TIDMMORE
RNS Number : 0850O
Hostmore PLC
29 September 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
29 September 2023
Hostmore plc
Turnaround implemented and beginning to benefit results
Objective of repaying borrowings on track
INTERIM RESULTS
Hostmore plc ("Hostmore" or the "Company" and, together with its
subsidiaries, the "Group") is pleased to announce its interim
results for the 26 weeks ended 2 July 2023 ("H1 2023"). This
half-yearly financial report has not been audited or reviewed by
auditors pursuant to the Financial Reporting Council guidance on
Review of Interim Financial Information.
Key highlights
-- Transitional H1 2023 period included appointment of new
senior leadership, implementation of operating turnaround, and
introduction of revised capital allocation policy
-- H1 2023 LFL revenue, adjusted for differences in VAT, only (2)% versus H1 2022
-- H2 2023 LFL revenue to 24 September +2% versus H2 2022
-- Previously announced annualised cost reductions of GBP5.9
million now increased to GBP8.2 million
-- Cost reductions benefitting FY 2023 by GBP5.8 million, an
increase from the previously announced GBP4.0 million, with GBP4.3
million of benefit in H2 2023 versus H2 2022
-- C ost inflation of purchased inputs, including food, drinks,
and utilities, now stabilising with significant portion under
long-term contracts or hedged at favourable prices
-- Successful operational and portfolio management of bottom 20
loss-making stores has reduced latest 12 months' (to end H1 2023)
losses of GBP4.2 million in 2022 to less than GBP1.5 million at
recent annualised rate
-- New store openings deferred until at least 2025, saving
approximately GBP15 million of cash expenditures
-- H1 2023 ending net debt of GBP31.3 million, improvement from
guidance of GBP32.2 million
-- Refinancing process commenced with existing and potential new
lenders, expected to be concluded by end of Q1 2024
-- On course to repay borrowings and commence shareholder distributions
Financial summary
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 2022 2023
------------------------------------ ----------- ----------- -----------
Total revenue GBP93.6m GBP98.5m GBP195.7m
Gross profit GBP71.1m GBP76.1m GBP150.6m
EBITDA (note 1) GBP6.6m GBP17.8m GBP31.1m
EBITDA FRS102 (note 2) (GBP3.8m) GBP7.1m GBP11.3m
Loss from operations (GBP3.8m) (GBP11.2m) (GBP91.9m)
Basic loss per share (8.5p) (10.6p) (77.8p)
Net debt (GBP175.3m) (GBP176.6m) (GBP176.3m)
Net bank debt FRS102 (note 3) (GBP31.3m) (GBP26.2m) (GBP27.7m)
Cashflows from operating activities GBP6.6m GBP16.2m GBP28.8m
Notes
1. EBITDA reflects the underlying trade of the business. It is calculated as statutory operating (loss)/profit adjusted for depreciation, net interest and bank arrangement fees, impairment, amortisation and share based charges.
2. Includes GBP0.3 million of restructuring costs and a further
GBP0.3 million of financing-related charges which are non-recurring
in nature.
3. Net bank debt FRS102 is borrowings from bank facilities,
excluding the unamortised portion of loan arrangement fees and
leases, less cash and cash equivalents.
Stephen Welker, Chairman, commented:
"During the period we have undertaken a very thorough review of
our cost structure and store estate. We are pleased that the
actions taken have dramatically improved the financial outlook of
the business, thereby keeping us on the path to repaying all of our
borrowings and initiating shareholder distributions."
Julie McEwan, Chief Executive Officer, commented:
"The initiatives taken in the first half of 2023 have built a
leaner and more focused organisation. As we move through the second
half of our financial year, it is encouraging to see the effects of
our strategic and operational actions coming through in our
results. Leveraging our distinctive, trusted brand as the home of
celebrations, our teams are passionate and committed about
delivering an exceptional TGI Fridays guest experience.
Notwithstanding the challenges facing the sector, the early success
of our turnaround programme enables us to look to the future with
confidence. The leadership team we have in place is focused on
building a platform for future growth and shareholder returns, with
the Group well placed for the remainder of 2023 and in the years
ahead."
Results webcast
Stephen Welker (Chairman), Julie McEwan (Chief Executive
Officer), and Matthew Bibby (Interim Chief Financial Officer) will
be hosting a webcast with a live Q&A for investors and analysts
at 10:00am on Monday, 2 October 2023. The presentation relating to
this webcast will be made available shortly after 7am on Friday 29
September 2023 on the Company's website at
www.hostmoregroup.com/results-reports-presentations .
The attendee links and conference call details for the webcast
are detailed below:
Webinar Registration Link:
https://us02web.zoom.us/webinar/register/WN_XaU4GgnCQySDXYxKaEPLBA
Webinar ID: 848 6657 1023
Conference Call: 0203 769 6819
Conference Code: 592967
S
Enquiries
Hostmore plc Matthew Bibby, Interim Chief Financial
Officer
Tel: +44 (0)330 460 5588
Email: enquiries@hostmoregroup.com
Dentons Global Advisors Jonathon Brill, James Styles
Tel: +44 (0)20 7664 5095
Email: Hostmore@dentonsglobaladvisors.com
Business review
Overview
During the first half of the year, trading conditions remained
challenging across the leisure and hospitality industry, impacting
our financial performance. We have however started to see early
signs of progress from our strategic and operational initiatives as
we have moved into the second half of the Group's financial
year.
Whilst there remains much to progress, it is clear that TGI
Fridays is a highly recognised brand with a rich heritage. We are
broadening our guest appeal beyond our core families demographic,
becoming a destination of choice for guests from all walks of life
seeking a celebratory experience, be that office functions,
birthday parties, promotions, pre-wedding parties, or many other
occasions.
As a Group, we are focused on delivering an improved performance
from our core TGI Fridays estate, divesting unprofitable sites
where the opportunity arises, reducing costs, prioritising debt
reduction and executing on controlled, measurable organic growth
initiatives that support our objective of building a platform for
future growth and shareholder returns.
Operational review
On a like-for-like basis, adjusted for the impact of the lower
VAT rate in the equivalent period last year, our revenue
performance was 2% lower than 2022, partly offset by higher average
spend per head. The warm weather in June impacted footfall into our
restaurants, given our estate's limited outdoor space and with our
core family market spending time outdoors and entertaining at home.
We are examining ways to differentiate TGI Fridays' offering with
new initiatives, such as our 'Raising the Bar' project, to ensure
that we diversify our appeal across a broader range of customers
enabling us to improve sales volumes when the weather is
warmer.
The first half year of 2023 delivered a negative EBITDA FRS102
of GBP3.8m in comparison to a positive GBP7.1m for the same period
in 2022. H1 2023 was adversely impacted in comparison by the
reduced VAT rate to 12.5% for the first quarter of 2022, grants
issued by the Government in the same period and rent concessions
received from landlords. In addition, during H1 2023, we
experienced some comparative volume decline. Inflationary pressures
continued to impact the Group during the period, though we took
disciplined action on controlling costs and margin by implementing
menu price increases, which to some extent mitigated the impact of
these higher input costs. Encouragingly, the significant
inflationary pressures we saw in the first half are now starting to
moderate and, with the majority of the Group's EBITDA typically
earned in the second half of the year, our focus is on maintaining
the balance between delivering an improved margin whilst at the
same time continuing to ensure value for our customers.
Reducing Group debt continues to remain a priority as we move
into the second half of the year. Net debt at the end of H1 2023 of
GBP31.3m was better than our guidance of GBP32.2m in what is the
less profitable half of the Group's financial year. The period also
included the one-off cost impact from exceptional cost saving
actions which will be cash positive to the Group in H2 2023 and the
future.
Strategy
At the time of our full year results in April 2023, we announced
two elements of a cost reduction programme (with a combined
annualised value of GBP5.9m) to drive productivity and put the
Group on a more sustainable footing, alongside a revised capital
allocation policy that prioritises debt reduction and shareholder
returns over new site expansion. Having identified further savings,
I am pleased to confirm that we have now increased the annualised
value of the cost reduction programme from GBP5.9m to GBP8.2m.
Although still early, we are already seeing the impact of our
initiatives across the business. Our cost reduction actions are
expected to benefit FY 2023 results in aggregate by GBP5.8m, a
further increase from the GBP4.0m previously announced.
We review all opportunities to improve the Group's financial
results. Included within these is the continued implementation of
our digital transformation strategy in H2 2023 and FY24. As part of
our multi-channel strategy, the Group is experiencing an improved
conversion rate on the new TGI Fridays website which was launched
on 31 May 2023. The second phase of the digital transformation
process will result in the integration of the TGI Fridays rewards
app into the Group's wider digital infrastructure, making it
simpler for our consumers to redeem offers, such as our Stripes
rewards scheme. We will explore further opportunities to drive
higher customer lifetime values, in addition to cost savings and
organic initiatives, such as promotional activity and a renewed
focus on upselling to drive sales.
App users are highly attractive customers, typically spending
GBP209 per annum (inclusive of VAT), compared to GBP79 per annum
for a non-app user. We have been encouraged by the number of
sign-ups as we look to make further progress with this channel.
The Group has committed not to make any new restaurant openings
in FY23 and FY24. As part of our proactive focus on managing costs
and closing unprofitable sites, we exited our loss-making TGI
Fridays restaurant at Manchester Piccadilly in May. Post period
end, the Group exited its loss-making 63rd+1st restaurant in
Edinburgh. A non-cash impairment of GBP1.4m of its property, plant
and equipment and right of use assets has been recorded. The effect
of these two closures is that their combined negative annual EBITDA
of GBP0.5m will now no longer feature in our results, making a
further positive contribution to our H2 2023 results and those of
future years. The Group will continue to evaluate opportunities to
exit other loss-making restaurants. In addition, initiatives are
being implemented to improve the performance of loss-making
restaurants that are retained due to their existing lease length
and we have achieved major improvements in many of these.
Enhancing the guest experience
Our disciplined approach to capital allocation has also enabled
management to focus investment on high ROI organic growth
initiatives; measures that we have trialled previously, that have
attractive cash conversation characteristics and that are
scalable.
