Another record set of results Annual Report 2014 Introduction The Group plc operates over 470 and Overview restaurants. Its principal trading Financial highlights 01 History 02 brands are Frankie & Benny’s, and Coast to Coast. The Strategic report Chairman’s statement 16 Group also operates Pub restaurants Review of Operations 18 Financial review 22 and a Concessions business which trades principally at UK airports. Governance Board of Directors 26 Report of the Directors 28 Corporate responsibility 36 Directors’ remuneration report 39 Audit Committee report 53

Financial statements Independent auditor’s report 55 Accounting policies for the consolidated accounts 59 Consolidated income statement 63 Consolidated statement of changes in equity 64 Consolidated balance sheet 65 Consolidated cash flow statement 66 Notes to the accounts 67 Company financial statements 86 – Company balance sheet 86 – Accounting policies and basis of preparation 87 Group financial record 89 Shareholder information 90 Overview Strategic report Governance Financial statements 78.1 15.40 117.0 14 14 14 72.7 14.00 107.8 13 13 13 Annual Report01 2014

64.6 95.5 11.80 12 12 12 60.3 0% 89.7 .4% 10.50 11 11 11 9.00 54.0 83.4 10 10 10 Dividend per share (p) Dividend per share +1 Adjusted EBITDA (£m) +8.5% tax (£m) before Profit +7 plc Group Restaurant The

80.5 29.96 635.2 14 14 14 74.9 579.6 28.02 13 13 13 66.4 532.5 24.08 12 12 12 61.2 0% .0% 21.86 487.1 .4% 11 11 11 56.7 454.0 19.25 10 10 10 EPS (p) +7 Operating profit (£m) Operating profit +7 +1 Total revenues (£m) revenues Total

flow

+2.8%)

40 new sites opened in sites new 40 period the targeted sites new 42-50 2015 for Revenue increased to to increased Revenue (like-for-like £635.2m sales EBITDA increased to to increased EBITDA £117.0 m tax increased before Profit to £78.1m 29.96p to increased EPS per share dividend year full Proposed per share 15.4p to increased •  • • out continues:Roll cash flow: £85.5m, 11% up The Group had another strong performance 2014 in with significant growth profits and revenues, in • • • • Operations strongly cash cashgenerative. Free Financial highlights 02 Annual Report 2014 The Restaurant Group plc

“Our objective over the coming years is to build on the firm foundations that are in place.”

1995 2004 2007 Name changed from City 50th Chiquito opens 1st Frankie & Centre Restaurants plc Benny’s opens to The Restaurant Group plc Brunning & Price acquired £250m Annual turnover reaches £250m

2001 2005 Company exits Concessions Division from High Street launched business Alan Jackson appointed Chairman Overview Strategic report Governance Financial statements

Annual Report03 2014

The Restaurant Group plc Group Restaurant The

2014 50th Pub opens appointed Breithaupt Danny Chief Executive Officer £600m Annual turnover exceeds £600m

2013 Chiquito 70th opens

2012 £500m Annual turnover reaches £500m

2011 200th Frankie and opensBenny’s First Coast Coast to opens

2008 350th restaurant opens 04 Annual Report 2014 The Restaurant Group plc

“Frankie & Benny’s has become one of the best known casual dining brands in the UK.” www.frankieandbennys.com Overview Strategic report Governance Financial statements

Annual Report05 2014

The Restaurant Group plc Group Restaurant The

The kitchen buzzes with bustling activity as the chefs prepare dishes from our broad menu – pizzas, pastas, burgers, grills and other favourites – while, in typical stateside fashion, service is second Frankie at none! to & Benny’s Settle enjoy a cosy a casual booth to into family meal or up a catch with friends and observe the clatter and chatter the open of kitchen and soundtrackthe familiar and 60’s classic 50’s playing in the background. The restaurant walls are filled with family snapshots and memorabilia showing life on the lower east side the of Big Apple, helping a “New into you First opened in in 1995 state-of-mind”. has become Frankie & Benny’s Leicester, one the best of known casual dining brands in the United Kingdom, and trades successfully in leisure and retail locations, standalone sites and seven at airports. The estate comprises restaurants spread across the country 247 of from Aberdeen St Austell. to 247 restaurants 19 openings in 2014 Frankie & Benny’s bringsFrankie together classic & Benny’s American and Italian style with and that always provides great value for money. 06 Annual Report 2014 The Restaurant Group plc

“We specialise in great food, good times and fantastic cocktails.” www.chiquito.co.uk Overview Strategic report Governance Financial statements

Annual Report07 2014

The Restaurant Group plc Group Restaurant The

The Chiquito menu offersgreat a range of dishesauthentic in Mexican and “Tex-Mex” a lively environment, with fantastic music. The décor draws inspiration from Mexican architecture and Latin style. Some restaurants a rustichave and relaxed feel while others demonstrate the buzz and graphic energy of contemporary Chiquito Mexico favourite City. dishes include nachos, burritos, enchiladas and our signature sizzling fajitas, as well as the old favourites – burgers, ribs, salads and hand-cut steaks from specialise the grill. We in great goodfood, times and fantastic cocktails to ensure every meal is a fiesta. Chiquito is open for breakfast, lunch, lazy afternoons and lively out shopping,evenings, so whether you’re meeting friends after work or planning a party the only in place the be! UK forit’s to Trading years, 20 over Chiquito continues attract to a broad mix young of adults, couples, teenagers, families and large parties. 80 leisure, retail and stand-alone restaurants cover the UK with planned. openings more 80 restaurants 8 openings in 2014 Mexican for fun, fantastic amazing food, atmospherefor a good – guaranteed. time, 08 Annual Report 2014 The Restaurant Group plc

“We offer the best of classic American food.” www.c2crestaurants.com Overview Strategic report Governance Financial statements

Annual Report09 2014

The Restaurant Group plc Group Restaurant The

13 restaurants 3 openings in 2014 Coast Coast to takes its inspiration from which spansthe Lincoln the Highway, United America States of to from New York San Francisco. This is reflected in our great range authentic of food and , all served with superb hospitality and service. offer We the best classic of American food – Aberdeen Angus beef burgers, deep dish style Chicago pizzas, distinctive amazing steaks, seafood dishes, wraps and American South-West specials. Coast Coast to is more than just a restaurant, with a great bar serving speciality cocktails and a wide range beers, of spirits and traditional milkshakes. The musicis an eclectic andmix American Motown of Rock, songs heard have not may you in a little while, but are absolutely guaranteed lift to your spirits and currently smile. make you We have restaurants open and13 see significant opportunities Coast Coast grow to into to a great brand. 10 Annual Report 2014 The Restaurant Group plc

“Really great are timeless…” www.brunningandprice.co.uk Overview Strategic report Governance Financial statements

Annual Report11 2014

The Restaurant Group plc Group Restaurant The

52 pubs 3 openings in 2014 Really great pubs are timeless, familiar and very British. Everybody knows what theirperfect pub Each looks ours of like. has its own style and personality always findwarm a andyou’ll welcome, set against ageless a backdrop of interiors. Mostly setin beautiful rural or semi- rural locations, each pub has a ‘local’ feel and many are set in intriguing buildings with fascinating want all our histories. don’t We lookpubs and to feel the same – instead we preserve the character the building, of which after all was what attracted the property us to in the firstWe serve place. a wide selectionof cask ales which change frequently and always try include to a local have We brew or two. decent wines but the top over not and the essence our of freshly prepared food is classic British dishes complemented more exotic by influences otherfrom partstheworld:of what believewe is modern British Seasonal cookery. and local specials mean the menu always offers new choices alongside trusted favourites engaging friendly, each time visit. you There’s service from the moment arrive, you ensuring that all your needs believe are We taken care of. whenthat, done classic well, pubs will never go out fashion of and that opportunities expand to in the sector are available for experienced operators with the right offer for customers. 12 Annual Report 2014 The Restaurant Group plc

“A market-leading reputation… with specialist operating knowledge” www.trgconcessions.co.uk Overview Strategic report Governance Financial statements

Annual Report13 2014

The Restaurant Group plc Group Restaurant The

58 restaurants bars and 7 openings in 2014 The Group’s ConcessionsThe Group’s business has a market-leading reputation for developing partnerships deliver to catering solutions that meet the needs our of clients and their customers. Currently operating from outlets busiest airports,in the UK’s other transport locations and shopping centres, have we yearsmoreexperience than of 21 providing exceptional hospitality the travelling public. to Our specialist operating knowledge and flexibility ensures successful performance across our diverse brand portfolio, covering a wide range popular of categories including table service, counter service, sandwich shops, meet clientpubs and and customer bars. To needs deliver we existing TRGbrands, create bespoke concepts and establish partnerships franchiseto brands from third parties as appropriate. Building on our track record partnership innovation, of and performance ahead sector of growth will ensure remain we a market leader in this sector. exciting 14 Annual Report 2014 The Restaurant Group plc

Founded in London’s West End in 1979, Garfunkel’s is proud to be the original British café restaurant serving breakfast, lunch and dinner all day every day. Wake up to a traditional British fry-up or a warming bowl of porridge and great coffee, made just the way you like it. For lunchtime our salad bar really hits the spot, it is fast, it is fresh and you can make it any way you want to. And of course there are Garfunkel’s classics like rotisserie chicken, hand-battered fish and chips and tasty topped burgers fresh from the grill. Everything has been chosen because we just love the taste. Principally located across Central London, each Garfunkel’s restaurant offers a place to relax and take a break from the hustle and bustle outside, with a loyal following of visitors, local residents and workers who have been eating at Garfunkel’s for years. 15 restaurants “A truly great name in British restaurant brands.” www.garfunkels.co.uk Overview Strategic report Governance Financial statements

Annual Report15 2014

East Anglia – 32 Frankie & Benny’s17 06 Chiquito 02 Pub restaurants Concessions06 TRG Coast01 Coast to 57 – Midlands 40 Frankie & Benny’s Chiquito 11 Pub01 restaurants Concessions TRG 02 03 Coast Coast to North West – 70 32 Frankie & Benny’s Chiquito 10 Concessions TRG 08 Pub restaurants19 Coast01 Coast to North East – 44 33 Frankie & Benny’s 09 Chiquito 02 Coast Coast to The Restaurant Group plc Group Restaurant The

Scotland – 55 – Scotland Frankie28 & Benny’s Chiquito 10 02 Garfunkel’s Concessions TRG 08 Coast07 Coast to Northern Ireland – 07 06 Frankie & Benny’s Chiquito 01 Wales 23 – Frankie14 & Benny’s Chiquito 04 05 Pub restaurants South West – 29 Frankie19 & Benny’s Chiquito 07 01 Garfunkel’s Concessions TRG 02 South East – 108 40 Frankie & Benny’s Chiquito 15 20 Pub restaurants Concessions TRG 28 05 Coast Coast to London (inside the M25) – 47 Frankie18 & Benny’s Chiquito 07 12 Garfunkel’s 05 Pub restaurants Concessions TRG 04 Coast01 Coast to

8 0 1 32 47 57 44 29 70 23 55

07

across the UK… the across Over 470 restaurants 470 Over 16 Annual Report 2014 The Restaurant Group plc

Chairman’s statement Investing in the next stage of growth

“Like-for-like sales were 2.8% ahead of the previous year and I am very encouraged that this positive trend has continued into 2015.”

Alan Jackson Chairman 15.4p Total dividend

Over 470 restaurants 40 new restaurants Overview Strategic report Governance Financial statements

Annual Report17 2014

The Restaurant Group plc Group Restaurant The

The new financialyear has startedwell totalwith sales growth sales and 9.5% like-for-like of growth for the first 2.5% of eight have an We outstandingweeks the of year. business with market leading brands across a range segments of in the eating out marketand an experienced management team with real strength and depth. With these core strengths and an improving UK I am economy, confident that TRG wellis placed continue to making further profitable progress 2015 in and over the coming years. Alan Jackson Chairman February27 2015

Danny Breithaupt took over as Chief Executive the of Group followingonthe the retirement 1 September of 2014, Andrew Page. I am delighted report to that the transition has gone extremely smoothly and Danny has already clearly demonstrated that he is the right person lead to The Restaurant Group through the next stage its of evolution. During the year Sally Cowdry joined the Board as a non- executive Director and is making a valuable contribution to the work the of Board. Since the year-end have we announced that Debbie Hewitt will be joining the Board from 1 May as non-executive further Director, strengthening and broadening the skill base the of Board. As a result the of strong financial performance in theyear, the Board is recommending a final dividend9.3p of per share an increase on give 10% to for a total of the year 15.4p, of the This prior dividend year. is covered almost two times earnings by per share, in line with our stated dividend policy. Subject shareholder to approval at the Annual General the final dividendMeeting May 2015, be held to will on 14 andbe paid the shares on 8 July will 2015 be marked ex-dividend June 2015. on 18 During the year the Group passed a number key of milestones, with turnover exceeding £600m and the total number restaurants of in our portfolio increasing over 470. to The continued growth and success the of Group is the product the of hard work, experience and dedication our of Directors, senior management and staff. On behalf the of Board I would record like to our thanks and appreciation to all our of teams across the country. I am very encouraged that this positive trend has continued again We increased our 2015. into openings programme with 40 of a total new restaurantsduring 2014 opened in Sincethe 2009 year. have we increased the number new of site openings every and fully we year, expect this trend to continue going forward. have excellent We visibility on our opening programme over the next few years. Like-for-like salesLike-for-like ahead were 2.8% the of previous year and The Group has delivered another record set results of in the financialyear 2014 with significantgrowth in revenues,profits and cashThese flow. results have been achievedfollowing more than a decade consistent of year on year growth in earnings, underscoring the strength business. the of Group’s 18 Annual Report 2014 The Restaurant Group plc

Review of Operations A clear strategy to deliver growth

“The Group is in robust shape with strong brands and an excellent management team. Our objective over the coming years is to build on the firm foundations that are in place.”

Danny Breithaupt Chief Executive Officer 19 +£500k new Frankie & raised for charity Benny’s restaurants in 2014 opened this year

More than 1,300 new jobs created in 2014 8 +2.8% new Chiquito restaurants increase in opened this year like-for-like sales Overview Strategic report Governance Financial statements

Annual Report19 2014

The Restaurant Group plc Group Restaurant The

Our brands Our units)Frankie (247 & Benny’s Frankie traded & Benny’s well during the year with growth in turnover and profit. During theyear we introduced a number menuof initiatives, notably the introduction a chicken of section on the menu which has be proved hugely to successful. also We took further steps strengthen to the management team as the brand continues its rapid of rate growth. During the year opened we new restaurants, 19 reaching almost of a total an increase 250, some of 20% in the sizethe of estate in the last three years. As in previous years these are in a range different of locations including new developments, the extension existing of schemes and the conversion units of from other operators. at our new Trading openings has been strong and they are set deliver to excellent returns. anticipate We opening new and between 18 14 The strengthFrankie the of Frankie in 2015. & Benny’s & brand,Benny’s its breadth appeal, of high levels customer of recognition and strong family appeal all contribute a to consistent track record success. of This gives us great confidence about the continuing success and furtherroll out this of brand. (80Chiquito units) Chiquito had an excellent year with strong growth in turnover and profits. Severalyears agowe made some significant management changes in this brand. This has been supplemented months in the an last by evolution 18 both of the fit out and the menu. The strong improvement in financial performance is clear testament the success to these of initiatives and are we now confident in increasing the rate openingsof opened we in Chiquito. During eight new 2014 restaurants (compared four to in the previous year). These are trading superbly and are deliver set to strong returns. In 2015 expectwe open to between eight and ten new Chiquito restaurants. Most our of Chiquito restaurants are co-located with Frankie either & Benny’s, as part a new of development or as a new site on a scheme where already we successfully trade with the Frankie brand. are & Benny’s excited We about the prospects for Chiquito and are confident that this is a style cuisine of which is becoming more mainstream and familiar across the UK.

The Group has an active programme supporting of charities with which are we proud the be involved. to During 2014 charitieskey supported we were Leukaemia and Lymphoma Research, Hospital Children’s Association Scotland and Caudwell Children. During the year raised we over £500,000 for these and other are we charities. In 2015 partnering with Rays Sunshine, of a charity for children with life limiting illnesses. Throughout the Group aim we continually to evolve and improve our offering in terms food, of service standards and facilities. Menus in all our of brands are reviewed on a regular basis take account to evolving of trends. also We aim ensure to that all our of menus have healthy options and ensureto have we something match all to our of customers’ requirements. As part our of ongoing health and safety assurance processes regularly we conducttesting of ingredients and facilities at our suppliers. Our people and our business business our and people Our TRG is a people business. employ We more than people15,000 throughout more the UK and during 2014 newthan team members 1,300 joined the Group. Our people and the culture within the Company are crucial factors in the continuing success TRG. of are therefore We putting in place a number initiatives of make further to improvements in this area, such as our “Proud be TRG” to and recently announced “Family Matters” employee engagement initiatives. TRG has an excellent track record delivering of consistent year on year growth in cash flows and profit, combined with high returns on investment, and this will continue be our to focus. Building on the solid growth that has been achieved over the past decade, TRG delivered another year of profitable with growth progress in sales, 2014 in profits and cash flow as described in more detail in the financial review. The Group’s strategyThe will Group’s continue be focused to on building saleslike-for-like and the disciplined roll out new of sites. intend accelerateWe to and broaden the expansion programme, as described in more detail later in this report. Introduction The Group is in robust shape with strong brands and an excellent management team. Our objective over the coming years build is to on the firmfoundations that are in place. 20 Annual Report 2014 The Restaurant Group plc

Review of Operations continued

Coast to Coast (13 units) Concessions (58 units) Coast to Coast also had an excellent year financially with Concessions had another really strong year with good growth substantial increases in turnover and profit. Following its in turnover and profits. We have a strong market position in launch at the end of 2011 in Brighton, Coast to Coast is now most of the leading UK airports. During the year we opened a well established and successful part of the Group’s portfolio seven new sites, including taking over all of the catering of brands. Most of our Coast to Coast restaurants are operations at Airport and opening the very co-located with Frankie & Benny’s and in a number of cases successful Wondertree restaurant in the new Heathrow both Frankie & Benny’s and Chiquito. It has a distinct market Terminal 2. We are delighted with the performance of our position and as a result we see negligible levels of new openings this year all of which are set to deliver strong cannibalisation in such co-located situations. Our location returns. In 2015 we expect to open between five and seven strategy for Coast to Coast tends to be on leisure and retail outlets in our Concessions business. This includes three schemes in larger markets. We are also confident that the outlets in the re-developed Stansted airport, including the brand can work well in some UK city centre locations, first Coast to Coast in an airport, as described earlier. following the successful Broad Street opening at the end of 2013. During the year we opened three Coast TRG business model and strategy to Coast restaurants all of which are performing well and set Our core objective is to grow shareholder value by building to deliver strong returns. In 2015 we expect to open between a business capable of delivering long-term sustainable and seven and ten Coast to Coast restaurants. We are also growing cash flows. We do this by providing great food, drink delighted to have secured our first Coast to Coast restaurant and service in well-appointed restaurants and pubs. Within in an airport environment as part of the major redevelopment the eating out market we focus on sectors where there are at Stansted, which will open during the first half of the year. barriers to entry, good growth prospects and strong returns. Our growth model is primarily based on organic roll out of Garfunkel’s (15 units) new sites. While most such sites are leasehold, we also Garfunkel’s is a good business generating significant cash acquire freehold premises where these give a satisfactory flows and excellent returns on investment. As other parts of level of return. Although not a core part of our development the Group continue to grow rapidly, Garfunkel’s is becoming plans, we remain open to evaluating acquisitions of existing a smaller proportion of the total. We do not have any specific businesses where there is a clear strategic rationale and roll out strategy for Garfunkel’s, but will consider new sites on where this would enhance shareholder value. an opportunistic basis. Our business model is to grow through a combination of Pub restaurants (52 units) like-for-like sales growth and new site development. The Our Pub restaurant business had a very strong year with profits from this growth are converted into cash at a healthy substantial increases in turnover and profits. The Pub rate, which we use to maintain our existing estate in good business is focused on delivering exceptional food and drink order, pay dividends and invest in more new sites generating in attractive buildings and locations and as a result has won high levels of return. This has proven to be a very successful a number of national and regional awards including the 2015 and value-accretive business model which has enabled the Good Pub Guide, Best Town Pub of the Year awarded to the Group to grow in a predominately organic way funded Old Harker’s Arms in Chester. principally by internally generated cash flows. This model delivers high returns, growth and income for shareholders During the year we opened three new pubs, all of which are in the form of dividends. performing well and are set to deliver strong returns. In 2015 we expect to open between three and five new pubs. Our Key to achieving all of this is that we continue to provide great Pub business has the potential to grow over the medium-term service and food in our restaurants, and evolve our brands to be a substantial business as a nationwide operator of high and offerings in line with changing consumer trends. quality, food-led pubs. Overview Strategic report Governance Financial statements Annual Report21 2014

The Restaurant Group plc Group Restaurant The

admissions.

stick our to areas expertise of focus on our customers providing by excellent value, choice and service maintain high standards operational of efficiency and execution add high quality new restaurants that meet our investment criteria. Future prospects prospects Future Since 2008, in line with most consumer-facing businesses, TRG has faced challenging trading conditions. As is well documented, real incomes have been in declinefor most thisof period but notwithstanding this TRG has continued grow sales,to profits and cash Weeveryhaveflows year. also continued roll to out new sites at an accelerating rate, as well as investing in our existing portfolio. In the last two years have contend had we to with disappointing film release schedules and associated reductions in UK cinema Looking forward, there are a number external of factors which should be much more positive for the business. In recent months, the UK has at last started see to an increase in real consumer incomes. and 2016 In addition, both 2015 have much stronger film release schedules thanwe have seen in thelast two years and this is expected generate to growth in cinema admissions levels. Combined with an accelerating new of rate site openings, this augurs well for the future prospects the of Group. In order capitalise to on these improvingtrends will we continue to: • • • • 22 Annual Report 2014 The Restaurant Group plc

Financial review

“Total revenue increased by 9.6%, reflecting 2.8% like-for-like sales growth and the impact of new site openings.”

