- Annual Report 2016 - Overview Business review Governance Financial statements 1

of comprehensive income Consolidated balance sheet Company balance sheet Consolidated statement Independent auditors’ report Consolidated profit and loss account of changes in equity Company statement of changes in equity Consolidated cash flow statement Notes to the financial statements 2016 highlights2016 Azzurri’s brands ASK Italian Coco di Mama Board of Directors Corporate governance report Azzurri’s strategy

Chairman’s statement

Corporate directory Zizzi 30 31 32 Financial statements 28 29 Consolidated statement 33 34 35 67 Contents Overview 02 03 04 05 review Business 06 10 14 16 Financial review Governance 18 19 Strategic report 21 Directors’ report 24 26

www.cocodimama.co.uk www.zizzi.co.uk Annual Report and Accounts 2016 www.askitalian.co.uk money, with typical money, spend (including head per value Brand tax) added reviews averaging are £19. on included Azzurri Group Limited Azzurri’s core brands ASK Italian and Zizzi are highly appealing complementary, to a broad customer base and lending themselves to different occasions. Both ASK Italian and Zizzi dining offer a memorable experience and great value for The Azzurri is Group a market in the leader Italian casual dining operating sector, ASK Italian, Zizzi and Coco di Mama. nearlyThe 6,000 employs Group serving people, million 15 over meals a year in our growing estate restaurants 260 over of and shops. Early during the period the review, under Azzurri further Group strengthened its estate through the acquisition of fastestCoco di Mama, London’s of growing one quick service food brands, offering a range quality of and Italian hot cold grab-and-go food, with a speciality in pasta hot and quality coffee. Further details are provided page on 15. pages 6 to 13. In April, the its opened Group first internationalsite, opening its first Zizzi in Ireland the of Republic in Dundrum. Further details are within included the Zizzi review to 13. pages on 10 2 2016 highlights Overview Financial summary Business highlights

£ 233.7m Acquisition Business review Total sales of Coco di Mama +7.3% year on year growth £35.0m 20 Adjusted EBITDA New openings +6.4% growth Governance £22.2m Republic of Ireland Capital investment (including premiums) First international Zizzi opened in Dundrum +£3.9m growth Financial statements Financial £32.1m 27 Transformations and refurbishments +£7.8m growth Operating cashflow

Azzurri Group Limited Annual Report and Accounts 2016 Overview Business review Governance Financial statements 5 3 11 £4 120

you. Shops New this year Employees spend perAverage head read moreTo about Coco di Mama shops please go to pages 14-15 At CocoAt di Mama, everything is do focused we on concentrate flavoursome simple, We on and delightful dishes, with combined great service – find such confident value won’t you we’re anywhere else. 11 145 £19 3,400

restaurants please go to pages 10-13

special. New this year Employees spend perAverage head read moreTo about Zizzi Restaurants We takeWe our passion for simple, delicious Italian food and a constant add stream of fresh inspiration to make each dish individual and this combine We with art of our love and design to create restaurants with personality and depth of character seen in not any other restaurant chains. 4 112 £19 2,300

Annual Report and Accounts 2016

To read moreTo about ASK Italian restaurants please go to pages 6-9 Average spend perAverage head Employees Restaurants New this year Everything – from here do we classic dishes to stoppingshow signatures, warm service to quintessentially Italian interiors – is so that you can eating enjoy together as as much the Italians do. Azzurri Group Limited Azzurri’s brands

Overview Business review Governance Financial statements 4 Azzurri’s strategy Overview Azzurri’s strengths Our strategy is simple... Outstanding: – to strive to be the leading Italian Food business in the UK, through: • Brands

• Quality Business review Running great restaurants Expansion Grow the core business through the roll-out of • Service through: our key brands as well as exploring new and Drive growth in profits from existing restaurants international markets • Value proposition • continual innovation and evolution of the Innovation • People & culture basics’ to deliver quality and value to our Seek to add further incremental business through • improvedcustomers operational focus on ‘restaurant new concepts and other revenue streams • Trading record

techniques to engage with our customers and • Growth potential Governance • useencourage of increasingly frequency sophisticated of visit marketing

continually improve margins • proactive management of our cost base to Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 Overview Business review Governance Financial statements 5 The versatility of Zizzi’s brand has enabled it to open a third location in Cardiff and a fourth in Manchester, while also securing Azzurri’s first site in Westfield London. ASK Italian, with a site at The O2, secured its first opening in London since 2003 as well as openings in Taunton, Newcastle and Harrogate. A cornerstone of the success of ASK Italian and Zizzi over recent years has been continued reinvestment in sites and the evolution of the brand and proposition. restaurants27 were refurbished during the year, meaning that everysite in the estate has received investment within the last 6 years. Both Zizzi and ASK Italian evolved their designs further this year, launching a new look-and-feel withoutstanding results. willWe continue to invest in new and existing sites across all of our brands in the coming year. Additionally, we are developing plans to launch an additional restaurant brand, from start-up, in the next few months. “Radio Alice” is planned to open in – a high November 2016 quality, fast casual pizzeria, which will further strengthen our portfolio of businesses. It has been another year of huge progress for Azzurri and its component businesses. Looking forward, the referendum result has created uncertainty in the although economy, this has not impacted our performance to date. have resilient We businesses and strong brands, which, together with the capability and dedication of our teams, leave us well positioned for the future. Harvey Smyth Chairman menus. Our partnership with Deliveroo, which The last 12 months have seen further significant progress on all frontsfor the Azzurri Group. Like-for-like revenue growth, new openings and EBITDA growth in our core brands, Zizzi and ASK Italian, have been complemented by the acquisition of the growing fast casual brand, Coco di Mama in July last year and by our very first overseas site, Zizzi, opening in Dundrum, Republic of Ireland, in April. Against a market backdrop of sharp increases in new restaurant openings, Azzurri has successfully continued to grow. This has been achieved through the strength of our brands, further investment in our restaurants and people, and innovation in our started in June has 2015, enabled usto reach customers through the growing delivery home market. Since the majority acquisition of Coco di Mama, we have worked with the Founders to develop one of the most exciting up-and-coming brands in the grab-and-go sector. The business has doubled in size during Azzurri’s ownership with ambitious plans to continue that journey. None of this could have been achieved without the dedicated leadership of the Founders, who have remained with the business, and who have managed to preserve Coco di Mama’s unique culture while at the same time embarking on a period of such ambitious growth. Including our first site in the Republic of Ireland, this year Azzurri opened new Zizzi 11 sites and 4 new ASK Italian restaurants, alongside 5 new Coco di Mama stores. Annual Report and Accounts 2016 well positioned for the future.” the for positioned well dedication of our teams, leave us leave teams, our of dedication together with the capability and and capability the with together and strong brands, which, which, brands, strong and We have resilient businesses businesses resilient have We “ Azzurri Group Limited Chairman’s statement Chairman’s

Overview Business review Governance Financial statements 6 Overview

www.askitalian.co.uk Business review 112 Restaurants Governance

4 statements Financial New openings

Azzurri Group Limited Annual Report and Accounts 2016 7

A transformed estate and a stronger brand Growing the estate Italian food to remember This year was another highly successful year for the ASK Italian With an additional 4 new openings, we now have 112 Our menu innovation continues to be driven by our passion for Overview brand and saw the completion of our major repositioning ASK Italian restaurants trading across the UK. Our latest Overview programme that commenced in 2010. Our estate now fully new restaurants have introduced the ASK Italian brand in previously unrepresented locations. We opened in authentic Italian food made with the finest quality ingredients, continue to deliver the same excellent returns. the Metrocentre shopping centre in Gateshead, the exciting andCapalbo. influenced by the knowledge of our expert friends, reflects this modernised design, and the latest refurbishments entertainment destination of The O2 Arena in London, including acclaimed chef Theo Randall and Italy expert Carla Building on the success of our prior year new openings in high and the busy towns of Taunton and Harrogate. established, food development in the year was focused on a further 4 new restaurants all in similarly prime locations. This year also saw the transformation of 11 restaurants and Withdeveloping our menu distinctive, of outstanding tempting classic and memorable Italian dishes dishes firmly to profile sites such as Manchester and Edinburgh, we opened marks the end of the transformation programme, leaving the engage our customers. Our look has continued to evolve and we have enhanced our estate fully invested and aligned in a fresh, contemporary Italian aesthetic. A focus on starters and desserts as a way to create interest, of major transformations that will replicate the key food, excitement and showcase our great ingredients led to the Business review Business review designservice giving and design us the elements confidence and to fuel commence our future a new growth. programme In May, we launched the latest evolution of the ASK Italian brand at our Gloucester Arcade site. This latest store builds on the Continued development and investment in our food, people original repositioning, has a blend of warm Mediterranean creation of our ‘Fiery Bread Sticks’ served with n’duja butter and service has resulted in further positive movement. colours and timeless Italian design alongside an elevation of andat table our ofpremium pouring ‘Garlic hot toffee Bread sauce Speciale’. over a The chocolate highlight dome of theto We have been more successful than ever at engaging with our our food offer and more personalised level of service. It has menureveal was a scoop our premiumof hidden ‘Chocolategelato making Etna’ it –an with instant the theatrehit and customers through focused promotions and campaigns. delivered further excellent performance results. our top selling dessert. Through the use of sophisticated segmentation and targeted We have also extended our reach to customers through Our passion for continual improvement also led to a broader marketing, combined with our continued focus on restaurant a successful partnership with Deliveroo. With all ASK Italian children’s menu with new healthy sides and a reinvigorated basics and strong operational controls, we were able to deliver sites already offering a take away service, half our estate now both enable kids to build their own desserts, which has restaurants. We plan to extend the Deliveroo partnership in line dessertdelighted offering. them, and ‘Tip set and the Top menu Ice Cream’ apart. and ‘Chocolate Pizza’ another strong year of profit growth. offers Deliveroo, which provides significant revenues to the Governance in-house take away offer. This year we were proud to be awarded the Gold Mumsnet Governance with their own geographical growth, whilst also refining our Family Friendly Award for our restaurant family offer and also

aOther Great menu Taste highlights Award for were our ‘Pistachiothe introduction and Olive in FebruaryOil Cake’. of a new crowd pleasing Calzone range and the introduction of

aand permanent Tonic’. range of Cocktails – with our ‘Italian Twinkle’ becoming a firm favourite alongside our ‘Elderflower Gin Financial statements Financial Financial statements Financial

“The highlight of the menu was our premium ‘Chocolate Etna’ – with the theatre at table of pouring hot toffee sauce over a chocolate dome to reveal a scoop of hidden gelato making it an instant hit and our top selling dessert.”

Azzurri Group Limited Annual Report and Accounts 2016 8 Overview

www.askitalian.co.uk Business review 2 Awards Governance

11 statements Financial Transformations

Azzurri Group Limited Annual Report and Accounts 2016 9

Reaching customers Investing in our team Making a difference We continue to invest in our ASK Italian Journey – the We continued in our mission to beat our £1 million fundraising Overview national awareness by capitalising on the trend of social training framework for all of our staff. This bespoke goal in support of Great Ormond Street Hospital Children’s Overview This year, our main marketing campaign ‘Temptation’ grew programme, providing consistent and high quality training Charity (GOSHCC), having reached over £850,000. psychologist to demonstrate how different personality types for all roles, to further drive internal succession, now stands footage,react to temptation.creating short We films used and short working animations with ina leading our email at a record high. This year we hosted a second ASK Triathlon to support communication to show off the excitement and theatre of the GOSHCC which was well supported by our teams alongside melting chocolate cup. A new dessert menu format, featuring our suppliers and partners. Entertainment was provided by tempting photography, and comprehensive staff training programme which again provided succession for key roles in the popular celebrity Louie Spence, whilst we were grateful We completed our fifth restaurant manager leadership to also have a GOSHCC family in attendance on the day itself. recruitment we introduced our new Applicant Tracking System, media interaction. We have also continued to raise money through our annual combined to drive significant local coverage and strong social ourwhich new has openings enabled and us to in provide the Operations an improved field team.service To to support all applicants, whilst extending the reach and impact of our option offered to customers when paying their bill. Business review taste trials of our new kids menu ensuring engaging, sharable recruitment campaigns. Business review Oursocial Summer footage campaign and a strong was blogger also very interest. successful with its filmed Giant Easter Egg raffles and through the Pennies donation At the core of our ASK Italian Journey sits our unique Italian Future growth Record service Education programme, which provides inspiration for our Service has again improved over the year with rising scores team members on the seasons, ingredients and culture of Italy. The completion of our estate transformation, continued across internal measures and public sites. ASKimprovement Italian continues in our customer to become scores, stronger and andthe unveilingmore profitable. of our new look and feel all demonstrate the strength of our brand. We have continued to shape our unique service proposition, Our teams reflect this inspiration in our Primo Competitions and as well as becoming famous for friendly and welcoming Our transformed estate and our exciting pipeline of premium where this year we crowned Megan our Primo Waiter and new sites set us up for further future success. service, it is now focused more on the consistency of our GeorgeIn a year our of risingPrimo costChef, pressures both from for our the Cardiff sector, team. we have customer experience. successfully navigated the National Living Wage, ending the We are looking forward to a year where we will begin the next year with an engaged and committed team at all levels. We were proud to have a record number of compliments phase of estate transformations, evolve the brand and expand received in the year, combined with our Trip Advisor score our business into new locations and opportunities. Governance Governance into delivering great service and food. at its highest position ever – reflecting the seriousness we put Financial statements Financial Financial statements Financial

“This year we were proud to be awarded the Gold Mumsnet Family Friendly Award for our restaurant family offer and also a Great Taste Award for our ‘Pistachio and Olive Oil Cake’.”

