Interim Results, 6 Sep 2023 07:00

06 September 2023, 07:00

Source - LSE Regulatory

RNS Number : 4934L

Restaurant Group PLC

06 September 2023

The Restaurant Group plc ("TRG" or "The Group") Interim results for the 26 weeks ended 2 July 2023 ("H1")

Increase in management expectations for FY23 EBITDA and excellent progress in executing medium-term plan

Highlights

· Strong like-for-like ("LFL") sales and Adjusted EBITDA¹ growth driven by Wagamama, Pubs and Concessions

· Trading performance supports a moderate increase in management's FY23 Adjusted EBITDA¹ expectations

· Excellent early progress in executing medium-term plan to:

o Deliver 250bps to 350bps of Adjusted EBITDA¹ margin accretion over a three-year time horizon²

o Target net debt/adjusted EBITDA¹ below 1.5x before the end of FY25, whilst supporting accelerated investment in Wagamama openings

· Continue to actively explore strategic options to further accelerate margin accretion and deleveraging

Financial summary

· Total revenue +10% to £467.4m (2022: £423.4m)

· Adjusted EBITDA¹ +15% to £36.3m on a pre-IFRS 16 basis versus the VAT adjusted basis of £31.4m in H1 2022 (2022 reported Adjusted EBITDA¹: £41.7m)

· Adjusted Profit before tax¹ of £7.2m on a pre-IFRS 16 basis, well ahead of the VAT adjusted comparable loss of £0.1m in H1 2022 (2022 reported Adjusted profit before tax: £10.2m)

· Statutory profit before tax of £2.3m on an IFRS 16 basis (2022: loss of £28.5m), includes exceptional charges of £15.2m predominately relating to non-cash impairment charges

FY23 Outlook

· FY23 costs in line with previous expectations and medium-term cost outlook continues to improve

· The trading performance supports a moderate increase in management's FY23 Adjusted EBITDA¹ expectations

o FY23 Net debt¹ expected to be between £180m and £190m

Andy Hornby, Chief Executive Officer, commented:

"We are encouraged by the significant progress made in the first eight months of the year, delivering strong LFL sales growth despite the consumer backdrop. In light of the strong trading we are increasing our expectations for FY23 Adjusted EBITDA.

We are making excellent progress on our medium-term plan and the Board continues to actively explore strategic options to further accelerate margin accretion and deleveraging.

A massive thanks to each and everyone of our dedicated team members who have worked so hard to deliver these excellent results."

Operational highlights

· Wagamama, Pubs and Concessions recorded strong LFL sales growth:

Year To Date ("YTD") LFL sales (%) vs 2022 comparable split by category for the 34 weeks to 27 August 2023

TRG Division	Total YTD LFL sales	Total YTD LFL sales VAT³ Adjusted	Delivery and takeaway LFL sales	Dine-in LFL sales	Dine-in LFL sales VAT³ Adjusted
Wagamama	+7%	+9%	(8)%	+11%	+14%
Pubs	+8%	+10%	n/a	+8%	+10%
Leisure	(3)%	(1)%	(6)%	(2)%	Flat
Concessions	+29%	+31%	n/a	+29%	+31%

o Wagamama, Pubs and Concessions all delivering dine-in covers growth (YTD)

· Customer ratings remain very strong across all brands:

o Wagamama maintained as the number one UK casual dining chain brand by BrandVue

o Brunning and Price recognised as best Pub Group in the UK by CGA Pub Track

· Segmental disclosure shows strong Adjusted EBITDA¹ progression in H1 23 on a VAT adjusted basis for Wagamama, Pubs and Concessions

· Excellent early progress in medium-term margin accretion and deleveraging plan:

o Strong current trading

o Incremental annualised cost savings achieved of £5m p.a.

o Acceleration of new Wagamama UK openings to 8-10 a year from FY24

o Leisure estate rationalisation ahead of plan

¹ Pre-IFRS 16 Adjustment and exceptional charges

² FY25 year-end run-rate

³VAT benefit boosted LFL sales by approximately 5 to 7% for the restaurant and pub sector in Q1 2022 (13 weeks to 3 April 2022). This is an estimation by management looking at the calculated VAT benefit impact within its divisions. The VAT adjusted figures in this announcement (including in the segmental disclosure section) have used this estimation consistently

Enquiries:

The Restaurant Group plc

Andy Hornby, Chief Executive Officer

Kirk Davis, Chief Financial Officer

Umer Usman, Investor Relations

020 3117 5001

MHP Group

Oliver Hughes

James McFarlane

020 3128 8789

07885224532

07584142665

Investor and analyst conference call facility

In conjunction with today's presentation to analysts, a live conference call and webcast facility will be available starting at 9:00am (UK time). If you would like to register, please contact MHP Group for details on 020 3128 8100 or email TRG@mhpgroup.com.

The presentation slides will be available to download from 7:30am (UK time) from the Company's website https://www.trgplc.com/investors/reports-presentations

Notes:

1. The Restaurant Group plc had approximately 380 restaurants and pub restaurants throughout the UK as at 6 September 2023. Its principal trading brands are Wagamama and Brunning & Price. It also operates a multi-brand Concessions business which trades principally in UK airports. In addition, the Wagamama business has a 20% stake in a JV operating seven Wagamama restaurants in the US and c. 60 franchise restaurants operating across a number of territories.

2. Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" and reflect the Group's current expectations concerning future events. Actual results may differ materially from current expectations or historical results.

3. The Group's Alternative performance measures ('APMs') such as like-for-like sales, Adjusted measures, pre-IFRS 16 basis measures and free cash flow are defined within the glossary at the end of this report.

Business review

Introduction

We are particularly pleased with the strong LFL sales and Adjusted EBITDA growth achieved in Wagamama, Pubs and Concessions in the first half of the year, which has continued in Q3 to date, and this supports a moderate increase in management's expectations for FY23 Adjusted EBITDA.

Our Leisure business has been most impacted by the current cost-of-living pressures and is in marginal LFL sales decline. In response to these ongoing challenges the business has accelerated the rationalisation of the estate and is focused on improving the cash generation within the Leisure business.

Overall, excellent early progress has been made on executing the medium-term plan to:

- Deliver 250 to 350 basis points improvement in Adjusted EBITDA¹ margins over the next three years (i.e. FY25 year-end run-rate)

- Reduce Net debt / Adjusted EBITDA¹ to below 1.5x before the end of FY2025, whilst supporting accelerated investment in Wagamama openings

We provide updates on the following areas below:

1. Trading update and key priorities for each division

2. Our margin accretion plan

1. Trading update and key priorities for each division

Total Like-for like ("LFL") sales (%) vs 2022 comparable split by H1 and current trading showing both Q3 (to-date) and Q2 and Q3 (to-date) combined

	H1 Total LFL sales	H1 Total LFL sales "Excl. VAT benefit" (illustrative)	Q3 (to-date) Total LFL sales	Q2 and Q3 (to-date) combined Total LFL sales
	26 weeks to 2 July 2023	26 weeks to 2 July 2023	8 weeks to 27 August 2023	21 weeks to 27 August 2023
Wagamama	+4%	+7%	+16%	+9%
Pubs	+9%	+12%	+5%	+10%
Leisure	(5)%	(2)%	+6%	(2)%
Concessions	+28%	+30%	+33%	+27%

VAT benefit boosted LFL sales by approximately 5 to 7% for the restaurant and pub sector in Q1 2022 (13 weeks to 3 April 2022). This is an estimation by management looking at the calculated VAT benefit impact within its divisions.

LFL sales figures in the section below versus the market reference the final column in the table above, for the 21-week period from 03 April to 27 August 2023 (i.e. Q2 and Q3 to date) versus the comparable period in the prior year, as this normalises the comparisons for both Lower VAT and Omicron closures impacting the market to varying degrees in Q1 2022.

Wagamama

Trading update

Wagamama has traded strongly throughout the year with trading strengthening further in Q3 to an exceptionally strong 16%, helped in part by the cool summer weather.

Wagamama delivered LFL sales growth of 9% in Q2 & Q3 to date, representing a 2% outperformance versus the market. The outperformance in "dine-in" sales has been particularly pleasing at 5%. Customer ratings have remained very strong with the June 2023 external NPS scores (as measured by BrandVue) maintaining Wagamama as the number one brand amongst casual dining chains in the UK.

Wagamama has a consistent and strong track record of market outperformance with the key drivers of this being:

- Unique colleague culture: the Wagamama business continues to be underpinned by our unique culture and ethos. In 2023 we have delivered significantly reduced team turnover and strong retention levels as we have continued to focus on mental health and well-being initiatives to support our teams

- Continuous menu innovation: In 2023 we further evolved our vegan and core menus with two highlights being our vegan Kare Loman (which is our 3^rd most popular plant-based dish) and within our sides range, we have seen our new crispy chilli mushrooms reach strong participation. In addition, as part of our summer menu launch, we innovated within the cocktail range and have seen cocktail participation increase significantly on last year

- Purpose-led marketing activity: Our marketing strategy remains to drive both short-term sales action whilst building long-term brand saliency to build both a functional and emotional relationship with our guests. In the first half of the year there has been a continuous drumbeat of demand driving activity which has included menu innovation, student-based activity and a Deliveroo exclusive TV campaign

- Well-invested estate: Wagamama's estates review process continues to ensure that we regularly invest in our sites and complete selective transformational refurbishments, such as the Ashford Designer Outlet in Kent, where we can further enhance returns.

