TheRestaurantGroupplc
Annualreport2007
Growingbrandsnationwide TheRestaurantGroupplcoperates
330restaurantsandpubrestaurants
predominantlyinleisurelocations
andairports.Itsprimaryofferings
areFrankie&Benny’s,Chiquito,
Garfunkel’s,Blubeckersand
Brunning&Price.
Frankie&Benny’s
20
newsites
20newunitsopened
during2007
EBITDAandoperating
profitgrewmorethan20%
Continuedstrongreturns
fromnewunits
Strongpipelinewith
15–20toopenin2008
Chiquito
8
newrestaurantsopenedin2007
Anotherexcellentyear
Almost30%EBITDAgrowth
5–10newrestaurants
toopenin2008
Garfunkel’s
29th
year
Refurbishmentprogramme
deliveringstrongsalesgrowth
Continuestodeliverexcellent
profitsandreturns
Blubeckers
6
newpubrestaurantsopened
Solidperformance
Pipelinebuildingwith5–10
newunitstoopenin2008
Brunning&Price
14
newrestaurants
Acquiredin2007
Experienced,talentedand
successfulteam
TRGConcessions
+13%
Operatingprofit
Verypleasingperformance
Increasedrevenue,profits
andmargins
Foursitesopeningin
HeathrowTerminal5 Scotland
31
North East
27
North West
46
Wales
13
South West
17
Midlands
41
East
24
South East
85
London
(inside the M25)
43
SouthEast –85
29Frankie&Benny’s
08Chiquito
18Blubeckers &Edwinns
28TRGConcessions
02Brunning&Price
Midlands–41
31Frankie&Benny’s
07Chiquito
03TRGConcessions
East – 24
12Frankie&Benny’s
01Chiquito
03Blubeckers &Edwinns
08TRGConcessions
NorthWest –46
23Frankie&Benny’s
11Chiquito
05TRGConcessions
07Brunning&Price
Scotland – 31
16Frankie&Benny’s
05Chiquito
09Garfunkel’s
01TRGConcessions
NorthEast – 27
18Frankie&Benny’s
07Chiquito
02TRGConcessions
London (inside theM25)–43
11Frankie&Benny’s
06Chiquito
07Blubeckers &Edwinns
16Garfunkel’s
03TRGConcessions
SouthWest –17
10Frankie&Benny’s
06Chiquito
01Garfunkel’s
Wales–13
06Frankie&Benny’s
02Chiquito
05Brunning&Price
Our locations
Operatingand financial review
An unbeatablecombination
ofclassicAmericanand
traditionalItaliandishes.
One of theUK’s most popular
family restaurantbrands,
Frankie&Benny’s trades
successfully in leisure, retailand
airport locations nationwide.
Frankie&Benny’s brings
together thebest ofclassic
American-Italian stylecuisine.
Alongside favourites including
char-grilledburgers, steaks,
pizzaandpastaarehouse
specialities suchaschicken
parmigianaandBBQ ribs.
Inside,Frankie&Benny’s has
theatmosphereofa favourite
family-run restaurant.From the
clear view of the open kitchen
to thebottle linedbar, it takes
youback to 1950’s NewYork.
Takea seat inacosy boothand
lookat the family snapshots
showing life in theLowerEast
Side of theBigApple.Music is
classic 50’s American swing.
Withits uniqueblend of sizzling
MexicanandTex-Mex food,
refreshing margaritasand
friendly service,Chiquito
delivers a fiesta forall the family.
Now withover 50UK outlets,
Chiquitooffersa sunny, spicy
extravaganza,all served ina fun
and livelyatmosphere.Thereare
burritos,chilli, nachos, wraps
and meatballs –and the famous
sizzling fajitas, smoking ona red-
hot skillet!Or youcan enjoy the
TexasBBQ ribs, juicyburgers or
steaks.TheKids’ Menu offers a
wide range of (less spicy)dishes
specially selected tobe tasty
and nutritious.
Thebar showcases signature
margaritas,classic tequilasand
cocktailsalongside refreshing
ice-coldbeers and soft drinks.
Stylishinteriors and lively
LatinAmericanmusicadd
to theatmosphere, whether
you visit fora family party,
a lazy lunch,anexciting
evening or fiesta occasion!
Our business 
ataglance A year of significant landmarks
150
Frankie&Benny’s,Stafford
Weare delighted tohave opened our
150thFrankie&Benny’s restaurant
50
Chiquito,Thanet
The 50thChiquito was opened
during the year inThanet
25
Blubeckers,Barnet
Blubeckers andEdwinns’ 25th site
was opened during the year
50
BarMCR,ManchesterAirport
Our 50thConcessions unit
was opened during the year
After trading successfully
in theUK’s most competitive
locations foralmost 30 years,
Garfunkel’s provides the
reassuranceofa familiar face,
well-knownfor its quality of
service, great menuchoice
andaffordable prices.
The menu features favourite
dishes fromaround the globe,
includinga range of steaks,
burgers, pasta,chicken, grills,
omelettesand the famous 
saladbar.
Whether you wantcoffee
anda pastry,breakfast, lunch,
a light snack,afternoon tea,
dinner or just a relaxing drink
while you watch the world go
by, you willalways receivea
warm welcomeatGarfunkel’s.
Blubeckers mixes thebest 
of the past with thebest 
of the present tocreatea
welcoming pub restaurant
youcan enjoy every day, in
almost 30 locations in the
SouthEast ofEngland.
Openall day, youcan pop
in fora pint of realaleanda
cottage pieat thebar or have
a glass ofChiantiand steak
in our comfortable restaurant
areas.There’s friendly, engaging
servicefrom the moment you
arrive, ensuring thatall your
needsare takencare of.
Our chefs use thebest 
quality ingredients toprepare
a menu thatcombines
traditionalfavourites with
world influences.Seasonal
and local specials regularly
feature,but our signature
burgerand ribs haven’t
changed since we opened
our doors for the first time,
over 25 years ago.
Brunning&Priceisa family
of 14 “proper pubs”located
inWales, theNorthWest and
SouthofEngland.The founders
of thebusiness have run
informalplaces for people
who like to meet, talk, eat
and drink ina relaxed friendly
atmosphere since 1981.
Mostly set inbeautiful rural
locations, eachpub hasa
‘local’ feel.Inall our pubs we
offer imaginative homecooking,
a variety ofcaskconditioned
beers, good wineandclassic
malt whiskiesall servedby
friendly staff in relaxed,
comfortable,classic interiors
that feature open fires, old
furniture,blackboards,anda
curious mix ofbooksand
pictures.
In 1997, 2004and 2007
Brunning&Price was voted
PubGroupof theYearby the
GoodPubGuide.
TRG’sConcessions division has
anestablished reputation for its
ability todevelop partnerships
and delivercatering solutions.
Operatingapproximately
50 outlets in theUK’sbusiest
airports, other transport
locationsand shoppingcentres,
wehaveover 15 years of
experienceofdelivering
hospitality to the travelling
public.Weprovidecatering
solutions drawing from our
diversebrand portfolio that
covera wide range of
categories including table
service,counter service,
sandwich shops, pubsandbars.
Using existingTRGbrands,
creating entirely newconcepts
and establishing partnerships
tofranchise with thirdparties,
within these specialisedareas,
wearea market leader in this
excitingand growing sector. Adjusted EBITDA (£m)
2004 2005 2006 2007
43.3
50.0
55.6
67.8
EBITDA increased by 22% 
during 2007
+22%
Adjusted profit before tax (£m)
2004 2005 2006 2007
24.4
29.5
35.0
43.5
Following a 19% increase 
in 2006, this is a very
satisfactory result
+24%
Adjusted EPS (p)
2004 2005 2006 2007
7.84
9.08
11.50
14.64
Adjusted earnings per share 
increased by 27% on 2006, 
which in turn was up 27% 
on 2005
+27%
Dividend per share (p)
2004 2005 2006 2007
4.20
4.75
6.00
7.25
The Directors propose a final dividend 
of 5.99p per share in respect of 2007 
making the full year dividend 7.25p 
per share 
+21%
01
TheRestaurant Groupplc
AnnualReport 2007
5.5%growthinlike-for-like sales 
Revenue up17% to £367m
Bothdivisions,LeisureandConcessions,continued togrow
revenues andoperatingprofi t
Operations strongly cashgenerative(£74mofcas h
generatedduring theperiod)
Rollout continues
> 36 new sites openedin theperiod–all self-funded
> 30-35new sites targetedfor 200 8
> Potentialfor over 250 Frankie&Benny’s (currently 159)
Brunning&Priceacquiredfor £32m,inOctober 2007,and
trading well
Operatingand
financial review
Highlights
01 Highlights
02 Chairman’s statement
04Chief Executive Officer’s 
review of operations
08Group Finance Director’s review
10 Directors
12 Report of the Directors
23Directors’ remuneration report
30Report of the independent auditors
32Accounting policies 
for the consolidated accounts
36Consolidated income statement
37Consolidated statement 
of changes in equity
38Consolidated balance sheet
39Consolidated cashflow statement
40 Notes to the accounts
61Report of the independent auditors
– company accounts
62Company financial statements 
– under UK GAAP
65 Groupfinancial record
66 Shareholder information
*Results markedas adjustedare stated excluding non-
trading items (refer tonote 2).Statutory profit before tax
increasedby 98% to £42.8mand statutory EPS roseby
105% to14.9p. 02
TheRestaurantGroupplc
Annual Report 2007
2007 was another year of excellent progress for The Restaurant Group, with substantial
increases in both revenue and profits. Againstamoredifficultbackground for consumer-
facing businesses the Group grew like-for-likesales by 5.5% following on from growth
of 5% for the previous year.Our strong and resilient market positioning combined with
affordable offerings enabled the Group to producearecordset of results, with adjusted
earnings per sharegrowth of 27%. We sold morethan 30 million meals (including around
four andahalf million children’smeals) during 2007, an increase of three million total meals
on the previous year and also created approximately 1,000 full and part time new jobs.
2007 was the second full year of trading in the Group’srefocused form. Youwill recall that
we took the decision to direct our focus away from the increasingly crowded high street
marketplace and positioned TRG’sbusiness firmly in the out of town segments of the
eating out market. This strategy has served us well as it affords us some protection in
amorechallenging economicenvironment.
Buildingonastrong performance for the first half of the year the Group made further
progress during the second half to produce an excellent set of full year results. Revenue
increased by 17% to £367m, adjusted profit beforetax increased by 24% to £43.5m
(2006: £35.0m) and adjusted earnings per shareincreased by 27% to 14.64p (2006:
11.50p).Following on froma27% increase in adjusted earnings per sharein2006 this
isavery strong performance and, asaresult, the Boardisrecommendingafinal dividend
of 5.99p per share(2006: 4.95p) givingatotal dividend for the year of 7.25p (2006: 6.00p)
per share, an increase of 21%. Subject to approval at the Annual General Meeting, the
final dividend will be payable on9July 2008 to shareholders on the register on 13 June 2008
and the shares will be marked ex-dividend on 11 June 2008.
Both of our divisions, Leisureand Concessions, performed superbly during 2007
with growth in like-for-like sales, revenue, profit and margins. We openedatotal of
36 new restaurants and pub restaurants during the year and we aredelighted with
their performance. Our expansion plans areunchanged and we aretargetingafurther
30-35 new openings for 2008. In October 2007 we acquired the Brunning&Price
pub restaurant business which added 14 high quality pub restaurants to this growing
part of our Leisuredivision. We welcome the Brunning&Price team to TRG and we
aredelighted with the performance of the business since its acquisition.
Our Leisuredivision, which incorporates Frankie&Benny’s, Chiquito, Garfunkel’sand Pub
Restaurants, enjoyed another successful year withastrong increase in like-for-like sales
growth, an improvement in adjusted operating profit margin anda21% increase in adjusted
operating profit. During the year we opened 34 new restaurants and pub restaurants within
this division–these areperforming well and areset to deliver strong returns.
Operatingand financial review
Chairman’ s
statement
“Ourstrongbusinessmodel
andresilientmarketpositioning,
combinedwithaffordableofferings,
enabledtheGrouptoproduce
arecordsetofresults.”
Alan Jackson
Chairman
*Results marked as adjusted arestated excluding non-trading items (refer to note 2) 03
TheRestaurantGroupplc
Annual Report 2007
Brunning&Price, Cross Foxes
The Concessions division also performed strongly with good growth in like-for-like sales,
an improvement in adjusted operating profit margin anda13% increase in adjusted
operating profit. We opened two new sites within this division in 2007 and both ar e
performing well.
Group-wide, this is another excellent set of results and is testament to the hardwork
and dedication of our Directors, senior management team and all staff. We arefortunate
to haveahigh quality and stable team at TRG and on behalf of the BoardIwould like to
thank them all for their valued contribution over the past year.
Since our last year end we have welcomed two new non-executive Directorstothe Board.
DavidRichardson who was previously Finance DirectorofWhitbread plc and Tony Hughes
who was until recentlyadirector at Mitchells&Butlers plc have joined our Board. Andrew
Thomas retired from the BoardinFebruary 2008 andIwould like to thank him for his
contribution over the past seven years.
2008 has started well with like-for-like sales for the first nine weeks 4% ahead of last
year and total revenueup21%. This is very encouraging and, whilst recognising that
we faceachallenging economicbackdrop,Ibelieve that it augurs well for another year
of progress.
AlanJackson
Chairman
5March 2008
Frankie&Benny’s, Stafford
+5.5%
like-for-likesalesgrowth,
following5%in2006
+21%
Increaseintheproposed
fullyeardividend 04
TheRestaurantGroupplc
Annual Report 2007
Introduction
2007 was another year of good progress for The Restaurant Group (“TRG”) building on
the strong performance of the previous year.Both divisions performed well and all of our
key performance metrics improved. Revenue, EBITDA, profits and margins all grew and
this serves to highlight both the benefits of our strategy of focusing on the out of town
marketplace and also the efficacy of our model. It is particularly encouraging that TRG
was able to achieve these results againstamorechallenging economic backdrop and this
demonstrates both the defensive and resilient characteristics of our market positioning
and the strength of our operations and brands. Asaresult, the Group achievedarecor d
level of adjusted earnings per shareat14.64p representing growth of 27% on the previous
year.Considering that the “bar” had been raised significantlyin2006, when earnings
per sharegrewby27%, these results representavery satisfactory performance.
TRGrationale
Our coreobjective continues to be growth in shareholder value and our strategy to
achieve this has been, and will continue to be, to buildabusiness capable of delivering
long-term, sustainable and growing cashflows.Iampleased to report that, again, we
have successfullyconverted our profits into cash atavery healthy rate. Strong growth in
earnings per sharehas translated into strong growth in cashflow per share. Our model
enablesthe Group to continue its growth inapredominantly organic and highly value
accretive way,funded through internally generated funds. Wherewedeem it appropriate
we arealso able to supplement this organic growth via targeted acquisitions, as we did
during 2007 with the acquisition of the Brunning&Price pub restaurant business. Our
touchstones arecashflow and returnoninvestment and, whether we areassessinga new
site or an acquisition, our focus is on ensuring that the investment is value accretive.
TRG’sprimary focus is on edge of town, out of town, rural, semi-rural and airport
locations. These locations have significant barriers to entry,offer good growth prospects
and enableustogenerate consistentlyhigh returns on investment. We occupy leading
marketpositions in each of these segments and we arewell placed to continue to grow
our business in these areas. Looking forward, we haveastrong pipeline of new sites for
the next three years.
Group results
*Results marked as adjusted arestated excluding non-trading items (refer to note 2)
All of our key performance metrics improved during 2007 with growth in both of our
divisions:
> Building on the 5% increase in like-for-like sales in 2006, we grew this metric by 5.5%
in 2007.Approximately70% of this increase represented “covers” growth with mor e
people using our restaurants and in 2007 we sold morethan 30 million meals;
> Revenue increased by 17% to £367m;
> Adjusted EBITDA increased by 22% to £67.8m and adjusted operating profit increased
by 23% to £48.2m; and
> Margins improved at both divisional and Group levels with our Group adjusted operating
profit marginincreasing by 60 basis points to 13.1%–avery satisfactory result
particularly againstatough hurdle of 140 and 90 basis point improvements in 2006
and 2005 respectively.
Again, the increase in profit was the product of three principal components–like-for-like
profit increases from the existing estate, profitable contribution from new openings and
further cost savings resulting from operational efficiencies and purchasing initiatives.This
combination representsahealthy background to our continued profitable development.
Operatingand financial review
ChiefExecutive
Officer’sreview
ofoperations
“Theteamdeliveredanother
impressiveperformancein2007,
withearningsup27%and36new
restaurantssuccessfullyopened
andtradingwell.”
Andrew Page
Chief Executive Officer
+17%
Increaseinrevenue 05
TheRestaurantGroupplc
Annual Report 2007
Total revenue
£285.2m
Operatingprofit
£61.6m
Operatingmargin
21.6%
Frankie&Benny’s(159units)
Frankie&Benny’sperformed superblywith both EBITDA and operating profit increasing
by morethan 20% and good growth in margins. During the year we opened 20 new
restaurantsofwhich 10 wereonnon-cinema sites. The results from the new openings
have been excellent and they areset to deliver very strong returns. This year we ar e
aiming to openasimilar number of new restaurants and, having been busy in recent years
buildingahigh quality pipeline of new sites, we lookforwardtocontinued strong returns.
Chiquito(53units)
Chiquito enjoyed another excellent year with growth in EBITDAand operating profit
of almost30% and operating profit margin up 90 basis points. Againstabackground
of very high growth in profits and margins in both 2006 and 2005, this represents an
outstanding performance. Last year we challenged the Chiquito team to build on their
terrific performance in 2006 and they did not let us down.Iamconfident that they will be
just as keen to repeat that feat in 2008! During the year we opened eight new restaurants
and we aredelighted with their performance. We expect to open 5-8 new Chiquito
restaurantsin2008. As noted in my report last year we areparticularly pleased with the
performance of our restaurants which areco-located with Frankie&Benny’sand we ar e
continuing with our plans to pursue these dual roll-out opportunities.
Garfunkel’s(26units)
Garfunkel’sperformed well during 2007 and, notwithstanding that we lost 19 weeks of
trade during the first half whilst restaurants wereclosed for refurbishment, the business
delivered approximatelythe same level of profit as for 2006. The refurbishments wer e
completed by the end of the first half and during the second half profits and margins
increased significantly. Garfunkel’sisnow in its 29th year and continues to deliver
excellent profits and returns.
PubRestaurants(42units)
This business now comprises Blubeckers and, following its acquisition in October 2007,
the Brunning&Price pub restaurant business. Blubeckers performed solidly during 2007
and has good potential.During 2006 we embarked uponamoreambitious rollout
programme for Blubeckers and this continued in 2007.Last year we opened six new
Blubeckers pub restaurants and in the summer we strengthened the Blubeckers team
by introducing senior management withastrong track recordwithin TRG of operational
management and also good experience of executing successful rollouts. The impact
of this has been very positive.
Following the acquisition of Brunning&Price (“B&P”), we addedafurther 14 new pub
restaurantstoour portfolio. We aredelighted with the performance of the B&P pub
restaurantssince the acquisition and we intend to grow the business.The B&P pub
restaurantshaveamorerelaxed feel compared with Blubeckers. Although B&P’spubs
arenot branded they all shareasimilar typeoffit out and operating style. The quality
of food is high–B&P won the Good Pub Guide’s Pub Group of the Year Awardfor the
thirdtime in 2007–and they attractaregular and loyal customer base. We aredelighted
to have retained all of the operational management team at Brunning&Price. It is an
experienced, talented and successful team and we look forwardtoworking with the
team to further develop and grow our Pub Restaurant business.
During 2008 we areexpecting to openatotal of 5-10 new pub restaurants and, longer-
term, the Pub Restaurantbusiness has the potential to becomeasignificant part of
the Group.
Frankie&Benny’sand Chiquito, Blackbur n
Brunning&Price, CornMill
Leisur e
+21%
Growth in revenue in our
Leisuredivision 06
TheRestaurantGroupplc
Annual Report 2007
Total revenue
£81.2m
Operatingprofit
£12.5m
Operatingmargin
15.4%
Our Concessions division enjoyed another year of good progress producingastrong
increase in operating profit and an improvement in margin. Againstamorechallenging
operating background both logisticallyand cost-wise this is an outstanding performance.
We opened two new units during 2007 and these aregenerating strong returns. We
expectasmallnet increase in the number of Concessions units during 2008 in what will
beayear of significant change given the developments at Heathrow airport. In late March
we will open four new sites at the new Terminal5and later in the year when Terminal 2
closes we will close our restaurant there. During 2008 we areexpecting some significant
swings in trading patterns at Heathrow as passengers migrate from the existing terminals
into the new T5. Going forward, we areconfident that these new developments place our
Concessions business inavery strong position.
Non-cor e
During the year losses from non-coreactivities decreased by £0.55m and we will continue
to take steps to reduce these non-corelosses.
Corporateactivity
In October 2007 we acquired Brunning&Price Limited for £32m in cash. The business
comprises of 14 trading pub restaurants and one development site. B&P is based
predominantly in the North West and hasalong history of profitable growth. We have
retained B&P’soperational management team, will continue to operate the pub restaurants
in the existing, highlysuccessful style and we will gradually add new pubs to the B&P
business. Together B&P and Blubeckers provideavery attractive opportunity to grow
our Pub Restaurant business.
Marketdynamicsandeconomicbackdrop
We areconfident that prospects for the eating out market remain positive. Socio-
economic factors such as an ageing population, morefemales in work and levels of
disposableincomes significantly higher than in previous generations augur well for our
industry.Lifestyle changes arealso positive with an increasing propensity to spend
on leisureactivities.Eating out, particularly at our popular price points (£10-£16 spend
per head),has becomeahabitual part of most people’slives and is something many ar e
reluctant to give up. During 2007 the smoking ban came into effect in England and
Wales, following the ban in Scotland the previous year.Overall, we believe that TRG has
benefited from this as morefamilies and those with an aversion to smoking have visited
our restaurants.
During most of 2007 and into 2008 much has been said and written aboutthe
deteriorating economic backdrop and pressures on the consumer.A series of successive
interest rate rises starting in 2006 and continuing through into 2007 saw base rates rise
by 125 basis points (in effect increasing the cost of borrowing almost 30%). The cost
of servicing an already high level of personal debt thereforerose for much of the UK
population. Compounding this we saw inflation rise, by varying amounts depending upon
which particular index one chose to use, and the burden of taxation increase. Together
this combination has served to make life moredifficult for the UK consumer and looking
forwardinto 2008 we anticipateacontinuation of these tighter conditions.
Whilst we would not suggest that TRG is completely impervious to these economic
factors, we arevery encouraged that our business has demonstratedaconsiderable
level of resilience in the face ofaslowing UK economy andatighter consumer market.
We believethat this is the result ofanumber of factors including our popular price point
and value for money,our focus on areas with higher barriers to entry (and thus lower
supply-side risk), the strength of our brands, consumers’ reluctance to forego eating out
and, very importantly, the skill and application of the TRG team. Restaurants which have
opened within the last few years have performed very well, delivering strong returns and
we intend to continue to openasimilar number of new restaurants each year for the
foreseeable future.