Azzurri Group Limited Annual Report and Accounts 2016 10 Overview

www.zizzi.co.uk Business review 144

Restaurants Governance across the uk

1 statements Financial restaurant in Republic of Ireland

Azzurri Group Limited Annual Report and Accounts 2016 11

Dynamic, leading Italian brand Accelerated pace of new openings and refurbishments Zizzi food – inspired to be individual In the last year we have continued to build on the strong The dedicated Zizzi food team is focused on seeking inspiration Overview Overview momentum of the previous year. We have further enhanced to increase our programme of new openings with 10 new to bring new exciting dishes and drinks to the market. In March the strength of the brand whilst accelerating our rollout Therestaurants strength in of the the UK Zizzi this brand year. hasThe given brand us has the proven confidence itself programme. We opened 11 new restaurants including to have broad appeal, giving us the ability to open multiple sites in key cities. This year we opened a third Zizzi in Cardiff and webuzz were and the support first highfrom street the growing chain to vegan launch community. new vegan/ a fourth in Manchester. non diary pizzas using vegan cheese that created significant expandingwell delivering our geographicallike-for-like revenue reach by growth opening and our another first in year Not only does Zizzi serve great Italian favourites but we also the Republic of Ireland. Our existing restaurants performed Staying fresh and relevant in such a competitive market is add dishes with our unique Zizzi twist. This year we introduced crucial and as such, despite having a fully invested estate, we ofThis profit achievement growth for has the been business underpinned as a whole. by a continued have continued to evolve our design and continued our strong investment and focus on our proposition, maintaining our pace of refurbishments this year. 16 restaurants now support newsage, handmade and also innovation ‘Pulled Beef on Arancini’,our drinks a range.premium Our ‘Rustica new range Pizza of relevance in a competitive marketplace and a drive to deliver this new enhanced design style which brings a striking new Carnoso’ with truffle salami, wild boar prosciutto and crispy Business review Business review the very best customer experience. We have continued to evolve our design and the refurbishment of our estate to interesting interiors. These latest design restaurants are ‘PimpWe have Your broadened Prosecco’ our and reach cocktails by developing have been a very range well of dishesreceived. ensure we remain fresh and interesting. exteriordelivering look outstanding featuring aresults. ‘Zizzi in lights’ logo and warmer, more that can be eaten in the home and partnered with Deliveroo to offer a home delivery service. This additional proposition gives We have relentless focus on menu innovation to drive us access to the fast growing premium food delivery market. interest and appeal to the latest food trends and we launched Instrongly addition, and, in given April itswe ability opened to our be instantlyfirst Zizzi successful internationally in to provide a memorable customer experience. Impactful digital innew the markets, Republic demonstrates of Ireland in Dundrum.the strength It is of performing the Zizzi brand. very amarketing ‘customer campaigns first’ service keep proposition customers that engaged empowers and help our keepteams Zizzi top of mind. Governance Governance

“Our new enhanced design style with a striking Financial statements Financial Financial statements Financial new ‘Zizzi in lights’ logo is delivering strongest ever results.”

Azzurri Group Limited Annual Report and Accounts 2016 12 Overview

www.zizzi.co.uk Business review 11 new openings Governance

16 statements Financial refurbishments

Azzurri Group Limited Annual Report and Accounts 2016 13

Sustained brand building Building a customer first culture Looking ahead Zizzi has delivered a step up in awareness and consideration A strong and recognised customer service reputation is crucial Zizzi is in excellent shape with all brand metrics and experience Overview Overview this year behind increased investment and innovation in in a very competitive market and this year we have seen a big measures showing sustained improvement. We aim to maintain improvement in customer experience as seen in our annual our dynamic approach in the year ahead with continued Casual Dining Awards for our #ZizziTacklesCancer campaign. brand tracking survey and on online sites such as TripAdvisor. investment in new openings, increasing rate of refurbishments marketing. We were awarded ‘Best Marketing Campaign’ by the and driving cut-through marketing campaigns. World Cup to drive awareness of Zizzi and secure donations for At the start of the year we launched our new service proposition This campaign saw us leverage the media interest in the Rugby which is based on building a culture of customer centricity and and Alex Corbisiero and took our customer engagement to a new any potential headwinds that may arise post Brexit, we are Cancer Research UK. We teamed up with rugby stars Jonny May invested in building the capability of our teams to ensure they Thewell strengthpositioned of tothe continue Zizzi brand to extend gives usour confidence reach and that, grow despite all in-restaurant experiences across all of our restaurants. empoweringunderstand and our execute teams to the always basics put brilliantly the customer and are first. then We elements of the business in the year ahead. level using gamification to combine online, mobile, social and focused on treating each customer as an individual to create a friendly and welcoming experience. Business review Business review as a way of generating interest and enhancing our engagement Wewith were customers the first by restaurant offering fun group digital in the games UK towith use a gamification chance to Standing up for our community win prizes. committed to raising £1 million over 3 years. To date we have We have also seen success in building our social followers and Ourraised charity in excess partner of £500,000 is Cancer through Research the UK #ZizziTacklesCancer and we have engagement on social platforms behind our very successful ambassador programme and strength of content. team building event. Open to every Zizzi employee and based campaign in September 2016, and our first national fundraising

onwho the took increasingly part to raise popular money ‘Tough for the Mudder’ campaign. style events, ours, called the ‘Zizzi Mudder’, attracted over 300 team members Governance Governance

“We were pleased to be awarded ‘best marketing Financial statements Financial Financial statements Financial campaign’ by the Casual Dining awards for our #ZizzitacklesCancer campaign.”

Azzurri Group Limited Annual Report and Accounts 2016 14 Overview

www.cocodimama.co.uk Business review 11 Shops Governance

5 statements Financial New openings

Azzurri Group Limited Annual Report and Accounts 2016 15

Coco and the Azzurri Group Developing our proposition Our people Early this year, Coco di Mama was acquired by the Azzurri We have always prided ourselves on the quality of our service

Overview to keep improving and evolving the proposition is crucial, Overview Ineven a fast for growinga new growth and rapidly business. changing QSR market the need that our people and culture are critical to our success, and we Group.the Group. As a rising star in London’s Quick Service Restaurants andinvest the heavily efficiency in this and area. friendliness We have of continued our teams. to Weoffer recognise market- (“QSR”) sector, Coco di Mama is seen as an exciting addition to We have always been famous for the quality of our coffee and leading remuneration, best-in-class learning and development our ability to serve it fast. This year we have added additional opportunities for our people. With a proven track record of to the fast growing fast casual grab-and-go market and offers machines to enable us to keep up with growing demand yet internal promotion and growing quickly, the opportunity for Cocoquality di ItalianMama isfood, a good a product fit for Azzurri. we know It well. gives As the part group of a accesslarger still focus on hand-crafting each coffee. fast career progression is enormous. group we have been able to unlock synergies and accelerate our growth plans. We continued to develop and drive volume growth in a number The central team continues to grow, with recent additions in of our core products including our pasta with improved sauces and exciting specials. In Spring, we overhauled our range of is critical for continued growth, and we will invest further Coco di Mama has doubled in size and transformed its cold grab-and-go products with a new range of salads, wraps Business review theover People, the coming Recruitment, year. and Food functions. Central support Business review Indeed, the first 12 months have yielded amazing results – and focaccias. and personality. The year ahead operations, whilst retaining and refining its unique culture June saw the launch of our breakfast proposition. Leveraging Rapid growth our unique cooking platform we have been able to develop momentum and an increasingly growing awareness of the Coco di Mama has seen rapid growth this year, opening 5 new a range of premium and quality breakfast items that can all Itbrand. has been We have a transformational a brand performing year andstrongly we finish and wellwith strong stores in prime locations. As well as 3 sites in the traditional be served personalised and as quickly as our pasta. The range positioned for further ambitious growth. We have every Coco di Mama heartland of the City, we have reached further includes a number of soft poached egg dishes from healthy to indulgent as well as a range of porridge. All are served with confidence that very shortly Coco di Mama will be joining afieldin our withability 2 sitesto trade outside; successfully in Victoria across and a on number the South of different Bank. the small group of players leading the London QSR space. These sites have performed incredibly well and built confidence ourWith signature each new Coco opening di Mama we have finishing continued flourish. to develop our more strongly than the last as the brand gains strength and store design and further build on and strengthen our brand customer profiles and location types. Each new site has opened communication. Our most recent stores have more striking

Governance record openings for us, and our most recent site, in Bow Lane, signage, a stronger visual appeal and warmer, more classic Governance awareness.likewise. All The openings openings have at served Bankside to push and Victoria on the brand were and its Italian interiors. look and feel as Coco di Mama seeks to be ever more distinctive and differentiated.

We delivered solid growth throughout the year as both the key Itproducts has been of a pasta strong and year coffee of profit volumes growth continued for the toexisting increase. estate.

and operational improvements, Coco di Mama’s margins have

Financial statements Financial Throughbeen transformed a combination whilst of maintaining scale benefits, and collective improving bargaining quality statements Financial and team remuneration.

“Coco di Mama has doubled in size and transformed its operations, whilst retaining and refining its unique culture and personality.”

Azzurri Group Limited Annual Report and Accounts 2016 16 Financial review Overview The reported statutory results cover the 52 week period to 26 June 2016 and comparatives for operated. The table below also summarises the comparative full year trading results of Azzurri the period 3 July 2014 to 28 June 2015, the first period in which the Azzurri Group (“the Group”) to this year’s results. Restaurants Limited as a more meaningful comparison of the underlying business performance Azzurri Azzurri Azzurri Group Group Limited Limited Limited 2015/16 Restaurants 52 week 3 July 2014 to

52 weeks 52 weeks* change 28 June 2015* Business review £m 2014/15£m % £m Total restaurant sales 233.7 217.7 7.3% 93.9 Adjusted EBITDA1 35.0 32.9 6.4% 13.7 Margin 15.0% 15.1% 14.6% Depreciation, amortisation and other adjustments (17.6) (11.7) (6.6) EBIT2 17.4 21.2 -17.9% 7.0 Exceptional items (1.1) (2.2) (4.7)

16.3 19.0 -14.2% 2.3 Governance

TheOperating above results profit include those of Coco di Mama from the date of acquisition of CDM Trading Limited by CDM Holdco Limited on 8 July 2015. The Azzurri Group Limited comparative results include those of ASK Italian and Zizzi, both

Limited by Azzurri Trading Limited on 21 January 2015. trading under Azzurri Restaurants Limited, from the date of acquisition of Azzurri Central for the 52 weeks to 28 June 2015.

The Azzurri Restaurants Limited comparative results include those of ASK Italian and Zizzi statements Financial 1 items of a one-off non-recurring nature and pre-opening costs, which totalled £1.5m (2015: £1.0m) 2 Adjusted EBITDA is defined as EBIT plus depreciation and amortisation, goodwill amortisation,

* EBIT is defined as operating profit excluding exceptional costs Figures have been restated following the adoption of FRS 102

Azzurri Group Limited Annual Report and Accounts 2016 Overview Business review Governance Financial statements 17 £0.3 million £0.3 million £5.1 million £28.4 million VAT paid VAT significant investment in capital expenditure across the estate, which qualifies for capital allowances that are designed to encourage such investment; and interest payments on the external debt and shareholder loans, a proportion of which is deductible for tax purposes. Corporation tax ■ Corporation and council tax ■ Rates ■ Stamp duty land tax NIC ■ Employers’ PAYE/NIC ■ Employees’ £9.9 million ■ £12.6 million Taxation The Group paid £0.3m in the year in relation to corporation tax instalments. The modest level of payment is a result of two key continuing features of its business: • • Although minimal corporation tax arose during the period, the contribution Group’s to the UK Exchequer is significant, contributing over £56 million during the financial year. the majority acquisition of Coco di funded Mama for £7.7m, by a drawdown of£8.0m from our banking facilities; and interest and loan repayments of £10.8m. shareholder loan notes; and shareholder equity. net investment in new restaurants and the maintenance of the estate totalling £22.2m; external bank debt; The year ended with the UK’s referendum result, creating market uncertainty which saw a sharp decline in the value of sterling, and a subsequent further reduction in interest rates. continueWe to closely monitorbusiness performance and are prepared to adjust our plans accordingly throughout this period. The external Group’s senior debt is syndicated to a number of participating financial institutions with maturity dates of June and 2020 June Further 2021. details are provided in notes to and the16 17 financial statements. In addition, the Group has a revolving credit facility million, of £10 of which £1m is carved out to cover insurance guarantees; and million a £15 capex facility, of which was £7m undrawn at the year end. The external facilities are subject to certain financial and non-financial covenants. The financial covenants include annual limitations on capital expenditure and require the maintenance of certain minimum ratios of EBITDA to interest payable and a maximum ratio of net debt to EBITDA. In addition there was a requirement that the net operating cash flows were not less than the cash Group’s cost of servicing the bank debt. All of the covenants were met with adequate headroom during the year. The loan notes and equity were provided primarily by Bridgepoint, together with smaller investments by Hermes and management. Interest on the shareholder loan notes rolls up into the principal balance and is not due for payment until the maturity or repayment of the respective loan. • • • • Cashflow Net cash inflow from operations for the year was £32.1m. During the year the key components of cash flow were: • Financing The financing Group’s structure, implemented on acquisition in January comprises 2015, three main components: •

Annual Report and Accounts 2016 the majority acquisition of Coco di Mama, which is currently in a rapid growth phase; opening our first restaurant outside of the United Kingdom, expanding Zizzi internationally by opening in the Republic of Ireland; opening new 20 sites across the estate; and improving the existing estate with refurbishments 27 and transformations completed in the year. Azzurri Group Limited Market update Again this year, we saw both UK and GDP Consumer Confidence continue to increase. The restaurant sector also continued to grow, albeit at a slower pace than the prior year, with like-for- like revenue growth of 1.6% (source: Coffer Peach Business Tracker). The strength of sterling against the euro, in Summer of 2015, resulted in record numbers of holiday goers vacationing outside the UK this year, however the Group has benefitted from low input price inflation, assisted by the strong exchange rate. Interest rates also remained low during the period. The sector was impacted by a number of headwinds during the year including labour cost pressures as a result of the National Minimum Wage increase in October and 2015 with the introduction of the National Living Wage in April 2016. Wage inflation looks set to continue to rise at significant levels until at least 2020. Performance summary This year, total sales for the Group grew to £233.7m, following the in-year acquisition of Coco di Mama which contributed revenues of £6.9m. Total sales higher were 7.3% than the prior year and all three brands experienced like-for-like growth. Increased sales across all our businesses were driven by the continued development and evolution of our brands as well as continued investment in our estate. Adjusted EBITDA for the year was £35.0m, representing pro-forma growth of 6.4% with the margin at 15.0%. The margin reduced largely by0.1% due to a different conversion obtained from Coco di Mama. supportTo Azzurri’s continual growth strategy, this year the Group has continued to invest through: • Financial review • • •

Overview Business review Governance Financial statements 18 Board of Directors Overview

Steve Holmes – Chief Executive Officer Jim Pickworth – Chief Financial Officer Kieran Pitcher – Group Property Director Business review

