Individual Restaurant Company plc

Preliminary results for the year ended 31 December 2009

Highlights

 

Audited results for the 12 months ended 31 December 2009.

 

Individual Restaurant Company Plc ("IRC" or "the Group"), a leading operator of 33 restaurants throughout the UK which trade under the Piccolino (22) and Restaurant Bar & Grill (11) formats, today announces preliminary results for the year ended 31 December 2009.

 

Another resilient performance

 

·                  Revenues increased by 1.7% to £53.3m (2008: £52.5m)

·                  Average EBITDA per restaurant before central costs of £266k (2008: £279k)

·                  Group EBITDA of £5.0m (2008: £5.3m)

·                  Clean* profit before tax of £1.3m (2008: £1.8m)

·                  Over the year achieved cost savings of £2.1m including central cost savings of £0.4m

 

Operations and expansion

 

·                  Both brands continue to trade well on a national basis

·                  New openings will recommence when trading conditions allow

 

Financially strong

 

·                  Successful renegotiation of £18.5m banking facility in June 2009

·                  Successful £2.6m equity fundraising

·                  Net debt reduced to £12.4m (2008:  £15.8m)

·                  Banking headroom of £6.1m available at the year end

·                  Interest covered eight times by EBITDA  (2008:  five times)

·                  Banking covenants passed comfortably

·                  Successful post year end agreement to extend the term of the Group's loan facility to January 2013 and cancelling the amortising facility

 

Current trading

 

·                  Trading performance for the first eight weeks of the current year is ahead of last year

 

 

*Clean is defined as before non trading costs

 

Steven Walker, Chief Executive said:

 

"I am pleased to announce another set of robust results in what has proved to be a challenging year.  The Group's performance is all the more creditable in that we intentionally refrained from mass discounting evident elsewhere across our industry. Whilst still offering value for money to our customers, this has served to protect margins and maintain the brand value of our premium casual dining concepts.

 

"The measures we have taken to refinance the business over recent months leave us well placed to progress with our expansion plans when the time is right.  We have had an encouraging start to trading in the initial weeks of the year and remain confident of the future prospects for the Group."

 

19 April 2010

 

Enquiries:

 

Individual Restaurant Company Plc
Steven Walker, Chief Executive	020 7457 2020 (today)
Vernon Lord, Finance Director	0161 839 5511 (thereafter)
Altium
Mike Fletcher	0845 505 4343
David Foreman
College Hill	020 7457 2020
Justine Warren
Matthew Smallwood

 

 

Chairman's statement

 

Introduction

 

Individual Restaurant Company plc ("IRC" or "the Group"), a leading restaurant operator with 33 premium casual dining restaurants throughout the UK which trade under the Piccolino (22) and Restaurant Bar & Grill (11) brands, announces its audited results for the 12 months ended 31 December 2009.

 

As anticipated, trading conditions continued to be challenging in 2009.  However, against this backdrop the Group is pleased to announce profit before tax (before non trading costs) for the year of £1.3m which was ahead of market consensus.

 

Net debt reduced in the year by £3.4m down to £12.4m (2008: £15.8m). As a multiple of EBITDA (before non trading costs), the year end net debt was just below 2.5 times compared with 3.0 times in 2008.

 

Financial performance

 

Revenues have increased across the Group by £0.9m (1.7%) to £53.3m (2008: £52.5m). Restaurant EBITDA* decreased across the Group by £0.7m to £8.8m (2008: £9.5m). This was partially offset by central cost savings of £0.4m. As a result EBITDA for the year of £5.0m was down £0.3m on 2008.

 

In anticipation of a challenging economic environment in 2009, the Group implemented a cost saving programme which achieved annual savings of £2.1m, £0.1m ahead of target, including the £0.4m of central cost savings referred to above.

 

The gross margin for the period remained in line with 2008. Both Restaurant Bar & Grill and Piccolino offer customers excellent value for money.  This is verified by the regular comparative pricing surveys which the Group undertakes in respect of other leading casual dining restaurant brands.  As previously reported, the Group has taken a strategic decision to refrain from entering the mass discounting market which has been widely practised across the restaurant sector.  Tactical promotions have occasionally been implemented to maintain margins and preserve the brand value of the Group's premium casual dining concepts. The Board is confident this remains the correct, long term strategy and will benefit the Group in the future.

 

Central costs in 2009 were £3.8m (2008: £4.2m) representing 7.1% of revenue (2008: 8.0%). Savings were generated primarily from reduced headcount.