Encouragingly, we have continued to see a sustained uplift in
guest satisfaction metrics at TGI Fridays during H1 2023, with our
Net Promoter Score up to 47 (FY 2022: 30) and our Guest Opinion
Score up to 79 (FY 2022: 74). Meanwhile our TripAdvisor rating
remained resilient at 4.5 (FY 2022: 4.5). Our teams are passionate
in delivering the customer experience and in particular our three
key elements, speed of service, food quality and guest interaction,
which in turn secures repeat visits.
These figures demonstrate that TGI Fridays remains a trusted
brand in attractive locations, with the organic growth initiatives
we now have in place having a positive impact on our guest
experience. Our ability to segment different customer cohorts
within our sites enables us to appeal to a broad mix of guests,
delivering a great experience, whatever the occasion. Our price
increases helped to offset inflationary pressures and will enable
us to increase our food and drink margins, demonstrating the
pricing power within the business. At the same time, we delivered
compelling value offers for customers, such as our kids eat free
initiative that ran throughout the August school holiday,
post-period end, ensuring that a strategic approach was taken to
rewarding our guests.
Our 'Raising the Bar' initiative has been successfully
implemented, yielding positive early results. Our "2 for 1"
cocktail pricing was trialled at six restaurants in early 2023.
Having since been rolled out across all our TGI Fridays
restaurants, we have seen drinks revenues increasing in total and
as a proportion of total restaurant takings. Over the period, sales
of cocktails, which have a net positive impact on Group margins,
increased from an average of 35,000 per week in H1 2022, to an
average of 46,000 in H1 2023, with a peak of 61,000 per week during
this period. We see good potential for further bar-focused revenue
opportunities, driven by our interactive Cocktail Masterclasses and
Bottomless Brunches, both of which performed well and have had a
positive impact in revenue and margins.
Optimising our supply chain
Our active focus on managing the Group's cost base enabled us to
mostly offset the inflationary pressures that impacted all
hospitality businesses in 2023. We achieved meaningful success by
changing some suppliers with a resultant improvement in our cost by
reference to general market prices.
As reported previously, we kept out of the hedging market for
gas and electricity during H2 2022 and benefitted from the
reduction in wholesale prices from August 2022 and into H1 2023. We
commenced our utilities hedging programme in May 2023 and have now
hedged 75% of our remaining FY23 usage of gas and electricity.
People
Our people are integral to the success of the Group and
recruiting, retaining and providing the right environment for our
people to excel is of the utmost importance. We aim to provide
rewarding careers for those in the hospitality industry. It has
been pleasing to see the success of our Aspire High Potential
Development programme, which seeks to develop leading talent for
the further progression of our business.
Our Aspire programme has so far supported five delegates in our
first cohort in their promotion to more senior roles within the
business. The eight delegates in our second cohort have commenced
the course this year and they will undertake a programme of
leadership development over a six month period.
In October, we are launching a programme of leadership
development across our restaurants and Support Centre which will be
supported by the introduction of our Ignite programme. This
programme is targeted at more junior aspiring leaders in our
business and will provide learning opportunities that will further
support and enhance our succession planning. We continue to align
our internal programmes with the National Apprenticeship
Programme.
Our Learning Management System continues to evolve with the
introduction of career pathways in development. We are seeing
greater levels of engagement in usage of this tool given that it
provides 24/7 access to engaging learning content. It also aligns
strongly with the expectations of our changing workforce.
We recognise, as a consumer facing business, that the heightened
cost of living continues to have a tangible impact on our people.
In order to mitigate some of these pressures, we are in the process
of launching 'Wagestream', an online financial wellbeing platform
which gives team members early access to wages when needed.
Last year's people survey on performance, focused amongst other
areas on the team member /manager relationship, culture and values
and an overall view of the business performance. The result of this
was that the Group subsidiary that employs almost the entire
workforce was accredited as a "Great Place to Work" which was a
major accolade for the Group as a whole. We will be conducting
regular pulse surveys to gauge the thoughts, views and opinions of
our people.
I would like to pay tribute to all of our hardworking team
members for their ongoing efforts, their commitment,
professionalism and dedication to delivering an exceptional
experience for our guests.
Leadership
During the half year ended 2 July 2023, we made a number of
appointments to strengthen the Board of Directors. I was delighted
to have been appointed permanent CEO in May 2023, having been in
the business since February 2022 and Interim CEO from early January
2023. We also welcomed Stephen Welker as Chairman at the conclusion
of the AGM in June, having already been a Non-Executive Director of
the Company since August 2022. The appointments in June 2023 of
Helena Feltham and Célia Pronto as Non-Executive Directors have
further strengthened and diversified the Board and they bring
valuable expertise to the Group.
Post-period end, Alan Clark resigned as an Executive Director
and as Chief Financial Officer. Matt Bibby was appointed as Interim
Chief Financial Officer in September 2023, having previously held
the role of Finance Director of Hostmore and having been in the
business since 2019.
The Board now contains a good mix of experience, skills and
sector expertise, enabling us to be well placed to deliver on our
business objectives.
Current trading and outlook
The initiatives taken in the first half of 2023 have built a
leaner and more focused organisation. In particular, the actions
taken have reduced costs, as we have adopted a much tighter capital
allocation policy and put in place a diversified array of organic
growth measures. The effects of these initiatives are already
coming through in our results. Our LFL revenue in H2 2023 to 24
September is already +2% versus H2 2022.
We continue to evaluate a number of measures relating to costs
and productivity. Notwithstanding the challenges facing the sector,
we look to the future with confidence, with some of the
inflationary pressures in the first half already beginning to ease.
Leveraging our distinctive, trusted brand as the home of
celebrations, we remain focused on quality, relevance and
simplicity, as well as delivering an exceptional TGI Fridays guest
experience. These factors mean we are well placed for the remainder
of 2023 and in the years ahead.
Julie McEwan
Chief Executive Officer
29 September 2023
Financial review
Introduction
The results for the 26 week period ended 2 July 2023 reflect the
swift and purposeful review of the Group's short-term strategy that
was referred to in our Annual Report for the 52 week period ended 1
January 2023. These actions have strengthened the cashflow of the
Group and improved the structure of the balance sheet. The key
elements of this strategy are reflected in greater detail within
this report. The resultant improvement in our operations arising
from this strategy has positioned the Group to be cash generative
in this current year and going forwards.
The consolidated financial statements included in these interim
results have been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting policies and methods of
computation used are consistent with those used in the Group's
latest annual audited financial statements for the 52 weeks ended 1
January 2023.
Trading results
The Group's trading results for the 26 weeks ended 2 July 2023
are summarised below:
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 2022 2023
------------------------------------ ----------- ----------- -----------
Total revenue GBP93.6m GBP98.5m GBP195.7m
Gross profit GBP71.1m GBP76.1m GBP150.6m
EBITDA (note 1) GBP6.6m GBP17.8m GBP31.1m
EBITDA FRS102 (note 2) (GBP3.8m) GBP7.1m GBP11.3m
Loss from operations (GBP3.8m) (GBP11.2m) (GBP91.9m)
Basic loss per share (8.5p) (10.6p) (77.8p)
Net debt (GBP175.3m) (GBP176.6m) (GBP176.3m)
Net bank debt FRS102 (note 3) (GBP31.3m) (GBP26.2m) (GBP27.7m)
Cashflows from operating activities GBP6.6m GBP16.2m GBP28.8m
Notes
1. EBITDA reflects the underlying trade of the business. It is calculated as statutory operating (loss)/profit adjusted for depreciation, net interest and bank arrangement fees, impairment, amortisation and share based charges.
2. Includes GBP0.3 million of restructuring costs and a further
GBP0.3 million of financing-related charges which are non-recurring
in nature.
3. Net bank debt FRS102 is borrowings from bank facilities,
excluding the unamortised portion of loan arrangement fees and
leases, less cash and cash equivalents.
Strategic direction
In the Annual Report for the 52 week period ended 1 January
2023, the Board outlined a change in the Group's capital allocation
policy. In particular, this included a pause on expansionary
capital expenditure for two years and the implementation of a
clearly defined cost saving strategy. The effect of these is that
the cash generation of the business has been significantly
improved. This in turn enables an acceleration of debt reduction
and resultant enhancement of shareholders' net worth and financial
returns.
The cash benefits of the reduction in capital expenditure and
the cost saving strategy are being delivered in line with the
Board's expectations. In addition, the cost savings initiatives
implemented during this first half will have a more substantial
impact on cashflow and earnings in the second half of the year and
are mostly of a permanent nature which underpins the Board's future
cashflow and profit expectations.
Financial update
The 26 week period ended 2 July 2023 includes the continuing
effect of macro-economic factors which impacted the sector during
the previous financial year. These include:
-- CPIH inflation of 6.3% at the reporting date, which impacts
both the Group's input costs and customer's disposable income.
-- Interest rates, with the Bank of England base rate of 5.0% at
the period end of 2 July 2023 and 5.25% at the date of this report.
This key rate has continued to increase as the Bank seeks to reduce
the rate of inflation.
-- Utilities pricing, which remains materially above the
historic 10-year trend and is likely to remain volatile until
geo-political factors are resolved.
The resultant impact is reflected by changes in how our
customers are managing their disposable income, which includes a
reduced frequency of dining out and a greater awareness of the
value concept.
For TGI Fridays, the brand has a strong level of awareness in
the marketplace and we have continued to improve our guest opinion
scores. During the period ended 2 July 2023, we have implemented
some price increases which are having a beneficial impact as we
progress in the second half of the year. A combination of declining
inflation, improved margins due to pricing, and any improvement in
demand is forecast by the Board to have a positive impact on the
Group's cash generation.
The cost savings initiative implemented in the first half of
2023 has progressed in line with expectations. The previously
announced savings of GBP4.0m for 2023 are now expected to be
GBP5.8m for 2023 as additional opportunities have been identified
and changes made. The impact on positive cashflow is expected to be
more evident during this second half of 2023 as the initiatives are
more fully realised and represent permanent monthly savings.