Stephen Critoph Chief Financial Officer and Company Secretary Results TRG performed strongly in 2014, despite another challenging +7.4% year for the sector, as summarised in the table below: 2014 2013 % increase in Group £m £m change profit before tax Revenue 635.2 579.6 +9.6%

Operating profit 80.5 74.9 +7.4% Margin % 12.7% 12.9%

Net interest (2.4) (2.2) +6.9% Profit before tax 78.1 72.7 +7.4% EPS (pence) 29.96 28.02 +6.9%

Total revenue increased by 9.6%, reflecting 2.8% like-for-like sales growth and the impact of new site openings. Total EBITDA for the year was £117m, an increase of 8.5% on the prior year, and operating profit at £80.5m grew by 7.4%. Group operating margin for the year was 12.7%, a 20 basis points decline on the previous year. This was primarily driven +9.6% by two factors: firstly by a high level of new openings at the end of the year and associated pre-opening costs, and secondly wage cost inflation during the second half of the revenue year, partly driven by increases in the national minimum wage, but also tightening labour market conditions.

After interest costs Group profit before tax of £78.1m was up by 7.4% on the prior year. The average tax rate in the year +11% was 23%, which was a little higher than the prior year average tax rate of 22.7% for the reasons described later in this report. This resulted in EPS of 29.96p, an increase of 6.9% on the free cash flow prior year. Overview Strategic report Governance Financial statements

15 52 20 80 58 472 247 2014 Year end - - - - - 2 (2) Annual Report23 2014 Transfers

- - (1) (1) (2) (9) (13) Closed - 3 8 3 7 19 40 Opened The Restaurant Group plc Group Restaurant The

15 16 73 49 60 232 445 2013 Year endYear Frankie & Benny’s Coast to Coast/ Filling Station Chiquito Garfunkel’s Cost inflation Cost Food cost inflation continuedto be subdued during2014. This is due a variety to factors of including good global crop a significant harvestsstrengthening and 2014, in both 2013 in Sterling against the Euro over the last two years (roughly half ourof food imports are sourced from the Eurozone) and further rationalisation our of supply chain take out to costs. currentlyWe anticipate this benign environment on food cost inflation will continue during2015. The national minimum wage increased 3% by in October the highest increase2014, have seen we for a number of years. This combined with some tightening in the labour market has resulted in stronger wage cost inflation than have seenwe since before the onset the of financial crisis. As the UK economy continues strengthen, to expect we this trend continue. to Our two other largest cost inputs are rent and utilities. are We seeing very modest increases in the levels rental of inflation reflecting a strengthening in the UK In relationeconomy. to utility costs our electricity key contracts are fixed until and Although gasOctober until March the 2016 current 2016. environment for wholesale energy costs remains benign, increases in tax, environmental and infrastructure levies mean that continue we see to mid-single digit inflation on our utility costs. expenditure Capital in capitalDuring the year the Group invested £70.1m of a total expenditure compared in the This prior £76.6m year. to includes £20m maintenance and refurbishment expenditure development of expenditure.and £50.1m During the year we opened 40 of a total sites and these are typically generating levels turnover of and return ahead feasibility. of The table below summarises openings and closures during the year: Pub restaurants Concessions Total £m 9.0 (1.1) ( 0.1) (2.3) (5.9) 77.1 74.9 32.9 (17.7 ) 2013 (41.9) (55.7) (24.9) (20.9) (36.0) 116.8 £m 9.6 8.0 3.3 (1.3) (5.3) 2014 80.5 36.5 85.5 (50.1) (41.9) (18.2) (20.0) (36.4) (38.6) 125.0

Net interest paid paid Tax Maintenance capital expenditure capital Maintenance Free cash flow expenditure capital Development Working capital and non-cash adjustments Dividends(including£6.9m dividend) special Net cash flow Depreciation Depreciation Cash flow from operations Purchase shares of for employee benefit trust Other items (includes LV disposal proceeds) disposal Operating profit Cash flow Cash generation was again strong with a healthy profit of rate conversion cash. into Operating cash flow increasedto 7% by Free cash flow (after interest, tax and £117m). (2013: £125m maintenance capex) on the was £85.5m, an increase 11% of Afterprior dividends development year. capex £50.1m, of payable and other sundry items, the Group had net positive cash flowof justover £3m, resulting year-endin net debtof £39m. Set out below is a summary cash flowfor theyear: Net bank debt at start year of Net bank debt at end year of item Non-trading the Group disposed April 2014 part of On 17 its of interest in the Living Ventures Group. TRG cash received of £7m proceeds in respect this of disposal and the resulting profit on disposal £6.9m, of net costs, of is reported as a non-trading item. The net proceeds the of disposal were distributed by a special of way dividend per 3.45p of share on 9 July 2014. Following the disposal, only remaining TRG’s interest in the Living Ventures Group is loan a £4m which note has been fully provided against. 24 Annual Report 2014 The Restaurant Group plc

Financial review continued

Financing and key financial ratios Strategy The Group currently has a £140m five year credit facility in place which runs until October 2016. There are two The Restaurant Group’s key objective is to grow shareholder covenants under this facility which are summarised in the value and the strategy deployed to achieve this is to build a table below, together with other key financial ratios: business capable of generating long-term, sustainable and growing cash flows. In pursuit of this we have built a scalable Banking covenant 2014 2013 business model which is focused on the growing casual eating out market. We have targeted areas of this market Banking covenant ratios which offer distinct barriers to entry, where we can be EBITDA/interest cover >4x 49x 48x confident of delivering good growth in profits and cash flows Net debt/EBITDA <3x 0.34x 0.39x and where there is potential for high returns on investment. Other ratios This has led the Group to focus on edge and out of town Fixed charge cover n/a 2.7x 2.7x leisure and retail developments, rural and semi-rural pubs and our Concessions business which operates principally on Balance sheet gearing n/a 16% 19% airports. The Group operates in the expanding casual dining market, and our offerings continue to provide good value for As can be seen, the Group has substantial headroom against money in comfortable surroundings with excellent service both banking covenants and continues to be in a strong from our dedicated teams. financial position. This enables us to continue to increase the acceleration of our opening programme over the coming The Group’s strategy is to deliver further organic growth years whilst at the same time investing and maintaining the through the roll out of our brands. We have a solid pipeline existing estate. of sites for development, coupled with a strong focus on continuing to deliver like-for-like sales growth from our Tax existing restaurants. Our Concessions business operates The total tax charge for the year was £17.9m analysed in a dynamic and complex market where our management as follows: teams have market-leading expertise and a track record 2014 2013 of innovation and improving sales performance. The Group £m £m continues to look for opportunities to expand this area of Corporation tax 18.0 19.2 the business. Deferred tax ( 0.1) (2.7) Total 17.9 16.5 We discuss risks that might impact the successful Effective tax rate 23.0% 22.7% execution of this strategy and the KPIs we use to measure its success below. The effective tax rate for the year was 23%, compared to 22.7% in the prior year. In 2013 we benefitted from a one off Principal risk factors credit of £2.1m, arising from the revaluation of our deferred The Board of Directors regularly identify, monitor and manage tax liability at the then newly enacted eventual corporation tax potential risks and uncertainties to the Group. The list on the rate of 20%. Without that credit the average tax rate in 2013 following pages sets out what the Directors consider to be would have been 25.6%. We expect to see the tax rate fall the current principal risks and uncertainties, with an overview again in 2015 in line with the implementation of the final of the mitigation process for these. This list is not presumed reduction in the headline rate of corporation tax to 20%. As to be exhaustive and is, by its very nature, subject to change. noted in previous reports, the Group’s effective tax rate will continue to be higher than the headline UK tax rate primarily due to our capital expenditure programme and the significant levels of disallowable capital expenditure therein. Overview Strategic report Governance Financial statements

Annual Report25 2014

The Restaurant Group plc Group Restaurant The

Mitigation process plans action appropriate performanceand of monitoring Regular Concentration on segments offering higher barriers entry to and good growth prospects; regular monitoring of performance and plans action appropriate Dedicated property department focusing on new site development, strong relationships with Concessions partners Training, mystery diner visits, monitoring of customer feedback, internal quality control testing Contingency planning for supply chain and suppliers Training of restaurant and pub teams; detailed health and safety manual; regular internal and external auditing of all sites; auditing of supply chain and suppliers; health and safety incentives and awards Benchmarking of remuneration packages; analysis of staff turnover; performance appraisal and review system retain to existing talent; IncentiveLong-Term Plan Rolling programme of securing longer-term contracts mitigate to programme efficiency energy fluctuations; pricing short-term Experienced staff in key roles; segregation of duties; internal and external audit processes; Audit Committee role Operating profit margin Operating profit The Board and management closely monitor profit margins as an indicator operating of efficiency within restaurants and across the Group. capital invested on Return The Group closely scrutinises the returns on invested capital from new site openings and the performance new of sites is subject periodic to post completion reviews which are reported andto considered the by Board. People workforce total 50%As TRG’s at December of 29 of 2014, member were the of women. Board15,000 One is (17%) female and this will rise two to (29%) from 1 May 2015, following the appointment Debbie of Hewitt as a non- executive Director (as announced January on 16 2015). the of senior executive team (excluding (17%) Directors)Two are female. also We have an excellent pipeline over of 1,600 managers coming up through the ranks, 40% which of are women. The approach Board’s gender to diversity is covered in more detail in the Report the of Directors. operationsTRG’s are located wholly within the UK and the Company respects all relevant human rights legislation. Further information social on and TRG’s community engagement can be found in the Report the of Directors. Approved the by Board Directors of and signed on behalf of the Board. Stephen Critoph OfficerFinancial Chief Secretary Company and February27 2015

Risks and uncertainties and Risks Adverse economic conditions and a decline in consumer confidence and spend in the UK Increased supply of new restaurant concepts into the market Lack of new site opportunities, and risks existing to Concession agreements Failure provide to customers with brand-standard value for money offerings and service levels Major failure of key suppliers deliver to products into restaurants Damage our to brands’ images due failures to in environmental health products of contamination from or restaurants the in compliance The loss of key personnel or failure manage to succession planning Increase in prices of key raw materials (including foreign currency fluctuations), wages, overheads and utilities Breakdown in internal controls through fraud or error, major failure of IT systems EBITDA The ability the of Group finance to rollits out programme is aided strong by cash flows from theexisting business. The Group definesEBITDA as operating profit before depreciation, amortisation and non-trading items. EBITDA serves as a useful proxy for cash flows generatedby operations and is closely monitored. New sites opened sites New The expansion our of brands driver is a key the of Group’s profitability.Potential new sites are subjectto a rigorous appraisal process before they are presented the Board to for approval. This process ensures maintain we the quality openingsof as well as the quantity sites of opened. Like-for-like sales This measure provides an indicator the of underlying performance our of existing restaurants and highlights successful development our of offerings best to match changing consumer demands over time. There is no accounting standard or consistent definition of “like-for-like sales” across the industry, although the Group has applied a consistent basis calculation of across years for reporting performance. like-for-like Key performance indicators Key The Board Directors of and executive management receive a wide range management of information delivered in a timely Listedmanner. below are the principal measures progress of that are reviewed on a regular basis monitor to the development the of Group. Further information on the management risks of highlighted above is provided in the Review Operations of and the Review. Financial 26 Annual Report 2014 The Restaurant Group plc

Board of Directors as at 27 February 2015

Alan Jackson (71) Danny Breithaupt (47) Non-executive Chairman Chief Executive Officer

Alan joined the Company as Executive Chairman in Danny joined the Company in 2001. He held a number March 2001 and became non-executive Chairman in of senior positions within Frankie & Benny’s, becoming January 2006. He has a wealth of experience in the leisure Operations Director in 2003 and Managing Director in sector. For 18 years, from 1973 to 1991, Alan occupied 2009. During his time leading Frankie & Benny’s the brand various positions within , principally Managing grew from 75 to over 200 units. In 2011 Danny led the Director of steakhouses and also the Whitbread successful launch of the new Coast to Coast brand and restaurant division where he was responsible for the was appointed Managing Director of the Group’s Leisure creation and development of the Beefeater, Travel Inns Division in 2012 and Chief Executive Officer on and TGI Friday brands. After the Beer Orders in 1991 he 1 September 2014. His earlier career included 10 years founded his own business which became Inn Business with Bella Pasta, then part of Whitbread PLC. Group plc in 1995 and was subsequently acquired by Punch in 1999. He chaired Oriental Restaurant Group plc until its sale to Noble House in 2000. Currently Alan is non-executive Chairman of Playtech plc.

Stephen Critoph (54) Chief Financial Officer and Company Secretary

Stephen was appointed as Finance Director of the Company in September 2004 and Company Secretary in 2013. In September 2014 he was promoted to the role of Chief Financial Officer. Previously Stephen held several senior finance positions in Compass Group plc and Granada Group plc, including Corporate Development Director of Compass Roadside and Finance Director of Travelodge and . He trained and qualified as a Chartered Accountant with Deloitte & Touche. Overview Strategic report Governance Financial statements

) 47 Annual Report27 2014

Non-executive Director Simon Cloke ( The Restaurant Group plc Group Restaurant The

Simon was appointed as a non-executive Director the of Company Formerly in March Global 2010. Head of Industrials at Dresdner Kleinwort Wasserstein, he was Diversified HSBC’s of Director Managing appointed Industries Group in 2005 and is currently responsible for managing business HSBC’s with some its of largest house building and building materials clients as well as a number relationships. corporate UK largest HSBC’s of ) ) 46 66 Non-executive Director Sally Cowdry ( Non-executive Director Tony Hughes ( Tony . lc strategic development and commercial performance commercial and development strategic Sally was appointed as a non-executive Director the of SallyCompany is Marketing in March and Consumer 2014. Director at Camelot Lotteries accountable UK Ltd, for the Theof National Lottery and its portfolio games. of Prior joining Sallyto Camelot was Marketing in 2013, and O2. at Director Consumer Tony was appointed asTony a non-executive Director of the Company in January was Managing 2008. Tony Director the of Restaurants Division Mitchells of & Butlers plc (previously Bass plc and Six Continents plc) from and 2007 served to 1995 on the Board Mitchells of & PriorButlers joining to Bass, plc from 2003 2007. to he held senior management roles at B&Q, J.A. Devenish and Whitbread p 28 Annual Report 2014 The Restaurant Group plc

Report of the Directors

The Directors present their Annual Report and the Group During the year the Audit Committee comprised the following Accounts for the year ended 28 December 2014. non-executive Directors: • Simon Cloke (Chairman) Results and dividends The results for the year are presented under International • Tony Hughes Financial Reporting Standards (“IFRSs”) as adopted by the • Sally Cowdry (from 1 March 2014) European Union. The Report and Accounts are drawn up on a 52 week reporting basis ending on 28 December 2014 During the year the Remuneration Committee comprised (2013: 52 week reporting basis ending on 29 December 2013). the following non-executive Directors: The results for the year are set out in the consolidated income • Tony Hughes (Chairman) statement on page 63. This shows a Group profit after tax of £67m (2013: £56.2m). An interim dividend of 6.1p per share • Simon Cloke was paid on 9 October 2014. The Directors propose a final • Sally Cowdry (from 1 March 2014) dividend of 9.3p per share, which is subject to approval at the Company’s Annual General Meeting (“AGM”) to be held on During the year the Nominations Committee comprised 14 May 2015. Should this be approved, the final dividend will the following Directors: be paid on 8 July 2015, bringing the ordinary dividend per • Tony Hughes (Chairman) share payable in respect of 2014 to 15.4p (2013: 14.0p). • Simon Cloke Directors • Alan Jackson The Directors who held office during 2014 were as follows: • Sally Cowdry (from 1 March 2014) • Danny Breithaupt (from 1 September 2014) Executive Directors • Danny Breithaupt (from 1 September 2014) • Andrew Page (until 31 August 2014) • Andrew Page (until 31 August 2014) The Directors’ remuneration report includes details of • Stephen Critoph Directors’ remuneration and interests in the Company’s shares and options, together with information on service Non-executive Directors contracts. • Alan Jackson • Tony Hughes Directors’ shareholdings The interests of the Directors in the shares of the Company, • Simon Cloke all being beneficially owned, were as follows: • Sally Cowdry (from 1 March 2014) At At At 26 February 28 December 29 December Each of the non-executive Directors (excluding the Chairman) 2015 2014 2013 is considered by the Board to be independent. Tony Hughes is senior non-executive Director. Alan Jackson was appointed Executive Directors non-executive Chairman on 1 January 2006 having previously Danny Breithaupt 52,703 52,703 n/a been executive Chairman and given his tenure as an Stephen Critoph 275,220 275,220 263,220 executive Director, is not considered to be independent as defined by the UK Corporate Governance Code. Non-executive Directors No Director has a service contract with the Company Alan Jackson 250,191 250,191 250,191 requiring more than twelve months’ notice. Tony Hughes 400,000 400,000 400,000 Simon Cloke 7,000 7,000 15,000 In accordance with the UK Corporate Governance Code, Sally Cowdry 1,000 1,000 n/a the Directors will be subject to re-election at the Annual General Meeting. Details of the Directors’ share options are disclosed in the Directors’ remuneration report. The closing mid-market price of the ordinary shares on 28 December 2014 was 666p and the range during the financial year was 555p to 713p. Overview Strategic report Governance Financial statements