Operatingand financial review
ChiefExecutive
Officer’sreview
ofoperations
continued
Concessions(50units)
Shake-A-Hula, Gatwick Airport
+22%
IncreaseinEBITDA
Brunning&Price, Pant-yr-Ochain, Wrexham 07
TheRestaurantGroupplc
Annual Report 2007
We believe that interest rates and employment levels aretwo key drivers of consumer
spend which can potentially impact our marketplace. We have recently seen two
reductions in base rates to the current level of 5.25% and we note that employment levels
are, and areprojected to remain, high. Whilst it is suggested that thereisscope for further
monetary relaxation during 2008 we believethat, in the light of current levels of inflation as
measured by the CPI, it may take some time beforethe base rate drops back below 5%.
We arealso mindful of the risks of further taxation pressures asaresult of the level of the
budget deficit. Furthermore, GDP growth is forecast to slow in 2008 toabelow trend level
but, looking further ahead, thereisthe prospect ofapick-up, back towards trend, in 2009.
Asaresult, we have factoredaless favourable macro-economic backdrop into our
planning for 2008 than we have experienced over the last five years.
Despite this we believe that TRG is well-placed to weather these tighter conditions. Recent
trading has been solid and we continue to see excellent results from our new openings.
Cost pressures have been an issue for some time. We identified the risk of inflationary
cost pressures with respect to our input costs two years ago and, during 2006 wherew e
wereable to, we took steps to remove or minimise that risk through taking out longer term
(typically three years) fixed or capped price contracts.This approach served us well during
2007 and we will continue to benefitfromthis in 2008 and 2009. However,weare still
exposed in some areas wherecurrently cost pressures arebeing felt (mainly fresh meats
and dairy/milk products). In these areas we would normallyfix prices for 6-12 months
but at present we are, in most cases, eschewing fixes of morethan three months as our
purchasing team anticipateareasonable possibility of prices softening later in the year.
We have also kept our menu content under regular review so as to try to mitigate the
impact of cost inflation through careful menu engineering. In the light of the current tighter
consumer market and, we believe, the importance of value for our customers we arelikely
to hold offincreasing menu prices in the short term but we will be carefully reviewing this
during the second quarter with the prospect of some increases later in the year.
Futureprospects
2007 was another year of good progress for the Group with both divisions achieving
growth. The current year has started well with like-for-like sales growth during the first nine
weeks at +4% (of which covers growth represents 70%) and total revenue for the same
period up 21% (a 16% increase excluding B&P). At this stage last year,like-for-like sales
growth was +5% (of which covers growth represented 75%) and total revenue was 16%
ahead. Whilst we areencouraged by this, we recognise both the ongoing impact of
acontinuation ofatighter consumer marketplace and alsothe fact that our comparative
like-for-like hurdles,at+8.3% and +7.3% in quarters two and three, aredemanding.
We have madeasolid start to the year and, providing thereisnotasignificant further
deterioration in the UK economy,weare confident of continuing our progress in 2008.
AndrewPage
ChiefExecutiveOfficer
5March 2008
>30m
Customers served
Chiquito, Southampton
Frankie&Benny’s, Portsmouth
27%
Earningsper sharegrowth in 2007 08
TheRestaurant Groupplc
AnnualReport 2007
Operatingand financial review
GroupFinanc e
Director’s review
Results
As described in theChairman’s statement theGrouphas hadanother excellent year. Total
Group revenueincreasedby 16.5% to £366.7m.Revenueof the principal tradingbrands
increasedby 18.7% to £366.4m.
AdjustedGroupEBITDA was £67.8m, up 21.9%compared to the prior year.After adding
backpre-openingcosts and theIFRS non-cash shareoptioncharge,adjustedGroup
EBITDA in the year was £72.1m.AdjustedGroupoperating profit grew by 23.0% to
£48.2m.In terms of margins wemade further good progress,adjustedGroupEBITDA
at 18.5% showedanimprovement of 80 basis points on the previous year, whileadjusted
Groupoperating profit marginat 13.1% was 60 basis points aheadof 2006.
Totalinterest costs in the year of £4.0m were 22.2%higher than the previous year .
This reflects the higher levels ofaverage net debt during 2007 (following payment of the
£35m specialdividend inMarch 2006 and the £32macquisition ofBrunning&Pricein
October 2007).
Totaladjusted profit before tax excludingLiving Ventures was £44.2m,anincreaseof
23.1% on the prior year.After taking intoaccount TRG’s shareof the losses ofLiving
Ventures totalGroupprofit before tax and non-trading items was £43.5m,anincrease
of 24.2%on the prior year .
Capitalexpenditur e
During 2007 theGroupinvesteda totalof £47.4m (2006: £40.8m) incapitaladditions.
This consisted of the following:
> £37.8m invested in 36 new sites (20 Frankie&Benny’s, eight Chiquito, six Blubeckers
and twoConcession outlets).This includes twofreehold developments and the
Heathrow Terminal5fit out costs.
> £9.6mon refurbishment and maintenanceexpenditure.
As wehavehighlighted previously, the Groupis very focused on ensuring that our
investments generateexcellent returns on investment. Inorder toensure that this is
achieved, we adopt a rigorous approach to capitalinvestment appraisal. All new site
proposals are subject to this process whichincludes detailed financialevaluations and
demographicanalysis,as well as local competitor and market analysis. All significant
projects are subject to approval by the Group Board and we conduct post completion
reviews on a regular basis. These confirm that we are continuing to achieve the excellent
expected levels of financial returnon a very consistent basis.
Cashflow 
Set out below is a summary cashflow statement for 2007.This demonstrates once
again the very strongcashgenerationcharacteristics ofTRG,and the very transparen t
conversion of reported operating profit intocash.Cashflow generated from operations a t
£73.8m showedanincreaseof16%on the prior year.After interest, tax and maintenance
capex, freecashflow of £50.6mgrew by 19% compared to 2006. This level of free cash
flow means that, onceagain, theGroup’s expanding development programmeas wellas
a significantly increasedlevel of ordinary dividend was entirely financed out of internally
generatedcashflow.
£ million 2007 2006
Adjusted operating profit 48.239.2
Workingcapital& non-cashadjustments 6.07.7
Depreciation 19.6 16.5
Cashflow from operations73.8 63.4
Interest paid (3.4) (2.8)
Tax paid (10.2)(9.7)
Maintenancecapex (9.6)(8.5)
Freecashflow 50.6 42.4
New buildcapex (37.8) (32.3)
Ordinary dividends paid (12.2)(9.5)
Underlying net cashflow0.60.6
Disposals and integration (includingLivingRoom) 8.6 (2.0)
Acquisition ofBrunning&Price(32.9) –
Cashproceeds from issueof shares 1.1 1.1
Specialdividend –(34.8)
Purchaseof shares for employeebenefit trust (7.2)–
Financingcosts offset against bank debt0.7 –
Change in net debt (29.1) (35.1)
Net debt at start of the year (47.5) (12.4)
Net debt at end of the year (76.6)(47.5)
“TheGroupis 
very focused
onensuring tha t
our investments
generateexcellen t
returns on
investment.”
StephenCritoph
Group Finance Director  09
TheRestaurant Groupplc
AnnualReport 2007
Other points tonoteon thecashflow areas follows:
> Totalordinary cashdividend payments to shareholders at £12.2mincreasedby 28%
compared to 2006.
>Disposals include £7.8m in respect of theLivingRoom disposalannounced inJune,
with thebalance relating to various property disposals.
>TheGroupinvesteda totalof £32.9m (includingcosts)acquiring theBrunning&Price
business,as announced inOctober .
>TheGroupinvested £7.2macquiring shares for the employeebenefit trust.This was 
in two tranches: 1.5m shares acquired on the 29June 2007 for a totalconsideration of
£5.0m; 1m shares acquired on 27 November 2007 for a totalconsideration of £2.2m.
TheGroupended the year withnet debt of £76.6mcompared to £4 7.5mat the start of the year .
Non-trading items 
The full year results includea net non-tradingcharge of £0.7mbefore taxation.This
consists of the following items:
>A provision of £1.7magainst thecarrying valueof theGroup’s investment inLiving
Ventures as previously announcedand detailed in theInterimResults for 2007 .
>Acredit of £1.0m recognised in respect of outstanding loannoteinterest received
fromLiving Ventures at the time of the sale of theLivingRoombusiness inJune 2007 
as alsopreviously announcedand detailed in theInterimResults.
>A net charge of £0.2min respect of the revaluation of the interest rates swapat the year end.
>A net credit of £0.2m relating to various property disposalitems.
Financing
InDecember 2007 theGroupcompleted new financingarrangements.This consists of
a new committed £120mfacility for five years untilDecember 2012.Inall respects this 
is on terms at least as goodas the previous facilities.
TheGroupalsohas interest ratehedging instruments in place tofix interest costs on
a significant proportion of the overall net debt position. £30mis fixedat a rateof4.695%
untilJanuary 2009.A further £25m is fixedat 4.92% untilJanuary 2011.
The Groupis thereforein a strong financialposition with substantialhead room against
covenants andavailable facilities, which will enable us tomaintain the new site
development programme.
Balance sheet and key financial ratios 
TotalGroupnet assets increased in the year from £65.2m to £77.2m.The detail of
this movement is set out in theconsolidated statement ofchanges in equity.The main
movements areanincreaseof £29m, representing the retained profits for the year,
less dividend payments of £12.2manda £7.2mcharge to reserves in respect of the
acquisition of shares for the employeebenefit trust.
The key financial ratios during the year wereas follows:
Covenan t 2007 2006
EBIT interest cover 12.1x 12.0x
EBITDA interest cover >4x 17.0x 17.1x
Fixedchargecover 2.4x 2.3x
Balance sheet gearing 99% 73%
Net debt / EBITDA <3x 1.13x 0.85x
Compared tobankingcovenants under the new facility arrangement, wehave substantial
head room.
In terms of financialgearing, given that theGroup’sbusiness is primarily leasebased, the
key ratio wefocus on is fixedchargecover.For the year this was 2.4 times,broadly in line
with the level in the previous year .
Taxation
The total taxation for the year on ordinary activities is £13.6mas follows:
2007 2006
Non- Non-
Trading trading Total Trading trading Total
Corporation tax 12.5 0.3 12.8 9.8 (1.3)8.5
Deferred tax 2.3 (1.5) 0.8 2.5 0.22.7
Total 14.8 (1.2)13.6 12.3 (1.1) 11.2
>The underlying normalised tax rateon tradingactivities excluding unrelievedassociate
losses was 33.5% (2006: 34.1%).The reduction in the rateofcorporation tax from 30%
to 28%announced in the 2007 Budget only comes in toeffect fromApril 2008,and has
thereforehadnoimpact on thecurrent year underlyingcharge.
>The non-tradingcredit of £1.2marises primarily as a result of revaluing the year end
deferred tax balanceat the new rateof 28%, in line withaccounting guidance.
StephenCritoph
GroupFinanceDirector
5March 2008
£4 7.4m
Invested incapitaladditions
19%
Increaseinfreecashflow
1 2.1x
EBIT interest cover
*Results markedas adjustedare stated excluding
non-trading items (refer tonote 2) 10
TheRestaurantGroupplc
Annual Report 2007
1AlanJackson,
Non-executive Chairman
Aged 64, he joined The Restaurant Group plc as Executive Chairman in March 2001
and becamenon-executive Chairman from January 2006. He hasawealth of experience
in the leisuresector.For 18 years, from 1973 to 1991, he occupied various positions
withinWhitbread, principally Managing Director of Beefeater steakhouses and also the
Whitbread restaurantdivisionwherehewas responsible for the creation and development
of Beefeater,Travel Inns and TGI Friday brands. After the Beer Orders in 1991 he founded
his own business which became Inn Business Group plc in 1995 and was subsequently
acquired by Punch in 1999. He chairedOriental Restaurant Group plc until its sale to
Noble House in 2000. CurrentlyAlan is non-executive Chairman of Luminar plc and
CharlesWells Limited, and he isanon-executive Director of Playtech plc.
2AndrewPage,
Chief Executive Officer
Aged 49, he joined The Restaurant Group plc as Finance Director in June 2001.
In December 2003 he was appointed Group Managing Director and in January 2006
became Chief Executive Officer.His career has spanned both international and domestic
businesses. Prior to joining The Restaurant Group plc, he heldanumber of senior
positions in the leisureand hospitality industry including Senior Vice President with
InterContinental Hotelsand Finance Director of Hanover International plc. Prior to that,
Andrew spent six years asaCorporate Financier with Kleinwort Benson having trained
and qualified asaChartered Accountant with KPMG.
3StephenCritoph,
Group Finance Director
Aged 47, he was appointed as Finance Director of The Restaurant Group plc in
September 2004. Previouslyhehas held several senior finance positions in Compass
Group plc and Granada Group plc, including Corporate Development Director of Compass
Roadside and Finance Director of Travelodge and Little Chef. He trained and qualified
asaChartered Accountant with Deloitte&Touche.
4KevinBacon,
Executive Director,LeisureDivision
Aged 48, he joined The Restaurant Group plc in 1996 as an Area Manager for Frankie
&Benny’s, becoming Operations Manager in 1998, Operations Director in 2000 and
Managing Director in 2002. In June 2003, he was appointed to the BoardofThe
Restaurant Group plc. Prior to joining The Restaurant Group plc, he had retail experience
with Granada Motorway Services Ltd, Forte Roadside Restaurants Ltd and Currys Ltd
(Dixons plc).
5TrishCorzine,
Executive Director, TRG Concessions
Aged 50, she joined The Restaurant Group plc in 1993 as Area Manager for Garfunkel’ s
which included the Group’sairport operations. In 1997 she was appointed Brand
Director of Garfunkel’sand Airports, and in 1999 was promoted to Operations Director –
Concessions. In March 2003 she was appointed Managing Director–Concessions and
in October 2003 was appointed to the Board. Prior to joining The Restaurant Group plc,
Trish worked for Häagen-Dazs then managed the Atacama Restaurant Group.
Directors
1
2
3
4
5 11
TheRestaurantGroupplc
Annual Report 2007
6JohnJackson,
Non-executive
Aged 61, he was appointedanon-executive Director of the Company in October 1996.
He is CEO of Jamie Oliver Holdings Limited, Chairman of Virgin VieAtHome, Victory
Corporation Limited, and various other Virgin companies. He is also senior non-executive
Director of Wilkinson HardwareStores Limited andanon-executiveDirector of Luminar
plc. He was formerlyChief Executive of Semara plc, Managing Director of Body Shop
International plc and Chairman and Managing Director of Chesebrough Ponds Limited.
7DavidRichardson,
Non-executive
Aged 56, he was appointed asanon-executive Director of the Company in February
2007.Hewas Finance Director of Whitbread plc from 2001 to 2005. He is currently
anon-executive Director of Serco Group plc, Dairy Crest Group plc, Tomkins plc and
Forth Ports plc.
8TonyHughes,
Non-executive
Aged 59, he was appointed asanon-executive Director of the Company in January
2008. He was Managing Director of the Restaurants Division of Mitchells&Butlers plc
(previously Bass plc and Six Continents plc) from 1995 to 2007 and served on the
BoardofMitchells&Butlers plc from 2003 to 2007.Prior to joining Bass, he held
senior management roles at B&Q,J.A. Devenish and Whitbread.
9RobertMorgan,
Company Secretary
Aged 36, he joined The Restaurant Group in 2002 in the finance department and was
appointed as CompanySecretary in September 2004. Previouslyheworked in the finance
function of Coca-Cola HBC S.A. having qualified asaChartered Accountant with KPMG.
6
7
8
9 12
The RestaurantGroup plc
Annual Report 2007
The Directors present their Annual Reportand the Group Accounts for the year ended 30 December 2007.
Results and dividends
The results forthe year ended 30 December 2007 arepresented under International Financial Reporting Standards(“IFRSs”). The
Report and Accountsare drawn up ona52week reporting basis (endingon30December 2007). The results for the year areset out
in the Groupconsolidated income statement on page 36. This showsaGroup profit after taxation of £29.2m (2006:£14.4m). An interim
dividend of 1.26p per sharewas paid on 18 October 2007. The Directors proposeafinal dividend of 5.99p per sharetobepaid on
9July 2008 bringing the ordinary dividend payable in respect of 2007 to 7.25p (2006: 6.00p).
Principal activity
The principal activity of the Group is the operation of restaurants and pub restaurants.Further information relating to the business
includingareview of the year’sperformance and planned developments is given in the Chief Executive Officer’sreviewonpages4to7 .
Directors
Full details of the Directors of the Company aregiven on pages 10 and 11. The Directors who held office during 2007 wereasfollows :
Alan Jackson
Andrew Page
Stephen Critoph
Kevin Bacon
Trish Corzine
John Jackson
Andrew Thomas (retired on6February 2008)
David Richardson (from1February2007)
Tony Hughes was appointedasa non-executive Director of the Companywith effect from1January 2008. Andrew Thomas retired
from the Boardon6February 2008.
In respect of 2007, each of thenon-executive Directors (excluding the Chairman) is considered by the Boardtobeindependent.
Alan Jackson transitioned from executive Chairman to non-executive Chairman on1January 2006 and following his tenureasan
executive Director,isnot considered to be an independent non-executive Director .
No Director hasaservice contract withthe Company requiring morethan twelvemonths notice. In accordance with the Articles
of Association, the Directorsretiring by rotation areAndrew Page and Stephen Critoph who, being eligible, offer themselves for
re-electionatthe Annual General Meeting.
Tony Hughes offers himself for election at the AnnualGeneralMeeting of the Company, being the first opportunity for shareholders
to approve his appointment. John Jacksonhas beenanon-executive Directorofthe Company for morethan nine years, and,in
accordance with corporate governance best practice, also offers himself for re-election. The Boardconsiders John Jackson to remain
independent and recommendshis re-election as an independent non-executive Director.
During the year the Audit Committee comprised the following non-executive Directors:
John Jackson (Chairman)
Andrew Thomas
David Richardson (from1February2007)
During the year the Remuneration Committee comprised the following non-executive Directors:
Andrew Thomas (Chairman)
John Jackson
David Richardson (from1February2007)
During the year the Nominations Committee comprised the following Directors:
John Jackson (Chairman)
Alan Jackson
Andrew Page
Andrew Thomas
David Richardson (from1February2007)
Following his appointment asanon-executive Director,Tony Hughes has been appointed asamember of the Remuneration, Audit
and Nominations Committees. Andrew Thomas retired from the Boardand the Audit, Remuneration and Nomination Committees
on6February 2008.
The Directors’ remuneration report, which includes detailsofDirectors’ remuneration and interests in the Company’sshares and options,
together with information on service contracts, is set out on pages 23 to 29.
Report of the Directors of
The Restaurant Group plc Directors’ shareholdings
The interests of the Directorsinthe shares of the Company, all being beneficially owned, wereasfollows:
At At At
5March 30 December 31 December
2008 2007 2006
Executive Directors
Andrew Page 270,166 270,166 183,950
Stephen Critoph 43,250 43,250 26,250
Kevin Bacon 125,133 125,133 95,566
Trish Corzine 100,423 100,423 74,400
Non-executiveDirectors
Alan Jackson 400,191 400,191 350,198
John Jackson 80,000 80,000 49,166
Andrew Thomas n/a 52,388 48,888
David Richardson 13,000 13,000 n/a
Tony Hughes – n/a n/a
Details of the Directors’ shareoptionsare disclosed in the Directors’ remuneration report on pages 28 and 29. The closing mid-market
price of the ordinary shares on 30 December 2007 was 183p and the range during the year was 175
1
⁄ 4pto373
3
⁄ 4p.
Sharecapital structure
The Company has one class of shares, ordinary shares of 28
1
⁄ 8p. The authorised sharecapital is 284,444,444 ordinary shares of 28
1
⁄ 8p.
As at 30 December 2007, the allotted,called up and fully paid number of shares in issue was 196,605,258 shares. Thereare no
preference shares or special rights pertaining to any of the shares in issue.
Following the 2007 Annual General Meeting the Directors have had the authority to allot shares up to an aggregate nominal amount of
£18,983,936 which represented approximately one thirdofthe ordinary sharecapital of the Company at the time the authority was given
by shareholders. This authority expires at the Annual General Meeting to be held on7May 2008 and it will be proposed to extend this
authority (updated for the current number of shares in issue) at the forthcoming Meeting. The Directors have no present intention of
exercising this authority .
In addition, following the 2007 Annual General Meetingthe Directorshave the authority to make market purchases of shares in The
Restaurant Group plc on behalfofthe Company up to 19,600,683 ordinary shares (which represented 10% of the Company’sissued
ordinary sharecapital). The minimum price that may be paid for such shares is 28
1
⁄ 8pper share. The maximum price is the higherof5%
above the average middle market quotation for the ordinary shares for the five business days preceding the date of purchase and the
higher of the price of the last independent trade and the highestcurrent independentbid on the London Stock Exchange Daily Official
List at the time the purchase is carried out. This authority expires at the forthcoming Annual General Meeting and it will be proposed to
extend this authority (updated for the current number of shares in issue) at the forthcoming Meeting. The Directors have no present
intention of exercising this authority .
The Group has entered into various contracts including leases during the course of ordinary businesswhich may be terminated in the
event ofachange of controlofThe Restaurant Group plc.
Substantial shareholdings
At 26 February2008 the Company had been notified of the following interests of 3% or moreinthe issued ordinary sharecapital
of the Company:
Number of %ofissued
shares sharecapital
Legal&General Investment Management11,257,984 5.73
F&C Asset Management 10,233,442 5.20
M&GInvestment Management 8,708,601 4.43
NewSmith Asset Management8,541,321 4.34
JP Morgan Asset Mgmt 8,066,211 4.10
Rathbone Unit Trust Management 7,630,742 3.88
Old Mutual Asset Managers 7,493,821 3.81
Artemis Investment Managers 6,000,000 3.05
WilliamBlair Capital Partners 5,951,897 3.03
13
The Restaurant Group plc
Annual Report 2007 14
The RestaurantGroup plc
Annual Report 2007
Corporate governance
The Company is committed to high standards of corporate governance. The Boardisaccountabletothe Company’sshareholders for
good corporate governance. This statement describes how the principles of corporate governance areapplied to the Company and the
Company’s compliance with the best practiceprovisions of the Combined Code on Corporate Governance and the Guidance on Audit
Committees, together “the Code”. The Company has been in full compliance throughout the year with the provisions set out in the
Code except for provisions concerning the number of Directors consideredtobeindependent, and the independence of the Chairman.
The Board
The Board’srole is to provide entrepreneurial leadership of the Company and Group withinaframework of prudent and effective
controls which enable risk to be assessed and managed. The Boardreviews theGroup’s strategic objectives and looks to ensure
that the necessary financialand human resourcesare in place to achieve these objectives, and to reviewmanagementperformance
against these objectives. The Boardalso sets the Company’svalues and standards and manages the business inamanner to meet
its obligations to shareholders and other stakeholders. The Boardcurrently comprises the non-executive Chairman, the Chief Executive
Officer,the Group Finance Director,the Executive Director of the Leisuredivision, the Executive Director of the Concessions division
and three non-executive Directors.Their biographies appear on pages 10 and 11 and these demonstratearange of experience and
sufficient calibretobringindependent judgement on issues of strategy,performance,resources andstandards of conduct which is vital
for the success of the Group.
John Jackson acts as senior independent non-executive Director and is available to shareholders if they have reasons for concern
on which contact through the normal channels is inappropriate or has failed to resolve an issue.
The roles of Chairmanand ChiefExecutive Officer areclearly defined.The Chairmanisresponsible for the leadership of the Board
and the Chief Executive Officer is responsible for the strategic direction and operational management of the Group.The Boardmeets
onaregular basis andthereisa formal schedule of matters specifically reservedfor its decision. This includes approval of the annual
budget and the three year business plan, approval of the interim and year end Report and Accounts, review and approval of significant
capital expenditure(including development of new sites), significant disposals of assets and acquisitions or disposals of businesses.