Growth opportunities

Wagamama UK: We have opened 38 new full-service restaurants between 2016-2021. Within this 33 of the sites opened were in 'regional' locations (i.e. outside central London and airport locations) and these delivered a ROIC[1] in excess of 35% (rolling 12 months to June '23) providing strong financial returns, despite high food and energy inflation costs.

These strong returns achieved by our regional openings gives us confidence to accelerate our expansion plans and we are now targeting to open between eight to 10 sites per year from FY24 onwards.

Our long-term ambitions include significant measured roll-out potential to expand in the UK to a targeted 200 to 220 restaurants (from an expected 161 sites at the end of FY23).

Wagamama US: As a reminder our US JV is a 20:80 partnership (with TRG as the minority investor) and the JV assumes full ownership of the operations of the US business. The JV therefore provides TRG with a capital light means for expanding the business in the US. TRG retains the option to repurchase the remaining 80% of the business starting in December 2027.

The JV will open four new sites in FY23 in Atlanta, Tampa, Dallas and Arlington bringing the estate to a total of nine sites by December 2023. We expect the JV to deliver a positive EBITDA contribution in FY24 as we further develop the US presence for Wagamama. The JV Board will decide the precise scale of the future expansion plans but we would continue to expect to target an overall estate size of 20-30 sites by December 2027.

Wagamama International franchise: Our Wagamama franchise business is currently comprised of 59 sites across Europe and the Middle East which contribute approximately £2.5m Adjusted EBITDA (post divisional overheads). We are in the final stages of securing a new franchise agreement to open several sites in airport locations in India (new territory) with the first site expected to open in 2024. In addition we are exploring opportunities to further accelerate our international footprint.

Brunning & Price Pubs

Trading update

Pubs have maintained a consistently strong performance from Q1 through to Q3, when normalising for weather comparisons over the summer.

The business delivered LFL sales growth of 10% in Q2 and Q3 to date, representing a 1% outperformance versus the market. Customer sentiment has continued to be very strong with social media scores (consolidation of Google, Facebook and TripAdvisor scores) averaging 4.6/5 for the last 12 months to June 2023, delivering our highest ever rating. We are particularly pleased that Brunning and Price was recognised as the best Pub Group in the UK by CGA Pub Track, which is all credit to the strong leadership and delivery of the teams over many years.

The key drivers of this continued market outperformance are:

- Good customer demographics: On average around 60% of the total population that lives within a 15-minute drive time form part of the higher income classes (A to C1), and there are usually at least a 25,000 people within these catchments.

- High quality property estate in defensible, well-invested locations: Our sites are typically located in rural and suburban locations (c.80%) with expansive layouts and limited competition nearby, which has been instrumental in the Group's ability to trade strongly over the years. Over 60% of the Pubs estate benefits from having in excess of 100 "external" covers, which is clearly beneficial through good summer trading.

Growth opportunities

Our Pubs business is a high-quality asset with significant potential to create further value. The B&P offer has proved timeless and the business has consistently outperformed the market over the last nine years (between 2013 and 2022). During this period the business has opened 29 pub restaurants that have delivered a ROIC[2] in excess of 20% (rolling 12 months to June 23) providing good financial returns, despite high food and energy inflation costs. Our pub restaurants benefit from high sales densities with a food mix typically in excess of 65% and the significant investment in new sites means that they then have low ongoing maintenance and refurbishments capital expenditure requirements and therefore deliver strong free cash flow.

We opened one new pub during the first half of the year, the Mytton and Mermaid in Shrewsbury, which has surpassed our expectations and is one of our most successful new pub openings. We aim to open between 1 to 3 high quality pubs per year from FY24 onwards.

Concessions

Trading update

We are very pleased with the strong recovery of our Concessions business in 2023, which has exceeded management's expectations with LFL sales growth of 27% in Q2 and Q3 to date versus 2022, which is an outperformance to the market of 12%. Year-to-date LFL sales for the 34 weeks are +29%.

Importantly, UK air travel continues to make a significant recovery in 2023, with passenger volumes in airports where TRG operate improving from c. 90% of 2019 volumes in Q1 to c. 96% of 2019 volumes in Q3. The strength of the Concessions performance is further illustrated by comparing the trading run-rates against pre-Covid levels, with LFL sales versus 2019 up 3% in Q1, up 10% in Q2 and up 13% in Q3.

We now expect that passenger volumes will recover to 2019 levels in 2024, which is a year earlier than originally expected. This is a significant milestone for the industry and TRG. It is reassuring that the recovery in passenger volumes has been consistent across the country, with London, Regional and Scottish airports all performing well vs 2019 sales levels.

In order to capitalise on the expected future growth opportunities and for TRG to continue to position itself as the partner of choice for all future Food and Beverage opportunities the business continues to focus on:

- Improving the customer experience through enhanced service and ongoing menu development

- Ongoing brand development in partnership with new and existing franchise partners, for example, Jones the Grocer being delivered for T2 Heathrow in Q1 2024

- Agreeing extensions on a number of existing contracts including major redevelopments at Gatwick and Luton. This activity maximises our future earnings stream from this business

Leisure

The Leisure business traded more resiliently in Q3 with a strong recent cinema slate helping LFL sales to 6% in Q3.

The business however has traded below the market, and achieved a LFL sales decline of 2% in Q2 and Q3 to date, with year-to-date LFL sales being down 3%. The Leisure business has been impacted by a number of challenges, in particular the cost-of-living pressures on its core customer base.

In response to these ongoing challenges the business has accelerated the rationalisation of the trading estate from 116 at FY22 year-end to an expected c. 76 sites at FY 23 year-end, delivering the planned two-year rationalisation programme in 12 months. This will be achieved through:

- Exercising the lease expiry / break clause on 14 sites, which have a contractual expiry within the next 18 months

- Selling eight freehold sites with five expected to complete in Q4 2023 generating c.£5m of proceeds

- Converting three sites to Wagamama by the end of FY24

- Accelerating the disposal of between 12 to 17 sites through mutual agreement with landlords / alternative tenants.

The TRG Property team has made good progress in efficiently managing the disposal programme and protecting net cash and we expect to exit the vast majority of the lease obligations of the c. 40 closed sites by the end of FY24.

In addition to the estate rationalisation the team remain focused on enhancing the core offer for both Frankie and Benny's and Chiquito's. In particular over the last six months the teams have concentrated on:

- Staff training and retention: We are investing in staff training and retention programs in order to attract and retain qualified employees, in order to provide our customers with the high-quality service that they expect

- Value for money: We are focusing on offering high-quality food and service at a competitive price in order to attract and retain customers

We continue to improve the customer offer and operational delivery in order to maximise the cashflow from the business.

2. Update on margin accretion and deleveraging plan

Excellent early progress has been made in the first eight months of the year on the margin accretion and deleveraging plans. As previously reported in our trading update at the start of May, £5m of incremental annualised cost savings had been identified and will in part benefit FY23 EBITDA with the full £5m of cost savings flowing through to FY24. In addition, other central cost saving initiatives have been identified and will deliver as part of the margin accretion plan in FY24.

As highlighted above, each of the Wagamama, Pubs and Concessions businesses have seen strong LFL sales growth, market share gains and delivered year on year volume growth. This continued market outperformance on volume with selective price increases will further benefit margin accretion through to 2025.

Finally, the increase in planned new openings for Wagamama to eight to 10 a year combined with the accelerated rationalisation of the Leisure portfolio further enhances the profitability of the Group's portfolio.

As a consequence of the early progress above, management is well on track to deliver a 250 to 350 basis points improvement in its Adjusted EBITDA¹ margins by December 2025 (i.e. year-end run-rate).

Net debt /Adjusted EBITDA¹ (pre-IFRS 16) is expected to be below 1.5x before December 2025, whilst supporting accelerated investment in Wagamama openings.

Summary

· Strong LFL sales and Adjusted EBITDA¹ growth driven by Wagamama, Pubs and Concessions

· Trading performance supports a moderate increase in management's FY23 Adjusted EBITDA¹ expectations

· Excellent early progress in executing medium-term plan to:

o Deliver 250bps to 350bps of Adjusted EBITDA¹ margin accretion over a three-year time horizon²

o Target net debt/Adjusted EBITDA¹ below 1.5x before the end of FY25, whilst supporting accelerated investment in Wagamama openings

· Continue to actively explore strategic options to further accelerate margin accretion and deleveraging

Financial Review

As outlined in the business review, we were particularly pleased to have delivered a continued strong LFL sales outperformance versus the market across our Wagamama, Pubs and Concessions businesses, illustrating the strength of our customer propositions and ability to outperform the market. Our Leisure business achieved a moderate LFL sales decline which was behind the market, with the business impacted by the increased inflationary pressures on the UK mid-market consumer.

Statutory Results

The key statutory financial measures (IFRS 16) are summarised below and are stated after the impact of exceptional costs:

	STATUTORY RESULTS (IFRS 16)
	26 weeks ended 2 July 2023 £m	27 weeks ended 3 July 2022 £m
Revenue	467.4	423.4
Operating Profit/ (loss)	19.6	(12.2)
Profit/(loss before tax)	2.3	(28.5)
Profit/(loss after tax)	(1.5)	(26.1)
Statutory loss per share (pence)	(0.2p)	(3.4 p)

Revenue for the period was £467.4m (2022: £423.4m) which represents an increase of 10% on the prior year, with strong growth across our Wagamama, Pubs and Concessions businesses.

The increase in operating profit to £19.6m (2022: loss of £12.2m) is due to the strong trading performance, good cost control and lower exceptional costs.