Steveof ASK was Italian appointed & Zizzi Chiefsince Executive2014 and ManagingOfficer of theDirector Group of in Jimof ASK was Italian appointed & Zizzi Chief since Financial 2013 and, Officer for 6 of years the Group prior toin Kieran was appointed Group Property Director in January January 2015, prior to which he was Chief Executive Officer Januarythat, Finance 2015, Director following at his Zizzi. roles He as was Chief previously Financial Finance Officer 2015, having been Group Property Director of the Gondola held a number of senior operational roles in various casual Groupgraduated since with 2007. a degree Prior to in this estate he wasmanagement Property andDirector was ASK Italian since 2012. Prior to joining ASK Italian, Steve at The Restaurant Group and Laurel Pub Company. Kieran Director for Yo! Sushi as well as Group Finance Director Surveyors in 1993. dining brands, including 8 years at PizzaExpress. for Pret A Manger and held a number of finance roles at appointed a member of the Royal Institute of Chartered McDonalds. He qualified as a Chartered Accountant at Ernst & Young. Governance

Harvey Smyth – Chairman Mike Black – Non-Executive Director Jason McGibbon – Non-Executive Director statements Financial Harvey became Chairman of the Group in January 2015. Mike became a Non-Executive Director of the Group in Jason became a Non-Executive Director of the Group in January 2015 after being involved in the acquisition. Development Capital, a partner of Bridgepoint and a He was previously Chief Executive Officer of the Gondola Januarymember 2015.of the He Firm’s is Managing Group Board, Partner having of Bridgepoint joined them in team. Jason joined Bridgepoint in 2000 and was formerly Grouphas a degree and PizzaExpress, in biochemistry and fromDeputy Bristol Chief University Executive and is Heresponsible is a Partner for ofBridgepoint’s Bridgepoint investment and leads their activities Consumer in Officer and UK Managing Director of Pret A Manger. Harvey Markets for 7 years, gaining broad experience in the capital Turkey and spent time based in Frankfurt and the Nordic 1996. Prior to joining Bridgepoint Mike worked at Natwest region. He has a degree from the University of Strathclyde also a qualified Chartered Accountant. divisions. He is an Economics graduate from the University markets, investment banking and acquisition finance Business School and is a qualified Chartered Accountant. of York. Azzurri Group Limited Annual Report and Accounts 2016 19 Strategic report for the 52 weeks ended 26 June 2016 Overview Overview

the prior year. The directors present their strategic report for Azzurri Group Limited (“the Company”) and Gross profit – The Group‘s gross profit margin was 17.7% for the period, up from 16.9% in itsPrincipal subsidiaries activities, (together business “the Group”) review for andthe 52 future weeks developments ended 26 June 2016 (“the period”). Adjusted EBITDA – The Group’s Adjusted EBITDA grew from £32.9m in the previous period During the period, the Company continued its activity as an investment company. The principal to £35.0m. activity of the Group is to operate restaurants. Exceptional costs – The Group incurred exceptional costs during the year of £1.1m (2015: £4.7m). During the period the Group incorporated CDM Group Limited and its subsidiary CDM Holdco See note 5 for further details. Limited. On 8 July 2015, CDM Holdco Limited acquired CDM Trading Limited (previously Following a year of marginal economic growth and with the results of the EU referendum, the interest in CDM Group Limited. Group, while committed to its growth plans, is monitoring market conditions and assessing the Business review Business review Tenfour Ventures Limited) trading as Coco di Mama. The Group has acquired a controlling impact a potential downturn may bring. A combination of expansion and a year of like-for-like growth, the three core brands performed well. ASK Italian and Zizzi continued to focus on improving their proposition, with ever more refurbishment a key part of the strategy. The TheDundrum Group Town also expanded Centre in intoDublin Ireland, in April incorporating 2016. Further Azzurri expansion Restaurants is planned Ireland for the Limited coming during year. subsequent expansion of Coco di Mama has seen the business nearly double, with the Group being the period. Incorporated in Ireland, to trade under the Zizzi brand, the first restaurant opened in During the year, the group incorporated 8 Slices Limited to operate the start-up brand are well positioned to continue their strong performance. able to add significant synergies in the form of procurement and cost savings. Azzurri’s brands Key performance indicators “RadioThe Group Alice”. measures performance using the following three key performance indicators The performance of the Group is measured through the use of key performance indicators as follows: (“KPIs”), for purposes of meaningful comparison KPIs were measured for the trading company: 2016 2015 Growth % Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, one-off • Sales versus prior year; £233.7m £217.7m 7.3% Governance Performance indicator Governance • Adjusted pre-exceptional EBITDA £35.0m £32.9m 6.3% The number of open restaurants versus prior year. Restaurant turnover adjustments and pre-opening costs) versus prior year; and Adjusted pre-exceptional EBITDA margin 15.0% 15.1% •A review of the Group’s operations and performance during the period and of future Number of restaurants 248 8.1% developments is found below. 268

Results and performance of the Group The results of the Group for the period are set out on page 28 and show a loss on ordinary and amortisation, goodwill amortisation, items of a one-off non-recurring nature and Adjustedpre-opening EBITDA losses. is defined as operating profit before exceptional costs, plus depreciation

Financial statements Financial activities before taxation of £13.1m (2015: £8.5m deficit). The total shareholders’ deficit as statements Financial The Group has invested £12.4m of capital in opening 20 new sites. A further £4.9m has been atResults 26 June and 2016 performance is £17.4m (2015: of £7.4mthe trading deficit). companies The Group continued to focus on expansion of the established brands and the acquisition of Duringinvested the in 2016refurbishment financial period, of the existing the Group estate. has continued to develop its portfolio of restaurants. a new brand. This strategy in the face of a highly competitive market delivered strong growth Other key indicators used by the Board and executive management include: on the previous year. New sites opened – Expansion is a key driver and potential new sites are subject to a rigorous Sales and sales growth – Group sales for the period were £233.7m. Group Sales in the previous appraisal process before approval. company, with sales of £217.7m, this represents a £16.0m or 7.3% growth. The contribution to periodturnover were by Coco£93.9m, di Mama reflecting was £6.9mthe period for the of Azzurriperiod since ownership. acquisition. When compared to the trading

Azzurri Group Limited Annual Report and Accounts 2016 20 Strategic report for the 52 weeks ended 26 June 2016 Overview Financial indicators – Notably, like-for-like sales growth, and labour and food margins. Continuity of supply chain – Our operations remain heavily dependent on key suppliers and distributors. We closely monitor against key supplier service level agreements, with contingent – Including staff and management turnover, tenure and stability. • arrangements in place where necessary. PeopleCustomer measures satisfaction – Measures from both third party sources and our own on-line  – Failure to maintain the high standards we have set can quickly affect public customer surveys. perception and could damage our brands. We monitor our customer service and operating FRS 102 transition • Reputationstandards regularly, and have dedicated quality and safety, and customer services teams. A crisis management process is also in place in the event of serious incidents. These are the principal risks affecting the Group operations, but is not an exhaustive list. ThisThe date is the of first transition year the adopted Group byhas the presented Group was its results3 July 2014. under The the comparatives new FRS 102 shownaccounting in the The comprehensive risk register ensures the Board are appraised of all risks, and contingent Business review framework. This framework replaces UK GAAP which the Group previously reported under. actions to mitigate them. financialan overall statements increase to have total been comprehensive restated to lossreflect of £2.4mFRS 102 and and the as net a result balance there sheet has impact been was By order of the Board a decrease£2.4m decrease in profit in before net liabilities. tax for the A full period overview 3 July of 2014 the toimpact 28 June of the 2015 transition of £0.3m. on There the Group’s was prior year results can be found in note 30. Principal business risks and uncertainties principal risks which the business faces and for developing appropriate policies to manage James Pickworth The Board of Directors (“the Board”) has the primary responsibility for identifying the Company secretary thoseGiven risks.the nature To assist of the with Group’s this process, businesses, an annual the principal Risk Review business is presented risks are asto follows:the Board. 21 October 2016 Economic conditions – Adverse economic conditions and uncertainty can lead to challenging market conditions which could result in pressure on all functions of the business. A medium Governance • term business plan coupled with regular forecasting allows us to pre-empt any periods of

difficultyEmployee and retention act early. – With our biggest asset being our employees, it is critical to attract and retain the best people at all levels. We review our employment policies regularly and are • committed to investing in our teams with competitive reward structures and comprehensive training and development programmes. Health & Safety – The Group maintains a strong focus on its food safety and health and safety standards, with the wellbeing of our teams and customers being paramount. Standards are • monitored regularly across all of our sites, and compliance with legislation and best practice statements Financial taken very seriously across the business.

Azzurri Group Limited Annual Report and Accounts 2016 21 Directors’ report Overview Overview The directors present their annual report for the Company and the Group together with their Employees Serving around 15 million meals a year to customers in our restaurants, our people truly are our greatest asset and we believe in treating them as such: with respect, looking after their welfare audited consolidated financial statements for the 52 weeks ended 26 June 2016. The basis ofResults preparation and dividends of the financial statements is set out in note 2 on page 35. The results of the Group for the period are set out on page 28. and allowing them the freedom to be themselves and to flourish. for our employees. The directors do not recommend the payment of a dividend (2015: £nil). We encourage a work environment that is fair, open and communicative, with many benefits Our employees have a performance review at least once a year, which includes consideration of Directors skills development and career prospects. We aim to retain, develop and promote our best staff,

Business review offering a variety of training courses and development opportunities. Business review statements are: The directors of the Company during the period and up to the date of signing the financial Informal, frank and open dialogue is encouraged at all levels of the Group. We aim to keep our Harvey Smyth employees informed of any changes and progress with the business on a regular basis in an engaging way. • Stephen Holmes

• has been to make it as easy as possible for our employees to air their opinions, express their • James Pickworth Communicationideas and voice any flows problems both ways, they as may we have.take theExamples views of include our employees a cascade seriously. process of Our meetings aim to communicate key messages throughout the organisation, and a weekly feedback process • KieranMichael Pitcher Black for operational issues. • Jason McGibbon We have a diverse workforce and an equal opportunities policy in place. We aim to employ people A brief summary of the experience of each director is provided on page 18. • of age, sex, disability, sexual orientation, race, colour, religion, marital status or ethnic origin. Governance Governance Charitable and political donations who reflect the diverse nature of society and value people and their contribution irrespective respond to accusations of workplace discrimination, harassment and victimisation. An effective employee grievance procedure is in operation, and the policy is properly communicated to The Group makes significant contributions to community related initiatives and uses the We do not tolerate harassment or bullying in any shape or form. Procedures are in place to our people. saleThe Groupof certain made menu no political items to donations raise funds in for the specific period causes.(2015: none). Going concern Applications from disabled persons are given full consideration providing the disability does not seriously affect the performance of their duties. Such persons, once employed, are given appropriate training and equal opportunities. Thethe year Group’s end financialdate which performance indicate the and Group position will beis describedable to meet in theall its Financial liabilities review when on they fall Operations outside the UK

Financial statements Financial pages 16 and 17. The directors have reviewed cash flow forecasts for a three year period from statements Financial During the period the Group expanded into Ireland, opening Zizzi in Dublin. The intention covenant compliance and liquidity is also monitored and management have considered the is to open further restaurants in future periods. due for the foreseeable future, despite having net liabilities as at 26 June 2016. Projected for the foreseeable future. The Group also has additional facilities available and the maturity mitigatingdates for all actions of the Group’savailable banking to ensure arrangements that sufficient are headroom to 2020 and on later.each Havingcovenant made is maintained an assessment of both liquidity and covenant compliance, the directors have continued to adopt

the going concern basis in preparing the financial statements.

Azzurri Group Limited Annual Report and Accounts 2016 22 Directors’ report Overview Environment (b) Credit risk The Azzurri Group has continued to reduce its impact on the environment by reducing its carbon footprint. There are a number of ongoing environmental programmes that work to do this and include the following: The Group has no significant concentrations of credit risk. The nature of its operations results in a large and diverse customer base and a significant proportion of cash sales. The Group has Azzurri manages waste at 184 restaurants (2015: 164), with the remaining sites having their policies(c) Liquidity that limit risk the amount of credit exposure to any financial institution. waste managed by the landlord. Of those 184 restaurants there are 168 segregating food waste The Group manages its exposure to liquidity risk through a naturally low level of debtors, • which is sent to anaerobic digestion plants. Overall, 83% of waste (by weight) is segregated maintaining a diversity of funding sources and the spreading of debt repayments over a range on-site into various recyclable waste streams. The Group continues to assess recycling of maturities. provisions at each restaurant in order to increase on-site segregation.

(d) Cash flow and interest rate risk Business review Used cooking oil is collected from all Azzurri restaurants and recycled into biodiesel. interest rates. The Group’s interest rate risk arises from long-term borrowings. Borrowings • The Group’s income and operating cash flows are substantially independent of changes in market water usage by both design and user campaigns. hedged up to February 2018. • Each brand has its own Energy Efficiency programme, which is aimed at reducing energy and issued at variable rates expose the Group to cash flow interest rate risk. Borrowings are majority The Group continues to closely analyse Smart Meter data to ensure equipment is not over-used (e) Price risk or utilised too early or inappropriately. The Group is exposed to variability in the price of commodities used in the running of our • assist them in their sustainability journey. • ASK Italian and Zizzi are members of the SRA (Sustainable Restaurant Association) to further restaurants.where possible. This includes exposure to price fluctuations in ingredients purchased. The Group mitigates this risk by entering into price negotiations with suppliers to fix and reduce costs equipment is considered in relation to all new purchases. Directors’ responsibilities statement • All light bulbs are being replaced with energy efficient bulbs and energy efficiency of Financial risk management Governance Theapplicable directors law are and responsible regulations. for preparing the Strategic Report, Directors’ Report and the group and parent company financial statements (the “financial statements”) in accordance with The Group’s activities expose it to a variety of financial risks: foreign exchange risk, credit risk, liquidity risk, cash flow risk and interest rate risk. The Group’s overall risk management focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on Company law requires the directors to prepare financial statements for each financial year. thewith Group’s the Group’s financial operating performance. units. Risk management is carried out by the Group under guidance Under that law the directors have prepared the financial statements in accordance with by the Board. The Group identifies, evaluates and addresses financial risks in close co-operation United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard (a) Foreign exchange risk applicable in the UK and Republic of Ireland”, and applicable law (United Kingdom Generally The Group operates primarily in the UK and is not susceptible to foreign exchange risk in the Accepted Accounting Practice). normal course of trading. Financial statements Financial Foreign exchange risk may however arise from commercial transactions, as the Group purchases certain goods from European suppliers. The Group has hedging agreements in place to protect itself from the risks as a result of any adverse movements in the euro.

