Full Year Results

Restaurant Group PLC

Mar 16 2022 07:00 BSTSource: RNS

RNS Number : 8958E

Restaurant Group PLC

16 March 2022

The Restaurant Group plc ("TRG" or "The Group")

FY21 Financial summary (for the 53 weeks ended 2 January 2022)

· Total sales of £636.6m (2020: £459.8m)

· Adjusted EBITDA profit of £81.2m on a pre IFRS 16 basis (2020: £8.7m)

· Adjusted Profit before tax of £16.6m on a pre IFRS 16 basis (2020: loss of £47.9m)

· Statutory loss before tax of £32.9m on an IFRS 16 basis (2020: loss of £132.9m)

· Net debt of £171.6m on a pre IFRS 16 basis (2020: £340.4m). IFRS 16 net debt was £582.0m (2020: £824.2m)

Key highlights

The Group is making good progress against its four strategic priorities:

· Maintain like-for-like sales outperformance versus market

o Strong like-for-like sales ("LFL") outperformance versus market since re-opening for dine-in on 17 May 2021:

LFL sales (%) vs 2019 comparable for the 33 weeks from 17 May 2021 to 2 January 2022

TRG Division	TRG LFL sales	Market* LFL sales	Outperformance vs market*
Wagamama	+15%	+7%	+8%
Pubs	+9%	(2)%	+11%
Leisure	+14%	+7%	+7%
Concessions**	(41)%	(59)%	+18%

· Deliver against key financial targets

o Recent Wagamama and Pub openings (2019 & 2020) delivering good returns

o Good progress made towards medium term net debt/EBITDA("leverage")*** target with FY21 year-end leverage*** at 2.1x

· Accelerate selective expansion opportunities

o Healthy FY22 pipeline of new Wagamama and Pubs openings

· Drive forward our ESG agenda

o Carbon neutral on scopes 1 and 2 in FY22

o Developing scope 3 emissions reduction plan

Current trading and outlook

· The Group will continue to report like-for-like sales for FY22 versus 2019 comparables (representing the last full year of comparisons without Covid-related disruptions)

· Current trading for the Group has continued to be strong, outperforming the market for the first two months of FY22:

LFL sales (%) vs 2019 comparable for the 8 weeks from 3 January to 27 February 2022

TRG Division	TRG LFL sales	Market* LFL sales	Outperformance vs market*
Wagamama	+21%	+8%	+13%
Pubs	+11%	(3)%	+14%
Leisure	+11%	+8%	+3%
Concessions**	(35)%	(48)%	+13%

· c.95% of electricity and gas volume hedged for 2022

o c.75% of electricity and gas volume hedged for 2023 and 2024

· Management's current expectations for FY22 remain unchanged, although we are mindful about the consequential inflationary impacts arising from the conflict in Ukraine

Andy Hornby, Chief Executive Officer, commented:

"2021 was a year of substantial progress at TRG. The recapitalisation of the balance sheet and strong trading performance have allowed us to deliver a robust set of financial results despite the various restrictions that have impacted the sector.

I'd like to thank every single one of our teams who have gone the extra mile on so many occasions during 2021 and delivered a market outperformance across all our brands".

*Market refers to Coffer Peach tracker for restaurants (Wagamama and Leisure benchmark) and Coffer Peach tracker for pub restaurants (TRG Pubs benchmark). Coffer peach LFL sales represent the weighted average of weekly LFL sales reported (internal calculation)

** UK air passenger growth used as market benchmark for Concessions

*** Pre IFRS 16 Adjustment and exceptional charges

Enquiries:

The Restaurant Group plc

Andy Hornby, Chief Executive Officer

Kirk Davis, Chief Financial Officer

Umer Usman, Investor Relations

020 3117 5001

MHP Communications

Oliver Hughes

Simon Hockridge

020 3128 8789/8742

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 8:45am (UK time). If you would like to register, please contact Robert Clark at MHP Communications for details on 020 3128 8826 or email TRG@mhpc.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. As at 2 January 2022, The Restaurant Group plc operated approximately 400 restaurants and pub restaurants throughout the UK. Its principal trading brands are Wagamama, Frankie & Benny's 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 five Wagamama restaurants in the US and over 50 franchise restaurants across a number of territories. The Group employs approximately 16,000 people in the UK.

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" within the meaning of the United States federal securities laws. These forward-looking statements reflect the Group's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

3. The Group's Adjusted performance metrics ('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.

Chairman's statement

I am delighted to have been given the opportunity to join the Board of TRG as Chair, a role which commenced on 1 January 2022. I would like to take this opportunity to thank our former Chair, Debbie Hewitt, for her work with the Board and TRG over the last five years.

During my first few months in the post, I have spent time with fellow Board members and other colleagues familiarising myself with our business. I have been very impressed with what I have seen thus far, affirming my view that TRG has a dynamic and experienced management team operating an excellent range of brands.

TRG has made substantial progress in the last year with the successful recapitalisation of the Group and strong trading performance since reopening for dine-in trade. This positions the Group well despite the inflationary pressures that continue to impact the sector.

The trading results for the year were obviously impacted by the ongoing effects of the Covid pandemic, and the resulting government restrictions, with dine-in trading only possible from 17 May 2021. We welcomed the essential government support received through these periods of restrictions, particularly the Coronavirus Job Retention Scheme, which enabled us to protect the employment of our employees whilst our restaurants and pubs were closed.

I would also like to thank all of my new colleagues at TRG, at our Head Office and in our restaurants and pubs nationwide, for their continued hard work and commitment during a very challenging year.

While we have no direct exposure to either Ukraine or Russia, it remains too early to assess the impact on supply chain costs and customer behaviour. We are however doing everything we can to offer support and assistance to our UK based Ukrainian and Russian employees.

Ken Hanna

Chairman

15 March 2022

Business review

Introduction

2021 was a year in which the whole TRG team demonstrated remarkable resilience in the face of ongoing disruption from the pandemic and government restrictions. It is their dedication to serving our customers which allowed us to bounce back strongly when we could open fully for dine-in trade from the middle of May and deliver a very strong recovery in sales, outperforming the wider market in each of our divisions.

A significant achievement during the year was securing the refinancing and recapitalisation of TRG and in the first quarter we agreed new long-term debt facilities providing the Group with significant financial flexibility over the next four to five years. We received excellent support from our shareholders in raising net proceeds of £166.8 million of new equity capital.

This stronger long-term capital structure provides us with the ability and increased flexibility to execute our four strategic priorities:

· Maintain like-for-like sales outperformance versus the market: Making selective investments in our existing estate to enhance our customer offer, as well as supporting our colleagues with increased development opportunities and well-being tools to aid recruitment and retention

· Deliver against key financial targets: Driving good sustainable returns on invested capital and remaining firmly on track to achieve our medium-term leverage[1] target of below 1.5x

· Accelerate selective expansion opportunities: From new Wagamama and Pubs sites and selectively considering inorganic opportunities that may arise

· Drive forward our ESG Agenda: Developing and implementing a detailed plan to deliver on our 2035 carbon net zero ambition and continuing to make positive contributions to our colleagues, customers and communities

The Board has confidence in the Group's ability to perform against these strategic objectives and deliver long-term sustainable growth for all stakeholders, given the strength of our brands, substantially reduced net debt and trading outperformance versus the market.

We provide more detailed updates on our strategic priorities, below:

1) FY21 Trading performance since the recommencement of dine-in on 17 May 2021

2) Making good progress towards bringing medium-term leverage target below 1.5x

3) Targeted organic growth plans for FY22

4) Driving forward our ESG agenda

1. FY21 Trading performance since the recommencement of dine-in (LFL sales % vs 2019 comparable for the 33 weeks from 17 May 2021 to 2 January 2022)

Wagamama

Since re-opening for dine-in on 17 May 2021, we have seen strong trading with LFL sales growth of 15%, representing an 8% outperformance versus the market. Customer ratings have remained strong with the December 2021 external NPS scores (as measured by BrandVue) positioning Wagamama as the number two brand within the top casual dining chains in the UK.

The key customer initiatives driving the performance have been:

- Food innovation: At the beginning of the year in support of Veganuary, Wagamama made a brand commitment that 50% of its menu would be plant-based (vegan or vegetarian) before the end of the year. In October we achieved this goal with the launch of a new menu incorporating new plant-based dishes such as our vegan ramens and vegan takes on some of our most popular items including "vegan chilli squid". Vegan participation has increased by +5% to >20% since introducing our plant pledge. Looking forward to 2022, we're excited to be introducing new plant-based dishes and ingredients with the launch of our summer menu

- Marketing: We are continually evolving our marketing tactics with purpose-led campaigns and initiatives to ensure we stay relevant and current. We have worked with celebrities in order to tap into complementary passion points (i.e. football and music) for our gen-z and eco-millennial audience, continuing to build relevancy and brand equity. Regional and local activation plans remain a crucial part of our plan, and we continue to encourage sites to 'own their mile' and have a positive presence in their local communities

- Delivery and takeaway: Given trading restrictions through the pandemic, we have seen an acceleration of the structural shift of both new and existing customers enjoying delivery and takeaway with our sales mix from these two channels combined increasing from 16% in 2019 to 28% in 2021. LFL delivery sales were up 114% and LFL takeaway sales up 76% in the period (33 week period ending 2 January 2022). This strong performance was aided by dedicated operations resource, insight tools and ensuring over 90% of our menu is offered on delivery. We will continue to make investment to improve operational efficiency and reconfigure sites to improve the delivery operation where possible

Pubs

We have seen a consistent outperformance versus the market and continued strong trading with LFL sales growth of 9%, representing a 11% outperformance versus the market. Customer sentiment remains strong with social media scores (consolidation of Google, Facebook and Tripadvisor scores) averaging 4.51/5 for 2021, our highest rating over the past five years.

The key operational initiatives driving the performance have been:

- Maximising opportunities from external trading: Developed more than 30 covered outside areas using stretch tents and marquees to facilitate external dining all year round. The installation of stretch tents gives more scope to extend our drinks festivals throughout the year and explore non-summer events such as Oktoberfest and Christmas markets

- Enhancements to food and drink offer: There has been a refocus post Covid on increased localisation and premiumisation on our menus. Within each section we have trialled providing more premium options and "when they're gone, they're gone!" blackboards to encourage increased participation and spend

Leisure

The business has delivered an encouraging trading performance, achieving LFL sales growth of +14%, outperforming the market by 7%. Our partnership with Yumpingo has provided greater customer insight on both customer service standards and dish feedback, and we have seen an improving trend on NPS scores (as measured on the Yumpingo platform) for both Frankie & Benny's and Chiquito.