Operational management areresponsible for the day-to-day runningofthe Group and reportonaregularbasis on that performance
to the Board. The Boardisresponsible for reviewing, challenging and approving the strategic direction of the Group and monitoring
operational performance.
The Boardisresponsibletoshareholders for the proper management of the Group and has access to the necessaryinformation to
enable it to discharge its duties. All Directors aresubject to election by shareholders at the first opportunity after their appointment,
except wherethey areappointedbyshareholders, and to re-election thereafter at intervals of notmorethan three years.
Thereissignificant involvement from the non-executive Directors. This involves an on-going dialoguewith the executiveDirectors
including constructive challenge of performance and the Group’sstrategy.The non-executive Directors areprovided with sufficient
information to allow them to monitor,assess and challenge the executive management of the Group. Comprehensive Boardpapers
including financial information arecirculated to all Directors prior to Boardmeetings and, onaweekly basis, they receive up-to-date
trading information. The non-executive Directorshave the opportunity to meet without the executive Directors present, and this includes
discussions of targets set and achieved by management.
All Directorshave access to the advice and services of the CompanySecretary andaprocedurehas been agreed for the Directors
in the furtherance of their duties to take independent professional advice, if necessary,atthe expense of the Company.Onjoining the
Boardthereisaprocessfor Directors to receive training as to their role and its requirements and for non-executive Directors to gain
an understanding of the whole business. Non-executive Directors areactively encouragedtomeet with operational management and
to visit the Group’soperations in order to enhance their understandingofthe Group’sbusiness, its brands, employees and processes .
During 2007 therewerenine Boardmeetings with full attendance by Boardmembers.
Executive Directors areincluded in the annual performance evaluation of all senior employeeswithin the Group. Thisinvolves a
comprehensive review of performance against objectives and covers areas for futuredevelopment through appraisal documentation
and meetings. The non-executive Directors also meet in the absence of the Chairman to appraise the Chairman’sperformance in the
light of his fee review .
The Company acknowledges the importance of developing the skills of the Directors to run an effective Board. To assist in this,
Directors aregiven the opportunity to attendrelevant coursesand seminarsand to acquireskills and experience which may enhance
their contribution to the on-going progress of the Group. The Boardand committees of the Boardhave been subject toaformal
performance appraisal, throughaninternal questionnaire, and the performance of all members of the Boardisconsidered as part
of the annual remuneration review process.
Report of the Directors of
The Restaurant Group plc
continued Communications with shareholders
Communications with shareholders aregiven high priority.TheChairman’s statement,ChiefExecutiveOfficer’s review andGroup
FinanceDirector’s review on pages 2 to9includea detailed review of thebusiness and theChiefExecutiveOfficer’s review on
pages 4 to 7 includes a review of planned futuredevelopments.Thereis a regular dialogue withinstitutionalinvestors including
presentations after theCompany’s preliminary announcement of the year end results,andat the half year .
Feedbackfrom major institutional shareholders is provided to theBoardona regular basis and, whereappropriate, theBoard will take
steps toaddress their concerns and recommendations.TheBoard uses theAnnualGeneralMeeting tocommunicate withprivate
and institutionalinvestors and welcomes their participation.TheChairmanaims toensure that thechairmen of theAudit Committee,
RemunerationCommitteeandNominations Committeeareavailableat theAnnualGeneralMeeting toanswer questions,and for all
Directors toattend.
RemunerationCommittee
TheRemunerationCommitteeconsists of three non-executiveDirectors.There was 100%attendanceof the twoRemuneration
Committee meetings during 2007.The role of this Committeeand details of how theCompany complies with the principles of the
Codeare set out in theDirectors’ remuneration report on pages 23 to 29.
Nominations Committee
TheNominations Committeeconsists of the non-executiveDirectors, the non-executiveChairmanand theChiefExecutiveOfficer.It me t
twiceduring 2007 withfullattendance.Thereare written terms of referencefor theNominations Committee.It makes recommendations
to theBoardfor theappointment or replacement ofadditionalDirectors.It is also responsible for succession planning for theGroup.
It was not felt necessary toemploy anexternal searchconsultant in the recruitment of Tony Hughes, given his profileand experience
in the puband restaurant industry.However, this does not imply that theCompany would not useexternal searchconsultants for futur e
appointments to theBoard.
Audit Committee
TheAudit Committeeconsists of three non-executiveDirectors.During the year theCommittee was chairedby JohnJackson who
is a qualifiedaccountant.It meets ona regular basis under its terms of reference,and meets with theGroupFinanceDirector and the
externalauditors to review the financial statements and externalfinancialannouncements madeby theCompany.It has responsibility 
for reviewingand monitoring the externalauditors’ independenceand objectivity,and reviews supplies ofall non-audit services provided
by the externalauditors toensure that their independenceand objectivity arenot compromised.DavidRichardson, who is achartered
accountant,brings considerable knowledge to theAudit Committee withhis experienceas FinanceDirector ofaFTSE 100 company .
TheAudit Committee met three times during 2007 withfullattendanceat eachmeeting.
During the year BDOStoy HaywardLLP resignedas auditors and theAudit Committee, inconjunction with senior management,carried
out a tender process for theGroupaudit.Following this process,Deloitte&ToucheLLP wereappointedas auditors of theCompany
andGroup.There werenomatters raisedby BDOStoy HaywardLLP in their letter of resignation which were required tobebrought 
to theattention of shareholders.Shareholders of theCompany have the opportunity to re-appoint Deloitte&ToucheLLPat theAnnual
GeneralMeeting tobeheld on 7May 2008.
Following the retirement from theBoardofAndrew Thomas,JohnJackson has taken over thechairmanship of theRemuneration
CommitteeandDavidRichardson will take over thechairmanship of theAudit Committee following theAnnualGeneralMeeting.
TheRestaurant Groupplc – strategy
TheRestaurant Group’s key objectiveis togrow shareholder valueand the strategy deployed toachieve this is tobuildabusiness
capable of generating long-term sustainableand growingcashflows.Inpursuit of this wehavebuilt abusiness whichis focused on
the growingcasualeating-out market.Wehave targeted segments of this market whichoffer distinct barriers toentry and where we
canbeconfident of delivering good growthinprofits andcashflows and where thereis good potentialfor high returns on investment.
This has led theGroup tofocus our activities in twoareas –LeisureandConcessions.This emphasis was underlinedby the divesting
of our high street businesses (CaffeUnoandEst Est Est)during 2005.TheGroupoperates in the expandingcasualdining market,and
our offerings continue toprovide good valuefor money incomfortable surroundings and excellent servicefrom our dedicated teams.
TheGroup’s strategy is set todeliver further organic growth through the roll-out of our brands –Frankie&Benny’s andChiquitoand our
PubRestaurant business.Wehavea plentifulpipeline of sites for development,coupled witha strong focus oncontinuing todeliver like-
for-like sales growthfrom our existing restaurants.Our Concessions business operates ina dynamicandcomplicated market whereour
management teams havemarket-leading expertiseanda track recordofinnovationand improving sales performance.
15
TheRestaurant Groupplc
AnnualReport 2007 16
The RestaurantGroup plc
Annual Report 2007
The Restaurant Group plc–risk factors
The BoardofDirectors regularly identify,monitor and manage potential risks and uncertainties to the Group. The list below sets out what
the Directors consider to be the current principal risksand uncertainties. This list is not presumedtobeexhaustive and is, by its very
nature, subject to change.
•Adverse economic conditions andadecline in consumer confidence and spend in the UK.
•Increased supply of new restaurant concepts into the market.
•Increase in prices of key raw materials, wages and overheads (including utilities).
•Impact of terrorism in key locations (including airports).
•Increased regulation of the food and beverage industry leading to higher costs.
•Possible health pandemic that may cause customers to stay away or prevent restaurants being adequately staffed.
•Failuretoprovide customers with brand-standardvalue for money offerings and service levels.
•Major failureofkey supplierstodeliver products intorestaurants.
•Damage to our brands’ images due to failures in environmental health in the restaurants or from contamination of products.
•The lossofkey personnel or failuretomanage successionplanning .
•Breakdown in internal controls through fraud or error .
The Restaurant Group plc–key performanceindicators
The BoardofDirectors and executive management receiveawide rangeofmanagementinformation delivered inatimely manner .
Listed below arethe principal measures of progress that arereviewed onaregular basis to monitor the development of the Group.
Like-for-like sales
This measureprovides an indicator of the underlying performance of our existing restaurants, and highlights successful development of
our offerings to best match changing consumer demandsover time.During 2007, the Group like-for-like salesincreased by 5.5%, which
followeda5%increase in 2006 anda3%increase in 2005.
New sites opened
The expansion of our brands isakey driver of Group’sprofitability.Asnoted in the Group Finance Director’sreview,potential new sites
aresubjecttoarigorous appraisal process beforethey arepresented to the Boardfor approval. This process ensures we maintain the
quality of openings as well as the quantity of sites opened. During 2007 the Group opened 36 new sites and plans to open 30-35 new
restaurantsduring 2008.
EBITDA
The ability of the Group to finance its roll-out programme is aided by strong cash flows from the existing business. The Group defines
EBITDA as operating profit beforedepreciation, amortisation and non-trading items. EBITDA serves asauseful proxy for cash flows
generated by operations and is closely monitored. During 2007 the Group generated£67.8m EBITDA, an increase of 22% on the
2006 level of £55.6m .
Operating profit margin
The Boardand management closely monitor profit margins as an indicator of operating efficiency within restaurants and across the
Group. During 2007 the Group adjustedoperating margin improved by 60 basis points to 13.1%.
In addition, the Group closely scrutinises the returns on investedcapital from new site openings and the average EBITDAgenerated
by restaurants.
Internal control
The Boardisresponsiblefor the Group’ssystem of internal control and for reviewing its effectiveness.Inaccordancewith guidance for
directors “Internal Control: Guidance for Directors on the CombinedCode” (the “Turnbull Guidance”), the Boardhas ensured that there
is an ongoing process for reviewing the effectiveness of the systemofinternal control including identifying, evaluating and managing the
significant risks faced by the Group. This process, which is regularly reviewed by the Board, is carried out in conjunction with business
planning and is documented inarisk register that has been progressively enhanced during the financial year and up to the date of
approval of the Annual Report and Accounts.
Whilst acknowledging its overall responsibility for the system of internal control, the Boardisawarethat the system is designed to
manage rather than eliminate the risk of failuretoachieve business objectives and can only provide reasonable, but not absolute,
assurance against material misstatement or loss.
Report of the Directors of
The RestaurantGroup plc
continued The Group has well established procedures which have been developed over many years which meet the requirementsofthe Turnbull
Guidance.Akey control procedureisthe day-to-day involvement of executive members of the Boardinall aspects of the business and
their attendance at regular management meetings at whichperformance against planand business prospects arereviewed. The Group
has establishedamonthly executive management meeting wherethe four executive Directors,senior operational managersand head of
functional departments review Group performance and issues affecting the Group.
Additionally,the Boardseeks to continually strengthen the internal control system wherethis is consistent with improving the relationship
between risk and reward. The Group’sassociate company,Living Ventures Limited (now restructured as Pimco2637 Limited), does not
fall under the same internal controls as the Group.The internal controls within the associateare discussed with management of that
companyduring shareholdermeetings and areconsidered to be appropriatefor an entity of its size.
Other key features and the processes for reviewing effectiveness of the internal control system aredescribed below:
•Terms of reference for the Boardand its sub-committees, includingaschedule of matters reserved for the Boardand an agreed
annual programme of fixed agenda items for Boardapproval.
•Anestablishedorganisationalstructurewith clear lines of responsibility and rigorous reporting requirements. Operational performance
and operational matters areconsidered at monthly meetings of the executive Directors with senior management. Financial
performance is monitored and action taken through weekly reporting to the executive Directors and monthly reporting to the
Boardagainstannual budgets approved by the Board.
•Capital investmentisregulatedbyabudgetary processand authorisation levels, with appraisals and post-investment reviews.
•Comprehensive policy manualssetting out agreed standards and control procedures.These includehuman resources related
policies, information technologyand health and safety .
•Aninternal audit functionheaded by an experienced internal auditorhas access to all areas of the Company and Group’sbusiness
and reports into the Board.
Statement of Directors’ responsibilities in relation to the accounts
The Directorsare responsible for keeping proper accounting records which disclosewith reasonable accuracy at any time the financial
positionofthe company,for safeguarding the Company’sassets, for taking reasonable steps for the prevention and detection of fraud
and other irregularities and for the preparation ofaReport of the Directorsand Directors’remuneration report which comply with the
requirements of the CompaniesAct 1985.
Financial statements arepublished on the Group’swebsite in accordance with legislation in the United Kingdom governingthe
preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenanceand
integrity of the Group’swebsite is the responsibility of the Directors. The Directors’responsibility also extends to the ongoing integrity
of the financialstatements contained therein.
The Directorsare responsible for preparing the Annual Report and the financial statements in accordance with the Companies Act 1985.
The Directorsare required to preparefinancial statementsfor the Group in accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the EuropeanUnion and Article4ofthe IAS Regulationsand have chosen to preparefinancialstatements for
the Companyinaccordancewith UK GAAP .
Group financial statements
Company law requires the Directors to prepare such financial statements in accordancewith IFRSasadopted by the EU, the
Companies Act 1985 and Article4ofthe IAS Regulation.
IAS1“Presentation of Financial Statements” requires that financialstatementspresent fairly for each financial year the Group’ s
financialposition,financial performance and cash flows. This requires the faithfulrepresentation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out
in the International Accounting Standards Board’s‘Framework for the preparation and presentation of financial statements’.
In virtually all circumstances,afair presentation will be achieved by compliance with all applicable International Financial Reporting
Standards.Afair presentation also requires the Directorsto:
•consistently selectand apply appropriate accounting policies;
•present information, including accounting policies, inamanner that provides relevant,reliable, comparableand understandable
information; and
•provide additional disclosures when compliance with the specific requirements in IFRSisinsufficient to enable users to understand
the impact of particular transactions, other events and conditions on the entity’sfinancialposition and financial performance .
17
The Restaurant Group plc
Annual Report 2007 18
The RestaurantGroup plc
Annual Report 2007
Parent company financial statements
Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state
of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent; and
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained
in the financial statements.
Information provided to auditors
All of the current Directors have taken all the steps that they ought reasonably to have taken to make themselves aware of any
material information needed by the Company’s auditors for the purpose of their audit and to establish that the auditors are aware
of that information. The Directors are not aware of any relevant material information of which the auditors are unaware.
Going concern
Based on the Group’s plans for 2008 and after making enquiries, the Directors have a reasonable expectation that the Group has
adequate resources to continue operations for the foreseeable future. For this reason they continue to adopt the going concern basis
in preparing the financial statements.
Corporate responsibility
The Restaurant Group plc (“TRG”) acknowledges that it has a significant role to play with regard to the community and wider
environment in which it operates. This statement sets out the principal areas of focus and activity that the Group has undertaken
to date, and what the Group is looking at for future development, in managing its impact on customers, employees, communities
and the wider environment.
This is split into five sections:
• Our market – the area of business that our strategy is focused on.
• Our environment – the impact of TRG on the wider environment, and how we are seeking to reduce this.
• Our people – the Group’s policies and actions towards our 8,500 and more employees.
• Our communities – how TRG interacts with those communities from which our customers and employees are drawn from.
• Our shareholders – those that have invested capital in the development of The Restaurant Group plc, and to whom the Directors
and management of the Group are reporting to.
Our market
The Restaurant Group has a clearly defined strategic aim – to grow shareholder value by operating in the expanding casual dining
market, focusing on those areas of this market which can offer barriers to entry, high returns on investment and strong and growing
cash flows. The general trend of a growing dining out market in the UK continues, but in recent years there has been an increased focus
from customers and regulatory authorities on healthy dining issues including dietary habits, drinking and smoking.
Healthy eating
Healthy eating is a personal responsibility but TRG acknowledges that as a provider of food and drink we have a role to play in providing
appropriate options from which individuals may choose when they eat out. TRG strongly believes that it should provide its guests with
choice. Whilst we do not wish to be prescriptive we aim to provide a healthy choice at each menu point, alongside more indulgent options.
For many people dining out is a treat and therefore the normal restrictions which may be applied to healthy eating on a day-to-day basis
are waived in favour of enjoyment and experience. For example whilst completing the weekly shop a consumer may choose chocolate
fudge cake for their weekend dessert as opposed to a piece of fruit during the week.
During 2007 TRG worked extensively on its children’s menus to provide a selection of healthy meals alongside the more “traditional”
dishes which, by virtue of their make-up, contain a higher number of calories. Healthy dishes are clearly marked on the children’s menus
in Chiquito & Garfunkel’s and all of our brands offer vegetables or salad with every child’s meal. We believe that a balanced diet is as
important as regular exercise and appropriate rest and relaxation in promoting physical and mental well being.
Healthy dining is of particular concern when it affects young people, and our Chiquito, Garfunkel’s and Filling Station brands have
children’s dishes which have no added sugar, colours or preservatives and are low in salt. These brands also offer a free salad with
every main dish on our children’s menu. In Frankie & Benny’s, all children can receive, at no additional cost, a portion of vegetables or
salad with any main course, and can replace fries with jacket potatoes. We also serve a wide range of alternatives to the traditional fried 
potato chip such as mashed potato, rice and jacket potatoes.
Report of the Directors of
The RestaurantGroup plc
continued Hydrogenated fats
In light of UK government and consumer focus with regardtoconsumptionofproducts containing high levels of fat, particularly
saturated fats and artificial hydrogenated trans-fats*, which have been linked to potential risks to cardiovascular health, during 2007
in conjunction with our external food safety consultants we conductedadetailedreview of our suppliers and our menu ingredients.
•Wehave worked closely with all of our supplierstoidentify the types and levels of fats and oils in our ingredients to facilitate
aprogramme of removal,replacement or reduction,whilst maintaining our required quality standards.
•The vast majority of our ingredients (>99%)are now free from hydrogenated fats and oils.
•Since August 2007 we have prohibited the supply of new ingredients containing added hydrogenated fats and oils.
•Wecontinuetowork closelywith all of our suppliers to identify and progress opportunities for reducing overall levels of saturatedfat
wherever possible and to provide healthier choices.
*Whilst some trans-fats occur naturally and arefound in small amounts in meat and dairy products, concerns have been raised about artificial trans-fats, formed duringafood
manufacturing process called hydrogenation that turns oils into solid/semi-solid fats. These hydrogenated fats/oils can be found in products such as biscuits, cakes, margarine,
processed foods and cooking oils.
Genetically modified foods
For many years the Grouphas hadapolicy of not sourcing genetically modified foods and new suppliers arerequired to confirm
that they will not provide The Restaurant Group with such products .
Drink aware
All our restaurants operate an “AreYou 21” policy,whereby we will ask for proof of identification to anyone who appears to be under21.
We also do not permit the sale of alcohol to under 18’s, even if the alcohol is for consumption withameal. All of our restaurants offer a
wide range of non-alcoholic drinks including fruit juices, carbonates, minerals and non-alcoholic cocktails.
Smoking
From1July 2007 we havecompliedfully with the legislation throughout the United Kingdomwhich has banned smoking in public areas.
Our environment
The Restaurant Group takes its commitment to the environment very seriously.Weare developinganumber of initiatives to reduce
our impact on the wider environment, which link in with improving our cost base. Our initial focus is ensuring we have reliable and
measurabledata to monitor our impact; hence we have been upgrading our facilities to measureconsumption of gas, electricity and
water.This will allow us to analyse inefficient use of these resources and then take steps to improve our usage. This will reduce our
impact on the environment and also save costs. We aretaking steps to recycle morepackaging and waste within the Group.Weare
working with suppliers to increase volumes of glass recycling and paper recycling–itissurprising how few suppliers areable to offer
assistance in this area–but we continuetowork with them to achieve this.
We haveanumber of initiatives and trials across the Groupwhich have been instigated over the past couple of years. We have been
monitoring their progress during the 2007 and look forwardtoincreasing these schemes. For example:
•During 2007 we have trialled glass recycling schemes in ten restaurants and arenow evaluating rolling this out across our restaurant
businessinthe Leisuredivision during 2008. We arealso currently working with our waste contractors to developasystem whereby
we can economically recycle our cardboardwaste.
•Within Frankie&Benny’swehave undertakenascheme to replace as many as possible of our light bulbs with lower wattage, more
energy efficient devices.
•For the past 18 months we have been installing refrigeration units that have new energy efficientcontroller technology,which can save
up to 15% on energy usage and costs on refrigeration equipment.
•During 2007, in co-operation with our principalfood distributor,wehave successfully trialled the use of reusable “Eco-trays”for the
delivery of fresh produce. This delivery mechanism has now been rolled out to 75% of our restaurants in early 2008 and it is planned
to increase this during the year .
•All new units complywith the latest environmental regulations .
•Our new head office at Marshalsea Road has recycling facilities for waste paper throughout the building.
19
The Restaurant Group plc
Annual Report 2007 20
The RestaurantGroup plc
Annual Report 2007
Our people
It is often said thatacompany’smost important assetisits people. At TRG we endeavour to build great teams, in which individuals
can develop their skills,contribute toasuccessful business and enjoy their time at work .
We employ over 8,500 people and this number is expanding rapidly–the roll-out of our great brandsmeans thereare plenty of
opportunities for individuals to develop with the Group inavariety of rewarding and challenging roles.
Our staffhandbook clearlysets out that the Group offers equal employment rights regardless of age, colour,gender,sexual orientation,
disability or religion.This is reinforced across our teams from the recruitment process onwards.
We have clear and fair terms of employment within the Group.All staffare provided withacontract of employment or service agreement
and thereare fully documentedprocedures in place for disciplinary issues and grievances raised by employees. The Group has
adefined termination policy,should this be required.
The Group devotes considerable resource to training our teams. Training commences on the first day of joining any of our brands
and we have recently invested inanew HR system to enable continual monitoring of the development of individuals through their time
with TRG. Employees take part in performance reviews on at least an annual basis with training and development opportunities or
requirements identified.
With an expanding portfolio of sitesandasizeable Group already in place, communications with all our teams areofvital importance.
All restaurants receive regular communicationpacks with updatesofwhat is happeningwithintheir brands. We also have processes
in place for monthly meetings within restaurants to cascade information throughoutthe Group. Most importantly,our moresenior
managersspendaconsiderable amount of time visiting the restaurants and discussing matters with the teams.
The health and safety of our customersand employees is of paramount importance. The Group has extensive procedures to ensurewe
mitigate risks to our guests and teams as far as possible. We have very clear procedures and standardsinplace, and to enforcethese
we employexternal auditorsand carry out benchmarking of our restaurants. We have also significantly increased the level of training in
health and safety matters across the Group in recent years to further enhance the clean, safe environment for our customers and staff.
Our communities
The Restaurant Group hasahistoryofinvolvement in the local communities around our restaurants andpub restaurants. Whilst the
Group hasabroad nationwide portfolio of sites, it is vital that each site has its roots in its local community.Whether it isaBlubeckers
or Brunning&Price pub, oftenabuilding of local historical importance, that has been carefully developed maintaining many of its original
features and characteristicsand so offering the warmth ofa“local” inasmall rural community,orabusy Frankie&Benny’sona large
leisurescheme, we aim to ensureour restaurants areinvolved in their communities.
