RNS Number:4129N
Food & Drink Group (The) PLC
07 December 2006
THE FOOD & DRINK GROUP PLC
("FDG" or "the Group")
Preliminary Results for the 52 weeks ended 23 September 2006
The Food & Drink Group PLC, the London focussed licensed retailer and operator
of 27 bars, announces record results for the 52 weeks ended 23 September 2006.
HIGHLIGHTS
* Sales increased 53% to #20.3m (2005: #13.3m)
* Like for like sales from the core bar business increased by 4.5%
* Gross margin increased to 75.2% (2005: 74.3%)
* Overall EBITDA improved 134% to #2.7m (2005: #1.2m)
* Profit before tax, pre exceptionals* and amortisation of goodwill, rose
204% to #1.3m (2005: #0.4m)
* Six-fold increase in earnings per share, pre amortisation of goodwill, to
29p (2005: 4p)
* Proposed maiden dividend of 1.0p
* All acquisitions fully integrated and performing ahead of expectations
* Current trading is good with like-for-like sales up 5.6% in first 10 weeks
of new financial year
* for the purposes of the highlights, exceptionals relate to reorganisation
costs and profit/loss of disposals.
Stephen Thomas, Chairman of The Food & Drink Group PLC, commented:
"This is another creditable performance from the Group as a whole with all three
divisions trading well. Trading in the current year is encouraging and the Group
is in a strong position to take advantage of new site opportunities and
continued sector consolidation."
7 December 2006
ENQUIRIES:
The Food & Drink Group PLC Tel: 020 7349 4440
Stephen Thomas, Chairman
James Kowszun, Chief Executive Today: 020 7457 2020
College Hill
Justine Warren /Jamie Ramsay Tel: 020 7457 2020
CHAIRMAN'S STATEMENT
Introduction
The financial year ended 23 September 2006 ("Financial Year") was a successful
period for The Food & Drink Group plc. Trading improved throughout the year as
our investment programme and operational improvement initiatives took effect.
In addition to a strong performance from the core estate, the integration of
both Henry J Bean's and the "The" bars has fully met internal expectations. As
a result, we were able to positively update the market towards the end of the
financial year. These results further exceed management's expectations and
demonstrate the success of The Food & Drink Group's strategy.
Financial Review
Sales in the Financial Year increased by 53% to #20.3m (2005: #13.3m),
benefiting from a full year's contribution from Henry J Bean's and Brodies, and
supplemented by the acquisition of two "The" bars in March. In addition,
like-for-like sales from our core bar business increased by 4.5%. Group gross
margin has increased once again, to 75.2% (2005: 74.3%). This increase has been
driven principally by better drink margins as a result of positive changes to
the sales mix and further progress with our supplier relationships, offset by a
small reduction in food gross margin resulting from increasing product costs not
passed on to consumers. We have addressed this issue by successfully
re-tendering all of our major food supply contracts and by focusing more closely
on improving efficiency within site kitchens.
Profit conversion improved significantly. Proactive management of the property
portfolio, both in the disposals announced at the end of 2004-05 and the
acquisitions completed since, have improved the Group's operating margins. Wage
control has also improved, resulting in a 1.7% point reduction in costs when
measured as a percentage of sales. This has been delivered principally through
the better utilisation of labour planning tools implemented as part of our
back-of-house systems last year. Fixed site costs have reduced as a percentage
of sales primarily as a result of the acquisition of larger, more profitable
premises. However, at the same time, site variable costs have increased by 0.4%
points as a result of increased spend on sales building activity and
entertainment. Overall, site EBITDA margin has improved by more than 2.5%
points and with continued tight control of central costs reducing the central
administrative cost burden to 6.6% of sales (2005: 8.8%), overall EBITDA has
improved by 134% to #2.7m (2005: #1.2m) and EBITDA margin has increased to 13.4%
(2005: 8.8%).
This excellent performance demonstrates the operational gearing inherent within
the Group, where the central infrastructure is in place to manage significant
further site expansion without a material increase in the central cost base.
Depreciation increased to #0.8m (2005: #0.6m) in the year but has marginally
reduced as a percentage of sales. We have now substantially completed a four
year programme of correcting previous under-investment in the trading sites,
where we have implemented long-term solutions that are now reducing on-going
maintenance capital expenditure. With the final accounting for the various
acquisitions over the last 12 months, the annual amortisation of goodwill charge
has risen to #0.5m (2005: #0.2m).