The key customer initiatives driving the performance have been:

- Significant investment in food quality: Our focus has been on improving food quality with new menus launched across all of our brands in May. We made investments across our range including fresh burger patties, better-quality steaks and ribs and a new pizza dough. Additionally we reduced the menu content by c.20% to help improve operational execution and reduce complexity

- Delivery and takeaway: The delivery business has been transformed over the past 18 months due to a combination of customer habits changing due to Covid and the investment in our online delivery brands which represent c.55% of the delivery sales mix. Delivery and takeaway sales now account for 17% of sales (for the 33-week period ending 2 January 2022) compared to only 5% in 2019. LFL delivery sales were up 389% and LFL takeaway sales up 31% in this period

We will also look to trial some targeted capital refurbishments across 10-15 sites in our Frankie & Benny's estate. The sites selected will be based on a number of factors including market capacity, delivery mix, competition and age of the current fit out. The focus of the refresh will be on external works to improve kerb appeal, customer facing areas such as seating & bar areas with targeted replacement of kitchen equipment as required. We expect to spend approximately £250,000 per site. If the trial sites generate a good return on capital, we will explore further opportunities to invest in the estate.

Concessions

The international travel sector had an incredibly challenging year due to ongoing changes in Government restrictions and the associated cost of Covid testing.

Our focus in the year was on a measured re-opening programme, only opening in locations with sufficient passenger volumes to support a positive commercial outcome. We also achieved more flexible terms with the vast majority of airport partners with regards to minimum guaranteed rents (MGRs) and mothballing fees. In addition, we have flexed our operating hours to match departing flight times in order to minimise costs whilst ensuring we offer a great service.

LFL sales declined by 41%, 18% ahead of the passenger volume decline in the period (for the 33-week period ending 2 January 2022). Sales have benefitted from a higher average spend per passenger (due to longer dwell times and the benefit of a reduced VAT rate) and reduced competition as other food and beverage operators manage their re-opening profile. We expect the level of out-performance to reduce as competitors reopen more sites and VAT reverts to 20%.

We currently have 27 sites open, representing c.60% of our total estate. Our opening plans for the remaining estate is dependent on passenger volume recovery and discussions with airport partners on terminal reopening's. With the recent encouraging news that restrictions and testing requirements are being relaxed, we currently expect to open the majority of the remaining estate over the summer in FY22.

2. Making good progress towards bringing medium-term leverage target below 1.5x

The Group made good progress during the year towards its medium-term leverage target with FY21 year-end leverage[2] (net debt/EBITDA) standing at 2.1x.

The equity capital raise, strong EBITDA recovery in the second half of the year and disciplined capital investment all contributing to the significant reduction in net debt in the year.

With the good progress made, the Group has repaid £45m of term loan on 15 March 2022, maintaining further flexibility to pay a further £44m at par before November 2022.

There is further detail in the financial review section on other key movements in the cashflow.

3. Targeted organic growth plans for FY22

The strength of trading of our Wagamama and Pubs businesses since re-opening has strengthened our belief on the site roll-out potential for both businesses.

We continue to apply a highly selective approach to opening new sites, based on a methodical, data-driven approach and a capital expenditure investment appraisal that carefully evaluates and scores its key selection criteria, including demographic and competitive dynamics.

Recent openings in 2019 and 2020 have delivered good returns with:

· Wagamama UK restaurants (excluding delivery kitchens) having delivered over 45% return on invested capital[3] (consisting of 10 new openings)

· Wagamama UK delivery kitchens having delivered over 60% return on invested capital (consisting of five new openings)

· Pub restaurants having delivered over 20% return on invested capital[4] (consisting of three new openings)

We continue to make good progress and our expansion plans for our UK openings in FY22 are outlined in the table below:

	Existing estate	New openings target annual run-rate	2022 planned openings
Wagamama UK restaurants	148	5-7	7-9
Wagamama UK Delivery kitchens	8	4-5	4-5
Pubs	79	3-5	3

With regard to the Wagamama International business we expect to open three to four new US sites under our JV partnership with the first two sites expected to be in Atlanta and Tampa. We also expect to open five to eight new international franchise sites predominantly in Italy and the Middle East.

We will remain disciplined in the way that we grow the estate, focusing on delivering good sustainable returns for our shareholders.

4. Driving forward our ESG agenda

'Preserving The Future' is TRG's programme that shapes and drives our Environmental, Social and Governance (ESG) agenda. We are committed to operating ethically and sustainably and the programme focuses on continuously finding ways to reduce our carbon footprint, improve our packaging, to further contribute to our communities and to improve the health and wellbeing of our colleagues and customers, all of which is underpinned by a strong governance framework.

Environmental initiatives overview

After having spent considerable time in the year assessing and compiling the appropriate data, in collaboration with the Zero Carbon Forum for Hospitality, we now have visibility of our emissions across all scopes allowing us to build a programme of activity focussed on short, medium and long term decarbonisation, in order to achieve our ambition of being Net Zero carbon emissions by 2035.

We recognise the significant challenge of reaching net-zero and are focussed on a number of environmental initiatives to reduce our impact, including:

· On 1 October 2021, we completed the move of all[5] our directly controlled supplies of electricity, gas and LPG used in our Wagamama, Pubs and Leisure divisions to renewable sources and all residual emissions from this particular scope will be offset by carbon removal reforestation projects from FY22. Carbon emissions from these scopes (i.e. scope 1 and 2) represent c.15% of our total carbon emission footprint

· Reducing energy consumption through ongoing activities that baseline usage per site, sets targets and drives ongoing consumption reduction through operational best practice and with the adoption of monitoring technologies that drive efficiency

· Reducing plate waste through a partnership with the Sustainable Restaurant Association that identifies menu ingredients that contribute most food waste so we can adapt menu design accordingly

· We have a new waste framework with our partners, that over the next three years aims to increase waste recycling by 16% to 71%, with an ambition to increase it by 6% in 2022

· Continuing to evolve our packaging with a new lower plastic packaging content range launching in 2022 for Wagamama with the ambition of reducing plastic packaging by at least 30%

· Our 'Bowl Return Scheme' trial in Brighton Wagamama that encourages recycling has been well received by our customers and we are looking at rolling it out more widely this year

We have worked with the Zero Carbon Forum to develop the high-level industry roadmap to net zero for Scope 3 and are using this as a starting point to develop our own specific roadmap and plan. Their sectoral guidance suggests a 70% reduction in emissions is possible with the residual 30% of emissions being offset. It should not be under-estimated though that this is a multi-year programme through to 2035 and that residual emissions will need to be off-set from 2035.

Social initiatives overview

Our charity partners are 'Mind' and 'Young Minds' (Mental Health Charities) and 'Only a Pavement Away' (A Homelessness Charity). We support our charities through a variety of fundraising activities and are donating profits from our retail range in Wagamama. We are also supporting our homelessness charity by providing employment opportunities and a skills hub that offers hospitality training. Through a combination of colleague led fundraising, company matched programmes, and contributions from our retail product range we are aiming to raise up to £500,000 in 2022.

In 2021 our Apprenticeship programme provided practical skills, experience and qualifications for over 240 apprentices across front of house, back of house, management and commercial roles and we are aiming to double the number of apprenticeships to over 500 apprentices in total in 2022. This will equip our graduates from the Apprenticeship programme with the equivalent qualifications ranging from 5 GCSEs right up to degree level.

Our role to provide a diverse and inclusive environment with a strong sense of purpose has never been more important. We have launched a range of engagement initiatives, led by colleague groups, which provide information, awareness and learning sessions to promote an inclusive workplace with appropriate recruitment, leadership and behaviours. Additionally, we partner with The Burnt Chef Project, a not-for-profit organisation who specialise in improving the wellbeing of those within the hospitality profession and challenging the stigma of mental health. We work with them to deliver mental health training to our managers and to put in place effective practices which improve wellbeing.

Reflecting the progress we have made in 2021, the Sustainable Restaurant Association awarded a three-star rating to each of our divisions, representing the highest rating attainable. The assessment areas focus on sourcing, society and the environment reflecting the importance of sourcing and serving food well. This is a significant progression on our 2019 ratings where we achieved a three-star rating for our Pubs division, two-star for our Leisure and Concessions division and one star for Wagamama.

We acknowledge the important role TRG plays in global climate and societal change. Our "Preserving The Future" programme is a continuous journey to establish environmental, social and governance best practice in everything we do.

Financial Review

The impact of Covid continued to have a significant impact on performance with the business operating only on delivery and takeaway in our Wagamama and Leisure businesses, through to 'outside dining' trade and full trading from 17 May 2021. The results for this year therefore represent only seven months of unrestricted trading when also allowing for the effect of the Omicron variant in December 2021. In addition, international air travel volumes have been significantly depressed throughout the whole period.

From full reopening, the business has traded very strongly, and we have been delighted with the performance of all our divisions outperforming their respective markets, which gives us confidence in our ability to trade relatively well into 2022.

We welcomed the invaluable government support through this period in the form of the reduced VAT rate, the business rates holiday and property grants. In a period where our team members, operations and financial performance were significantly impacted by the pandemic, these measures, along with the Coronavirus Job Retention Scheme, enabled us to protect the employment of our employees.

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)
	53 weeks ended 2 Jan 2022 £m	52 weeks ended 27 Dec 2020* £m
Revenue	636.6	459.8
Operating profit/(loss)	14.1	(95.1)
Operating margin	2.2%	(20.7%)
Loss before tax	(32.9)	(132.9)
Loss after tax	(38.4)	(124.2)
Statutory EPS (pence)	(5.3)p	(22.1)p

^*Restated

Revenue for the year was £636.6m (2020: £459.8m) which represents an increase of 38% on the prior year. The comparison between the two periods is complicated by the impacts of the pandemic and various Government restrictions in place across the hospitality sector during both years, with the increased ability to trade in 2021 the primary driver for the increase year-on-year.