Each year our brands choose various charities to support. During 2005, Frankie&Benny’scelebrated its 10th anniversary by
supporting the BBC’sChildren in Need charity,and through the effortsofour staffand customers, over £150,000 was raised for
this worthwhile cause.
In 2006, Frankie&Benny’s supported Great Ormond Street Hospital as the nominated charity.The charity of the yearfor 2007 was the
NSPCC, and therehave beenanumber of fund raising initiatives carried on at our restaurants to support this.During 2007,our teams in
Frankie&Benny’s have been actively encouragedtoget involvedinlocal projects and we areinvolved withanumber of schools through
sponsorship of sports teams up and down the country .
Chiquito also nominatesadifferentcharity each year to support throughamajor fund raising event across the brand on 5th of May ,
“Cinco de Mayo”. Cinco de Mayo isaNationalFiesta in Mexico, so it is very appropriate that Chiquito celebratesthis date with special
events at the restaurants. In 2007 £15,000 was raised on this one night alone. During 2008 Chiquito is proud to be working with
Childline to help raise funds and the profile of this worthwhilecause and thereareanumberofpromotions in place during the year ,
including the Cinco de Mayo celebrations.
Blubeckers support charities locally.Theme nights and events areheld on an ad-hoc basis to raise funds for local causes. Thousands
of pounds worth of vouchersare donated to charitableevents every year,tobeused as raffle prizes and auction lots.
Report of the Directors of
The RestaurantGroup plc
continued Our shareholders
The Group has hadaclear strategy since 2001–todeliver value for shareholders by focusing on sectors within the eating out market
that offer high barriers to entry,wherewecan generate sustainable and growing cash flows and which offer high returns on investment.
This hasled the Group to focus investmentinto the Leisuredivision and our Concessions division, which operates principally on airports.
In 2005 the Group disposed of its high-street focussed brands, Est Est Est and Caffe Uno. Garfunkel’sinCentral London,Bath and
Edinburghcontinues to perform well for the Group.
The Chairman’sstatement, Chief Executive’s review of operations and Group Finance Director’sreviewprovide further detail on the
Group’sstrategy,performance during 2007 and prospects for the Group.
Donations
No donations for political purposes have been directly made by the Company during the year.Charitable events, fund raising and
sponsorship areorganised by restaurants for organisations in their locality as described above.
Creditor payment policy
The Company’spolicy is to agree the terms of payments with its suppliers as and whenatrading relationship is established. The
Company ensures that the terms of payment areclear and its policy is to abide by the agreed terms, provided the supplier meets
its obligations. At 30 December 2007 the Company had no trade creditors.The Group had an average of 56 days (2006:52days)
purchases outstanding in trade creditors.
Capital risk management
The Group manages its capital to ensurethat it will be able to continue asagoing concernwhile looking to maximise returns to
shareholders. The capital structureofthe Group consists of equity (comprising issued sharecapital, reserves and retained earnings),
debt, finance leases and cash and cash equivalents. The Group monitors its capital structureonaregular basis through cash flow
projections and consideration of the cost of financing its capital .
In December2007 the Group completedarefinancing exercise and further detail on this is set out in the Group Finance Director’ s
review.Aspart of this the Group has externally imposed capital requirements. The Group hasa£120m revolving facility anda£10m
overdraft facility.Under the terms of the £120m revolving facility the Group is required to comply with its financing covenants whereby
net interest charges must be covered by at least four times by EBITDA and net debt must not exceed three times EBITDA. These
covenants aretested twiceannually and aremonitored onaregular basis .
Under the terms of the previous facility the Group was required to comply with its financingcovenants whereby net interest charges
must be covered by at least four times by profit beforeinterest and tax, and net debt must not exceed 2.5 times EBITDA. During 2007
the Groupremained within its external limits throughout the year .
Financial risk management
The BoardofThe Restaurant Group plc regularly reviews the financialrequirements of the Group and the risks associated therewith.
The Group does not use complex financial instruments, and wherefinancial instruments areused it is for reducing interest rate risk. The
Group does not use derivativefinancial instruments for trading purposes. Group operations areprimarilyfinanced from retained earnings
and bank borrowings (including an overdraft facility).
In additiontothe primaryfinancial instruments, the Group also has other financial instruments such as debtors, prepayments, trade
creditors and accruals that arise directly from the Group’soperations. Further information is provided in note 26 to the accounts.
Effectivefrom16January 2006, the Group entered intoathree year interest rate swap, for an initial notional amount of £25m rising to
£50m from 18 April 2006 until 16 January2008, when it reduced to £30m until 16 January2009, at which date it terminates. The fixed
rate for the duration of the three years is 4.695%.
Effectivefrom18January 2008, the Group entered intoafurther three year interest rate swap foranotional amount of £25m, from
18 January 2008 to 18 January 2011 atafixed rate of 4.92%.
After the impact of the interest rate swap, the average rate of interest charged during the year on the Group’sdebt was 6.02%
(2006: 5.67%), and the average year end rate was 6.40% (2006:5.41%). On 2007results, net interestwas covered 12.1 times
(2006: 12.0 times) by profit beforetax, interest and non-trading items. Based on year end debt and profits for 2007,a1%rise in
interest rates would reduce profits beforetax and non-trading items by 0.7% (2006: 0.1%) and interest cover would reduce to
11.3 times (2006:12.0 times) .
At 30 December 2007 the Group had gross borrowings attracting interest (including overdraft) of £79.0m (2006: £48.2m) and cash
balancesof£1.7m (2006: £0.7m).
21
The Restaurant Group plc
Annual Report 2007 22
The RestaurantGroup plc
Annual Report 2007
AnnualGeneral Meeting
AseparateCircular is included with the mailing of the Annual Report to shareholders setting out the resolutions to be voted on at
the Annual General Meeting, whichistotake place at 11am on7May 2008 at the offices of Dresdner Kleinwort Investment Bank,
30 Gresham Street, London EC2P 2XY .
The Boardbelieves that the proposed resolutions to be put to the shareholders at the Annual General Meeting areinthe best interests
of shareholders and, accordingly,recommends that shareholders vote in favour of the resolutions, as theDirectors intend to do in
respect of theirown beneficial shareholdings in the Company .
Auditors
During the year BDO Stoy HaywardLLP resigned as auditors and Deloitte&ToucheLLP wereappointedintheir place. Deloitte&
Touche LLP have expressed their willingness to continue as auditors, andaresolution will be proposed at the Annual General Meeting
for their reappointment.
By order of theBoard,
Robert Morgan
Company Secretary
5March 2008
Report of the Directors of
The RestaurantGroup plc
continued Introduction
This reporthas been prepared in accordancewith Schedule7aofthe Companies Act 1985. The report also meets the relevan t
requirements of the Listing Rules of the FinancialServices Authority and describes how the Boardhas applied the PrinciplesofGood
Governance relating to Directors’ remuneration. As required by the Regulations,aresolution to approvethe report will be proposed
at the Annual General Meeting of the Company at which the financial statements aresubject to approval.
The Regulations requirethe auditors to reporttothe Company’smembers on the part of the Directors’ remuneration report subject
to audit and to state whether in their opinion that part of the report has been properly prepared in accordance with Schedule 7a of the
Companies Act 1985 (as amended by the Regulations). The report has thereforebeen divided into separate sections for audited and
unauditedinformation.
Unaudited information
Remuneration Committee
The Company has establishedaRemuneration Committee (“the Committee”) which is constituted in accordance with the recommendations
of the Combined Code. The members of the committee during the year wereJohn Jackson, Andrew Thomas,and David Richardson
(from1February 2007) who wereall independent non-executive Directors. During the year the Committee was chaired by Andrew
Thomas and following his retirementfromthe Boardon6February 2008 is chaired by John Jackson. With effect from1January 2008,
Tony Hugheshas been appointedtothe Remuneration Committee.
None of the Committee has any personalfinancial interest in the Company (otherthan as shareholders). The Committee makes
recommendations to the Board. No Director playsapart in any discussion about his own remuneration. In determining the other
executive Directors’ remuneration for the year the Committee consulted Alan Jackson (Chairman) about its proposals.
New Bridge Street Consultants LLP (appointed independent adviserswho provided no other services to the Group during the year)
provided advice to the Committee,encompassing all elementsofthe remuneration packages.
Remuneration policy
Executive remuneration packages aredesigned to attract,motivate and retain Directors of the high calibreneeded to progress and
developthe Group and to rewardthem for enhancingvalue to shareholders.The performance measurement of the executive Directors
and the determination of their annual remuneration package areundertaken by the Committee. In addition, the Committeedetermines
the remuneration for the Chairman.The remuneration of the other non-executive Directors is determined by the Board. Thereare four
main elements of the remuneration package for executiveDirectors :
•Basic annual salary (including Directors’ fees) and benefits;
•Annual bonus payments which cannot exceed 100% of basic salary for executiveDirectors;
•Long-Term Incentive Plan awards; and
•Pension arrangements.
The Company’spolicy is thatasubstantialproportion of the remuneration of the executive Directors should be performance related.
As describedbelow,executive Directors may earnannual incentivepaymentsofupto100% of their basic salary together with the
benefits of the participation in the Long-Term IncentivePlan.
Executive Directors areentitled to accept appointments outsidethe Company or Group. Thereisnorequirement for Directors to remit
fees earned from appointments outsideofthe Company or Group to The RestaurantGroup plc.
Basic salary
An executive Director’sbasic salary is determined by the Committee prior to the beginningofeach year and when an individual
changes position or responsibility.Indecidingappropriatelevels, the Committee considers the Group asawhole and by reference
to remuneration levels at other companiesinthe leisureand hospitality sectors.Basic salaries werereviewed in December 2006 with
increases taking effect from1January 2007. They wereagain reviewed in December 2007 with increases from1January2008.
In additiontobasic salary,the executive Directors receive pensioncontributions and certain benefits-in-kind, principallyacar (or car
allowance), and health and life insurance .
Changes to the basic salary in 2007 represented increasesofbetween 25% and 40%.These significant adjustments wereconsidered
necessary to ensurethat the managementteam wereretained in circumstances whereseveral members of the team had been
approached by other organisations offering very attractive packages (potentially significantly higher than the current packages). In part,
this increase also recognised the increased complexity of the businessand performance of the Company and individual executives.
Directors’ remunerationreport
23
The Restaurant Group plc
Annual Report 2007 24
The RestaurantGroup plc
Annual Report 2007
Annual bonus payments
The annual bonus is basedonthe achievement of stretching profit beforetax targets and personal objectives.Performance targets
areset annually as part of the budgeting process and performance is reviewed against those targets at the end of the financial year .
The maximum performance related bonus that can be paid in respect of performancein2008 is 100% of basic annual salary and for
significant bonuses to be paid, performance must be outstanding. For any bonus payment made in excess of 75% of salary thereisa
reinvestment commitment for the Director into shares in The Restaurant Group plc, and these shares form part of the matching element
described in the Long-Term Incentive Plan detailed below .
Long-term incentives
The Company operates the 2005 Long-TermIncentive Plan (“LTIP” or “Plan”),and the 2003 Save As YouEarn(“SAYE”) Scheme under
which awards may be granted to executive Directors.
Long-Term Incentive Plan
The 2005 LTIP is the primarylong-term incentive scheme of the Company.Under the terms of the LTIP,individualsmay receive an
awardofconditional free shares (“Conditional Awards”) withaface value at grant of up to 100% of salary per annum, vesting at least
three years after grant subject to performance conditions and continued employment.
In addition, the Plan has the flexibility to grant conditional awards onamatching basis, prorata to the number of shares purchased
via the annual bonus (“Matching Awards”). Matching Awards may be grantedover shares worth up to 37.5% of base salary per
annum. The aggregate value of annual awards (Conditional and Matching)iscapped at 137.5% of base salary.Under the Plan,
the Remuneration Committee has the discretion to increase this cap to 200% of salary if the Committeedecides thereare exceptional
circumstances in relation to retention and recruitment of employees. The Remuneration Committee has determined that exceptional
circumstances do currently exist in relation to the retention of certain key employees and Directors and may exercise its discretion to
make awards of up to 200% of salary in 2008.
The Committee considers that Earnings Per Share(“EPS”)and Total Shareholder Return (“TSR”)are the most appropriate measures
of performance, with EPS targets rewarding significant and sustained earnings growth and TSR providingabalance to the financial
performance and retainingashareprice discipline in the remuneration package.
For the Conditional Awards to executive Directorstobemade in 2008, two separate performance conditions apply to proportions
of the award. These have been reviewed to ensuretheir continued appropriateness:
•The performance conditionattached to 50% of the Conditional Awards requires average annual EPS growth from1January 2008
to 31 December 2010 of between RPI plus 4% to RPI plus 10% p.a. for between 30% and 100% of this part of the awardtovest
(i.e. between 15% and 50% of the total award).
•The performance conditionattached to the other 50% of the Conditional Awards is based on TSR performance measured against the
constituents of the FTSE Travel&LeisureIndex overasingle three-year period from1March 2008 to1March 2011. This awardwill
vest between 30% for median performance increasing onastraightline basis to 100% for upper quartile performance of this award
to vest (i.e. between 15% (for median) and 50% (for upper quartile performance) of the total award).
•Awards will vest onastraight line basis between minimum and maximum thresholds.
•For Matching Awards, therewill bea0.3:1 match for average EPS growth of RPI plus 4% p.a., rising onastraightline basis to the
full 1:1 match for average EPS growth of RPI plus 10% p.a.
Performance against the TSR and EPS targets will be independentlycalculated and reviewed by the Committee. Following the
approval of the LTIP,shareholding guidelines for executive Directors have been introduced, linked to the out-turnofthe Plan. At the
time Conditional and Matching Awards vest under the Plan (or any other executive plan established in the future), thereisa requirement
to retain no fewer than 50% of the shares net of taxes vestingunder an LTIP awarduntilashareholding withamarket value equal to
100% of base salary is achieved.
SAYE Scheme
The Company also operatesaSAYEShareOption Scheme, the 2003 SAYE Scheme, for eligible employees under which options may
be granted atadiscount of up to 20% of market value. Eligible employees arefull time employeesand executiveDirectors who have
worked for the Groupfor at least one year.Under the termsofthe Scheme the eligibleemployees areable to purchase sharesunder
athree-year savingscontract. Awards under the SAYE scheme weremade in 2004 and 2006 to eligible employees and Directors and
it is planned to makeafurther awardtoeligible employees and Directorsduring 2008.
Directors’ remuneration report
continued Pensionarrangements
Executive Directors have individualpension arrangementsinthe form of personal pension plans. The Company makesacontribution
atarate of up to 20% of basic salary towards funding each executive Director’spensionplan. To the extent that this funding exceeds
the relevant current HMRC limit, thesurplus may be paid asasalary supplement. Thereare no unfundedpension promises or similar
arrangement for Directors.
Performance graph
As requiredbythe Regulations, the graph below compares the Company’sTSR performance with the FTSE 350 Travel and Leisure
ShareIndex for each of the past five years.
The FTSE 350 Travel and LeisureShareIndex has been selected for this comparison becauseitisthe index most relevant to gauging
the Company’srelative performance.
This graph shows the value, by1March 2008, of £100 invested in The Restaurant Group plc on1March 2003 compared with the value
of £100 investedinthe FTSE All-ShareIndex and the FTSE 350 Travel and Leisure ShareIndex.
Directors’ contracts
It is the Company’spolicy that executive Directors should have contracts with an indefinite term providing foramaximum of one
year’snotice.However,itmay be necessary occasionally to offer longer initial notice periods to new Directors.All executive Directors
have contractswhich aresubjecttoone year’snotice by either party.Inthe event of early termination (including followingachange of
control in the Company), the Directors’ contracts provide for compensation in line with their contractual notice period.
The details of the executive Directors’ contracts aresummarised in the tablebelow:
Date of contract Notice period
Andrew Page 28 August 2002 1year
Stephen Critoph 7July 20041 year
Kevin Bacon 17 March 2003 1year
Trish Corzine 31 March 2003 1year
25
The Restaurant Group plc
Annual Report 2007
The Restaurant Group plc
FTSE All-ShareIndex
FTSE 350 Travel and LeisureShareIndex
2003 2004 2005 2006 2007 2008
0
100
200
300
400
500
600
700
800 26
The RestaurantGroup plc
Annual Report 2007
Non-executive Directors
The service contracts of the non-executiveDirectors wereeach set for an initial three-year period (thereafter renewable forperiods of
three years). They arerequired to submit themselves for re-election every three years and the Boardbelieves this to be appropriate in the
Company’scircumstances. David Richardson was elected and John Jackson re-elected in 2007.
In accordance with best practice,John Jackson is standing for re-electionatthe Annual General Meeting to be held on7May 2008
as he has served on the Boardfor morethan nine years. The non-executive Directors’ appointments weremade as follows:
Date of appointment as
non-executive Director Notice period
Alan Jackson* 9November 2005 1year
John Jackson 1October 1996 Nil
David Richardson 1February 2007 Nil
Tony Hughes 1January 2008 Nil
*Alan Jackson was previously Executive Chairman of theCompany,and was appointed in March 2001.From1January 2006 he has held the position of non-executiveChairman.
All non-executive Directors have specific terms of engagement and their remuneration is determined by the Boardbased onareview of
fees paid to non-executive Directors of similar companies and reflects the time commitment and responsibilities of each role. The basic
fee paid to the non-executiveDirectors (excluding Alan Jackson) in the year was £45,000 (prorated by tenureofservice).
Auditedinformation
Aggregated Directors’ remuneration
The total amounts for Directors’remuneration wereasfollows:
2007 2006
Executive Non-executive Total Total
£’000 £’000 £’000 £’000
Emoluments 2,306 441 2,747 1,810
Money purchase pension contributions 226 –226 284
Total 2,532441 2,973 2,094
(a) Emoluments
(i) Executive
2007 2006
Basic Bonus Benefits
salary Bonus waived in kind Total Total
£’000 £’000 £’000 £’000 £’000 £’000
Andrew Page 475 475 (36) 26 940 506
Stephen Critoph 225 225 –15465 333
Kevin Bacon 240 240 –13493 345
Trish Corzine 210 210 (24) 12 408 232
1,150 1,150 (60) 66 2,306 1,416
The annual bonuses wereatthe maximum level of 100% of salary reflecting the excellent profit performance of the Group and
achievementinfull of the personal objectives set out at the start of the year .
Of the bonus amounts disclosed above, Andrew Page and Trish Corzineelected to waive £35,625 and £23,625 of their bonus
respectively and they received additional pension contributions from the Group equivalent to the amount (which areincluded in
the pensioncontribution table overleaf).
Directors’ remuneration report
continued (ii) Non-executive
2007 2006
Benefits
Fees in kind Total Total
£’000 £’000 £’000 £’000
Alan Jackson 275 35 310 277
John Jackson 45 –45 40
Andrew Thomas 45 –45 40
David Richardson 41 –41 –
RobertIvell ––– 37
406 35 441 394
(b) Pension schemes
The executive Directors aremembers of money purchase schemes. Whereanexecutive Director’s entitlement toacontribution exceeds
the allowable limit set by the HMRC,asalary supplement may be payable up to but not exceeding the level of entitlement. Contributions
paid by the Groupinrespect of the executive Directors wereasfollows:
2007 2006
Pension Salary Pension Salary
contribution supplement Total contribution supplement Total
£’000 £’000 £’000 £’000 £’000 £’000
Andrew Page 127 6133 141 28 169
Stephen Critoph 23 –23 17 –17
Kevin Bacon 24 –24 19 –19
Trish Corzine 46 –46 79 –79
220 6226 256 28 284
As noted above, in respect of the financial year ended 30 December 2007, Andrew Page and Trish Corzineelected to waive part of their
bonus and received additionalpension contributions (grossed up by 6%) from the Group of £37,763 and £25,043(2006: £121,635 and
£63,600) respectively,which areincluded in the pension contribution table.
27
The Restaurant Group plc
Annual Report 2007 28
The RestaurantGroup plc
Annual Report 2007
Directors’ shareoptions
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquireordinaryshares in the Company
granted to or held by the Directors. The Company operatesanumber of shareoptionschemes which executive Directors may
participate in. Following the Placing of 19,430,000 shares on 14 January 2004, an applicationtorestate the number and price of share
options granted under the 1998 and 2003 schemes to Directors and employees was approved by the HMRC. This restatement was
calculated to ensurethe effective number and price attributed to the optionswas as beforethe Placing with no incremental benefit
to the option holders.The information provided below is stated assuming the restatement occurred on1January 2004.
At At Date from
1January 30 December Exercise which Expiry
Name of DirectorScheme 2007 Granted ExercisedLapsed 2007 price exercisable date
Alan Jackson Note (1) 400,000 –(200,000) –200,000 45.0p 5.6.2004 5.6.2011
2003 178,114 –– –178,114 67.4p4.7.2006 4.7.2013
2003 200,000 –– –200,000 97.7p4.10.20074.10.2014
2003 SAYE 11,993 –(11,993)– –79.0p 1.12.2007 1.6.2008
2003 250,000 –– –250,000 134.4p 4.4.20084.4.2015
LTIP (1) 137,755 –– –137,755 –Publication of 6months
2008 results after vesting
LTIP (2) 103,316 –– –103,316 –Publication of 6months
2008 results after vesting
Andrew Page 2003 716,223 –(716,223) –– 67.4p 4.7.2006 4.7.2013
2003 200,000 –– –200,000 97.7p4.10.20074.10.2014
2003 SAYE 11,993 –(11,993)– –79.0p 1.12.2007 1.6.2008
2003 250,000 –– –250,000 134.4p 4.4.20084.4.2015
LTIP (1) 180,272 –– –180,272 –Publication of 6months
2008 results after vesting
LTIP (2) 67,602 –– –67,602 –Publication of 6months
2008 results after vesting
LTIP (3) –145,929– –145,929 –Publication of 6months
2009 results after vesting
LTIP (4) –23,110 –– 23,110 –Publication of 6months
2009 results after vesting
Stephen Critoph 2003 250,000 –– –250,000 97.7p 4.10.2007 4.10.2014
2003 50,000 –– –50,000 134.4p 4.4.2008 4.4.2015
LTIP (1) 112,244 –– –112,244 –Publication of 6months
2008 results after vesting
LTIP (2) 37,167 –– –37,167 –Publication of 6months
2008 results after vesting
2006 SAYE 5,843– –– 5,843 160.0p 1.6.2009 1.12.2009
LTIP (3) –69,124 –– 69,124 –Publication of 6months
2009 results after vesting
LTIP (4) –20,737 –– 20,737 –Publication of 6months
2009 results after vesting
Kevin Bacon 2003 100,000 –– –100,000 97.7p 4.10.2007 4.10.2014
2003 SAYE 11,993 –(11,993)– –79.0p 1.12.2007 1.6.2008
2003 140,000 –– –140,000 134.4p 4.4.20084.4.2015
LTIP (1) 119,047 –– –119,047 –Publication of 6months
2008 results after vesting
LTIP (2) 39,942 –– –39,942 –Publication of 6months
2008 results after vesting
LTIP (3) –73,732 –– 73,732 –Publication of 6months
2009 results after vesting
LTIP (4) –21,313 –– 21,313 –Publication of 6months
2009 results after vesting
Trish Corzine 2003 100,000 –– –100,000 97.7p 4.10.2007 4.10.2014
2003 SAYE 11,993 –(11,993)– –79.0p 1.12.2007 1.6.2008
2003 100,000 –– –100,000 134.4p 4.4.2008 4.4.2015
LTIP (1) 102,040 –– –102,040 –Publication of 6months
2008 results after vesting
LTIP (2) 34,237 –– –34,237 –Publication of 6months
2008 results after vesting
LTIP (3) –64,516 –– 64,516 –Publication of 6months
2009 results after vesting
LTIP (4) –18,433 –– 18,433 –Publication of 6months
2009 results after vesting
Directors’ remuneration report
continued The Group plans to make awards under the LTIP scheme following the publication of preliminary results in March 2008.