Net interest costs of £17.3m (2022: £16.3m) are higher than the prior year due to an increase in the interest cost of our floating debt and a lower exceptional gain on Group's interest rate caps in the current period compared to last year.

Alternative Performance Measures

TRG uses a number of non-statutory measures to monitor business performance which are referred to within the Interim Report, but primarily relate to Adjusted and pre-IFRS 16 profit metrics. This is because the pre-IFRS 16 profit is consistent with the financial information used in the management accounts to inform business decisions and investment appraisals. It is TRG's view that presenting the information on a pre-IFRS 16 basis will provide a useful basis for understanding the Group's results to all stakeholders. Specifically, the measures mainly relate to three adjustments:

- The main profit measure used is Adjusted EBITDA. This is not a statutory measure but closely represents the Group's ability to make cash trading profits as it excludes key non-cash elements of the Income Statement such as depreciation and amortisation.

- The adjusted profit and debt measures are based on the IAS 17 approach to lease accounting and does not include the impact of IFRS 16. This is used as it more closely represents the cash profits of the business, and debt as measured by our banks.

- The adjusted profit measures are quoted excluding the impact of items that management have deemed as exceptional as they are material and not related to underlying trading in the period.

As these measures are not defined by accounting standards, they may not be comparable across companies. The adjusted results may exclude significant costs (such as restructuring or impairments) and so may not be a complete picture of the Group's financial performance, which is presented in the statutory results.

The key alternative performance measures (APM) are summarised below. Both pre-IFRS 16 and post- IFRS 16 figures are shown and are stated before the impact of exceptional costs:

APM (Pre-IFRS 16) APM (IFRS 16)

	26 weeks ended 2 July 2023 Pre-IFRS 16 £m	26 weeks ended 3 July 2022 Pre-IFRS 16 £m	26 weeks ended 2 July 2023 IFRS 16 £m	26 weeks ended 3 July 2022 IFRS 16 £m
Revenue	467.4	423.4	467.4	423.4
Adjusted¹ EBITDA	36.3	41.7	72.2	72.2
Adjusted¹ operating profit/(loss)	20.3	22.9	39.1	35.5
Adjusted¹ operating margin	4.3%	5.4%	7.6%	8.4%
Adjusted¹ profit/(loss) before tax	7.2	10.2	17.5	13.9

¹The Group's adjusted performance metrics are defined within the glossary at the end of this report. All such adjusted measures are stated pre-exceptional items

Adjusted EBITDA (on a pre-IFRS 16 basis) for the 26 weeks is £36.3m (2022: £41.7m). As mentioned above and outlined in the business review, the main driver of the decrease in Adjusted EBITDA is due to the reduced VAT rate in Q1 2022, which was worth approximately £10m of EBITDA in H1 2022. Excluding the benefit of VAT in Q1 2022 underlying EBITDA increased from £31.4m in H1 2022 to £36.3m in H1 2023.

The Group made an adjusted profit before tax (on a pre-IFRS 16 basis) for the period of £7.2m (2022: £10.2m).

Segmental analysis

Segmental disclosure is provided below to present a clearer view of the trading performance across each of our businesses. The information below is shown both with and without the benefit of the lower VAT rate in Q1 2022 having been removed (which contributed an estimated £10.3m to EBITDA in 2022). This allows the reader to understand the underlying performance of each business without the benefit of the lower VAT in Q1 2022:

Segmental analysis: H1 23 vs H1 22

	Wagamama		Pubs		Concessions		Leisure		TRG Group

	2023 HY £m	2022 HY £m	2023 HY £m	2022 HY £m	2023 HY £m	2022 HY £m	2023 HY £m	2022 HY £m	2023 HY £m	2022 HY £m
Revenue	222	207	80	71	81	57	84	88	467	423
Restaurant EBITDA*	36.6	37.2	11.7	12.5	8.8	5.0	2.1	10.4	59.2	65.1
Divisional overheads	(7.8)	(8.1)	(2.7)	(2.7)	(2.0)	(1.7)	(2.9)	(3.2)	(15.4)	(15.7)
Divisional EBITDA* (including VAT benefit for H1 2022)	28.8	29.1	9.0	9.8	6.8	3.3	(0.8)	7.2	43.8	49.4
VAT benefit**	-	(6.0)	-	(1.6)	-	(0.6)	-	(2.1)	-	(10.3)
Divisional EBITDA* (excluding VAT benefit for H1 2022)	28.8	23.1	9.0	8.2	6.8	2.7	(0.8)	5.1	43.8	39.1
Central overheads									(7.5)	(7.7)
EDITDA* (VAT adjusted)									36.3	31.4

*Adjusted (pre-exceptional charges)

**VAT benefit boosted LFL sales by approximately 5 to 7% for the restaurant and pub sector in Q1 2022 (13 weeks to 3 April 2022). This is an estimation by management looking at the calculated VAT benefit impact within it's divisions. The VAT adjusted figures in the table above have used this estimation

- Wagamama delivered Adjusted EBITDA¹ of £28.8m compared to £23.1m on a VAT adjusted basis in the prior year, an increase of 25%

- Pubs delivered Adjusted EBITDA¹ of £9.0m compared to £8.2m on a VAT adjusted basis in the prior year, an increase of 10%

- Concessions delivered Adjusted EBITDA¹ of £6.8m compared to £2.7m on a VAT adjusted basis in the prior year, an increase of 150% based on a strong recovery of passenger volumes across UK airports; and

- Leisure (including Barburrito) delivered an Adjusted¹ EBITDA loss of £0.8m compared to a VAT adjusted EBITDA profit of £5.1m in the prior year. This decline in EBITDA is due to the year-on-year sales decline and significant inflation impacting cost of goods sold, labour and utilities

In the period, divisional overhead costs were £15.4m, down from £15.7m in the prior year. Divisional overheads relate to operational resource, HR, marketing, and commercial finance teams within the divisions supporting their trading activities.

Central overheads were marginally lower at £7.5m compared to £7.7m in the prior year. Approximately 40% of central overheads relate to shared service functions supporting the trading divisions (procurement, property and IT) and c.60% related to corporate functions (including Plc Board requirements, central finance and Head Office property costs).

Cash flow and net debt

Net debt on an IFRS 16 basis has increased marginally from £581.7m (as at the Dec 22 year-end) to £585.5m in the period. The key driver of this increase in net debt relates to the timing of our capital expenditure and exceptional costs being first half weighted.

On a full year basis, we expect pre-IFRS 16 net debt to be between £180 to £190m. The reduction in net debt by year-end will be driven by:

- Higher management expectations for FY23 EBITDA

- Proceeds from the sale of Leisure freehold sites (c.£5m)

- An expected working capital inflow

- Lower capital expenditure in H2; and

- Lower exceptional costs

Operating cash flow (on a pre-IFRS 16 basis) in the period reduced to £36.4m from £57.6m in the prior year. The reduction in operating cashflow is primarily due to the prior year benefiting from a significant working capital inflow of £15.9m following the largely unrestricted trading in H1 2022 when compared to H1 2021 as a result of Covid related closures.

Summary cash flow for the year (on a pre-IFRS 16 basis) is set out below:

	HY 2023 £m	HY 2022 £m
Adjusted EBITDA (Pre-IFRS 16 basis) ¹	36.3	41.7
Working capital and non-cash adjustments	0.1	15.9
Operating cash flow²	36.4	57.6
Net interest paid	(10.0)	(11.0)
Tax paid	(0.5)	(2.0)
Refurbishment and maintenance expenditure	(16.0)	(15.6)
Free cash flow	9.9	29.0
Development expenditure	(7.8)	(6.4)
Movement in capital creditor	(0.8)	1.0
Utilisation of onerous property cost provisions	(5.5)	(3.9)
Exceptional costs	(4.7)	(3.1)
Other items	(0.6)	(1.4)
Cash movement	(9.5)	15.2

Net Debt (Pre-IFRS 16 basis)
Group net debt brought forward	(185.7)	(171.6)
Non-cash movements in net debt	(0.3)	(2.0)
Group net debt carried forward (Pre IFRS 16 basis)	(195.5)	(158.4)

Incremental lease liabilities (IFRS 16)	(390.0)	(402.4)
Group net debt carried forward (IFRS 16 basis)	(585.5)	(560.8)

¹The Group's adjusted performance metrics are defined within the glossary at the end of this report. All such adjusted measures are stated pre-exceptional items

²Operating cash flow excludes certain exceptional costs and includes payments made against lease obligations

The Group continues to benefit from significant cash headroom with £133.4m as at the half-year period end (2022 Year-end: £139.2m).

The Group continues to target net debt/EBITDA[3] below 1.5x before the end of FY25.

Exceptional items

An exceptional pre-tax charge of £15.2m has been recorded in the period (2022: £42.4m). The key driver of this charge has been the impairment of certain sites and goodwill predominantly relating to the Leisure division. A net impairment charge of £13.6m has been provided in the period (2022: £45.4m).

The other two significant exceptional items are a £4.4m charge relating to the Leisure Division estate rationalisation programme (2022: £0.7m) and a further gain on the revaluation of the Group's interest rate caps of £4.3m (2022: £5.3m).

The tax credit relating to these exceptional charges was £1.5m (2022: £6.0m tax credit).

Cash expenditure associated with the above exceptional charges was £4.7m (2022: £3.1m).