Following the removal of restrictions in May to early December, we are particularly pleased to have delivered strong LFL sales growth across our Wagamama, Pubs and Leisure businesses with all our businesses (including Concessions) outperforming their respective markets.

Statutory operating profit increased substantially to £14.1m compared to an operating loss of £95.1m in 2020. These figures include the impact of exceptional items which significantly reduced from £45.4m to £24.9m. The remainder of the increase was due to the increased ability to trade across the business in 2021, disciplined cost control and the benefit of Government assistance noted above.

Interest costs (including the impact of IFRS 16) rose to £47.0m from £37.8m due to an increase in the effective interest rate, a higher gross debt, and an exceptional write off of fees on the prior facilities of £1.9m.

Alternative Performance Measures

TRG uses a number of non-statutory measures to monitor business performance which are referred to within the Annual 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 our 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 profit of the business, and the 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.

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. Full definitions of the APMs are included in the Glossary to the Annual Report.

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

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

	53 weeks ended 2 Jan 2022 PRE IFRS 16 £m	52 weeks ended 27 Dec 2020* PRE IFRS 16 £m	53 weeks ended 2 Jan 2022 IFRS 16 £m	52 weeks ended 27 Dec 2020* IFRS 16 £m
Revenue	636.6	459.8	636.6	459.8
Adjusted¹ EBITDA	81.2	8.7	115.2	53.4
Adjusted¹ operating profit/(loss)	42.8	(30.5)	37.1	(49.7)
Adjusted¹ operating margin	6.7%	(6.6%)	5.8%	(10.8%)
Adjusted¹ profit/(loss) before tax	16.6	(47.9)	(8.0)	(87.5)

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

^*Restated

Adjusted EBITDA (pre-IFRS 16) for 2021 is £81.2m (2020: £8.7m). The Group generated an Adjusted EBITDA loss (pre-IFRS 16) of £18.1m in the first quarter, whilst in lockdown and only being able to trade for delivery and takeaway. As mentioned above, we saw strong LFL sales growth and EBITDA delivery across our Wagamama, Pubs and Leisure businesses once we were able to reopen for dine-in.

The Group made a profit before tax (pre-IFRS 16) for the year of £16.6m (2020: loss £47.9m).

Refinancing and Equity Raise

During February 2021, the Group successfully agreed a £500m debt package which consisted of a 5 year £380m term loan through to 2026, and a four year £120m super senior revolving credit facility through to 2025.

In March 2021, the Group successfully raised net proceeds of £166.8m of equity from its supportive shareholder base through a placing and open offer with the aim to give us the liquidity needed to withstand further trading restrictions, to invest in growing the business over the medium term and to deliver good sustainable shareholder returns.

In May 2021, the Group drew down £330m of the term loan facility which reduced the total available facilities to £450m. Given the strong recovery of EBITDA and lower net debt, the Group has repaid £45m of the term loan on 15 March 2022. The Group currently has £405m of available debt facilities.

Capital allocation framework

The Group remains disciplined in its approach to capital allocation with the overriding objective being to enhance shareholder value. The Group's capital allocation framework prioritises:

Priorities	Parameters
(1) Investment in customer offer	Refurbishment and maintenance capex within a range of £25m to £35m
(2) Maintain a strong balance sheet	Target leverage[6] below 1.5x in the medium term
(3) Wagamama and Pubs new site expansion	Deliver against targeted returns criteria: o Wagamama >40% ROIC o Pubs >20% ROIC
(4) Selectively consider inorganic growth opportunities	Deliver long-term shareholder value

Cash flow and net debt

Net debt on an IFRS 16 basis has fallen from £824.2m to £582.0m in the year, a fall of £242.2m. The key driver of this reduction has been the injection of £166.8m of equity from the capital raise in March 2021. Secondly, the reduction in lease liabilities of £73.4m is due to both the renegotiations of existing airport rent deals to remove minimum payments and making them more flexible in line with passenger numbers, and payments of lease liabilities in the year.

Pre-IFRS 16 net debt has decreased from £340.4m to £171.6m, a reduction of £168.8m. As mentioned above this is due primarily to the capital raise. Free cash flow increased to £44.7m (2020: outflow £50.6m) following an increase in Adjusted EBITDA to £81.2m (2020: £8.7m), and a reduction in maintenance and refurbishment capex to £19.0m (2020: £21.9m), offset by an increase in interest costs to £20.6m (2020: £15.5m).

Development expenditure of £15.1m (2020: £17.9m) related primarily to opening five new Wagamama restaurants, two Wagamama delivery kitchens, and one freehold pub. There were also some costs relating to the completion of four new Concession sites in the redeveloped Manchester Airport terminal.

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

	2021 £m	2020 £m
Adjusted EBITDA (Pre-IFRS 16 basis) ¹	81.2	8.7
Working capital and non-cash adjustments	5.7	(27.0)
Operating cash flow**	86.9	(18.3)
Net interest paid	(20.6)	(15.5)
Tax (paid)/received	(2.6)	5.1
Refurbishment and maintenance expenditure	(19.0)	(21.9)
Free cash flow	44.7	(50.6)
Development expenditure	(15.1)	(17.9)
Utilisation of onerous property cost provisions	(13.4)	(9.3)
Exceptional costs	(7.4)	(34.9)
Proceeds from issue of share capital	166.8	54.6
Other items	(1.6)	3.3
Cash movement	174.0	(54.8)

Net Debt (Pre IFRS 16 basis)
Group net debt brought forward	(340.4)	(286.6)
Derecognition of finance lease liability (IFRS 16 transition)	-	2.6
Non-cash movements in net debt	(5.2)	(1.6)
Group net debt carried forward (Pre IFRS 16 basis)	(171.6)	(340.4)

Incremental lease liabilities (IFRS 16)	(410.4)	(483.8)
Group net debt carried forward (IFRS 16 basis)	(582.0)	(824.2)

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

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

At year-end, the Group had cash headroom of £258.1m (2020: £118.7m) consisting of £111.6m of undrawn revolving credit facilities (2020: £78.0m) and a cash balance of £146.5m (2020: £40.7m) which provides the Group with significant liquidity to fund both the operations of the Group and future new openings for both our Wagamama and Pubs businesses.

Exceptional items

An exceptional pre-tax charge of £24.9m has been recorded in the year (2020: £45.4m).

Exceptional items consist of:

- Impairment of assets of £25.9m (2020: £142.9m). The impairment charges relate to:

o £19.6m due to trading in certain locations, primarily relating to sites in our Concessions business

o A charge of £6.3m relating to the write down of assets on closed sites

- A credit of £4.5m (2020: credit of £100.7m). The key elements are rent concessions achieved of £15.1m, lease liabilities exited totalling a net credit of £4.9m, partially offset by onerous property cost provisions of £8.6m, payments to exit sites of £2.7m, staff redundancies of £2.7m, and other costs of £1.5m

- A cost of £1.9m (2020: nil) for loan facility fees relating to the prior debt facilities written off on refinancing

- Professional fees of £1.6m (2020: £3.2m) relating to corporate financing and restructuring activity.

The tax credit relating to these exceptional charges was £2.6m (2020: £1.5m).

Cash expenditure associated with the above exceptional charges was £7.4m in the year (2020: £33.7m) relating principally to the staff restructuring, closure costs, and professional fees as discussed above. The remainder of the exceptional items were non-cash in nature.

Tax

The tax charge for the year was £5.5m (2020: credit of £8.7m), summarised as follows:

	2021			2020
	Trading £m	Exceptional £m	Total £m	Trading £m	Exceptional £m	Total £m
Corporation tax	0.7	(0.7)	-	(9.5)	-	(9.5)
Deferred tax	(2.6)	10.3	7.7	(2.3)	3.3	1.0
Total current year tax	(1.9)	9.6	7.7	(11.8)	3.3	(8.5)
Adjustments in respect of prior years	(2.4)	0.2	(2.2)	(0.2)	-	(0.2)
Total tax (credit) / charge	(4.3)	9.8	5.5	(12.0)	3.3	(8.7)

Effective tax rate (excl prior years adjustments)	23.8%	(38.6%)	(23.4%)	13.5%	(8.2%)	6.7%
Effective tax rate	53.8%	(39.4%)	(16.7%)	13.7%	(8.2%)	6.8%

Given that the Group has made a statutory loss in both the current and prior periods, the effective tax rate is not indicative of future expected tax rates. It is also worth noting that the Group has further statutory losses and interest restrictions worth £19.8m which will reduce future cash tax payments over the next two to three years.

The effective adjusted tax rate for the year was 53.8% compared to the 13.7% in the prior year. In the current year, we have had an increase in the tax credit following a review of the tax treatment for corporate activities undertaken and an updated capital allowances claim, resulting in a lower tax charge for prior years which has been reflected in these accounts. Excluding these benefits, the effective tax rate is 23.8% (2020: 13.5%). Consistent with prior years, the tax rate is higher than the UK corporation tax rate due to non-deductible expenses primarily relating to depreciation on non-qualifying assets.

The current year exceptional tax charge of £9.6m consists of a £12.2m charge relating to the change in the tax rate from 19% to 25% in April 2023 which increases the value of the deferred tax liability, offset by £2.6m of tax credits from the exceptional costs.