2003–Under the 2003 Mirror Scheme the performancecriteria that must be met requires the Company’sEPS to grow at an annual rate
of the Retail Price Index plus 2.5% over the three-yearperiod prior to exercise of the option.Nofurther awards may be made under the
2003 Scheme following the adoption of the LTIP .
LTIP (1)–these areConditional Shares awarded under the LTIP scheme. They arefreeshares awarded to the Directors should the performance criteria be met. The vesting criteria
aredependent on EPS growth of the 2008 results compared with the 2005 results and TSR performance.
LTIP (2)–these areMatching Shares awarded under the LTIP scheme. They arefreeshares and areconditional on the Directors acquiring and retainingacertain number of shares
by7May 2006 for the respective Director to be entitled to the Matching Shares available under the scheme, and the performance criteria be met. The vesting criteria aredependent
on earnings per sharegrowth of the 2008 results compared with the 2005 results.
LTIP (3)–these areConditional Shares awarded under the LTIP scheme. They arefreeshares awarded to the Directors should the performance criteria be met. The vesting criteria are
dependent on EPS growth of the 2009 results compared with the 2006 results and TSR performance.
LTIP (4)–these areMatching Shares awarded under the LTIP scheme. They arefreeshares and areconditional on the Directors acquiring and retainingacertain number of shares
by 30 June 2007 for the respective Director to be entitled to the Matching Shares available under the scheme, and the performance criteria be met. The vesting criteria aredependent
on earnings per sharegrowth of the 2009 results compared with the 2006 results.
Those options awarded under LTIP (3) and LTIP (4) weregranted on8March 2007.
Note (1): Alan Jackson was granted an option over 2,400,000 ordinary shares on5June 2001 at an exercise price of 45p per share.
This option was divided into three tranches of 800,000 shares, each of which may only be exercised if certain performance criteria are
met. The Company’sshareprice must meetaspecified target,which is 75p in the case of the first tranche, 105p in the case of the
second tranche and 135p in the case of the thirdtranche. In addition, the Remuneration Committee must be satisfied that therehas
beenasustained improvement in the underlying performance of the Group beforeany tranche of the option can be exercised. For the
second and thirdtranches, half of each tranche of the optionmay be exercised after three years and half after four years in each case
following the date of the grant. Each tranche of the option will lapse six years following the date of the grant if the target shareprice has
not by then been met. If, however,the target sharepricerelating to any tranche of theoptionismet within this period that tranche will
remain exercisable until ten years following the date of grant. Ifachange of control of the Company occurs, Alan Jackson is entitled to
exercise the option in full.
The Company’sshareprice has met the criteria of the three tranches and the Remuneration Committeeissatisfied that therehas been
asustained improvement in the underlying performanceofthe Group. Alan Jackson has exercised all of those options available to him
under the first and second tranches, and has exercised half of the thirdtranche.
During 2007 certain Directors exercised shareoptionsthat had vested. Details of the exercises arenoted below:
2007 2006
Gain on Gain on
Number Market price exercise exercise
of options Exercise at date beforetax beforetax
Name of director Scheme exercised price of exercise (£000) (£000)
Alan Jackson *200,000 45.0p 369.0p 648 640
SAYE 11,993 79.0p 199.0p 14 –
Andrew Page 2003 25,000 67.4p 336.0p 67 –
2003 691,22367.4p 351.15p 1,961 –
SAYE 11,993 79.0p 199.0p 14 –
Kevin Bacon SAYE 11,993 79.0p 199.0p 14 709
Trish Corzine SAYE 11,993 79.0p 199.0p 14 334
*Alan Jackson exercised 200,000 of the final tranche of options detailed in note (1) above during 2007.
Approval
This report was approved by the BoardofDirectors on5March 2008 and signed on its behalf by:
John Jackson
Chairman of the Remuneration Committee
29
The Restaurant Group plc
Annual Report 2007 30
The RestaurantGroup plc
Annual Report 2007
We have audited the Group financial statements of The Restaurant Group plc for the 52 weeks ended 30 December 2007 which
comprise the consolidated income statement, the consolidated statementofchanges in equity,the consolidatedbalance sheet,
the consolidated cash flow statement, and the related notes1to29. These Group financialstatements have been prepared under
the accounting policiesset out therein. We have also audited the information in the Directors’ remuneration report that is described
as having been audited.
We have reportedseparately on the parentcompany financialstatementsofThe Restaurant Group plc for the 52 weeks ended
30 December 2007.
This report is made solely to the Company’smembers, asabody,inaccordance with section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the Company’smembers those matters we arerequiredtostate to them in an
auditors’ report and for no other purpose. To the fullest extent permitted by law,wedonot accept or assume responsibility to anyone
other than the Company and the Company’smembers asabody,for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the Annual Report, the Directors’ remuneration reportand the Group financial statements
in accordance with applicable law and International FinancialReportingStandards “IFRSs” as adopted by the European Union are
set out in the statement of directors’ responsibilities.
Our responsibility is to audit the Group financialstatements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We reporttoyou our opinionastowhether the Group financial statements giveatrue and fairview,whether the Group financial
statements have been properly prepared in accordance with the Companies Act 1985 and Article4ofthe IAS Regulation and whether
the part of the Directors’ remunerationreport described as having been audited has been properly prepared in accordance with the
Companies Act 1985. We also report to you whether in our opinion the information given in the report of the Directors is consistent
with the Group financial statements.
In addition we reporttoyou if, in our opinion, we have not received all the information and explanations we requirefor our audit,
or if information specified by law regarding Directors’ remuneration and other transactions is not disclosed .
We reviewwhether the corporategovernancestatementreflectsthe Company’s compliance with the nine provisions of the 2006
Combined Code specified for our review by the Listing Rules of the Financial Services Authority,and we reportifitdoes not.Weare
not requiredtoconsider whether the Board’sstatements on internal control cover all risks and controls, or form an opinion on the
effectiveness of the Group’scorporategovernance procedures or its risk and control procedures.
We read theother information contained in the Annual Report as described in the contents section and considerwhether it is
consistent with the audited Group financialstatements. We consider the implicationsfor our reportifwebecome awareofany
apparent misstatements or material inconsistencies with the Group financial statements. Our responsibilities do not extend to any
further information outsidethe Annual Report.
Basis of audit opinion
We conducted our audit in accordance with InternationalStandards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, onatest basis, of evidencerelevant to theamounts and disclosures in the Group financial
statements and the part of the Directors’ remuneration reporttobeaudited.Italso includes an assessment of the significant estimates
and judgments made by the directors in the preparation of the group financial statements, and of whether the accounting policies
areappropriate to the Group’scircumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidencetogive reasonable assurance that the group financialstatements and the part of the Directors’
remunerationreport to be audited arefreefrommaterial misstatement, whether caused by fraud or other irregularity or error.Informing
our opinion we also evaluated the overall adequacy of the presentation of information in the Group financial statements and the part
of the Directors’ remuneration report to be audited .
Independent auditors’ report
to the members of
The Restaurant Group plc 31
The Restaurant Group plc
Annual Report 2007
Opinion
In our opinion:
•the Group financial statements giveatrue and fair view,inaccordance with IFRSs as adopted by the European Union, of the state
of the Group’saffairs as at 30 December 2007 and of its profit for the 52 weeks then ended;
•the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article4ofthe
IAS Regulation;
•the part of the Directors’ remuneration reportdescribed as having been audited has been properlyprepared in accordance with
the Companies Act 1985; and
•the information given in the report of the Directors is consistent with the group financial statements .
Deloitte&Touche LLP
CharteredAccountants and RegisteredAuditors
London
5March 2008 32
The RestaurantGroup plc
Annual Report 2007
Accounting policies for
the consolidated accounts
Significant accounting policies
The Restaurant Group plc (the “Company”) isacompanyincorporated and registered in Scotland. The consolidated financial statements
of the Company for the year ended 30 December 2007 comprise the Company and its subsidiaries (together referred to as the “Group”)
and the Group’sinterest in its associate.
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with InternationalFinancial Reporting Standards(“IFRSs”)
and its interpretationsadopted by the InternationalAccounting Standards Board(“IASB”) and as adopted by the European Union.
(b) Basis of preparation
The accounting year runs to the nearest Sunday to 31 December each year which will bea52or53week period .
The financial statements arepresented in sterling, rounded to the nearest thousand. They arepreparedonthe historicalcost basis
except derivative financial instruments which areheld at their fair value. Non-currentassets and disposal groups held for sale arestated
at the lower of carrying amount and fair value less costs to sell.
The preparation of financial statements in conformity with IFRS requires managementtomake judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions arebased on historicalexperience and various other factors that arebelieved to be reasonable under the circumstances,
the results of which form the basis of making the judgments about carrying values of assetsand liabilities that arenot readilyapparent
from othersources. Actual results may differ from these estimates.
The estimates and underlying assumptions arereviewed on an ongoingbasis. Revisionstoaccounting estimates arerecognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and futureperiods if
the revision affects both current and future periods.
In the current year the Group has adopted IFRS7“Financial Instruments: Disclosures”, which is effective for annual reporting periods
beginning on or after1January 2007 and the related amendmenttoIAS1“Presentation of Financial Statements”.The impact of the
adoptionofthese standards has been to expand the disclosuresprovided in the financial statementsregarding the Group’s financial
instruments and management of capital.
Futureaccounting policies
IFRS8“Operating Segments” will be mandatoryfor the Group for the 2009 year end results. This will require the Group to amend
certain disclosures but will not change the Group’sresult. The Group does not consider that any other standards or interpretations
issues by the IASB, but not yet applicable, will have any significant impact on the financialstatements.
(c) Basis of consolidation
(i) Subsidiaries
Subsidiaries areentities controlled by the Company.Control exists when the Company has the power,directly or indirectly,togovern
the financial and operatingpolicies of an entity so as to obtain benefitsfromits activities. In assessing control, potential voting rights that
presently areexercisable or convertible aretaken into account,regardless of management’sintention to exercise that option or warrant.
The financialstatements of subsidiaries areincluded in the consolidated financial statements from the date that control commences until
the date that control ceases.
(ii) Associates
Associates arethose entities in which the Group has significant influence,but not control, overthe financial and operating policies.
The consolidated financial statements include the Group’sshareofthe total recognised gains and losses of associates on an equity
accounted basis, from the date that significant influence commences until the date that significantinfluence ceases. When the Group’ s
shareoflosses exceeds its interest in an associate, the Group’scarrying amount would be reduced to nil and recognition of further
lossesisdiscontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf
of an associate.
(iii) Transactions eliminatedonconsolidation
Intragroup balancesand any gains and losses or income and expenses arising from intragroup transactions areeliminated in preparing
the consolidated financial statements. Unrealised gains arising from transactions with associates areeliminated to the extent of the
Group’sinterest in the entity.Unrealised losses areeliminated in the same way as unrealised gains, but only to the extent that there
is no evidence of impairment. (d) Foreign currency
Assets and liabilities in foreign currencies aretranslated into sterling at the rates of exchange ruling at the date of the balance sheet.
Transactions in foreign currencies aretranslatedinto sterling at the rate of exchange at the date of the transaction. The profitand loss
accounts for overseas operations aretranslated at the average rate of exchange for the periods covered by the accounts. Exchange
differences that relate to the net equity investment in overseas activities aretaken directly to reserves. Allother translation differences
aretaken to the income statement.
(e) Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposuretointerest rate risks arisingfromoperational, financingand
investment activities. In accordance with its treasury policy,the Group does not hold or issue derivative financial instrumentsfor trading
purposes. However,derivatives that do not qualify for hedge accounting areaccountedfor as trading instruments.
Derivative financial instrumentsare recognised initiallyatcost. Subsequent to initial recognition, derivativefinancial instruments are
stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement. However,where
derivatives qualify for hedge accounting, recognition of anyresultantgain or loss depends on the nature of the item being hedged.
The fair value of interest rate swaps is the estimated amount that the Group would receive or paytoterminate the swap at the balance
sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties .
(f) Property,plant and equipment
Items of property,plant and equipment arestated at cost less accumulateddepreciation (see below) and impairment losses
(see accountingpolicyk).
Whereparts of an item of property,plant and equipment have different useful lives, they areaccountedfor as separate items of property ,
plant and equipment.
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership areclassified as finance leases.
The owner-occupied property (excluding land element) acquired by way of finance lease is stated at an amount equal to the lower
of its fair value and the present value of the minimum lease paymentsatinceptionofthe lease, less accumulated depreciation
(see below) and impairment losses (see accounting policy k). Lease paymentsare accountedfor as describedinaccounting policy r.
Subsequent costs
The Group recognises in the carrying amount of an item of property,plant and equipment the cost of replacing part of such an item
when that cost is incurred if it is probablethat the futureeconomic benefits embodied with the item will flow to the Group and the cost
of the item can be measured reliably.All other costs arerecognisedinthe income statement as an expenseasincurred.
Depreciation
Depreciation is charged to the income statement onastraight-line basis over the estimated useful lives of each part of an item
of property,plant and equipment.The estimated useful lives areasfollows:
Freehold land Indefinite
Freehold buildings50years
Long and short leasehold property Term of lease or 25 years, whichever is lower
Fixtures and equipment 3-10 years
Motor vehicles 4years
Computer equipment 3-5 years
(g) Intangible assets–Goodwill
All business combinations areaccounted for by applyingthe purchase method. Goodwill represents amounts arising on acquisition
of subsidiaries, associates and joint ventures. In respectofbusiness acquisitions that have occurred since1January 2004, goodwill
representsthe difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
The classification and accounting treatment of business combinations that occurred prior to1January 2004 has not been reconsidered
in preparing the Group’s opening IFRS balancesheet at1January 2004.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is tested at least
bi-annually for impairment (see accounting policy k). In respect of associates, the carrying amount of goodwill is included in the carrying
amount of the investment in the associate.
Negativegoodwill arising on an acquisition is recognised directly in the income statement.
33
The Restaurant Group plc
Annual Report 2007 34
The RestaurantGroup plc
Annual Report 2007
(h) Trade and other receivables
Trade and other receivables arestated at their cost less impairment losses (see accounting policy k).
(i) Stock
Stock is stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course
of business, less the estimated costs of completion and selling expenses.
(j) Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits. Bank overdrafts that arerepayable on demand and form
an integral part of the Group’scash management areincludedasacomponent of cash and cash equivalents for the purposeofthe
statement of cash flows.
(k) Impairment
The carrying amounts of the Group’s assets arereviewed at each balance sheet date to determine whether thereisany indication
of impairment. If any such indication exists, the asset’srecoverable amount is estimated. For goodwill and assets that have an
indefinite useful life, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognisedwhenever
the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount. Impairmentlosses arerecognised in
the income statement.
(l) Share-based payment transactions
The shareoption programme allows Group employees to acquireshares of the Company.The fair value of options granted is
recognisedasanemployee expense withacorresponding increase in equity.The fairvalue is measured at grant date and spread over
the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured
usingaStochastic model,taking into account the terms and conditions upon which the options weregranted. The amount recognised
as an expense is adjusted to reflect the actual number of shareoptions that vest except whereforfeitureisonly due to market based
conditionsnot achieving the threshold for vesting.
(m) Provisions
Aprovision is recognised in the balance sheet when the Group hasapresent legal or constructive obligation asaresult ofapast event,
and it is probable that an outflowofeconomicbenefits will be required to settle the obligation. If the effect is material, provisions are
determined by discountingthe expected futurecash flows atapre-tax rate that reflects current market assessmentsofthe time value
of money and, whereappropriate, the risks specific to the liability.
(n) Deferred and current tax
Corporation tax payable is provided on the taxable profit at the current rate. Deferred tax is recognisedinrespect of all temporary
differences that have originated but not reversed at the balance sheet date, except to the extent that the deferred tax arises from
the initial recognition of goodwill. Temporary differencesare differences between the carrying amount of the Group’sassets and liabilities
and their tax base.
Deferred tax is measured at the tax rates that areexpected to apply in the periodsinwhich the timing differences areexpected to
reverse based on tax rates and laws that areenacted, or substantively enacted,bythe balance sheet date. Deferred tax is measured
onanon-discountedbasis.
(o) Pensions
The Groupmakes contributions for selected employees into defined contribution pension plans and these contributions arecharged to
the income statement as they become payable. The Group does not operateany defined benefit plans.
(p) Onerous contracts
Aprovision for onerous contracts is recognisedwhen the expected benefitstobederived by the Group fromacontract arelower than
the unavoidable cost of meeting its obligations under the contract.
(q) Revenue
Revenue represents amounts received and receivable forservices and goods provided (excluding value added tax and voluntary
gratuities left by customers for the benefit of employees) and is recognised at the point of sale.
Accounting policies for
the consolidated accounts
continued (r) Expenses
(i) Operating lease payments
Payments made under operating leases arerecognised in the income statement onastraight line basis over the term of the lease.
Incentives to enter into an operating lease arealso spreadonastraight line basis over the lease term.
(ii) Finance lease payments
Minimum lease payments areapportioned between the finance charge and the reduction of the outstanding liability. The financecharge
is allocated to each period during the lease term so as to produceaconstantperiodic rate of interestonthe remaining balanceo f
the liability .
(iii) Pre-opening expenses
Property rentals and related costs incurred up to the date of opening ofanew restaurant arewritten offtothe income statement in
the period in which theyare incurred.Promotional and trainingcosts arewrittenoff to the income statement in the period in which
they areincurred.
(vi) Borrowing costs
Debt is stated net of borrowingcosts whichare spread over the term of the loan.
(s) Dividend policy
In accordancewith IAS 10 “Events after the Balance Sheet Date”, dividends declared after the balance sheet date arenot recognisedas
aliability at that balance sheet date, and arerecognised in the financialstatements whenthey have received approval by shareholders .
Critical accounting judgements and key sources of estimation and uncertainty
In the process of applying the Group’saccounting policiesasdescribed above,management has made the following judgements and
estimations that have the most significant effect on the amounts recognised in the financial statements:
a) Impairment of carrying value of associate
Following the disposal by LivingVentures Limited of the Living Rooms business and the subsequent capital restructure, the Directors
have concluded that it is appropriate to makeafurther provision of £1.7m, which together with the £9.5m provision made in the year
ended 31 December 2006, leavesa£nil carryingvalue of both the investment and the loan note due. Further details areprovided in
notes5and 14.
b) Impairment of goodwill
The Group determines whether goodwill is impaired at least onabi-annualbasis. This requires an estimate of the value-in-use of the
assets to which goodwill is ascribedto. Estimating the value-in-use requires the Group to makeanestimate of the futurecash flows
from those assets and to chooseasuitable discountrate in order to calculatethe present value of those cashflows.
c) Acquisition of Brunning and Price Limited
Following the acquisition of Brunningand Price Limited on 17 October2007, the Group has consolidated the fair value of its assets
and liabilities at that date. This required an estimate of the fair value of the properties acquired which the Directors have determined
based on advice from an independent firm of qualified valuers .
35
The Restaurant Group plc
Annual Report 2007 36
The RestaurantGroup plc
Annual Report 2007
Year ended 30 December 2007 Year ended 31 December 2006
Continuing Discontinued Total Continuing Discontinued Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Revenue 3 366,710– 366,710 314,018 730 314,748
Cost of sales 4 (296,669) –(296,669) (256,060) (1,026) (257,086)
Gross profit/(loss) 70,041 –70,041 57,958 (296) 57,662
Administrationcosts (21,834) –(21,834) (18,475) –(18,475)
Provision against carrying
value of associate 5 (1,656) –(1,656) (9,500) –(9,500)
Loss on integration of DPP 5 ––– (4,582) –(4,582)
Profit on disposal of fixed assets 5 247 –247 –––
Operating profit/(loss) 46,798 –46,798 25,401 (296) 25,105
Interest payable 7 (4,254) –(4,254) (3,308) –(3,308)
Interest receivable 7 1,025 –1,025 699 –699
Profit/(loss) beforeshare
of associate and tax 43,569 –43,569 22,792 (296) 22,496
Shareofpost-tax result in
associated undertaking 14 (749) –(749) (917) –(917)
Profit/(loss) beforetax 42,820 –42,820 21,875 (296) 21,579
Profit/(loss) beforetax,
analysed as:
Trading business 43,480 –43,480 35,312 (296) 35,016
Non-trading items 5 (660) –(660) (13,437) –(13,437)
42,820 –42,820 21,875(296) 21,579
Taxonprofit/(loss)
from ordinaryactivities 8 (13,644) –(13,644) (11,264) 101 (11,163)
Profit/(loss) on ordinary
activitiesafter tax 29,176 –29,176 10,611 (195) 10,416
Profit on sale of businesses
net of tax 5 ––– –3,950 3,950
Profit for the financial year
attributable to equity shareholders29,176 –29,176 10,611 3,755 14,366
Earnings per share(pence)
Basic 9 14.90 –14.90 5.36 1.90 7.26
Diluted 9 14.82 –14.82 5.34 1.89 7.23
Dividend per share(pence)
Ordinary 10 7.25 6.00
Special 10 – 16.00
Consolidated income statement Year ended Year ended
30 December 31 December
2007 2006
Note £’000 £’000
Opening equity 65,204 91,436
Profit for the year 29,176 14,366
Foreign exchange translation differences 40 1
Taxonshare-based payments taken directly to equity (712) 1,529
Total recognised income and expense for the year28,504 15,896
Dividends–ordinary 10 (12,173) (9,490)
Dividends–special 10 – (34,793)
Issue of new shares 20, 23 1,090 1,096
Share-based payments–credit to equity 22, 23 1,738 1,059
Employee benefit trust–purchase of shares21 (7,209) –
Total changes in equity in the year 11,950 (26,232)
Closing equity 77,154 65,204
Consolidated statemen t
of changes in equity
37
The Restaurant Group plc
Annual Report 2007 38
The RestaurantGroup plc
Annual Report 2007
At At
30 December 31 December
2007 2006
Note £’000 £’000
Non-current assets
Intangible assets 12 26,516 11,275
Property,plant and equipment 13 228,757 174,035
Investment in associate 14 – 7,810
Trade and other receivables 14 – 875
255,273 193,995
Current assets
Stock 15 3,349 2,992
Financial assets–derivative financial instruments 26 415 652
Trade and other receivables 16 7,027 5,170
Prepayments 12,830 12,138
Cash and cash equivalents 25 1,692 683
25,313 21,635
Total assets 280,586 215,630
Current liabilities
Short-term borrowings 25 – (1,165)
Income tax liabilities (6,842) (4,947)
Trade and other payables 17 (85,191 ) (74,864)
Other payables–finance lease debt 27 (271) (271)
(92,304) (81,247)
Net current liabilities (66,991) (59,612)
Non-current liabilities
Long-term borrowings 25 (78,265) (47,000)
Other payables–finance lease debt 27 (2,558) (2,466)
Deferred tax liabilities 19 (25,388) (16,247)
Provisions 18 (4,917) (3,466)
(111,128) (69,179)
Total liabilities(203,432) (150,426)
Net assets 77,154 65,204
Equity
Sharecapital 20 55,295 54,863
Sharepremium 23 21,004 20,346
Foreign currency reserve 23 121 81
Other reserves23 (3,648) 1,823
Retained earnings 23 4,382 (11,909)
Total equity shareholders’ interests 77,154 65,204
The financial statements on pages 32 to 60 wereapproved by the BoardofDirectors and authorised for issue on5March 2008 and
weresigned on its behalf by:
Alan Jackson
Stephen Critoph ACA
Consolidated balance sheet Year ended Year ended
30 December 31 December
2007 2006
Note £’000 £’000
Cash flows from operating activities
Cash generated from operations 24 73,812 63,374
Interest received 1,546 68
Interest paid (3,468) (2,906)
Taxpaid (10,228 ) (9,656)
Net cash flows from operating activities 61,662 50,880
Cash flows from investing activities
Acquisition of subsidiary,net of cash acquired 11 (32,884 ) –
Disposal of business, net of cash disposed – (1,455)
Net proceedsfromdisposal of business by associate 6,280 –
Integration of business – (584)
Purchase of property,plant and equipmen t (47,407 ) (40,775)
Proceeds from sale of property,plant and equipment 815 58
Net cash flows used in investing activities(73,196) (42,756)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 1,090 1,096
Employee benefit trust–purchase of shares (7,209) –
Net proceedsfromissue of bank loans 32,000 36,000
Dividends paid to shareholders 10 (12,173 ) (44,283)
Net cash flows from/(used in) financing activities 13,708 (7,187)
Net increase in cash and cash equivalents 2,174 937
Cash and cash equivalents at start of year 25 (482) (1,419)
Cash and cash equivalents at end of year 25 1,692 (482)
Consolidated cash
flow statemen t
39
The Restaurant Group plc
Annual Report 2007 40
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
1Segmental analysis
Year ended 30 December2007
Operating
EBITDA Operating profit
Turnover EBITDA margin profit margin
£’000 £’000 %£’000 %
Leisure285,226 76,161 26.7% 61,572 21.6%
Concessions 81,199 16,567 20.4% 12,485 15.4%
Principal trading brands 366,425 92,728 25.3% 74,057 20.2%
Non-corebrands 285 (1,134)(398.0%) (1,449) (508.5%)
Continuing operations 366,71091,594 25.0% 72,608 19.8%
Discontinued operations –––––
Total all brands 366,71091,594 25.0% 72,608 19.8%
Pre-opening costs (included in cost of sales) (2,567)(0.7%) (2,567) (0.7%)
Administration(19,483) (5.3%)(20,096) (5.5%)
Share-based payments (1,738)(0.5%) (1,738) (0.5%)
Total beforenon-trading items 67,806 18.5% 48,207 13.1%
Provision against carrying value of associate (1,656)
Loss on integration of DPP –
Profit on disposal of fixed assets 247
Operating profit 46,798
Year ended 31 December 2006
Operating
EBITDA Operating profit
Turnover EBITDA margin profit margin
£’000 £’000 %£’000 %
Leisure236,258 62,703 26.5% 50,745 21.5%
Concessions 72,479 15,154 20.9% 11,088 15.3%
Principal trading brands 308,737 77,857 25.2% 61,833 20.0%
Non-corebrands 5,281 (1,789)(33.9%) (1,999) (37.8%)
Continuing operations314,018 76,068 24.2% 59,834 19.1%
Discontinued operations 730 (296) (40.6%) (296) (40.6%)
Total all brands 314,74875,772 24.1% 59,538 18.9%
Pre-opening costs (included in cost of sales) (1,876)(0.6%) (1,876) (0.6%)
Administration(17,192) (5.5%)(17,416) (5.5%)
Share-based payments (1,059)(0.3%) (1,059) (0.3%)
Total beforenon-trading items 55,645 17.7% 39,187 12.5%
Provision against carrying value of associate (9,500)
Loss on integration of DPP (4,582)
Profit on disposal of fixed assets –
Operating profit 25,105
No geographical segment analysishas been provided as the Directorsdonot consider theretobemateriallysignificantgeographical
segments. The Group currently operates three restaurantsoutside of the United Kingdom.