The material impact of utilities input costs has started to
recede. The decision by the Board to not enter into hedging
contracts during the first half of 2023 has been beneficial as
prices have reflected a steady decline since the beginning of the
year. With the guidance of our energy brokers, the Group has
recently undertaken a programme of hedging both our gas and
electricity supplies to reflect a level of 75% of anticipated
demand for the remainder of the current financial year. A
longer-term strategy is planned for the Group's utility
requirements from January 2024 onwards, in conjunction with the
execution of new supplier contracts.
Post period end, the Group exited its loss-making 63rd+1st
restaurant in Edinburgh. A non-cash impairment of GBP1.4m of its
property, plant and equipment and right of use assets has been
recorded. The effect of this closure is that the annual negative
EBITDA of GBP0.3m arising from this restaurant will now no longer
feature in our results, making a further positive contribution to
our H2 2023 results and those of future years. No other impairments
were required at the half year end, reflecting the improvement in
financial performance of the business referred to above.
EBITDA for the period ended 2 July 2023
The Board measures its business performance under the FRS102
basis of lease accounting which is consistent with prior years. The
first half year of 2023 delivered a negative EBITDA FRS102 of
GBP3.8m in comparison to a positive GBP7.1m for the same period in
2022. H1 2023 was adversely impacted in comparison to the prior
year by the reduced VAT rate to 12.5% for the first quarter of
2022, grants issued by the Government in the same period and rent
concessions received from landlords. In addition, during H1 2023,
we experienced some comparative volume decline and the additional
cost of utilities inflation in comparison to H1 2022. As referred
to above, projections for H2 2023 are positive as all of the above
comparators unwind, we implemented a major cost saving programme in
April 2023 and we have implemented price increases in Q2 and Q3
enhancing bottom line returns.
Under the IFRS16 basis of lease accounting, the Group delivered
EBITDA of GBP6.6m (HY 2022: GBP17.8m) as reflected in these
financial statements. The basic loss per share is 8.5p (HY 2022:
loss 10.6p).
EBITDA
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 2023
GBP'000 (unaudited) (audited)
GBP'000 GBP'000
------------------------------------------ ----------------- ------------ ----------
Loss before tax (10,846) (17,089) (104,345)
Net interest payable and bank arrangement
fees 7,080 5,934 12,478
Depreciation 8,885 10,895 20,339
Net impairment of property, plant and
equipment
and right of use assets 1,364 17,806 31,179
Impairment of goodwill - - 70,858
Share based payment charge 102 254 581
EBITDA 6,585 17,800 31,090
------------------------------------------ ----------------- ------------ ----------
EBITDA FRS102
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 2023
GBP'000 (unaudited) (audited)
GBP'000 GBP'000
--------------------------------- ----------------- ------------ ----------
EBITDA 6,585 17,800 31,090
Less rent paid to lessors (10,424) (10,823) (19,931)
Add rent received from subleases 10 164 101
--------------------------------- ----------------- ------------ ----------
EBITDA FRS102 (3,829) 7,141 11,260
--------------------------------- ----------------- ------------ ----------
Cash flow and net debt
The Group's consolidated statement of cash flows and movement in
debt for the 26 weeks ended 2 July 2023 is summarised below:
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------------------ -------- -------- ----------
Net cash from operating activities 12,980 4,882 19,978
New store openings and purchase of other
fixed assets (3,151) (4,956) (10,241)
Net cash used in financing activities (9,093) (20,856) (32,726)
------------------------------------------ -------- -------- ----------
Net increase/(decrease) in cash in period 736 (20,930) (22,989)
Net cash at start of period 9,091 32,080 32,080
------------------------------------------ -------- -------- ----------
Net cash at end of period 9,827 11,150 9,091
------------------------------------------ -------- -------- ----------
Gross bank debt at start of period 36,800 44,300 44,300
Loans drawn 15,000 - 10,500
Loans repaid (10,700) (7,000) (18,000)
------------------------------------------ -------- -------- ----------
Gross bank debt at end of period 41,100 37,300 36,800
------------------------------------------ -------- -------- ----------
Net bank debt 31,273 26,150 27,709
------------------------------------------ -------- -------- ----------
The GBP3.6m increase in the net debt since 1 January 2023
reflects the payment of new store opening costs for Barnsley and
Durham which opened in November and December 2022 respectively and
the impact of a greater than 2% increase in interest rate incurred
during the period. It is nevertheless lower by GBP0.9m than the
guidance of GBP32.2m given at the time of announcement of our
results for the 52 weeks ended 1 January 2023, reflecting the tight
control maintained on Group cash.
New capital expenditure for the 26 weeks ended 2 July 2023 and
since the period end has been limited to the maintenance of the
estate and the development of a new TGI Fridays website. The new
website went live on 31 May 2023 and improves our interaction with
guests and enables restaurant reservations to be much more
straightforward.
Financing and refinancing
On 28 April 2023, the Group signed a restated bank facility
agreement with its lending banks. Under the terms of that
agreement, certain covenants in the previous facility agreement
were amended to align with the Group's two year forward forecasts.
In addition, the previous requirement for the Group to maintain a
minimum cash balance of GBP12.5m was reduced to GBP1.5m, thereby
reducing interest costs on undrawn facilities. The new facility
comprises a term loan of GBP26.1m and a revolving credit facility
of GBP21.5m.
In April 2023 the Board announced that it would undertake a
refinancing process in Q3 2023. This exercise has been commenced
with existing and potential new lenders and is expected to be
concluded by the end of Q1 2024.
On 28 September 2023, amongst other things, additional
amendments and waivers to the covenant tests in the Group's banking
facility were agreed with the Group's banks, aligning the facility
still further with the Group's forward forecasts. The restated
facility continues with the same level of amortisation of GBP1.5m
per quarter, with the balance repayable at maturity at the end of
the facility on 1 January 2025.
Going concern
In forming their opinion on the financial statements for the 52
week period ended 1 January 2023, the auditors' report, which was
not modified, considered the adequacy of the Group's disclosure
made in the note to those financial statements relating to going
concern and the Group's and the Company's ability to continue as a
going concern. Based on the Directors' forecasts, under a severe
but plausible downside scenario, the Group was forecast to breach
the monthly cumulative EBITDA covenant and the Net debt to EBITDA
ratio covenant within 12 months from the date of approval of those
financial statements, due to the possible impact of reduced demand
following significant energy and cost of food inflation, which
would make the loans repayable on demand. In addition, in the
severe but plausible model, there was uncertainty over the adequacy
of liquidity within 12 months from the date of approval of those
financial statements. These conditions, along with the other
matters explained in the note to the financial statements relating
to going concern, indicated the existence of a material
uncertainty. The financial statements did not include the
adjustments that would result if the Group and the Company were
unable to continue as a going concern. The draft financial
statements of the subsidiaries of the Company for the 52 week
period ended 1 January 2023, which have not yet been signed, have
similar notes and references to an uncertainty.
In considering the going concern basis of preparation of the
interim financial statements, the Directors took account of
significant elements across the business. These included the cost
reduction exercise that commenced in H1 2023, the banking covenants
being recently reset with the Group's lending banks post-period
end, the agreement with the franchisor in H1 2023 to defer all new
store opening obligations until FY25, and LFL revenue in H1 2023,
adjusted for the variance in the VAT rate on food sales between H1
2022 and H1 2023, being broadly in line with the comparative period
in 2022. The results of this review have also been underpinned by
the implementation of new revenue initiatives referred to in the
Business review above.
The Directors have reviewed the Group's forecasts and underlying
assumptions in detail and monitored actual performance against
forecast. They have also assessed the forecast deliverability of
the Group's updated business plan and the strategies implemented by
the Executive Team to deliver forecast results in the plan. This
has enabled the Directors to assess the expected operating
performance and cash availability for the 15 months from September
2023 to December 2024. This assessment also considered possible
adverse effects, including severe but plausible downside
sensitivities of trading and a worsening rate of profit conversion
over the forecast period. The Board maintains a tight focus on the
Group capital allocation policy and all operating costs, such that
both can be reduced further if trading is reduced to the levels
inferred in the severe but plausible downside scenario.
In light of the above, the Directors have continued to adopt the
going concern basis in the preparation of the financial
statements.
Principal risks and uncertainties
The management of the business and the execution of the business
strategy are subject to a number of risks. These risks are formally
reviewed by the Board and appropriate processes and controls
implemented to monitor and mitigate them. The key business risks
affecting the Group are set out below.
Brand usage risk
The Group's business is dependent on its ability to use the TGI
Fridays, 63rd+1st and Fridays and Go brands, which it uses under
long term Franchise Agreements (in the case of the TGI Fridays and
Fridays and Go brands) and a Licence Agreement (in the case of the
63rd+1st brand) entered into with the Franchisor. The Group relies
on the intellectual property rights owned by the Franchisor and
relies on it to protect such rights. The Group's reputation and the
quality of the TGI Fridays, 63rd+1st and Fridays and Go brands are
critical to its business and success. The Group's business could be
materially and adversely affected if the perception of the brands
is damaged.
The Board seeks to maintain a strong business relationship with
the Franchisor. The Franchisor's business model depends on the
strength of its brands. It therefore operates and adheres to, and
requires its franchisees to operate and adhere to, systems and
standards which seek to safeguard its brands. The Group adopts and
maintains these systems and standards, and, in certain areas goes
beyond these contractual standards.
COVID-19 risk
Another lockdown or pandemic could have a material effect on the
business if the UK Government required restaurants to close or if
the UK Government reintroduced safety measures, such as social
distancing.
The Group is focused on ensuring the safety and wellbeing of
both its customers and team members. In previous years, the Group
accessed Government support, negotiated landlord rent concessions
and ensured it was able to reopen rapidly when the environment
enabled this. The Group's strategy has been adapted to ensure the
Group is in a strong position to confront similar restrictions.
UK economic climate
The Group's business is based exclusively in the UK, save for
one restaurant in Jersey, and so is almost exclusively exposed to
UK economic conditions and consumer confidence. Leisure activities
may be affected by the performance of the UK economy, the level of
consumer disposable income and customer confidence to meet in
social settings. These factors may continue to be impacted upon by
the cost of living crisis as well as other matters.