Key inflationary themes FY22

There are some well-documented sector wide cost challenges for the year ahead, as outlined below:

All inflation figures below are stated as their incremental impact in FY22 vs FY21 post mitigating activities

- Labour market pressures: as widely reported the economy is at near full employment and there is well over 1 million vacancies in the UK. This shortage of labour across the UK is leading to upward pressure on wage rates in addition to the above inflationary increase in the National Living Wage (NLW) from April 2022 of 6.6%

- General food & drink inflation: is driven by global commodity markets and supply chain pressures that are expected to continue into 2023. This is expected to result in cost inflation of 5%+ for FY22 before any consequential inflationary impacts arising from the conflict in Ukraine

- Utilities inflation: Material market-driven increases in electricity and gas will cost the Group an additional £6m to £7m in FY22

There are a number of actions the Group is taking to mitigate the significant effects from the elevated levels of cost inflation expected for the current year:

• Revised labour deployment model to manage the evolving sales mix across dine-in and delivery sales

• Continuing to work with our supply chain partners to leverage the scale of the business based on both volume growth and new site openings

• c.95% of electricity and gas volume hedged for 2022

• c.75% of electricity and gas volume hedged for 2023 and 2024

Selected FY22 Guidance

· Proactive negotiations with landlords and airport partners on renewing Leisure and Concession sites approaching lease expiry/break:

o Achieved extensions/renewals on 32 sites representing 60% of sites at risk of expiry

o Potential remaining exposure of £2m-£3m EBITDA on nine sites

· Total capital expenditure approximately £55m-£60m:

o Maintenance and IT investment of c.£20m

o Refurbishment capex of c.£10m includes:

- 3-5 Wagamama transformational refurbishments

- 10-15 targeted capital refreshes in Frankie & Benny's estate

o Expansionary capex of £25m-£30m

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

o Net add-back £47m to £53m

- £55m to £60m for fixed rent

- (£7m) to (£8m) for non-cash property charges

· Depreciation and interest detailed in table below:

	Pre-IFRS 16 £'m	IFRS 16 £'m	Total £'m
P&L Depreciation	42-43	35-37	77-80
P&L Interest	24-25	17-18	41-43

· The Group continues to monitor the Russia/Ukraine situation and its impact on the supply chain and is working on contingency planning where appropriate

· Management's current expectations for FY22 remain unchanged, although we are mindful about the consequential inflationary impacts arising from the conflict in Ukraine

Viability Statement

In accordance with provision 31 of the UK Corporate Governance Code (July 2018) (the 'Code'), the Directors have assessed the viability of the Group over a three-year period to December 2024.

The Directors believe that three years is the appropriate time-period over which to evaluate long term viability, and this is consistent with the Group's current strategic planning process. Management have prepared, and the Board has considered two key scenarios:

- A 'base case' where the business is allowed to trade normally throughout the period without further trading restrictions, specifically the Group has forecast sales like-for-like performance to be broadly in line with the levels seen in the 33 weeks since trading resumed on the 17 May 2021, and cost inflation of c.5%. The Concessions business is forecast to return to pre-pandemic levels in 2024 in line with current air passenger forecasts.

- A 'stress case' whereby the company is impacted by further variants of the COVID-19 in winter 2022, 2023 and 2024 to the same severity as the recent Omicron strain, sales are further reduced by 5% across the entire period (outside of variant impact), and cost inflation is higher than in the base case by 1%.

As detailed in the Risk Committee report, the Board has conducted a robust assessment of the principal risks facing the business. The resilience of the Group to the impact of these risks has been assessed by the creation of the 'stress case' which management believe to be a severe but plausible scenario based on past experience.

Taking account of the company's current position, principal risks facing the business and the sensitivity analysis discussed above, as well as the potential mitigating actions that the company could take, and the experience that the company has in adapting the business to change, the Board expects that the company will be able to continue in operation and meet its liabilities as they fall due over the three-year period of assessment.

Further details on the forecast process and assumptions can be found in Note 1 to the accounts.

The Restaurant Group plc
Consolidated income statement
		53 weeks ended 2 January 2022


		Trading	Exceptional items
		business	(Note 7)	Total
	Note	£m	£m	£m

Revenue		636.6	-	636.6

Cost of sales		(548.2)	(21.4)	(569.6)

Gross profit/(loss)	5	88.4	(21.4)	67.0

Share of results of associate		(0.3)	-	(0.3)
Administration costs		(51.0)	(1.6)	(52.6)

Operating profit/(loss)		37.1	(23.0)	14.1

Interest payable	8	(45.7)	(1.9)	(47.6)
Interest receivable	8	0.6	-	0.6

Loss on ordinary activities before tax		(8.0)	(24.9)	(32.9)

Tax on profit/(loss) from ordinary activities	9	4.3	(9.8)	(5.5)

Loss for the year		(3.7)	(34.7)	(38.4)

Other comprehensive income
Foreign exchange differences arising on consolidation		0.1	-	0.1
Total comprehensive loss		(3.6)	(34.7)	(38.3)

Loss per share (pence)
Rights adjusted basic	10	(0.5)	-	(5.3)
Rights adjusted diluted	10	(0.5)	-	(5.3)



EBITDA		115.2	2.9	118.1

Depreciation, amortisation and impairment		(78.1)	(25.9)	(104.0)

Operating profit/(loss) for the year		37.1	(23.0)	14.1

The Restaurant Group plc
Consolidated income statement
		52 weeks ended 27 December 2020


		Trading	Exceptional items*
		business	(Note 7)	Total
	Note	£m	£m	£m

Revenue		459.8	-	459.8

Cost of sales		(470.6)	(37.8)	(508.4)

Gross profit/(loss)	5	(10.8)	(37.8)	(48.6)

Share of results of associate		(0.6)	-	(0.6)
Administration costs		(38.3)	(7.6)	(45.9)

Operating profit/(loss)		(49.7)	(45.4)	(95.1)

Interest payable	8	(38.2)	-	(38.2)
Interest receivable	8	0.4	-	0.4

Loss on ordinary activities before tax		(87.5)	(45.4)	(132.9)

Tax on profit/(loss) from ordinary activities	9	12.0	(3.3)	8.7

Loss for the year		(75.5)	(48.7)	(124.2)

Other comprehensive income
Foreign exchange differences arising on consolidation		0.1	-	0.1
Total comprehensive loss		(75.4)	(48.7)	(124.1)

Loss per share (pence)
Rights adjusted basic*	10	(13.4)	-	(22.1)
Rights adjusted diluted*	10	(13.4)	-	(22.1)



EBITDA		53.4	97.5	150.9
Depreciation, amortisation and impairment		(103.1)	(142.9)	(246.0)
Operating profit/(loss) for the year		(49.7)	(45.4)	(95.1)

*Restated - refer to Note 2

The Restaurant Group plc		At 2 January 2022	At 27 December 2020*
Consolidated balance sheet	Note	£m	£m

Non-current assets
Intangible assets	11	599.9	599.5
Right of use assets	12	289.4	368.9
Property, plant and equipment	13	285.1	300.3
Derivative financial instruments	18	2.1	-
Trade and other receivables		4.7	3.0
		1,181.2	1,271.7

Current assets
Inventory		6.0	5.1
Trade and other receivables		13.9	16.1
Prepayments		6.1	8.8
Corporation tax debtor		-	0.1
Cash and cash equivalents	18	146.5	40.7
		172.5	70.8

Total assets		1,353.7	1,342.5

Current liabilities
Trade and other payables		(128.3)	(116.7)
Provisions	15	(6.0)	(4.3)
Lease liabilities	16	(73.1)	(91.5)
		(207.4)	(212.5)

Net current liabilities		(34.9)	(141.7)

Long-term borrowings	18	(318.1)	(381.1)
Other payables		-	(1.3)
Deferred tax liabilities		(41.9)	(39.7)
Provisions	15	(9.3)	(8.3)
Lease liabilities	16	(337.3)	(392.3)
		(706.6)	(822.7)

Total liabilities		(914.0)	(1,035.2)

Net assets		439.7	307.3

Equity
Share capital		215.2	165.9
Share premium		394.1	276.6
Other reserves		0.1	(3.9)
Retained earnings		(169.7)	(131.3)
Total equity		439.7	307.3

*Restated - refer to Note 2

The Restaurant Group plc
Consolidated statement of changes in equity

		Share	Share	Other	Retained	Total
		capital	premium	reserves	earnings
	Note	£m	£m	£m	£m	£m
Balance at 29 December 2019		138.2	249.7	(5.9)	19.9	401.9
Adjustment for IFRS 16 transition		-	-	-	(27.0)	(27.0)
Balance at 30 December 2019 (revised)		138.2	249.7	(5.9)	(7.1)	374.9

Loss for the year*		-	-	-	(124.2)	(124.2)
Other comprehensive income		-	-	0.1	-	0.1
Total comprehensive income/(loss)		-	-	0.1	(124.2)	(124.1)

Gross proceeds from share issue		27.7	29.3	-	-	57.0
Share issue transaction costs		-	(2.4)	-	-	(2.4)
Share-based payments		-	-	2.0	-	2.0
Deferred tax on share-based payments taken directly to other reserves		-	-	(0.1)	-	(0.1)


Balance at 27 December 2020		165.9	276.6	(3.9)	(131.3)	307.3
Loss for the year		-	-	-	(38.4)	(38.4)
Other comprehensive income		-	-	0.1	-	0.1
Total comprehensive income/(loss)		-	-	0.1	(38.4)	(38.3)
Gross proceeds from share issue		49.3	125.9	-	-	175.2
Share issue transaction costs		-	(8.4)	-	-	(8.4)
Share-based payments		-	-	3.4	-	3.4
Deferred tax on share-based payments taken directly to other reserves		-	-	0.5	-	0.5

Balance at 2 January 2022		215.2	394.1	0.1	(169.7)	439.7

*Restated - refer to Note 2

Other reserves represents the Group's share-based payment transactions, foreign currency translation reserve and shares held by the employee benefit trust.

The Restaurant Group plc
Consolidated cash flow statement
		53 weeks ended 2 January 2022	52 weeks ended 27 December 2020
	Note	£m	£m


Operating activities
Cash generated from operations	17	128.1	3.2
Interest received		-	0.2
Interest paid		(20.6)	(15.7)
Corporation tax (paid)/repayment		(2.6)	5.1
Payment against provisions	15	(5.9)	-
Payment of exceptional costs	7	(7.4)	(34.9)
Net cash flows from operating activities		91.6	(42.1)

Investing activities
Purchase of property, plant and equipment	13	(31.1)	(37.3)
Purchase of intangible assets	11	(2.7)	(1.9)
Proceeds from disposal of property, plant and equipment		-	3.3
Investment in associate		(0.3)	(0.6)
Net cash flows from investing activities		(34.1)	(36.5)

Financing activities
Net proceeds from issue of ordinary share capital		166.8	54.6
Repayment of obligations under leases	16	(48.7)	(30.8)
Repayment of overdraft	18	-	(10.0)
Repayment of borrowings	18	(383.6)	(24.0)
Drawdown of borrowings	18	330.0	80.6
Upfront loan facility fee paid	18	(14.6)	(0.9)
Derivative financial instruments fees paid	18	(1.6)	-
Net cash flows used in financing activities		48.3	69.5

Net increase/(decrease) in cash and cash equivalents		105.8	(9.1)

Cash and cash equivalents at the beginning of the year	18	40.7	49.8

Cash and cash equivalents at the end of the year	18	146.5	40.7

1 General Information

Corporate information

The Restaurant Group plc (the 'Company') is a public listed company incorporated and registered in Scotland. The consolidated financial statements of the Group for the year ended 2 January 2022 comprise the Company and its subsidiaries (together referred to as the 'Group'). The principal activity of the Group during the period continued to be the operation of pubs and restaurants.