3.11 4.13 7.6 8 4.61 5.48 3.02 4.39 5.94 8.29 % of issued share capital share Annual Report29 2014

Number of shares 8,217,255 6,233,517 8,815,382 9,252,342 6,060,000 11,922,136 15,413,727 16,625,449 10,990,927 The Restaurant Group plc Group Restaurant The

Management Management Management Inc Aviva Investors Aberdeen Asset Management Templeton Franklin governance Corporate The Company is committed high to standards corporate of governance and observing to the principles corporate of governance contained in the UK Corporate Governance Code that was revised the by Financial and issued in 2014 Reporting Council (“the Code”) for which the Board is accountable shareholders. to Statement of compliance with the Code Throughout the year ended the December 28 2014, Company has been in compliance with the provisions set out in the Code except for the independence the of Chairman (who was previously executive Chairman before being appointed the role to non-executive of Chairman in January 2006). Sally Cowdry was appointed a non-executive Director and is consideredfrom 1 March 2014 independent. Accordingly, since that the Company date, has had three non-executive Directors who are considered be to independent and has been in compliance with Code since that time. The Audit, Nomination andprovision B.1.2., Remuneration Committees therefore comprised three of non-executive Directors from 1 March 2014. The size and composition the of Board is regularly reviewed ensureto that the effectiveness the of Board (and performance the of Group) remains at a high standard. As announced Debbie inJanuary Hewitt 2015, will join the Board as an independent non-executive Director on 1 May 2015. Debbie is currently Chair Moss of Bros Group Plc and senior non-executive director Redrow of Plc and NCC Group Plc. Legal & General Investment Royal London Asset M&G Investment Management Old Mutual Asset Managers Standard Life Investments Black Rock Investment Substantial shareholdings As at 4 February the Company had been 2015, notifiedtheof following interests 3% of or more in the issued ordinary share capital the of Company: p per share. The maximum price is the higher 8 ⁄ 1 p. As at 28 December 2014, the issued, December As at 28 p. called up 2014, and 8 ⁄ 1 In addition, Annual following General the 2014 Meeting, the Directors have the authority make market to purchases sharesof in The Restaurant Group plc on behalf the of ordinary sharesCompany (which 20,064,714 up to represented the of Company’s issued 10% ordinary share capital Annual at the time the of General Notice the of 2014 Meeting). The minimum price that may be paid for such shares is 28 At the 2014 Annual General theAt 2014 Meeting the Directors were also provided with the authority allot to shares for cash other than on a pre-emptive basis, an up aggregate to nominal amount which represented £2,821,600 of approximately the of 5% issued share capital at the time that the authority was given shareholders. by This authority also expires at the Annual General and it will be Meeting May 2015 be held to on 14 proposed extend to this authority (updated for the current number shares of in issue) at the forthcoming Meeting. Following the 2014 AnnualFollowing General the 2014 Meeting the Directors have had the authority allot to shares an up aggregate to which representednominal amount £18,810,669 of approximately one third the of ordinary share capital the of Company at the time the authority was given by shareholders. This authority expires at the Annual General Meeting be to and it will be proposed May 2015 held extend to on 14 this authority (updated for the current number shares of in issue) at the forthcoming Meeting. The Directors have no present intention exercising of this authority. fully paid number sharesof in issue shares. was 200,648,821 There are no preference shares or special rights pertaining to any the of shares in issue. Share capital structure capital Share The Company has one class shares, of ordinary shares of 28 This authority expires at the forthcoming Annual General Meeting and it will be proposed extend to this authority (updated for the current number shares of in issue) at the Meeting. The Group has entered various into contracts, including leases, during the course ordinary of business which may be terminated in the event a change of control of The of Restaurant Group plc. of 5% above 5% of the average middle market quotation for the ordinary shares for the five business days preceding the purchasedate of and the higher the of price the of last independent trade and the highest current independent bid on the London Stock Exchange Daily Official List at the time the purchase is carried out. 30 Annual Report 2014 The Restaurant Group plc

Report of the Directors continued

Application of Code Principles The Board is responsible to shareholders for the proper The Company has applied the principles of the Code, management of the Group and has access to the necessary including both the Main Principles and the supporting information and training to enable it to discharge its duties. principles, as reported above. Further explanation of how All Directors are subject to election by shareholders at the the Main Principles have been applied is set out below and first opportunity after their appointment, except where in the Directors’ remuneration report and the Audit they are appointed by shareholders, and to annual Committee report. re-election thereafter.

The Board There is significant involvement from the non-executive The Board’s role is to provide entrepreneurial leadership of Directors. This includes an ongoing dialogue with the the Company and Group within a framework of prudent and executive Directors including constructive challenge of effective controls which enable risk to be assessed and performance and the Group’s strategy. The non-executive managed. The Board reviews the Group’s business model Directors are provided with sufficient information to allow and strategic objectives and looks to ensure that the them to monitor, assess and challenge the executive necessary financial and human resources are in place to management of the Group. achieve these objectives, to sustain them over the long-term and to review management performance against these Comprehensive Board papers including financial information objectives. The Board also sets the Company’s values and are circulated to all Directors prior to Board meetings and, on standards and manages the business in a manner to meet a weekly basis, they receive up-to-date trading information. its obligations to shareholders and other stakeholders. The non-executive Directors have the opportunity to meet without the executive Directors being present. Matters The Board currently comprises the non-executive Chairman, examined on these occasions include consideration of the Chief Executive Officer, the Chief Financial Officer and targets set and performance achieved by management. three independent non-executive Directors. Their biographies appear on pages 26 and 27 and demonstrate a range of All Directors have access to the advice and services of the experience and sufficient calibre to bring independent Company Secretary and a procedure has been agreed for judgement on issues of strategy, risk management, the Directors, in the furtherance of their duties, to take performance, resources and standards of conduct which independent professional advice, if necessary, at the expense is vital for the success of the Group. of the Company. On joining the Board there is a process for Directors to receive training as to their role and its Tony Hughes acts as senior independent non-executive requirements and for non-executive Directors to gain an Director and is available to shareholders if they have concerns understanding of the whole business. Non-executive on which contact through the normal channels is Directors are actively encouraged to meet with operational inappropriate or has failed to resolve an issue. management and to visit the Group’s operations in order to enhance their understanding of the Group’s business, The roles of Chairman and Chief Executive Officer are clearly its brands, employees and processes. defined. The Chairman is responsible for the leadership and effectiveness of the Board and the Chief Executive Officer During 2014 there were eight Board meetings with full is responsible for the strategic direction and operational attendance by Board members at all but one meeting, management of the Group. The Board meets on a regular which Sally Cowdry was unable to attend due to a prior basis and there is a formal schedule of matters specifically commitment that pre-dated her appointment to the Board. reserved for its consideration. This includes approval of the annual budget and the three year business plan, approval of The Company acknowledges the importance of developing the interim Report and year-end Report and Accounts, review the skills of the Directors to run an effective Board. To and approval of significant capital expenditure (including assist in this, Directors are given the opportunity to attend development of new sites), significant disposals of assets and relevant courses and seminars to acquire additional skills acquisitions or disposals of businesses. and experience which may enhance their contribution to the ongoing progress of the Group. The performance Operational management are responsible for the day-to-day of the Board and its Committees are appraised annually. running of the Group and report on a regular basis on that The process is led by the Chairman, supported by the performance to the Board. The Board is responsible for Company Secretary, and involves a comprehensive review reviewing, challenging and approving the strategic direction of performance against objectives and areas for future of the Group and monitoring operational performance. development. The non-executive Directors also meet in the absence of the Chairman to appraise the Chairman’s performance. Overview Strategic report Governance Financial statements

Annual Report31 2014

The Restaurant Group plc Group Restaurant The

Following an extensive search a leading, by independent executive search consultancy (who are a signatory the of Voluntary Code Conduct), of Sally Cowdry was appointed as a non-executive Director the of Company on 1 March 2014. Debbie Hewitt will also join the Board with effect from 1 May 2015. The Nominations Committee is also responsible for succession it oversaw planning the for the Group. In 2014, appointment Danny of Breithaupt as Chief Executive Officer following a search carried out a leading by independent search consultancy. The Committee’s work on succession planning was a significant factor in the smooth transitionof this role key within the Group. Both the Nominations Committee and the Board acknowledge the importance diversity of and promoting equal opportunities throughout the Group and continue to have regard the recommendations to Lord of Davies’ “Women on Boards” report published in its in February 2011 deliberations on future appointments and the benefits to of broadly. more diversity CommitteeAudit the AuditSince Committee 1 March 2014 has consistedof three non-executive Directors. During the year the Committee was chaired Simon by Cloke. There are written terms of reference for the Audit Committee. The Audit Committee met on two occasions with full during attendance 2014 at each meeting but for the absence Sally of Cowdry at one meeting due another to commitment that pre-dated her appointment the Board.to A more detailed description the of work undertaken the by Audit Committee is included in the Audit Committee report. Shareholders will have the opportunity to re-appoint Deloitte LLP as external auditor the of Company at the Annual General Meeting May 2015. be held to on 14 controlInternal The Board is responsible system internal of for the Group’s control and for reviewing its effectiveness. In accordance with the Code (as revised the Board in September 2014) has ensured that there is an ongoing process for reviewing the effectiveness the of system internal of control including identifying, evaluating and managing the significant risks faced the by Group. This process, which is reviewed throughout is carried the year, out in conjunction with business planning and is documented in a risk register that has been progressively enhanced during the financial year and the up approval date of to the of Annual Report and Accounts. Nominations Committee Nominations the NominationsSince 1 March Committee 2014, has consisted the of three independent non-executive Directors, the non-executive Chairman and the Chief Executive Officer. It with met twice fullattendance. during 2014, There are written terms reference of for the Nominations Committee. It is responsible for making recommendations the Board to for the appointment or replacement additional of Directors and ensuring there is an appropriate balance and diversity skills,of experience, knowledge and independence, both now and in the future. Remuneration CommitteeRemuneration Since the appointment Sally of the Cowdry on 1 March 2014, independent three of consisted has Committee Remuneration non-executive Directors. There are written terms reference of for the Remuneration Committee. The Remuneration Committee met There on four occasions was full in 2014. attendance at each meeting but for the absence Sally of Cowdry at one meeting, due a commitment to that pre-dated her appointment the Board. to The role the of Committee and details how of the Company complies with the principles of the Code are set out in the Directors’ remuneration report. The Board uses the Annual General Meeting communicate to with private and institutional investors and welcomes their participation. The Chairman seeks ensure to that the Chairs theof Audit Committee, Remuneration Committee and Nominations Committee are available at the Annual General Meeting answer to questions, and for all Directors attend. to Communications with shareholders with Communications Communications with shareholders are given high priority. The Strategic Report includes a detailed review the of business and operations, including a review planned of future developments. There is a regular dialogue with institutional investors including presentations after the Company’s announcement the of year end results, and at the half year. Feedback from major institutional shareholders is provided the Boardto ona regular basis and, whereappropriate, the Board will take steps address to their concerns and recommendations. Following feedback received during the externally facilitated review Board of effectiveness Board completed in 2013, papers are more focussed on matters strategic of importance. The papers are now circulated electronically via a secure web based an internal portal. review was In 2014 undertaken which examined the functions key the of Board, the effective discharge its of responsibilities and progress since the prior The review. results year’s were analysed the by Board which concluded that no further significant changes or improvements were required. The Board continues evolve to in accordance with best practice and feedback received from the Directors. 32 Annual Report 2014 The Restaurant Group plc

Report of the Directors continued

Whilst acknowledging its overall responsibility for the system Statement of Directors’ responsibilities in relation to of internal control, the Board is aware that the system is the accounts designed to manage rather than eliminate the risk of failure The Directors are responsible for preparing the Annual Report to achieve business objectives and can only provide and Accounts in accordance with applicable law and reasonable, but not absolute, assurance against material regulations. Company law requires the Directors to prepare misstatement or loss. the Group financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as The Group has well-established procedures which have been adopted by the European Union and Article 4 of the IAS developed over many years which meet the requirements of Regulation and have chosen to prepare the parent company the Turnbull Guidance and the Code. A key control procedure financial statements in accordance with United Kingdom is the day-to-day involvement of executive members of the Generally Accepted Accounting Practice (United Kingdom Board in all aspects of the business and their attendance at Accounting Standards and applicable law). Under company regular management meetings at which performance against law the Directors must not approve the accounts unless they plan and business prospects are reviewed. The Group has a are satisfied that they give a true and fair view of the state of monthly executive management meeting where the executive affairs of the Company and of the profit or loss of the Directors, senior operational managers and heads of Company for that period. functional departments review Group performance and issues affecting the Group. Additionally, the Board seeks to In preparing the Group financial statements, International continually strengthen its’ internal control procedures to Accounting Standard 1 requires that Directors: ensure there is a consistent and appropriate balance • properly select and apply accounting policies; between risk and reward. • present information, including accounting policies, in a Other key features and the processes for reviewing manner that provides relevant, reliable, comparable and effectiveness of the internal control and risk management understandable information; system in relation to financial reporting are described below: • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable • terms of reference for the Board and its sub-committees, users to understand the impact of particular transactions, including a schedule of matters reserved for the Board and other events and conditions on the entity’s financial position an agreed annual programme of fixed agenda items for and financial performance; and Board approval; • make an assessment of the Company’s ability to continue • an established organisational structure with clear lines of as a going concern. responsibility and rigorous reporting requirements; • operational performance and operational matters are In preparing the parent company financial statements, the considered at monthly meetings of the executive Directors Directors are required to: with senior management. Financial performance is monitored and action taken through weekly reporting to the • select suitable accounting policies and then apply them executive Directors and monthly reporting to the Board consistently; against annual budgets approved by the Board; • make judgements and accounting estimates that are • capital investment is regulated under a budgetary process reasonable and prudent; and appropriate authorisation levels, including appraisals • state whether applicable UK Accounting Standards have and post-investment reviews; been followed; and • comprehensive policy manuals setting out agreed • prepare the financial statements on the going concern basis standards and control procedures. These include human unless it is inappropriate to presume that the Company will resources related policies, information technology and continue in business. health and safety. The Group employs a firm of external auditors to monitor restaurants on a regular basis for compliance with statutory and internal health and safety requirements; and • an internal audit function headed by an experienced internal auditor with access to all areas of the Company and Group’s business. Overview Strategic report Governance Financial statements

Annual Report33 2014

The Restaurant Group plc Group Restaurant The

Capital risk management risk Capital The Group manages its capital ensure to that it will be able continueto as a going concern whilelooking maximise to returnsshareholders. to The capital structure the of Group consists equity of (comprising issued share capital, other reserves and retained earnings), debt, finance leases and cash and cash equivalents. The Group monitors its capital structure on a regular basis through cash flow projections and considerationof the cost financingof its capital. revolvingThe Group£140m has a credit facility in place and until a £10m October 2016 overdraft facility. Under revolving the terms the of £140m credit facility the Group is required comply to with its financing covenants whereby net interest charges must be covered at least four times EBITDA by and net debt must not exceed three times EBITDA. The margin (on interest rates) applied the revolving to facility is dependent on the ratio of net debt EBITDA. to The banking facility covenants are tested twice annually and are monitored ona regular basis. The Group remained within its banking facility covenant limits 2014. throughout management risk Financial The Board regularly reviews the financial requirementsof the Group and the risks associated therewith. The Group does not use complex financial instruments, and where financial instruments are used it is for reducing interest risk. rate The Group does not use derivative financial instrumentsfor trading purposes. Group operations are primarily financed from retained earnings and bank borrowings (including an overdraft facility). In addition the primary to financial instruments, the Group also has other financial instruments such as debtors, prepayments, trade creditors and accruals that arise directly operations.from the Group’s Further information is provided the accounts. to in 23 note The average interest of rate charged during the year on the and the average year debt 2.74%), was 2.90% (2013: Group’s results, net On 2014 1.74%). (2013: end was rate 1.75% interest times) times was 33.6 covered (2013: 33.7 profit by before tax, interest and non-trading items. Based on year end 1% rise a in interest rateswoulddebt and profitsfor 2014, reduce profits before tax and non-trading 0.5% itemsby and interest cover 0.7%) would(2013: reduce times 28.9 to times). 27.4 (2013: the December Group 28 At had gross borrowings 2014 attracting interest (including overdraft) £50m) £40m of (2013: and cash balances £0.9m of £7.3m). (2013: Based on the Group’s plans for 2015 andBased after plans on making the for Group’s 2015 enquiries (including preparation reasonable of trading forecasts, consideration current of financing arrangements and current headroom for liquidity and covenant compliance), the Directors have a reasonable expectation that the Group has adequate resources continue to operations for the foreseeable future. For this reason they continue adopt to the going concern basis in preparing the financial statements. Further information policies on the Group’s for capital risk management and financial risk management are set out Thebelow. principal risk factors and uncertainties that could affect the business are detailed in the Strategic Report. Going concernGoing The Financial Review contains a summary the of cash flows and borrowing position the of Group. The Group is highly cash generative and enjoys negative working capital as, given the nature the of business, it generally does not give credit to its customers. Information provided to auditor to provided Information Each the of current Directors have taken all the steps that they ought have taken make to themselves to aware any of relevant information needed the by Company’s auditor for the purposetheir of audit and establish to that the auditor is aware that of information. The Directors are not aware any of relevant information which of the auditor is unaware. This information is given and should be interpreted in accordance the of Companieswith the provisions Act 2006. s418 of The Directors are responsible for the maintenance and integrity the of corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination financial of statements may differ fromlegislation in other jurisdictions. The Directors are responsible for keeping adequate accounting records that are sufficientto show andexplain the Company’s transactions and disclose with reasonable accuracy at any time the financial positionof the Company and enable them ensure to that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assetsthe of Company and hence for taking reasonable steps for the prevention and detection fraud of and other irregularities. 34 Annual Report 2014 The Restaurant Group plc

Report of the Directors continued

Annual General Meeting A separate Circular is included with the mailing of the Annual Report and Accounts to shareholders setting out the resolutions to be voted on at the Annual General Meeting, which is to take place at 11am on 14 May 2015 at the offices of Instinctif Partners, 65 Gresham Street, London, EC2V 7NQ.

The Board believes that the proposed resolutions to be put to the shareholders at the Annual General Meeting are in the best interests of shareholders and, accordingly, recommends that shareholders vote in favour of the resolutions, as the Directors intend to do in respect of their own beneficial shareholdings in the Company.

Auditor Deloitte LLP have expressed their willingness to continue in office as auditor and a resolution to re-appoint them will be proposed at the forthcoming Annual General Meeting.

Directors’ responsibility statement We confirm that to the best of our knowledge: • the financial statements, prepared in accordance with the International Financial Reporting Standards (“IFRSs”) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; • the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and • the Annual Report and Accounts, taken as a whole are fair, balanced and understandable and provide the necessary information for shareholders to assess the Company’s performance, business model and strategy.