(predominantly Euros). This currency exposure is not material as at the date of this report. TheCurrency finance exposures function are is responsible reviewed regularly. for managing the net position in each foreign currency

Azzurri Group Limited Annual Report and Accounts 2016 23 Directors’ report Overview Overview Provision of information to auditors

Under company law the directors must not approve the financial statements unless they are satisfiedstatements, that the they directors give a true are requiredand fair view to: of the state of affairs of the group and the company Each(1) so of far the as persons the director who is is a aware, director there at the is nodate relevant of approval audit ofinformation this report of confirms which the that: Company’s and of the profit or loss of the group and company for that period. In preparing these financial (2) auditorseach director are unaware; has taken and all the steps that he ought to have taken as a director in order to • select suitable accounting policies and then apply them consistently; make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. • make judgements and accounting estimates that are reasonable and prudent;

Business review • state whether FRS 102 “The Financial Reporting Standard applicable in the UK and Republic s418(2) of the Companies Act 2006. Business review of Ireland” has been followed, subject to any material departures disclosed and explained This confirmation is given and should be interpreted in accordance with the provisions of in the financial statements; BIS audit exemption For the Group’s subsidiaries, Azzurri MidCo 1 Limited, Azzurri MidCo 2 Limited, Azzurri Trading • notify shareholders in writing about the use of disclosure exemptions, if any, of FRS 102 used in Limited, Azzurri Central Limited , advantage has been taken of the audit exemption available the preparation of financial statements; and for small companies conferred by section 479A of the Companies Act 2006 on the grounds presume that the company will continue in business. • prepare the financial statements on the going concern basis unless it is inappropriate to that for the year ended 26 June 2016 the company was entitled to the exemption from a statutory audit under section 479A of the Companies Act 2006 relating to subsidiary show and explain the company’s transactions and disclose with reasonable accuracy at any time • companies, and The directors are responsible for keeping adequate accounting records that are sufficient to statements comply with the Companies Act 2006. They are also responsible for safeguarding that no notice has been deposited under section 476 of the Companies Act 2006 in relation to the financialassets of theposition company of the and company the group and and the hence group for and taking enable reasonable them to ensure steps thatfor the the prevention financial • and detection of fraud and other irregularities. The directors acknowledge their responsibilities for Governance the financial statements for the financial year. Governance Electronic publication ensuring that the Company keeps adequate accounting records which comply with section 366 The maintenance and integrity of the Azzurri Group website is the responsibility of the of the Companies Act 2006, and • and, accordingly, the auditors accept no responsibility for any changes that may have occurred directors; the work carried out by the auditors does not involve consideration of these matters • preparingthe requirement financial of section statements 394 ofwhich the Companies give a true Actand 2006,fair view and of which the state otherwise of the affairscomply of with the tofrom the legislation financial statements in other jurisdictions. since they were initially presented on the website. Legislation in the Company at 26 June 2016 and of its profit and loss for the year then ended in accordance with United Kingdom governing the preparation and dissemination of financial statements may differ applicable to the company. Directors’ indemnities the requirements of the Companies Act 2006 relating to financial statements so far as Independent auditors Financial statements Financial Companies Act 2006, have been in force during the period and at the date of approval of the statements Financial Qualifyingannual report. third party indemnity provisions for the benefit of directors, as defined by the resolution concerning their re-appointment will be proposed at the Annual General Meeting. PricewaterhouseCoopers LLP have indicated their willingness to continue in office and a By order of the Board

James Pickworth Company secretary 21 October 2016

Azzurri Group Limited Annual Report and Accounts 2016 24 Corporate governance report Overview The Group is committed to high standards of corporate governance appropriate for a large, The executive directors are responsible for: private company and the Board is accountable to all of the Group’s shareholders, including minority shareholdings held by management and employees, for good corporate governance. The Board • settingpreparing the annual strategic budgets direction and ofmedium the Group; term projections for the Group and monitoring The current Board was put in place following the acquisition of Azzurri Central Limited in January 2015. The Board considers that it is of an appropriate size for the requirements of the • business, and that it has the appropriate balance of skills, knowledge and experience. performance against plans and budgets; The Board comprises a chairman, two Non-Executive Directors who represent the shareholders’ • overseeing the day-to-day management of the Group; interests and three executive directors, who were part of the management team of the trading • effective communication with shareholders; and Business review company prior to acquisition. •The preparing Company the Secretary annual financial acts as secretary statements. to the Board and its committees. He is responsible for The Board’s role is to provide leadership to, and to set the strategic direction of, the Group. ensuring that the directors receive appropriate information prior to meetings, and for ensuring The Board monitors operational performance and is also responsible for establishing Group that governance requirements are considered and implemented. policies and internal controls to assess and manage risk.

The Board meets regularly throughout the year and, in addition to the routine reporting of directors during the year, reporting to the Chairman. Executive directors are included in the Theannual Remuneration performance Committee evaluation has of allundertaken senior management, a review of whichthe effectiveness includes a review of the executive of is a schedule of matters reserved for the Board and certain matters are delegated to the Board’s financialCommittees and and operational the executive issues, directors. reviews Thethe performanceschedule of reserved of each of matters the brands includes in detail. approval There of annual budgets, strategic plans, senior management appointments, dividend policy and capital Relationsperformance with against Shareholders a range of specific objectives. structure, major contracts and major capital expenditure. Items delegated to the executive The Group is committed to maintaining effective communication with all of its shareholders directors include the approval of capital or other expenditure below the limits required for board in order to maintain a clear understanding of its objectives and its performance against those objectives. sign off, disposal of low value assets and approval of minor contracts or less senior appointments. Governance The two Non-Executive Directors are appointed by the largest shareholders of the Group, the

The Boardexecutive is scheduled responsibility to meet for between overseeing eight the and day-to-day twelve times management each financial of the period.Group is delegated to Stephen Holmes, the Chief Executive, together with his executive team. Bridgepoint Funds. The remaining shareholders of the Group include Hermes GPE PEC II L.P, and seniorCentral management Limited. Employees and employees receive ofregular the Group communication who hold shares about through the performance the ‘Azzurri of theEquity Group, There is a clear division of responsibility between the Non-Executive Chairman and the executive Plan’as described and ‘Azzurri on page Investment 21. Plan’ which were established following the acquisition of Azzurri directors. The Chairman is responsible for: Financial statements Financial

• thefacilitation leadership of the of theeffective Board, contribution ensuring its of effectiveness Non-Executive and Directors, setting its and agenda; ensuring and constructive relations between them and the executive directors. •

Azzurri Group Limited Annual Report and Accounts 2016 25 Corporate governance report Overview Overview Remuneration Committee Taxation policy This committee comprises the Chairman, the Chief Executive and two of the Non-Executive In line with its overall approach to corporate governance, Azzurri is committed to suitably Directors and is chaired by Michael Black. strong governance in relation to all of its tax affairs. The Group seeks to:

The Remuneration Committee is responsible for the following key areas: effectiveness, but using a straightforward and transparent approach without use of any • determining the participation of directors and employees in the Azzurri Equity Plan and • structure its affairs in a tax efficient way, as would be expected in order to ensure commercial Azzurriagreeing Investment the framework Plan; for the remuneration of the executive directors and other senior executives, and determining the total individual remuneration packages of each person,

Business review aggressive tax planning strategies; Business review • including pension arrangements. The Chief Executive is not present when his own • ensuremaintain that adequate it pays allsystems, taxes which processes are due and (and adequately to do so experienced promptly); staff in order to achieve

remuneration package is determined; • encourage enhanced performance by being rewarded in a fair manner for their individual the above; and • determining specific incentives for the executive directors and senior management to •Azzurri’s maintain tax a transparentaffairs are relatively and constructive straight-forward, relationship given with that HMRC. it is UK domiciled and that it ensuring that contractual terms on termination and any payments made are fair to the operates in a sector which does not have inherent complexity – i.e. consumer-facing, with no contributions to the success of the Group; long-term or complicated revenue streams and relatively predictable cost structures. • In managing its affairs, the Group’s aim is to limit tax related uncertainty. Our approach is individualevaluating andthe performanceto the Group (andof the that executive failure directorsis not rewarded); against objectivesand set. •Audit Committee commercially practicable. Where there is uncertainty in relation to a material tax issue, we to discuss significant transactions openly with the tax authorities in ‘real time’, as far as is Governance Governance ThisAudit committee Committee comprises meetings the as required.Chairman, During the Chief the Financial year the groupOfficer undertook and two of a the competitor Non-Executive tender will seek to obtain tax authority agreement/clearance in advance where practicable. Directorsprocess for and audit is chaired services. by Jason McGibbon. Relevant senior management are invited to attend The Group has reconfirmed its agreement relating to the VAT treatment for specific The Audit Committee is responsible for all matters relating to the regulatory and accounting revenue categories to clarify the VAT treatment of non-standard sales transactions, property transactions, membership subscriptions or sales of gift cards/vouchers with HMRC. The Group control procedures adopted by the Group. In addition, the committee is responsible for ensuring alsoand maintainseeks to reconfirm the condition the treatmentof existing ofones). capital allowances representing the amortisation for tax requirementsthat an objective that and may professional affect the Group, relationship together is maintained with the financial with the reporting external and auditors. internal purposes of the significant capital investments we make in our estate (to open new restaurants Key areas for which the committee is responsible include: Financial statements Financial statements Financial

• reviewing the Group’s financial statements prior to approval on behalf of the Board and reviewing the external auditors’ reports thereon; • establishingreviewing internal procedures controls to ensure and establishing that the Group an internal monitors audit and plan evaluates to monitor risks the appropriately; effectiveness • ofconsidering those controls; the consistency of accounting policies across the Group and the accounting for • anyassessing significant the effectiveness, or unusual transactions independence where and differentobjectivity approaches of the external are possible; auditors. and • Azzurri Group Limited Annual Report and Accounts 2016 26 Independent auditors’ report to the members of Azzurri Group Limited Overview Report on the financial statements Other matters on which we are required to report by exception Our opinion Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion:

In our opinion, Azzurri Group Limited’s group financial statements and company financial statementsgive a true (the and “financial fair view statements”):of the state of the group’s and of the company’s affairs as at 26 June • weadequate have not accounting received recordsall the information have not been and kept explanations by the company, we require or returns for our adequate audit; or • 2016have beenand of properly the group’s prepared loss and in accordancecash flows for with the United 52 week Kingdom period Generally(the “period”) Accepted then ended; • for our audit have not been received from branches not visited by us; or and returns.

• Business review have been prepared in accordance with the requirements of the Companies Act 2006. • the company financial statements are not in agreement with the accounting records Accounting Practice; and We have no exceptions to report arising from this responsibility. What we have audited • Directors’ remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain The financial statements, included within the Annual Report and Financial Statements (the “Annual Report”), comprise: to report arising from this responsibility. disclosures of directors’ remuneration specified by law are not made. We have no exceptions • the consolidated and company balance sheets as at 26 June 2016; Responsibilities for the financial statements and the audit Our responsibilities and those of the directors • the consolidated profit and loss account and consolidated statement of comprehensive income As explained more fully in the Directors’ responsibilities statement, the directors are responsible for the period then ended; fair view. • the consolidated cash flow statement for the period then ended; for the preparation of the financial statements and for being satisfied that they give a true and Governance • the consolidated and company statement of changes in equity for the period then ended; and policies and other explanatory information. with applicable law and International Standards on Auditing (UK and Ireland) (“ISAs (UK & • the notes to the financial statements, which include a summary of significant accounting Our responsibility is to audit and express an opinion on the financial statements in accordance Standards for Auditors. Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical The financial reporting framework that has been applied in the preparation of the financial This report, including the opinions, has been prepared for and only for the company’s members statements is United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally purpose. We do not, in giving these opinions, accept or assume responsibility for any other Accepted Accounting Practice), and applicable law. aspurpose a body or in to accordance any other personwith Chapter to whom 3 of this Part report 16 of isthe shown Companies or into Act whose 2006 hands and for it mayno other come save where expressly agreed by our prior consent in writing. Inthey applying have made the financial assumptions reporting and considered framework, future the directors events. have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, statements Financial Opinion on other matter prescribed by the Companies Act 2006

Instatements. our opinion, the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements are prepared is consistent with the financial

Azzurri Group Limited Annual Report and Accounts 2016 27 Independent auditors’ report to the members of Azzurri Group Limited Overview Overview What an audit of financial statements involves We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining

evidencewhether causedabout the by amountsfraud or error. and disclosures This includes in the an assessmentfinancial statements of: sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether the accounting policies are appropriate to the group’s and the company’s

• circumstances and have been consistently applied and adequately disclosed; Business review Business review • the reasonableness of significant accounting estimates made by the directors; and •We the primarily overall presentation focus our work of thein these financial areas statements. by assessing the directors’ judgements against statements. available evidence, forming our own judgements, and evaluating the disclosures in the financial We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

Ininformation addition, we that read is apparently all the financial materially and non-financial incorrect based information on, or materially in the Annual inconsistent Report with, to Governance identifythe knowledge material acquired inconsistencies by us in the with course the audited of performing financial the statements audit. If we and become to identify aware any of any Governance apparent material misstatements or inconsistencies we consider the implications for our report.

Simon Bailey (Senior Statutory Auditor)

Chartered Accountants and Statutory Auditors

Financial statements Financial forGatwick and on behalf of PricewaterhouseCoopers LLP statements Financial 21 October 2016

Azzurri Group Limited Annual Report and Accounts 2016 28 Financial statements Consolidated profit and loss account for the 52 weeks ended 26 June 2016 Overview

52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 Note £m £m Group turnover 3 233.7 93.9 Cost of sales (192.4) (78.0) Gross profit 41.3 15.9 Administrative expenses (23.9) (8.9) Exceptional costs 5 (1.1) (4.7) Business review Total administrative expenses (25.0) (13.6) Group operating profit 16.3 2.3 Loss on disposal of tangible assets (1.3) (0.3) Profit on ordinary activities before interest and taxation 15.0 2.0 7 (28.1) (10.5) Loss on ordinary activities before taxation (13.1) (8.5) Net finance costs Tax on loss on ordinary activities 8 3.6 (0.4) Loss for the financial period (9.5) (8.9) Governance Loss attributable to: Owners of the parent (8.6) (8.9) Non-controlling interests (0.9) – (9.5) (8.9)

The results above all relate to continuing operations.