The Group operates a multi-channel business, which enables it to
earn revenue through a variety of sources. Measures have been put
in place in relation to the adverse economic climate to try and
ensure that cost increases are mitigated, whilst continuing to
offer an attractive proposition to customers.
Competition risk
The Group faces competition from other market participants. The
competition may result in the Group losing custom to other
participants or suffering a reduction in margin. A loss of custom
or reduction in margin impacts on the Group's revenues and
profitability.
The Group ensures that it has a compelling offering, which is
attractive relative to its competitor set. The offering is
refreshed periodically and backed up by appropriate marketing to
ensure that it retains its appeal. The Group operates a loyalty
programme to ensure that repeat custom is rewarded.
Operational risk
The Group's restaurants have high footfall and high usage, in
particular at peak times. There is a risk that without the right
level of ongoing investment or if the Group ceased to be able to
attract sufficient skilled team members that the quality of the
customer experience might decline, impacting the customer
experience and likelihood of return visits.
The Group is committed to promoting its values and fairness in
the way that it pays all team members s in relation to their
skills, experience and performance. The Group has learning and
development programmes in place to enhance team member capabilities
and to promote the Group's values and people retention.
Regulatory changes
The introduction of new laws or regulations which run contrary
to the Group's strategy could have a significant impact on the
Group's strategic objectives. This might result in damage to the
Group's brands, and cause reputational loss, and possible
revocation of licences.
The Board regularly considers legal, risk and compliance issues
affecting the Group. Where required, the Group obtains external
specialist advice to assess, scope and plan its responses to
changes in laws or regulations. In addition to complying with
applicable laws and regulations, the Board advances procedures to
ensure that the Group continues to behave in a socially responsible
manner.
Business interruption risk
A major IT incident could impact the Group's ability to keep
trading. Changing preferences mean that increasingly customers book
online, which increases this risk. There has also been an increase
in the level of high-profile cyber-attacks of other companies in
recent years, including on providers of IT services. This increases
the risk that business information could be accessed by third
parties.
The Executive Team manages these risks by maintaining and
testing business continuity plans and establishing remote IT
disaster recovery capabilities. Cyber-security is of great
importance to the Group. The Group adopts a multi-faceted approach
to protection through internal and external sources. The Executive
Team also regularly reviews the level of monitoring and threat
protection systems that are in place and enhances these when
increases might be warranted.
Key supplier issues
The Group has a number of key distributors and suppliers that
provide its food and beverage products. Limitations and issues
faced by these distributors and suppliers, such as driver,
employee, goods or fuel shortages, escalating costs, union activity
and capacity constraints, could impact the Group's profitability or
ability to offer its customers the level of experience they would
wish.
Meetings are held between the Group and its key distributors and
suppliers to discuss operational issues and mitigating actions. The
Group requires certain of its food and beverage suppliers to adhere
to specific additional KPIs. Failure by a supplier may lead to
short-term disruption, although alternative suppliers could be
introduced at relatively short notice. The Group also seeks to take
mitigating actions, such as ensuring that it has adequate stock
levels and transferring stock between restaurants.
Operational risk related to allergens
There have been a number of high-profile incidents across the
restaurant sector related to allergens in food products. These
incidents have arisen due to inadequate awareness, training,
communication or flagging of allergen items included in menus.
The Group reviews all menus and menu changes for
allergen-related products and wording is included on its menus to
reflect these items. The Group has robust assured advice from its
primary authority partner in place for allergen management
processes and procedures. These translate into comprehensive
operating practices in its restaurants to manage this risk and to
ensure the Group's guests are safe. Allergen awareness is part of
the Group's team member training programme.
Matthew Bibby
Interim Chief Financial Officer
29 September 2023
Responsibility statement
The Directors confirm to the best of their knowledge that:
a. the condensed set of financial statements, which have been
prepared in accordance with International Accounting Standard IAS
34 (Interim Financial Reporting), gives 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 as a
whole as required by DTR 4.2.4R (preparation and content of
condensed set of financial statements);
b. the interim management results include 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 results include a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
Approved by the Board of Directors on 29 September 2023 and
signed on its behalf by:
Julie McEwan Matthew Bibby
Chief Executive Officer Interim Chief Financial Officer
Calculation of key performance indicators and alternative
performance measures
The Board uses several key performance indicators ("KPIs") to
track the financial and operating performance of the business.
These measures are derived from the Group's internal systems. Some
of the KPIs are alternative performance measures ("APMs") that are
not defined or recognised under IFRS. They may not be comparable to
similarly titled measures used by other companies and should not be
considered in isolation or as a substitute for analysis of the
Group's operating results reported under IFRS. The following
information on KPIs and APMs includes reconciliations to the
nearest IFRS measures where relevant.
Sales
Like-for-like ("LFL") sales measure the performance of the Group
on a consistent year-on-year basis. The table below includes sites
that were open for all of 2022 for comparability and separately
includes sites opened since 2022 or subsequently disposed of.
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 2022 2023
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ ----------
LFL gross of VAT benefit in 2022 90,871 95,849 189,087
Less VAT benefit in 2022 - (2,664) (2,664)
--------------------------------- ------------ ------------ ----------
Net LFL 90,871 93,185 186,423
Additions since January 2022 2,668 2,554 6,422
Disposals since January 2022 171 118 359
Deferred revenue provisions (82) (68) (148)
--------------------------------- ------------ ------------ ----------
Total net of VAT benefit in 2022 93,628 95,789 193,056
Add VAT benefit in 2022 - 2,664 2,664
--------------------------------- ------------ ------------ ----------
Total 93,628 98,453 195,720
--------------------------------- ------------ ------------ ----------
In Q1 2022 the VAT rate was lowered to 12.5% before returning to
20% in Q2 2022. The VAT benefit adjustment reflects the benefit
received in H1 2022 to provide fair comparability with 2023 LFL
sales.
EBITDA
EBITDA is the Group's earnings before net interest payable and
bank arrangement fees, tax, depreciation, impairment and share
based payment charges.
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 2023
GBP'000 (unaudited) (audited)
GBP'000 GBP'000
------------------------------------------ ----------------- ------------ ----------
Loss before tax (10,846) (17,089) (104,345)
Net interest payable and bank arrangement
fees 7,080 5,934 12,478
Depreciation 8,885 10,895 20,339
Net impairment of property, plant and
equipment
and right of use assets 1,364 17,806 31,179
Impairment of goodwill - - 70,858
Share based payment charge 102 254 581
EBITDA 6,585 17,800 31,090
------------------------------------------ ----------------- ------------ ----------
Calculation of key performance indicators and alternative
performance measures
EBITDA FRS102
EBITDA FRS102 is the Group's EBITDA under IFRS adjusted for rent
paid to lessors and rent received from subleases.
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 2023
GBP'000 (unaudited) (audited)
GBP'000 GBP'000
--------------------------------- ----------------- ------------ ----------
EBITDA 6,585 17,800 31,090
Less rent paid to lessors (10,424) (10,823) (19,931)
Add rent received from subleases 10 164 101
--------------------------------- ----------------- ------------ ----------
EBITDA FRS102 (3,829) 7,141 11,260
--------------------------------- ----------------- ------------ ----------
Net debt
Net debt calculated in accordance with IFRS16, is the Group's
long-term borrowings (excluding issue costs) and lease liabilities
less cash and cash equivalents at each period end.
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000 GBP'000 (audited)
GBP'000
-------------------------------- ------------------ ------------------ -----------
Gross bank loans and borrowings (41,100) (37,300) (36,800)
Lease liabilities (143,984) (150,474) (148,555)
Cash & cash equivalents 9,827 11,150 9,091
-------------------------------- ------------------ ------------------ -----------
Net debt (175,257) (176,624) (176,264)
-------------------------------- ------------------ ------------------ -----------
Net debt FRS102
Net debt calculated in accordance with FRS102, is the Group's
long-term borrowings (excluding issue costs), less cash and cash
equivalents at each period end.
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000 GBP'000 (audited)
GBP'000
-------------------------------- ------------------ ------------------ -----------
Gross bank loans and borrowings (41,100) (37,300) (36,800)
Cash & cash equivalents 9,827 11,150 9,091
-------------------------------- ------------------ ------------------ -----------
Net debt (31,273) (26,150) (27,709)
-------------------------------- ------------------ ------------------ -----------
Consolidated statement of comprehensive income for the 26 week
period ended 2 July 2023
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023 (audited)
GBP'000 GBP'000 GBP'000
Note
------------------------------------ ------- ------------------ ------------------ ----------------
Revenue 93,628 98,453 195,720
Cost of sales (22,534) (22,311) (45,103)
------------------------------------ ------- ------------------ ------------------ ----------------
Gross profit 71,094 76,142 150,617
Underlying administrative expenses (73,578) (70,243) (141,152)
Exceptional items 7 - - (70,858)
Administrative expenses (73,578) (70,243) (212,010)
Impairment reversal of property,
plant and equipment
and right of use assets - - 5,712
Impairment of property, plant and
equipment
and right of use assets 12.1 (1,364) (17,806) (36,891)
Other operating income 82 752 705
Loss from operations (3,766) (11,155) (91,867)
Finance income 8 88 4 78
Finance expense 8 (7,168) (5,938) (12,556)
------------------------------------ ------- ------------------ ------------------ ----------------
Loss before tax (10,846) (17,089) (104,345)
Tax (charge)/credit 9 282 3,743 6,801
------------------------------------ ------- ------------------ ------------------ ----------------
Loss for the period (10,564) (13,346) (97,544)
Total comprehensive expense (10,564) (13,346) (97,544)
------------------------------------ ------- ------------------ ------------------ ----------------
All operations are continuing operations.
There are no amounts recognised within other comprehensive
income in the current or prior periods.