By order of the Board

Stephen Critoph Company Secretary 27 February 2015 Overview Strategic report Governance Financial statements

Annual Report35 2014

The Restaurant Group plc Group Restaurant The

Fruit and Vegetables will – we support customers in their consumption fruit of and vegetables. help achieve this To willwe be using the Government’s “5-a-day” guidelines, due with be published to a view help to making in 2015, it easier for our customers choose to healthier meals. Alcohol Unit Reduction have – we signed a core up to commitment “foster to a culture responsible of drinking”. Part the of commitment help is to remove to 1 billion units alcoholof sold annually from the market December by aimachieve We to this improvingby consumer2015. choice lowerof alcohol products and making the alcohol units more visible on our products and displays. Being a Responsibility Deal partner means that the Company is required monitor to and provide regularupdates the to Department Health of with regard the actions to are we taking fulfilto our commitments within each pledge. Healthy eating is a personal responsibility but the Group acknowledges that as a provider food of and drink have we a role play in to providing appropriate options from which individuals may choose when they out. The Company strongly believes that should we offer our guests choices on the menu. Whilst do we not wish be prescriptive to aim we to provide a healthy choice at each menupoint, alongside more indulgent options. For many people, dining out is a treat and therefore normal restrictions which may be applied healthyto eating on basis a day-to-day may be waived in favour their of enjoyment and experience. Allergens Frankie launchedIn & Benny’s October 2013, a Non-Gluten Containing Ingredients (NGCI) menu cater to for consumers with a gluten allergy or intolerance. This menu has been fully endorsed Coeliac by UK and as a result, Chiquito also launched a NGCI menu improve to choice for customers in 2014. published we During full allergen 2014, information for food and drink for all our of Leisure and Concessions brands in accordance with legislation. EU This information is easily accessible customers to on our brand websites. Frankie & andBenny’s Chiquito customers are also now able customise the menus online selecting by their dietary needs. Customers visiting these brands can also access allergen information online via a personalised iPad on site. • • employees.

to the saltto agreed targets the by for the end 2012 of Responsibility Deal which of achieved we 95% compliance in 2014; salt targets achieve andto are the currently 2017 working with suppliers reduce to salt in the products procure;we and workto towards reaching the Salt Catering: Procurement target help to consumers lower their salt intake while eating meals out the of home. commit We procuring to at least 50% (by volume) products of meet to these targets. –  –  Our communities – how TRG interacts with those communities from which our customers and employees are drawn. Our environment – the impact TRG of on the wider environment, and how are we seeking reduce to this. Our shareholders – those thathave invested capital in the development TRG, of and whom to the Directors and management the of Group are accountable. have we removed all added trans fats from our products and constantly monitor our products ensure to this remains the case; willwe use our local presence encourage to children and adults become to more active; and commitwe ensuring to effective action is taken in all premises reduce to and prevent under-age sales alcohol of (primarily through the rigorous application Challenge of 21 and Challenge 25). Salt Reduction feel – we this is an important consideration for our customers and as a result have agreed three to pledges under this category and commit: –  Nutrition approach – the healthy Group’s to eating. Our people policies – the Group’s and actions towards our

• • • Nutrition TRG is a partner the of Public Health Responsibility Deal (“the Responsibility Deal”), launched the by Department Health. of The Responsibility Deal has been established tap the to into potential for businesses and other organisations improve to public health through their influenceover food, alcohol, physical activity and health in the workplace. The Group has renewed three pledges within the ResponsibilityDeal: • • • The Group has also signed a further up to five pledges during 2014: • This statement sets out the principal areas focus of and activity that the Group has undertaken date: to • • The Restaurant Group plc “Company” (“TRG”, or “Group”) acknowledges that it has a significantrole to play in the communities and wider environment in which it operates. Corporate responsibility report 36 Annual Report 2014 The Restaurant Group plc

Corporate responsibility report continued

Other initiatives During 2014 the Group successfully opened a further 40 The Group is a member of the Supplier Ethical Data restaurants and in the process created over 1,300 jobs within Exchange (“SEDEX”), which facilitates measurement and the local communities; a trend which we expect to continue improvement in ethical business practices across the supply as we expand our business. As part of our commitment to chain; in 2013, 164 of our food and non-food suppliers equal opportunities, our policies offer equal rights regardless provided information describing their procedures and of age, colour, gender, sexual orientation, disability or religion practices to the Group via SEDEX. This has risen to 251 and the diversity of our people reflects the diversity of the in 2014. customers we serve.

As in previous years, there continues to be no known The Group pays all of its employees at least the national genetically modified in any product the Group uses minimum wage and does not utilise tips in any form to make and new suppliers are required to confirm that they will up this rate. All gratuities are paid to the employees, with not provide the Group with such products. We have also credit card tips attracting only the usual tax deductions but, removed the “Southampton Institute” colourings that can unlike some of our competitors, no administration fee is taken cause hyperactivity in children from all TRG branded by the Company. products. Within the Company, training and development is the Our people foundation on which our business is built. We have specialist The most important asset any company can have is its training teams that ensure that every employee receives the people and with over 15,000 employees it is essential that highest quality training possible. We have invested and we foster that talent, and support employees in building great launched a state of the art e-learning platform, providing new teams. All employees are encouraged and supported to IT equipment for every site allowing us to deliver a wide array progress and develop within our Company and we endeavour of classroom training, on the job development and individually to provide them with the tools and knowledge to achieve this. designed training programmes through our own training This is the key to any successful business and our team is teams and selected specialist learning partners. We feel this one of which we are especially proud. approach helps keep the Group and all of our employees ahead of the competition. All of our new managers, no matter the experience or the level, undertake our Managers in Training (“MIT”) programme when As our portfolio of sites is spread throughout the UK, it is vital they join us or are promoted from within. Our MIT programme that our communication is of a very high standard. We work continues to identify and develop talent; the Group also hard to ensure employees, in particular those based at our continues to implement leadership programmes to assist in branches, are given regular team briefings. Our senior the identification and development of our future managers. managers travel extensively around our businesses and Whilst we realise the importance of developing internal talent, interact daily with their branch management and team we are expanding our commitment to apprentice and members to ensure full two-way communication is present graduate programmes to help create a clear path for an throughout the business. individual, as part of this programme, to join the Company and progress in to a management position. Already some of our Employee engagement is important for the Group. In graduates from previous intakes have been promoted into addition to the 2015 Employee Survey, we are currently more senior roles. Appraisals setting clear objectives are also implementing new visions and values through our “Proud firmly in place with development and performance linked to to be TRG” initiative. clear salary structures and career progression. Health and Safety Such schemes are a key feature of the Group’s succession The health and safety of our customers and employees is planning strategy and are therefore designed to equip of paramount importance. The Group has worked hard to managers with the skills they need to develop their careers ensure extensive procedures are in place to mitigate risks as at the next level and to ensure the Company remains their far as possible to our guests and employees. We have very employer of choice over the long-term. clear procedures and standards in place, and to enforce these we employ external auditors to perform a rolling programme of independent safety audits and carry out benchmarking of our restaurants.

We have invested significant time and resources in health and safety matters across the Group in recent years to further enhance the clean, safe environment for our customers and staff. Overview Strategic report Governance Financial statements

Annual Report37 2014

The Restaurant Group plc Group Restaurant The

Benny’s.

Help Amber Walk Appeal Walk Amber Help Frankie became & Benny’s In August aware a young of 2014, girl called Amber who suffers from Spastic Diplegia Cerebral She neededPalsy. raise to £60,000 pay for an to operation that would enable her walk. to Following fundraising efforts throughout the weekends in our restaurants and sponsorship mile a 100 of cycle, Frankie were able & Benny’s donate to towards her operation. The operation was aover £17,300 success and Amber is currently undergoing physiotherapy. HeartBritish Foundation Chiquito raised fundsIn 2014, for the British Heart Foundation, heartthe nation’s charity and the largest independent funder cardiovascular of research. Throughout the year the restaurants held a variety charity of breakfasts and fun days and donated over £12,700. Charity breakfasts & local charity events In addition the large to fundraising drives above, there any many other charities that have benefitted from our support regularly We this year. host charity breakfasts at which we offer free breakfasts in return for a donation local to charities including Phyllis Epilepsy, Tuckwell Hospice, Young St HospitalGeorge’s Charity and Shine Northern Ireland. Coast Coastto and Filling Station regularly raise funds for DEBRA who are the national charity supporting individuals and families affected Epidermolysis by Bullosa (EB); during 2014 the brand donated over £15,400. EducationSport & sponsorship sports team Junior Frankie have a long & Benny’s history sponsoring of local junior sponsored sports. we junior During 144 of a total 2014, teams across the country playing hockey, football, rugby, swimming, gymnastics, netball and much more. Not only do provide we kits for the teams, but also we take an active role during the season, attending tournaments and inviting them enjoy to end season of celebration dinnersat Frankie & programme visit Schools The Frankie schools & Benny’s visit programme has been in place for more than six years now and continues grow to in visits popularity taking place with in over 2014. 1,750 School children, accompanied their by teachers, are given the opportunity visit to our restaurants help to bring curriculum based subjects such as maths, science and food hygiene life. The to children are also able make their to own pizzas choosing by their toppings. Whilst leave we the cooking the chefs, to school children are given an educational activity book complete to – a pack that has been designed educationalby experts. BBC Children in Need our ‘Penny fromDuring a pint’ campaign 2014 raised over £20,000 forChildren in Need and a further £90,000 had been raised through a number local of fund raising activities across our Frankie restaurants. & Benny’s In the last six years, the brand has raised a combined over of total £500,000 for Children in Need. Caudwell Children support services,family provide Children Caudwell equipment, treatment and therapies for disabled children and their families across the UK. Frankie raised & Benny’s helping fund£60,000 to treatment for in 2011 a little girl called Susanna were we who pleased was unable walk. to In 2014 raiseto over £43,000 for Susanna continue to her rehabilitation and help fund to treatment for another 16 children who have cerebral palsy and brain injuries. Susanna has recently started playing netball, the first time she has ever been classes able participate to at school. in P.E. Children’s Hospice Association (CHAS) Scotland Children’s The Group has raised over £400,000 for CHAS since fundraising Filling began. During Station undertook 2014 various fundraising activities for CHAS raising over £11,000 for the charity. CHAS provides the only hospice service in Scotland for children and young people who have life- shortening conditions for which there is no known cure. Leukaemia & Lymphoma Research Lymphoma Leukaemia & Frankie worked & Benny’s withDuring Leukaemia 2014, & Lymphoma Research, the UK blood cancer charity. Every year they help prevent people dying blood of cancer and carry out research preventable into measures avoid those to developing blood cancer in the first instance. several In July, members the of senior management team took part in a 500kmLondon Paris to bike ride raising over and £275,000 throughout the year restaurants have held various fundraising weekends help to highlight the need for further research. Throughout 2014 we supported we Throughout a number 2014 local of and national charitable events, some which of are detailed below: Our communitiesOur are passionateWe about engaging with our communities and actively support our teams in their fundraising efforts and engagement. community 38 Annual Report 2014 The Restaurant Group plc

Corporate responsibility report continued

Our environment Under Scope 1 we have seen a significant drop in our F-Gas The Group recognises its responsibility in minimising its (Operation of Facilities) compared to 2013 where there impact on the natural environment and continues its was a higher need for replacement gas due to maintenance commitment in reducing its energy consumption (and carbon issues; something the Group has worked hard to rectify emissions), water usage and waste. throughout 2014.

Energy Consumption and Carbon Emissions We continue to promote our energy saving campaign to The Group continues to maintain the Carbon Saver Gold all restaurants and through the timely supply of accurate Standard and also seeks to further improve the energy reporting, operational managers have the information efficiency of the fabric of its estate. New restaurant fit-out they need to allow them to monitor and reduce energy specifications now include heat recovery systems, energy consumption levels. This alongside our other initiatives will saving lighting, low energy hand dryers and increased assist the Group in completing future obligations under the insulation. In the course of the year we opened a number new Energy Savings Opportunity Scheme (ESOS) legislation of sites under the Building Research Establishment and allow us to explore new environmental opportunities. Environmental Assessment Method (BREEAM) incorporating the use of Solar PV, Building Management Software and grey Our shareholders water harvesting. The Group has had a clear strategy since 2001 – to deliver value for shareholders by focusing on sectors within the Further investment in Voltage Optimisation equipment and eating out market that offer high barriers to entry, where we behavioural training resulted in a like-for-like energy reduction can generate sustainable and growing cash flows and which for the 5th consecutive year. offer high returns on investment. This has led the Group to focus investment in edge and out of town leisure locations, Waste Management rural and semi-rural pubs and our Concessions business, The Group has introduced food recycling across the estate which operates principally within airports. The Group has resulting in 85% of our waste being redirected from landfill; maintained a progressive track record of growing profits and up from 49% in 2013. dividends for shareholders. The Chairman’s Statement, the Review of Operations and the Financial Review provide Emissions data in respect of the 2014 reporting period, on the further detail on the Group’s strategy, performance during financial control reporting basis, is as follows: 2014 and the prospects for the Group. 2013/14 2012/13 CO e tonnes CO2e tonnes 2 (Carbon (Carbon Dioxide Dioxide Emission Type equivalent) equivalent) Scope 1: Operation of Facilities 851 4,046 Scope 1: Combustion 16,909 17,3 97 TOTAL Scope 1 Emissions 17,76 0 21,443 Scope 2: Purchased Energy 61,700 53,788 TOTAL Scope 2 Emissions 61,700 53,788 Total Emissions 79,460 75,231

Greenhouse Gas Emissions Intensity Ratio: Total Footprint (Scope 1 and Scope 2) – CO2e 79,460 75,231 Turnover (£) 635.2m 579.2m

Intensity Ratio (tCO2e/£1,000) 0.125 0.130 Notes: – Our methodology has been based on the principals of the Greenhouse Gas Protocol. –  We have reported on all the measured emissions sources required under The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. –  Conversion factors for electricity, gas and other emissions are those published by the Department for Environment, Food and Rural Affairs in 2013. –  Refrigerant fugitive emissions from our pub estate were excluded last year due to an absence of data. Overview Strategic report Governance Financial statements

Annual Report39 2014

The Restaurant Group plc Group Restaurant The

AGM.

Remuneration policy for 2015 for policy Remuneration The Remuneration Committee continually reviews the executive remuneration policy ensure to itpromotes the attraction, retention and incentivisation high of calibre executives deliver It is equally to strategy. the Group’s important that the policy reflects shareholder’s views and the changing landscape in which the Group operates. As a result reaching the of 2005 year LTIP the end life, its of 10 the Committee has consulted with major shareholders on a number changes of the current to designed policy, to simplify remuneration and further enhance the link between pay andlong-term performance. Subject shareholder to Annualapproval General at the 2015 Meeting, it is therefore proposed Scheme that the 2005 LTIP (the finalawards under which are expected be granted to will in March 2015) be replaced a broadly by yet simplified, similar, long-term incentive arrangement under which no Matching Awards may be granted. In addition, a two year post-vesting holding period will apply with the effect the extent to that, that vest afterawards granted LTIP three under years, the 2015 executive Directors will be required retain to the net taxof shares for a further two years thereafter. Full details are Noticeincluded AGM. of in the 2015 In light the of proposed changes the remuneration to policy approved shareholders by the at last AGM, revised year’s policy will again be put shareholders to for approval this year. I hope that you will be supportive the of two resolutions approveto the Directors’ remuneration report at this year’s Yours sincerely, Yours Hughes Tony Remuneration Committee the Chairman of February27 2015 the Directors’ remuneration policy report, amended from the previous year as described sets out below, the Directors’ remuneration policy for the Company from and will be subjectthe the date of in AGM May 2015 to a binding shareholder vote; and the annual report on remuneration provides details of the remuneration earned Directors by in the year to and December how28 the policy will 2014 be implemented financialyearfor the 2015 and will be subjectto an advisory shareholder vote. Dear Shareholder, Dear I am pleased introduce to our report on Directors’ remuneration for the year ended This December 28 2014. report complies with the reporting regulations published by the Department for Business, Innovation and & Skills in 2013 will be subject two to shareholder at the votes forthcoming Annual General Meeting (“AGM”): • • Remuneration outcomes in 2014 For the year under and review, reflecting theexcellent financial performanceof the the Group, annual bonus paid the of maximumout at 75% for each the of executive Directors as detailed in the annual report on remuneration. Incentive Plan (“LTIP”), Long-Term The which 2012 vests in based on performanceMarch 2015 over the three year period will vest and up to at 100% in including respect 2014, theof shareholder total return (“TSR”) element and at 88% in respect earnings of per share (“EPS”) performance. Annual statement Annual Directors’ remuneration report 40 Annual Report 2014 The Restaurant Group plc

Directors’ remuneration report continued

Directors’ remuneration policy report Consideration of employment conditions elsewhere in the Group Policy overview In determining the remuneration of the Group’s Directors, The objective of our remuneration policy is to attract, retain the Committee takes into account the pay arrangements and incentivise a high calibre of senior management who can and terms and conditions across the Group as a whole. direct the business and deliver the Group’s core objective of The Committee seeks to ensure that the underlying principles growth in shareholder value by building a business that is which form the basis for decisions on Directors’ pay are capable of delivering long-term, sustainable and growing consistent with those on which pay decisions for the rest cash flows. of the workforce are taken.

To achieve this objective, executive Directors and senior Key elements of the remuneration policy for Directors management receive remuneration packages with elements Set out below is a summary of the main elements of the of fixed and variable pay. Fixed pay elements (basic salary, remuneration policy for executive Directors and non-executive pension arrangements and other benefits) are set at a level Directors, together with further information on how these to recognise the experience, contribution and responsibilities aspects of remuneration operate. The main changes from of the individuals and to take into consideration the level the policy approved at the 2014 AGM are: of remuneration available from a range of the Group’s • the replacement of the 2005 LTIP which expires in broader competitors. November 2015; • a reduction in annual bonus potential; Variable pay elements (annual bonus and Long-Term Incentive Plan (“LTIP”) awards) are set at a level to incentivise executive • the introduction of a two year post-vesting LTIP holding Directors and senior management to deliver outstanding period; and performance in line with the Group’s strategic objectives. • an increase in executive Director shareholding guidelines.

Consideration of shareholders’ views This policy will be operated from the date of the Annual The Remuneration Committee considers feedback from General Meeting in May 2015. shareholders received at each AGM and any feedback from additional meetings as part of any review of executive remuneration. In addition, the Remuneration Committee engages pro-actively with shareholders and ensures that shareholders are consulted in advance where any material changes to the remuneration policy are proposed.

Purpose and Operation Opportunity Performance link to strategy metrics

Basic salary Attract and retain Reviewed annually from No prescribed maximum None. key personnel. 1 January or when an annual increase. The individual changes position Committee is guided by or responsibility. Increases the general increase for Reflects individual based on role, experience, the broader UK employee responsibilities, skills performance and population but on and achievement consideration of the broader occasions may need to of objectives. workforce pay review and recognise, for example, competitor pay levels. an increase in the scale, scope or responsibility of the role.