 

Finance cost in the year fell to £0.7m (2008: £1.0m). The savings resulted from a lower average net debt level throughout the year combined with a significant reduction in base rates as, for the first six months of the year the Group's facility was still tracking the base rate.

 

Profit before tax and non trading items was £1.3m (2008: £1.8m). Year on year profit before tax and non trading items fell £0.5m due entirely to an uplift in the annual depreciation charge from £2.6m to £3.1m. The uplift in the depreciation charge was due principally to restaurants opened in 2008.

 

In the year non trading costs totalled £2.2m (2008: £0.6m), arising predominately from two areas: onerous lease provisions totalling £1.2m and business restructuring costs of £0.9m. The onerous lease provisions comprised £0.8m relating to the conversion of Wandsworth Piccolino to a Group training and trialling centre and an increase in the provision on Zinc Birmingham of £0.4m. In the current property market conditions it has proved difficult to find a suitable buyer for this unit and as a result the two year ongoing cost provision when the unit was closed in 2007 has been exhausted, necessitating a new provision for a further two years. Business restructuring costs for the year of £0.9m included closure costs at Wandsworth, bank arrangement fees resulting from our bank refinancing and costs associated with the successful equity fundraising completed in July 2009. 

 

There was a tax credit in the year of £0.1m (2008: a charge of £0.6m) which resulted from a movement in the deferred tax balance.

 

After non trading items and tax the Group incurred a loss for the year of £0.8m (2008: profit of £0.5m).

 

Cash flow and Balance Sheet

 

Net debt reduced in the year by £3.4m down to £12.4m (2008: £15.8m). The reduction in net debt was driven by two factors. Firstly the Group completed an equity fundraising of £2.6m. As above the costs associated with this are shown on the consolidated income statement as part of business restructuring costs. Secondly the Group generates strong cash flow from operations, £3.4m in 2009, which, after interest and maintenance capital expenditure resulted in £1.4m of free cash flow.

 

With net debt at £12.4m, gearing was 29% (2008: 38%).  Interest costs of £0.7m were covered by EBITDA generated in the year by a factor of almost eight times (2008: five times). As a multiple of EBITDA the year end net debt was just below 2.5 times compared with 3.0 times in 2008. The available headroom on the banking facility was £6.1m compared with £2.7m in 2008.

 

Following the successful equity fundraising, the Group held discussions with its banking partner and negotiated the cancellation of the planned facility amortisation of £1.0m scheduled for December 2009.  Having very comfortably passed all year end banking covenant tests the Group has held further discussions with its bank in 2010. As a result of those discussions the loan is now non-amortising (under the previous facility amortisation payments totalling £2.0m and £2.5m were due in 2010 and 2011 respectively) and the term of the facility has been extended twelve months to January 2013. This new facility is a positive step for the Group and will allow the Group to return to estate growth when the timing is right.

 

Future outlook and current trading

 

The Group anticipates that trading conditions in 2010 will be as challenging as 2009. In common with most of the industry, trading over the first two weeks of 2010 was affected by the adverse weather conditions which kept many customers at home.  The impact of these conditions was felt most acutely outside of the South East of England where a disproportionate number of the Group's restaurants are based.

 

The first quarter of 2010 has also seen many operators returning to the same discount-led promotions used in 2009. The Group will continue with its strategy of avoiding the margin erosion resulting from such policies, concentrating instead on the quality of its people, food, customer service and restaurant cleanliness to drive long term financial success.

 

Pleasingly, despite the impact on sales from the snow and short term challenges resulting from competitor discounting, trading performance (as measured by EBITDA) is marginally ahead of last year after the first eight weeks of trading.

 

This year will see a keen focus on organic growth from the Group's existing portfolio of restaurants. Likewise, we will maintain our tight grip on cost control going forward.

 

Leases have been signed on four sites, Aberdeen, Knutsford, the City of London and Dorking. The quantum and timing of these openings will be determined by trading performance, which, as already stated, we expect to remain challenging in 2010. No new sites will be opened in the first half of 2010. 

 

The Board believes that the Group's results in such a difficult and challenging year as 2009 demonstrate the robustness of its brands and business models and remains confident of the future prospects for Individual Restaurant Company.