The 2022 AGM will be held on 24 May 2022. The notice convening this meeting is expected to be sent to shareholders in mid-April, along with details regarding proxy voting, and will be made available at the same time at www.trgplc.com/investors/reports-presentations/.

Accounting policies

Basis of preparation

The information included in this preliminary announcement has been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union ("IFRS").

The consolidated financial statements are presented in pounds sterling and all values are rounded to the nearest hundred thousand except when otherwise indicated.

Going concern basis

The directors have adopted the going concern basis in preparing the Annual Report and Accounts after assessing the Group's principal risks including the risks arising from Covid-19.

The principal risks and uncertainties are disclosed in the Risk Committee Report. These have been considered by Directors in forming their opinion. The Directors have reviewed financial projections to 31 March 2023 (the review period), containing both a 'base case' and a 'stress case'. In the 'base case', the business is allowed to trade normally throughout the period without further trading restrictions, specifically the Group has forecast sales like-for-like performance to be broadly in line with the levels seen in the 33 weeks since trading resumed on the 17 May 2021, and cost inflation of c. 5%. However, in the 'stress case' a further reduction in sales relating to a further variant of Covid-19 is expected in Winter 2022, plus sensitivities have been included for a 5% reduction in sales, and an additional 1% of cost inflation. In addition, the Group has performed a reverse stress case which has shown that the Group could withstand a further 6% fall in sales compared to the stress case before the covenant levels would be exceeded on 31 March 2023, which in the context of the above the Directors consider remote.

The projections assume that tranches of the Term Loan facility will be repaid to improve balance sheet efficiency, subject to a governance process managed by the Board to ensure that appropriate liquidity is maintained throughout the review period.

In both base and stress case forecasts, the Group has sufficient liquidity and passes all relevant covenants within the review period. These covenants consist of a minimum liquidity covenant of £40.0m until the end of December 2022, and a leverage covenant test in December 2022, and March 2023. Further details of the covenants are in Note 18 to the Financial Statements.

Following a review of the forecasts above, the Board has concluded that the going concern basis remains appropriate throughout the review period.

2 Restatement of comparatives

As a result of an FRC review of the 2020 Annual Report, the Directors reconsidered the accounting for capitalised right of use asset depreciation of £9.4m that arose during the fit-out period for four new Concessions sites. Part of that amount (£5.3m pre-tax) should have been considered as abnormal wastage and expensed in the prior year income statement as an exceptional item given that it related to a period during which the fit-out was interrupted by the pandemic. The impact of correcting this error is shown below.

	As originally disclosed	Adjustment	As restated
	£m	£m	£m
Consolidated income statement for the 52 weeks ended 27 December 2020
Exceptional cost of sales	(32.5)	(5.3)	(37.8)
Exceptional tax on profit/(loss) from ordinary activities	(4.3)	1.0	(3.3)
Exceptional loss for the year	(44.4)	(4.3)	(48.7)
Loss for the year	(119.9)	(4.3)	(124.2)

Consolidated balance sheet at 27 December 2020
Property, plant and equipment	305.6	(5.3)	300.3
Deferred tax liabilities	(40.7)	1.0	(39.7)
Retained earnings	(127.0)	(4.3)	(131.3)

The above restatement has no effect on the 2020 pre-exceptional measures of Loss for the year (before or after tax) and EBITDA.

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 segments of:

- Wagamama

- Pubs

- Leisure

- Concessions

The economic characteristics of these businesses, including Gross Margin, Net Margin, EBITDA and Sales trajectory, have been reviewed by the Directors along with the non-financial criteria of IFRS 8. It is the Directors' judgment that all of the segments meet the requirements for aggregation under IFRS 8.

Geographical Segments

The Group trades primarily within the United Kingdom and generates revenue from the operation of 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.

4 Reconciliation to underlying 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.

	2021 Trading IAS17		Adjustments for IFRS 16	2021 Trading IFRS 16	Exceptional Items (Note 7)	2021 Total IFRS 16	2020 Total IFRS 16*
	£m		£m	£m	£m	£m	£m
Revenue		636.6	-	636.6	-	636.6	459.8
Cost of sales		(542.5)	(5.7)	(548.2)	(21.4)	(569.6)	(508.4)

Gross profit/(loss)		94.1	(5.7)	88.4	(21.4)	67.0	(48.6)
Share of result of associate		(0.3)	-	(0.3)	-	(0.3)	(0.6)
Administration costs		(51.0)	-	(51.0)	(1.6)	(52.6)	(45.9)

Operating profit/(loss)		42.8	(5.7)	37.1	(23.0)	14.1	(95.1)
Interest payable		(26.7)	(19.0)	(45.7)	(1.9)	(47.6)	(38.2)
Interest receivable		0.5	0.1	0.6	-	0.6	0.4
Profit/(loss) before tax		16.6	(24.6)	(8.0)	(24.9)	(32.9)	(132.9)


EBITDA		81.2	34.0	115.2	2.9	118.1	150.9
Depreciation, amortisation and impairment		(38.4)	(39.7)	(78.1)	(25.9)	(104.0)	(246.0)
Operating profit/(loss)		42.8	(5.7)	37.1	(23.0)	14.1	(95.1)

*Restated- refer to Note 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 'Underlying' basis to the IFRS 16 basis of accounting:

	2021	2020
	£m	£m
Underlying Trading profit/(loss) before tax	16.6	(47.9)
Removal of rent expense	34.0	44.7
Net change in depreciation	(39.7)	(63.9)
Net change in net interest payable	(19.0)	(20.6)
Interest receivable on net investments in subleases	0.1	0.2
Trading loss before tax under IFRS 16	(8.0)	(87.5)

5 Profit for the year	2021	2020
	£m	£m
Profit for the year after exceptional items has been arrived at after charging/(crediting):
Amortisation (Note 11)	2.3	2.5
Depreciation on right of use asset (Note 12)	39.9	64.1
Depreciation on property, plant and equipment (Note 13)	35.9	36.5
Loss on sale of property, plant and equipment	2.4	-
Impairment of property, plant and equipment and software (Note 13)	12.6	21.2
Impairment of right of use asset (Note 12)	13.3	121.7
Impairment on net investments in subleases	0.1	6.6
Purchases of food, beverages and consumables	121.0	99.5
Inventory write downs	0.5	3.6
Staff costs (Note 6)	248.3	202.9
Covid-19 government grants	10.9	-

Variable rents	17.6	3.3
Rental income	(0.2)	(0.7)
Net rental costs	17.4	2.6

6 Staff costs

a) Average staff numbers during the year (including Directors)	2021	2020
Restaurant staff	14,415	15,843
Administration staff	356	425
	14,771	16,268

	2021	2020
b) Staff costs (including Directors) comprise:*	£m	£m
Wages and salaries	220.5	163.5
Social security costs	17.9	17.8
Share-based payments	3.4	2.0
Pension costs and salary supplements	3.8	4.4
	245.6	187.7

	2021	2020
c) Exceptional Staff Costs	£m	£m
Severance pay	2.7	15.2

	2021	2020
d) Directors' remuneration	£m	£m
Emoluments	2.3	1.3
Salary supplements	0.1	0.1
	2.4	1.4
Charge in respect of share-based payments	0.9	0.5
	3.3	1.9

*This is a net amount after Coronavirus Job Retention Scheme payments of £43.2m (2020: £123.5m).

7 Exceptional items
	2021	2020*
	£m	£m

Included within cost of sales:
- Impairment charges relating to trading sites	19.6	37.0
- Abnormal wastage (Note 2)	-	5.3
- Estate closure	0.6	5.5
- Disposal of assets in administration	-	9.9
- Estate restructuring	1.2	(19.0)
- Remeasurement of other provision	-	(0.9)
	21.4	37.8
Included within administration costs:

- Integration costs	-	3.2
- Professional fees	1.6	3.2
- Disposal of US operation	-	1.2
	1.6	7.6

Included within interest payable :
- Refinancing costs	1.9	-

Exceptional items before tax	24.9	45.4

Impact of tax change	12.2	4.8
Tax effect of exceptional Items	(2.4)	(1.5)

Net exceptional items for the year	34.7	48.7

*Restated - refer to Note 2

Impairment of assets

An impairment charge has been recorded against certain assets to reflect forecast results at several trading sites. This £19.6m charge comprises of an impairment of right of use assets of £9.5m (Note 12) and an impairment of property, plant and equipment of £10.1m (Note 13).

Further details on the impairment of non-current assets are given in Note 14.

Estate restructuring

The Group has permanently closed a significant number of sites, following the impact of the coronavirus pandemic. As a result of these closures, the Group has recognised a number of material and non-recurring charges and credits amounting to £1.2m.

The key elements are onerous property cost provisions of £8.6m, payments to exit sites of £2.7m, staff redundancies of £2.7m, Impairment of non-trading sites of £6.3m and other costs of £0.9m.

This has been partially offset by lease liabilities exited amounting to a net credit of £4.9m, as well as rent concessions achieved of £15.1m.

Professional fees

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

Refinancing costs

An exceptional charge of £1.9m has been recognised during the year as a result of the write off of capitalised loan fees on the previous facilities.

Tax rate change

The 2021 Budget in March 2021 announced an increase in the UK corporation tax rate to 25% with effect from 1 April 2023. This was substantively enacted on 24 May 2021. The total impact of the increase in tax rate on deferred tax was £12.2m, of which £14.8m related to the deferred tax asset associated with intangibles on the Wagamama trademark. This has been recognised as an exceptional item in the tax charge for the year as it is unrelated to underlying trading.

