurants (in Cardiff and Southampton) and thefirst few months' results from these units are highly encouraging with goodsales and returns. During 2005 we will conclude the refurbishment programme at Chiquito and wecurrently anticipate that we will open between 3-5 new restaurants this year. ConcessionsUnits: 36 Total turnover: £48.9m Like-for-like sales: +12.0% Profit: £7.0mOperating margin: 14.4% Our Concessions division had a very busy year with a total of 11 new unitopenings. This division now consists of 36 units of which 33 are situated onairports. Turnover increased by almost 25% and this resulted in a 22% increasein operating profit. During 2004 we opened a new balcony food court at Gatwick, comprising fiveunits, which is trading well. We also opened a new Est Est Est unit at theTrafford Centre in Manchester, the trading of which has, so far, exceeded ourexpectations. The quality of earnings and cash flow from our concession units is high and weoccupy a market leading position in the provision of food and beverages in UKairports. We are particularly encouraged with the performance of our units inairports where we are enjoying growth in turnover per square foot in excess ofthe growth in passenger numbers. The auguries for this business are good withstrong growth forecast in air travel and, more particularly, good growth inpassengers flying with low cost airlines. During 2005 we expect to add up to six new units in our Concessions businesswhilst seeing the benefit of the significant increase in new units opened during2004 flow through to the bottom line. 2005 has started well and we are delightedto have recently been awarded three new concession units at Luton airport. Thesewill open in the summer of 2005. High Street RestaurantsTotal turnover: £81.9m Profit: £11.9m Operating margin: 14.5% Garfunkel'sUnits: 31 Turnover: £26.1m Like-for-like sales: +2.5% Garfunkel's traded well during 2004, with a 5% increase in turnover.Like-for-like sales increased by 2.5% which, in a competitive market place,represents a creditable performance. Close attention to costs and operating efficiencies meant that margins alsoimproved. Garfunkel's, which is now in its 26th year, continues to generateexcellent returns and strong cash flow. During 2004 we refurbished a smallnumber of our London units in a more contemporary style and we anticipate thisexercise continuing during 2005. We have a very stable and enthusiastic team in the Garfunkel's business and thegradual evolution of the offering should enable us to continue to deliver goodreturns. Caffe UnoUnits: 60 Turnover: £38.5m Like-for-like sales: -1.0% Caffe Uno traded reasonably well during 2004 in a very competitive segment ofthe popular dining market. During the year there was significant focus on driving through more operationalefficiencies and this meant that, despite a lower level of turnover, thebusiness made higher profits than last year and enjoyed an improvement inoperating profit margin. During 2005 we will be looking to continue the tight control on costs andmargins whilst also looking for an improvement in top line turnover. Est Est EstUnits: 19 Turnover: £17.2m Like-for-like sales: -2.1% Est Est Est comprises 19 units and accounts for about 7% of Group turnover. Aspreviously reported we have faced particularly tough competitive conditions in ahandful of our Est Est Est units. Despite tight cost controls the impact of thisincreased competitive supply in certain locations has resulted in a 7% drop inturnover and a lower level of operating profit than last year. Non-Core BrandsTotal turnover: £0.1m Loss: (£1.5m) During the year losses from non-core activities increased from £1.1m to £1.5m.At the end of 2004 we disposed of a number of non-core units which previouslymade a profit contribution - this had the effect of increasing the aggregatelosses from non-core units but, concomitantly, has the benefit of yielding cashproceeds for the Group and thus saving interest costs. We will continue to takesteps to mitigate the losses from non-core units. Future prospects 2004 was a good year for the Group, building on the foundations laid in theprevious two years. We have an excellent business which is clearly focusedacross three distinct market segments, each with differing dynamics, which lendsa high quality balance to the Group's earning and cashflows. Our financialstrength and management resource means that we are well placed to not onlycontinue to drive higher returns from our existing units but also to accelerateexpansion in those areas where we are confident of securing high returns. At TheRestaurant Group, we have a business which occupies market leading positions intwo of our three segments and a portfolio of units that