 

 

 

 

 

 

Robert Breare

Chairman

19 April 2010

 

*Restaurant EBITDA is defined as EBITDA generated before pre-opening costs and central costs

  

Consolidated income statement

 

		Year	Year
		ended	ended
	Note	31 December	31 December
		2009	2008
		£'000	£'000
Revenue		53,349	52,472
Cost of sales		(13,630)	(13,328)
Gross profit		39,719	39,144
Other operating expenses		(37,772)	(36,424)
Operating result before non-trading costs		1,947	2,720
Business restructuring costs		(859)	-
Reversal of impairment of non-current assets		-	996
Impairment of non-current assets		-	(996)
Share option charge		(108)	(108)
Increase in provision for onerous leases		(1,200)	(500)
Operating (loss)/profit		(220)	2,112
Finance cost		(652)	(957)
(Loss)/profit before taxation		(872)	1,155
Income tax		66	(639)
(Loss)/Profit from continuing operations		(806)	516
(Loss)/Profit for the period attributable to equity holders
of parent		(806)	516
Earnings per share from continuing operations:	2
Basic		(1.64p)	1.34p
Diluted		(1.64p)	1.34p

 

Consolidated statement of comprehensive income

		2009	2008
		£'000	£'000
(Loss)/profit for the period		(806)	516
Total comprehensive income to the period		(806)	516
Attributable to equity holders of the parent		(806)	516

 

Consolidated statement of financial position

 

		As at	As at
		31 December	31 December
		2009	2008
		£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		35,857	36,909
Intangible assets		38,647	38,647
Total non current assets		74,504	75,556
Current assets
Inventories		987	1,059
Trade and other receivables		3,105	2,492
Derivative financial instrument		-	7
Cash and cash equivalents		6,121	2,686
Total current assets		10,213	6,244
Total assets		84,717	81,800
LIABILITIES
Current liabilities
Trade and other payables		(11,970)	(11,867)
Short term borrowings		(2,000)	(18,500)
Provisions		(430)	(177)
Total current liabilities		(14,400)	(30,544)
Non-current liabilities
Long term borrowings		(16,500)	-
Provisions		(1,206)	(500)
Deferred taxation		(9,641)	(9,707)
Total non current liabilities		(27,347)	(10,207)
Total liabilities		(41,747)	(40,751)
Net assets		42,970	41,049

 

		As at	As at
		31 December	31 December
		2009	2008
		£'000	£'000
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
OF THE PARENT
Share capital		2,982	13,826
Share premium account		13,275	11,663
Capital redemption reserve		11,851	-
Merger reserve		22,034	22,034
Shares to be issued		324	216
Retained earnings		(7,496)	(6,690)
Total equity		42,970	41,049

 

Consolidated statement of changes in shareholders' equity

 

	Share capital	Other reserves	Shares to be issued	Profit and loss account	Total
	£'000	£'000	£'000	£'000	£'000
At 1 January 2008	12,409	30,866	4,356	(7,206)	40,425
Share based payments	-	-	108	-	108
Deferred consideration shares	1,417	2,831	(4,248)	-	-
Transactions with owners	1,417	2,831	(4,140)	-	108
Profit and total comprehensive
income for the period	-	-	-	516	516
At 31 December 2008	13,826	33,697	216	(6,690)	41,049
At 1 January 2009	13,826	33,697	216	(6,690)	41,049
Share based payments	-	-	108	-	108
Deferred shares purchased	(11,851)	11,851	-	-	-
Shares issued	1,007	1,612	-	-	2,619
Transactions with owners	(10,844)	13,463	108	-	2,727
Loss and total comprehensive
income for the period	-	-	-	(806)	(806)
At 31 December 2009	2,982	47,160	324	(7,496)	42,970

 

Other reserves represent the share premium account, the merger reserve and the capital redemption reserve.

 

 

 

Consolidated cash flow statement

 

		Year	Year
		ended	ended
		31 December	31 December
		2009	2008
		£'000	£'000
Cash flows from operating activities
(Loss)/Profit after taxation		(806)	516
Adjustments for:
Depreciation, impairment and amortisation charges		3,062	2,609
Share based administrative expense		108	108
Interest expense		652	957
Movement in deferred tax provision		(66)	639
Movement in provisions		959	177
(Increase) in trade and other receivables		(665)	(493)
(Decrease)/increase in inventories		72	(250)
Increase in trade payables		65	432
Cash flow from operations		3,381	4,695
Interest paid		(655)	(965)
Net cash from operating activities		2,726	3,730
Cash flows from investing activities
Purchase of property, plant and equipment		(1,910)	(9,251)
Purchase of subsidiary		-	(4,248)
Net cash used in investing activities		(1,910)	(13,499)
Cash flows from financing activities
Proceeds from issue of share capital		2,619	-
New bank loans raised		-	8,000
Net cash from financing activities		2,619	8,000
Net increase/(decrease) in cash and cash equivalents		3,435	(1,769)
Cash and cash equivalents at beginning of year		2,686	4,455
Cash and cash equivalents at end of the year		6,121	2,686