26 weeks 26 weeks 52 weeks
ended ended ended
(Loss)/earnings per share in pence 2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023 (audited)
Note
-------------------------------------- ------- ------------------ ------------------ ----------------
Basic loss per share 10 (8.5) (10.6) (77.8)
Diluted loss per share 10 (8.5) (10.6) (77.8)
-------------------------------------- ------- ------------------ ------------------ ----------------
Consolidated statement of financial position at 2 July 2023
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000
GBP'000 (audited)
Note GBP'000
Assets
Non-current assets
Property, plant and equipment 11 34,774 39,928 36,140
Right of use assets 12 90,383 104,302 94,568
Goodwill 14 75,121 145,979 75,121
Net investment in subleases 89 100 95
Deferred tax assets 9 13,083 10,596 12,801
Total non-current assets 213,450 300,905 218,725
-------------------------------------- ---------------------- ------------------ -----------
Current assets
Inventories 1,219 1,300 1,464
Trade and other receivables 3,666 7,477 6,285
Current tax assets - - 740
Net investment in subleases 11 83 12
Cash and cash equivalents 9,827 11,150 9,091
------------------------------ ------ ---------------------- ------------------ -----------
Total current assets 14,723 20,010 17,592
-------------------------------------- ---------------------- ------------------ -----------
Total assets 228,173 320,915 236,317
-------------------------------------- ---------------------- ------------------ -----------
Liabilities
Non-current liabilities
Loans and borrowings 15 18,224 26,180 23,146
Lease liabilities 13 131,824 135,989 133,261
Provisions 16 5,187 2,352 5,143
------------------------------ ------ ---------------------- ------------------ -----------
Total non-current liabilities 155,235 164,521 161,550
-------------------------------------- ---------------------- ------------------ -----------
Current liabilities
Trade and other payables 21,207 19,188 18,136
Contract liabilities 974 800 1,004
Current tax liabilities 8 113 -
Loans and borrowings 15 22,181 10,497 13,295
Lease liabilities 13 12,160 14,485 15,294
Provisions 16 307 377 475
------------------------------ ------ ---------------------- ------------------ -----------
Total current liabilities 56,837 45,460 48,204
------------------------------ ------ ---------------------- ------------------ -----------
Total liabilities 212,072 209,981 209,754
------------------------------ ------ ---------------------- ------------------ -----------
( 42,114
Net current liabilities ) (25,450) (30,612)
------------------------------ ------ ---------------------- ------------------ -----------
Net assets 16,101 110,934 26,563
------------------------------ ------ ---------------------- ------------------ -----------
Consolidated statement of financial position at 2 July 2023
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000
GBP'000 (audited)
Note GBP'000
----------------------------------------- ------ ------------------ ------------------ -----------
Issued capital and reserves attributable
to owners of the Company
Share capital 17 25,225 25,225 25,225
Share premium reserve 14,583 14,583 14,583
Merger reserve (181,180) (181,180) (181,180)
Share based payment reserve 736 307 634
Retained earnings 156,737 251,999 167,301
Total equity 16,101 110,934 26,563
------------------------------------------------- ------------------ ------------------ -----------
The notes on pages 21 to 36 form part of these financial
statements.
The financial statements on pages 17 to 36 were approved and
authorised for issue by the Board of Directors on 29 September 2023
and were signed on its behalf by:
Julie McEwan Matthew Bibby
Chief Executive Officer Interim Chief Financial
Officer
Consolidated statement of changes in equity for the 26 week
period ended 2 July 2023
Share Share based
Share premium Merger payment Retained Total
capital reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- --------- ------------- ---------- ----------
At 2 January 2023 25,225 14,583 (181,180) 634 167,301 26,563
Comprehensive expense
for the period
Loss for the period - - - - (10,564) (10,564)
--------------------------- --------- --------- --------- ------------- ---------- ----------
Total comprehensive
expense for the period - - - - (10,564) (10,564)
--------------------------- --------- --------- --------- ------------- ---------- ----------
Contributions by and
distributions to owners
Share based payment
charge - - - 102 - 102
Total contributions
by and distributions
to owners - - - 102 (10,564) (10,462)
--------------------------- --------- --------- --------- ------------- ---------- ----------
At 2 July 2023 (unaudited) 25,225 14,583 (181,180) 736 156,737 16,101
--------------------------- --------- --------- --------- ------------- ---------- ----------
At 3 January 2022 25,225 14,583 (181,180) 53 265,345 124,026
Comprehensive expense
for the period
Loss for the period - - - - (13,346) (13,346)
--------------------------- ------ ------ --------- ----- ---------- ----------
Total comprehensive
expense for the period - - - - (13,346) (13,346)
--------------------------- ------ ------ --------- ----- ---------- ----------
Contributions by
and distributions
to owners
Share based payment
charge - - - 254 - 254
Total contributions
by and distributions
to owners - - - 254 (13,346) (13,092)
--------------------------- ------ ------ --------- ----- ---------- ----------
At 3 July 2022 (unaudited) 25,225 14,583 (181,180) 307 251,999 110,934
--------------------------- ------ ------ --------- ----- ---------- ----------
At 3 January 2022 25,225 14,583 (181,180) 53 265,345 124,026
Comprehensive expense
for the period
Loss for the period - - - - (97,544) (97,544)
----------------------------- ------ ------ --------- ----- ---------- ----------
Total comprehensive
expense for the period - - - - (97,544) (97,544)
----------------------------- ------ ------ --------- ----- ---------- ----------
Contributions by and
distributions to owners
Share purchases by Employee
Benefit Trust - - - - (500) (500)
Share based payment charge - - - 581 - 581
----------------------------- ------ ------ --------- ----- ---------- ----------
Total contributions by
and distributions to owners - - - 581 (500) 81
----------------------------- ------ ------ --------- ----- ---------- ----------
At 1 January 2023 (audited) 25,225 14,583 (181,180) 634 167,301 26,563
----------------------------- ------ ------ --------- ----- ---------- ----------
Consolidated statement of cash flows for the 26 week period
ended 2 July 2023
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000 GBP'000 (audited)
Note GBP'000
Cash flows from operating activities 18 6,585 16,169 28,800
Movements in working capital:
Decrease/(increase) in trade and
other receivables 2,619 (1,897) (2,415)
Decrease in inventories 245 191 25
Increase/(decrease) in trade and
other payables 2,924 (8,303) (8,071)
(Decrease)/increase in provisions
and employee benefits (152) (445) 2,391
--------------------------------------- ------ ----------------- ----------------- ----------
Cash generated from operations 12,221 5,715 20,730
Corporation taxes recovered/(paid) 748 (858) (857)
Rental income from subleases 11 25 105
--------------------------------------- ------ ----------------- ----------------- ----------
Net cash from operating activities 12,980 4,882 19,978
----------------------------------------------- ----------------- ----------------- ----------
Cash flows from investing activities
Purchases of property, plant and
equipment (3,235) (4,956) (10,311)
Interest received 84 - 70
Net cash used in investing activities (3,151) (4,956) (10,241)
----------------------------------------------- ----------------- ----------------- ----------
Cash flows from financing activities
Repayment of bank borrowings (10,700) (7,000) (18,000)
Payment of loan arrangement fees (810) - -
Receipt of bank borrowings 15,000 - 10,500
Interest paid on bank borrowings (1,344) (892) (2,291)
Share purchases by Employee Benefit
Trust - - (500)
Payment of lease liabilities (11,239) (12,964) (22,435)
--------------------------------------- ------ ----------------- ----------------- ----------
Net cash used in financing activities (9,093) (20,856) (32,726)
----------------------------------------------- ----------------- ----------------- ----------
Net cash increase/(decrease) in
cash and cash equivalents 736 (20,930) (22,989)
Cash and cash equivalents at the
beginning of period 9,091 32,080 32,080
--------------------------------------- ------ ----------------- ----------------- ----------
Cash and cash equivalents at the end
of the period 9,827 11,150 9,091
----------------------------------------------- ----------------- ----------------- ----------
Notes to the consolidated financial statements for the 26 weeks
ended 2 July 2023
1. Basis of preparation
The Group's consolidated financial statements have been prepared
in accordance with UK-adopted International Accounting Standards
and with the requirements of the Companies Act 2006 as applicable
to companies reporting under those standards.
The consolidated financial statements included in these interim
results have been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting policies and methods of
computation used are consistent with those used in the Group's
latest annual audited financial statements for the 52 weeks ended 1
January 2023. The consolidated interim financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's latest annual consolidated financial statements for the 52
weeks ended 1 January 2023.
The information for the 52 weeks ended 1 January 2023 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory financial statements of
the Company for that period, prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRS), has been delivered to the Registrar of
Companies. The auditor's report on those financial statements was
unqualified, did not contain a statement under section 498(2) or
(3) of the Companies Act 2006, but did draw attention to a matter
by way of emphasis.
The accounting period of the Group runs to the nearest Sunday at
the end of each half year. The Directors have presented the Group's
results and consolidated interim financial statements for the 26
week period ended 2 July 2023, with the comparative period being
the 26 week period ended 3 July 2022.
2. Functional and presentation currency
These consolidated financial statements are presented in pounds
sterling, which is the Group's functional currency. All amounts
have been rounded to the nearest thousand pounds, unless otherwise
indicated.
3. Going concern
In forming their opinion on the financial statements for the 52
week period ended 1 January 2023, the auditors' report, which was
not modified, considered the adequacy of the Group's disclosure
made in the note to those financial statements relating to going
concern and the Group's and the Company's ability to continue as a
going concern. Based on the Directors' forecasts, under a severe
but plausible downside scenario, the Group was forecast to breach
the monthly cumulative EBITDA covenant and the Net debt to EBITDA
ratio covenant within 12 months from the date of approval of those
financial statements, due to the possible impact of reduced demand
following significant energy and cost of food inflation, which
would make the loans repayable on demand. In addition, in the
severe but plausible model, there was uncertainty over the adequacy
of liquidity within 12 months from the date of approval of those
financial statements. The Directors continued to adopt the going
concern basis in preparing those financial statements, and the
financial statements did not include adjustments to the carrying
amounts or classification of assets and liabilities that would
result if the Group was unable to continue as a going concern. The
draft financial statements of the subsidiaries of the Company for
the 52 week period ended 1 January 2023, which have not yet been
signed, have similar notes and references to an uncertainty.
The financial statements for the 26 weeks ended 2 July 2023 have
been prepared on a going concern basis. The impact on consumer
confidence of the inflationary pressures, together with increases
in interest rates, increasing energy costs and supply cost
inflation, adversely affected the nature of the market in which the
Group operates. The Board responded proactively to these changes.