Operating profit on ordinary activities before interest and taxation has risen
more than six times to #1.3m (2005: #0.2m). Within operating profit is a
previously announced exceptional charge of #150,000 relating to the completion
of the integration of Henry J Bean's. The other one-off item within this year's
accounts is the #0.4m profit on disposal relating to the surrender of the lease
at Jamies, Philpot Lane.
Excluding both of these one-off items and amortisation of goodwill, pre-tax
profit has risen by 204% to #1.3m (2005: #0.4m), despite a significant increase
in interest payable to #0.7m (2005: #0.2m) resulting from the 100% debt-funding
of the acquisition of Henry J Bean's last year.
The Group incurred a small tax charge in the year of #26,000, representing
withholding tax on paid on the international Henry J Bean's franchise income.
The Group has generated earnings per share of 18.0p, up from zero in 2005.
Excluding the impact of the amortisation of goodwill, this rises to 29.0p
representing a six-fold increase on last year (2005: 4.0p).
The Board intends to pay its first dividend and is recommending a final net
dividend of 1p per share. This will be payable on 16 March 2007 to shareholders
on the register on 16 February 2007.
The Group spent #1.1m during the Financial Year on capital projects and site
acquisitions, funded in part by the surrender of the lease at Jamies Philpot
Lane for net proceeds of #0.7m, resulting in a net cash outflow from capital
expenditure and investment of only #0.4m. At the year end, net debt was #8.1m
(2005: #9.2m). Gearing has consequently reduced substantially to 102% (2005:
129%) and the ratio of debt:EBITDA has fallen to less than 3.0 times. The funds
generated by the disposals of Camden and Canyon after the year end have further
reduced gearing to around 80%.
Tangible fixed assets are valued at #10.9m, representing the net book value of
our leasehold trading properties. This tangible fixed asset value represents a
multiple of less than 2.8 times the EBITDA generated from these sites, which
gives substantial comfort as to the manageable underlying level of financial
gearing within the business.
Henry J Bean's
Henry J Bean's performance has been encouraging with total sales of #5.2m
(including a strong year of franchise performance), underpinned by a
like-for-like sales increase from the UK managed sites of 4.9% and a percentage
point improvement in gross margin. The gross margin enhancement has been seen
in both food and drink sales and delivered through improvements in efficiency
and the supply-chain rather than via price increases. However, this has not yet
flowed through into an improvement in EBITDA as we have deliberately reinvested
in both labour and variable costs at the sites to reverse the squeeze that
occurred in the period immediately prior to purchase of the business. The
benefits of this reinvestment are now being seen as all three core sites are
building on the strong performance in the second half, with strong like-for-like
sales growth continuing in the new financial year.
Acquired in September 2005, we refrained from altering the Henry J Bean's
template until after the critical Christmas period, simply installing our
group-wide controls and procedures. Prior to commencing a roll-out, a
comprehensive review of the brand and operational template was undertaken, which
assessed each aspect of the brand's operation. Much of the work to date has
focussed on re-instating a culture of excellence based upon training and
development within the sites. Key operational improvements include a review of
the cocktail menu, wine and beer stocking policies and the introduction of table
service. These changes have improved efficiency and have given us the drivers
to deliver further sales growth. Further changes will be implemented in the
current financial year including a modernisation of the brand identity, a
fundamental review of the food offer and a roll-out of the new sound and visual
media system that is being trialled at the flagship site in Chelsea.
At the time of the acquisition a brand overview was completed which concluded
that three of the five managed sites in the UK fitted the brand well, namely
Chelsea, Manchester and Bristol. Since the year end Camden has been sold and
Birmingham has recently been de-branded.
The growth potential for the Henry J Bean's brand is substantial. Prior to
commencing the expansion of the brand, we have committed significant resource to
ensure that we have optimal brand and operational templates in place. This work
is substantially complete and early stage implementation has already delivered
benefits to the current sites, with more still to come.
However, the material growth prospects for the brand come from the ability to
roll out to key locations in the UK, and internationally, through franchising.
We are currently in the process of securing sites for the first phase of this
brand expansion and look forward to providing a more substantive update in the
near future.