Financial Statements. For the period ended 26 June 2016 the Company generated a £5.6m loss (2015: loss of £2.4m). Financial statements Financial As permitted by Section 408 of the Companies Act 2006, a profit and loss account for Azzurri Group Limited has not been presented in these

Azzurri Group Limited Annual Report and Accounts 2016 29 Financial statements Consolidated statement of comprehensive income for the 52 weeks ended 26 June 2016 Overview Overview

52 weeks ended 3 July 2014 26 June 2016 to 28 June 2015 Note £m £m Loss for the financial period (9.5) (8.9)

Foreign exchange translation reserve 20 (0.1) 0.1 Other comprehensive (expense)/income: Total comprehensive expense for the period (9.6) (8.8) Business review Business review Total comprehensive expense attributable to: Owners of the parent (8.7) (8.8) Non-controlling interests (0.9) – (9.6) (8.8) Governance Governance Financial statements Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 30 Financial statements Consolidated balance sheet as at 26 June 2016 Overview

26 June 2016 28 June 2015 Note £m £m Fixed assets Intangible assets 9 185.2 177.4 Tangible assets 10 140.1 130.3 325.3 307.7 Current assets Inventories 11 7.3 6.9 Business review Debtors 12 10.8 10.0 Cash at bank and in hand 13 5.4 4.8 23.5 21.7 Creditors: amounts falling due within one year 14 (42.6) (40.3) Net current liabilities (19.1) (18.6) Total assets less current liabilities 306.2 289.1 Creditors: amounts falling due after more than one year 15 (294.4) (264.2) 18 (29.2) (32.7) Net liabilities (17.4) (7.8) Provisions for liabilities Capital and reserves Governance Called up share capital 20 – – Share premium account 20 1.0 1.0 Translation reserve 20 (0.1) – Accumulated losses 20 (17.4) (8.8) Total equity attributable to owners of the parent (16.5) (7.8) Non-controlling interests (0.9) – Total equity (17.4) (7.8)

statements Financial The notes on pages 35 to 66 form an integral part of these statements.

The financial statements on pages 28 to 66 were approved by the Board of Directors on 21 October 2016 and signed on its behalf by

Director Director Stephen Holmes James Pickworth Company registration number: 09115901

Azzurri Group Limited Annual Report and Accounts 2016 31 Financial statements Company balance sheet as at 26 June 2016 Overview Overview

26 June 2016 28 June 2015 Note £m £m Fixed assets Investments 19 46.0 46.0 46.0 46.0 Current assets Debtors 12 0.2 0.1

Business review Net current assets 0.2 0.1 Business review Total assets less current liabilities 46.2 46.1 Creditors: amounts falling due after more than one year 15 (53.2) (47.5) Net liabilities (7.0) (1.4) Capital and reserves Called up share capital 20 – – Share premium account 20 1.0 1.0 Accumulated losses 20 (8.0) (2.4) Total equity (7.0) (1.4)

Governance The notes on pages 35 to 66 form an integral part of these statements. Governance

The financial statements on pages 28 to 66 were approved by the Board of Directors on 21 October 2016 and signed on its behalf by

Director Director Stephen Holmes James Pickworth Company registration number: 09115901 Financial statements Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 32 Financial statements Consolidated statement of changes in equity for the 52 weeks ended 26 June 2016 Overview

Share Non- Called up premium Translation Accumulated controlling Total share capital account reserve losses Total interest equity £m £m £m £m £m £m £m Balance as at 3 July 2014 – – – – – – – – – – (8.9) (8.9) – (8.9) Other comprehensive income for the year – – – 0.1 0.1 – 0.1 Loss for the financial year Issue of ordinary share capital (note 20) – 1.0 – – 1.0 – 1.0 Balance as at 28 June 2015 – 1.0 – (8.8) (7.8) – (7.8) Business review – – – (8.6) (8.6) (0.9) (9.5) Other comprehensive loss for the year – – (0.1) – (0.1) – (0.1) Loss for the financial year Balance as at 26 June 2016 – 1.0 (0.1) (17.4) (16.5) (0.9) (17.4) Governance Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 33 Financial statements Company statement of changes in equity for the 52 weeks ended 26 June 2016 Overview Overview

Share Called up premium Accumulated share capital account losses Total £m £m £m £m Balance as at 3 July 2014 – – – – – – (2.4) (2.4) Issue of ordinary share capital (note 20) – 1.0 – 1.0 Loss for the financial year Balance as at 28 June 2015 – 1.0 (2.4) (1.4) Business review – – (5.6) (5.6) Business review Balance as at 26 June 2016 – 1.0 (8.0) (7.0) Loss for the financial year Governance Governance Financial statements Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 34 Financial statements Consolidated cash flow statement for the 52 weeks ended 26 June 2016 Overview

26 June 2016 28 June 2015 Note £m £m Net cash inflow from operating activities 21 32.1 3.8 Interest paid (7.6) (0.8) Taxation paid (0.3) (1.0) Net cash generated from operating activities 24.2 2.1

Cash flow from investing activities Business review 10 (20.8) (10.1) 25 (7.7) (249.0) Purchase of tangible fixed assets Net cash used in investing activities (28.5) (259.1) Purchase of subsidiary net of cash

Net cash outflow before financing activities (4.3) (257.0)

Cash flow from financing activities 16 (1.2) 113.8

Issue of shareholder loan notes 16 0.1 100.0 Governance (Repayment)/issue of bank debt Issue of ordinary share capital 16 – 1.0 Issue of preference shares 16 – 45.0 Drawdown of capex facility 16 8.0 – 16 (2.0) 2.0 Net cash inflow from financing activities 4.9 261.8 (Repayment)/drawdown of revolver facility Net increase in cash and cash equivalents 21 0.6 4.8

statements Financial Cash and cash equivalents at the beginning of the year 4.8 – Cash and cash equivalents at the end of the year 13 5.4 4.8

Azzurri Group Limited Annual Report and Accounts 2016 35 Notes to the financial statements for the 52 weeks ended 26 June 2016 Overview Overview 1 General information The areas involving a higher degree of judgement or complexity, or areas where assumptions in the related notes: The principal activity of Azzurri Group Limited (“Azzurri” and the “Company”) and its and estimates are significant to the financial statements are listed below and in more detail subsidiaries (together, the “Group”) is operating restaurants. of Azzurri Central Limited (including the ASK Italian, Zizzi and Coco di Mama businesses), Thetogether consolidated with the financialGroup holding information companies presented described is in inrespect note 29 of forthe the underlying 52 weeks business ended • the carrying amount of goodwill and intangible assets (note 9); 26 June 2016. The results of CDM Trading Limited have been included from the date of acquisition of 8 July 2015. • the carrying amount of inventories (note 11); • theprovisions carrying for amount liabilities of debtors (note 18). (note 12); and

Business review The company is a private company limited by shares and is incorporated in the Business review Going• concern 25 Chapel Street, London NW1 5DH. United Kingdom. The address of its registered office is Third Floor, Capital House, date which indicate the Group will be able to meet all its liabilities when they fall due for the The directors have reviewed cash flow forecasts for a three year period from the year end 2 Accounting policies compliance and liquidity is also monitored and management have considered the mitigating Statement of compliance foreseeable future, despite having net liabilities as at 26 June 2016. Projected covenant foreseeable future. The Group also has additional facilities available and the maturity dates actionsfor all of available the Group’s to ensure banking that arrangements sufficient headroom are to 2020 on eachand later. covenant Having is maintained made an assessment for the The Group and individual financial statements of Azzurri Group Limited have been prepared of both liquidity and covenant compliance, the directors have continued to adopt the going in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, “The Financial Reporting Standard applicable in the United Kingdom and the RepublicBasis of ofpreparation Ireland” (“FRS 102”) and the Companies Act 2006. concernExemption basis for in preparingqualifying the entities financial under statements. FRS 102 Governance Governance The financial information has been prepared on a going concern basis, under the historical cost FRSexemptions 102 allows by the a qualifying Company’s entity shareholders. certain disclosure exemptions, subject to certain conditions, convention, as modified by the recognition of certain financial assets and liabilities measured which have been complied with, including notification of, and no objection to, the use of atin fairnote value. 30. The most significant accounting policies, which have been applied consistently The Company has taken advantage of the following exemptions: throughout the period, are described below. Details of the transition to FRS 102 are disclosed The Company has taken advantage of the exemption in section 408 of the Companies Act from

(i) from preparing a statement of cash flows, on the basis that it is a qualifying entity and the disclosingAccounting its individualjudgements profit and and estimates loss account. consolidated statement of cash flows, included in these financial statements, includes the Company’s cash flows; It also requires management to exercise its judgement in the process of applying the Group and 11.48A and paragraphs 12.26 to 12.29, as the information is provided in the consolidated

Financial statements Financial TheCompany preparation accounting of financial policies. statements requires the use of certain critical accounting estimates. (ii) from the financial instrument disclosures, required under FRS 102 paragraphs 11.39 to statements Financial

(iii) financialfrom disclosing statement the Companydisclosures; key management personnel compensation, as required by

(iv) FRSa reconciliation 102 paragraph of the 33.7; number and of shares outstanding at the beginning and end of the period,

as required by FRS 102 p4.12(a)(iv).

Azzurri Group Limited Annual Report and Accounts 2016 36 Notes to the financial statements Overview 2 Accounting policies continued Allocation of costs Consolidation Cost of sales includes all direct costs incurred in restaurants. Administrative expenses include of all subsidiaries. Subsidiaries acquired during the period are recorded using the acquisition and intangible asset amortisation. Themethod consolidated of accounting balance and sheet their includesresults are all includedresults, cash from flows the date and of the acquisition. assets and The liabilities cost of central and area management, administration and head office costs, together with goodwill an acquisition is measured as the fair value of the assets given, equity instruments issued Rental income and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the relevant lease. It is netted off against rental costs and is recognised within administrative in a business combination are measured initially at their fair values at the acquisition date, Rentalexpenses. income from operating leases is recognised on a straight line basis over the term of theirrespective acquisition. of the Identifiable extent of assetsany minority acquired interest. and liabilities The excess and ofcontingent the cost of liabilities acquisition assumed over

Pension costs Business review

All transactions and balances between the Group’s businesses have been eliminated in the and loss account in the year in which they become payable. the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. Contributions to defined contribution personal pension schemes are charged to the profit Pre-opening costs ends and follow uniform accounting policies. preparation of the consolidated financial information. All subsidiaries have co-terminous year The group recognises any non-controlling interest on an acquisition-by-acquisition basis, either Exceptional costs at fair value or at the non-controlling interest’s proportionate share of the recognised amounts Pre-opening costs, which comprise site operating costs, are expensed as incurred.

Theand expectedGroup presents infrequency a total ofnet the figure, events on giving the face rise of to the them, profit merit and separateloss account, presentation for exceptional to allow of the acquiree’s identifiable net assets. The non-controlling interest’s proportionate share in items. Exceptional items are material items of profit or loss that, because of the unusual nature totalForeign comprehensive currency income for the financial year is recognised in equity. anDeferred understanding taxation of the Group’s financial performance. with the exception of Notes 6, 16 and 20. The Company’s functional and presentation currency Deferred taxation is recognised in respect of all timing differences that have originated but not Governance Theis the Group’s pound financialsterling. statements are presented in pound sterling and rounded to millions, reversed at the balance sheet date which are due to transactions or events which have occurred Transactions denominated in foreign currencies are recorded at the spot rate applicable at the at that date and which will result in an obligation to pay more, or a right to pay less, tax in the date of the transaction. Monetary assets and liabilities expressed in foreign currencies held at future. the balance sheet date are translated at the closing rate. The resulting exchange gain or loss

The trading results of Group undertakings are translated into sterling at the average exchange Resultantfrom the underlying deferred tax timing assets differences are recognised can be only recovered to the extent against. that it is considered more likely is dealt with in the profit and loss account. than not that there will be suitable taxable profits from which the deferred tax assets resulting Deferred tax is measured on an undiscounted basis at the average tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted rates for the year. Exchange adjustments arising from the translation of the profits or losses or substantively enacted at the balance sheet date. atTurnover average rates are recognised in ‘other comprehensive income’. statements Financial Turnover represents net invoiced sales of food and beverages, and excludes value added tax. Turnover of restaurant services is recognised when the goods have been provided.