8 Net finance charges


	2021			2020
	£m			£m

Bank interest payable		22.3	15.6
Unwinding of discount on lease liabilities		19.6	21.0
Amortisation of facility fees		3.3	1.6
Other interest payable		0.5	-
Exceptional refinancing cost (Note 7)		1.9	-
Trading borrowing costs		47.6	38.2

Unwinding of discounts on investments in subleases		(0.1)	(0.2)
Gain on derivative financial instrument		(0.5)	-
Other interest receivable		-	(0.2)
Total interest receivable		(0.6)	(0.4)

Total net finance charges		47.0	37.8

9 Tax
		Trading		Exceptional		Total		Total
		2021		2021		2021		2020*
a) The tax charge comprises:		£m		£m		£m		£m

Current tax
UK corporation tax		0.7		(0.7)		-		(9.5)
Adjustments in respect of previous years		2.8		-		2.8		0.7
		3.5		(0.7)		2.8		(8.8)


Deferred tax
Current year		(2.6)		(1.9)		(4.5)		(1.0)
Origination and reversal of temporary differences		-		-		-		(5.4)
Adjustments in respect of previous years		(5.2)		0.2		(5.0)		(0.9)
Charge in respect of rate change on deferred tax liability		-		12.2		12.2		4.5
Charge in respect of fixed asset impairment		-		-		-		2.9
		(7.8)		10.5		2.7		0.1

Total tax (credit)/charge for the year		(4.3)		9.8		5.5		(8.7)


b) Factors affecting the tax charge for the year

	The tax charged for the year varies from the standard UK corporation tax rate of 19% (2020: 19%) due to the following factors:

			Trading		Exceptional		Total		Total
			2021		2021		2021		2020*
			£m		£m		£m		£m

Loss on ordinary activities before tax			(8.0)		(24.9)		(32.9)		(132.9)

Loss on ordinary activities before tax multiplied
by the standard UK corporation tax rate of 19% (2020: 19%)			(1.5)		(4.7)		(6.2)		(25.3)

Effects of:
Depreciation/impairment on non-qualifying assets			1.3		0.6		1.9		4.9
Expenses not deductible for tax purposes			0.5		1.0		1.5		0.7
Movement on unrecognised deferred tax asset			(2.2)		0.6		(1.6)		2.4
Charge in respect of rate change on deferred tax liability			-		12.2		12.2		4.6
Effect of overseas tax rates			-		(0.1)		(0.1)		-
Adjustment in respect of previous years			(2.4)		0.2		(2.2)		(0.2)
Balances eliminated on entering administration			-		-		-		3.9
Share options			-		-		-		0.4
Movement in capital loss			-		-		-		(0.1)
Total tax (credit)/charge for the year			(4.3)		9.8		5.5		(8.7)

*Restated - refer to Note 2

The 2021 Budget in March this year announced an increase in the UK corporation tax rate to 25% with effect from 1 April 2023. This was substantively enacted on 24 May 2021.

10 Earnings per share
	2021	2020*

Weighted average ordinary shares for the purposes of basic earnings per share	722,182,407	562,652,429
Effect of dilution - share options	-	-
Diluted weighted average number of shares	722,182,407	562,652,429

	2021	2020
	£m	£m
Loss for the year after tax	(38.4)	(124.2)
Effect of exceptional items on earnings for the year	34.7	48.7
Adjusted loss for the year after tax	(3.7)	(75.5)

	2021	2020
	pence	pence
Basic loss per share for the year	(5.3)	(22.1)
Effect of exceptional items on earnings for the year per share	4.8	8.7
Adjusted loss per share	(0.5)	(13.4)

Diluted earnings per share on loss for the year	(5.3)	(22.1)
Diluted earnings per share on adjusted loss for the year	(0.5)	(13.4)

Diluted earnings per share information is based on adjusting the weighted average number of shares for the purpose of basic earnings 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. Anti-dilutive shares that reduce the loss per share have been excluded from this calculation. There are 267,076 (2020: 84,176) share options excluded from the diluted earnings per share calculation because they would be anti-dilutive.

* The adjusted diluted earnings per share for the 52 weeks ended 27 December 2020 has been re-presented to take account of a correction in the calculation of dilutive shares for that period and a change in the presented loss after tax (refer to Note 2). No other measures have been affected.

11 Intangible assets		Trademarks and	Franchise	Software and IT
	Goodwill	licences	agreements	development	Total
	£m	£m	£m	£m	£m
Cost
At 29 December 2019	357.1	236.0	21.9	4.8	619.8
Additions	-	-	-	1.9	1.9
Disposals	(14.5)	-	-	(0.3)	(14.8)
Reclassifications	-	-	-	(1.1)	(1.1)
At 27 December 2020	342.6	236.0	21.9	5.3	605.8

Accumulated amortisation and impairment
At 29 December 2019	-	-	1.5	1.5	3.0
Charged during the year	-	-	1.4	1.1	2.5
Reclassifications	-	-	-	1.1	1.1
Disposals	-	-	-	(0.3)	(0.3)
At 27 December 2020	-	-	2.9	3.4	6.3

Cost
At 27 December 2020	342.6	236.0	21.9	5.3	605.8
Additions	-	-	-	2.7	2.7
Disposals	-	-	-	(0.2)	(0.2)
At 2 January 2022	342.6	236.0	21.9	7.8	608.3

Accumulated amortisation and impairment
At 27 December 2020	-	-	2.9	3.4	6.3
Charged during the year	-	-	1.5	0.8	2.3
Disposals	-	-	-	(0.2)	(0.2)
At 2 January 2022	-	-	4.4	4.0	8.4

Net book value as at 27 December 2020	342.6	236.0	19.0	1.9	599.5
Net book value as at 2 January 2022	342.6	236.0	17.5	3.8	599.9

The recoverable amount of the goodwill and trademark CGUs is £1,337.6m as at 2 January 2022 (£1,589.0m as at 27 December 2020). The recoverable amount has been based on value in use estimates using forecasts approved by the Board. The projected cash flows have been discounted using a rate based on the Group's pre-tax weighted average cost of capital of 10.6% (2020: 8.7%) that reflects the risk of these assets. Cash flows are extrapolated in perpetuity with an annual growth rate of 2-3% (2020: 2-3%). It was concluded that the value in use for each CGU is higher than its carrying value and therefore did not require impairment.

The carrying amount of goodwill and indefinite life intangible assets allocated to groups of CGUs is presented below along with the group of CGU's recoverable amounts.

		Goodwill	Total intangibles	Recoverable Amount
	Trademarks & Licenses	Goodwill	Total intangibles	Recoverable Amount
	£m	£m	£m	£m
Wagamama	236.0	315.5	551.5	1,079.7
Brunning & Price	-	15.2	15.2	213.5
Blubeckers	-	11.3	11.3	42.6
Ribble Valley Inns	-	0.6	0.6	1.8
	236.0	342.6	578.6	1,337.6

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 outlined in the stress case scenario at Note 1 as well as risk weightings applied to cash flows, discount rates used and terminal growth rates as outlined in Note 14. The sensitivity analysis show that no reasonably possible movements in these assumptions would lead to an impairment.

The Company has assessed that the Wagamama trademark of £236.0m (2020: £236.0m) has an indefinite useful life, and therefore is not amortising this asset. If the trademark was amortised on a straight line basis over a period of 25 years, an additional £9.4m (2020: £9.4m) of depreciation would be recognised.

12 Right of use assets

Set out below are the right of use assets recognised in the Group's balance sheet and movements therein during the year. All assets relate to access to and use of property and there is, therefore, no analysis of assets into different classes of use.

	2021	2020
	£m	£m
Right of use assets at beginning of year	368.9	819.5
Additions	18.4	18.0
Disposals	(4.6)	(167.8)
Depreciation	(39.9)	(73.5)
Remeasurements	(40.1)	(105.6)
Impairment (Note 7)	(13.3)	(121.7)
Right of use assets at reporting date	289.4	368.9

When indicators of impairment exist, right of use assets are assessed for impairment. As described in Note 14, all non-current assets were assessed at the end of 2021.

13 Property, plant and equipment		Fixtures,
	Land and	equipment
	buildings	and vehicles	Total
	£m	£m	£m
Cost
At 29 December 2019	647.3	265.3	912.6
Adjustment on transition to IFRS 16	(3.2)	-	(3.2)
At 30 December 2019 (Restated)	644.1	265.3	909.4
Additions*	22.6	17.9	40.5
Disposals	(96.3)	(46.6)	(142.9)
Reclassifications	-	1.1	1.1
At 27 December 2020*	570.4	237.7	808.1

Accumulated depreciation and impairment
At 29 December 2019	380.7	196.2	576.9
Adjustment on transition to IFRS 16	(1.3)	-	(1.3)
At 30 December 2019 (Restated)	379.4	196.2	575.6
Provided during the year	16.4	20.1	36.5
Impairment	23.0	8.1	31.1
Impairment reversals	(7.7)	(2.2)	(9.9)
Disposals	(81.7)	(42.7)	(124.4)
Reclassifications	-	(1.1)	(1.1)
At 27 December 2020	329.4	178.4	507.8

Cost
At 27 December 2020	570.4	237.7	808.1
Additions	19.3	16.4	35.7
Disposals	(41.0)	(82.3)	(123.3)
At 2 January 2022	548.7	171.8	720.5

Accumulated depreciation and impairment
At 27 December 2020	329.4	178.4	507.8
Provided during the year	14.1	21.8	35.9
Impairment (Note 7)	13.0	11.1	24.1
Impairment reversals (Note 7)	(3.7)	(7.8)	(11.5)
Disposals	(39.5)	(81.4)	(120.9)
At 2 January 2022	313.3	122.1	435.4
Net book value as At 27 December 2020*	241.0	59.3	300.3
Net book value as At 2 January 2022	235.4	49.7	285.1

*Restated- refer to Note 2

The Group has carried out impairment testing of property, plant and equipment as described in Note 14.

The difference between the purchase of property plant and equipment in the cash flow statement and the additions to property plant and equipment in Note 13 relates entirely to fixed asset accruals.

	2021	2020
Net book value of land and buildings:	£m	£m

Freehold	103.2	98.8
Long leasehold (leasehold improvements)	3.7	3.7
Short leasehold (leasehold improvements)	128.5	138.5
	235.4	241.0

Capital commitments

At 2 January 2022, the Group had commitments of £Nil (2020: £Nil).