Benefits To provide market Contractual entitlement. No maximum limit. None. consistent benefits. Benefits packages typically comprise a car (or car allowance), health insurance, and life assurance although other benefits may be provided where appropriate. Overview Strategic report Governance Financial statements

Annual Report41 2014

Performance metrics None. on a one year performanceperiod. Majority the of opportunity bonus will be based on Group profit before tax. Normally based Normally

The Restaurant Group plc Group Restaurant The

Opportunity Up to 20%Up to basic of salary for the executive Directors. Maximum 150% of of basicof salary. Operation Contribution a personal to pension plan (no defined benefit schemes operate) and/or a salary supplement where (e.g. HMRC limits would be exceeded). renewed annuallyTargets as part the of budgeting process and primarily related Group to performance. Bonus level is determined the by Committee after the year-end based on performance conditions drawn up before the financialyear commences. In respect any of bonus in excess 100% salary, of of within three months of payment bonus of the executive must invest any such excess, net tax, of in shares (or retain shares vested under to the LTIP an equivalent value) which must be held for not less than three years (“deferred bonus shares”) or until the executive ceases full time employment, there is a change control of of the Company or other circumstances. appropriate pensionable. Not A claw back mechanism operates.

link to strategy Purpose and and Purpose Rewards sustained contribution. Rewards the achievement annual of financial targets and other performance key depending indicators, on job responsibilities.

bonus Pension Annual 42 Annual Report 2014 The Restaurant Group plc

Directors’ remuneration report continued

Purpose and Operation Opportunity Performance link to strategy metrics

LTIP Promotes achievement Annual grant of Conditional Maximum of 200% Normally based of long-term strategic Awards in the form of of base salary. on a three year objectives of increasing nil cost options. performance period. shareholder value and Conditional Awards vest TSR vs comparator delivering sustainable three years after grant group. and expanding cash subject to performance flows. Financial metrics conditions and continued (e.g. EPS). employment. 25% of an award Two year post-vesting vests at threshold holding period applies to the performance net of tax shares for awards increasing to full under the 2015 LTIP (with vesting at maximum the first grant expected to performance. be made in 2016). Dividend equivalents may be payable. A claw back mechanism operates.

Save As You Encourages employee HMRC plan under which Prevailing HMRC limits. None. Earn scheme share ownership eligible employees are able (‘SAYE’) and therefore increases to purchase shares under alignment with a three year savings contract shareholders. at a discount of up to 20% of market value at grant. Provides tax advantages to UK employees.

Shareholding Increase alignment Requirement to retain no 200% of basic salary. None. guidelines with shareholders. fewer than 50% of the net of tax shares vesting under an LTIP award until the required shareholding is achieved.

Non-executive Reflects fees paid Fees are reviewed annually. As per executive Directors, None. Directors’ fees by similarly sized Fees paid in cash. there is no prescribed companies. maximum annual increase. Reflects time The Committee is guided commitments and by the general increase in responsibilities the non-executive director of each role. market and for the broader UK employee population but on occasions may need to recognise, for example, an increase in the scale, scope or responsibility of the role. Overview Strategic report Governance Financial statements

39% 34% 27% Maximum 33% 25% 42% CFOCFO On-target Annual Report43 2014

100% Minimum 27% 39% 34% Maximum The Restaurant Group plc Group Restaurant The

33% 25% 42% CEO On-target LTIP Bonus benefits and pension Basic salary, 100% Minimum 0 500 2,500 2,000 1,500 1,000 Value of remuneration packages at different levels levels at different packages of remuneration Value of performance (£’000) Salary levels are based on those applying from 1 January 2015. The value of benefits receivable is estimated in 2015 and pension is based on 20% of salary. The on-target level of bonus is taken be to 50% of the maximum bonus opportunity of salary (150% for both the Chief Executive Officer and the Chief Financial Officer). The on-target level of vesting under is the taken LTIP be to 55% of the face value of the awards expected LTIP at grant 2016 and the maximum value is taken be to 100% of the face value of the expected awards of salary at grant2016 (175% for both executive Directors). No share price appreciation has been assumed for the deferred bonus shares and awards. LTIP Notes: 1 2 3 4 5 promotions and recruitment to Approach The remuneration package for a new executive Director would be set in accordance with the terms the of Company’s prevailing approved remuneration policy at the time appointment of and take account into the skills and experience the of individual, the market for rate a candidate thatof experience and the importance securing of the individual. relevant Salary would be provided at such a level as required to attract the most appropriate candidate and may be set initially at a below mid-market level on the basis that it may progress towards the mid-market level once expertise and performance has been proven and sustained. The annual bonus potential would be salary of limited 150% to and grants under would be limited the LTIP 200% to salary of (but normally limited In a maximum addition, to the 175%). of Committee may offer additional cash and/or share-based elements replace to deferred or incentive pay forfeited by an executive leaving a previous It would employer. seek to ensure, where possible, that these awards would be consistent with awards forfeited in terms vesting of periods, expected value and performance conditions. For an internal executive Director appointment, any variable pay element awarded in respect the of prior role may be allowed pay out to according its terms. to In addition, any other ongoing remuneration obligations existing prior to appointment may continue. Illustration of application of remuneration policy remuneration policy of application Illustration of The chart below showsthe value the of executive Directors’ packages under three performance scenarios, minimum, on-target and maximum assuming that the proposed changes the policy to AGM. are approved at the 2015 References annual financial to bonusyear the relate 2015 to awardswhile references awards the relate 2016 to LTIP to the(i.e. firstto award be granted under the new policy). For avoidance doubt, of in approving this Directors’ remuneration policy report, authority is given the Company to honourto any prior commitments entered with into current or former Directors. There are no material differences in the structure of remuneration arrangements for the executive Directors and quantum, from aside population, management senior performance metrics and participation rates in incentive schemes, which reflect the fact that a greater emphasis is placed on performance-related pay for executive Directors and the most senior individuals in the management team. Outside the of senior management team, the Company aims provideto remuneration structures for employees which reflect market norms. The Committee operates share plans in accordance with their respective rules and in accordance with the Listing Rules and HMRC where relevant. The Committee, consistent with market practice, retains discretion over a number areas of relating the operation to and administration these of plans. Financial performance measures (profit before tax, earnings per share(“EPS”) and shareholder total return (“TSR”)) are used as the performance key indicators (“KPIs”). The combination EPS and of TSR performance conditions provides a balance between rewarding management for growth in sustainable profitability and stock market outperformance. TSR is a clear indicator the of relative success the of Group in delivering shareholder value and, as a performance measure, firmly aligns the interestsof Directors and shareholders. The EPS target range will require growth from the current all-time high level profitability of and the TSR condition will be based from a strong recent share price performance. Performance against EPS and TSR targets are reviewed the by Committee. 44 Annual Report 2014 The Restaurant Group plc

Directors’ remuneration report continued

For external and internal appointments, the Committee may Non-executive Directors agree that the Company will meet certain relocation and/or Letters of appointment for the non-executive Directors were incidental expenses as appropriate. each set for an initial three year period (renewable thereafter for periods of three years). They are required to submit If appropriate, the Committee may agree, on the recruitment themselves for re-election every year. The Chairman has of a new executive, to a notice period in excess of 12 months a notice period of a year and the non-executive Directors but to reduce this to 12 months over a specified period. are appointed under arrangements that may generally be terminated at will by either party without compensation. Service contracts and payments for loss of office Contractual provisions Fees payable for a new non-executive Director appointment It is the Company’s policy that any new executive Director will take into account the experience and calibre of the appointment should have a service contract with an indefinite individual and current fee structure. term which is subject to one year’s notice by either party with provision, at the Board’s discretion, for early termination by way of a payment in lieu of salary, benefits and pension, with the ability to phase payments and mitigate such payments if alternative employment is obtained. There will be no provisions in respect of a change of control. Annual report on remuneration

In respect of the newly appointed Chief Executive Officer, in Implementation of the remuneration policy for the the event of early termination by the Company, the Company 2015 financial year shall make a payment in lieu of notice equivalent to twelve Executive Directors’ salaries for 2014 and applying with effect months of base salary only. There are no provisions in respect from 1 January 2015 are: of change of control. 2014 2014 (from 2015 Under the Chief Financial Officer’s contract (originally (to 31 August 1 September (from 1 January dated 7 July 2004), the Company shall make a payment 2014) 2014) 2015) in lieu of notice equivalent to twelve months of base salary, Basic salary £ £ £ benefits, pension and annual bonus. Following a review Danny Breithaupt – £450,000 £480,000 of service contract provision carried out in November 2014, Andrew Page £615,000 – – Stephen Critoph relinquished his contractual change of Stephen Critoph £290,000 £350,000 £380,000 control provisions (as disclosed in last year’s remuneration policy report). Total Executive Director Outstanding incentive awards salaries £905,000 £800,000 £860,000 The annual bonus may be payable with respect to the period of the financial year worked although it will be pro-rated for Following Danny Breithaupt’s promotion to Chief Executive time and paid at the normal pay-out date. Officer from 1 September 2014, his annual base salary was set at £450,000 from appointment. While this reflected a Any share-based entitlements granted to an executive below median base salary (and was c.27% lower than Director under the Company’s share plans will be determined previous Chief Executive Officer’s base salary), the based on the relevant plan rules. Any outstanding LTIP Committee intends to increase his salary to market level over awards will normally lapse on cessation of employment. time as his experience in the role grows. The first such However, in certain prescribed circumstances, such as death, assessment was carried out at the start of 2015 and, noting ill-health, disability, retirement or other circumstances at the Danny Breithaupt’s progress to date, his salary with effect discretion of the Committee, ‘good leaver’ status may be from 1 January 2015 was increased from £450,000 to applied. Awards held by executive Directors will normally vest £480,000. The next such review will take place at the start on their scheduled vesting date, subject to the satisfaction of of 2016. the relevant performance conditions at that time and reduced pro-rata to reflect the proportion of the performance period actually served. However, the Remuneration Committee has discretion to determine that awards vest at cessation and/or to dis-apply time pro-rating. Overview Strategic report Governance Financial statements

2015 £56,200 £ 3 37,6 0 0 Annual Report45 2014

2014 £53,500 £321,500 The Restaurant Group plc Group Restaurant The

EPS element (50%) – growth in the Company’s EPS in excess inflation. of 30%of this elementof the award vests for growth increasing equal p.a., RPI + 4% full to to vesting for growth equal or in to excess p.a.. RPI of + 10% TSR element (50%) – the Company’s TSR vs the FTSE 350 and LeisureTravel sector (excluding airlines). 30% this of element the of award vests for a median ranking, increasing fullto vesting for an upper quartile ranking; and Chairman Conditional Awards (there will be no facility grant to Matching Awards) will, subject granted from shareholder to 2016 be AGM, granted LTIP. underapproval at the the 2015 2015 The elements Scheme key LTIP the of proposed new 2015 are set out inthe Notice AGM. of Directors Non-executive As detailed in the remuneration the Company’s policy, approach setting to non-executive Directors’ fees is by reference fees to paid at similar companies and reflects the time commitment and responsibilities each of role. A summary current of fees is as follows: • Performance targets awards for LTIP to be granted in 2015 Consistent with previous years, the final Conditional and Matching be Awards granted to under will the 2005 be LTIP subject the following to targets: • Other non-executive Directors For 2015, Danny Breithaupt’s annualFor 2015, bonus will be set at salary of 150% (a reduction salary of from the 165% offered the previousto Chief Executive Officer) and Stephen Critoph’s annual bonus potential will salary of be set at 150% for 2015 to salary of onwards (an for 2014 increase from the 137.5% reflect his increased responsibilities). Performance targets for the annual bonus in 2015 the annual bonusFor 2015, will continue be based to on Group financial measures. The Committee has chosen not disclose,to in advance, the performance targets for the forthcoming year as these include items which the Committee sensitive. commercially considers Pension and benefits and Pension Pension and benefits will continueto be provided in line with the stated policy. In addition the reviewto Danny of Breithaupt’s base salary carried out at the start the Committee the of year, has also reviewed Stephen salary Critoph’s with effect from Stephen1 January salary Critoph’s was 2015. set at £350,000 following from September 1 a material 2014 change in his role and responsibilities. Upon originally reviewing role, the Committee Stephen’s arrived at a base salary range between of £350,000 – £400,000 (based on Chief Financial Officer salaries topin the halfof the FTSE 250). review the At time the date, the of September 2014 Committee felt that it was appropriate position to the salary at the bottom the of range and review his performance in the followingrole over time. a review However, Stephen’s of performance in the role; how his role has evolved date; to and his importance in respect working of with Danny Breithaupt deliverto the growth strategy over the longer term, the Committee determined that his salary should be increased from £350,000 £380,000 to with effect from 1 January 2015. In the this Committee’s now view, places salary Stephen’s broadly around market when compared similarly to sized FTSE roles. 250 Future salary increases for StephenCritoph are expected be in to line with workforce inflation. The average increase for managerial and administrative employees across pay the review. Group was 3% for the 2015 46 Annual Report 2014 The Restaurant Group plc

Directors’ remuneration report continued

Remuneration received by Directors (audited) The table below sets out the remuneration received by the Directors in relation to performance in the year ended 28 December 2014 (or for performance periods ending in 2014 in respect of long-term incentives) and the year ended 29 December 2013.

Long-Term Incentive Plan4, 5 Increase Value in value of vesting due to rise Salary Taxable Annual SAYE award in share Dividend Value of £’000 & fees benefits1 Pension2 bonus3 vesting at grant price equivalent award Total Executive Directors Danny Breithaupt6 2014 150 5 15 169 – 236 303 35 574 913 Andrew Page7 2014 410 18 82 509 – 1,808 1,567 165 3,540 4,559 2013 602 27 120 993 – 1,042 933 123 2,098 3,840 Stephen Critoph 2014 310 12 62 300 – 397 509 59 965 1,649 2013 284 13 56 378 16 376 338 44 758 1,505 Trish Corzine (retired 2013) 2014 – – – – – – – – – – 2013 94 4 9 103 – 330 296 39 665 875 Non-executive Directors Alan Jackson 2014 322 49 – – – – – – – 371 2013 315 47 – – – – – – – 362 Tony Hughes 2014 53 – – – – – – – – 53 2013 53 – – – – – – – – 53 Simon Cloke 2014 53 – – – – – – – – 53 2013 53 – – – – – – – – 53 Sally Cowdry 2014 45 – – – – – – – – 45 1 Benefits comprise car (or car allowance), health care and life assurance. 2 This comprises contributions to the Directors’ personal pension plans and/or salary supplements. 3 This relates to the payment of the annual bonus for the year ended 28 December 2014. Further details of this payment are set out below. 4 This relates to the vesting of the 2012 LTIP Conditional and Matching Awards (where the performance period ended on 28 December 2014). Further details of the values attributed to the 2012 LTIP awards are set out below. 5 Prior year LTIP awards were valued with reference to the three month average share price to 29 December 2013 of 561.2 pence. The actual share price on the date of exercise by the executive directors was 698.0 pence. 6 Remuneration for Danny Breithaupt relates to the period after 1 September 2014 and, in the case of the LTIP, for the performance periods ending after this date. 7 Andrew Page’s remuneration covers the period until his retirement from office on 31 August 2014. Overview Strategic report Governance Financial statements

2 44% 94% 94% 44% 50% 50% value Awards) Awards) Awards) 394,121 179,545 315,298 Awards) 649,294 Estimated % Vesting Matching Matching Matching Matching Conditional Conditional Conditional (max 50% for (max 50% for (max 50% for (max 50% for 1 Annual Report47 2014

to vestto 19,161 10,911 23,951 39,458 Actual on shares shares on 144.0% Cash value value Cash of dividends 29.96p EPS 1,620 3,557 2,846 5,859 to lapse Number of shares Target The Restaurant Group plc Group Restaurant The

Stretch Quartile) 30.75p EPS 30.75p 140.1% (Upper 140.1% Total vesting for MatchingTotal Award to vestto Total vesting for ConditionalTotal Award 57, 231 26,072 45,785 94,285 Number of shares Target Threshold 26.24p EPS 26.24p 80.2% (Median) 27,6 92 60,788 48,631 Number at grant 100,144 of shares Type of award Type Matching Award Matching Award Conditional Award Conditional Award EPS growth of RPI + 4% p.a. (15% EPS growth (15% p.a. RPI of + 4% vesting) (50% p.a. RPI + 10% to vesting) over three financialyears. Performance Condition Performance TSR against the constituents the of andFTSE Leisure 350 Travel sector (excluding airlines). vesting for 15% median performance and 50% vesting for upper quartile performance. TSR measured over three financialyears with a three month average at the start and end theof performance period. The table above and following wording assumes Award dividend LTIP the 2012 equivalent will be settled in cash. Consistent with best enablesthe practice, LTIP award holders benefit to from the payment of dividend equivalents but onlyto the extent that the underlyingThe accountingshare awards vest. charge for these amounts is spread over the relevant vesting period as part of the IFRS 2 “Share-basednote 20). payments” As disclosed charge (see above and consistent with past practice, dividend equivalents awards, on the the to extent 2012 they vested, willby way be of cash settled payments. The estimated value of the vested shares is based on the average share price during the 3 months December 28 to (646.8 2014 pence).awards Details held of by Andrew Page which vested at cessation are presented in the Payments on cessation of office section below. 1 2 Danny Breithaupt Danny Metric Earnings per share (50% for Conditional Award; 50% for Matching Award) VestingAwards of LTIP in year under review (audited) was based Award grantedThe on on a three 1 March LTIP year 2012 performance period ended December 28 2014. As disclosed in previous annual reports, the performance condition for this award was as follows: Targets have not beenTargets disclosed on the grounds commercial of sensitivity. The target will PBT be disclosed in subsequent a remuneration report when it no longer forms part the of comparative result. PBT 23% maximum of potential bonus was payable for achieving increasing target of target 100% for achieving PBT. to PBT, 107% The actual result target of was 103% PBT. Annual bonus payments (audited) payments bonus Annual The annual bonus for the year under review for the Chief Executive Officer and Chief Financial Officer was primarily based on profit before tax performance. The structureof the targets and the actual performance against the targetswas follows:as Executive Stephen Critoph Stephen Total shareholderTotal return (50% for Conditional Award; 50% for Matching Award) The award details for the executive Directors are therefore as follows: 48 Annual Report 2014 The Restaurant Group plc