Tax

The tax charge for the period was £3.8m (2022: credit of £2.4m), summarised as follows:

	HY 2023			HY 2022
	Trading £m	Exceptional £m	Total £m	Trading £m	Exceptional £m	Total £m
Corporation tax	1.0	(1.0)	-	-	-	-
Deferred tax	4.3	(0.5)	3.8	3.6	(6.0)	(2.4)
Total current year tax	5.3	(1.5)	3.8	3.6	(6.0)	(2.4)

Effective tax rate	30.2%	10.0%	165.9%	25.9%	14.2%	8.4%

The Group's pre-exceptional effective tax rate is 30.2% (2022: pre-exceptional effective tax rate of 25.7%). The effective tax rate exceeds the blended statutory corporation tax rate of 23.0% primarily as a result of non-qualifying depreciation (which accounts for 6.0% of the differential on the effective tax rate).

The current year tax effect of exceptional items of £1.5m (effective tax rate of 10%) comprises a corporation tax credit of £1.0m and a net £0.5m deferred tax credit relating to the tax deductions on exceptional items such as right of use asset impairment and provisions.

Selected FY23 financial modelling guidance

· Total capital expenditure approximately £43m to £45m:

o Maintenance and IT investment of c. £20m

o Refurbishment capex of c.£10m

o Expansionary capex of c. £10 to £15m

· IFRS 16 EBITDA add-backs (i.e., rent & other property non-cash charges):

o Net add-back £58m to £64m:

- £60m to £62m for fixed rent

- £7m to £9m for lease modifications

- (£7m) to (£9m) for non-cash property charges

· Depreciation and interest detailed in table below:

	Pre-IFRS 16 £'m	IFRS 16 £'m	Total £'m
P&L Depreciation	35-36	34-35	69-71
P&L Interest	27-28	16-17	43-45

Going concern

The directors have adopted the going concern basis in preparing the Interim Financial Review after assessing the Group's principal risks including current macroeconomic headwinds, relating to the cost-of-living crisis and elevated levels of inflation. In conducting their review, the Directors have concluded that the Group has sufficient liquidity and covenant headroom for the going concern review period to 30 September 2024.

The Group has substantial liquidity with £133m in cash and cash equivalents, or available facilities at the balance sheet date. Following an amend and extend in December 2022 these facilities are committed until at least March 2027. The facilities consist of a £220m Term loan and a £120m RCF. Further details of the Group's debt facilities and covenants are in Note 23 to the FY22 Annual Report and Accounts.

Whilst the Group has delivered Total revenue growth of 10% in the first half of the year the Directors remain cautious about the ability for our customers to continue their current level of spending in our restaurants and pubs whilst the cost-of-living crisis continues, and the current and future impact of increases in the Bank of England Interest rate. In preparing the 'base case' forecast for the period to 30 September 2024, the Directors have assumed continued growth in sales but that this growth would moderate throughout the period. Further, management have included the impact of current elevated levels of inflation throughout the remainder of 2023 and then a reduction in inflation in 2024. In this forecast, available liquidity does not fall below £89m compared to a minimum liquidity covenant of £40m, and Senior Secured Net Leverage does not exceed 2.3x against a covenant requirement of no more than 4.25x.

In addition, the Board has considered a 'stress case' scenario where sales have been reduced 4% from base case (5% reduction in volume with the benefit of a 1% price increase). In this 'stress case' scenario, without mitigation, liquidity falls to a minimum of £81m and Senior Secured Net Leverage increases to 2.5x but still within the covenants of the Group's banking facilities. In this 'stress case' scenario, including mitigations, such as, the ability to further increase our selling prices, conduct a central cost reduction program and to refine our uncommitted capital expenditure plans, liquidity falls to a minimum of £85m, and Senior Secured Net Leverage increases to 2.5x but still within the covenants of the Group's banking facilities.

The Board have also considered a reverse stress case to determine the level by which sales would need to fall from the 'base case' before there is a risk of a leverage covenant breach. Pre-mitigating actions, the level of sales decline compared to the base case is 9.7%. Following mitigating actions, which are within management's control, and include the ability to increase selling prices, conduct a far more extensive central cost reduction program and further refinement to capital expenditure plans the level of sales decline compared to the base case increases to 17.1%. Selling price increases before the assumed volume reduction have the largest mitigating benefit. The Board considers this level of sales decline over a sustained 12 month period as remote due to trading being ahead of the base case in the year to date, the current economic outlook from both the Bank of England and the International Monetary Fund is for a shallow recession in 2023 and that during the last economic recession the Group only experienced a modest sales decline of less than 2% in 2009 compared to the prior year and less than 1% in 2010 when compared to 2009.

However, if this level of sales decline were experienced on a sustained basis, the Group would take further decisive actions which is within its control to further reduce both its operating costs and capital expenditure to mitigate the potential risk of a covenant breach. Furthermore, the directors would also engage with its lending group for covenant waivers, which were provided during the pandemic given similarly extreme circumstances.

Based on the above the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the period to 30 September 2024, being at least the next twelve months from the date of approval of the year-end accounts. On this basis, the Directors continue to adopt the going concern basis of preparation.

Principal Risks and Uncertainties

The Group set out its internal risk management process together with its formal assessment of its principal risks and uncertainties as at the date of publication on pages 69 to 70 of its 2022 Annual Report. Since then, the Group's Risk and Audit Committees have continued to review and assess the main risks likely to impact the Group while assessing the controls and mitigations being put in place across the Group. In addition, the Risk Committee maintains a watch on emerging risks, as well as those relating to climate change and the environment, to ensure that the appropriate steps are taken at the right time. The potential impacts of climate change on the business are recorded in a separate register and are currently acknowledged within the key risks as part of the Group's broader supply chain risks. The Senior Management Risk Committee, which meets quarterly, has held three meetings to date during the financial year, and reported back to the Audit Committee and, ultimately, to the Board. The key material risks as currently identified by the Directors remain unchanged overall since the date of the Annual Report and are listed below, together with the controls and mitigations that are in place:

Risk

Mitigating Factors

Consumer Demand

· Reduction due to cost-of-living increases and significant inflation levels

· Temporary reductions as a result of the impact on wider hospitality industry from transport strikes

· Potential reduction due to expected future increases in Bank of England interest rates and the impact on consumers' mortgages

· Broad portfolio of brands that provide a range of offers across various customer demographics

· Flexible capital allocation policy to ensure that plans are adapted to a changing economic environment

· Ongoing focus on ensuring value for money offering across the brands with regular price benchmarking against competitor pricing

· Periodic business review process and weekly trading meeting to review and assess any adaptation required to trading plans

· Detailed monitoring of key cost lines in 2023 Budget

Supply Chain Inflation

· Increases in cost of goods sold inflation due to commodity, labour, distribution and utilities cost rises within the supply chain

· Ongoing inflation due to the Russia-Ukraine war impacting world markets

· Higher sourcing costs/supply issues for ingredients caused by increased climate-related extreme weather events impacting harvests

· Continuing to streamline supply base to efficiently meet the requirements of revised estate

· Inflation tracked by brand with monthly CFO review and business updates provided to divisional teams

· Identifying and delivering against a good pipeline of commercial opportunities which includes bringing new suppliers to market

· Working with the development and operations teams to inform on inflation risks and agree mitigation opportunities which could include adapting menus

· Strategic purchasing and category management approach so buyers can partially mitigate increases through negotiation or tender or by moving supplier

· Dual sourcing of essential products

Cybersecurity

· Risk associated with the failure to mitigate against external attacks on systems and networks, loss or corruption of data and inadequate internal processes over the handling and management of data

· Vulnerability assessments conducted monthly, and remediation works undertaken

· Cyber Essentials yearly gap analysis

· Working to external accreditation frameworks

· Annual penetration tests for all external services

· Regular phishing tests

· Cyber insurance in place

Employee Recruitment and Retention

· Failure to attract, retain, or develop chefs, and general and senior managers

· Employee turnover is excessive across the industry for front of house, back of house and management roles. Risk of high employee turnover is greater due to the current age profile and increased part-time nature of the workforce

· New recruitment process embedded to enhance the quality of team selection

· Continued improvement of onboarding and induction process focused on the first 90 days of employment to improve employee engagement, as well as ongoing training opportunities

· Extension of apprenticeship schemes across brands to further enhance team development with a particular focus on back of house roles

· Ongoing review of the need to increase attraction/retention payments for key roles, e.g. chefs

· Pay increases being brought forward where required

· Ongoing focus on wellbeing and mental health as part of the employee proposition

Allergen Incident

· Serious allergen incident involving adverse customer reaction or death as a result of failure of procedures on site or incorrect ingredient data being provided by suppliers

· Detailed database built up by ingredient/supplier and testing process including physical verification

· Allergy advice and information on all brand websites and menus

· All-staff training focused on asking about allergies and reinforcing best practice.