The Group's capital allocation policy was re-set to focus on
delivering improved performance from the core TGI Fridays estate,
with substantial improvements to marketing, operating effectiveness
and site management. The Board also negotiated an amendment to the
development agreement with the brand's US Franchisor, resulting in
no new site openings being required during the two years ending 31
December 2024. These actions have resulted in a material
improvement in net cash retention by the Group. They have also been
complemented by a major cost reduction programme and related
working capital enhancement. These improvements commenced in Q1
2023. All of the above strategies have been reflected in the
Group's forecasts for FY 2023 and 2024.
The banking facilities available to the Group were amended and
restated on 28 April 2023 and further amended on 28 September 2023.
These amendments included, amongst other things, the revision and
waiver of certain covenants in line with the Group's Business Plan.
These are referred to in more detail in note 15 to the financial
statements. Under the restated facility agreement, the Group
provides increased reporting to the banks. The Group will also not
open any new restaurants during the term of the facility which
ensures that capital expenditure is reduced. Having already
successfully implemented a range of revenue initiatives and a
substantial reduction in central costs, the Board is confident that
these actions are resulting in an improvement in cash
generation.
The Group has prepared forecasts of the expected position for
the next 15 months from the date of approval of these financial
statements, which includes a severe but plausible downside
scenario. The severe but plausible downside scenario assesses the
position in a depressed trading environment and worsening of
performance by the Group's restaurants, with reduced recovery in H2
2023 and FY 2024. These scenarios are based on the business plan of
the Group but apply a downturn in trading of its restaurants for
the remainder of 2023 and throughout 2024. They also model the
impact that this would have on the amended covenants of the
Group.
In the Group's forecasts, the Group has sufficient liquidity
from its restated facilities to finance its operations for the next
fifteen months to the end of the facility in January 2025,
including compliance by the Group with its amended banking
covenants and debt amortisation as it comes due under the
facility.
The Directors are confident that the business will continue to
trade for a period of at least 15 months following the signing of
these financial statements and therefore that it is appropriate to
prepare these financial statements on a going concern basis. The
Directors have continued to adopt the going concern basis in
preparing these financial statements and the financial statements
do not include adjustments to the carrying amounts or
classification of assets and liabilities that would result if the
Group was unable to continue as a going concern.
4. Accounting policies
These consolidated financial statements have been prepared on a
basis consistent with the accounting policies set out in the
Group's financial statements for the 52 week period ended 1 January
2023.
5. Critical accounting judgements, estimates and assumptions
Judgements, estimates and assumptions are evaluated at each
reporting date and are based on historical experience as adjusted
for current market conditions and other factors. Judgements,
estimates and assumptions have been made in respect of the
following:
5.1 Judgements
Goodwill
The Group does not allocate goodwill to individual CGUs. This is
because it is deemed to represent the ongoing value of the existing
business and brand and it cannot be allocated to individual
restaurants on a non-arbitrary basis. Therefore, the goodwill is
allocated to all CGUs as a group as it is considered that they all
benefit equally from the brand value. This includes TGI Fridays,
63rd+1st and Fridays and Go.
Lease term
Several leases of restaurant properties contain extension
options or break clauses. The non-cancellable period and
enforceable period are both considered to be the lease term in the
contract in place at the period end, including leases which have
been extended.
Leases for restaurant properties are generally long-term. Due to
the nature of the business, decisions to extend or terminate leases
are based on evolving market dynamics that may create an economic
incentive to do so. Therefore, at the period end there is no
reasonable certainty of whether an option to extend or terminate
will be exercised except where hindsight has been used.
Deferred tax asset
The Group has recognised deferred tax assets of GBP13,083k (HY
2022: GBP10,596k) based on all deductible temporary differences on
the basis that there will be future taxable profits. The Group has
projected its taxable profits for the next 48 months and
extrapolated these into the future for the purposes of this
assessment, consistent with the projections used for impairment
assessment. This has confirmed that the deferred tax assets
recognised will be utilised within the next 12 years.
5.2 Estimates and assumptions
Goodwill
The Group tests all cash generating units ("CGUs") for
impairment at each reporting date on a value-in-use basis. Where a
CGU is considered impaired, its carrying value is reduced to its
recoverable amount. The value-in-use calculations are based on
future projected cashflows of the operating business, over the life
of the leases, with management assuming profitable stores' leases
will be extended and therefore projected into perpetuity,
discounted back using a pre-tax discount rate of 15.8%.
If the combined carrying amount of the CGUs and goodwill is
higher than the recoverable amount of the group of all CGUs, the
residual impairment losses are allocated to goodwill.
Impairment
The Group performs an impairment assessment at the end of each
reporting period. For this purpose, each restaurant in the Group is
considered a separate CGU. An impairment charge is recognised where
the recoverable amount is less than the carrying value of the RoU
assets of the CGU. The recoverable amount is based on value-in-use
calculations, using discounted forecasted cashflows and each
restaurant's ability to cover its costs, including an allocation of
central overheads, marketing and maintenance standards of assets.
An impairment charge is not recognised where the assets have been
trading for less than 12 months at the reporting date.
The recoverable amount is based on value-in-use calculations
with cash flow projections over the lease term of each restaurant.
This uses the Group's updated 2023 budget and the business plan
growth rate for the next two years, applying a long-term growth
rate of 2% per annum. The discount rate applied in the value-in-use
calculations is by reference to the Group's weighted average cost
of capital and similar benchmarks in the industry. A pre-tax
discount rate of 14.2% (HY 2022: 12.3%) has been applied in the
value-in-use calculations.
6. Segment information
The Group's reportable segments are all under the TGI Fridays
brand. 63rd+1st and Fridays and Go are aggregated with TGI Fridays
in internal reporting and are therefore not a separate reportable
segment under IFRS 8 (Operating Segments). The Group's Chief
Executive Officer and all other Board members are considered to be
the Chief Operating Decision Maker, who receive information at a
Group and site-by-site level. These sites share similar economic
characteristics and are corporately under the TGI Fridays licensed
branding and meet the aggregation criteria under IFRS 8 paragraph
12.
7. Exceptional items
Exceptional items are those items that, by virtue of their
unusual nature or size, warrant separate, additional disclosure in
the financial statements to fairly assess the underlying
performance of the Group.
Included within the loss from operations in the 52 weeks ended 1
January 2023 were items which are considered to be exceptional in
nature. These are as follows:
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 2023
GBP'000 (unaudited) (audited)
GBP'000 GBP'000
--------------------------------- ------------------ ------------- ----------
Impairment of goodwill (note 14) - - 70,858
--------------------------------- ------------------ ------------- ----------
8. Finance income and expense
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000 GBP'000 (audited)
GBP'000
----------------------------------------- ----------------- ----------------- -----------------
Finance income
Interest receivable on net investment in
subleases - 4 -
Other interest receivable 88 - 78
----------------------------------------- ----------------- ----------------- -----------------
Total finance income 88 4 78
----------------------------------------- ----------------- ----------------- -----------------
Finance expense
Bank interest payable 1,846 829 2,569
Amortisation of loan arrangement fees 474 254 209
Interest on lease liabilities 4,819 4,827 9,726
Other interest payable - 28 -
Unwinding of discount on provisions 29 - 52
----------------------------------------- ----------------- ----------------- -----------------
Total finance expense 7,168 5,938 12,556
----------------------------------------- ----------------- ----------------- -----------------
9. Tax (charge)/credit
9.1 Tax (charge)/credit recognised in consolidated statement of
comprehensive income
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000 GBP'000 (audited)
GBP'000
----------------------------------------------- ----------------- ----------------- ----------
Corporation tax (charge)/credit
Current tax charge on profits for the period - (661) -
Adjustments in respect of prior periods - - 192
----------------------------------------------- ----------------- ----------------- ----------
Total corporation tax (charge)/credit - (661) 192
----------------------------------------------- ----------------- ----------------- ----------
Deferred tax (charge)/credit
Origination and reversal of timing differences 282 4,404 4,842
Adjustments in respect of prior periods - - 27
Change in future tax rate - - 1,740
----------------------------------------------- ----------------- ----------------- ----------
Total deferred tax credit 282 4,404 6,609
----------------------------------------------- ----------------- ----------------- ----------
Tax credit for the period 282 3,743 6,801
----------------------------------------------- ----------------- ----------------- ----------
9.2 Deferred tax assets
Deferred tax assets in the consolidated statement of financial
position arose as follows:
Recognised
in consolidated
statement of
2 January comprehensive 2 July
2023 income 2023
GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ---------------- ---------
Deferred tax assets in relation to:
Property, plant and equipment differences 3,111 (492) 2,619
Other temporary differences 76 - 76
Losses carried forward 228 474 702
Deferred tax arising from leases 9,386 300 9,686
------------------------------------------ ----------- ---------------- ---------
Total deferred tax assets 12,801 282 13,083
------------------------------------------ ----------- ---------------- ---------
Recognised
in consolidated
statement of
3 January comprehensive 3 July
2022 income 2022
GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ---------------- ---------
Deferred tax assets in relation to:
Property, plant and equipment differences 1,970 591 2,561
Other temporary differences 71 - 71
Deferred tax arising from leases 4,151 3,813 7,964
------------------------------------------ ----------- ---------------- ---------
Total deferred tax assets 6,192 4,404 10,596
------------------------------------------ ----------- ---------------- ---------
Recognised
in consolidated
statement of
3 January comprehensive 1 January
2022 income 2023
GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ---------------- -----------
Deferred tax assets in relation to:
Property, plant and equipment differences 1,970 1,141 3,111
Other temporary differences 71 5 76