Directors’ remuneration report continued

Outstanding share awards The table below sets out details of executive Directors’ outstanding share awards (which will vest in future years subject to performance and/or continued service). At 29 At 28 Date from December December Exercise which Name of Director Scheme 2013 Granted Exercised Lapsed 2014 price exercisable Expiry date Danny Breithaupt LTIP (1) 43,594 – (41,043) (2,551) – – 17.0 3.2014 17.0 9.2014 LTIP (2) 26,156 – (23,095) (3,061) – – 17.0 3.2014 17.0 9.2014 Publication 6 months LTIP (3) 60,788 – – – 60,788 – of 2014 results after vesting Publication 6 months LTIP (4) 27,6 92 – – – 27,692 – of 2014 results after vesting 2012 SAYE 2,226 – – – 2,226 283p 01.12.2015 01.06.2016 Publication 6 months LTIP (5) 49,867 – – – 49,867 – of 2015 results after vesting Publication 6 months LTIP (6) 24,933 – – – 24,933 – of 2015 results after vesting Publication 6 months LTIP (7) – 43,947 – – 43,947 – of 2016 results after vesting Publication 6 months LTIP (8) – 16,480 – – 16,480 – of 2016 results after vesting 2014 SAYE – 2,228 – – 2,228 525p 01.12.2017 01.06.2018 Andrew Page LTIP (1) 284,790 – ( 268,129 ) (16,661) – – 17.0 3.2014 17.0 9.2014 LTIP (2) 94,930 – (83,823) (11,107) – – 17.0 3.2014 17.0 9.2014 LTIP (3) 318,804 – (265,670) ( 53,134) – – 31.08.2014 28.02.2015 LTIP (4) 100,504 – (83,752) (16,752) – – 31.08.2014 28.02.2015 2012 SAYE 3,180 – – – 3,180 283p 01.12.2015 01.06.2016 LTIP (5) 218,326 – (109,162) (109,164) – – 31.08.2014 28.02.2015 LTIP (6) 72,775 – (36,386) (36,389) – – 31.08.2014 28.02.2015 LTIP (7) – 142,251 (23,708) (118,543 ) – – 31.08.2014 28.02.2015 LTIP (8) – 47,417 ( 7,9 02 ) (39,515) – – 31.08.2014 28.02.2015 Stephen Critoph LTIP (1) 91,867 – (86,492) (5,375) – – 17.0 3.2014 17.0 9.2014 LTIP (2) 45,933 – (40,558) (5,375) – – 17.0 3.2014 17.0 9.2014 Publication 6 months LTIP (3) 100,144 – – – 100,144 – of 2014 results after vesting Publication 6 months LTIP (4) 48,631 – – – 48,631 – of 2014 results after vesting Publication 6 months LTIP (5) 68,544 – – – 68,544 – of 2015 results after vesting Publication 6 months LTIP (6) 34,272 – – – 34,272 – of 2015 results after vesting Publication 6 months LTIP (7) – 44,718 – – 44,718 – of 2016 results after vesting Publication 6 months LTIP (8) – 22,359 – – 22,359 – of 2016 results after vesting 2014 SAYE – 3,428 – – 3,428 525p 01.12.2017 01.06.2018 Overview Strategic report Governance Financial statements

1 206 969 Value 2,365 (£’000) Vesting years to Estimated determined by Three financial Three 1 January 2017 performance over Annual Report49 2014

3,856 36,023 124,918 30% 30% 30% 30% dividends on Cash value of % of face value that vested shares would vest at threshold performance** shares 69,886 Number 145,553 158,058 of lapsed The Restaurant Group plc Group Restaurant The

3 07,49 9 144,998 922,498 289,996 Face value value Face of award (£)* shares 31,610 Number of vested 145,548 349,422 47,417 44,718 22,359 Number 142,251 was granted which award of shares over at grant Number 291,101 419,308 189,668 of shares 658.5p 658.5p 658.5p 658.5p date of grant Share price at 150% 100% Basis of of salaryof of salaryof of £615,000 £615,000 of of £290,000 Compulsory Compulsory award granted and voluntary bonus deferral and voluntary bonus deferral Matching Matching Conditional Conditional Conditional cost option cost option cost option cost option Awards – nil Type of award Type Awards – nil Awards – nil Awards – nil LTIP awardsLTIP are valued at the share price on the day of vesting pence). (641.0 Performance targets were met in full. Based on an average share price of 648.5pence immediately prior grant. to Details of the performance targets are set out on page 45 of the annual report on remuneration. 2014 Stephen Critoph Stephen 2013 1 2012 LTIP award LTIP * ** Payments on cessation of office (audited) Andrew Page stepped No payments down from were the made Board August for loss on 31 2014. office. of wasHe eligible receiveto a pro-rated annual bonus for the year ended in respect December 28 the of period 2014 the of financialyear that he worked amounting full August £509,000. time to (to 31 2014) Asdisclosed Directors’ remuneration in the 2013 report, outstanding awards vested on cessation LTIP subject performance to and time pro-rating. Amounts vesting under those awards amounted to: Executive Andrew Page Long-Term incentives granted during the year (audited) year the during granted incentives Long-Term the awards following February wereOn granted 27 executive LTIP to Directors: 2014, LTIP (1) – 2011 Conditional – 2011 (1) Award:LTIP Vesting of 50% of the award was based on relative TSR performance and 50% was based on EPS growth to 29 December Details 2013. of the Company’s performance against the performance conditions are set out inlast year’s Directors’ of the Conditionalreport. remuneration 94.15% Award vested based on performance 29 December to 2013. Matching (2)LTIP Award: – 2011 Vesting was based on EPS growth 29 December to Details 2013. of the Company’s performance against the performance condition are set out in last year’s Directors’ remuneration report. 88.3% of the Matching Award vested. (3) ConditionalLTIP 2012 – Award: Details of performance conditions are set out on page 47. Matching (4)LTIP – 2012 Award: Details of performance conditions are set out on page 47. (5)LTIP and (6) Conditional – 2013 Award and Matching Award: Vesting of 50% of the award is based on TSR performance of the Group againstcomparator a group comprising the FTSE and 350 Travel Leisure Sector (excluding airlines) over the three with 30% years 2015, to of this from 2012 part of the award vesting at median performance and full vesting of this part of the award for upper quartile performance.award is based on EPS growth The results remaining of the 2015 compared 50% results, with of the the 2012 with a requirement for average annual growth of between RPI+4%and p.a.. RPI+10% (7) andLTIP (8) Conditional – 2014 Award and Matching Award: Vesting of 50% of the award is based on TSRperformance of the Group against a comparator group comprising the FTSE and 350 Travel Leisure Sector (excluding airlines) over the three with years 30% 2016, to of this from 2013 part of the award vesting at median performance and full vesting of this part of the award for upper quartile performance.awardis based on EPS growth Theresults of remaining the 2016 compared 50%results, with of thethe 2013 with requirementa for average annual growth of between RPI+4% and p.a.. RPI+10% 50 Annual Report 2014 The Restaurant Group plc

Directors’ remuneration report continued

Payments to past Directors (audited) After stepping down from the Board on 15 May 2013, Trish Corzine continued to work for the Company on a part-time basis until 31 May 2014. She received £21,042 in salary and £1,142 in benefits in respect of her employment with the Company from 30 December 2013 until she left the Company. As disclosed in the 2013 Directors’ remuneration report, 99,286 shares relating to the 2012 LTIP vested on the cessation of Trish Corzine’s employment, with an estimated value, including dividend equivalent, of £631,000, based on the share price on the date of vesting (612.1 pence) (2013 payments to Trish Corzine as a past Director as disclosed in 2013 Annual Report: salary of £69,777, benefits of £3,309 and pension contribution of £1,086).

Statement of Directors’ shareholdings and share interests (audited)

Beneficially Beneficially Shareholding owned at owned at % of salary at 29 December 28 December Outstanding 28 December Guideline Director 2013 2014 LTIP awards 2014 Met? Danny Breithaupt 52,7031 52,703 223,706 76% No Andrew Page 490,056 n/a n/a n/a n/a Stephen Critoph 263,220 275,220 318,667 509% Yes Alan Jackson 250,191 250,191 n/a n/a n/a Tony Hughes 400,000 400,000 n/a n/a n/a Simon Cloke 15,000 7,000 n/a n/a n/a Sally Cowdry n/a 1,000 n/a n/a n/a 1 Holding on appointment at 1 September 2014

The Chief Executive Officer and Chief Financial Officer are required to hold shares in the Company worth 200% of salary and must retain no fewer than 50% of the shares, net of taxes, vesting under an LTIP Award until the required shareholding is achieved. At 28 December 2014, Stephen Critoph had met the shareholding requirement.

As at the date this report was approved by the Board of Directors, there have been no changes in respect of the numbers of shares presented in the table above.

Performance graph and Chief Executive Officer pay The graph below compares the Company’s TSR performance and that of the FTSE 250 index, the FTSE Small Cap Index and the FTSE 350 Travel and Leisure Index over the past six years, all rebased from 100. The FTSE 350 Travel & Leisure Index has been selected for this comparison because it is the index most relevant to gauging the Company’s relative performance. This graph shows the value, by 28 December 2014, of £100 invested in The Restaurant Group plc on 28 December 2008 compared with the value of £100 invested in the FTSE 250 Index, the FTSE Small Cap Index and the FTSE 350 Travel and Leisure Index. On this basis the value, as at 28 December 2014, of £100 invested is as follows:

The Restaurant Group plc (dividends re-invested) £718 FTSE 250 Index £317 FTSE Small Cap Index £302 FTSE 350 Travel & Leisure £296

Overview Strategic report Governance Financial statements

5 15 35 150 574 170 913 743 236 169 303 75% 94% 2014 from 2014 01.09.2014 Annual Report51 2014 Danny Breithaupt Danny

18 82 410 165 510 509 75% 1,567 1,808 100% 4,049 4,559 3,540 2014 to 31.08.2014 The Restaurant Group FTSE 250 FTSE SmallCap Index & Leisure FTSE 350 Travel Thomson Reuters (Datastream) Source:

27 123 120 749 933 602 993 2013 93% The Restaurant Group plc Group Restaurant The 1,042 1,042

3,091 100% 3,840 2,098 28 Dec 14

91 27 118 974 647 623 590 735 2012 82% 1,361 3,070 100% 2,335 2,335 29 Dec 13

27 112 243 558 720 697 2011 86% 1,471 1,097 2,811 Andrew Page 100% 3,531 4,228 30 Dec 12

29 916 154 109 543 681 543 543 2010 90% 1,114 2,184 2,727 100% 3,408 01 Jan 12

27 34 108 535 670 670 509 357 642 999 999 (186) 85% 2009 1,669 100% 02 Jan 11

27 Dec 09

This graph shows the value, by 28 December 2014, of £100 invested in The Restaurant Group plc on 28 December 2008 invested in The Restaurant Group This graph shows the value, by 28 December 2014, of £100 Indices. and Leisure 250* and FTSE 350 Travel with the value of £100 invested in the FTSE SmallCap*, FTSE compared the values at intervening financial year-ends. The other points plotted are * excluding investment trusts 0

800 700 600 500 400 300 200 100 28 Dec 08 Value (£) Value Total shareholder return shareholder Total Vesting % related related grant and vest value between at grant of vestedof shares Dividend equivalent Dividend Total LTIP

Total performance performance Total remuneration Annual LTIP

LTIP increaseLTIP in Annual bonus % remuneration Total face valueLTIP Salary The table below shows the remuneration total for the Chief Executive Officerfor eachof the last sixyears: bonus Annual Benefits Pension Total fixedTotal remuneration 52 Annual Report 2014 The Restaurant Group plc

Directors’ remuneration report continued

Percentage change in Chief Executive Officer’s The Committee makes recommendations to the Board. remuneration No Director plays a part in any discussion about his or her The table below shows the percentage change in the own remuneration. In determining the executive Directors’ Chief Executive Officer’s salary, benefits and annual bonus remuneration for the year, the Committee consulted Alan between the financial year ending 28 December 2014 and Jackson (non-executive Chairman) about its proposals. 29 December 2013, compared to all employees of the Group. Salary Benefits Bonus New Bridge Street (‘NBS’), part of Aon plc, were appointed % change % change % change by the Committee and act as independent advisers to the Committee, providing services encompassing all elements Chief Executive n/a n/a n/a of the remuneration packages. Neither NBS nor any other All employees 3% 3% 3% part of Aon plc provided any other services to the Group Average number during the year. Total fees paid to NBS in respect of its of employees 13,601 services were £31,855.

Following Danny Breithaupt’s appointment as Chief Executive NBS is a signatory to the Remuneration Consultants’ Code Officer from 1 September 2014, his annual base salary of Conduct. The Committee has reviewed the operating was set at £450,000 and this increased to £480,000 on processes in place at NBS and is satisfied that the advice 1 January 2015. His salary on 1 September represents a that it receives is objective and independent. c.27% reduction to the previous Chief Executive Officer’s base salary and his bonus entitlement of 150% of salary Statement of shareholder voting represents a c10% reduction to the previous Chief Executive The Directors’ remuneration policy and the Directors’ Officer’s bonus potential. remuneration report for the financial year ending 29 December 2013 were put to shareholders at the Annual Relative importance of spend on pay General Meeting held on 15 May 2014 on an advisory basis. The following table shows the Company’s actual spend on pay (for all employees) relative to dividends. The voting outcomes were as follows: £m 2013 2014 % change Directors’ remuneration policy Staff costs 184.1 205.2 11.5% Votes cast in favour 140,732,782 99% Dividends1 24.9 29.5 18.5% Votes cast against 1,100,972 1% Retained profits1 56.2 60.1 6.9% Total votes cast 141,833,754 100% 1 Dividends and retained profits are as reported for the 2014 trading Votes withheld 164,888 business and exclude the non-trading income and dividend relating to the disposal of the Group’s equity interest in BH Restaurants Limited. Directors’ remuneration report

Appointments outside the Group Votes cast in favour 132,863,783 100% Executive Directors are entitled to accept appointments Votes cast against 664,055 0% outside the Company or Group and there is no requirement Total votes cast 133,527,838 100% for Directors to remit any fees to The Restaurant Group plc. Votes withheld 8,470,804 Currently, none of the executive Directors hold any external appointments. Approval This report was approved by the Board of Directors on Consideration by the Directors of matters relating 27 February 2015 and signed on its behalf by: to Directors’ remuneration The Company has a Remuneration Committee Tony Hughes (“the Committee”) which is constituted in accordance Chairman of the Remuneration Committee with the recommendations of the UK Corporate Governance Code. The members of the Committee during the year were Tony Hughes (Chairman), Simon Cloke and Sally Cowdry, who were independent non-executive Directors. None of the Committee has any personal financial interest in the Company (other than as shareholders). Overview Strategic report Governance Financial statements

Annual Report53 2014

The Restaurant Group plc Group Restaurant The

the suitability accounting the of Group’s policies and practices. Specific accounting policy issues whichwere considered include policies the Group’s in relation the to recognition and timing commercial of discounts received, classification the and assets fixed tangible of impairment the of leases. the effectiveness the of external audit process and consideration the of reappointment the of external auditor; non-audit work carried out the by external auditor in accordance with the Committee’s policy ensure to the safeguard audit of independence; the scope and cost the of external audit; the external interim auditor’s and full year reports; interim and full year financial results. As partof this review the Committee received reports from the external auditor on their audit the of Annual Report and Accounts and their review the of Interim Report; • • • • • The Audit Committee also reviews the arrangements whereby staff the of in Company confidence, may, raise concerns about possible improprieties in financial reporting otheror matters, ensure to there are proportionate andindependent procedures in place for such an occurrence. The Board as a whole reviews the risks facing the Group, and the processes put in place mitigate to those risks, on a regular and formal basis. The Board also reviews the work carried out the by Internal Audit function. frequency Committee Audit The Audit Committee meets formal at least twice Two a year. meetings the of Committee review to were held during 2014 and year discuss end audit the and 2013 the findings from the external interim On one review. auditor on the 2014 occasion, a conflicting appointment prevented full attendance theof Committee. The Chairman andother members the of Committee also meet with the Chief Financial Officer and the external as required, auditor, discuss to matters pertinent to the Committee’s responsibilities. This included a meeting to discuss the external audit plan, including significant risk assessment, developments in corporate governance and audit fees. The Chairman the of Audit Committee also meets, as required, with the Group Internal Audit function review to findings. their Audit Committee process The Committee discharges its responsibilities, as defined in its terms reference, of through Audit Committee meetings during at which the detailed year, reports are presented for time From time, the to review. Committee commissions reports from external advisers or Company management, either after consideration the of Company’s major risks or in response developing to issues. The Committee has the opportunity meet to privately with the external auditor at least twice a year and liaises with Company management in considering areas for review. During the Committee the year, considered the following matters: •

provide additional assurance regarding the integrity, quality and reliability financial of information usedby the Board and in financial statements issuedto shareholders and the public; review the Company’s internal procedures for control and compliance with regard financial to reportingto satisfy itself that these are adequate and effective; review the principles, policies and practices adopted in the preparation financial the of Group’s statementsto ensure they comply with statutory requirements and generally accepted accounting principles; receive reports external from the Group’s auditor concerning external announcements, in particular the Annual Report and Accounts and the Interim Report; develop and oversee the Company’s policy regarding the external audit process, review the independence the of external review the provision auditor, non-audit of services provided the by external auditor and review and approve the remuneration the of external auditor; and consider any other matter that is brought its attention to theby Board or the external auditor. Responsibilities of the Audit Committee Audit the Responsibilities of The responsibilities the of Audit Committee are set out in its terms reference of and the principal matters are to: • • • • • • The Audit Committee regularly invites the external auditor, the Chairman the of Board, the Chief Executive Officer and the Chief Financial Officerto its meetings. Discussions are held in private when appropriate. The Board continuesreview to the composition the of Audit Committee ensure to that it remains proportionate the task to and provides sufficient scrutinyof risk management and internal and external controls. Audit CommitteeAudit composition The Audit Committee is appointed the by Board and comprises independent non-executive Directors the of TheCompany. Committee is chaired Simon by Cloke, who has significant financial experience gained as a Managing Director within HSBC Corporate Bank’s Sector Group. On the Sally Cowdry1 March became 2014 a member the of Audit Committee shortly after her appointment the Board. to Tony Hughes is also a member the of Committee. The Code recommends that audit committees be comprised at least of three independent non-executive directors for companies with a premium listing, such as The Restaurant Group plc. Following Sally Cowdry’s appointment, the Audit Committee has comprised three of independent non-executive directors. This report sets out the work carried out the by Audit Committee (“Committee”) the of Board with reference to the UK Corporate Governance Code (“the Code”) and associated best practice guidance issue the by Financial ReportingCouncil. Audit CommitteeAudit report 54 Annual Report 2014 The Restaurant Group plc

Audit Committee report continued

• Commercial discounts received – this is an area the Board • the overall extent of non-audit services provided by the has also focussed closely on due to recent high profile external auditor, in addition to its case-by-case approval cases in the broader food and retail sector. The report from of the provision of non-audit services by the external the external auditor has covered this topic in detail and the auditor; and Committee also considered the strength of management • the past service of the auditor who was first appointed by controls in this area. formal tender in 2007. • Impairment of tangible fixed assets – tangible fixed assets are the most quantitatively significant item on the balance To assess the effectiveness of the external audit process, sheet, with a net book value at 28 December 2014 of the Committee takes into account: £368.6 million. The Committee has reviewed the paper that • the arrangements for ensuring the independence and management prepare setting out their approach and objectivity of the external auditor; challenged the key judgements made relating to impairment as well as reviewing this topic in discussion with the external • the external auditor’s fulfilment of the agreed audit plan; auditor. • the robustness and perceptiveness of the auditor in their • Lease classification – the Group has over 400 leases and handling of the key accounting and audit judgements; and therefore their classification as either finance or operating • the auditor’s conclusions with regard to existing leases is critical to the financial statements. The Audit management and control processes. Committee notes that typically the Group takes leases of 25 years or less and it considered management’s approach The External Audit and Audit Tendering to assessing the appropriate classification of leases as part Under transition rules set out in the Competition & Markets of the report it received from the external auditor. Authority (“CMA”) final order in response to recent EU  regulations, the Group has to mandatorily tender the audit For further information on the judgements and estimates every 10 years. Deloitte LLP was first appointed as external reviewed in relation to the impairment of tangible fixed assets, auditor, following a tender process, for the year ended see section a) of the Critical accounting judgements and key 30 December 2007. sources of estimation and uncertainty in the Accounting policies for the consolidated accounts. The Committee expects to tender the external audit no later than is necessary to comply with the new regulations. The Company’s public financial statements are reviewed by the Committee in advance of their consideration by the Board. The Committee undertakes a review of the objectivity and effectiveness of the audit process each year. When Independence of the external auditor considering the suitability of the external auditor, the The Committee has adopted a policy on the use of the Committee takes account of the findings set out in the Public external auditor for non-audit work which is in compliance Report on the most recent inspections of Deloitte carried out with the Code. The pre-approved services may be by the Financial Reporting Council’s Audit Quality Review summarised as follows: team and their reports on all other auditors in its sample. When considering suitable external auditors the Committee • audit related services, including work related to the annual also takes account of the ability of the auditor to add value Group financial statements audit, subsidiary audits and through observations from the audit process and interactions local statutory accounts; and of the auditor with the Company’s management. • certain specified tax services, including tax compliance, tax planning and tax advice. Overview As a result of its work during the year, the Audit Committee Other work to be carried out by the external auditor is subject has concluded that it has acted in accordance with its terms to review by the Audit Committee. To fulfil its responsibility of reference. The Committee has reviewed the independence regarding the independence of the external auditor, the and objectivity of Deloitte LLP as external auditor and Committee takes into account the following: recommends the re-appointment of Deloitte LLP by • the external auditor’s plan for the current year, noting the shareholders at the Annual General Meeting to be held on role of the senior statutory audit partner who signs the audit 14 May 2015. report and who, in accordance with professional rules, has not held office for more than five years; On behalf of the Audit Committee, • the arrangements for day-to-day management of the audit relationship; Simon Cloke • a report from the external auditor describing their Chairman of the Audit Committee arrangements to identify, report and manage any conflicts 27 February 2015 of interest; Overview Strategic report Governance Financial statements