· Ongoing refresher training delivered

· Weekly monitoring of training status for current and new employees, with compliance statistics sent out to the operations teams

The Restaurant Group plc

Consolidated income statement

		26 weeks ended 2 July 2023
		Trading business	Exceptional items (Note 5)	Total
		(Unaudited)	(Unaudited)	(Unaudited)
	Note	£'m	£'m	£'m
Revenue	3	467.4	-	467.4
Cost of sales		(403.7)	(18.0)	(421.7)
Gross profit/(loss)		63.7	(18.0)	45.7
Administration costs		(24.6)	(1.5)	(26.1)
Operating profit/(loss)		39.1	(19.5)	19.6
Interest payable	6	(21.9)	-	(21.9)
Interest receivable	6	0.3	4.3	4.6
Profit/(loss) before tax		17.5	(15.2)	2.3
Tax on profit/(loss)	7	(5.3)	1.5	(3.8)
Profit/(loss) for the period		12.2	(13.7)	(1.5)
Other comprehensive income:
Foreign exchange differences arising on consolidation		-	-	-
Total comprehensive income/(loss) for the period		12.2	(13.7)	(1.5)
Basic earnings/(loss) per share (pence)	8	1.6	(1.8)	(0.2)
Diluted earnings/(loss) per share (pence)	8	1.6	(1.8)	(0.2)

The table below is provided to give additional information to shareholders on a key performance indicator:

EBITDA	72.2	(6.3)	65.9
Depreciation, amortisation and impairment	(33.1)	(13.2)	(46.3)
Operating profit/(loss)	39.1	(19.5)	19.6

All amounts relate to continuing activities

		26 weeks ended 3 July 2022			52 weeks ended 1 January 2023
		Trading business	Exceptional items (Note 5)	Total	Total
		(Unaudited)	(Unaudited)	(Unaudited)	(Audited)
	Note	£'m	£'m	£'m	£'m
Revenue	3	423.4	-	423.4	883.0
Cost of sales		(359.6)	(46.1)	(405.7)	(883.5)
Gross profit/(loss)		63.8	(46.1)	17.7	(0.5)
Administration costs		(28.3)	(1.6)	(29.9)	(49.2)
Operating profit/(loss)		35.5	(47.7)	(12.2)	(49.7)
Interest payable	6	(22.0)	-	(22.0)	(49.3)
Interest receivable	6	0.4	5.3	5.7	12.2
Profit/(loss) before tax		13.9	(42.4)	(28.5)	(86.8)
Tax on profit/(loss)	7	(3.6)	6.0	2.4	18.3
Profit/(loss) for the period		10.3	(36.4)	(26.1)	(68.5)
Other comprehensive income:
Foreign exchange differences arising on consolidation		(0.2)	-	(0.2)	(0.4)
Total comprehensive income/(loss) for the period		10.1	(36.4)	(26.3)	(68.9)

Basic earnings/(loss) per share (pence)	8	1.3	(4.8)	(3.4)	(9.0)
Diluted earnings/(loss) per share (pence)	8	1.3	(4.8)	(3.4)	(9.0)

The table below is provided to give additional information to shareholders on a key performance indicator:

EBITDA	72.2	(1.4)	70.8	138.7
Depreciation, amortisation and impairment	(36.7)	(46.3)	(83.0)	(188.4)
Operating profit/(loss)	35.5	(47.7)	(12.2)	(49.7)

All amounts relate to continuing activities

Consolidated balance sheet
		As at 2 July	As at 3 July	As at 1 January
		2023	2022	2023
	Note	(Unaudited) £'m	(Unaudited) £'m	(Audited) £'m
Non-current assets
Intangible assets		596.5	591.6	604.1
Right of use assets	9	240.1	265.9	237.6
Property, plant and equipment		269.5	272.0	257.7
Derivative financial instruments	13	17.9	8.8	15.4
Investments		0.6	-	-
Other receivables		7.6	5.4	8.2
		1,132.2	1,143.7	1,123.0
Current assets
Inventory		7.1	6.8	6.5
Trade and other receivables		13.3	17.7	18.3
Prepayments		4.6	10.5	8.0
Cash and cash equivalents		18.3	72.6	27.7
		43.3	107.6	60.5

Total assets		1,175.5	1,251.3	1,183.5
Current liabilities
Trade and other payables		(153.8)	(148.6)	(160.7)
Provisions		(3.8)	(2.5)	(2.3)
Lease liabilities	9	(58.5)	(61.6)	(55.0)
		(216.1)	(212.7)	(218.0)

Net current liabilities		(172.8)	(105.1)	(157.5)
Long-term borrowings	12	(213.8)	(231.0)	(213.4)
Deferred tax liabilities		(29.7)	(41.7)	(25.8)
Lease liabilities	9	(331.5)	(340.8)	(341.0)
Provisions		(4.8)	(3.4)	(5.3)
		(579.8)	(616.9)	(585.5)

Total liabilities		(795.9)	(829.6)	(803.5)

Net assets		379.6	421.7	380.0
Equity
Share capital		215.2	215.2	215.2
Share premium		-	394.1	-
Other reserves		2.7	0.9	1.6
Retained earnings		161.7	(188.5)	163.2
Total equity		379.6	421.7	380.0

Consolidated statement of changes in equity	Share	Share	Other	Retained
	capital	premium	reserves	earnings	Total
	£'m	£'m	£'m	£'m	£'m
Balance at 2 January 2022 (audited)	215.2	394.1	0.1	(162.4)	447.0
Loss for the period	-	-	(0.2)	(26.1)	(26.3)
Share-based payments	-	-	1.5	-	1.5
Deferred tax on share-based payments	-	-	(0.5)	-	(0.5)
Balance at 3 July 2022 (unaudited)	215.2	394.1	0.9	(188.5)	421.7
Balance at 2 January 2022 (audited)	215.2	394.1	0.1	(162.4)	447.0
Loss for the period	-	-	(0.4)	(68.5)	(68.9)
Cancellation of share premium	-	(394.1)	-	394.1	-
Share-based payments	-	-	2.4	-	2.4
Deferred tax on share-based payments	-	-	(0.5)	-	(0.5)
Balance at 1 January 2023 (audited)	215.2	-	1.6	163.2	380.0
Loss for the period	-	-	-	(1.5)	(1.5)
Share-based payments	-	-	1.2	-	1.2
Deferred tax on share-based payments	-	-	(0.1)	-	(0.1)
Balance at 2 July 2023 (unaudited)	215.2	-	2.7	161.7	379.6

Consolidated cash flow statement

		26 weeks ended 2 July 2023	26 weeks ended 3 July 2022	52 weeks ended 1 January 2023
		(Unaudited)	(Unaudited)	(Audited)
	Note	£'m	£'m	£'m
Operating activities
Cash generated from operations	11	63.0	84.7	150.5
Interest received		0.3	0.2	-
Interest paid		(11.9)	(11.2)	(21.3)
Cash received from interest cap		1.8	-	-
Corporate tax paid		(0.5)	(2.0)	-
Payment against provisions		(1.3)	(1.1)	(1.7)
Payment on exceptionals		(4.7)	(3.1)	(8.6)
Net cash flows from operating activities		46.7	67.5	118.9
Investing activities
Purchase of property, plant and equipment		(21.6)	(20.9)	(54.2)
Purchase of intangible assets		(3.1)	(0.1)	(5.4)
Proceeds from disposal of property, plant and equipment		-	-	0.8
Purchase of Barburrito Group Limited		-	-	(6.3)
Net cash flows from investing activities		(24.7)	(21.0)	(65.1)
Financing activities
Repayment of obligations under leases	12	(30.8)	(29.9)	(59.8)
Repayments of borrowings		(128.0)	(89.1)	(110.0)
Drawdown of borrowings		128.0	-	-
Upfront loan facility fee paid		(0.6)	-	(1.4)
Derivative financial instruments purchased		-	(1.4)	(1.4)
Net cash flows used in financing activities		(31.4)	(120.4)	(172.6)
Net decrease in cash and cash equivalents		(9.4)	(73.9)	(118.8)
Cash and cash equivalents at the beginning of the period		27.7	146.5	146.5
Cash and cash equivalents at the end of the period		18.3	72.6	27.7

1 Accounting policies

Basis of preparation

The interim condensed consolidated set of financial statements included in this interim financial report has been prepared in accordance with the UK adopted 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. The interim condensed consolidated 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 as at 1 January 2023.

General information

The comparatives for the full year ended 1 January 2023 do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on these accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The accounting period runs to a Sunday each half year which will be a 26 or 27 week period. The Directors present their report and consolidated financial statements for the 26 week period ended 2 July 2023, with the comparative 26 week period to 3 July 2022.

Going concern basis

Whilst the Group has delivered Total sales growth of 10% in the first half of the year the Directors remain cautious about the ability for our customers to continue their current level of spending in our restaurants and pubs whilst the cost-of-living crisis continues, and the current and future impact of increases in the Bank of England Interest rate. In preparing the 'base case' forecast for the period to 30 September 2024, the Directors have assumed continued growth in sales but that this growth would moderate throughout the period. Further, management have included the impact of current elevated levels of inflation throughout the remainder of 2023 and then a reduction in inflation in 2024. In this forecast, available liquidity does not fall below £89m compared to a minimum liquidity covenant of £40m, and Senior Secured Net Leverage does not exceed 2.3x against a covenant requirement of no more than 4.25x.

The Board have also considered a reverse stress case to determine the level by which sales would need to fall from the 'base case' before there is a risk of a leverage covenant breach. Pre-mitigating actions, the level of sales decline compared to the base case is 9.7%. Following mitigating actions, which are within managements control, and include the ability to increase selling prices, conduct a far more extensive central cost reduction program and further refinement to capital expenditure plans the level of sales decline compared to the base case increases to 17.1%. Selling price increases before the assumed volume reduction have the largest mitigating benefit. The Board considers this level of sales decline over a sustained 12 month period as remote due to trading being ahead of the base case in the year to date, the current economic outlook from both the Bank of England and the International Monetary Fund is for a shallow recession in 2023 and that during the last economic recession the Group only experienced a modest sales decline of less than 2% in 2009 compared to the prior year and less than 1% in 2010 when compared to 2009. .

2 Changes in accounting policies

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

Other standards, interpretations and amendments issued but not yet effective are not expected to have a material impact on the Group financial statements.