14 Impairment reviews

The significant trading disruption in the period is judged to be an indicator of potential impairment of assets and, accordingly, the Directors have chosen to assess all non-financial assets for impairment in accordance with IAS 36.

Approach and assumptions

Our approach to impairment reviews is unchanged from that applied in previous periods and relies primarily upon "value in use" tests, although for freehold sites an independent estimate of market value by site has also been obtained as at 27 December 2020 and, where this is higher than the value in use, we rely on freehold values in our impairment reviews. These valuations are not expected to have materially moved in the period and therefore have been used for the 2021 impairment calculation.

Discount rates used in the value in use calculations are estimated with reference to our Group weighted average cost of capital. For 2021, we have applied the discount rate of 10.6% to all assets (2020: 8.7%). The higher discount rate used in 2021, reflects that a greater proportion of the capital structure is equity following the capital raise which requires a higher rate of return.

For the current period, value in use estimates have been prepared on the basis of the forecast described above in Note 1 under the heading "Going concern basis". The most significant assumptions and estimates relate to revenue recovery forecast on site-by-site cash flows. It is assumed that our businesses, with the exception of Concessions, maintain a steady recovery in revenues, with Wagamama being the quickest to recover. Concessions is assumed to recover more slowly, however passenger numbers are forecast to return to 2019 levels in 2024.

Results of impairment review

Impairment has been recorded in a number of specific CGUs, as well as impairment reversals. A net impairment charge of £25.9m (2020: £142.9m) has been recognised, of which £12.6m was recorded against Property, Plant & Equipment ("PPE") and a further £13.3m against right of use assets. This is a gross impairment charge of £49.2m offset by impairment reversals of £23.3m.

No impairment was recorded against the Group's intangible assets (including goodwill).

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 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 as outlined the going concern basis in Note 1(b).

The sensitivity analysis of forecast cash flows with a 5% reduction in sales would give rise to an additional Group impairment of approximately £44.6m across PPE and right of use assets, made up of an increase in impairment of £33.5m and a reduction in impairment reversals of £11.1m. Furthermore, this reduction in sales would also give rise to an impairment to the Goodwill in Blubeckers Limited and Ribble Valley Inns Limited of £10.1m, and £1.6m respectively. An increase in inflation rate of 2% would give rise to additional impairment of £27.9m, made up of an increase in the impairment expense of £20.6m and a reduction in the impairment reversals of £7.3m. A decrease in inflation rate of 2% would give rise to a reduction in impairment of £19.1m, made up of a reduction in the impairment expense of £11.3m and a increase in the impairment reversals of £7.8m. An increase in discount rate of 1% would give rise to additional impairment of approximately £2.5m, made up of an increase in the impairment expense of £1.6m and a reduction in the impairment reversals of £0.9m.

Additionally, we have conducted sensitivity assessments on terminal growth rate, freehold valuations, and risk factors but a reasonably possible change was not material to the impairment charge.

15 Provisions
	2021	2020
	£m	£m
Property cost provisions	12.9	11.3
Other provisions	2.4	1.3
Balance at the end of the year	15.3	12.6
Analysed as:
Amount due for settlement within one year	6.0	4.3
Amount due for settlement after one year	9.3	8.3
	15.3	12.6

	Property cost provisions	Other	Total


	£m	£m	£m

At 27 December 2020	11.3	1.3	12.6
Remeasurement	6.2	6.2	2.4
Amounts utilised	(4.6)	(1.3)	(5.9)
Unwinding of discount	-	-	-
At 2 January 2022	12.9	2.4	15.3

Property cost provisions

A provision is made for property-related costs for the period that a sublet or assignment of the lease is not expected to be possible. The amount and timing of the cash outflows are subject to uncertainty. The average period over which the provision is expected to be utilised is 2.3 years which is a key assumption in the valuation of the provision. An increase of one year in the expected period over which a sublet or assignment is not expected to be possible would result in an increase in the provision of £3.4m, whilst a decrease would result in a reduction on the provision of £3.5m amount.

Onerous contract and other property provisions are discounted using a discount rate of 1.0% (2020: 1.0%) based on an approximation for the time value of money.

Other provisions

Other provisions includes a best estimate of the liability in respect of a constructive obligation to meet certain lease payments of a restaurant operated by an associate, the liability for which is considered probable on the closure of that restaurant, most likely within a year.

16 Lease liabilities and net investments in subleases

The Group is both a lessee and lessor of property.

(a) Group as lessee

Set out below are the movements in the carrying amount of lease liabilities during the period. All leases relate to access to and use of property.

	2021	2020
	£m	£m
At 27 December 2020	483.8	933.4
Additions	18.4	18.0
Unwinding of discount on lease liabilities	19.6	21.0
Cash payments made	(48.7)	(30.8)
Liabilities extinguished in disposals	(9.5)	(335.7)
Remeasurements	(53.2)	(122.1)
At 2 January 2022	410.4	483.8
Analysed as:
Amount due for settlement within one year	73.1	91.5
Amount due for settlement after one year	337.3	392.3
	410.4	483.8

The Group leases various buildings which are used for the purpose of operating pubs and restaurants. The leases are non-cancellable operating leases with varying terms and renewal rights, and include variable payments that are not fixed in amount but based upon a percentage of sales.

The total value of expense relating to low value leases in 2021 was £7,793 (2020: £61,588).

In addition to the unwinding of discount on lease liabilities noted in the above table and depreciation on right of use assets, the Group is exposed to leases where future cash outflows are not reflected in the lease liabilities because the agreements are based on variable lease payments in the form of turnover rent. The Group also incurred £0.6m (2020: £2.3m) of costs relating to short term leases.

As at 2 January 2022, the Group was not committed to any leases with future cash outflows which had not yet commenced.

Sensitivity to changes in assumptions

Termination Options

Some leases contain termination options exercisable by group before the end of the non-cancellable period. These extension and termination options held are exercisable only by the group and not by the lessors. The group assesses at lease commencement whether it is reasonably certain to exercise the extension or termination options. The group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant change in circumstances within its control.

The group has estimated that the potential future lease payments, should it exercise the termination options, would result in a decrease in cash outflows of £105.0m.

Discount Rate

Lease liabilities under IFRS 16 are initially recorded at the present value of future lease payments discounted using the Group's incremental borrowing rate, which we estimate with reference to our debt facilities and observed bond yields, calculated on a lease by lease basis. Lease liabilities are subsequently unwound using the same discount rate and included in finance expense in the Group Profit and Loss. Increasing the discount rate by 1% would lead to an increased interest expense of £0.5m, while decreasing by 1% would lead to a decrease of £0.6m.

(b) Group as lessor

All income relates to fixed rental receipts. Movements in the net investment in lease assets included income of £0.9m and an expected credit loss provision of £2.8m. There was no income from leases classified as operating leases.

Finance leases

Undiscounted lease receipts relating to finance leases for future years are set out in the table below. The total in the table for Finance Leases is greater than the balance sheet amount due to the effects of discounting and provisions for expected credit losses. There is no undiscounted unguaranteed residual value within the amounts recognised.

	2021	2020
	£m	£m
Amounts receivable in the next year	1.1	0.8
Amounts receivable in 1-2 years	0.9	0.6
Amounts receivable in 2-3 years	0.9	0.4
Amounts receivable in 3-4 years	0.9	0.4
Amounts receivable in 4-5 years	0.8	0.4
Amounts receivable after 5 years from the balance sheet date	6.5	4.0
Total	11.1	6.6

Operating leases

	2021	2020
	£m	£m
Amounts receivable in the next year	0.4	0.4
Amounts receivable in 1-2 years	0.4	0.3
Amounts receivable in 2-3 years	0.3	0.2
Amounts receivable in 3-4 years	0.3	0.1
Amounts receivable in 4-5 years	0.3	0.1
Amounts receivable after 5 years from the balance sheet date	3.9	0.8
Total	5.6	1.9

17 Reconciliation of profit before tax to cash generated from operations

	2021	2020
	£m	£m
Loss on ordinary activities before tax	(32.9)	(132.9)
Net interest payable	45.1	37.8
Exceptional items (Note 7)*	24.9	45.4
Share of results of associate	0.3	0.6
Share-based payments	3.4	2.0
Depreciation and amortisation	78.1	103.1
(Increase)/decrease in inventory	(0.9)	3.6
Decrease in receivables	5.1	15.9
Increase/(decrease) in creditors	5.0	(72.3)
Cash generated from operations	128.1	3.2

*Restated- refer to Note 2

Of the cash and cash equivalents at 2 January 2022, £40.0m is maintained in support of minimum liquidity requirements under borrowing covenants.

	2021	2020
Reconciliation of net cash from operating activities to free cash flow	£m	£m
Net cash flows from operating activities	91.6	(42.1)
Payment on exceptionals	7.4	34.9
Payment of obligations under leases	(48.7)	(30.8)
Refurbishment and maintenance expenditure	(19.0)	(21.9)
Payment against provisions	13.4	9.3
Free cash flow	44.7	(50.6)

18 Financial instruments and derivatives

Financial assets

The financial assets of the Group, which are classified at amortised cost and fair value through profit and loss, comprise:

	2021	2020*
	£m	£m
Cash and cash equivalents	146.5	40.7
Other receivables	18.6	19.1
Financial assets at amortised cost	165.1	59.8
Derivative financial instrument	2.1	-
Financial assets at fair value through profit and loss	2.1	-
Total financial assets	167.2	59.8

*Restated to include long term other receivables

Cash and cash equivalents are comprised of cash at bank and cash floats held on site. The cash and cash equivalents balance includes £5.4m (2020: £0.7m) of credit card receipts that were cleared post year end.

Cash and cash equivalents also include £0.9m (2020: £0.8m) held on account in respect of deposits paid by tenants under the terms of their rental agreement.

During the period, the Group entered into a derivative in the form of an interest rate cap which is measured at fair value through the profit and loss. The interest rate cap has an effective date of November 2022 to November 2025, for a value of £100.0m. The strike price of the interest rate cap is 0.75%. Net gains or losses associated to the movement in the fair value of the interest rate cap do not include any interest paid relating to the interest rate cap.