EBITDA is operating profitbeforedepreciation, amortisation and non-trading items. 1Segmental analysis continued
Year ended 30 December 2007
Capital Segment Segment
Depreciation additionsassets liabilities
£’000 £’000 £’000 £’000
Leisure14,589 39,834 236,353 50,670
Concessions 4,082 7,166 22,216 13,638
Principal trading brands 18,671 47,000 258,569 64,308
Non-corebrands 315 12 1,836 10,567
Continuing operations 18,986 47,012 260,405 74,875
Discontinued operations ––––
Total all brands 18,986 47,012 260,405 74,875
Administration 613 395 10,912 10,438
Unallocated items –– 9,269 118,119
Total Group 19,599 47,407 280,586 203,432
Year ended 31 December 2006
Capital Segment Segment
Depreciationadditionsassets liabilities
£’000 £’000 £’000£’000
Leisure11,958 31,628 167,970 43,086
Concessions 4,066 5,087 19,099 11,504
Principal trading brands 16,024 36,715 187,069 54,590
Non-corebrands 210 –2,233 7,112
Continuing operations 16,234 36,715 189,302 61,702
Discontinued operations ––– 2,568
Total all brands 16,234 36,715 189,302 64,270
Administration 224 4,060 10,920 10,614
Unallocated items –– 15,408 75,542
Total Group 16,458 40,775 215,630 150,426
Segmental assets areallocated to divisions wherepossible. Unallocated segmental assets include the investment in associate,
non-current and current trade and otherreceivables, derivativefinancial instruments, cash and cash equivalents and certain prepayments.
Unallocated liabilities include borrowings, provisions, current and deferred tax and certain accruals and other creditors.
41
The Restaurant Group plc
Annual Report 2007 42
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
2Additionalincomestatement
Additional income statement information is provided asauseful guide to underlying tradingperformance.The adjustments from the
statutoryincome statementexclude the non-trading items, as described in note 5, and aretoaid understanding of the income statement
and should be read in conjunctionwith, rather than asasubstitute for,the reported information.
The 2007 and 2006 results includeanumber of items which areofaone-offnatureorare unrelated to the period’sresultand hence are
not representative of theunderlying trading performance of the business. These have been separately identified in the additional income
statementasnon-trading items.
2(a) Additional income statement
Year ended 30 December2007
Continuing Discontinued TradingNon-
operations operationsbusiness trading Total
£’000 £’000 £’000 £’000 £’000
Revenue 366,710 – 366,710 – 366,710
Cost of sales:
Excluding pre-opening costs (294,102) – (294,102) – (294,102)
Pre-opening costs (2,567) – (2,567) – (2,567)
(296,669) – (296,669) – (296,669)
Gross profit/(loss) 70,041 – 70,041 – 70,041
Administrationcosts (21,834) – (21,834) – (21,834)
Trading profit/(loss) 48,207 – 48,207 – 48,207
Provision against carrying value of associate –– – (1,656) (1,656)
Loss on integration of DPP –– – – –
Profit on disposal of fixed assets –– – 247 247
Operating profit/(loss) 48,207 – 48,207 (1,409) 46,798
Interest payable (4,017)– (4,017) (237) (4,254)
Interest receivable 39 – 39 986 1,025
Profit/(loss) beforeshareofassociate and tax 44,229 – 44,229 (660) 43,569
Shareofpost-tax result in associatedundertaking (749) – (749) – (749)
Profit/(loss) on ordinary activities beforetax 43,480 – 43,480 (660) 42,820
Taxonprofit/(loss) from ordinary activities (14,802) – (14,802) 1,158 (13,644)
Profit/(loss) on ordinaryactivities after tax 28,678 – 28,678 498 29,176
Profit on sale of businesses net of tax –– – – –
Profit/(loss)for the year 28,678 – 28,678 498 29,176
Earnings per share(pence)
Basic 14.64 14.90
Diluted 14.56 14.82
Dividend per share(pence)
Ordinary 7.25
Special – 2(a) Additional income statement continued
Year ended 31 December 2006
Continuing Discontinued Trading Non-
operations operations business trading Total
£’000 £’000 £’000 £’000 £’000
Revenue 314,018730 314,748 – 314,748
Cost of sales:
Excluding pre-openingcosts (254,184) (1,026) (255,210) – (255,210 )
Pre-openingcosts (1,876)– (1,876) – (1,876 )
(256,060) (1,026) (257,086) – (257,086)
Gross profit/(loss) 57,958 (296) 57,662 – 57,662
Administration costs (18,475) – (18,475) – (18,475)
Trading profit/(loss ) 39,483 (296) 39,187 – 39,187
Provision againstcarrying value of associate –– – (9,500) (9,500)
Loss on integrationofDPP –– – (4,582) (4,582)
Profit on disposal of fixedassets –– – – –
Operating profit/(loss) 39,483 (296) 39,187 (14,082) 25,105
Interest payable(3,308) – (3,308) – (3,308 )
Interest receivable54– 54 645 699
Profit/(loss) beforeshareofassociate and tax 36,229 (296) 35,933 (13,437) 22,496
Shareofpost-tax result in associated undertaking (917) – (917) – (917)
Profit/(loss) on ordinary activities beforetax 35,312 (296) 35,016 (13,437) 21,579
Taxonprofit/(loss) from ordinary activities (12,364) 101 (12,263) 1,100 (11,163)
Profit/(loss) on ordinary activities after tax 22,948 (195) 22,753 (12,337) 10,416
Profit on sale of businesses net of tax –– – 3,950 3,950
Profit/(loss) for the year 22,948 (195) 22,753 (8,387) 14,366
Earnings per share(pence)
Basic 11.50 7.26
Diluted 11.45 7.23
Dividend per share(pence)
Ordinary 6.00
Special 16.00
43
The Restaurant Group plc
Annual Report 2007 44
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
2(b) Additional non-statutory information*
*Results arestated excluding non-trading items
Year ended 30 December 2007
Operating
EBITDA Operating profit
Turnover EBITDA margin profit margin
£’000 £’000 %£’000 %
Leisure285,226 76,16126.7% 61,572 21.6%
Concessions 81,199 16,567 20.4% 12,485 15.4%
Principal tradingbrands 366,42592,728 25.3% 74,057 20.2%
Non-corebrands 285 (1,134) (398.0%) (1,449) (508.5%)
Continuing operations 366,71091,594 25.0% 72,608 19.8%
Discontinued operations –––––
Total all brands 366,710 91,594 25.0% 72,608 19.8%
Pre-opening costs (included in cost of sales) (2,567) (0.7%) (2,567)(0.7%)
Administration (19,483) (5.3%) (20,096)(5.5%)
Share-based payments (1,738) (0.5%) (1,738) (0.5%)
EBITDA/adjusted operatingprofit 67,806 18.5% 48,207 13.1%
Total net interest charges (3,978)
Adjusted profit beforeshareofassociate and tax 44,229
Shareofpost-tax result in associated undertaking (749)
Adjusted profit beforetaxation 43,480
Taxation (14,802)
Adjusted profit after taxation 28,678
Earnings per share(pence)–trading business
Basic 14.64
Diluted 14.56
Year ended 31 December 2006
Operating
EBITDA Operating profit
Turnover EBITDA margin profit margin
£’000 £’000 %£’000 %
Leisure236,258 62,70326.5% 50,745 21.5%
Concessions 72,479 15,154 20.9% 11,088 15.3%
Principal tradingbrands 308,73777,857 25.2% 61,833 20.0%
Non-corebrands 5,281 (1,789) (33.9%) (1,999) (37.8%)
Continuing operations 314,01876,068 24.2% 59,834 19.1%
Discontinued operations 730 (296) (40.6%) (296) (40.6%)
Total all brands 314,748 75,77224.1% 59,538 18.9%
Pre-opening costs (includedincost of sales) (1,876) (0.6%) (1,876) (0.6%)
Administration (17,192) (5.5%) (17,416)(5.5%)
Share-based payments (1,059) (0.3%) (1,059) (0.3%)
EBITDA/adjusted operatingprofit 55,645 17.7% 39,187 12.5%
Total net interest charges (3,254)
Adjusted profit beforeshareofassociate and tax 35,933
Shareofpost-tax result in associated undertaking (917)
Adjusted profit beforetaxation 35,016
Taxation (12,263)
Adjusted profit after taxation 22,753
Earnings per share(pence)–trading business
Basic 11.50
Diluted 11.45
No geographical segment analysis has been provided as the Directorsdonot consider there to be materiallysignificant geographical
segments. The Group currently operates three restaurants outside of the United Kingdom .
Financial information regarding segmental assets and liabilities is detailed in note 1.
EBITDA is operating profit beforedepreciation,amortisation and non-trading items. 3 Revenue
2007 2006
£’000 £’000
Revenueconsists of the following:
Continuing operations 366,710 314,018
Discontinued operations (see note5) – 730
366,710 314,748
Other income not included within revenuein the income statement:
Rentalincome 4,013 5,960
Investment income 1,025 699
371,748 321,407
4Profit from operations
2007 2006
£’000 £’000
Cost of sales consists of the following:
Continuingbusiness excluding pre-openingcosts 294,102 254,184
Pre-openingcosts 2,567 1,876
Continuing operations 296,669 256,060
Discontinued operations (see note5) – 1,026
Totalcost of sales for the year296,669 257,086
2007 2006
£’000 £’000
Profit for the year has beenarrivedat after charging/(crediting):
Depreciation 19,599 16,458
Purchases 86,300 75,362
Staffcosts (see note 6) 111,059 94,479
Operating lease rentals of landandbuildings 47,380 44,102
Rentalincome (4,013) (5,960)
Auditor’s remuneration:
Audit of theannualaccounts 133 138
Audit of overseas subsidiary 9 5
Totalaudit fees 142 143
Tax services 60 58
Disposalofbusiness by associate 45 –
Corporatefinance services 120 –
Duediligenceassurancefees 200 –
Other assurance services 34 47
Totalnon-audit fees 459 105
Totalfees paid to theCompany’s auditors 601 248
Audit fees included in theabove total relating to theCompany areborneby a subsidiary undertaking.Of the totalfees paid toauditors,
£0.2m was expensedas administrationcosts, £0.3m was capitalisedas part of the professionalfees incurred onanacquisitionand
£0.1m was expensedas professionalfees incurred on disposalofbusiness by associate.In 2006, of the totalfees paid toauditors,
£0.2m was expensedas administrationcosts.
During the year, theGroupappointedDeloitteand ToucheLLPas auditors.Of the totalfees paid toauditors in the year ended
30 December 2007, £0.1m was paid toBDOStoy HaywardLLP (2006: £0.2m)and £0.5m was paid toDeloitteand ToucheLLP
(2006: £nil).
45
TheRestaurant Groupplc
AnnualReport 2007 46
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
5Non-trading items
2007 2006
Note £’000 £’000
Items classified as non-trading within ordinary activities :
Provision against carrying value of associate i (1,656) (9,500)
Interest receivable from associateii 986 –
Loss on integration of DPP iii – (4,582)
Finance (charge)/gain arising from remeasurement of interest rate swap iv (237) 645
Profit on disposal of fixed assets v 247 –
Loss on ordinary activities beforetax (660 ) (13,437)
Taxation(charge)/credit on non-trading items (225) 1,100
Credit in respect of rate change on deferred tax liability vi 1,383 –
Profit/(loss) on ordinary activities after tax 498 (12,337)
Profit on sale of businesses:
Profit on disposal of Est Est Est RestaurantsLimited vii – 184
Profit on disposal of the Caffe Uno business viii – 2,696
Profit on sale of businesses beforetax – 2,880
Taxonsale of businesses – 1,070
Profit on sale of businesses after tax – 3,950
Total non-trading items after tax 498 (8,387)
i)A£1.7m provision has been made against the carrying value of the Group’s associate company,Living Ventures Limited,which,
together with the £9.5m provision made in the year ended 31 December 2006, leavesa£nil carrying value of both the investment
and the loan note. Further details areprovided in note 14.
ii)Acredit of £1.0m has been recognised in respect of accrued loan note interest received from Living Ventures Limited not previously
recorded in the income statement. Further details areprovidedinnote 14.
iii) The loss on integration of the Deep Pan Pizza business is in relation to costs incurred during 2006 on employee and contract
terminations andanumber of property costs including the write down of the carrying value of the business on integration,provisions
for onerous leases and premiums on disposal of some of the properties.
iv) The Group has takenacharge of £0.2m (2006:£0.6m credit) in respect of the remeasurement of its interest rate swap. Further details
areprovided in note 26.
v) During the year the Group disposed of fixed assets and provided for committed disposals, and realisedanet profit of £0.2m
(2006:£nil).
vi)Anon-trading taxationcredit of £1.4mhas been recognisedinthe income statement due to the impact of the rate change on the
deferred tax liability.Further details areprovided in note 8.
vii) On 31 March 2005, the Group sold Est Est Est Limited to Living Ventures Limited andaprofitof£1.6m was recognised in the year
ending1January2006.Afurther £0.2m was recognised in the year ended 31 December 2006. No further profit has been recognised
in 2007.
viii) On 12 December 2005, the Group disposed of 53 of the 59 sites that formed the Caffe Uno brand to Paramount foraprofit of
£3.7m. In 2006,afurther £2.7m profit was recognised followingthe release of accruals in respect of dilapidations and warranty claims
that werenolonger required as they became time lapsed, and followingthe completion of better than anticipated deals on disposal of
some of the sites not sold to Paramount. Therehas been no furtherprofit recognised in 2007. The discontinued results in 2006 relate
to the sites not sold to Paramount, all of which have been subsequently disposed.
6Staffcosts and numbers
2007 2006
a) Staffnumbers (including executive Directors)
Restaurant staf f 8,566 7,485
Administrationstaf f 179 178
8,745 7,663 6Staffcosts and numbers continued
2007 2006
£’000 £’000
b) Staffcosts (including Directors) comprise:
Wages and salaries 100,860 86,403
Social security costs 8,198 6,759
Share-based payments 1,738 1,059
Pension costs 263 258
111,059 94,479
c) Directors’ remuneration
Emoluments 2,747 1,810
Money purchase(and other) pensioncontributions 226 284
2,973 2,094
Charge in respect of shareoptions 917 586
3,890 2,680
Further details of the Directors’ emoluments and the executive pensionschemesare given in the Directors’ remuneration report on
pages 23 to 29, of which the information on pages26to29has been audited.
7Net finance charges
2007 2006
£’000 £’000
Bank interest payable 3,370 2,816
Other interest payable 330 149
Interest on obligations under finance leases 317 343
Fair value charge on interest rate swap 237 –
Interest payable 4,254 3,308
Bank interest receivable 9 11
Interest received on loan note from Living Ventures 986 –
Other interest receivable 30 43
Fair value credit on interest rate swap – 645
Interest receivable 1,025 699
Net finance charges 3,229 2,609
8Taxation
a) The taxation charge comprises:
2007 2006
£’000 £’000
Current taxation
UK corporation tax at 30% 12,901 8,594
Adjustments in respectofprevious periods (107) (115)
12,794 8,479
Deferred taxation
Origination and reversal of timing differences 2,306 2,684
Adjustments in respectofprevious periods (73) –
Credit in respect of rate change (1,383) –
850 2,684
Taxationcharge on ordinary activities 13,644 11,163
Current tax credit on saleofbusiness (1,082)
Deferred tax charge on sale of business – 12
Total taxationcharge for the year,including impact of disposalofbusiness 13,644 10,093
47
The Restaurant Group plc
Annual Report 2007 48
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
8Taxation continued
b) Factors affecting the tax charge for the year
The tax assessmentfor the year is higher than the standardUKcorporation tax rate of 30% due to the following factors:
2007 2006
£’000 £’000
Profit on ordinary activities beforetaxation 42,820 21,579
Profit on ordinary activities beforetaxation multiplied
by the standardUKcorporation tax rate of 30% (2006: 30%) 12,846 6,474
Effects of:
Loss made by associate, with no tax credit available 225 276
Depreciation on non-qualifying assets 1,416 1,555
Expenses not deductible for tax purposes 794 2,263
(Profit)/loss on disposal of non-qualifying assets (74) 710
Credit in respect of rate change on deferred tax liability (1,383) –
Adjustment in respect of previous years (180) (115)
Taxationcharge on ordinary activities 13,644 11,163
Taxationcredit on disposal of business – (1,070)
Total taxation charge for the year, including impact of disposal of business 13,644 10,093
Current tax charge on ordinary activities consists of £12.8m (2006:£8.6m) for continuing activities and £nil (2006:£0.1m credit) in
respect of discontinuedactivities. Deferred tax on ordinary activities consists of £0.8m (2006:£2.7m)inrespect of continuing activities
and £nil (2006: £0.01m credit) in respect of discontinued activities. In addition,atax credit of £1.1m was recognised in respect of the
disposal of the Caffe Uno business in 2006.
The Finance Act 2007 reduced the rate of corporation tax from 30% to 28% from April 2008, and this rate is required to be used in
calculating deferred tax provisions at the balance sheet date. This has resulted inaone-offnon-trading tax credit in the income statemen t
of £1.4m.
9Earnings per share
2007 2006
a) Basic earnings per share:
Weighted average ordinaryshares in issue during the year 195,878,089 197,790,404
Total basic profit for the year(£’000) 29,176 14,366
Basic earnings per sharefor the year (pence) 14.90 7.26
Total basic profit for the year(£’000) 29,176 14,366
Effect of non-trading items on earnings for the year (£’000) (498) 8,387
Earnings excluding non-trading items (£’000) 28,678 22,753
Adjustedearnings per share(pence) 14.64 11.50
b) Continuing and discontinuedactivities:
Profit for the year from continuingactivities 29,176 10,611
Basic earnings per sharefromcontinuing activities (pence)14.90 5.36
Profit for the year from discontinued activities – 3,755
Basic earnings per sharefromdiscontinued activities (pence) – 1.90
c) Diluted earnings per share:
Weighted average ordinary shares in issueduring the year 195,878,089 197,790,404
Dilutive shares to be issued in respect of options granted under the ShareOption Scheme 1,023,168 953,597
196,901,257 198,744,001
Diluted earnings per share(pence) 14.82 7.23
Adjusteddiluted earnings per share(pence) 14.56 11.45
Diluted earnings per sharefromcontinuing activities(pence) 14.82 5.34
Diluted earnings per sharefromdiscontinued activities (pence) – 1.89
The additional earnings per shareinformation (wherenon-trading items, describedinnote 5, have been added back) has been provided
as the Directorsbelieve theyprovideauseful indication as to the underlying performance of the Group.
Diluted earnings per shareinformation is basedonadjusting the weighted average numberofshares in issue in respect of notional share
awards made to employees in respect of shareoption schemes. No adjustment is made to the reported earnings for 2007 and 2006. 10 Dividend
2007 2006
£’000 £’000
Amountsrecognised as distributions to equity holdersduring the year:
Final dividend for the year ended 31 December 2006 of 4.95p (2005: 3.84p) per share 9,702 7,442
Interimdividendfor the year ended 30 December 2007 of 1.26p (2006:1.05p) per share 2,471 2,048
Total ordinary dividends paid in the year 12,173 9,490
Special dividend of 16p per sharepaid on9March 2006 – 34,793
Total dividends paid in the year 12,173 44,283
Proposed final dividendfor the year ended 30 December 2007
of 5.99p (2006 actualproposedand paid: 4.95p) per share11,777 9,702
The proposed final dividend is subjecttoapproval by shareholdersatthe Annual General Meetingtobeheld on7May 2008 and
is not recognised asaliability in these financial statements. The proposed final dividend payablereflects the number of shares in issue
on 30 December 2007.