Losses carried forward - 228 228
Deferred tax arising from leases 4,151 5,235 9,386
------------------------------------------ ----------- ---------------- -----------
Total deferred tax assets 6,192 6,609 12,801
------------------------------------------ ----------- ---------------- -----------
10. (Loss)/earnings per share
26 weeks 26 weeks 52 weeks
ended
2 July ended ended
2023 (unaudited) 3 July 1 January
2022 2023
(unaudited) (audited)
---------------------------------------- ------------------ ------------- -----------
Basic loss per share
Weighted average outstanding number of
shares ('000) 124,734 126,127 125,427
Loss after tax for the period (GBP'000) (10,564) (13,346) (97,544)
---------------------------------------- ------------------ ------------- -----------
Basic loss per share (pence) (8.5) (10.6) (77.8)
---------------------------------------- ------------------ ------------- -----------
Diluted loss per share
Weighted average outstanding number of
shares ('000) 124,734 126,127 125,427
Dilutive shares ('000) - - -
---------------------------------------- ------------------ ------------- -----------
124,734 126,127 125,427
Loss after tax for the period (GBP'000) (10,564) (13,346) (97,544)
---------------------------------------- ------------------ ------------- -----------
Diluted loss per share (pence) (8.5) (10.6) (77.8)
---------------------------------------- ------------------ ------------- -----------
11. Property, plant and equipment
Leasehold
property Plant and Fixtures
improvements machinery and Total
GBP'000 GBP'000 Fittings GBP'000
GBP'000
----------------------------- -------------- ------------ ----------- ----------
Cost
At 2 January 2023 (audited) 9,874 54,590 95,669 160,133
Additions - 1,946 1,135 3,081
Disposals - (225) (649) (874)
----------------------------- -------------- ------------ ----------- ----------
At 2 July 2023 (unaudited) 9,874 56,311 96,155 162,340
----------------------------- -------------- ------------ ----------- ----------
Accumulated depreciation and
impairment
At 2 January 2023 (audited) 9,874 46,550 67,569 123,993
Depreciation charge for the
period - 1,517 2,292 3,809
Impairment charge for the
period - - 632 632
Disposals - (225) (643) (868)
------------------------------ ------ ------- ------- --------
At 2 July 2023 (unaudited) 9,874 47,842 69,850 127,566
------------------------------ ------ ------- ------- --------
Net book value
----------------------------- --- ------ ------- -------
At 2 July 2023 (unaudited) - 8,469 26,305 34,774
----------------------------- --- ------ ------- -------
At 3 July 2022 (unaudited) - 7,457 32,471 39,928
----------------------------- --- ------ ------- -------
At 1 January 2023 (audited) - 8,040 28,100 36,140
----------------------------- --- ------ ------- -------
12. Right of use assets
Motor
Property vehicles Total
GBP'000 GBP'000 GBP'000
---------------------------- ---------- -------------------------- ---------
Cost
At 2 January 2023 (audited) 171,614 262 171,876
Additions and modifications 2,993 - 2,993
Disposals (1,370) - (1,370)
At 2 July 2023 (unaudited) 173,237 262 173,499
------------------------------ ---------- -------------------------- ---------
Accumulated depreciation and impairment
At 2 January 2023 (audited) 77,058 250 77,308
Depreciation charge for the period 5,065 11 5,076
Impairment charge for the period 732 - 732
At 2 July 2023 (unaudited) 82,855 261 83,116
------------------------------------------ ------ --- ------
Net book value
---------------------------- ------- -------
At 2 July 2023 (unaudited) 90,382 1 90,383
------------------------------ ------- -------
At 3 July 2022 (unaudited) 104,274 28 104,302
------------------------------ ------- -------
At 1 January 2023 (audited) 94,556 12 94,568
------------------------------ ------- -------
12.1 Impairment losses recognised in property, plant and
equipment and right of use assets in the period
The Group performs an impairment assessment at the end of each
reporting period. For the purposes of impairment of property, plant
and equipment and right of use assets, each restaurant in the Group
is considered a separate cash generating unit ("CGU"). An
impairment charge is recognised when the recoverable amount is less
than the carrying value of the property, plant and equipment and
right of use assets. Where there is an indication that an
impairment loss recognised in prior periods no longer exists, the
impairment loss is reversed and credited to the consolidated
statement of comprehensive income.
The recoverable amount is based on value-in-use calculations,
using discounted forecasted cashflows of each restaurant and its
ability to cover its costs, including an allocation of central
overheads, marketing and maintenance standards of assets. The
recoverable amount is assessed over the lease term of each
restaurant, using the Group's updated budget for 2023, applying a
long-term growth rate of 2%. The discount rate applied in the
value-in-use calculations is by reference to the Group's weighted
average cost of capital and similar benchmarks in the industry. A
pre-tax discount rate of 14.2% (HY 2022: 12.3%) has been applied in
the value-in-use calculations.
The Directors have assessed the carrying value of property,
plant and equipment and right of use assets at the period end by
reference to the Group's updated business plan and the interest
rates now prevailing. Post period end, the Group exited its
loss-making 63rd+1st restaurant in Edinburgh. A non-cash impairment
of GBP1,364k of its PPE and RoU assets has been recorded in the
results to 2 July 2023. No other impairments were required during
the half year ended 2 July 2023 (HY 2022: GBP17,806k).
Sensitivities to impairment charges
The key assumptions in the calculation of impairment of
property, plant and equipment and right of use assets are the
predicted cashflows of the CGUs and the discount rate applied. The
Group has conducted a sensitivity analysis taking into
consideration the impact of key impairment test assumptions arising
from a range of reasonably possible trading and economic scenarios.
The reasonably possible effect on impairment of property, plant and
equipment and right of use assets for a 2% absolute change in the
discount rate or a 10% variation in EBITDA, with all other
variables held constant is as follows:
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000
GBP'000 (audited)
GBP'000
---------------------------- ------------------ ------------------ -----------
Discount rate - 2% increase 2,994 1,894 3,113
Discount rate - 2% decrease (3,145) (1,933) (2,541)
EBITDA - 10% increase (4,230) (2,741) (3,926)
EBITDA - 10% decrease 4,842 3,320 4,738
---------------------------- ------------------ ------------------ -----------
13. Leases
The Group has entered into a number of leases on properties from
which it operates its restaurants. It has also entered into lease
arrangements for motor vehicles for use by team members. These have
all been recognised as right of use assets in the consolidated
statement of financial position.
Lease liabilities are due as follows:
2 July 3 July 1 January
2023 2022 (unaudited) 2023 (audited)
(unaudited) GBP'000 GBP'000
GBP'000
------------------------------------------ ------------- ------------------ ----------------
Contractual undiscounted cash flows due
Not later than one year 20,757 19,763 20,925
Between one year and five years 81,670 80,357 80,764
Later than five years 99,868 112,215 104,673
------------------------------------------ ------------- ------------------ ----------------
Total contractual undiscounted cash flows 202,295 212,335 206,362
------------------------------------------ ------------- ------------------ ----------------
Contractual discounted cash flows of lease
liabilities
Non-current 131,824 135,989 133,261
Current 12,160 14,485 15,294
------------------------------------------- ------- ------- -------
Total lease liabilities 143,984 150,474 148,555
------------------------------------------- ------- ------- -------
The contractual cash flows of lease liabilities have been
discounted by applying an appropriate incremental borrowing cost
for each lease, depending on the remaining lease term ranging from
2% for leases with shorter terms to 7.5% for leases with longer
terms.
14. Goodwill
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023 (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ----------------- ----------------- ---------------
Cost
Opening and closing balance 155,284 155,284 155,284
---------------------------- ----------------- ----------------- ---------------
Accumulated impairment
Opening balance 80,163 9,305 9,305
Impairment charge for the period - - 70,858
Closing balance 80,163 9,305 80,163
--------------------------------- ------ ----- ------
Net book value 75,121 145,979 75,121
--------------- ------ ------- ------
The Directors consider that the TGI Fridays brand is the sole
cash generating unit of goodwill as it cannot be allocated to
individual restaurants on a non-arbitrary basis. The Group
continues to assess goodwill for impairment at each reporting date.
No impairment charge has been necessary for the 26 weeks ended 2
July 2023 as the value-in-use calculations support the net book
value of all assets, goodwill, property, plant and equipment and
right of use assets. The value-in-use calculations are based on
future projected cashflows of the operating business, over the life
of the leases, assuming profitable stores' leases will be extended,
discounted back using a pre-tax discount rate of 15.8%.
Sensitivities to impairment charges
The key assumptions in the impairment calculation of goodwill
are the predicted cashflows of the CGUs and the discount rate
applied. The Group has conducted a sensitivity analysis taking into
consideration the impact of key impairment test assumptions arising
from a range of reasonably possible trading and economic scenarios.
The reasonably possible effect on impairment of goodwill for a 2%
absolute change in the discount rate or a 10% variation in EBITDA,
with all other variables held constant is as follows:
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023
GBP'000
GBP'000 (audited)
GBP'000
---------------------------- ------------------ ------------------ -----------
Discount rate - 2% increase 4,507 1,894 3,113
Discount rate - 2% decrease - (1,933) (2,541)
EBITDA - 10% increase - (2,741) (3,926)
EBITDA - 10% decrease 2,135 3,320 4,738
---------------------------- ------------------ ------------------ -----------
15. Loans and borrowings
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023 (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------------- ----------------- ---------------
Secured bank loans and borrowings
Non-current 18,224 26,180 23,146
Current 22,181 10,497 13,295
---------------------------------------- ----------------- ----------------- ---------------
Total secured bank loans and borrowings 40,405 36,677 36,441
---------------------------------------- ----------------- ----------------- ---------------
Movement of Loans
2 July 3 July 1 January
2023 2022 (unaudited) 2023
GBP'000
(unaudited) (audited)
GBP'000 GBP'000
----------------------------------------- ------------- ------------------ -----------
Opening balance 36,441 43,422 43,422
Loans drawn down 15,000 - 10,500
Loans repaid (10,700) (7,000) (18,000)
Amortisation of loan arrangement fees 474 255 209
Loan arrangement fees waived - - 325
Loan arrangement fees incurred in period (810) - (15)
----------------------------------------- ------------- ------------------ -----------
Closing balance 40,405 36,677 36,441
----------------------------------------- ------------- ------------------ -----------
The Group completed an extension and restatement of the bank
loan facilities on 28 April 2023. The restated facility agreement
consists of a GBP24.6m term loan and a GBP21.5m revolving credit
facility, with a term date of 1 January 2025. Arrangement fees of
GBP0.8m were incurred in respect of this refinancing exercise. At
the period end, GBP16.5m had been drawn on the revolving credit
facility.