Azzurri Group Limited Annual Report and Accounts 2016 37 Notes to the financial statements Overview Overview 2 Accounting policies continued Tangible fixed assets Business combinations and goodwill The cost of a business combination is the fair value of the consideration given, liabilities incurred includes the purchase price of the asset, together with incidental expenses incurred. Depreciation or assumed and of equity instruments issued plus the costs directly attributable to the business Tangibleis provided fixed at the assets following are stated annual at historic rates in purchase order to write cost less down accumulated to estimated depreciation. residual values Cost combination. the cost of each asset over its estimated useful economic life on a straight-line basis:

contingent liabilities unless the fair value cannot be measured reliably, in which case the value Fixtures 10% per annum Onis incorporated acquisition of in a goodwill. business, fair values are attributed to the identifiable assets, liabilities and PlantIT equipment 20%20-33% per per annum annum

Business review Goodwill represents the difference between the fair value of the purchase consideration Short leasehold properties are depreciated over the length of the lease except where the Business review and the fair value of the separable net assets acquired. Goodwill on the acquisition of a business is capitalised and amortised over its useful economic life. The useful economic life applied useful life is appropriate. The maximum depreciation period for short-term leasehold properties anticipatedis 30 years. renewal or extension of the lease is sufficiently certain so that a longer estimated acquisition. by the Group is 20 years for the Azzurri Restaurant group and 10 years for the Coco di Mama construction, including costs directly attributable to bringing the asset into use. Assets are Assets under construction comprise tangible fixed assets acquired for restaurants under On acquisition, goodwill is allocated to cash-generating units (‘CGUs’) that are expected to is provided on assets under construction as these assets have not been brought into working Goodwill is assessed for impairment when there are indicators of impairment and any benefit from the combination. transferredcondition for to intended short leaseholds, use. plant and fixtures when the restaurant opens. No depreciation when the reasons for the impairment no longer apply. impairment is charged to the income statement. Reversals of impairment are recognised Intangible assets are exchanged. Sales of properties are recognised in the financial statements when unconditional contracts

Governance Intangible assets are stated at cost less accumulated amortisation and accumulated impairment Governance losses. Amortisation is calculated, using the straight-line method, to allocate the depreciable expected. On disposal, the difference between the net disposal proceeds and the carrying amount amount of the assets to the residual values of their estimated useful lives, as follows: Tangibleis recognised fixed in assets Loss onare disposal derecognised of tangible on disposal assets inor thewhen income no future statement. economic benefits are Coco di Mama brand 10% per annum date and in periods where events or changes in circumstances indicate that the carrying value The carrying values of tangible fixed assets are reviewed for impairment at each balance sheet impairment are recognised when the reasons for the impairment no longer apply. Amortisationno amortisation is charged is charged. to Administrative expenses in the profit and loss account. The Zizzi may not be recoverable. Any impairment is charged to the income statement. Reversals of and ASK Italian brands are considered by the directors to have an indefinite useful life and Intangible assets are assessed for impairment when there are indicators of impairment and Inventories

Financial statements Financial when the reasons for the impairment no longer apply. statements Financial Rawdetermined materials by andreference consumables to the standard are valued quantity at the lowerin issue of tocost each and restaurant. net realisable value. Cost any impairment is charged to the income statement. Reversals of impairment are recognised is based on the purchase cost on a first-in, first-out basis. Cost for smallware inventories is

Azzurri Group Limited Annual Report and Accounts 2016 38 Notes to the financial statements Overview 2 Accounting policies continued Financial instruments Cash and liquid resources into known amounts of cash without curtailing or disrupting the business. Liquid resources The(i) Financial Group has assets chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments. Liquidcomprise resources term deposits are defined of less as than current one assetyear (other investments, than cash). given that they are readily convertible Basicwhere financial the transaction assets, includingis measured trade at theand present other debtors value of and the cash future and receipts bank balances discounted are initiallyat recogniseda market rate at oftransaction interest. price, unless the arrangement constitutes a financing transaction, RestrictedRebates receivable cash comprises from amounts suppliers held as letters of credit for potential insurance liabilities. Where a rebate agreement with a supplier covers more than one year the rebates are recognised Such assets are subsequently carried at amortised cost using the effective interest method. Business review inDebt the financialfinance statements in the period in which they are earned. for evidence of impairment. If an asset is impaired the impairment loss is the difference between All borrowings are initially stated at the fair value of consideration received after deduction of At the end of each reporting period, financial assets measured at amortised cost are assessed account over the term of the borrowing, or over a shorter period where it is more likely than not the carrying amount and the present value of the estimated cash flows discounted at the asset’s issuethat the costs. lender The will issue require costs andearlier interest repayment payable or onwhere borrowings the borrower are charged intends to or the is profitrequired and to loss originalIf there is effective a decrease interest in the rate. impairment The impairment loss arising loss from is recognised an event occurringin profit or after loss. the impairment redeem early. or loss. Onerous lease provisions was recognised, the impairment is reversed. The impairment reversal is recognised in profit Onerous lease provisions are recognised when the Group has a vacant property, a sublet property Derivatives, including interest rate swaps and foreign exchange contracts, are recognised at fair for which the Group’s lease obligation cannot be met in full. An estimate is made of the period value on the date the derivative contract is entered into and are subsequently re-measured at accordingly. and loss account. their fair value. Changes in the fair value of the derivative contracts are recognised in the profit of time and the extent to which the lease obligations cannot be fulfilled and a provision made Governance Share capital expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset Financialare transferred assets to are another derecognised party. when (a) the contractual rights to the cash flows from the asset Ordinaryas an interest shares expense. are classified as equity. Mandatorily redeemable preference share capital are (ii) Financial liabilities classified as liabilities, the dividends on these shares are recognised in the income statement Operating leases that are classed as debt, are initially recognised at transaction price, unless the arrangement basis over the term of the lease. Basic financial liabilities, including trade and other payables, bank loans and preference shares Rentals paid under operating leases are charged to the profit and loss account on a straight line of future receipts discounted at a market rate of interest. constitutes a financing transaction, where the debt instrument is measured at the present value Debt instruments are subsequently carried at amortised cost, using the effective interest

over the lease term. The Group has taken advantage of the exemption in respect of lease statements Financial The benefit of lease incentives are taken to the profit and loss account on a straight line basis rate method. incentives on leases in existence on the date of transition to FRS 102 (1 July 2014). The Group continues to credit these lease incentives to the profit and loss account over the period to the first review date.

Azzurri Group Limited Annual Report and Accounts 2016 39 Notes to the financial statements Overview Overview 2 Accounting policies continued Financial instruments continued Fees paid on establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is amortised over the period of the facility to which it relates. Derivatives, including interest rate swaps and foreign exchange contracts, are recognised at fair value on the date the derivative contract is entered

account. into and are subsequently re-measured at their fair value. Changes in the fair value of the derivative contracts are recognised in the profit and loss

Business review Investments Business review Investments are held at cost less accumulated impairment losses.

impairment. Impairment reviews are performed by the directors when there has been an indication of potential impairment. In the Group and Company financial statements, investments in subsidiary undertakings are stated at cost plus incidental expenses less any 3 Group turnover 52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £m £m Analysis of turnover by business sector 226.8 93.9 Governance Governance Quick-service restaurants 6.9 – Restaurants 233.7 93.9

52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £m £m Analysis of turnover by geography United Kingdom 233.4 93.9

Financial statements Financial 0.3 – statements Financial 233.7 93.9 Republic of Ireland

Azzurri Group Limited Annual Report and Accounts 2016 40 Notes to the financial statements Overview 4 Group operating profit

Group operating profit is stated after charging/(crediting): 52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £m £m Shown within cost of sales: Employee costs (note 6) 72.9 29.4

Business review 5.9 2.5 Depreciation of tangible fixed assets (note 10): – Short leasehold properties 4.7 2.0 – Plant, fixtures and IT equipment Operating lease rentals: – Short leasehold properties 27.5 10.1 (1.9) –

Rental income

52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £m £m Governance Shown within administrative expenses: Employee costs (note 6) 10.9 3.7 Amortisation of intangible assets (note 9) 4.7 1.5

0.4 0.2 Depreciation of tangible fixed assets (note 10): – Short leasehold properties 0.2 0.0 – Plant, fixtures and IT equipment Operating lease rentals: Financial statements Financial – Short leasehold properties 0.5 0.9 (0.1) (0.8) Auditors’ remuneration: Rental income – Statutory audit fees and expenses 0.1 0.1 – Advisory services – 0.2

Azzurri Group Limited Annual Report and Accounts 2016 41 Notes to the financial statements Overview Overview 5 Exceptional costs Group 52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £m £m Exceptional costs – Brand development costs 0.8 – 0.3 – Business review – Transaction costs – 3.1 Business review – Restructuring costs – Separation costs – 1.0 – Estate review – 0.6 Total operating exceptional costs 1.1 4.7

Brand development costs largely relate to costs associated with expanding into new territories. The prior year costs relate to the separation from the Gondola group and transaction costs following the Azzurri acquisition.

6 Employees and directors Group

Governance 52 weeks ended 3 July 2014 to Governance 26 June 2016 28 June 2015 £m £m a) Employee costs: Wages and salaries 78.0 30.8 Social security costs 5.1 2.0 Other pension costs 0.7 0.3 83.8 33.1

Financial statements Financial Disclosed within: statements Financial Cost of sales 72.9 29.4 Administrative expenses 10.9 3.7 83.8 33.1

Azzurri Group Limited Annual Report and Accounts 2016 42 Notes to the financial statements Overview 6 Employees and directors continued 52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 b) Employee numbers (including directors) The monthly average number of persons employed by the Group during the period was: 5,730 5,457 Administration 120 102 Restaurants and distribution

5,850 5,559 Business review

Total directors’ remuneration was as follows:

52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £000 £000 Aggregate emoluments 1,258.6 824.7

Included within the emoluments above are pension contributions of £43,700 (2015: £22,700) paid into the individual personal pension plans of three directors. Emoluments in respect of the highest paid director were as follows: Governance

52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £000 £000 Aggregate emoluments 420.1 295.5 16.3 9.5 436.4 305.0 Pension contributions Jason McGibbon and Michael Black, who represent the Bridgepoint Group, received no remuneration from the Group in respect of their services Financial statements Financial services (see note 24). This amount was not included in the aggregate emoluments disclosed above. as directors or in respect of any services to the Group. During the period, £0.2m (2015: £0.1m) was accrued to Bridgepoint Partners LLP for their No director waived any emoluments in the period (2015: nil).

TheCompany Group does not operate a defined benefit pension scheme. The Company has no employees (2015: nil).

Azzurri Group Limited Annual Report and Accounts 2016 43 Notes to the financial statements Overview Overview 7 Net finance costs Group 52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 Note £m £m Finance income Gain on revaluation of fair value derivatives – 0.1 Foreign exchange gain 0.1 –

Business review 0.1 0.1 Business review Finance costs Bank loans – Senior facilities 15 (7.2) (2.6) Amortisation of debt issue costs 15 (0.9) (0.4) Interest payable on shareholder loan notes 15 (13.0) (5.2) 15 (5.7) (2.4) Loss on revaluation of fair value derivatives (1.4) – Preference share dividends (28.2) (10.6) Net finance costs (28.1) (10.5) Governance Governance Interest on shareholder loans and dividends accrued on preference shares roll up into the principal balance annually and do not fall due until the maturity or repayment of the respective loan or preference share capital. Financial statements Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 44 Notes to the financial statements Overview 8 Tax on loss on ordinary activities Group 52 weeks ended 3 July 2014 to 26 June 2016 28 June 2015 £m £m Current tax United Kingdom corporation taxation 0.1 – Adjustments in respect of prior periods (0.4) –

Total current tax charge (0.3) – Business review

Deferred tax Origination and reversal of timing differences (0.4) 0.4 Effect of change in rate of taxation (2.9) – Total deferred tax charge (note 18) (3.3) 0.4 Tax charge on ordinary activities (3.6) 0.4

The tax charge for the period is higher (2015: higher) than the standard rate of corporation tax in the UK of 20.0% (2015: 20.75%). The differences are explained below: 52 weeks ended 3 July 2014 to Governance 26 June 2016 28 June 2015 £m £m Loss on ordinary activities before taxation (13.1) (8.5) Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.0% (2.6) (1.7) Effects of: Expenses for tax purposes non-deductible – 1.0 (0.4) – (2.9) – Prior year adjustments statements Financial Amortisation of goodwill non-deductible 0.7 0.3 Re-measurement of deferred tax, change in UK tax rate 1.1 0.5 Interest non-deductible 0.5 0.3 Preference share dividends non-deductible Total tax (3.6) 0.4

The Finance (No.2) Act 2015 was substantively enacted on 26 October 2015 and reduced the main rate of corporation tax to 19.0% with effect from 1 April 2017 and 18.0% from 1 April 2020. Closing deferred tax balances have therefore been valued at 18.0%, 19.0% or 20.0% depending on the date they are expected to unwind. A further reduction in the main rate of corporation tax to 17.0% with effect from 1 April 2020 has been announced but was not substantively enacted at the balance sheet date.

Azzurri Group Limited Annual Report and Accounts 2016 45 Notes to the financial statements Overview Overview 9 Intangible assets Group Goodwill Brands Total Note £m £m £m At 28 June 2015 Cost 70.8 108.1 178.9 Accumulated amortisation (1.5) – (1.5) Net book amount 69.3 108.1 177.4 Business review Business review

Year ended 26 June 2016 Opening net book amount 69.3 108.1 177.4 Acquisition 25 9.6 2.9 12.5 Amortisation (4.4) (0.3) (4.7) Closing net book amount 74.5 110.7 185.2

At 26 June 2016 Cost 80.4 111.0 191.4 Governance Governance Accumulated amortisation (5.9) (0.3) (6.2) Net book amount 74.5 110.7 185.2

Goodwill relating to the Azzurri acquisition is being amortised over 20 years. The directors believe that the period is appropriate based on a

to have growth opportunities in the long-term future. Goodwill and brands relating to the Coco di Mama acquisition are amortised over 10 years, reviewwhich the of thedirectors expected believe future is ancash appropriate flows of the period Group, for the the fact business. that ASK Italian and Zizzi are long standing operations and that the Group continues Company

Financial statements Financial The Company has no intangible assets (2015: £nil). statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 46 Notes to the financial statements Overview 10 Tangible assets Group

Assets under Short leasehold construction properties IT equipmentPlant, Total Note £m £m fixtures and£m £m At 28 June 2015 Cost 2.2 147.6 77.1 226.9

Accumulated depreciation – (48.9) (47.6) (96.5) Business review Net book amount 2.2 98.7 29.5 130.4

Year ended 26 June 2016 Opening net book amount 2.2 98.7 29.5 130.4 Acquisition 25 – 0.6 0.5 1.1 Additions 14.8 1.1 4.9 20.8 Transfers (16.0) 11.0 5.0 – Disposals – (0.4) (0.6) (1.0)

Depreciation – (4.9) (6.3) (11.2) Governance Closing net book amount 1.0 106.1 33.0 140.1

At 26 June 2016 Cost 1.0 157.7 85.8 244.5 Accumulated depreciation and impairment – (51.6) (52.8) (104.4) Net book amount 1.0 106.1 33.0 140.1

There was no capital expenditure contracted but not provided as at 26 June 2016 (2015: £nil). statements Financial Company

The Company has no tangible fixed assets (2015: £nil).

Azzurri Group Limited Annual Report and Accounts 2016 47 Notes to the financial statements Overview Overview 11 Inventories Group 26 June 2016 28 June 2015 £m £m Equipment 5.5 5.3 Food and drink 1.8 1.6 7.3 6.9

Business review There is no material difference between the replacement cost and book value of inventory. Business review Inventories are stated after provision for impairment of £38,000 (2015: £38,000). During the year £53.1m (2015: £49.3m) of inventory has been recognised as an expense. Company The Company holds no inventories (2015: £nil).

12 Debtors Group Company 26 June 2016 28 June 2015 26 June 2016 28 June 2015 £m £m £m £m

Governance Trade debtors 1.2 3.8 – – Governance – 0.2 – – – 0.1 – – Restricted cash 9.4 5.9 – – Derivative financial instruments Corporation tax 0.2 – – – Prepayments and accrued income Amounts owed by subsidiary undertakings – – 0.2 0.1 10.8 10.0 0.2 0.1

Financial statements Financial All of the debtors stated above are due within one year. statements Financial Trade debtors are stated after provision for impairment of £13,000 (2015: £220,000). Amounts owed by group undertakings are interest-free and are repayable on demand. The prior year restricted cash relates to a £0.2m letter of credit deposited with Barclays in relation to potential insurance liabilities. The Group no longer holds this letter of credit.