We acquired two "The" bars in Chelmsford and Wimbledon in March 2006 intending
to convert these to Henry J Bean's. However since acquisition, we have made
substantial improvements to the operations at both sites, in terms of reduced
costs, improved efficiency and the nature of the offer delivered to customers.
Both sites are already delivering a very attractive return on capital,
significantly above our original expectation. With our key investment criteria
continuing to be cash return on cash capital employed, we have consequently
decided not to convert these sites into Henry J Bean's. We believe that better
returns can be achieved by investing the money elsewhere in the Group and will
now only perform minor improvement projects at each site in the new financial
year.
Bars
The bars division, which consists of 13 sites, has performed strongly this year
with excellent like-for-like sales growth of 6.5% supplemented by a full-year's
contribution from the two Brodies and the addition of the two "The" bars in
March. Total sales have grown by 38% to #9.3m. EBITDA margin has also
improved, by nearly a full percentage point, resulting in a 45.7% increase in
EBITDA.
As in previous years, action plans for the business are based on site-specific
needs, rather than generic, broad-brush programmes. Performance improvement at
Brodies, Canary Wharf, and Polka in Soho are particularly pleasing. Both sites
have seen EBITDA margin improve by more than 10 percentage points, through a
balance of sales-driving activity, staff training and rigorous cost control.
The Common Room in Wimbledon has also just achieved its fourth consecutive year
of like-for-like sales growth, improving EBITDA delivery once again, despite a
significant increase in both rent and rates in the previous year.
Material capital investment projects within the bars were limited to two sites
this year. We invested in extending the bar and outside trading facilities at
Jamies, Canary Wharf before the critical summer trading period. This site
subsequently delivered a record week's trading and has continued to perform
consistently well throughout the year. We also converted Brodies, Paternoster
Square into a new bar called "The Saint" which reopened in May. We are
delighted with the performance of this site. Despite a substantial increase in
the trading competition in the immediate vicinity of the bar, sales are 30%
ahead of the prior year comparatives in the six months since reopening.
Operational focus remains on the ongoing improvement and evolution of these
sites. Specific plans in the current year include upgrading the food offer and
improving our delivery of quality cocktails. Capital plans for the current
financial year include projects at the Jamies sites in Bishopsgate and Charlotte
Street together with minor refurbishments to Jamies, Ludgate Hill and the two "
The" bars in Wimbledon and Chelmsford.
City Bars
The nine City wine bars are a mature and cash generative business that deliver
an excellent return on capital. Sales are driven more by the occupancy levels
of immediately adjacent office space than by general economic factors and
consequently can have uneven year-to-year performance, whilst remaining
extremely profitable.
Following the disposal of three sites in the prior year and the surrender and
short-term occupancy of Jamies, Philpot Lane, total sales declined 18.3% to
#4.1m, with like-for-like sales showing a small 0.8% decline. However, a small
improvement in gross margin coupled with excellent wage control has generated a
1.8% point improvement in EBITDA margin that has more than offset the
like-for-like decline in sales.
Several sites suffered during the World Cup and the hot weather in early summer
but this was offset by strong performance at other sites, notably the Pavilion
at Finsbury Circus. We successfully reached agreement with the landlords for
the creation of an outside trading area at The Orangery in Cutlers Gardens which
has proved to be popular with customers.
Operational activity within the City Bars remains focused on the consistent
delivery of excellent customer service. We will continue to focus on ensuring
that the food offer is simplified but improved and we have successfully
increased the level of resource dedicated to the corporate events market. We
are planning two capital projects in the new financial year for the City Bars -
the major refurbishment of Jamies, Groveland Court and the conversion of the
former restaurant at Hodgsons, Chancery Lane into a flexible dedicated function
and events space.
Restaurant
Our last remaining restaurant, Canyon in Richmond was identified as non-core
some time ago. We have now exchanged contracts to sell the site for #1.2m, with
completion scheduled for 2 January 2007. This will result in a profit on
disposal of approximately #0.5m and the sale proceeds will be used to fund the
on-going expansion of the Group's core bar business.