	2021	2020
	£m	£m
Trade and other payables	128.3	116.7
Lease liabilities	73.1	91.5
Short-term financial liabilities	201.4	208.2
Long-term borrowings - at fixed interest rates	-	225.0
Long-term borrowings - at floating interest rates¹	330.0	158.6
Bank fees	(11.9)	(2.5)
Lease liabilities	337.3	392.3
Other payables	-	1.3
Long-term financial liabilities	655.4	774.7
Total financial liabilities	856.8	982.9

¹Total financial liabilities attracting interest were £330.0m (2020: £383.6m). Interest is payable at floating interest rates which fluctuate and are dependent on LIBOR and base rate. The average rate of interest charged during the year on the Group's debt was 5.70% (2020: 3.50%).

On 2021 results, net interest was covered 2.5 times (2020: 1.4 times) by earnings before interest, tax, depreciation and exceptional items. Based on year-end debt and earnings for 2021, a 1% rise in interest rates would reduce interest cover to 2.3 times (2020: 1.4 times).

At 2 January 2022, the interest rate on the Term Loan is 6.5% above LIBOR. A commitment fee of 1.2% is charged on the undrawn Revolving Credit Facility. The maturity dates on the Group's debt facilities are as follows: May 2026 for the Term Loan; and May 2025 for the Revolving Credit Facility.

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while looking to maximise returns to shareholders. The capital structure of the Group consists of equity (comprising issued share capital, other reserves and retained earnings), borrowings and cash and cash equivalents. The Group monitors its capital structure on a regular basis through cash flow projections and consideration of the cost of financing its capital.

The Group is subject to externally imposed capital requirements in respect of the Term Loan and Revolving Credit Facility. The Group is required to maintain a net debt to EBITDA ratio and a minimum liquidity requirement of £40.0m. The leverage covenants do not take effect until December 2022, subject to maintaining the £40.0m minimum liquidity requirement.

Secured liabilities and assets pledged as security

The Group has pledged certain assets in order to fulfil the collateral requirements of the Term Loan and Revolving Credit Facility.

The Term Loan and Revolving Credit Facility are secured by a fixed charge over the shares and intellectual property of TRG (Holdings) Limited, The Restaurant Group (UK) Limited, Blubeckers Limited, Brunning and Price Limited, TRG Concessions Limited, Wagamama Limited and Wagamama Group Limited, as well as a floating charge on all present and future assets, property, business, undertaking and uncalled capital.

The maturity profile of anticipated gross future cash flows, including interest, relating to the Group's non-derivative financial liabilities, on an undiscounted basis, are set out below:

At 2 January 2022

	Trade and other payables excluding tax	Fixed rate loan	Floating rate loan	Lease liability debt	Total
	£m	£m	£m	£m	£m
Within one year	128.3	-	24.6	74.6	227.5
Within one to two years	-	-	24.6	58.4	83.0
Within two to three years	-	-	24.6	53.4	78.0
Within three to four years	-	-	23.7	47.8	71.5
Within four to five years	-	-	353.1	40.2	393.3
After five years	-	-	-	262.7	262.7
	128.3	-	450.6	537.1	1,116.0

At 27 December 2020

	Trade and other payables excluding tax	Fixed rate loan	Floating rate loan	Lease liability debt	Total
	£m	£m	£m	£m	£m
Within one year	116.7	9.6	14.0	94.1	234.4
Within one to two years	-	4.6	144.6	65.0	214.2
Within two to three years	-	225.2	-	61.1	286.3
Within three to four years	-	-	-	56.1	56.1
Within four to five years	-	-	-	52.0	52.0
After five years	-	-	-	289.9	289.9
	116.7	239.4	158.6	618.2	1,132.9

Fair value of financial assets and liabilities

Financial assets at fair value

There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior period.

The Group has no financial assets or liabilities that require measurement using Level 2 or Level 3 measurement techniques as defined by IFRS 13.

Long-term borrowings

	At 2 January 2022			At 27 December 2020
	Drawn	Available facility	Total facility	Drawn	Available facility	Total facility
	£m	£m	£m	£m	£m	£m
High yield bond	-	-	-	225.0	-	225.0
Term loan	330.0	-	330.0	-	-	-
Revolving credit facilities	-	111.6	120.0	108.6	78.0	195.0
CLBILS*	-	-	-	50.0	-	50.0
Total banking facilities	330.0	111.6	450.0	383.6	78.0	470.0
Unamortised loan fees	(11.9)			(2.5)
Long-term borrowings	318.1			381.1

Cash and cash equivalents	146.5	146.5		40.7	40.7
Pre-lease liability net debt	171.6			340.4
Lease liabilities	410.4			483.8
Net debt	582.0			824.2
Cash headroom		258.1			118.7

The Group has covenants over both the term loan and the revolving credit facilities (RCF). Until 31 December 2022, both facilities require a minimum liquidity level of £40.0m which is measured as the total of cash and undrawn facilities. On the term loan, from 31 December 2022, the covenant requires total net debt to be no more than 5.0x EBITDA, reducing to 4.5x at June 2023. On the RCF, the Group is required to maintain total net debt to EBITDA below 5.5x at 31 December 2022, and 4.75x at 30 June 2023. In addition, the ratio of RCF debt to EBITDA can be no more than 1.5x from June 2022, when the RCF is drawn.

The available revolving credit facilities are reduced from the total facility by £8.4m of letters of credit issued to external suppliers

*CLBILS was fully cleared in May 2021.

	Cash and cash equivalents	Overdraft	Bank loans falling due after one year	Finance leases	Lease liabilities	Total
	£m	£m	£m	£m	£m	£m
Balance as at 29 December 2019	49.8	(10.0)	(323.8)	(2.6)	-	(286.6)
Adjustment on transition to IFRS 16	-	-	-	2.6	(933.4)	(930.8)
Opening balance as at 30 December 2019	49.8	(10.0)	(323.8)	-	(933.4)	(1,217.4)
Net drawdown of borrowings	56.6	-	(56.6)	-	-	-
Repayment of overdraft	(10.0)	10.0	-	-	-	-
Upfront loan facility fee paid	(0.9)	-	0.9	-	-	-
Repayment of obligations under leases	(30.8)	-	-	-	30.8	-
Non-cash movements in the year	-	-	(1.6)	-	418.8	417.2
Net cash outflow	(24.0)	-	-	-	-	(24.0)
Balance as at 27 December 2020	40.7	-	(381.1)	-	(483.8)	(824.2)
Net repayments of borrowings	(53.6)	-	53.6	-	-	-
Upfront loan facility fee paid	(14.6)	-	14.6	-	-	-
Repayment of obligations under leases	(48.7)	-	-	-	48.7	-
Non-cash movements in the year	-	-	(5.2)	-	24.7	19.5
Net cash inflow	222.7	-	-	-	-	222.7
Balance as at 2 January 2022	146.5	-	(318.1)	-	(410.4)	(582.0)

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.

Publication of Annual Report

This preliminary statement is not being posted to shareholders. The Annual Report will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company. Copies of the Annual Report will be available from the Company's website in March 2022.

Responsibility statement of the directors on the Annual Report

The responsibility statement below has been prepared in connection with the Group's full annual report for the year ended 2 January 2022. Certain parts of the annual report are not included within this announcement.

We confirm that, to the best of our knowledge

• the financial statements, prepared in accordance with the International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

• the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board

Andy Hornby Kirk Davis

Chief Executive Officer Chief Financial Officer

15 March 2022 15 March 2022

The directors believe the Adjusted Performance Metrics used within this report, and defined below, provide additional useful information for shareholders to evaluate and compare the performance of the business from period to period. These are also the KPIs used by the directors to assess performance of the business. The adjusted metrics are reconciled to the statutory results for the year on the face of the income statement and the relevant supporting notes.

Measure	Description
Adjusted diluted EPS	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	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	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 prior to the impact of Exceptional items.
Adjusted operating margin	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	Calculated by taking the profit before tax of the business pre-Exceptional items.
Adjusted tax charge	Calculated by taking the tax of the business pre-exceptional items.
Effective adjusted tax rate	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	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	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	This is the Capital expenditure relating to profit-generating projects upon which we expect a commercial return in future years.
EBITDA	Earnings before interest, tax, depreciation, amortisation and impairment.
Exceptional items	Those items that are material, and not related to the underlying trade of the business.
Free cash flow	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	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 2019. Sites that are closed, disposed or disrupted during a financial year are excluded from the like-for-like sales calculation.
Leverage	Net Debt/EBIDTA ratio (pre-IFRS 16 and exceptional charges)
Minimum liquidity	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	Net debt is calculated as the net of all borrowings less cash and cash equivalents, plus the IFRS 16 Lease liabilities.
Outlet EBITDA	Pre-IFRS 16 and Exceptional EBITDA directly attributable to individual sites and therefore excluding corporate and central costs.
Pre-lease liability net debt	As above Net Debt but excluding the IFRS 16 Lease liabilities.
Refurbishment and maintenance expenditure	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)	Outlet EBITDA (pre-IFRS 16 and exceptional charges)/initial capital invested.
Trading business	Represents the performance of the business before exceptional items.
TSR	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.

[1] Pre-IFRS 16 and exceptional charges

[2] Pre IFRS 16 Adjustment and exceptional charges

[3] Return on invested capital (ROIC) defined by 2021 outlet EBITDA/initial capex invested grossed up for 12 months. i.e. 2021 outlet EBITDA is for the 7 month period June to December 2021. Returns have also been adjusted to take out the VAT benefit and property grants received in the respective period

[4] Pub restaurants returns EBITDA assumed on leasehold basis at 6% interest on freehold component of investment

[5] Includes electricity, gas & LPG. Where we control the specific supply point for contracting. Excludes landlord supplies

[6] Net debt to EBITDA ratio (Pre IFRS 16 Adjustment and exceptional charges)

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Company Announcements

Full Year Results

Priorities

Parameters

(1) Investment in customer offer

Refurbishment and maintenance capex within a range of £25m to £35m

(2) Maintain a strong balance sheet

Target leverage[6] below 1.5x in the medium term

(3) Wagamama and Pubs new site expansion

Deliver against targeted returns criteria:

o Wagamama >40% ROIC

(4) Selectively consider inorganic growth opportunities

Deliver long-term shareholder value