Azzurri Group Limited Annual Report and Accounts 2016 48 Notes to the financial statements Overview 13 Cash at bank and in hand Group 26 June 2016 28 June 2015 £m £m Cash at bank and in hand 5.4 4.8 Total cash at bank and in hand 5.4 4.8

Company The Company holds no cash (2015: £nil). Business review

14 Creditors: amounts falling due within one year Group 26 June 2016 28 June 2015 £m £m Trade creditors 8.3 5.0 Bank loans – Senior facilities (note 16) 5.3 2.3 Accrued bank interest 1.6 2.2 – 2.0 Taxation and social security 7.6 8.6 Governance Revolving facility Accruals and deferred income 12.6 13.5 Other creditors 7.2 6.7 42.6 40.3 Company The Company has no creditors falling due within one year (2015: £nil). Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 49 Notes to the financial statements Overview Overview 15 Creditors: amounts falling due after more than one year Group Company 26 June 2016 28 June 2015 26 June 2016 28 June 2015 £m £m £m £m Amounts falling due between one and five years Bank loans – Senior facilities 18.6 18.8 – – Capex facility 8.0 – – –

Business review 1.3 – – – Business review 27.9 18.8 – – Derivative financial instruments Amounts falling due after more than five years Bank loans – Senior facilities 89.6 92.7 – – Unsecured shareholder loan notes 123.7 105.2 – – 53.2 47.5 53.2 47.5 266.5 245.4 53.2 47.5 Preference shares Total creditors falling due after more than one year 294.4 264.2 53.2 47.5

Governance 16 Loans and borrowings Governance Group Company 26 June 2016 28 June 2015 26 June 2016 28 June 2015 £m £m £m £m Bank loans – Senior facilities 113.6 113.8 – – Capex facility 8.0 – – – – 2.0 – – Unsecured shareholder loan notes 123.7 105.2 – – Revolving facility Financial statements Financial 53.2 47.5 53.2 47.5 statements Financial 298.5 268.5 53.2 47.5 Preference shares

Azzurri Group Limited Annual Report and Accounts 2016 50 Notes to the financial statements Overview 16 Loans and borrowings continued Senior debt

Onperiods 29 November of one, three 2014, or the six Groupmonths entered as agreed into in borrowing advance. arrangements to finance the purchase of Azzurri Central Limited. The loans were syndicated to a range of institutions and carry interest at varying rates above LIBOR (see table below), interest being payable in arrears at time Total issue costs of the senior debt of £6.6m are being amortised over the period to the maturity date. At 26 June 2016, the unamortised cost was £5.4m (2015: £6.2m). Banking terms and maturity dates

The outstanding principal loan amount and the maturity dates of the senior facilities at year end are summarised in the table below: Business review

Weighted average interest rate Maturity amount date Principal loan Senior A facility £28.8m above4.25% LIBOR January 2021 Senior B facility £90.0m 4.75% January 2022

Additional borrowing facilities

The Group has a Capex facility of £15.0m (2015: £15.0m) of which £8.0m (2015: £nil) was drawn during the year to finance the purchase of CDMThere Trading is also aLimited. committed The revolvingfacility accrues facility interest of £10.0m, at LIBOR none ofplus which 4.25% was and drawn has a at final year maturity end (2015: date £2.0m), of January however 2021. £1.0m has been carved out Governance to cover outstanding letters of credit. The utilised portion of each facility incurs interest at LIBOR plus 4.25%, while the unused facility incurs commitmentUnsecured loanfees of notes 1.7%. The facility has a final maturity date of January 2021. Azzurri MidCo 1 Limited, a subsidiary of the Company, has in issue 100,000,000 £1 shareholder loan notes (2015: 100,000,000 £1 shareholder loan notes). The maturity date of the loan notes is January 2023. The loan notes accrue interest at a compound rate of 12% per annum. CDM Holdco Limited, a subsidiary of the Company, has in issue £5.4m (2015: nil) shareholder loan notes. The loan notes comprise strip loan notes of £3.4m which accrue interest at a compound rate of 12% per annum and the vendor loan notes of £2.0m accrue interest at a compound rate of 3% per annum. Loan notes are redeemable through a number of options however if these option are not exercised, the maturity date is January 2023. Financial statements Financial 8 Slices Limited, a subsidiary of the Company, has in issue 100,000 £1 shareholder loan notes (2015: nil). The maturity date of the loan notes is 1 January 2023. The loan notes accrue interest at a compound rate of 12% per annum.

Azzurri Group Limited Annual Report and Accounts 2016 51 Notes to the financial statements Overview Overview 16 Loans and borrowings continued Preference shares Group and Company 26 June 2016 28 June 2015 £ £ Authorised, Allotted, issued and fully paid: 45,175,211 12% Cumulative preference shares of 0.001p each 452 452

Business review The 12% cumulative preference shares, which do not carry any voting rights, were issued in January 2015 at £1 per share, giving rise to a share Business review

these dividends are compounded annually on 1 January and are repayable along with the capital, on 1 January 2023. On winding up, the preference premiumshareholders of £45.1m. rank above Shareholders ordinary areshareholders entitled to and receive are entitled dividends to receiveat 12% per£1 per annum share on and the any par dividends value of these accrued shares but on unpaid a cumulative in respect basis; of their shares.

17 Financial instruments

Group Company The Group and Company have the following financial instruments: 26 June 2016 28 June 2015 26 June 2016 28 June 2015 Note £m £m £m £m Financial assets measured at fair value Governance Governance 12 – 0.1 – – through profit or loss – 0.1 – – Derivative financial instruments Financial assets that are debt instruments measured at amortised cost – – Trade debtors 12 1.2 3.8 – – Other debtors 12 1.0 – – –

Financial statements Financial 12 – 0.2 – – statements Financial Amounts owed by group undertakings 12 – – 0.2 0.1 Restricted cash 2.2 4.0 0.2 0.1 Financial liabilities measured

15 (1.3) – – – at fair value through profit or loss (1.3) – – – Derivative financial instruments

Azzurri Group Limited Annual Report and Accounts 2016 52 Notes to the financial statements Overview 17 Financial instruments continued Group Company 26 June 2016 28 June 2015 26 June 2016 28 June 2015 Note £m £m £m £m Financial assets that are debt instruments measured at amortised cost Bank loans – Senior facilities 15, 16 (113.6) (113.8) – – Capex facility 15, 16 (8.0) – – – Trade creditors 14 (8.3) (5.0) – – Business review Unsecured shareholder loan notes 15, 16 (123.7) (105.2) – – 14, 16 – (2.0) – – Accruals and deferred income 14 (12.6) (13.5) – – Revolving facility Other creditors 14 (7.2) (6.7) – – 15, 16 (53.2) (47.5) (53.2) (47.5) (326.6) (293.7) (53.2) (47.5) Preference shares

With the exception of the derivative financial instruments, there is no material difference between the fair value and amortised cost of any of the Governance financial instruments. Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 53 Notes to the financial statements Overview Overview 17 Financial instruments continued Derivative financial instruments – Interest rate swaps The Group has entered into interest rate swaps to pay interest at 1.19%. The instrument is used to hedge the Group’s exposure to interest rate movements on the loan facility. At period end there were three swaps totalling £100,000,000. Details of the swap contracts are below:

Notional Interest Start Maturity amount rate paid date date £80.0m 1.19% August February 2015 2016

Business review Swaps – GBP Business review £100.0m 1.19% February February 2016 2017 Swaps – GBP £90.0m 1.19% February February 2017 2018 Swaps – GBP The fair value of the interest rate swaps is a liability of £1,318,000 (2015: £142,000 asset). During the 2016 year, a loss of £1,460,000

(2015:Derivative £142,000 financial gain) was instruments recognised in– theForward profit andexchange loss account. contracts During the year the Group entered into forward exchange contracts to mitigate the exchange rate risk associated with purchases made in euro. At balance date there were two contracts in place for the purchase of €0.4m at an average exchange rate of 1.34 (2015: €2.5m at an average exchange rate of 1.38). Governance Governance

The fair value of the forward exchange contracts is an asset of £29,000. A gain of £29,000 was recognised in the profit and loss account. 18 Provisions for liabilities Group Deferred Onerous taxation leases Total £m £m £m At 28 June 2015 28.8 3.9 32.7 Financial statements Financial Utilised in period (0.4) (0.7) (1.1) statements Financial Acquisitions through business combinations 0.5 – 0.5 Change in assumptions (2.9) – (2.9) At 26 June 2016 26.0 3.2 29.2

Azzurri Group Limited Annual Report and Accounts 2016 54 Notes to the financial statements Overview 18 Provisions for liabilities continued Onerous leases The onerous lease provision represents operating leases on vacant property, a sublet property for which the Group’s lease obligation cannot be met in full, until the end of their lease or until the directors estimate the properties can be sublet. Deferred taxation

26 June 2016 28 June 2015 The provision for deferred tax consists of the following deferred tax liabilities/(assets): £m £m

Intangible assets 19.9 21.6 Business review Accelerated capital allowances 6.4 7.2 Accumulated losses (0.3) – Total provision 26.0 28.8

Company The Company had no provisions for liabilities at 26 June 2016 (2015: £nil).

19 Investments Company

£m Governance Investment in subsidiary companies At 28 June 2015 and 26 June 2016 46.0 Total investment in subsidiary companies 46.0

The directors believe the carrying value of the investment is supported by the underlying assets. A list of the subsidiary companies is provided in note 29. Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 55 Notes to the financial statements Overview Overview 20 Share capital and other reserves Group and Company 26 June 2016 28 June 2015 £ £ Allotted, issued and fully paid 825,000 Ordinary A shares of £0.01 each 8,250 8,250 90,355 Ordinary B shares of £0.01 each 904 904

Business review 68,000 Ordinary C shares of £0.04 each 2,720 2,720 Business review 11,874 11,874

Ordinary A and C shares carry voting rights and the right to receive notice of meetings and rights to appoint directors. Ordinary B shares carry none of these rights.

PreferenceShare premium shares areaccount classified as liabilities (see note 15). Group and Company 26 June 2016 28 June 2015 £m £m Opening share premium account 1.0 – Governance Governance – 1.0 Closing share premium account 1.0 1.0 Premium arising on the issue of ordinary share capital

Translation reserve Group 26 June 2016 28 June 2015 £m £m Opening translation reserve –

Financial statements Financial – statements Financial Foreign exchange gain for period (0.1) – Closing translation reserve (0.1) –

Azzurri Group Limited Annual Report and Accounts 2016 56 Notes to the financial statements Overview 20 Share capital and other reserves continued Accumulated losses Group Company 26 June 2016 28 June 2015 26 June 2016 28 June 2015 £m £m £m £m Opening balance (8.9) – (2.4) – (9.5) (8.9) (5.6) (2.4) Closing balance (18.4) (8.9) (8.0) (2.4) Loss for the financial period Business review

Attributable to: Owners of the parent (17.5) (8.8) (8.0) (2.4) Non-controlling interests (0.9) – – – (18.4) (8.8) (8.0) (2.4)

21 Notes to cash flow statement a) Reconciliation of operating loss to operating cash flows 26 June 2016 28 June 2015 £m £m Governance Loss for the financial period (9.5) (8.9) Adjustments for: Tax on loss on ordinary activities (3.6) 0.4 Net interest payable and similar charges 28.1 10.5 15.0 2.0 11.2 4.7 Operating profit Amortisation of intangible assets 4.7 1.5 Depreciation of tangible fixed assets statements Financial Loss on disposal of assets 1.3 – Movement in provisions (0.6) – (0.4) 0.1 (0.3) 0.7 (Increase)/decrease in inventories 1.2 (5.3) (Increase)/decrease in debtors Net cash inflow from operating activities 32.1 3.8 Increase/(decrease) in creditors

Azzurri Group Limited Annual Report and Accounts 2016 57 Notes to the financial statements Overview Overview 21 Notes to cash flow statement continued b) Reconciliation of net cash flow to movement in net debt 26 June 2016 28 June 2015 £m £m Increase in cash (note 13) 0.6 4.8 Bank fees paid – 6.2 Issue of debt (8.1) (267.2) 3.2 – Business review Business review Change in net debt resulting from cash flows (4.3) (256.2) Repayment of debt Other non-cash changes (28.4) (5.5) Net debt at beginning of period (261.7) – Net debt at end of period (294.4) (261.7)

c) Analysis of changes in net debt At At 29 June 2015 movements Acquired movements 26 June 2016 £m Cashflow£m £m Non cashflow£m £m Cash at bank and in hand 4.8 0.5 0.1 – 5.4 Governance Governance (2.0) 2.0 – – – Bank loans – senior facility (current) (2.3) 1.2 – (4.2) (5.3) Revolver loan Bank loans – senior facility (non-current) (111.9) – – 3.6 (108.3) Shareholder loan notes (105.2) (0.1) – (18.4) (123.7) Capex facility – (8.0) – – (8.0) 0.1 – – (1.4) (1.3) (45.2) – – (8.0) (53.2)

Financial statements Financial Derivative financial instruments statements Financial Total net debt (261.7) (4.4) 0.1 (28.4) (294.4) Preference shares Other non-cash changes comprise movement in accrued capitalised interest, preference shares and amortisation of loan issue costs.

Azzurri Group Limited Annual Report and Accounts 2016 58 Notes to the financial statements Overview 22 Operating lease commitments Group The Group has the following future minimum lease payments for each of the following periods:

26 June 2016 28 June 2015 £m £m Land and buildings Not later than one year 29.5 25.1

113.8 99.5 Business review 242.7 221.6 Later than one year and not later than five years 386.0 346.2 Later than five years

Company The Company had no operating lease commitments at 26 June 2016 (2015: £nil).