The Smoking Ban
As has been well publicised, smoking is due to be banned in bars and restaurants
in England in July 2007. Whilst the transition in customer behaviour, from a
smoking to a smoke-free environment will provide a period of uncertainty for the
industry, we believe that the outcome will be positive for the Group. Food
sales already account for 27% of our total revenue and we will be increasing
focus on upgrading our food offer in the new financial year. This strong food
focus, coupled with the specific nature of the occasions for which customers use
our sites shields us from many of the risks associated with a smoking ban and
exposes us to the potential upside. However, from a property perspective, we
are also looking at the most effective ways in which we can maximise choice for
customers within the new legislation. We are investing in a number of
improvements to our outside trading spaces to exploit these opportunities. 50%
of our current estate has outside trading space.
Management and Employees
This year has seen a restructuring of the central support team, preparing the
Group for the next exciting stage of its development and strengthening several
key functions in the process. After joining the business earlier in the year,
Ray McClymont joined the Board as Chief Operating Officer in August 2006. Ray
has the key task of managing the operational challenges created as a result of
our continued growth and achievement of critical mass. His team has been
strengthened with key new roles in Food Development, Training and Events
Management and we are already seeing the positive impact of these appointments.
Our approach to training and development of site staff has become more
structured in the last 12 months. At present, two thirds of our general and
assistant managers are "home grown", having been promoted into their current
role from within the business. Whilst we aspire to this ratio rising higher in
the future, it is already a good result and enables us to ensure that standards
and culture are maintained and developed within our operations.
It was with great sadness that the Group had to say farewell to our senior
independent non-executive director, David Pickard, who retired from the Board at
the end of the financial year. David has been a superb asset to the business
and will be missed. We wish David well in his retirement and thank him for his
service and support over the years. To maintain the correct corporate
governance, the Board has appointed Christopher Poil to replace David as senior
independent non-executive director.
Current Trading and Prospects
Since the year-end, the business has continued to improve and performance is
strong. With 10 weeks of the new financial year completed, like-for-like sales
are 5.6% ahead of last year. Encouragingly, all three divisions of the Group
are delivering positive sales performance. With the increased resource we have
focused on functions and event management the early signs are that confirmed
bookings for the Christmas trading period are substantially ahead of last year.
The Group has the team, trading concepts and funding structure in place to
continue to deliver continued growth into the future and the Board looks forward
with confidence.
Stephen Thomas
Chairman
The Food & Drink Group plc
7 December 2006
The Food & Drink Group PLC
Consolidated Profit & Loss Account
for the 52 weeks ended 23 September 2006
52 weeks 23 52 weeks 24
September 2006 September 2005
#'000 #'000
Turnover 20,313 13,273
Cost of Sales (5,032) (3,407)
Gross Profit 15,281 9,866
Administrative expenses (13,929) (9,519)
excluding Exceptional expenses
Exceptional administrative expenses
Reorganisation (150) (200)
Total Administrative expenses (14,079) (9,719)
Operating Profit 1,202 147
Other Operating Income 60 35
Operating Profit on ordinary activities 1,262 182
before interest and taxation
Profit / (loss) on disposal 373 (12)
Interest receivable and similar income 8 5
Interest payable and similar charges (715) (194)
Profit / (loss) on ordinary activities before tax 928 (19)
Taxation on profit / (loss) on ordinary activities (26) 0
Profit / (loss) for the financial period 902 (19)
Dividends 0 0
Amounts transferred to / (from) reserves 902 (19)
Earnings / (loss) per share
Basic 18.00 p (0.38) p
Diluted 17.30 p (0.38) p
The Food & Drink Group PLC
Consolidated Balance Sheet
As at 23 September As at 24 September
2006 2005
#000's #000's
FIXED ASSETS
Intangible assets 8,959 7,941
Tangible assets 10,893 10,703
19,852 18,644
CURRENT ASSETS
Stocks 335 303
Deferred Tax 684 234
Debtors 2,862 2,322
Cash at bank and in hand 735 540
4,616 3,399