Reclassification of cost of sales and administrative expenses

Within the 2022 Annual report and accounts, the Directors adjusted the allocation of cost of sales and administration expenses to more appropriately reflect the nature of costs incurred. The same allocation has been consistently applied within the results for the 26-week period ended 2 July 2023. No adjustment has been made to the prior year interim figures presented as comparative information. Had an adjustment been made, costs of sales in the 26-week period ended 3 July 2022 would have been £4.2m greater and administration expenses reduced by an equivalent amount.

3 Segmental analysis

Operating segments

IFRS 8 Operating segments requires operating segments to be based on the Group's internal reporting to its Chief Operating Decision Maker (CODM). The CODM is regarded as the combined Executive team of the Chief Executive Officer, and the Chief Financial Officer.

The Group has four operating segments of:

-Wagamama

-Pubs

-Leisure; and

-Concessions

It is the Directors' judgment that given the ongoing cost-of-living crisis' impact on the broader casual dining sector and in particular the Leisure business that it is no longer appropriate to aggregate all segments under IFRS 8. The Directors have reviewed the future economic characteristics of our Wagamama, Pubs and Concessions businesses, including Gross Margin, Net Margin, EBITDA and Sales trajectory, along with the non-financial criteria of IFRS 8 and concluded they are similar. However, given the ongoing cost-of-living crisis and its impact on certain customer segments, the Leisure division no longer has similar long-term economic characteristics.

In addition, the Directors believe it is of greater value to stakeholders for the Group to provide transparency of divisional performance and central overheads cost through the provision of full divisional disclosure. In providing this segmental reporting the Directors are meeting the requirements of IFRS 8 and its stakeholders.

Comparative period segmental presentation has been represented.

Geographical segments

The Group trades primarily within the United Kingdom and generates revenue from the operation of pubs and restaurants, with substantially all revenue generated within the United Kingdom. The Group generates some revenue from franchise royalties primarily in Europe and the Middle East. The segmentation between geographical location does not meet the quantitative thresholds and so has not been disclosed.

Wagamama			Pubs		Leisure		Concessions		Group Total
	H1 2023 £m	H1 2022 £m	H1 2023 £m	H1 2022 £m	H1 2023 £m	H1 2022 £m	H1 2023 £m	H1 2022 £m	H1 2023 £m	H1 2022 £m
Revenue	222.4	207.4	79.6	71.5	84.2	87.6	81.2	56.9	467.4	423.4
Restaurant EBITDA	36.6	37.2	11.7	12.5	2.1	10.4	8.8	5.0	59.2	65.1
Divisional Overheads*	(7.8)	(8.1)	(2.7)	(2.7)	(2.9)	(3.2)	(2.0)	(1.7)	(15.4)	(15.7)
Divisional EBITDA (Inc VAT Benefit)	28.8	29.1	9.0	9.8	(0.8)	7.2	6.8	3.3	43.8	49.4
VAT Benefit	-	(6.0)	-	(1.6)	-	(2.1)	-	(0.6)	-	(10.3)
Adjusted Divisional EBITDA	28.8	23.1	9.0	8.2	(0.8)	5.1	6.8	2.7	43.8	39.1
Central Overheads									(7.5)	(7.7)
Group adjusted EBITDA (VAT adjusted)									36.3	31.4
Add back VAT benefit									-	10.3
Depreciation and amortisation									(16.0)	(18.8)
Interest									(13.1)	(12.7)
Profit before taxation and exceptional items									7.2	10.2
Adjustments for IFRS 16									10.3	3.7
Exceptional items									(15.2)	(42.4)
Group profit/(loss) before taxation									2.3	(28.5)

*Divisional overheads relate to operational resource, HR, marketing, and commercial finance teams within the divisions supporting their trading activities.

40% of central overheads relate to shared service functions supporting the trading divisions (procurement, property and IT) and 60% related to corporate functions (including Plc Board requirements, central finance and Head Office property costs).

Wagamama		Pubs	Leisure	Concessions	Group Total
	FY 2022 £m	FY 2022 £m	FY 2022 £m	FY 2022 £m	FY 2022 £m
Revenue	423.7	149.7	178.6	131.0	883.0
Restaurant EBITDA	74.9	26.8	14.9	9.1	125.7
Divisional Overheads	(13.4)	(5.8)	(6.6)	(3.4)	(29.2)
Divisional EBITDA (Inc VAT Benefit)	61.5	21.0	8.3	5.7	96.5
VAT Benefit	(6.0)	(1.6)	(2.1)	(0.6)	(10.3)
Adjusted Divisional EBITDA	55.5	19.4	6.2	5.1	86.2
Central Overheads					(13.5)
Group adjusted EBITDA (VAT adjusted)					72.7
Add back VAT benefit					10.3
Depreciation and amortisation					(38.5)
Interest					(24.2)
Profit before taxation and exceptional items					20.3
Adjustments for IFRS 16					10.4
Exceptional items					(117.5)
Group loss before taxation					(86.8)

4 Reconciliation to Underlying Trading Profit

The results used by the Directors to monitor and review the performance of the Group continue to reflect the IAS 17 approach to accounting and a number of the key metrics used in this report are prepared on that basis. A reconciliation is provided below of the key differences between results under IFRS 16 and the basis used for management reporting.

	H1 2023 Trading	Adjustments for IFRS 16	H1 2023 Trading	Exceptional items	H1 2023 Total	H1 2022 Total
	IAS 17		IFRS 16	(Note 5)	IFRS 16	IFRS 16
	£'m	£'m	£'m	£'m	£'m	£'m
Revenue	467.4	-	467.4	-	467.4	423.4
Cost of sales	(422.5)	18.8	(403.7)	(18.0)	(421.7)	(405.7)
Gross profit/(loss)	44.9	18.8	63.7	(18.0)	45.7	17.7
Administration costs	(24.6)	-	(24.6)	(1.5)	(26.1)	(29.9)
Operating profit/(loss)	20.3	18.8	39.1	(19.5)	19.6	(12.2)
Interest payable	(13.4)	(8.5)	(21.9)	-	(21.9)	(22.0)
Interest receivable	0.3	-	0.3	4.3	4.6	5.7
Profit/(loss) before tax	7.2	10.3	17.5	(15.2)	2.3	(28.5)

EBITDA	36.3	35.9	72.2	(6.3)	65.9	70.8
Depreciation, amortisation and impairment	(16.0)	(17.1)	(33.1)	(13.2)	(46.3)	(83.0)
Operating profit/(loss)	20.3	18.8	39.1	(19.5)	19.6	(12.2)

The "Adjustments for IFRS 16" summarised above can be seen in the below reconciliation of trading profit before tax (excluding exceptional items) from the IAS 17 basis to the IFRS 16 basis of accounting:

	H1 2023 £'m	H1 2022 £'m
Underlying trading profit before tax	7.2	10.2
Removal of net rental related expenses and lease movements	35.9	30.5
Net change in depreciation	(17.1)	(17.8)
Net change in interest payable	(8.6)	(9.0)
Interest receivable on net investments in subleases	0.1	-
Trading profit before tax under IFRS 16	17.5	13.9

5 Exceptional Items

	26 weeks ended		26 weeks ended	52 weeks ended
	2 July 2023		3 July 2022	1 January 2023
	(Unaudited)		(Unaudited)	(Audited)
	£'m		£'m	£'m
Included within cost of sales:
- Impairment charges relating to property, plant and equipment and right-of-use assets		4.5	38.9	106.4
- Impairment charges relating to goodwill		9.1	6.5	7.5
- Estate restructuring		4.4	0.7	6.8
		18.0	46.1	120.7
Included within administration costs:
- Professional fees re. various corporate activities		1.2	-	-
- Business Transformation		0.3	1.6	1.7
		1.5	1.6	1.7
Included within interest payable :
- Gain made on derivative financial instruments at fair value through income statement		(4.3)	(5.3)	(11.9)
- Refinancing costs		-	-	7.0
		(4.3)	(5.3)	(4.9)
Exceptional items before tax		15.2	42.4	117.5
Impact of tax rate change		-	-	(5.2)
Tax effect of exceptional Items		(1.5)	(6.0)	(18.0)
		(1.5)	(6.0)	(23.2)
Net exceptional items for the period		13.7	36.4	94.3

Impairment charges

An impairment charge has been recorded against certain assets to reflect forecast EBITDA at our trading sites over the Group's viability period.

This charge comprises the following:

- An impairment reversal of property, plant and equipment and right-of-use assets of £4.5m

- An impairment of goodwill of £9.1m

The impairment charge includes a reversal of £6.4m of impairment from the prior year due to a revision in allocation of prior impairments to Cash Generating Units. Further details on the impairment of non-current assets are given in note 10.

Estate restructuring

At FY22 year-end the Group announced a restructuring programme relating to the closure of certain sites within the Leisure Division. At the half year the Group has reassessed the onerous obligations relating to these sites and any additional costs that need to be provided for, including redundancy costs.

Professional fees re. various corporate activities

During the year, the Group incurred material one-off costs relating to corporate refinancing and restructuring activity. Since these costs are material, one-off and unrelated to underlying or ongoing trading, they are presented as exceptional items.

Business Transformation

As part of the ongoing transformation activity to deliver synergies across the group a project has been undertaken to implement a common finance platform. In H1 2023, costs of £0.3m were incurred as the finance platform was extended to cover the Wagamama operations from March 2023.

Gain made on derivative financial instruments at fair value through income statement.

At the 2 July 2023, the Group held interest rate caps valued at £17.9m which are used to manage in parts the Group's exposure to interest rate risk on a proportion of its borrowing facilities. In the current interim period, a gain of £3.9m was recognised upon fair value remeasurement. The main reason for this gain is the increasing future expectations of SONIA rates over the remaining term of the derivative instruments.