23 Contingent liabilities

OnThe 29 facilities November were 2014, drawn certain on 21 Company January 2015subsidiaries to fund (thethe acquisition ‘Original Obligors’) of Azzurri became Central guarantors Limited, at to which a Senior point Facilities the acquired Agreement subsidiaries between

Azzurri MidCo 2 Limited and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (trading as Rabobank International) London Branch. Governance becameThe amounts ‘Additional outstanding Obligors’ at theto the balance agreement. sheet dates for these loans were £120.4m including accrued interest (2015: £124.2m). Each Guarantor irrevocably and unconditionally jointly and severally:

• guarantees to each Finance Party punctual performance by each other Obligor of all that Obligor’s obligations under the Finance Documents; • undertakes with each Finance Party that whenever another Obligor does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and Financial statements Financial • agreesnot paying with any each amount Finance which Party would, that if but any for obligation such unenforceability, guaranteed by invalidity it is or becomes or illegality, unenforceable, have been invalid payable or by illegal, it under it will, any asFinance an independent Document andon the primary date when obligation, it would indemnify have been that due. Finance Party immediately on demand against any cost, loss or liability it incurs as a result of an Obligor

Azzurri Group Limited Annual Report and Accounts 2016 59 Notes to the financial statements Overview Overview 24 Related party transactions No separate disclosure has been made of transactions and balances between companies in the Group that have been eliminated in the preparation

ofTransactions these financial with statements. Bridgepoint All other transactions and balances with related parties of the Group have been detailed below. outstanding at Balance sheet date following a cash payment of £0.1m in relation to the prior period. Monitoring fees of £0.2m (2015: £0.1m) due to Bridgepoint Partners LLP were incurred during the financial year and £0.2m (2015: £0.1m) remains Transactions with Bridgepoint portfolio companies

Business review as a result of the review. During the year £0.1m was paid in commission (2015: £nil). Business review The Group engages Pepco Services LLP to complete procurement reviews. The Group has agreed to pay 20% commission on any cost savings made The Group enters into forward exchange contracts with TTT MoneyCorp Limited to fund purchases made in euro. At balance date there were two contracts in place for the purchase of €0.4m at an average exchange rate of 1.34 (2015: €2.5m at an average exchange rate of 1.38). Azzurri MidCo 1 Limited Loan Notes

directors to purchase Azzurri MidCo 1 Limited loan notes at cost. As detailed in note 16, interest accrues at 12% and is capitalised into the Inprincipal addition on to an the annual principal basis. investment made by and on behalf of the Bridgepoint Funds, the “Azzurri Equity Plan” allows eligible employees and

25 Business combinations During the period, Azzurri Central Limited incorporated CDM Group Limited and its subsidiary CDM Holdco Limited to acquire 100% of the share

Governance Azzurri Central Limited has a 63.5% interest in CDM Group Limited. The remaining 36.5% is held outside the Group. Governance capital in CDM Trading Limited (formerly Tenfour Ventures Limited). The acquisition took place on 8 July 2015 for total consideration of £13.2m. The results of the trading company were included within the Group results from the date of acquisition. The revenue from CDM Trading Limited

been £7.1m. included in the consolidated profit and loss account was £6.9m. Had the Group owned the company for the full period revenues would have The goodwill arising on acquisition was £9.6m and the directors have estimated the useful life of goodwill to be 10 years. This is based on

aThe review book of values the expected of the assets future and cash liabilities flows and have the been fact taken that Coco from di the Mama management will continue accounts to have of CDMgrowth Trading opportunities Limited on in 8the July long 2015 term (the future. date of acquisition). The following table summarises the consideration paid by the Group, the fair value of assets acquired and liabilities assumed.

Financial statements Financial Consideration at 8 July 2015 statements Financial £m 12.7 Directly attributable costs 0.5 Proceeds Total consideration 13.2

Azzurri Group Limited Annual Report and Accounts 2016 60 Notes to the financial statements Overview 25 Business combinations continued

£m For cash flow disclosure purposes the acquisition amounts are disclosed as follows: Cash consideration 7.3 Directly attributable costs 0.5 Total cash paid 7.8 Less:

Cash and cash equivalents acquired (0.1) Business review 7.7

Net cash outflow

Book Fair Recognised amounts of identifiable assets acquired and liabilities assumed value Adjustments value £m £m £m 1.1 – 1.1 Debtors 0.6 – 0.6 Tangible fixed assets Cash 0.1 – 0.1

Creditors (0.6) – (0.6) Governance Deferred tax liabilities – (0.5) (0.5) Intangible assets – brands – 2.9 2.9 Net assets acquired 1.2 2.4 3.6

Goodwill 9.6 Consideration 13.2

statements Financial Cash 7.8 Consideration satisfied by: Shareholder loan notes 5.4 Total 13.2

Azzurri Group Limited Annual Report and Accounts 2016 61 Notes to the financial statements Overview Overview 26 Non-controlling interests Group The movement in non-controlling interests was as follows: 26 June 2016 28 June 2015 £m £m At 28 June 2015 – – Total comprehensive income attributable to non-controlling interest 0.9 – At 26 June 2016 0.9 – Business review Business review

27 Post balance sheet events There were no material events within the Group that occurred after the period end date.

28 Ultimate parent undertakings

Bridgepoint’s shares in Azzurri Group Limited are held in the name of a nominee company, BEV Nominees Limited, which holds the shares as nominee for the 12 limited partnerships that comprise the Bridgepoint Europe V Fund being Bridgepoint Europe V ‘A1’ LP, Bridgepoint Europe V ‘A2’ LP, Bridgepoint Europe V ‘A4’ LP, Bridgepoint Europe V ‘B1’ LP, Bridgepoint Europe V ‘B2’ LP, Bridgepoint Europe V ‘B3’ LP, Bridgepoint Europe V ‘B4’ LP, Bridgepoint Europe V, ‘B5’ LP, Bridgepoint Europe V ‘C’ LP, Bridgepoint Europe V ‘D’ LP, Bridgepoint Europe V ‘E’ LP and Wigmore Street Governance Co-Investments No.1 LP (the “Partnerships”). The Partnerships each act by their FCA authorised fund manager, Bridgepoint Advisers Limited. Governance at 28 June 2015, the directors consider the Company’s ultimate controlling party to be Bridgepoint Advisers Group Limited. BEV Nominees Limited’s and Bridgepoint Advisers Limited’s ultimate parent company is Bridgepoint Advisers Group Limited. Accordingly, Financial statements Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 62 Notes to the financial statements Overview 29 Principal subsidiary undertakings The subsidiary undertakings of the Group for the period ended 26 June 2016 were as follows:

voting shares held Country of Proportionand of interest ordinary in incorporation allotted capital

Azzurri MidCo 1 Limited (formerly ZASKI MidCo 1 Limited) HoldingPrincipal Company activity UK 100% Azzurri MidCo 2 Limited (formerly ZASKI MidCo 2 Limited) Holding Company UK 100% Azzurri Trading Limited (formerly ZASKI BidCo Limited) Management Services UK 100% Business review Azzurri Central Limited (formerly Gondola Central Limited) Holding Company UK 100% UK 100% Dormant Company UK 100% Azzurri Restaurants Limited (formerly Gondola Restaurants Limited) Restaurant operations Azzurri MOF Limited (formerly Mean Ole Frisco Limited) Dormant Company UK 100% Azzurri ITS Limited (formerly ITS Restaurants Limited) Azzurri ASK 25 Limited (formerly ASK 25 Limited) Dormant Company UK 100% 100% 8 Slices Limited UK 70% Azzurri Restaurants Ireland Limited Restaurant operations ROI CDM Group Limited Management Services UK 63.5%

Restaurant operations Governance CDM Holdco Limited Holding Company UK 63.5% UK 63.5%

TheCDM registered Trading addressesLimited (formerly for all UK companiesTenfour Ventures are 3rd Floor Limited) Capital House, 25 ChapelRestaurant Street, operationsLondon, NW1 5DH.

Azzurri Restaurants Ireland Limited’s registered address is 25-28 North Wall Quay, Dublin 1. Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 63 Notes to the financial statements Overview Overview 30 Transition to FRS 102

This is the first year the Group has presented its results under FRS 102. The last financial statements under UK GAAP were for the period 3 July 2014 to 28 June 2015. The date of transition to FRS 102 was 1 July 2014. Set out below are the changes in accounting policies which reconcile profit for the period ended 28 June 2015 and total equity as at 3 July 2014 and 28 June 2015 between UK GAAP as previously reported and FRS 102. no reconciliation has been provided. Upon transition to FRS 102, there is no effect on the Company balance sheet, profit and loss account or statement of changes in equity, therefore a) Balance sheet

Business review Effect of Business review Year ended 28 June 2015 As previously Other stated transition adjustments (as restated) Note £m FRS 102£m £m FRS 102£m Fixed assets Intangible assets A 153.9 23.5 – 177.4 Tangible assets C 130.5 (0.2) – 130.3 284.4 23.3 – 307.7 Current assets Inventories 6.9 – – 6.9

Governance Debtors B, C 9.7 0.3 – 10.0 Governance Cash at bank and in hand 4.8 – – 4.8 21.4 0.3 – 21.7 Creditors: amounts falling due within one year C (40.0) – (0.3) (40.3) Net current liabilities (18.6) 0.3 (0.3) (18.6) Total assets less current liabilities 265.8 23.6 (0.3) 289.1 Creditors: amounts falling due after more than one year (264.2) – – (264.2)

Financial statements Financial D (11.1) (21.6) – (32.7) statements Financial Net liabilities (9.5) 2.0 (0.3) (7.8) Provisions for liabilities Capital and reserves Called up share capital – – – – Share premium account 1.0 – – 1.0 Accumulated losses (10.5) 2.0 (0.3) (8.8) Total equity (9.5) 2.0 (0.3) (7.8)

Azzurri Group Limited Annual Report and Accounts 2016 64 Notes to the financial statements Overview 30 Transition to FRS 102 continued b) Profit and loss account

Effect of Year ended 28 June 2015 As previously Other stated transition adjustments (as restated) Note £m FRS 102£m £m FRS 102£m Group turnover 93.9 – – 93.9 Cost of sales C (77.9) – (0.1) (78.0) Business review Gross profit 16.0 – (0.1) 15.9 Administrative expenses A (10.6) 1.9 (0.2) (8.9) Exceptional costs (4.7) – – (4.7) Total administrative expenses (15.3) 1.9 (0.2) (13.6) Group operating profit 0.7 1.9 (0.3) 2.3 Loss on disposal of tangible assets (0.3) – – (0.3) Profit on ordinary activities before interest and taxation 0.4 1.9 (0.3) 2.0 B (10.6) 0.1 – (10.5) Governance Loss on ordinary activities before taxation (10.2) 2.0 (0.3) (8.5) Net finance costs Tax on loss on ordinary activities D (0.4) – – (0.4) Loss for the financial period (10.6) 2.0 (0.3) (8.9)

Other comprehensive income: Foreign exchange translation reserve 0.1 – – 0.1 Total comprehensive expense for the period (10.5) 2.0 (0.3) (8.8)

statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 65 Notes to the financial statements Overview Overview 30 Transition to FRS 102 continued c) Statement of changes in equity As previously Effect Other stated of transition adjustments (as restated) Note £m £m £m FRS 102£m Balance as at 3 July 2014 – – – – Loss for the year A, B, C, D (10.6) 2.0 (0.3) (8.9) Other comprehensive income 0.1 – – 0.1

Business review Issue of share capital 1.0 – – 1.0 Business review Balance as at 28 June 2015 (9.5) 2.0 (0.3) (7.8)

A Restatement of prior acquisitions At 28 June 2015, additional brand names and trademarks with a net book value of £108.1m has been recognised. This together with related deferred tax liabilities of £21.6m resulted in a reduction in the net book value of goodwill by £86.5m to £70.8m. There was a reduction in the amortisation expense for the year of £1.9m. The overall impact was an increase to net assets at 28 June 2015 of £1.9m. B Derivative financial instruments

FRS 102 requires derivative financial instruments to be recognised at fair value. Previously under UK GAAP the Group did not recognise these instruments in the financial statements. Accordingly, the Group has recognised the interest rate swaps it holds and an asset of £142,000 has been Governance recognised.C Rent free The period corresponding for operating entry isleases a gain and to finance other costs adjustments of £142,000 for the period ended 28 June 2015. Governance

UnderGroup previoushas taken UK advantage GAAP operating of the exemption lease incentives, for existing including leases rent at the free transition periods anddate lease to continue premiums, to recognise were spread these over lease the incentives shorter of on the the lease same period or the period to when the rental was set to a fair market rent. FRS 102 requires that such incentives be spread over the lease period. The The rent free period adjustment has resulted in an increase of £24,000 in the operating lease charge in the period ended 26 June 2016, with basisa corresponding as previous increase UK GAAP. in Accordingly the accrued thelease FRS liability. 102 accounting The lease policypremium has adjustmentbeen applied has to resultednew operating in an increase leases entered of £2,000 into in since the operating 1 July 2014. lease charge for the period ended 26 June 2016. The corresponding entry was a decrease to tangible assets of £150,000 and increase to debtors of £148,000.

Financial statements Financial adjustment of £235,000 being recognised into the prior period reserves. statements Financial The other adjustment relates to the requirement to record a holiday pay accrual for head office staff. This resulted in an opening balance

Azzurri Group Limited Annual Report and Accounts 2016 66 Notes to the financial statements Overview 30 Transition to FRS 102 continued D Deferred taxation The impact on deferred tax as a result of the adjustments above was to increase the deferred tax liability at 28 June 2015 by £21.6m and decrease theE Statement profit and lossof cash account flows charge by £28,000.

The Group’s cash flow statement reflects the presentation requirements of FRS 102, which is different to that prepared under FRS 1. In addition the cash flow statement reconciles to cash and cash equivalents whereas under previous UK GAAP the cash flow statement reconciled to cash. Cash andhand cash and equivalents deposits repayable are defined on demand in FRS 102 with as any ‘cash qualifying on hand institution,and demand less deposits overdrafts and short-term from any qualifying highly liquid institution investments repayable that are on readilydemand’. Business review convertible to known amounts of cash and that are subject to an insignificant risk of change in value’ whereas cash is defined in FRS 1 as ‘cash in

The FRS 1 definition is more restrictive. Governance Financial statements Financial

Azzurri Group Limited Annual Report and Accounts 2016 67 Corporate directory Overview Overview Directors

Stephen Holmes JamesJason McGibbon Pickworth

Harvey Smyth KieranMichael Pitcher Black Company secretary Business review Business review JamesRegistered Pickworth office Third Floor Capital House 25 Chapel Street London NW1 5DH Company number 09115901 Independent auditors

Chartered Accountants and Statutory Auditors PricewaterhouseCoopers LLP

Governance 25 High Street Governance TheCrawley Portland Building

West Sussex RH10 1BG Financial statements Financial statements Financial

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