CREDITORS:amounts falling due within (7,780) (6,666)
one year
NET CURRENT LIABILITIES (3,164) (3,267)
TOTAL ASSETS LESS CURRENT LIABILITIES 16,688 15,377
CREDITORS:amounts falling due after (7,375) (8,250)
more than one year
PROVISIONS FOR LIABILITIES AND CHARGES (1,309)
8,004 7,127
CAPITAL & RESERVES
Called up share capital 50 5,457
Share premium account 6,022 8,104
Merger reserve 0 2,060
Capital redemption reserve 0 5,440
Other reserve 0 (54)
Profit and Loss account 1,932 (13,880)
SHAREHOLDERS' FUNDS 8,004 7,127
The Food & Drink Group PLC
Consolidated Cash Flow Statement
for the Period ended 23 September 2006
52 Weeks 52 Weeks
ended ended
23 September 2006 24 September
2005
Note #'000 #'000 #'000 #'000
Net cash inflow from operating 1 2,213 1,046
activities
Returns on investment & servicing of
finance
Interest Received 8 5
Interest Paid (715) (194)
(707) (189)
Taxation (26) -
Capital Expenditure & Financial
Investment
Acquisition of Fixed Assets (1,104) (1,036)
Net Proceeds from sale of tangible fixed 719 182
assets
Purchase of subsidiary undertakings 0 (7,828)
Cash acquired with subsidiary 0 165
Net cash outflow from capital (385) (8,517)
expenditure and financial investment
Net cash inflow / (outflow) before 1,121 (7,660)
management of liquid resources
Financing
Cost of issue of new share capital (25) -
New short term borrowing 0 1,500
Repayment of short term borrowing 0 (608)
New long term borrowing 0 8,250
Repayment of long term borrowing (875) (1,132)
(900) 8,010
Increase in Cash 2 195 350
The Food & Drink Group PLC
NOTES
1 Net cash inflow from operating activities
23 September 25 September
2006 2005
#'000 #'000
Operating profit for period 1,262 182
Amortisation of Goodwill 549 220
Depreciation 759 560
(Increase) in stock (32) (39)
(Increase) in debtors (540) (692)
Increase in creditors 215 815
Net cash inflow from operating activities 2,213 1,046
2 Reconciliation of net cash flow to movement in net debt
23 September 25 September
2006 2005
#'000 #'000
Increase in cash in the period 195 350
Net cash outflow /(inflow) from repayment 875 (8,010)
of loan
Movement in net debt in the year 1,070 (7,660)
Net debt at start of period (9,210) (1,550)
Net debt at end of period (8,140) (9,210)
3 Analysis of changes in net debt
At 25 September Cash flow At 23 September
2005 2006
#'000 #'000 #'000
Cash at bank and in hand 540 195 735
Loans due before one year (1,500) - (1,500)
Loans due after one year (8,250) 875 (7,375)
Total net debt (9,210) 1,070 (8,140)
4 Nature of Preliminary Announcement
This preliminary results statement has been prepared on the basis of the same
accounting policies as those set in the financial statements for the period
ended 24 September 2005, The financial information contained in this statement
does not constitute accounts as defined in section 240 of the Companies Act
1985.
The summarised balance sheet at 23 September 2006 and the summarised profit and
loss account, summarised cashflow statement and associated notes for the year
ended have been extracted from the Group's 2006 financial statements. Those
financial statements have not yet been delivered to the Registrar of Companies.
The financial information for the period 24 September 2005 is an abridged
version of the Group's financial statements for the period which contained an
unqualified audit report and which have been filed with the Registrar of
Companies.
The report and account for the period ended 23 September 2006 will be hosted to
shareholders in the first week of February 2007 and will be available for at
least one month free of charge at the registered office; 195-197 Kings Road,
Chelsea, London, SW3 5ED and at the Group's website: www.foodanddrinkgroup.co.uk
5 Share Capital
As at 6 December 2006 the total number of voting rights in respect of the
Group's ordinary shares of 1p each is 5,005,497.
6 Earnings per Share
2006 2005
Earnings weighted per share Earnings weighted per share
average number amount pence average amount pence
of shares number of
shares
Basic earnings/
(loss) per share
Earnings attributable
to ordinary
shareholders 902,000 5,005,497 18.0 (19,000) 5,000,000 (0.4)
Dilutive effect of
securities
Options 196,608 0
Diluted earnings/
(loss) per share 902,000 5,202,105 17.3 (19,000) 5,000,000 (0.4)
Adjusted Earnings per share
Earnings
attributable to
ordinary
shareholders 902,000 5,005,497 (19,000) 5,000,000
Amortisation of
goodwill 549,000 220,000
Earnings before
goodwill 1,451,000 5,005,497 29.0 201,000 5,000,000 4.0
This information is provided by RNS
The company news service from the London Stock Exchange
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