Aspecial dividendof16p per share(totalling £34.8m) was paid to shareholderson9March 2006. This is in respect of the returnofvalue
to shareholders following the disposalofthe Caffe Uno business in December 2005.
11 Acquisition of Brunning&Price
On 17 October 2007 The Restaurant Group plc completed the acquisition of 100% of the ordinary sharecapital of Brunning&Price
Limited (“B&P”) for £26.4m plusthe costs of acquisition, andafurther payment of £5.7m for the repayment of existingdebt withinB&P .
B&P operates 14 pub restaurants, predominantly in the North-West of England. In the period that B&P wasasubsidiary of the Group,
it contributed £0.4m to net profit. If the acquisition had occurred on1January 2007, Group revenue would have been £381.3mand
profit beforetax wouldhave been £43.6m.
The acquisition had the following effect on the Group’sassets and liabilities:
Recognised Fair value Carrying
values adjustments amounts
£’000 £’000 £’000
Intangible assets259 (259) –
Property,plant and equipment17,933 9,213 27,146
Stocks 374 (138) 236
Trade and other receivables 255 65 320
Net debt (5,687) –(5,687)
Trade and other payables (2,154) (1,279) (3,433)
Deferred tax (197) (6,429) (6,626)
Net identifiable assets and liabilities 11,956
Goodwillonacquisition 15,241
Consideration paid, satisfied in cash 27,197
Net debt acquired and settled 5,687
Cash outflow including settlementofacquired debt 32,884
12 Intangible assets
Goodwill
£’000
Cost
At1January 2007 11,275
Acquisition of Brunning&Price Limited(see note 11) 15,241
At 30 December 2007 26,516
Goodwillarising on business combinations is not amortised but is subjecttoanannual impairment review,ormorefrequently if events
or changes in circumstances indicate that it might be impaired. Goodwill arising on the acquisition of Blubeckers Limited and Brunning
&Price Limited is monitoredatabrand level and the review is based onavalue-in-use calculation, whereby the cash flow projections of
the businesses, discounted at 7.4%, arereviewed against the carrying value. Cash flow projections arebased on historical performance
and budgeted information, as approved by the Board.Aprudent approach has been adoptedwith no growth rate being applied
and no residual value being factored into the calculations. As at 30 December 2007, management concluded that therehas been
no impairment.
49
The Restaurant Group plc
Annual Report 2007 50
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
13 Property,plant&equipment
Fixtures,
Land and equipment
buildings &vehicles Total
£’000 £’000 £’000
Cost
At2January2006 170,952 80,496 251,448
Exchangemovement 112
Additions 27,344 13,431 40,775
Disposals (3,439) (8,142) (11,581)
At 31 December 2006 194,858 85,786 280,644
Accumulated depreciation and impairment
At2January2006 55,672 44,439 100,111
Exchangemovement 1– 1
Provided during the year 12,207 4,251 16,458
Impairment 359 1,225 1,584
Disposals (3,439) (8,106) (11,545)
At 31 December 2006 64,800 41,809 106,609
Cost
At1January2007 194,858 85,786 280,644
Exchangemovement 206 73 279
Acquisitions (see note 11) 26,339 807 27,146
Additions 32,012 15,395 47,407
Disposals (2,674) (818) (3,492)
At 30 December 2007 250,741 101,243 351,984
Accumulateddepreciation and impairment
At1January2007 64,800 41,809 106,609
Exchangemovement 107 39 146
Providedduring the year 12,206 7,393 19,599
Disposals (2,366) (761) (3,127)
At 30 December 2007 74,747 48,480 123,227
Net book value as at 31 December 2006 130,058 43,977 174,035
Net book value as at 30 December 2007 175,994 52,763 228,757
The impairment in 2006 is the write down of the carrying value of the Deep Pan Pizza business on integration.
2007 2006
£’000 £’000
Net book value of land and buildings:
Freehold 48,099 29,986
Long leasehold 1,890 1,739
Short leasehold 126,005 98,333
175,994 130,058
2007 2006
£’000 £’000
Assets held under finance leases
Cost at start and end of year 1,961 1,961
Depreciation
At start of year 1,023 982
Provided during the year 26 41
At end of year 1,049 1,023
Net book value at end of year 912 938 14 Investment in associate
The Group’sassociate company began the year as Living Ventures Limited.Following the disposal of the Living Rooms businessin
June 2007, the company underwentacapital restructureandanew company,Pimco 2637 Limitedwas formed. The Group now holds
a38% investment in Pimco 2637 Limited and the loan note of £10.4m,which is fullyprovided as described in note5(i), is receivable
from LV Finance Limited,asubsidiary of Pimco 2637 Limited .
(a) Investment in LivingVenturesLimited
The 38% investment in Living Ventures Limited is accountedfor using the net equity method. Living Ventures Limitedhistorically had
an accounting year end date of 31 March and as therewas no material benefit in making the accounting year end co-terminus with the
Group, no change has been made.
On 22 June 2007, Living Ventures Limited disposed of the Living Rooms business. Asaresult of this transaction, the Group received
aconsideration of £6.3mincash, net of costs. In addition, the outstanding interest on the loan note, amounting to £1.5m, was settled
in full. Of the £1.5m interest received, £1.0m had not been previously recognised in the income statement and was recorded asanon-
trading credit in the income statement in the year ended 30 December 2007 (2006: £nil). The Directors have concluded that it is appropriate
to makeafurther provisionof£1.7m, which together with the £9.5m provisionmade in the year ended 31 December 2006, leaves
a£nil carrying value of both the investment and the loan note.
The Group’sshareofthe post-tax result of Living Ventures Limited for the period to 22 June 2007 wasaloss of £0.7m (2006: £0.9m).
Summarised financial information on Living Ventures Limited for the period to 22 June 2007 is as follows:
2007 2006
£’000 £’000
Non-current assets – 34,857
Current assets – 3,606
Non-current liabilities – (29,478)
Current liabilities – (9,458)
Equity – (473)
Revenue 21,720 47,567
Net loss (1,972) (2,292)
At 30 December 2007 Living Ventures Limited was contractually committedto£nil (2006: £0.025m) of capital expenditure.
(b) Investment in Pimco 2637 Limited
Following the disposal of the Living Rooms business on 22 June 2007, Living Ventures Limited underwentacapital restructureand
anew company,Pimco 2637 Limited was formed. The Restaurant Group holdsa38% investment in Pimco 2637 Limited and this
investment is accounted for using the equity method.Pimco 2637 Limited also has an accounting year end date of 31 March.
The Group’sshareofthe post-tax result of Pimco 2637 Limited for the period 23 June to 30 December 2007 wasaloss of £0.2m .
This loss has not been recognised in the income statement, in accordance with IAS 28 “Associates and Joint Ventures”.
Interest is receivablefromLVFinance Limited,asubsidiary of Pimco 2637 Limited, on the loan note of £10.4m atarate of LIBOR.
Since 22 June 2007, £0.3m of interest has been accrued of which the Group has recognised £nil. Under the terms of the loan note
none of this interest was payable at 30 December 2007, consequently in addition to the loan note of £10.4m outstanding at that date,
£0.3m of interest receivable was also due from LV Finance Limited .
Summarised financial information on Pimco 2637 Limited for the period is as follows :
2007
£’000
Non-current assets 20,196
Current assets 2,442
Non-current liabilities (17,170)
Current liabilities (4,812)
Equity 656
Revenue 10,744
Net loss (433)
At 30 December 2007 Pimco 2637 Limited was contractually committedto£0.4m of capital expenditure.
51
The Restaurant Group plc
Annual Report 2007 52
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
15 Stock
Stock comprises raw materials and consumables and have been valued at the lower of cost and estimated net realisable value.
The replacement cost at 30 December 2007 is considered by theDirectors not to be materially different from the balance sheet value .
The Group recognised £86.3m of purchases as an expense in 2007 (2006:£75.4m).
16 Trade and otherreceivables
2007 2006
£’000 £’000
Amounts fallingdue within one year:
Trade debtors 3,294 2,583
Other debtors 3,733 2,587
7,027 5,170
17 Trade and other payables
2007 2006
£’000 £’000
Amounts fallingdue within one year:
Trade creditors 35,809 30,110
Other tax and social security 10,581 9,511
Other creditors 8,190 8,964
Accruals 30,611 26,279
85,191 74,864
18 Provisions
2007 2006
£’000 £’000
Provision for onerous lease contracts:
Balance at start of year 3,466 763
Charged to the income statement during the year 1,653 3,009
Unwinding of discount 254 74
Utilisedduring the year (456) (380)
Balanceatend of year4,917 3,466
The provisionfor onerous contracts is in respect of lease agreements and covers the element of expenditure over the life of those
contracts which areconsidered onerous, expiring in1–33years.Adiscount rate of 7.4% has been applied in calculating the provision.
19 Deferred taxation
2007 2006
£’000 £’000
Balance at start of year 16,247 13,971
Capital allowances in advance of depreciationcharged to the income statement 2,619 2,845
Other timing differences (386) (161)
Adjustment arising on disposal of business assets of Caffe Uno – 12
Credit in respect of rate change (1,383) –
Deferred tax taken directly to the income statement 850 2,696
Taxonshare-based paymentstaken directly to equity 1,623 (1,529)
Charge in respect of rate change 42 –
Deferred tax taken through equity 1,665 (1,529)
Deferred tax arising on acquisition of Brunning&Price Limited (see note 11) 6,626 –
Transfer of corporation tax balance, reclassified as deferred taxation – 1,109
Other adjustments 6,626 1,109
Balanceatend of year25,388 16,247
2007 2006
£’000 £’000
Deferred tax consists of:
Capital allowances in advanceofdepreciation 27,836 18,183
Capital gains held over 148 460
Capital gains rolled over 591 633
Other timing differences (3,187) (3,029)
25,388 16,247 20 Sharecapital
Number £’000
Authorised:
At1January 2007 and 30 December 2007 (ordinary shares of 28
1
⁄ 8peach) 284,444,444 80,000
Allotted, called up and fully paid:
At2January 2006 (25p ordinary shares) 217,462,569 54,366
Shareconsolidation on 27 February 2006 (24,162,505) –
Revisednumberofshares (28
1
⁄ 8pordinary shares)193,300,064 54,366
Exercise of shareoptions 1,767,199 497
At1January 2007 195,067,263 54,863
Exercise of shareoptions 1,537,995 432
At 30 December 2007 196,605,258 55,295
On 27 February2006 The Restaurant Group plc undertookashareconsolidation, whereby nine existing shares wereexchanged for
eight new shares. Following the share consolidation the nominal value of an ordinary shareofThe Restaurant Group plc is 28
1
⁄ 8p.
The authorised sharecapital is 284,444,444 shares and the allotted, called up and fully paid up number of shares was 193,300,064
immediately after the shareconsolidation .
21 Employee benefit trust
An employee benefit trust (“EBT”)was established in 2007 in order to satisfy the exercise or vesting of existing and futureshareawards
under the Long-Term Incentive Plan (“LTIP”). The EBT purchases shares in the market,using funds provided by the Company, based
on expectations of futurerequirements. Dividends arewaived by the EBT.At30December 2007, the Trustees, Appleby Trust (Jersey)
Limited, held 2,500,000 shares in the Company,1,500,000 purchased on 29 June 2007 at an average price of £3.270544per share
and 1,000,000purchased on 27 November2007 at an average price of £2.23621 per share. Net cash outflow in the year ended
30 December 2007 was £7.2m, net of costs.
Details of optionsgrantedunder the Group’sshareschemes aregiven in note 22.
22 Share-basedpayment schemes
The Group operatesanumber of shareoptionschemes,details of which areprovided in theDirectors’ remuneration report on pages 23
to 29. The Group has taken advantageofthe exemption under IFRS2“Share-based payments” not to account for shareoptions
granted before7November 2002.
The charge recorded in the financial statements of the Group in respect of share-based payments is £1.7m (2006: £1.1m).
Executive ShareOption Plans (“ESOPs”)
The Group has in place three ESOPs,the 1998 scheme, the 2003 scheme andaone-offscheme. Under these schemes, the
Remuneration Committeemay grant options over shares in The Restaurant Group plc to employees of the Group. The contractual life
of an option is ten years. Awards under the ESOPs aregenerally reserved for senior management level and above and 47 employees
wereeligible to participate at 30 December 2007. Options granted under ESOPs becomeexercisable on the thirdanniversary of the
date of grant, subject to growth in earnings per shareexceeding RPI growth by morethan 4% (under the 1998 scheme) or 2.5%
(under the 2003 scheme). Exercise of options is subjecttocontinuedemployment within the Group. Options werevalued using
aStochasticoption pricing model. No performance conditions wereincluded in the fair value calculations.
53
The Restaurant Group plc
Annual Report 2007 54
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
22 Share-based payment schemes continued
Year ended 30 December 2007:
Exercise Outstanding Outstanding Exercisable
Period during which options areexercisable price at start of year Granted Exercised Lapsed at end of year at end of year
1998 Scheme
2002–2009 75.0p 50,244 –(50,244) –––
2003–2010 48.6p 6,030 –(2,240)(775) 3,015 3,015
Total number56,274 –(52,484) (775) 3,015 3,015
Weighted average exercise price 72.2p –73.9p 48.6p 48.6p 48.6p
2003 Scheme
2006–2013 67.4p 967,742 –(776,333)– 191,409 191,409
2007–2014 97.7p 1,667,500 –(183,000)(5,000) 1,479,500 1,479,500
2008–2015 134.4p 1,479,000 –– (10,000) 1,469,000 –
Total number4,114,242 –(959,333) (15,000) 3,139,909 1,670,909
Weighted average exercise price 103.8p –73.2p 122.2p 113.0p 94.2p
One-offscheme (see note below)
2004–2011 45.0p 400,000 –(200,000)– 200,000 200,000
Total number400,000– (200,000) –200,000 200,000
Weighted average exercise price 45.0p –45.0p –45.0p 45.0p
Total number4,570,516 –(1,211,817) (15,775) 3,342,924 1,873,924
Weighted average exercise price 98.2p –68.6p 118.6p 108.9p 88.9p
Year ended 31 December 2006:
Exercise Outstanding OutstandingExercisable
Period during which options areexercisable price at start of year Granted Exercised Lapsedatend of year at end of year
1998 Scheme
2002–2009 75.0p 110,586 –(60,342) –50,24450,244
2003–2010 48.6p 58,853 –(52,823) –6,030 6,030
Total number169,439– (113,165) –56,27456,274
Weighted average exercise price 65.8p –62.7p –72.2p 72.2p
2003 Scheme
2006–2013 67.4p 2,231,825 –(1,254,034) (10,049) 967,742 967,742
2007–2014 97.7p 1,760,000 –– (92,500) 1,667,500 –
2008–2015 134.4p 1,544,000 –– (65,000) 1,479,000 –
Total number5,535,825 –(1,254,034) (167,549) 4,114,242 967,742
Weighted average exercise price 95.7p –67.4p 110.1p 103.8p 67.4p
One-offscheme (see note below)
2004–2011 45.0p 800,000 –(400,000)– 400,000 400,000
Total number800,000– (400,000) –400,000 400,000
Weighted average exercise price 45.0p –45.0p –45.0p 45.0p
Total number6,505,264 –(1,767,199) (167,549) 4,570,516 1,424,016
Weighted average exercise price 88.7p –62.0p 110.1p 98.2p 61.3p
During 2007,the weighted average market price at date of exercise was 304p per share(2006: 227p).
Note: The one-offscheme is in respect of Alan Jackson’sshareoptions granted on5June 2001. Further details areprovided in the Directors’ remuneration report on page 29.
During the year Alan Jackson exercised 200,000 options under this scheme, and as at 30 December 2007 thereare 200,000 shareoptions outstanding. No charge to the income
statement is recognised in respect of Alan Jackson’sshareoptions as they weregranted prior to7November 2002.
Long-Term Incentive Plan
On9November 2005 an Extraordinary General Meeting of The Restaurant Group plc approved the adoption ofanew Long-Term
Incentive Plan (“LTIP”) for the Group,details of which areprovided in theDirectors’ remuneration report on pages 23 to 29. Awards under
the LTIP aregenerally reserved for senior management level and above and 70 employees wereeligible to participate at 30 December 2007.
Conditional Awardshareoptions and Matching Awardshareoptions weregranted to Directors and selected employees on7December
2005 and8March 2007. In respect of the Matching Awardshareoptions, the respectiveDirector or employee was requiredtoacquire
anumber of shares by7May 2006 in respect of the7December 2005 awardand by 30 June 2007 in respect of the8March 2007
award, known as “Deposited Shares”, and retainthese shares untilthe Matching Awardshareoptions vest, for those Matching Award
shareoptions to be valid. Vesting of shareoptions under the LTIP is dependentoncontinuing employment.
The options from the LTIP scheme will be satisfied through sharepurchases viaatrust. Further details areprovided in note 21. 22 Share-basedpayment schemes continued
Year ended30December2007:
Period during which Shareprice Outstanding at Outstanding at Exercisable at
options areexercisable Type of awardatgrant date start of year Granted Exercised Lapsed end of year end of year
2009 Conditional147.0p1,079,712–– (66,325) 1,013,387–
2009 Matching 147.0p 386,339 –– (16,977) 369,362–
2010 Conditional 325.5p –567,293 –– 567,293–
2010 Matching 325.5p –247,908 –(64,187) 183,721–
Total number1,466,051815,201 –(147,489) 2,133,763–
Year ended 31 December 2006:
Period during which Shareprice Outstanding at Outstanding at Exercisable at
options areexercisable Type of awardatgrant date start of year Granted Exercised Lapsed end of year end of year
2009 Conditional 147.0p –1,131,188 –(51,476) 1,079,712–
2009 Matching 147.0p –643,515 –(257,176) 386,339 –
2010 Conditional 325.5p ––––––
2010 Matching 325.5p ––––––
Total number– 1,774,703 –(308,652) 1,466,051–
Save As YouEarnScheme
Under the Save As YouEarn(“SAYE”) scheme, the Boardmay grant optionsover shares in The Restaurant Group plc to UK-based
employees of the Group. Options aregranted withafixed exercise price equal to 80% of the average market price of the shares for
the five days prior to invitation. Employees payafixed amount from their salary intoasavings account each month for the three-year
savings period. At the end of the savings period,employees have six months in which to exercise their options using the funds saved.
If employees decide not to exercise their options, they may withdraw their funds saved and the options expire. Exercise of options is
subject to continued employment within the Group. In exceptional circumstances, employeesmay be permittedtoexercisethese options
beforethe end of the three-year savingsperiod. Options werevalued using the Stochastic sharepricing model.
Year ended30December2007:
Period during which OutstandingatOutstandingatExercisable at
options areexercisable Exercise price start of year Granted Exercised Lapsed end of year end of year
2007-2008 79.0p 401,602– (323,892) (18,228) 59,482 59,482
2009 160.0p 266,029– (2,286) (44,424) 219,319 –
Total number667,631 –(326,178) (62,652) 278,801 59,482
Year ended 31 December 2006:
Period during which Outstanding at OutstandingatExercisable at
options areexercisable Exercise price start of year Granted Exercised Lapsed end of year end of year
2007-2008 79.0p 444,472–– (42,870) 401,602 –
2009 160.0p –292,317 –(26,288) 266,029 –
Total number444,472 292,317 –(69,158) 667,631 –
Assumptions used in valuation of share-based paymentsgranted in the year ended 30 December 2007
2007 LTIP 2007 LTIP
Conditional AwardMatching award
Scheme TSR element EPS element
Grant date 8/3/07 8/3/07 8/3/07
Sharepriceatgrant date 325.5p 325.5p 325.5p
Exercise price n/a n/a n/a
No of options originally granted 187,787 379,506 247,908
Minimum vestingperiod (years) 3years 3years 3years
Expected volatility 27.6% 27.6% 27.6%
Contractuallife 3.5 years3.5 years 3.5 years
Risk free rate n/a n/a n/a
Expected dividend yield 0.00% 0.00% 0.00%
Expected forfeitures 5% 5% 5%
Fair value per option 240.9p 336.0p 336.0p
55
The Restaurant Group plc
Annual Report 2007 56
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
23 Reserves
Foreign
ShareSharecurrency OtherRetained
capital premium reserve reserves earnings Total
£’000 £’000 £’000 £’000 £’000 £’000
At2January2006 54,366 19,747 80 764 16,479 91,436
Issue of shares497 599 ––– 1,096
Profit for the year –––– 14,366 14,366
Dividend–ordinary –––– (9,490) (9,490)
Dividend–special –––– (34,793) (34,793)
Share-based payments–credit to equity ––– 1,059 – 1,059
Taxonshare-based payments
taken directly to equity –––– 1,529 1,529
Foreign exchange translation differences– –1 –– 1
At 31 December 2006 and1January2007 54,863 20,346 81 1,823 (11,909) 65,204
Issue of shares432 658 ––– 1,090
Profit for the year –––– 29,176 29,176
Dividends– ––– (12,173) (12,173)
Share-based payments–credit to equity ––– 1,738 – 1,738
Employee benefit trust–purchase of shares ––– (7,209) – (7,209)
Taxonshare-based payments
taken directly to equity –––– (712) (712)
Foreign exchangetranslation differences –– 40 –– 40
At 30 December 2007 55,295 21,004121 (3,648) 4,382 77,154
The other reserve reflects the credit to equity made in respect of the charge for shareoptions made through the income statement and
the purchase of shares in the market in order to satisfy the vesting of existingand futureshareawards under the Long-Term Incentive
Plan (see notes 21 and 22).
Since1January 1989 the cumulativeamount of goodwill written offagainst realised reserves is £50.4m (2006:£50.4m).Records for
periodsprior to this dateare not readily available.
24 Reconciliation of profit beforetax to net cash flow from operatingactivities
2007 2006
£’000 £’000
Profit beforetax 42,820 21,579
Net finance charges 3,229 2,609
Profit on disposal of fixed assets (247) –
Loss on integration of DPP (net of operatingcash flow) – 4,101
Provision against carrying value of associate 1,656 9,500
Shareofloss made by associate 749 917
Share-based payment charge 1,738 1,059
Depreciation 19,599 16,458
Increase in stocks (121) (229)
Increase in debtors (3,043) (1,295)
Increase in creditors 7,432 8,675
Cash flows from operating activities73,812 63,374
Discontinued operations had an EBITDA of £nil in the year ended 30 December 2007 (2006: £0.3m loss). No separate cash flow has
been presented in respect of discontinued activities as it is notpossibletoseparately identify working capital or financing payments and
receipts in respect of these operations, as these arecentrally managed. EBITDA and capital additions approximately represent operating
and investing cash flows respectively .
Major non-cash transactions
During the year ended 30 December 2007, the Group received £6.3m, net of costs, following the disposal of the Living Rooms business
by Living Ventures Limited, an associate of the Group. Followingthis transaction, the Group madeaprovision of £1.7m (2006: £9.5m)
againstthe carrying value of the investmentinLiving Ventures and the loan note receivable. Further details areprovided in note 14.