Annual Report55 2014

The Restaurant Group plc Group Restaurant The

we have we not identified any material uncertainties that may cast significant doubtability on the Group’s to continue as a going concern. we have we concluded that the Directors’ use the of going concern basis accounting of in the preparation the of financial statements is appropriate; and How thescope of our audit responded to the risk audit the riskTo potential of fixed asset impairment our audit procedures included the following: challengedWe management’s identificationof CGUs and whether it is appropriate given the requirements in IAS 36, “Impairment Specifically assets”. of we considered whether it is appropriate treat to certain sites together in clusters, given their location and impact customers. of alsoWe considered the indicators impairment of identified management,by and performed if any, an analysis to challenge their assumptions. did We this analysing by historical and budgeted branch performance, benchmarking with comparator sites (for example those sites similar of size or in similar locations such as centres town or retail parks). In addition, held we discussions with business heads and sought evidence support to assumptions improved of profitability supporting the assetvalue. However, becauseHowever, not all future events or conditions can be predicted, this statement is not a guarantee the as Group’s to ability continue to as a going concern. • Funds and the related notes 1 to 27. The financialFunds and reporting the related 27. notes 1 to framework that has been applied in the preparation the of Group financial statements is applicable law and IFRSs as adopted the by European Union. The financial reporting framework that has been applied in the preparation the of parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). concernGoing As required the by Listing Rules have we reviewed the directors’ statement that the Group is a going concern. confirmWe that: •

the financial statements give a true and fair viewof the state and the of parent theof Group’s affairs company’s as at profit andfor December the theyear of 28 Group’s 2014 then ended; the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted the by EuropeanUnion; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the financial statements have been prepared in accordance with the requirements the of Companies Act 2006 and, as regards the Group financial statements, Articleof the 4 IAS Regulation. Impairment of tangible fixed assets fixedTangible assets are the most quantitatively significant item on the balance sheet with a net book value £368.6 of December theat 28 to million (see 2014 11 note financial statements) The fixed asset balance is primarily comprisedof freehold and leasehold buildings and the plant and equipment therein that support restaurant the Group’s operations. There are separate restaurant472 sites. The assessment the of carrying value tangible of fixed assets requires evaluating whether any indicators impairment of exist in the asset base reference by expected to future profitabilityof cash generating units (“CGUs”) within the restaurant estate. This is recognised as a critical judgement in the accounting policies on the of page financial 61 statements. Risk Our assessment of risks of material misstatement material of risks of assessment Our The Restaurant Group plc In our opinion: • • • • The financial statements comprise the Consolidated Income Statement, the Consolidated and Parent Company Balance Sheets, the Consolidated Cash Flow Statement, the Consolidated Statement Changes of in the Equity, Parent Company Reconciliation Movements of in Shareholders’ The assessed risks material of misstatement described below are those that had the greatest effect on our audit the strategy, allocation resources of in the audit and directing the efforts the of engagement team: Opinion on financial statements of of statements financial on Opinion Independent auditor’s report auditor’s Independent plc Group The Restaurant members of the to 56 Annual Report 2014 The Restaurant Group plc

Independent auditor’s report to the members of The Restaurant Group plc continued

Risk How the scope of our audit responded to the risk

Lease accounting The Group operates a significant number of leasehold sites To test the classification of leases, our audit procedures with varying lease terms. focussed on a substantive sample of leases, including The accounting for leases involves the exercise of judgement new leases. We evaluated the lease terms against the particularly whether the leases meet the definition of an criteria in IAS 17, “Leases” and considered whether the operating or a finance lease. The Group primarily operates risks and rewards support management’s classification. operating leases. If these were incorrectly classified the For onerous leases we challenged the judgements associated assets would be capitalised and there would be supporting leases identified as onerous and considered depreciation and finance charges in the Income Statement completeness by reference to site trading performance. with a commensurate reduction in operating rent paid. We also tested the onerous lease calculation to supporting This judgement is recognised as a critical judgement in the evidence, including the lease terms. Discount rates used accounting policies on page 61 of the financial statements. were also assessed for appropriateness. Obligations under operating leases are disclosed in note 24. There is also judgement in the identification of potentially onerous leases and whether any provision is required under IAS 37, “Provisions, contingent liabilities and contingent assets”. Provisions for onerous leases are disclosed in note 16 to the financial statements.

Recognition of commercial discounts The restaurant business uses a wide range of suppliers. It is We held meetings with those negotiating commercial typical for suppliers to be on term contracts (mostly annual) discount arrangements to identify the types of deal in place. and as part of the process to agree the contract, it is common Our substantive testing focussed on completeness of for price discounts to be agreed. These principally take the discount arrangements, cut-off and the appropriate form of rebates for meeting quantitative volume targets. recognition in the financial year by sampling contracts and The recognition of commercial discounts in the Income comparing suppliers with discount arrangements and Statement is a risk given their scale and, in certain cases, amounts recognised in prior periods. the judgement that is required in calculating the discount. With reference to ageing of amounts outstanding, we have Commercial discounts should be recognised in accordance also assessed the reasonableness of any provisions held with negotiated supplier contracts and over the correct against commercial discounts receivable. period to which they relate. Overview Strategic report Governance Financial statements

Annual Report57 2014

The Restaurant Group plc Group Restaurant The

the parent company financial statements are not in agreement with the accounting records and returns. adequate accounting records have not been the kept by parent or returns company, adequate for our audit have not been received from branches not visited us; by or we have we not received all the information and explanations requirewe for our audit; or the information given in the Strategic Report and the Directors’ report for the financialyear for which the financial statements are prepared is consistent with the financial statements. the part the of Directors’ remuneration report be audited to has been properly prepared in accordance with the Companies Act 2006; and We have nothingWe report to in respect these of matters. Directors’ remuneration Under the Companies Act 2006 are we alsorequired report to if in our opinion certain disclosures directors’ of remuneration have not been made or the part the of Directors’ remuneration report be audited to is not in agreement with the accounting records and returns. have nothing We report to arising from matters. these Statement Governance Corporate Under the Listing Rules are we also required review to the part the of Corporate Governance Statement relating the to company’s compliance with ten provisions the of UK Corporate Governance Code. have nothing We report to arising from our review. • • Matters on which we are required to report exception by records accounting and received explanations of Adequacy Under the Companies Act 2006 are we required report to in our you if, opinion:to • • Based on this assessment our Group audit scope focused headon office the Group’s in London and the accounting function which in Chester, were subject a full to audit. This represents net assets, 100% the of Group’s revenue and profit before tax. Our auditwork was executed at levelsof materiality applicable each to individual subsidiary entity, which were lower than Group materiality. Allaudit work done across all components was carried out the by Group audit team. the by matters prescribed other on Opinion Companies Act 2006 In our opinion: • An overview of the scope of our audit Our Group audit was scoped obtaining by an understanding theof Group and its environment, including Group-wide controls, and assessing the risks material of misstatement at the Group level. We agreedWe with the Audit Committee that would we report to the Committee all audit differences in excess £80,000 of £108,000),(2013: as well as differences below that threshold inthat, warranted our view, reporting on qualitative grounds. alsoWe report the Audit to Committee on disclosure matters that identified we when assessing theoverall presentationof the financial statements. This is a change in approach order of align to from more 2013 closely with comparable companies. used we a In 2013 materiality of £5.4m of which was approximately 7.5% statutory profit before tax and equatedto of 3% equity. We determinedWe materiality for the Group be which £4m, to is approximately statutory of 5% pre-tax profit adjustedfor the one-off exceptional gain on disposal the of associate,Living Ventures, and below 2% equity. of Our application of materiality of application Our defineWe materiality as the magnitudeof misstatement in the financial statements that makes it probable that the economic decisions a reasonably of knowledgeable person would be changed or influenced.We use materiality both in planning the scope our of audit work and in evaluating the results of our work. Our audit procedures relating these to matters were designed in the context our of audit the of financial statements as a whole, and express not to an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respectto theof any risks described above, and do we not express an opinion on these individual matters. The description risks of above should be read in conjunction with the significant issues consideredby the Audit Committee discussed on page 53. Last year our report included one other risk relating the to impairment goodwill of all which of relates the Pub to restaurant business. have not included We this as risk a key in our report this year as the growth in and continued profitabilityof the Pub restaurant business has increased headroom and consequently it has not had a great impact on our audit strategy or allocation resources. of 58 Annual Report 2014 The Restaurant Group plc

Independent auditor’s report to the members of The Restaurant Group plc continued

Our duty to read other information in the Annual Report Scope of the audit of the financial statements Under International Standards on Auditing (UK and Ireland), An audit involves obtaining evidence about the amounts we are required to report to you if, in our opinion, information and disclosures in the financial statements sufficient to give in the annual report is: reasonable assurance that the financial statements are free • materially inconsistent with the information in the audited from material misstatement, whether caused by fraud or error. financial statements; or This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent • apparently materially incorrect based on, or materially Company’s circumstances and have been consistently inconsistent with, our knowledge of the Group acquired applied and adequately disclosed; the reasonableness of in the course of performing our audit; or significant accounting estimates made by the directors; • otherwise misleading. and the overall presentation of the financial statements. In addition, we read all the financial and non-financial In particular, we are required to consider whether we have information in the annual report to identify material identified any inconsistencies between our knowledge inconsistencies with the audited financial statements and to acquired during the audit and the directors’ statement that identify any information that is apparently materially incorrect they consider the Annual Report is fair, balanced and based on, or materially inconsistent with, the knowledge understandable and whether the Annual Report appropriately acquired by us in the course of performing the audit. If we discloses those matters that we communicated to the Audit become aware of any apparent material misstatements or Committee which we consider should have been disclosed. inconsistencies we consider the implications for our report. We confirm that we have not identified any such inconsistencies or misleading statements. Mark Lee-Amies, FCA (Senior statutory auditor) Respective responsibilities of Directors and auditor for and on behalf of Deloitte LLP As explained more fully in the Directors’ responsibilities Chartered Accountants and Statutory Auditor statement, the directors are responsible for the preparation London, United Kingdom of the financial statements and for being satisfied that they 27 February 2015 give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Overview Strategic report Governance Financial statements

Annual Report59 2014

(2010 – 2012) Cycle – 2012) (2010 Cycle – 2013) (2011 Financial Instruments Revenue from contracts Customers with The Restaurant Group plc Group Restaurant The Consolidated Financial Statements Joint Arrangements Disclosure Interests of in Other Entities Separate Financial Statements Investments in Associates Financial Instruments Impairment Assets of Financial Instruments Levies

Future accounting policies accounting Future theAt authorisation date of these of financial statements, the following new and revised Standards and Interpretations have been adopted in the current Their year. adoption has not had any significant impact on the amounts reported in these financial statements. (Issued)IFRS 10 (Issued)IFRS 11 (Issued)IFRS 12 (Revised)IAS 27 (Revised)IAS 28 IAS (Amended) 32 IAS 36 (Amended) IAS 39 (Amended) (Issued)IFRIC 21 theAt authorisation date of these of financial statements, the following Standards and Interpretations which have not been applied in these financial statementswere in issue but yet not effective (and in some cases had not yet been adopted by the EU): Annual Improvements IFRSs to Annual Improvements IFRSs to IFRS 9 (Issued) (Issued)IFRS 15 The Directors do not expect that the adoption the of Standards and Interpretations listed above will have a material impact on the financial statementsof the Group in future periods, except as that IFRS 9 will impact both the measurement and disclosures financial of instruments. Beyond the information above, it is not practicable provide to a reasonable estimate the of effect these of Standards until a detailed review has been completed. (d) consolidation Basis of (i) Subsidiaries Subsidiaries are entities controlled the by Control Company. exists when the Company directly has the power, or indirectly, governto the financial and operating policiesof an entity so obtainas to benefits from its activities. In assessing control, potential voting rightsthat presently are exercisable or convertible are taken account, into regardless of management’s intention exercise to that option or warrant. The financial statementsof subsidiaries are included in the consolidated financial statements from the thatdate control commences until the date that control ceases. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions accounting to estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period the of revision and future periods if the revision affects both current and future periods. The preparation financial of statements in conformity with IFRS requires management make judgements, to estimates and assumptions that affect the application policies of and reported amounts assets of and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed be reasonable to under the circumstances, the results which of form the basis making of the judgements about carrying values assets of and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The financial statements are presented in sterling,rounded the nearestto thousand. They have been prepared on the historical cost basis except derivative financial instruments which are held at their fair value. Non-current assets and assets held for sale are stated at the lower carrying of amount and fair value less costs sell. to (c) Basis of preparation The accounting year runs a Sunday to within seven days of December31 each year which will or be 53 week a 52 period. (b) Going concern basis The consolidated financial statements have been prepared on a going concern basis as, after making appropriate enquires, the Directors have a reasonable expectation that the Group has adequate resources continue to in operational existence for the foreseeable future at the time approving of the financial statements. The principal risks and uncertainties facing the Group and further comments on going concern are set out in the report the of Directors. (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) and its interpretations adopted the by International Accounting Standards Board (“IASB”) and as adopted by the European Union. Significantaccounting policies The Restaurant Group plc (the “Company”) is a company incorporated and registered in Scotland. The consolidated financial statementsof the Companyfor theyear ended comprise December28 the Company 2014 and its subsidiaries (together referred as the to “Group”). Accounting policies the for consolidatedaccounts 60 Annual Report 2014 The Restaurant Group plc

Accounting policies for the consolidated accounts continued

(ii) Associates (g) Property, plant and equipment Associates are those entities in which the Group has Items of property, plant and equipment are stated at cost less significant influence, but not control, over the financial and accumulated depreciation (see below) and impairment losses operating policies. The consolidated financial statements (see accounting policy (l)). include the Group’s share of the total recognised gains and losses of associates on an equity accounted basis, from the Where parts of an item of property, plant and equipment have date that significant influence commences until the date that different useful lives, they are accounted for as separate items significant influence ceases. When the Group’s share of of property, plant and equipment. losses exceeds its interest in an associate, the Group’s carrying amount would be reduced to £nil and recognition Leases in which the Group assumes substantially all the risks of further losses is discontinued except to the extent that the and rewards of ownership are classified as finance leases. Group has incurred legal or constructive obligations or made The owner-occupied properties (excluding land element) payments on behalf of an associate. acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of (iii) Transactions eliminated on consolidation the minimum lease payments at inception of the lease, less Intragroup balances and any gains and losses or income and accumulated depreciation (see below) and impairment losses expenses arising from intragroup transactions are eliminated (see accounting policy (l)). Lease payments are accounted for in preparing the consolidated financial statements. Unrealised as described in accounting policy (s). gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity. Unrealised Subsequent costs losses are eliminated in the same way as unrealised gains, The Group recognises in the carrying amount of an item of but only to the extent that there is no evidence of impairment. property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that (e) Foreign currency the future economic benefits embodied with the item will Assets and liabilities in foreign currencies are translated into flow to the Group and the cost of the item can be measured sterling at the rates of exchange ruling at the date of the reliably. All other costs are recognised in the income balance sheet. Transactions in foreign currencies are statement as an expense as incurred. translated into sterling at the rate of exchange at the date of the transaction. The profit and loss accounts for overseas Depreciation operations are translated at the average rate of exchange for Depreciation is charged to the income statement on a the periods covered by the accounts. Exchange differences straight-line basis over the estimated useful lives of each part that relate to the net equity investment in overseas activities of an item of property, plant and equipment. The estimated are taken directly to reserves. useful lives are as follows:

(f) Derivative financial instruments Freehold land Indefinite The Group uses derivative financial instruments, where Freehold buildings 50 years appropriate, to hedge its exposure to interest rate risks arising Long and short leasehold property Term of lease or from operational, financing and investment activities. In 50 years, whichever accordance with its treasury policy, the Group does not hold is lower or issue derivative financial instruments for trading purposes. Fixtures and equipment 3-10 years However, derivatives that do not qualify for hedge accounting Motor vehicles 4 years are accounted for as trading instruments. Computer equipment 3-5 years

Derivative financial instruments are recognised initially at (h) Intangible assets – Goodwill cost. Subsequent to initial recognition, derivative financial All business combinations are accounted for by applying the instruments are stated at fair value. The gain or loss on acquisition method. Goodwill represents amounts arising on remeasurement to fair value is recognised immediately in the acquisition of subsidiaries, associates and joint ventures. In income statement. However, where derivatives qualify for respect of business acquisitions that have occurred since hedge accounting, recognition of any resultant gain or loss 1 January 2004, goodwill represents the difference between depends on the nature of the item being hedged. The Group the cost of the acquisition and the fair value of the net does not currently hold any derivative financial instruments. identifiable assets acquired.