For details of prior period exceptional items, please see Note 5 of the Group's 2022 interim results and Note 7 of the 2022 Annual report and accounts.

6 Net Interest Payable

	26 weeks ended	26 weeks ended	52 weeks ended
	2 July 2023	3 July 2022	1 January 2023
	(Unaudited)	(Unaudited)	(Audited)
	£'m	£'m	£'m
Bank interest payable	12.9	10.8	21.1
Unwinding of discount on lease liabilities	8.6	9.0	17.7
Amortisation of facility fees	0.4	2.0	3.5
Other interest payable	-	0.2	-
Trading interest payable	21.9	22.0	42.3
Exceptional refinancing costs	-	-	7.0
Interest payable	21.9	22.0	49.3
Other interest receivable	(0.3)	(0.3)	(0.3)
Unwinding of discounts on investments in subleases	-	(0.1)	-
Trading interest receivable	(0.3)	(0.4)	(0.3)
Gain made on derivative financial instruments at fair value through income statement	(4.3)	(5.3)	(11.9)
Interest receivable	(4.6)	(5.7)	(12.2)
Total net finance charges	17.3	16.3	37.1

Bank interest payable is largely comprised of interest on the term loan (see Note 12), which has increased due to rising SONIA rates.

7 Tax

The tax net charge of £3.8m is composed of a trading current tax charge of £1.0m, as well as a trading deferred tax charge of £4.3m. This is partially offset by the tax impact on exceptional items, comprising a current tax credit of £1.0m, as well as a deferred tax credit of £0.5m. The effective Corporation tax rate on the adjusted loss (before exceptional items) is 30.2%. The effective tax rate is above the corporation tax rate of 23.5% principally as a result of non-qualifying depreciation. The effective corporation tax rate on exceptional items is 10.0% due principally to impairment charges on goodwill.

On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax rate of 15%. The legislation implements a domestic top-up tax and a multinational top-up tax, effective for accounting periods starting on or after 31 December 2023.

The Group has applied the exception under IAS 12 to recognising and disclosing information about deferred tax assets and liabilities related to top-up income taxes.

8 Earnings Per Share

	26 weeks ended	26 weeks ended	52 weeks ended
	2 July 2023 (Unaudited)	3 July 2022 (Unaudited)	1 January 2023 (Audited)
Weighted average ordinary shares for the purposes of basic earnings per share	764,516,127	764,479,722	765,057,356
Effect of dilution - share options	4,845,334	-	2,434,551
Diluted weighted average number of shares	769,361,461	764,479,722	767,491,907
	£m	£m	£m
Profit/(loss) for the period after tax	(1.5)	(26.1)	(68.5)
Effect of exceptional items on earnings for the period	13.7	36.4	94.3
Adjusted profit for the period after tax	12.2	10.3	25.8
	pence	pence	pence
Basic profit/(loss) per share for the period	(0.2)	(3.4)	(9.0)
Effect of exceptional items on earnings for the year per share	1.8	4.8	12.3
Adjusted profit per share for the period	1.6	1.3	3.3

Diluted earnings per share on profit/(loss) for the period	(0.2)	(3.4)	(9.0)
Diluted earnings per share on adjusted profit for the period	1.6	1.3	3.4

Diluted earnings per share information is based on adjusting the weighted average number of shares for the purposes of basic and diluted earnings per share per share in respect of notional share awards made to employees in regards of share option schemes and the shares held by the employee benefit trust.

The diluted earnings per share figures allow for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the year.

9 Right of Use Assets and Lease Liabilities

Movements in the right of use assets during the period are shown below:

	26 weeks ended 2 July 2023 (Unaudited)	26 weeks ended 3 July 2022 (Unaudited)	52 weeks ended 1 January 2023 (Audited)
	£'m	£'m	£'m
Brought forward right of use assets	237.6	289.4	289.4
Arising on business combination	-	-	8.5
Additions	3.7	7.1	11.0
Disposals	(1.2)	-	(0.5)
Depreciation	(17.2)	(17.8)	(36.4)
Remeasurements	24.8	11.6	26.0
Impairment (Note 10)	(7.6)	(24.4)	(60.4)
Carry forward right of use assets	240.1	265.9	237.6

When indicators of impairment exist, right of use assets may be assessed for impairment. As described in Note 10, all non-current assets were assessed at 2 July 2023.

Movements in lease liabilities during the period are shown below:

	£'m	£'m	£'m
Brought forward lease liabilities	396.0	410.4	410.4
Arising on business combination	-	-	8.5
Additions	3.7	7.1	11.0
Unwinding of discount on lease liabilities	8.7	9.0	17.7
Cash payments made	(30.8)	(29.9)	(59.8)
Liabilities extinguished on disposals	(3.8)	(2.3)	(5.7)
Remeasurements	16.2	8.1	13.9
Carry forward lease liabilities	390.0	402.4	396.0

Analysed as:
Amount due for settlement within one year	58.5	61.6	55.0
Amount due for settlement after one year	331.5	340.8	341.0
Total lease liability	390.0	402.4	396.0

10 Impairment Reviews

Due to the significant inflationary pressures during 2023, the current cost of living crisis impacting consumer demand and increased interest rates in the UK, there are indicators of potential impairment of assets and, accordingly, the Directors have chosen to assess all non-current assets for impairment in accordance with IAS 36.

Approach and assumptions

The Group's approach to impairment reviews is unchanged from that applied in previous periods and relies primarily upon "value in use" tests, of restaurant cash generating units ('CGUs') although for freehold sites utilises independent estimates of market value by site. Where this is higher than the value in use, impairment reviews rely on freehold valuations. For intangible assets, the testing is performed at the level of the relevant group of CGUs that benefit from the goodwill or other intangible asset.

Discount rates used in the value in use calculations are estimated with reference to our Group weighted average cost of capital. For 2023, we have applied the pre-tax discount rate of 11.2% to all assets (2022: 11.5%). Terminal growth rates range from zero to three percent.

For the current period, value in use estimates were prepared on the basis of forecasts consistent with those described in Note 1 under the heading "Going concern basis". The most significant assumptions and estimates relate to revenue recovery and cost forecasts on site-by-site cash flows.

Results of impairment review

Impairment has been recorded in a number of specific restaurant CGUs. A net impairment charge of £4.5m (2022: £39.8m) has been recognised, comprised of an impairment charge of

£17.1m and impairment reversals of £12.6m. Of this charge, a net reversal of £3.1m was recorded against Property, Plant & Equipment ("PPE") and a net charge of £7.6m was recorded against Right of Use Assets. A further charge of £9.1m was recorded as impairment to Goodwill.

A net impairment charge was recorded in the interim period of £13.6m. This comprised a net impairment charge in the Leisure division of £15.9m, with net impairment reversals within the Concessions and Wagamama divisions of £1.2m and £1.1m, respectively. The net impairment charge was within the Leisure division, which continues to be impacted by the cost-of-living crisis and reduced customer demand in its core customer segments.

Sensitivity to further impairment charges

The key assumptions used in the recoverable amount estimates are the discount rates applied and the forecast cash flows. The Group has conducted a sensitivity analysis taking into consideration the impact on key impairment test assumptions arising from a range of possible trading and economic scenarios as well as discount rates used.

The resulting sensitivities to fluctuations in the key assumptions have been summarised as follows:

Property, plant and equipment and right-of-use asset impairment:

Sensitivity	Change applied	Decrease in Net Impairment Expense	Increase in Net Impairment Expense
Sales forecast	+/- 1%	£(4.9)m	£3.7m
Inflation forecast	+/- 1%	£(2.9)m	£3.4m
Discount rate	-/+ 1%	£(1.3)m	£1.0m
Terminal growth rate	+/- 1%	£(0.7)m	£0.4m
Freehold Valuation	+/- 5%	£(0.1)m	£1.1m

Goodwill impairment:

Sensitivity	Change applied	Decrease in Impairment Expense	Increase in Impairment Expense
Sales forecast	+/- 1%	£(3.9)m	£3.7m
Inflation forecast	+/- 1%	£(2.4)m	£3.5m
Discount rate	-/+ 1%	£(0.9)m	£2.4m
Terminal growth rate	+/- 1%	£(0.5)m	£2.0m
Freehold Valuation	+/- 5%	Nil	Nil

11 Reconciliation of profit before tax to cash generated from operations

	26 weeks ended	26 weeks ended	52 weeks ended
	2 July 2023	3 July 2022	1 January 2023
	(Unaudited)	(Unaudited)	(Audited)
	£'m	£'m	£'m
Profit/(loss) on ordinary activities before tax	2.3	(28.5)	(86.8)
Net interest charges	21.6	16.3	42.0
Exceptional items (Note 5)	15.2	47.7	117.5
Share-based payments	1.2	1.4	2.4
Depreciation and amortisation	33.1	36.7	74.5
Increase in inventory	(0.6)	(0.8)	(0.5)
Decrease/(increase) in receivables	9.2	(6.9)	(6.3)
(Decrease)/increase in payables	(19.0)	18.8	7.7
Cash generated from operations	63.0	84.7	150.5