This impairment representsasignificant non-cash transaction. 25 Reconciliation of changes in cash to the movement in net debt
2007 2006
£’000 £’000
At the beginning of the year (47,482 ) (12,419)
Movements in the year:
Loans taken out (32,000 ) (36,000)
Non cash movementsinthe year 735 –
Cash inflow 2,174 937
At the end of the year (76,573 ) (47,482)
Represented by:
At Cash flow At Cash flow Non cash At
2January movements 1January movements movements 30 December
2006 in the year 2007 in the year in the year 2007
£’000 £’000 £’000 £’000 £’000 £’000
Cash at bank and in hand 426 257 683 1,009 – 1,692
Overdrafts (1,845) 680 (1,165) 1,165 – –
(1,419) 937 (482) 2,174 – 1,692
Bank loans falling due within one year – – – –– –
Bank loans falling due after one year (11,000) (36,000) (47,000) (32,000) 735 (78,265)
(11,000) (36,000) (47,000 ) (32,000) 735 (78,265)
(12,419) (35,063) (47,482 ) (29,826) 735 (76,573)
26 Financial instruments and derivatives
The Group finances its operations through equity and borrowings. The Group borrows at floating rates and uses interest rate swaps
to generatethe desired interest profile. The use of any financial instruments is carefully controlledand monitored by the Boardinline with
the Group’streasury strategyand the terms and conditions of its facilities.
Management’sapproach to treasury is to:
•ensuresufficient committed loan facilities areinplace to supportanticipated businessrequirements;
•ensurethe Group’sdebt service will be supported by anticipated cash flows and that covenantswill be complied with;and
•manage interest rate exposurewithacombinationoffloating rate debt and interest rate swaps.
Further details on the businessrisk factors that areconsidered to affect the Group and morespecific financial risk management(including
sensitivity to increases in interest rates) areincludedinthe report of the Directors on page 21. Further details on market and economic
risk is included in the Chief Executive’sreview on pages4to7.Further detail on headroom against covenants is includedinthe Finance
Director’s review on pages8and 9.
(a) Financial assets and liabilities
Financial assets
The financial assets of the Group comprise:
2007 2006
£’000 £’000
Cash and cash equivalents–Sterling 1,555 510
Cash and cash equivalents–Euro 137 173
1,692 683
Derivative financial instruments 415 652
Trade and other receivables 7,027 5,170
Current financial assets 9,134 6,505
Non-current financial assets – 875
Total financialassets 9,134 7,380
Cash and cash equivalents include balances held on which interest is received at floating rates in the overnight money market and
balances held on account for deposits paid by tenants, under the terms of their lease agreement .
57
The Restaurant Group plc
Annual Report 2007 58
The RestaurantGroup plc
Annual Report 2007
Notes to the accounts
continued
26 Financial instruments and derivatives continued
Financial liabilities
The financial liabilities of the Group comprise:
2007 2006
£’000 £’000
Short-term borrowings–atfloating interest rates* – 1,165
Trade and other payables 85,191 74,864
Finance lease debt 271 271
Short-term financial liabilities85,462 76,300
Long-term borrowings–atfloating interest rates * 78,265 47,000
Finance lease debt 2,558 2,466
Provisions 4,917 3,466
Long-term financial liabilities 85,740 52,932
Total financial liabilities 171,202 129,232
*T otal financial liabilities attracting interest were£79.0m (2006: £48.2m). Interest is payable at floating interest rates which fluctuate and aredependent on LIBOR or base rate.
The average weighted year end interest rate for these borrowings was 7.41% (2006: 6.30%). After taking into account the effect of the interest rate swap, the average weighted
year end interest rate for these borrowings was 6.40% (2006: 5.41%).
On 19 December 2007 the Group entereda5year facility agreement for £120m which was utilised from 17 January2008 and replaced
the existingfacility under which the borrowingsset out above weredrawn down. Interestispayableonthe amount drawn down at
LIBOR plus mandatory cost and the bank’smargin, which is dependent on the debt to EBITDA ratio. The Group hasa£10m overdraf t
facility,which is repayableondemand, on which interest is payableatthe bank’soverdraft rate.
The maturitiesset out above constitute the earliest contractual maturities. Trade and otherpayables arelargely due within three months.
Furtherdetails of maturityofthe finance lease debt is provided in note 27 and further details of the maturity of provisions is provided in
note 18.
The Grouphas £41.0m (2006: £33.0m) of committed borrowing facilities in excess of gross borrowings at 30 December 2007.
Effective from 16 January 2006, the Group entered into an interest rate swap for an initial notionalamount of £20m, rising to £50m from
18 April 2006 until 16 January 2008, when it reduced to £30m until 16 January 2009, when it terminates. The fixed rate for the duration
of the three years is 4.695% .
Effective from 18 January 2008 the Group entered intoanew interest rate swap foranotional amount of £25mfor3years. The fixed
rate for the duration of the three years is 4.92% .
Fair value of financial assets and liabilities
The Group has derivative financial instrumentsrelating to interest rate swaps and in accordance with IAS 39 these have been valued
at 30 December 2007. The fair value of these instruments was £0.4m (2006:£0.7m) and this is accounted for as an asset in the
consolidated balance sheet. The movement in fair value has been recorded asanon-trading item in the consolidated income statement.
All financial assets and liabilities, excluding the interest rate swap, areaccounted for at cost and the Directors consider the carrying value
to approximate their fair value.
(b) Credit risk
Credit risk refers to the risk thatacounterparty will default on its contractual obligations resulting in financial losses to the Group.
Counterparties for cash and derivative balances arewith financialinstitutions with strong creditratings. The Group is exposed to credit
related losses in the event of non-performance by the financial institutions but does not expect them to fail to meet their obligations.
Credit risk with respect to trade receivables is limited due to the Group’scustomer base beingspread overalarge number of
customers primarily transacting in cash or by credit cardand areshort-term in nature. Management thereforebelieve thereisno
additional provisionrequired in excess of thenormal provision for doubtful debts and thereare no material amounts past due that
have not been provided against. 26 Financial instruments and derivatives continued
The Group has an outstanding long-term receivable of £10.4m due from LV Finance Limited (previously Living Ventures Limited).
This debt is secured on the assets of Living Ventures Restaurants Limited,formerly Est Est Est Restaurants Limited, but is subject
toaprior ranking behind LV Finance Limited’sbank. Followingadetailed review of the carryingvalue of the business, including the
loan note receivable, the Boardconcluded that it is appropriatetomakeafull provision against the loan note due (2006: £9.5m
provision). Following the restructuring of Living Ventures Limited in June 2007, the payment terms and interest on the loan have
also been restructured.
The carryingamount of financial assets recordedinthe financial statements, net of any allowances for losses, representthe Group’ s
maximum exposuretocredit risk .
(c) Liquidity risk
The Group has built an appropriate mechanism to manage liquidity risk of the short, medium and long-term funding and liquidity
management requirements. Liquidity risk is managed through the maintenance of adequate cash reservesand bank facilities by
monitoring forecast and actual cash flows and matching the maturityprofiles of financial assets and liabilities. The Group’sloan
facilities, which maturein2012 (as set out in note (a) above), ensurecontinuity of funding.
(d) Foreign currency risk
As the Group operates primarily within the United Kingdom any transactional or translational exposuretochanges in foreign exchange
rate is limited. The three restaurants the Group operates in Spain areserviced by local Eurodenominated debt. The Group is not
materiallyexposed to changes in foreign currency rates and does not use foreign exchange forwardcontracts.
(e) Interest rate risk
Exposure to interest rate movements is controlled through the use of floatingrate debt and an interest rate swap to achieveabalanced
interest rate profile and to ensurethataminimum level of borrowings areatfixed rates for the next three years in line with the Group’ s
treasury strategy. Details of the current swap areset out in note (a) above. The interest rate profile is reviewed onaregular basis.
27 Lease commitments
Futurelease payments in respectoffinance leases aredue as follows:
Present value of
Minimum lease minimum lease
payments payments
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Withinone year 271 271 271 271
Withintwo to five years 1,082 1,082 830 830
After five years 6,157 6,427 1,728 1,636
7,510 7,780
Less: Futureinterest payments (4,681) (5,043)
Present value of lease obligations2,829 2,737 2,829 2,737
Analysedas:
Amount due for settlement within one year 271 271
Amount due for settlement after one year 2,558 2,466
Present value of lease obligations 2,829 2,737
Lease commitments areinrespect of property leases wherethe term of the lease is in excess of 25 years and the conditions of the lease
areinkeeping withafinance lease. The interest rate applied in calculating the present value of the payments is the incrementalborrowing
cost of the Groupinrelation to each lease. The fair value of the lease payments is estimated as £2.8m (2006:£2.8m).
The total futureminimum rentals payable under operatingleases over the remaining lives of the leases are:
Payable Receivable Payable Receivable
2007 2007 2006 2006
Lease expiring: £’000 £’000 £’000 £’000
Withinone year 1,015 – 1,942 –
Withintwo to five years 25,321 2,608 22,859 1,316
After five years 483,653 42,914 405,723 49,724
509,989 45,522 430,52451,040
The Group has entered intoanumber of propertyleases on standardcommercial terms. Thereare no restrictions imposedbythe
Group’soperating leases,either in the current or prior year .
Included within the minimum rentals areamounts payableasconcessionfees. These arrangements areprincipallyinthe Group’ s
Concessions division, which operatesinUKairports. Within these concession arrangements thereisusuallyaconcession fee for
each unit which is based on the revenue derived from that unit.
59
The Restaurant Group plc
Annual Report 2007 60
The RestaurantGroup plc
Annual Report 2007
28 Capital commitments
2007 2006
£’000 £’000
Authorised and contracted for: 12,948 15,948
29 Related party transactions
Pimco 2637 Limited, formerly Living Ventures Limited, isarelated party to The Restaurant Group plc throughthe Group’s38% holding.
During the year interest of £0.7m (2006: £0.6m) was accrued on the loan note between LV Finance Limited,asubsidiaryofPimco 2637
Limited, and The Restaurant Group plc at the rate of LIBOR. The Group recognised £1.0m (2006: £nil) in respect of interest income from
Living Ventures Limited not previously recorded for the period ending 22 June 2007. Since this dateafurther £0.3m of interest due from
LV Finance Limited has been accrued of which the Grouphas recognised £nil. Under the terms of the loan note none of this interest
was payable as at 30 December 2007, consequently in additiontothe loan note of £10.4m outstanding at that date, £0.3m of interest
receivablewas also due from LV Finance Limited. Further details areprovided in note 14.
For the year to 30 December 2007, Alan Jacksonreceivedafee of £2,916 (2006: £35,000) from Pimco 2637 Limited, formerly Living
Ventures Limited,inrespect of his duties as non-executive chairman of that Company.Alan Jackson resignedasadirectorofLiving
Ventures Limited on 17 January 2008.
Alan Jacksonisanon-executive director of Charles Wells Limited, an independent brewing, pub and distribution company.During 2005,
The Restaurant Group plc entered intoalease forasite owned by Charles Wells Limited and subsequently this site was converted into
aFrankie&Benny’srestaurant.Nopremium was paid by the Group to Charles Wells Limited.The Group has enteredinto the lease with
Charles Wells Limited,onanarms length basis, withanannual rent of £73,850 per annum.Inaddition, the Group purchased products
withavalue totalling£0.7m (2006: £0.6m) from CharlesWells Limited during the year,onanarms length basis. No balance was directly
outstanding at the year end. Alan Jacksonreceived no remuneration or compensation in respect of these transactions.
Remuneration in respect of key management personnel, defined as the Directors for this purpose, is disclosed in note 6.
Furtherinformation concerning the Directors’ remunerationisprovided in the Directors’ remuneration reportonpages 23 to 29, of which
pages 26 to 29 areaudited.
Notes to the accounts
continued We have audited the parent company financial statements of The Restaurant Group plc for the 52 weeks ended 30 December 2007
which comprise the balance sheet and the relatednotesitovi. These parent company financialstatements have been prepared under
the accounting policies set out therein.
We havereported separatelyonthe Group financial statementsofThe RestaurantGroup plc for the 52 weeksended 30 December 2007
and on the information in the Directors’ remunerationreportthat is described as having been audited.
This report is made solely to the Company’smembers, asabody,inaccordance with section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the Company’smembers those matters we arerequiredtostate to them
in an auditors’ report and for no other purpose. To the fullest extent permitted by law,wedonot accept or assume responsibility to
anyone other than the Company and the Company’smembers asabody,for our audit work, for this report, or for the opinionswe
have formed.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the Annual Reportand the parent companyfinancial statementsinaccordance with
applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) areset out
in the statement of directors’ responsibilities.
Our responsibility is to audit the parent company financial statements in accordance with relevant legaland regulatory requirements
and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whetherthe parent company financial statements giveatrue and fair view and whether the parent
company financial statements have been properly preparedinaccordance with the Companies Act 1985. We also report to you
whetherinour opinion the report of the Directorsisconsistent with the parent company financial statements.
In additionwereport to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the
information and explanations we requirefor our audit, or if information specified by law regarding Directors’ remuneration and other
transactions is not disclosed.
We read the other information contained in the Annual Report as described in the contents section and consider whether it is consistent
with the audited parent company financial statements. We consider the implications for our report if we become awareofany apparent
misstatements or material inconsistencies with the parentcompany financial statements.Our responsibilities do not extend to any further
information outsidethe Annual Report .
Basis of audit opinion
We conducted our audit in accordance with InternationalStandards on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, onatest basis, of evidence relevant to the amounts and disclosures in the parent company
financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation
of the parent company financialstatements, and of whether the accounting policies areappropriatetothe Company’scircumstances ,
consistently applied and adequately disclosed .
We planned and performed our auditsoastoobtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the parent company financial statements arefreefrommaterial
misstatement, whether caused by fraud or other irregularity or error.Informing our opinion we also evaluated the overall adequacy
of the presentation of informationinthe parent company financial statements.
Opinion
In our opinion:
•the parent company financial statements giveatrue and fair view,inaccordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the Company’saffairs as at 30 December 2007;
•the parent company financial statements have been properly prepared in accordance with the Companies Act 1985; and
•the information given in the report of the Directors is consistent with the parent company financial statements .
Deloitte&Touche LLP
Chartered Accountants and Registered Auditors
London
5March 2008
Independent auditors’ report
to the members of
The Restaurant Group plc
61
The Restaurant Group plc
Annual Report 2007 62
The RestaurantGroup plc
Annual Report 2007
Company financialstatements
–under UK GAAP
Company balance sheet
At At
30 December 31 December
2007 2006
Note £’000 £’000
Fixed assets
Investment in associated undertaking i – 7,810
Investments in subsidiary undertakings ii 139,177 110,242
139,177 118,052
Current assets
Debtors
Amounts falling due withinone year from Group undertakings 48,529 36,529
48,529 36,529
Creditors
Amounts falling due within one year to Group undertakings iii (89,021 ) (49,810)
Net current liabilities (40,492 ) (13,281)
Total assets less current liabilities 98,685 104,771
Net assets 98,685 104,771
Capitaland reserves
Calledupsharecapital vi 55,295 54,863
Sharepremium account vi 21,004 20,346
Other reservesvi (3,648) 1,823
Profit and loss account vi 26,034 27,739
Shareholders’ funds 98,685 104,771
The financialstatements on pages 62 to 64 wereapproved by the BoardofDirectors and authorised for issue on5March 2008 and
weresigned on its behalf by:
Alan Jackson
Stephen Critoph ACA
Accounting policies and basisofpreparation
Basis of accounting
The accounts for the Company have been prepared under UK GAAP,whilstthe Group accounts have been prepared under International
FinancialReporting Standards. The Company accounts have been prepared under the historical cost convention in accordance with
applicable UK accounting standards and onagoing concernbasis.
Investments
Investments arevalued at cost less any impairment.
Dividend
In accordance with FRS 21 “Events after the Balance Sheet Date”, dividends declared after the balance sheet date arenot recognisedas
aliability at that balancesheet date, and arerecognised in the financialstatements when they have received approval by shareholders .
Share-based payment transactions
The shareoptionshave been accounted for as an expense in the company in which the employees areemployed, usingavaluation
based on the Stochastic simulation model.
In accordance with an available election in FRS 20, share-based awards granted before7 November 2002 have not been subject
toacharge. An increase in the investment held by the Company in the subsidiary in which the employees areemployed, with a
corresponding increase in equity,isrecognised in the accountsofthe Company.Information in respect of the Company’sshare
option schemes is provided in note 22 to the consolidated financial statements.
The value is accounted for asacapital contribution in relevantGroup subsidiaries thatemploy the staffmembers to whom awards
of shareoptions have been made. i) Investment in associate
£’000
At1January 2007 7,810
Impairment of investment (1,532)
Repaymentofequity (4,488)
Repaymentofpreference shares (2,200)
Fees 410
At 30 December 2007 –
ii) Investment in subsidiaries
Loans
Shares and other Total
£’000 £’000£’000
Cost
At1January 2007 66,902 44,762 111,664
Additions–shareoption scheme –1,738 1,738
Acquisition of Brunning&Price Limited27,197 –27,197
At 30 December 200794,099 46,500 140,599
Amountswritten of f
At1January and 30 December 2007 888 534 1,422
Net book value at 30 December 2007 93,211 45,966 139,177
Net book value at1January2007 66,014 44,228 110,242
The Company’soperating subsidiaries are:
Proportion of voting
rights and shares held
Holding at 30 December 2007
City CentreRestaurants (UK)Limited Ordinary shares 100%
ChiquitoLimited Ordinary shares 100%
Blubeckers Limited Ordinary shares 100%
Frankie&Benny’sS.L.* Ordinary shares 100%
DPP Restaurants Limited*Ordinary shares 100%
Brunning&Price Limited** Ordinary shares 100%
*Held by subsidiary undertakings.
** On 17 October 2007, the Group acquired 100% of the sharecapital of Brunning&Price Limited. Further details aregiven in note 11 of the consolidated accounts.
Other than Frankie&Benny’sS.L., the Company’sprincipaloperating subsidiaries areregistered in England and Wales, and operate
restaurants in the United Kingdom. Frankie& Benny’sS.L. is registered and operates three restaurants in Spain.
All other subsidiary undertakings arewholly owned by the Company or one of its subsidiaries, and aredormant.
63
The Restaurant Group plc
Annual Report 2007 64
The RestaurantGroup plc
Annual Report 2007
iii) Creditors–amounts falling due within one year
In accordance with FRS 21, the proposed dividend payable in respect of 2007 is not recognised asaliabilityinthese accounts
as it has not yet been approved by shareholders. The creditors falling due within one year areinrespect of intercompany balances.
iv) Profit attributable to membersofthe holding Company
As permitted by section 230(3) of the Companies Act 1985,aseparate profit and lossaccount has not been presented for the
holdingCompany.During the year the Company madeaprofit of £10.5m which included dividends of £12.0m received from
subsidiary undertakings (2006: profit of £62.7m which includesdividends of £65.0m received from subsidiary undertakings).
Remuneration of the auditors is borne by subsidiary undertakings (refer to note4inthe consolidated accounts).
v) Employee costsand numbers
All costs of employeesand Directors areborne by subsidiary undertakings. At 30 December 2007 the Company employed six persons
(31 December 2006: five persons).
vi) Sharecapital and reserves
ShareShareOther Profit and
capital premium reserves loss account Total
£’000 £’000 £’000 £’000 £’000
At1January2007 54,863 20,346 1,823 27,739 104,771
Issue of shares 432 658 –– 1,090
Profit for the year ––– 10,468 10,468
Employee shareoption schemes –– 1,738 – 1,738
Employee benefit trust–purchase of shares –– (7,209) – (7,209)
Dividends– –– (12,173) (12,173)
As at 30 December 2007 55,295 21,004 (3,648) 26,034 98,685
Details of shareissues during the year aregiven in notes 20 and 23 of the consolidated financialaccounts and details of the dividends
paid and proposed during the year aregiven in note 10 of the consolidated accounts.
Company financialstatements
–under UK GAAP
continued 2007 2006 2005 2004 2004 2003
IFRS IFRS IFRS IFRS UK GAAP UK GAAP
£’000 £’000 £’000 £’000 £’000 £’000
Revenue 366,710 314,748302,328255,446255,446 227,438
Trading business excluding DPP 48,207 39,187 31,962 26,070 25,904 21,793
Underlying interest (3,978 ) (3,254) (1,823) (1,667) (1,179) (2,539)
Shareofassociate (749) (917) (600) –––
Adjusted profit beforetaxation43,480 35,016 29,539 24,403 24,725 19,254
Loss beforetaxation made by DPP – –(1,733) –––
Non-trading items (660) (13,437) (1,348) (3,390) (2,597) (2,613)
Profit on ordinary activities beforetaxation 42,820 21,579 26,458 21,013 22,128 16,641
Taxation (13,644 ) (11,163) (8,617) (6,942) (7,039) (5,606)
Profit on ordinary activities after taxation 29,176 10,416 17,841 14,071 15,089 11,035
Profit on sale of businessesnet of tax – 3,950 5,504 –––
Profit for the year 29,176 14,366 23,345 14,071 15,089 11,035
Basic earnings per share 14.90p 7.26p 10.78p 6.59p 7.06p 5.68p
Adjusted earnings per share 14.64p 11.50p 9.08p 7.84p 7.95p 6.66p
Proposed total dividend per share 7.25p 6.00p 4.75p 4.20p 4.20p 3.65p
Dividend cover (excluding non-trading items) 2.02 1.92 1.91 1.87 1.89 1.82
Employment of finance
Property,plant&equipment 228,757 174,035151,337154,678149,683 146,220
Othernon-current assets 26,516 19,960 30,377 –––
Net current liabilities (66,991 ) (59,612) (61,848) (51,014)(55,111) (43,617)
Long term liabilities (85,740 ) (52,932) (14,459) (12,056)(7,625) (35,687)
102,542 81,451 105,407 91,608 86,947 66,916
Financed by:
Equity shareholders’ funds 77,154 65,204 91,436 75,883 70,855 50,144
Deferred tax 25,388 16,247 13,971 15,725 16,092 16,772
102,542 81,451 105,407 91,608 86,947 66,916
Net debt (76,573 ) (47,482) (12,419) (11,652)(11,294) (38,163)
Gearing 99.2% 72.8% 13.6% 15.4% 15.9% 76.1%
Interest cover beforenon-trading items (times) 12.1 12.0 17.5 15.6 22.0 8.6
The amounts stated for 2003are stated on the basis of UK GAAP as it is not practicable to restate this period forthe transition to IFRS.
Group financialrecord
65
The Restaurant Group plc
Annual Report 2007 66
The RestaurantGroup plc
Annual Report 2007
Directors
Alan Jackson
Non-executive Chairman
Andrew Page
Chief Executive Officer
Stephen Critoph
Group Finance Director
Kevin Bacon
Executive Director,Leisure
Trish Corzine
Executive Director,Concessions
John Jackson
Non-executive
David Richardson
Non-executive
Tony Hughes
Non-executive
Company Secretary
Robert Morgan
RegisteredOffice
151 St Vincent Street
GlasgowG25NJ
Head Office
5-7 Marshalsea Road
London SE1 1EP
Telephone Number
0845 612 5001
Company Number
SC030343
Registrar
Equiniti Limited
PO Box 28448
Finance House
OrchardBrae
Edinburgh, EH4 1WQ
Auditors
Deloitte&ToucheLLP
Hill House
1Little New Street
London EC4A 3TR
Financial Calendar
Annual General Meeting
7May 2008
Proposed Final Dividend–2007
Announcement5March 2008
Ex Dividend 11 June 2008
RecordDate 13 June 2008
Payment Date9July 2008
Shareholder information 67
TheRestaurant Groupplc
AnnualReport 2007
Notes 68
TheRestaurant Groupplc
AnnualReport 2007
Notes Designedand producedbyTheCollege +44 (0)20 7457 2030
7 The Restaurant Group plc
5-7 Marshalsea Road
London SE1 1EP
Tel: 0845 612 5001
www.trgplc.com