positions us well tocontinue to deliver good growth in earnings and cashflow. We remain focused ondelivering high quality and good service to all of our customers, to sticking toour area of expertise and most importantly continuing to grow shareholder value. Andrew Page Group Managing Director 9 March 2005 Finance Director's Review Results * As noted in the Executive Chairman's statement the Group has had another verystrong year. Total Group turnover for the year increased by 12.3% to £255.4m(2003: £227.4m). This was the result of a highly satisfactory 5% growth in likefor like sales plus the impact of new unit openings as described in the GroupManaging Director's review of operations. EBITDA increased by an impressive17.2% to £43.1m, and operating profit increased by 18.9% to £25.9m. It is verypleasing to see that the Group has made further progress again this year inimproving margins with operating margin increasing from 9.6% to 10.1%. Group interest costs reduced from £2.5m to £1.2m, reflecting further reductionsin net debt during the year as a result of strong cash flow and the £13.4mplacing in January 2004. Profit before tax at £24.7m is up 28% compared toprior year, resulting in a 17.5% increase in normalised earnings per share to7.64p (2003: 6.50p). * Results are stated excluding exceptional items Exceptional Items Exceptional charges during the year amounted to £2.6m net (2003: £2.6m). Duringthe year the Group disposed of a number of properties resulting in a loss ondisposal of £0.6m. In addition provision has been made for losses on a number ofproperties where disposal was at an advanced stage of negotiations at the yearend (£1.9m). Also included are the write off of £0.5m in respect ofconsideration due from DPP Restaurants Limited (as announced in November 2004),partially offset by release of an over accrual and costs recovered of £0.46mrelating to the aborted acquisition of ASK Central plc. Financing Following the Extraordinary General Meeting held on 14 January 2004, the Companyplaced 19,430,000 shares (representing approximately 10% of the then existingshare capital) on 15 January 2004, at a price of 71p per share which representeda discount of 1.4% to the closing mid-market price on 17 December 2003 (the lastDealing Day prior to the announcement of the Placing). The Placing raised£13.4m net of expenses, further reduced the Group's net debt and is being usedto fund the continued roll-out of the Group's successful branded restaurantconcepts. In addition the Company has issued 2.6 million shares following theexercise of share options by employees and directors of The Restaurant Groupplc. Cashflow and Balance Sheet The Group continues to be strongly cash generative. Cash flow from operationswas £49.5m, an increase of 30% compared to prior year. This resulted from thestrong growth in operating profit referred to above combined with a net workingcapital inflow of £6.0m. Total capital expenditure in the year was £26m, a 28%increase on prior year. It is extremely encouraging to see that the Group'sinternally generated cash flow is sufficient to support this increased level ofinvestment, while at the same time overall Group net debt has reduced from£38.2m last year end to £11.3m. Group interest cover (the number of times net interest charges are covered byoperating profit) in 2004 was 22.4 times (2003: 7.9 times). Before exceptionalitems interest cover was 22 times (2003: 8.6 times). Group gearing (net debt asa percentage of net assets) was 16% compared to 76% in 2003. Clearly the Group'sfinancial position by either of these measures has strengthened considerably inthe year. In assessing the appropriate capital structure of the Group other 'gearing' factors also need to be considered, in particular the Group's ongoingnet property rental costs, which were £32.5m in 2004 (2003: £28.2m). Capital Expenditure During the year the Group invested £26.0m (2003: £20.4m) in opening 29 new units(2003: 18 new units) and in maintaining the existing estate to a high standard. The Group operates a rigorous investment appraisal process. The financialviability of all significant projects is subject to a detailed review byreference to a financial model which relates the expected return on investmentto the Group's cost of capital. This process includes a critical assessment ofthe underlying trading and other assumptions factored into the model. All newsites are reviewed and approved by the Board. The Group also conductspost-investment appraisals on new sites and these have indicated continuedstrong performance. Deep Pan Pizza ("DPP") On 17 November 2004 the Group announced that it had been granted an option totake full control of DPP in the event of certain events taking