On 28 September 2023, amongst other things, additional
amendments and waivers to the covenant tests in the Group's banking
facility were agreed with the Group's banks, aligning the facility
still further with the Group's forward forecasts.
The Group's loans are denominated in pounds sterling. There is
no foreign exchange risk on the Group's loan arrangements. The
carrying value of loans and borrowings classified as financial
liabilities are measured at amortised cost, which approximates to
their fair value. The balances at the period end are summarised
below:
2 July 3 July 2 January
2023 (unaudited) 2022 2022
GBP'000
Nominal interest Date of Repayment (unaudited) (audited)
maturity
Loan Facility rate schedule GBP'000 GBP'000
------------------ -------------------- ----------- -------------- ------------------ ------------- -----------
Margin plus GBP1.5m per
compound reference quarter from
rate based June 2022,
Secured bank on 1 January with balance
loan SONIA 2025 on maturity 41,100 37,300 36,800
Unamortised
loan arrangement
fees (695) (623) (359)
--------------------------------------------------------------------- ------------------ ------------- -----------
40,405 36,677 36,441
------------------------------------------------------------------ ------------------ ------------- -----------
15. Loans and borrowings (continued)
During the 26 week period ended 2 July 2023 the Group complied
with all covenants within its bank facilities as amended on 28
September 2023. This has continued to the date of approval of these
financial statements.
The restated facility agreement, as amended on 28 September
2023, includes the following covenants:
-- a minimum liquidity covenant tested on a weekly basis,
requiring an aggregate of cash and undrawn commitments under the
Revolving Credit Faciity of not less than GBP1.5m tested by
reference to quarterly forward forecasts;
-- an adjusted leverage covenant of Group net debt at the end of
each quarter to adjusted EBITDA in such period not exceeding
prescribed ratios set out in the restatement agreement;
-- a cumulative monthly EBITDA covenant tested monthly between
31 October 2023 and 31 March 2024 and then quarterly from 30 June
2024 to 31 December 2024. The covenant requires the Group's
cumulative EBITDA for each period to be not less than prescribed
amounts set out in the restatement agreement; and
-- a capital expenditure covenant that is tested annually on 31
December, requiring the Group to have not incurred capital
expenditure greater than prescribed values set out in the
restatement agreement.
Interest on the Group's loan facility is payable at the
aggregate of a compound reference rate based on SONIA plus a rachet
referred to in the table below, with any increase or decrease on
the margin as a result of the margin rachet applying from the
beginning of the next interest quarter.
Margin %
Interest rate margin payable in addition to SONIA per annum
Adjusted leverage
Bank borrowings less than 1.0x adjusted leverage 3.25
Bank borrowings greater than or equal to 1.0x but less
than 1.5x adjusted leverage 3.50
Bank borrowings greater than or equal to 1.5x but less
than 2.0x adjusted leverage 3.75
Bank borrowings greater than or equal to 2.0x adjusted
leverage 4.00
------------------------------------------------------- ----------
In addition, under the restatement agreement, a further interest
charge accrues at a rate of 5% per annum on the amount of bank debt
in excess of 2.5x adjusted leverage. This additional interest will
become payable on the earlier of repayment of the loan, including
under a refinancing, or at maturity of the loan on 1 January
2025.
The borrower and guarantor Group companies under the facilities
agreement and Hostmore Group Limited have provided English law
fixed and floating charges over all of their assets in support of
the obligors' obligations under the facilities agreement. Hostmore
plc has granted a debenture to Hostmore Group Limited and the
obligor companies under the facility.
Under the restated agreement, the term loan is repayable in
quarterly instalments of GBP1.5m from 30 June 2023. The remaining
balance is due for repayment at the end of the facility on 1
January 2025. At 2 July 2023, and in accordance with the terms of
the facility agreement, there was GBP1.0m of interest owed to the
lenders which has been accrued in these financial statements.
15. Loans and borrowings (continued)
Undrawn facilities
The Group had committed undrawn borrowing facilities at floating
rates at 2 July 2023 as follows:
2 July 3 July 1 January
2023 2022 (unaudited) 2023
GBP'000
(unaudited) (audited)
GBP'000 GBP'000
------------------------------- ------------- ------------------ -----------
Expiring between 1 and 2 years 5,000 25,000 22,500
------------------------------- ------------- ------------------ -----------
Undrawn loan facilities incur a charge at 40% of the interest
rate margin on the drawn facilities.
16. Provisions
2 July 3 July 1 January
2023 2022 (unaudited) 2023
GBP'000
(unaudited) (audited)
GBP'000 GBP'000
---------------------------------------------------- ------------- ------------------ -----------
Opening balance 5,618 3,175 3,175
Increase in provision 26 - 2,935
Charged to consolidated statement of comprehensive - - -
income
Credited to consolidated statement of comprehensive
income (181) (473) (544)
Unwind of discount 31 27 52
---------------------------------------------------- ------------- ------------------ -----------
Closing balance 5,494 2,729 5,618
---------------------------------------------------- ------------- ------------------ -----------
Expected to be utilised within one year
or less 307 377 475
Expected to be utilised after more than
one year 5,187 2,352 5,143
Closing balance 5,494 2,729 5,618
---------------------------------------- ----- ----- -----
The dilapidation provision arises from an obligation to return
leased sites to their original condition at the end of their lease
term. The requirement for provisions is based on value-in-use
calculations, using discounted forecasted cashflows of each
restaurant and their ability to cover their costs, including an
allocation of central overheads, marketing and maintenance
standards of assets. The recoverable amount is assessed over the
lease term of each restaurant.
17. Share capital
Issued and fully paid
Number GBP'000
-------------------------------------------- ----------- ---------
Ordinary shares of 20p each at 3 July 2022,
1 January 2023 and 2 July 2023 126,127,279 25,225
-------------------------------------------- ----------- ---------
Share issues during the period
There were no shares issued during the 26 week period ended 2
July 2023.
17. Share capital (continued)
Rights attaching to ordinary shares
The Company's shares form a single class for all purposes,
including with respect to voting, dividends and other distributions
declared, made or paid on the Company's share capital. Shareholders
are entitled to one vote per share at shareholder meetings of the
Company.
Dividends on ordinary shares
No dividends were declared or paid by the Company during the 26
week period ended 2 July 2023.
Market purchases of ordinary shares
At the Company's annual general meeting held on 7 June 2023, the
Company's shareholders passed a special resolution in accordance
with the Companies Act 2006 to authorise the Company to purchase in
the market up to a maximum number of 12,612,725 shares in the
Company, representing 10% of its issued share capital at 7 June
2023, within normal market guidelines. No market purchases were
made under this authority during the period from the Company's
annual general meeting on 7 June 2023 to the date of approval by
the Board of these financial statements. The authority granted at
the Company's annual general meeting held on 7 June 2023 will
expire (unless previously revoked, varied or renewed) at the close
of business on 30 June 2024 or, if earlier, at the conclusion of
the Company's annual general meeting to be held in 2024. The
Company intends to seek a renewal of this authority at its annual
general meeting to be held in 2024.
Under the existing authority, purchases can be made at a minimum
price of the nominal value of the share and a maximum price of the
higher of (a) 5% above the average of the closing price for a share
for the five business days immediately preceding the date the share
is contracted to be purchased, and (b) an amount equal to the
higher of the price of the last independent trade of a share and
the highest current independent bid for a share as derived from the
London Stock Exchange Trading System.
Authorities to issue share capital
At the Company's annual general meeting held on 7 June 2023, the
Directors were authorised to allot and issue ordinary shares in the
Company within normal market guidelines. No issuances were made
under this authority during the period from the Company's annual
general meeting on 7 June 2023 to the date of approval by the Board
of these financial statements. This authority will expire (unless
previously revoked, varied or renewed) at the close of business on
30 June 2024 or, if earlier, at the conclusion of the Company's
annual general meeting to be held in 2024.
18. Cash flows from operating activities
26 weeks 26 weeks 52 weeks
ended ended ended
2 July 3 July 1 January
2023 (unaudited) 2022 (unaudited) 2023 (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------------- ----------------- ----------------- ---------------
Loss for the period (10,564) (13,346) (97,544)
Adjustments for non-cash items and amounts
disclosed separately:
Depreciation of property, plant and equipment
and right of use assets 8,885 10,895 20,339
Impairment reversal of property, plant and
equipment
and right of use assets - - (5,712)
Impairment of property, plant and equipment
and right of use assets 1,364 17,806 36,891
Impairment of goodwill - - 70,858
Finance income (88) (4) (78)
Finance expense 7,168 5,938 12,556
Covid-19 rent concessions - (1,631) (2,290)
Income tax charge/(credit) (282) (3,743) (6,801)
Share based payment charge 102 254 581
---------------------------------------------- ----------------- ----------------- ---------------
Cash flows from operating activities 6,585 16,169 28,800
---------------------------------------------- ----------------- ----------------- ---------------
19. Related parties
Transactions with key management personnel
During the 26 week period ended 2 July 2023, a relative of Julie
McEwan, the Group's Chief Executive Officer, received GBP13k of
Board approved sponsorship in return for advertising the TGI
Fridays brand at sports events.
Definitions
The following definitions shall apply throughout this document
unless the context requires otherwise:
"Company" Hostmore plc, a company registered in England and
Wales with company number 13334853 whose registered
office is at Highdown House, Yeoman Way, Worthing,
West Sussex BN99 3HH
"EBITDA" earnings before interest and bank arrangement fees,
tax, depreciation, impairment and share based payments
"Exceptional items" items that, by virtue of their unusual nature or
size, warrant separate, additional disclosure in
the financial statements in order to assess the performance
of the Group
"Group" the Company together with its direct and indirect
subsidiaries and subsidiary undertakings
"IFRS" International Financial Reporting Standards as adopted
by the UK
"Like-for-like (LFL) the revenue performance of the Group measured by
Sales" reference to its business in
operation during any comparable period
"Net Debt" the Group's long-term borrowings (excluding issue
costs) and lease obligations less cash and cash equivalents
at each period end
"RoU asset" right of use asset
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