	26 weeks ended	26 weeks ended	52 weeks ended
	2 July 2023	3 July 2022	1 January 2023
	(Unaudited)	(Unaudited)	(Audited)
Reconciliation of net cash from operating activities to free cash flow	£'m	£'m	£'m
Net cash flows on operating activities	46.7	67.5	118.9
Payment on exceptionals	4.7	3.1	8.6
Payment of obligations under leases	(30.8)	(29.9)	(59.8)
Refurbishment and maintenance expenditure	(16.0)	(15.6)	(36.6)
Payment against onerous lease provision (pre-IFRS 16)	5.3	3.9	8.3
Free cash flow	9.9	29.0	39.4

12 Long Term Borrowings

	As at 2 July 2023			As at 3 July 2022			As at 1 January 2023
	(Unaudited)			(Unaudited)			(Unaudited)
	Drawn	Available facility	Total facility	Drawn	Available facility	Total facility	Drawn	Available facility	Total facility
	£'m	£'m	£'m	£'m	£'m	£'m	£'m	£'m	£'m
Term loan	220.0		220.0	240.9	-	240.9	220.0	-	220.0
Overdraft facility	-	15.0	15.0	-	-	-	-	-	-
Revolving credit facilities	-	100.1	100.1	-	111.6	120.0	-	111.5	111.5
Total banking facilities	220.0	115.1	335.1	240.9	111.6	360.9	220.0	111.5	331.5
Unamortised loan fees	(6.2)			(9.9)			(6.6)
Long-term borrowings	213.8			231.0			213.4

Cash and cash equivalents	(18.3)	18.3		(72.6)	72.6		(27.7)	27.7
Pre-lease liability net debt	195.5			158.4			185.7
Lease liabilities	390.0			402.4			396.0
Net debt	585.5			560.8			581.7
Cash headroom		133.4			184.2			139.2

At 1 January 2023 and 2 July 2023, the Group has covenants over both the term loan and the revolving credit facilities (RCF). Both facilities require a minimum liquidity level of £40m which is measured as the total of cash and undrawn facilities. On the term loan, the covenant requires total net debt to be no more than 5.0x EBITDA, gradually reducing to 4.0x by March 2025 until the end of the facility.

On the RCF, the Group is required to maintain total net debt to EBITDA below 5.25x, gradually reducing to 4.25x by March 2025 until the end of the facility. In addition, the ratio of RCF debt to EBITDA can be no more than 1.5x, when the RCF is drawn.

During the period ended 2 July 2023, the Group converted £15m of its RCF into an overdraft facility. The overdraft facility includes the same interest charge and covenant conditions as the RCF, but provides greater operating and cost efficiency in managing the Group's debt facilities.

The available revolving credit facilities are reduced from the total facility by £4.9m of letters of credit issued to external suppliers

Net Debt
		Bank loans
	Cash and	falling due
	cash	after one	Lease
	equivalents £m	year £m	liabilities £m	Total £m
Balance as at 2 January 2023	27.7	(213.4)	(396.0)	(581.7)
Net repayments of borrowings	-	-	-	-
Repayment of obligations under leases	(30.8)	-	30.8	-
Non-cash movements in the year	-	(0.4)	(24.8)	(25.2)
Net cash inflow	21.4	-	-	21.4
Balance as at 2 July 2023	18.3	(213.8)	(390.0)	(585.5)

The non-cash movements in lease liabilities are in relation to the de-recognition and remeasurement of lease liabilities, while the non-cash movement in bank loans are in relation to amortisation of prepaid facility costs.

13 Financial instruments

IFRS 13 'Financial Instruments: Disclosures' requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in the measurements, according to the following levels:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

At 2 July 2023, 1 January 2023 and 3 July 2022, the Group's fair value measurements were categorised as Level 2, relating to the interest rate cap derivative instruments entered into during 2021 and 2022.

The Group entered these derivative financial instruments as hedges to manage its exposure to interest rate fluctuations. The instruments are measured at fair value using Level 2 valuation techniques after initial recognition. The fair value of derivative instruments classified as Level 2 is calculated by discounting all future cash flows by the relevant market discount rate at the balance sheet date. At 2 July 2023, an asset valued at £17.9m (1 January 2023: an asset of £15.4m; 3 July 2022: an asset of £8.8m) was recognised in relation to these instruments.

A gain of £4.3m was recognised in the 26-week period ended 2 July 2023 (see Note 5). Gains of £5.3m and

£11.9m were recognised in the prior interim period and full year, respectively.

There were no transfers between levels during any period disclosed. The carrying value of the Group's short- term receivables and payables is a reasonable approximation of their fair values. The fair value of all other financial instruments carried within the Group's financial statements is not materially different from their carrying amount.

14 Subsequent Events

Since the balance sheet date no material subsequent events requiring further disclosure or adjustment to these financial statements have been identified.

INDEPENDENT REVIEW REPORT TO THE RESTAURANT GROUP PLC

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 2 July 2023 which comprises a Condensed Consolidated Income Statement, a Condensed Consolidated Balance Sheet, a Condensed Consolidated Statement of Changes in Equity, a Condensed Consolidated Cash Flow Statement and explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 2 July 2023 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" (ISRE) issued by the Financial Reporting Council. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

London

5/09/2023

Glossary

Measure	Closest GAAP Measure	Reconciliation	Description
Adjusted diluted EPS	Diluted EPS	Note 8	Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year, including the effect of dilutive potential ordinary shares.
Adjusted EBITDA	Operating Profit	Income Statement	Earnings before interest, tax, depreciation, amortisation and exceptional items. Calculated by taking the Trading business operating profit and adding back depreciation and amortisation.
Adjusted EPS	EPS	Note 8	Calculated by taking the profit after tax of the business pre-exceptional items divided by the weighted average number of shares in issue during the year.
Adjusted operating profit	Operating Profit	Income Statement & Note 4 for IAS 17 basis	Operating profit prior to the impact of Exceptional items.
Adjusted operating margin	N/A	Income Statement & Note 4 for IAS 17 basis	Calculated as the Operating profit as a percentage of Revenue. For the 'Adjusted' basis this is using the profit and revenue prior to Exceptional items
Adjusted profit before tax	Profit before tax	Income Statement & Note 4 for IAS 17 basis	Calculated by taking the profit before tax of the business pre-Exceptional items.
Adjusted tax charge	Tax on profit from ordinary activities	Income Statement	Calculated by taking the tax of the business pre-Exceptional items.
Effective adjusted tax rate	N/A	Note 7 & Financial Review	Calculated as the tax expense as a percentage of profit before tax. For the 'Adjusted' basis this is using the tax and profit prior to Exceptional items.
Cash headroom	Cash & Cash equivalents	Note 12	Calculated as the funds available to the business through either its Cash & cash equivalents balance or through undrawn facilities, less letters of credit.
Capital expenditure	Net cash flow from investing activities	N/A	This is calculated as the total of Development capital expenditure and Refurbishment and maintenance expenditure and is the cash outflow associated with the acquisition of Property, plant and equipment, intangibles and investments in the US joint venture.
Development capital expenditure	Net cash flow from investing activities	N/A	This is the Capital expenditure relating to profit-generating projects upon which we expect a commercial return in future years.
EBITDA	Operating profit	Income Statement & Note 4 for IAS 17 basis	Earnings before interest, tax, depreciation, amortisation and impairment.
Exceptional items	N/A	Income Statement and Note 5	Those items that are material, and not related to the underlying trade of the business.
Free cash flow	Net cash flow from operating activities	Financial Review	Adjusted EBITDA (IAS17 basis) less working capital and non-cash adjustments (excluding exceptional items), tax payments, interest payments and Refurbishment and maintenance expenditure.
Like-for-like sales	N/A	N/A	This measure provides an indicator of the underlying performance of our existing restaurants. There is no accounting standard or consistent definition of 'like-for-like sales' across the industry. Group like-for-like sales are calculated by comparing the performance of all mature (traded for at least 65 weeks) sites in the current period versus the comparable period in the prior year. Sites that are closed, disposed or disrupted during a financial year are excluded from the like-for-like sales calculation.
Minimum liquidity	N/A	N/A	The minimum liquidity is a financial covenant required under the terms of our loans to have a minimum of both available undrawn facilities plus Cash and cash equivalents of at least £40 million.
Net debt	Long-term borrowings	Financial Review	Net debt is calculated as the net of all borrowings less cash and cash equivalents, plus the IFRS 16 Lease liabilities.
Pre-lease liability net debt	Long-term borrowings	Financial Review	As above Net Debt but excluding the IFRS 16 Lease liabilities.
Refurbishment and maintenance expenditure	Net cash flow from investing activities	Financial Review	This is the Capital expenditure relating to projects to maintain and refurbish our estate. No incremental financial return is expected on this expenditure.
Return on Invested Capital (ROIC)	N/A	N/A	Outlet EBITDA (pre-IFRS 16 and exceptional charges)/initial capital invested.
Trading business	N/A	N/A	Represents the performance of the business before exceptional items.
TSR	N/A	N/A	Total Shareholder Return over a period. Total shareholder return (TSR) is calculated as the overall appreciation in the share price, plus any dividends paid, during a period of time; this is then divided by the initial purchase price of the stock to arrive at the TSR.
Group EBITDA (VAT adjusted)	EBITDA	Note 3	Adjusted EBITDA (IAS17 basis) reduced by the benefit received by the Group in 1Q 2022 from the UK's reduced VAT rate of 12.5%, contributing £10.3m to EBITDA.

[1] Return on invested capital defined by outlet EBITDA/initial capex invested…..outlet EBITDA is the rolling 12 months to June 23 (pre-IFRS 16)

[2] Return on invested capital defined by outlet EBITDA/initial capex invested…..outlet EBITDA is the rolling 12 months to June 23

[3] Pre-IFRS 16 and exceptional charges

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