place. The totalnet amount receivable from DPP at the date of the announcement was £1.8m in rentand £0.5m of deferred consideration. As indicated at the time of theannouncement the Group has made full provision against the deferredconsideration as an exceptional charge in the 2004 accounts. The level of netrent receivable has subsequently reduced to £1.5m at the year end. On 31 December 2004 the option became exercisable following a failure on thepart of DPP to make a payment due under the warrant agreement. The option hasnot been exercised to date and we continue to monitor the situation closely. Taxation The taxation charge for the year amounted to £7.0m (2003: £5.6m). This consistsof a mainstream corporation tax charge of £7.7m and a deferred tax credit of£0.7m. An analysis of the current year tax charge is set out in note 3 of theabridged accounts attached to this statement. The tax charge incorporates anadjustment to deferred tax to take account of capital losses now expected to beavailable to the Group. Excluding this the underlying tax charge under FRS 19 is34% (2003: 34%). International Financial Reporting Standards ("IFRS") & Disclosure Changes Listed institutions are required to report their consolidated financialstatements under IFRS for accounting periods commencing on or after 1 January2005. Consequently our first published financial statements under IFRS will bethe 2005 Interim Results. We are currently completing our detailed analysis ofthe impact of IFRS and we will be making an announcement during the secondquarter of 2005 on this subject. It should be noted that following the Deep PanPizza ("DPP") warrant option becoming exercisable (see above), under IAS 27 wewill be required to consolidate the results of DPP, regardless of whether theoption has been exercised or not. In the interim 2005 results announcement we also intend to make some changes tothe level of disclosure that is currently given. Subject to any modificationsrequired by IFRS it is our intention to maintain the divisional segmentalanalysis in its current format, showing turnover and profit by division andcease disclosing sales and like for like sales performance by brand. We willcontinue to report like for like sales on a total Group basis. Stephen Critoph Finance Director 9 March 2005 Segmental Analysis Year ended 31 December Year ended 31 December 2004 2003 Turnover EBITDA EBITDA Profit Profit Turnover EBITDA EBITDA Profit Profit Margin Margin Margin Margin £'000 £'000 % £'000 % £'000 £'000 % £'000 % Leisure 124,634 32,179 25.8% 25,687 20.6% 104,102 25,127 24.1% 19,962 19.2% Concessions 48,882 9,925 20.3% 7,018 14.4% 39,152 8,586 21.9% 5,754 14.7% High Street 81,855 17,824 21.8% 11,880 14.5% 83,247 17,517 21.0% 12,013 14.4%Restaurants Principal Trading 255,371 59,928 23.5% 44,585 17.5% 226,501 51,230 22.6% 37,729 16.7%Brands Non-core Brands 75 (1,270) - (1,496) - 937 (746) (79.6%) (1,140) (121.7%) Total all Brands 255,446 58,658 23.0% 43,089 16.9% 227,438 50,484 22.2% 36,589 16.1% Pre opening Costs (948) (0.4%) (948) (0.4%) (403) (0.2%) (403) (0.2%)Administration (14,628) (5.7%) (16,237) (6.4%) (13,327) (5.9%) (14,393) (6.3%) EBITDA / Operating 43,082 16.9% 25,904 10.1% 36,754 16.2% 21,793 9.6%Profit* Interest Charges (1,179) (2,539) Profit before 24,725 19,254Taxation andExceptional Items Exceptional Items (2,597) (2,613) Profit on ordinary 22,128 16,641activities beforetaxation No geographical segment analysis has been provided as the Directors do notconsider there to be materially significant geographical segments. The Groupcurrently operates three restaurants outside of the United Kingdom. Nosegmental analysis for net assets has been provided as the Directors considerthis would be prejudicial to the Group. * EBITDA and Operating Profit are stated before exceptional costs Profit and Loss AccountUnaudited preliminary results for the year ended 31 December 2004 2004 2003 Before Exceptional Exceptional Items Items Total Total Note £'000 £'000 £'000 £'000 Turnover 255,446 - 255,446 227,438 Cost of sales: Excluding pre-opening costs (212,357) - (212,357) (190,849) Pre-opening costs (948) - (948) (403) (213,305) - (213,305) (191,252) Gross profit 42,141 - 42,141 36,186 Administrative expenses: Excluding exceptional items (16,237) - (16,237) (14,393) Exceptional items 2 - 457 457 (1,630) (16,237) 457 (15,780) (16,023) Operating profit 25,904 457 26,361 20,163 Loss on termination of business 2 - (500) (500)Loss and provision for loss on disposal 2 - (2,554) (2,554) (983)of tangible fixed assetsNet interest payable (1,179) - (1,179) (2,539) Profit on ordinary activities before 24,725 (2,597) 22,128 16,641taxation Tax on profit on ordinary activities 3 (7,747) 708 (7,039) (5,606) Profit on ordinary activities after 16,978 (1,889) 15,089 11,035taxation Dividends 4 (9,083) (7,655) Retained profit for the year 6,006 3,380 All amounts relate to continuingactivities. Earnings per share 5Basic earnings per share, in pence 7.06 5.68Basic earnings per share, excluding 7.95 6.66exceptional items, in penceDiluted earnings per share, in pence 7.05 5.64Basic earnings per share, excluding 7.64 6.50exceptional items and taxation overprovision from prior years, in pence Statement of total recognised gains and lossesUnaudited preliminary results for the year ended 31 December 2004 2004 2003 Note £'000 £'000 Profit for the financial year 15,089 11,035Currency translation differences on foreign currency investments (36) 204 Total recognised gains and losses relating to the year 15,053 11,239 Reconciliation of movements in shareholders' funds Total recognised gains and losses for the year 15,053 11,239Dividends 4 (9,083) (7,655)Issue of ordinary shares - Placing on 15 January 2004 13,427 -Issue of ordinary shares - exercise of share options 1,314 -Total movements during the year 20,711 3,584 Shareholders' funds at 1 January 50,144 46,560 Shareholders' funds at 31 December 70,855 50,144 Group balance sheetUnaudited preliminary results for the year ended 31 December 2004 As at 31 December 2004 2003 £'000 £'000Fixed assets Tangible assets 149,683 146,220 Current assets Stocks 2,437 2,508Debtors 14,524 15,999Cash at bank and in hand 482 526 17,443 19,033 Creditors Amounts falling due within one year (72,554) (62,650) Net current liabilities (55,111) (43,617) Total assets less current liabilities 94,572 102,603 Creditors Amounts falling due after one year (7,000) (35,000) Provisions for liabilities and charges Property provision (625) (687)Deferred tax (16,092) (16,772)Total provisions for liabilities and charges (16,717) (17,459) Net assets 70,855 50,144 Capital and reserves Called up share capital 54,087 48,576Share premium account 19,422 10,192Profit and loss account (2,654) (8,624) Shareholders' funds - equity 70,855 50,144 Group statement of cash flowsUnaudited preliminary results for the year ended 31 December 2004 2004 2003 Note £'000 £'000 Net cash flow from operating activities 6 49,538 37,955 Returns on investments and servicing of financeInterest received 98 221Interest paid (1,476) (2,683)Net cash outflow from returns on investments and servicing (1,378) (2,462)of finance TaxationCorporation tax paid (6,753) (3,295) Capital expenditurePayments to acquire tangible fixed assets (26,021) (20,375)Receipts from sales of tangible fixed assets 4,719 988Net cash outflow for capital expenditure (21,302) (19,387) Acquisitions and disposalsNet proceeds received from the disposal of Deep Pan Pizza - 427Net cash inflow from acquisitions and disposals - 427 Equity dividends paid (7,977) (6,801) Cash inflow before financing 12,128 6,437 FinancingLoans taken out 7 - 43,000Loans repaid 7 (28,000) (53,657)Net proceeds received from issue of shares 14,741 - (13,259) (10,657) Decrease in cash in the period 7 (1,131) (4,220) Notes to the accounts For the year ended 31 December 2004 1) Deep Pan Pizza In December 2001 The Restaurant Group plc ('TRG') disposed of the Deep Pan Pizza ('DPP') business for a consideration of£3.3m of which £1m was paid on completion with the balance to be paid on a deferred basis. Since then, a further £1.8m has been received, leaving an outstanding balance of £500,000. DPP has faced a challenging trading environment during the latter part of 2004 and has sought to counter this through a programme of estate rationalisation and in so far as its financial resources have permitted by investing in and refreshing some restaurants. Throughout this time DPP has enjoyed the continuing support of its bank and the support of TRG through the facilitation of delayed settlement of rent. On 17 November 2004 TRG announced that it had deferred settlement of the outstanding consideration due from DPP and had taken a warrant which incorporates an option (exercisable in certain specified circumstances) to convert its outstanding£500,000 deferred consideration balance into new DPP ordinary shares at par. The option became exercisable on 31 December 2004 but TRG has currently not chosen to convert the warrant. If TRG were to exercise its option it would gain full control of DPP. As noted in the announcement on 17 November 2004 full provision has been made for the deferred consideration due from DPP and this is highlighted in note 2 (exceptional items). As at 31 December 2004 the net rent receivable from DPP was £1.5m. 2) Exceptional items 2004 2003 £'000 £'000 a) Net costs recovered / (incurred) in respect of the aborted bid for ASK 457 (1,183)Central plcb) Payments in respect of termination of employment contract - (447)Net exceptional costs included in operating profit 457 (1,630)c) Provision in respect of deferred consideration due from Deep Pan Pizza (500) -d) Loss and provision for loss on disposal of properties (2,554) (983)Total exceptional costs (2,597) (2,613)Impact on taxation of exceptional items 708 714Net impact on earnings of exceptional items (1,889) (1,899) 3) Taxation 2004 2003 £'000 £'000a) The taxation charge comprises: Current taxationUK Corporation tax at 30% (2003: 30%) 7,601 5,425Adjustments in respect of previous periods 118 (313) 7,719 5,112 Deferred taxationOrigination and reversal of timing differences 148 494Adjustments in respect of previous periods (828) - (680) 494 7,039 5,606 b) Factors affecting the corporation tax charge for the year The tax assessed for the year is higher than the standard UK corporation taxrate of 30% due to the following factors: 2004 2003 £'000 £'000 Profit on ordinary activities before taxation 22,128 16,641 Profit on ordinary activities before taxation multiplied 6,638 4,992by the standard UK corporation tax rate of 30% (2003: 30%) Effects of: Capital allowances for period in excess of depreciation (197) (466)Net expenses not deductible for tax purposes 1,160 899Movement in respect of prior years 118 (313) 7,719 5,112 4) Dividend 2004 2003 £'000 £'000 Interim paid of 0.825p per share (2003: 0.75p) 1,779 1,457Final proposed of 3.375p per share (2003: 2.90p) 7,304 6,198 9,083 7,655 The proposed dividend, if approved by shareholders at the Annual GeneralMeeting, will be paid on 6 July 2005. 5) Earnings per share 2004 2003 a) Basic earnings per share:Weighted average ordinary shares in issue during the year: 213,638,719 194,301,733 Total basic profit for the year (£'000): 15,089 11,035 Basic earnings per share for the year (pence) 7.06 5.68 Effect of exceptional items on earnings for the year (£'000) 1,889 1,899Earnings excluding exceptional items (£'000) 16,978 12,934 Adjusted earnings per share (pence) 7.95 6.66 Taxation over provision from prior years (£'000) (666) (313) Earnings excluding exceptional items and taxation over provision from prior years (£'000) 16,312 12,621 Basic earnings per share excluding exceptional items and 7.64 6.50 taxation over provision from prior years (pence) b) Diluted earnings per share: Weighted average ordinary shares in issue during the year: 213,638,719 194,301,733Dilutive shares to be issued in respect of options granted under theShare Option Schemes: 315,824 1,418,767 213,954,543 195,720,500 Diluted earnings per share (pence) 7.05 5.64 Diluted earnings per share excluding exceptional items (pence) 7.94 6.61 Diluted earnings per share excluding exceptional items and taxation over provision from prior years (pence) 7.62 6.45 The additional Earnings Per Share information (where exceptional items and thetaxation over-provision release relating to prior years have been added back)has been provided as the Directors believe they provide a useful indication asto the underlying performance of the Group. 6) Reconciliation of operating profit to net cash inflow from operatingactivities 2004 2003 £'000 £'000 Operating profit 26,361 20,163Depreciation 17,178 14,961Decrease / (increase) in stocks 71 (242)Decrease / (increase) in debtors 975 (3,090)Increase in creditors 4,953 6,163 Net cash inflow from operating activities 49,538 37,955 7) Reconciliation of changes in cash to the movement in net debt 2004 2003 £'000 £'000 At the beginning of the period (38,163) (44,600)Movements during the period:Loans taken out - (43,000)Loans repaid 28,000 53,657Cash outflow (1,131) (4,220) At the end of the period (11,294) (38,163) Represented by: At Cash flow At 1 January movements 31 December 2004 in the year 2004 £'000 £'000 £'000 Cash at bank and in hand 526 (44) 482Overdrafts (3,689) (1,087) (4,776) (1,131) Bank loans due after one year (35,000) 28,000 (7,000) (38,163) 26,869 (11,294) 8) Basis of preliminary statement The financial information set out above has been prepared on the basis of theaccounting policies set out in the Group's 2003 statutory accounts. It does notconstitute the company's statutory accounts for the years ended 31 December 2004or 2003, but is derived from those accounts. Statutory accounts for 2003 havebeen delivered to the Registrar of Companies and those for 2004 will bedelivered following the company's annual general meeting. The auditors have not yet reported on the 2004 accounts but do not expect theirreport to be qualified. Their report on the 2003 accounts was unqualified anddid not contain statements under the Companies Act 1985, s237(2) or (3). This information is provided by RNS The company news service from the London Stock Exchange