The fair value of interest rate swaps is the estimated amount The classification and accounting treatment of business that the Group would receive or pay to terminate the swap combinations that occurred prior to 1 January 2004 has not at the balance sheet date, taking into account current been reconsidered in preparing the Group’s opening IFRS interest rates and the current creditworthiness of the swap balance sheet at 1 January 2004. counterparties. Overview Strategic report Governance Financial statements

Annual Report61 2014

The Restaurant Group plc Group Restaurant The

(m) Share-based transactions payment The share option programme allows Group employees to acquire shares the of Company and all options are equity- settled. The fair value options of granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled the options. to The fair value the of options granted is measured using a Stochastic model, taking account into the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted reflect to the actual number share of options that vest except where forfeiture is only due market to based conditions not achieving the threshold for vesting. (n) Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result a past of event, and it is probable that an outflowof economic benefits will be requiredto settle the obligation. If the effect is material, provisions are determined discounting by the expected future cash flows at a pre-tax that rate reflects current market assessments the of time value money of and, where appropriate, the risks specificto the liability. (o) Deferred and current tax Corporation tax payable is provided on the taxable profit at the current Deferred rate. tax is recognised in respect all of temporary differences that have originated but not reversed at the balance sheet the except extent to date, that the deferred tax arises from the initial recognition goodwill. of Temporary differences are differences between the carrying amount of assetsthe and Group’s liabilities and their tax base. Deferred tax is measured at the tax rates that are expected to apply in the periods in which the temporary differences are expected reverse to based on tax rates and laws that are enacted, or substantively enacted, the by balance sheet date. Deferred tax is measured on a non-discounted basis. (p) Pensions The Group makes contributions for eligible workers into defined contribution pension plans and these contributions are charged the income to statement as they become payable. The Group does not operate any defined benefit plans. (q) Onerous contracts A provision for onerous contracts is recognised when the expected benefitsto be derivedby the Group from a contract are lower than the unavoidable cost meeting of its obligations under the contract. For goodwill and assets that have an indefinite useful life, the recoverable amount is estimated annually. An impairment loss is recognised whenever the carrying amount an of asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement and are not subsequently reversed. All goodwill stated on the balance sheet relates the acquisition to Blubeckers of Limited and Brunning and Price Limited and is included in the impairment analysis the of Pub restaurant business conducted at each balance sheet date. For property, plant and equipment, the carrying value each of cash generating unit (“CGU”) is compared its estimated to value in use. Value in use calculationsare based on discounted cash flowsover the remaining useful life theof CGU (between 2 and 50 years). The discount used rate is the believed rate theby Board reflect to the risks associated with each CGU. Impairment losses are recognised in the income statement. (l) Impairment The carrying amounts assets the of are Group’s reviewed annually determine to whether there is any indication impairment.of (k) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits.Bank overdrafts that are repayable on demand and form an integral part cash the of management Group’s are included as a component cash of and cash equivalents for the purpose the of statement cash of flows. (j) Stock Stock is stated at the lower cost of and net realisable value. Net realisable value is the estimated selling price in the ordinary course business, of less the estimated costs of completion and selling expenses. (i) and other Trade receivables and other receivablesTrade are stated at their cost less impairment losses (see accounting policy (l)). Any excess fair of value net of assets over consideration on acquisition are recognised directly in the income statement. Goodwill is stated at cost less any accumulated impairment losses. Goodwillis allocated cash to generating units and is formally tested for impairment annually (see accounting policy (l)). In respect associates, of the carrying amount of goodwill is included in the carrying amount the of investment in the associate. 62 Annual Report 2014 The Restaurant Group plc

Accounting policies for the consolidated accounts continued

(r) Revenue Critical accounting judgements and key sources of Revenue represents amounts received and receivable for estimation and uncertainty services and goods provided (excluding value added tax In the process of applying the Group’s accounting policies and voluntary gratuities left by customers for the benefit of as described above, management has made a number of employees) and is recognised at the point of sale. Where judgements and estimations of which the following are the the Group operates a Concession unit under a franchise most significant: agreement, it acts as principal in this trading arrangement. All revenue from franchise arrangements is recognised by the a) Impairment of property, plant and equipment Group at the point of sale and licencing fees are recorded in The Group formally determines whether property, plant Cost of Sales as the goods are sold. The Group does not act and equipment are impaired by considering indicators of as a franchisor in any trading relationship. impairment annually. This requires the Group to determine the lowest level of assets which generate largely independent (s) Expenses cash flows (cash generating units or “CGU”) and to estimate (i) Operating lease payments the value in use of these assets or CGU; and compare these Payments made under operating leases are recognised in to their carrying value. Cash generating units are deemed to the income statement on a straight-line basis over the term be individual units or a cluster of units depending on the of the lease. Incentives to enter into an operating lease are nature of the trading environment in which they operate. also spread on a straight-line basis over the lease term as a reduction in rental expense. Calculating the value in use requires the Group to make an estimate of the future cash flows of each CGU and to choose (ii) Finance lease payments a suitable discount rate in order to calculate the present value Minimum lease payments are apportioned between the of those cash flows. The discount rate used in the year ended finance charge and the reduction of the outstanding liability. 28 December 2014 for all CGUs was based on the Group’s The finance charge is allocated to each period during the weighted average cost of capital of 9.7% (year ended lease term so as to produce a constant periodic rate of 29 December 2013: 9.9%) as the Directors believe there are interest on the remaining balance of the liability. broadly equal risks associated with each CGU.

(iii) Pre-opening expenses No impairment is required in the year ended Property rentals and related costs incurred up to the date 28 December 2014. of opening of a new restaurant are written off to the income statement in the period in which they are incurred. b) Impairment of loan note due Promotional and training costs are written off to the income The Group has an outstanding long-term receivable of £4.0m statement in the period in which they are incurred. from BH Restaurants Limited. As a result of a detailed trading review of the business, the Board has made full provision (iv) Borrowing costs against the loan note due (further details are provided in Debt is stated net of borrowing costs which are spread over note 12). the term of the loan. All other borrowings costs are recognised in the income statement in the period in which c) Lease classification they are incurred. The Group has over 400 leases and therefore their classification as either finance or operating leases is critical to (t) Dividend policy the financial statements. The accounting for leases involves In accordance with IAS 10 “Events after the Balance Sheet the exercise of judgement particularly whether the leases Date”, dividends declared after the balance sheet date are not meet the definition of an operating or a finance lease. recognised as a liability at that balance sheet date, and are recognised in the financial statements when they have received approval by shareholders.

(u) Commercial discount policy Commercial discounts represent a reduction in cost of goods and services in accordance with negotiated supplier contracts, the majority of which are based on purchase volumes. Commercial discounts are recognised in the period in which they are earned and to the extent that any variable targets have been achieved in that financial period. Costs associated with commercial discounts are recognised in the period in which they are incurred. Overview Strategic report Governance Financial statements

– 216 Total £’000 27.97 28.02 (2,447) (3,784) 74,916 74,916 56,190 72,685 ( 31,160 ) (16,495) (32,875) 107,791 106,076 579,589 (473,513) (469,729) – – – – – – – – – – – – – – – – Non- £’000 Annual Report63 2014 trading

– 216 £’000 27.97 28.02 (2,447) (3,784) 74,916 74,916 Trading 56,190 72,685 ( 31,160 ) (16,495) (32,875) 107,791 business 106,076 579,589 (473,513) (469,729) 52 weeks52 ended 29 December 2013 The Restaurant Group plc Group Restaurant The

103 Total £’000 7,000 33.39 33.35 (4,702) 87,312 (2,488) 80,312 84,927 66,999 (17,928 ) (36,522) (33,588) 113,900 123,834 635,225 (516,623) (521,325) – – – – – – – – 30 (138) (138) Non- £’000 7,000 6,892 6,862 6,862 6,862 trading – 103 £’000 29.92 29.96 (4,702) 60,107 (2,488) 78,065 80,450 80,450 Trading (17,958 ) 116,972 (36,522) (33,450) 113,900 635,225 business (516,623) (521,325) 52 weeks ended 28 December 2014 8 8 7 6 6 5 3 2 3 Note

depreciation and amortisationdepreciation and Depreciation Earnings before interest, tax, interest, before Earnings Diluted Earnings per share (pence) share per Earnings Basic Profit for the year Tax on profit Tax from ordinary activities Interest receivable Interest Profit on ordinary activities before tax Interest payable Interest Operating profit Operating Disposal investment of in associate Administration costs profit Trading Pre-opening costs profit Gross Revenue Cost of sales: Excluding pre-opening costs Consolidated income statementConsolidated 64 Annual Report 2014 The Restaurant Group plc

Consolidated statement of changes in equity

Share Share Other Retained capital premium reserves earnings Total £’000 £’000 £’000 £’000 £’000 Balance at 30 December 2013 56,432 24,491 (8,940) 143,982 215,965

Profit for the year – – – 66,999 66,999 Issue of new shares 1 4 – – 5 Dividends – – – (36,367) (36,367) Share-based payments – credit to equity – – 2,795 – 2,795 Employee benefit trust – purchase of shares – – (5,272) – (5,272) Other reserve movements – – (554) – (554) Current tax on share-based payments taken directly to equity – – – 1,474 1,474 Deferred tax on share-based payments taken directly to equity – – – (521) (521)

Balance at 28 December 2014 56,433 24,495 (11,971) 175,567 244,524

Balance at 31 December 2012 56,334 24,027 (7,737) 111,224 183,848

Profit for the year – – – 56,190 56,190 Issue of new shares 98 464 – – 562 Dividends – – – (24,863) (24,863) Share-based payments – credit to equity – – 2,947 – 2,947 Employee benefit trust – purchase of shares – – (2,291) – (2,291) Other reserve movements – – (1,859) – (1,859) Current tax on share-based payments taken directly to equity – – – 950 950 Deferred tax on share-based payments taken directly to equity – – – 481 481

Balance at 29 December 2013 56,432 24,491 (8,940) 143,982 215,965

There is no comprehensive income other than the profit for the year in the year ended 28 December 2014 or the year ended 29 December 2013. Overview Strategic report Governance Financial statements

At (330) 2013 £’000 7,79 4 7,3 07 5,085 (1,120 ) (9,725) (3,246) (2,885) (8,940) 14,601 24,491 34,787 56,432 26,433 (12,524) ( 67,819 ) (49,164) ( 80,168 ) 3 37,519 215,965 215,965 143,982 398,739 (182,774) 363,952 (114,955 ) (103,780) 29 December At Annual Report65 2014

880 2014 (332) (993) £’000 8,991 5,530 (8,055) (2,926) (2,930) 29,410 14,009 24,495 26,433 56,433 (11,971) (12,947) (58,261) (39,458) (92,224) 424,419 175,567 368,576 244,524 244,524 395,009 (121,634) (112,254) (179,895) 28 December December 28 11 17 14 15 18 13 16 16 10 24 24 22 22 Note 19,20 The Restaurant Group plc Group Restaurant The

Deferred tax liabilities The financial statementsof The Restaurant Group plc (company registration number SC030343) on pagesto were85 59 approved the by Board Directors of and authorised for issue February on and 27 were signed 2015 on its behalf by: Alan Jackson Stephen Critoph ACA Share premium Share earnings Retained equity Total Equity capital Share Other reserves Provisions liabilities current Net Non-current liabilities borrowings Long-term Other payables – finance lease obligations Provisions liabilities Total assetsNet Property, plant and equipment Non-current assets Non-current Intangible assets Consolidated balanceConsolidated sheet Cash and cash equivalents Total assets Total Current liabilitiesCurrent Corporation tax liabilities and other payablesTrade Other payables – finance lease obligations Current assets Current Stock and other receivablesTrade Prepayments 66 Annual Report 2014 The Restaurant Group plc

Consolidated cash flow statement

52 weeks 52 weeks ended ended 28 December 29 December 2014 2013 Note £’000 £’000 Operating activities Cash generated from operations 21 124,992 116,838 Interest received 103 216 Interest paid (1,424) (1,308) Tax paid (18,222) (17,70 0 ) Net cash flows from operating activities 105,449 98,046

Investing activities Purchase of property, plant and equipment (70,070) (76,626) Disposal of fixed assets 2,828 (400) Net proceeds from repayment of loan note 5 7,000 – Net cash flows used in investing activities (60,242) ( 77,026 )

Financing activities Net proceeds from issue of ordinary share capital 5 562 Employee benefit trust – purchase of shares 19 (5,272) (2,291) Net repayments of loan draw downs (10,000) – Dividends paid to shareholders 9 (36,367) (24,863) Net cash flows used in financing activities (51,634) (26,592)

Net decrease in cash and cash equivalents (6,427) (5,572)

Cash and cash equivalents at the beginning of the year 22 7,307 12,879

Cash and cash equivalents at the end of the year 22 880 7,3 07 Overview Strategic report Governance Financial statements

216 2013 2013 2013 £’000 £’000 £’000 8,418 3,784 3,338 (3,338) 57, 26 6 32,875 62,346 65,684 184,122 473,513 583,143 129,703 469,729 579,589 Annual Report67 2014

103 2014 2014 2014 £’000 £’000 £’000 4,702 8,278 2,950 (2,950) 67,356 70,306 62,028 36,522 139,141 205,197 516,623 521,325 638,278 635,225 The Restaurant Group plc Group Restaurant The

Contingent rents Minimum lease payments Purchases Staff costs (see 4) note Depreciation operatingTotal lease rentals land of and buildings Rental income Rental costs rental Net

Interest income

Cost sales of consists the of following: Continuing business excluding pre-opening costs 2 Revenue The Group trades in one business segment (that operating of restaurants) and one geographical segment (being the United Kingdom). brands The Group’s meet the aggregation criteria set out in paragraph IFRS of 22 8 “Operating Segments” and as such the Group report the business as one reportable segment. Income for the year consists the of following: Revenue from continuing operations Other income not included within revenue in the income statement: income Rental incomeTotal for the year 3 Profit for the year Pre-opening costs 1 Segmental analysis Segmental 1 Notes to the accounts the to Notes December 2014 28 ended year the For Total costTotal of sales for the year Profitfor theyear has been arrived at after charging / (crediting): 68 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

3 Profit for the year continued 2014 2013 £’000 £’000 Auditor’s remuneration: Fees payable to the Company’s auditor for the audit of the Company’s annual accounts 137 134 Fees payable to the Company’s auditor and their associates for other services to the Group The audit of the Company’s subsidiaries 10 15 Total audit fees 147 149 Audit-related assurance services 20 20 Other assurance services 31 27 Tax compliance services 47 56 Other tax advisory services – 10 Other services – 21 Total non-audit fees 98 134 Total auditor’s remuneration 245 283

Audit fees included in the above total relating to the Company are borne by a subsidiary undertaking. All of the auditor’s remuneration in 2014 and 2013 was expensed as administration costs.

4 Staff costs and numbers 2014 2013 a) Average staff numbers during the year (including executive Directors) Restaurant staff 13,313 12,025 Administration staff 288 270 13,601 12,295

2014 2013 £’000 £’000 b) Staff costs (including Directors) comprise: Wages and salaries 187,494 167,4 5 5 Social security costs 13,614 12,738 Share-based payments 2,795 2,947 Pension costs 1,294 982 205,197 184,122

2014 2013 £’000 £’000 c) Directors’ remuneration Emoluments 2,405 2,966 Money purchase (and other) pension contributions 159 185 2,564 3,151 Charge in respect of share-based payments 1,233 1,463 3,797 4,614

Further details of the Directors’ emoluments and the executive pension schemes are given in the Directors’ remuneration report. Overview Strategic report Governance Financial statements

(11) (47) (60) 373 330 399 (158) (261) (216) 2013 2013 (558) £’000 £’000 2,447 2,231 1,345 (2,707) (2,089) 19,463 19,202 16,495 – (1) 63 Annual Report69 2014 (11)

(91) (98) 314 376 420 (161) 2014 2014 (103) (642) £’000 £’000 1,378 2,488 2,385 17,928 18,026 18,668 The Restaurant Group plc Group Restaurant The

Credit in respect change rate of Adjustments in respect previous of years Adjustments in respect previous of years Origination and reversal temporary of differences UK 23.25%) corporation (2013: tax at 21.5% Total taxTotal charge for the year

7 Tax

Deferred tax Interest on obligations under finance leases costs borrowing Total Facility fees Bank interest receivable Other interest receivable charges finance Net Bank interest payable 6 Net finance charges finance Net 6 Other interest payable Loan interest note receivable (see 12) note receivable interest Total The Group cash received of proceeds £7m in respect this of disposal and the resulting profit on disposalof £6.9m, netof costs, is reported as a non-trading item in weeks the 52 ended The net December proceeds 28 the of disposal 2014. were distributed a special of way by dividend pence 3.45 of Following per share the disposal, only on 9 July remaining 2014. TRG’s interest in the residual business is loan£4m a which note has been fully provided against as a result a detailed of review the of trading performance the of business. 5 Non-trading item Non-trading 5 The Restaurant April 2014 GroupOn 17 disposed part of its of interest in The Living Ventures group following the sale the of business. Gusto a) The tax charge comprises: Current tax 70 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

7 Tax continued b) Factors affecting the tax charge for the year The tax charged for the year varies from the standard UK corporation tax rate of 21.5% (2013: 23.25%) due to the following factors: 2014 2013 £’000 £’000 Profit on ordinary activities before tax 84,927 72,685

Profit on ordinary activities before tax multiplied by the standard UK corporation tax rate of 21.5% (2013: 23.25%) 18,259 16,899

Effects of: Depreciation on non-qualifying assets 1,933 1,811 Expenses not deductible for tax purposes (180) 195 Exempt non-trading income (1,505) – Credit in respect of rate change on deferred tax liability – (2,089) Adjustment in respect of previous years (579) (321) Total tax charge for the year 17,928 16,495

The Finance Act 2012 introduced a reduction in the main rate of corporation tax from April 2014 from 23% to 21% resulting in a blended rate of 21.5% being used to calculate the tax liability for the 52 weeks ended 28 December 2014.

A further rate reduction to 20% from April 2015 was substantively enacted on 2 July 2013, therefore the deferred tax provision at the balance sheet date has been calculated at 20%.

8 Earnings per share 2014 2013 a) Basic earnings per share: Weighted average ordinary shares in issue during the year 200,647,834 200,510,419 Total profit for the year (£’000) 66,999 56,190 Basic earnings per share for the year (pence) 33.39 28.02 Total profit for the year (£’000) 66,999 56,190 Effect of non-trading items on earnings for the year (£’000) (6,892) – Earnings excluding non-trading items (£’000) 60,107 56,190 Adjusted earnings per share (pence) 29.96 28.02

2014 2013 b) Diluted earnings per share: Weighted average ordinary shares in issue during the year 200,647,834 200,510,419 Dilutive shares to be issued in respect of options granted under the share option schemes 275,381 3 47,0 6 5 200,923,215 20 0,8 57,4 8 4 Diluted earnings per share (pence) 33.35 27.97 Adjusted diluted earnings per share (pence) 29.92 27.97

The additional non-statutory earnings per share information for 2014 (where non-trading items, described in note 5, have been added back) has been provided as the Directors believe it provides a useful indication as to the underlying performance of the Group.

Diluted earnings per share information is based on adjusting the weighted average number of shares in issue in respect of notional share awards made to employees in respect of share option schemes. Overview Strategic report Governance Financial statements

– 2013 £’000 £’000 17,373 14,460 10,403 24,863 24,863 26,433 Annual Report71 2014

2014 £’000 6,849 17,373 12,145 18,516 29,518 36,367 The Restaurant Group plc Group Restaurant The

An increase in the discount 1% of rate A decrease on 5% of forecast cash flows (2013 actual proposed(2013 and paid: per share 8.75p) Cost and carrying amount and Cost and 29 30 December December and December 28 31 At 2013 2012, 2014 Value in use calculations are based on cash flowforecasts derived from the most recent financial budgets and three year business plans approved the by Board. Cash flows are thenextrapolated in perpetuity with an annual growthof 2%. rate Perpetuity is believed be reasonable to due the significant to proportionof freeholds in the estate and the natureof the leasehold properties. The pre-tax discount applied rate 9.9%) cash to which flow projections is the(2013: rate 9.7% is believed the by Directors reflect to the risks associated with the CGU. The Group has conducted a sensitivity analysis taking consideration into the impact on impairment key test assumptions arising from a range possible of trading and economic scenarios. The scenarios have been performed separately with the sensitivities summarised as follows: • • The sensitivity analysis shows that no impairment would result from either an increase in the discount or rate a decrease in forecast cashflows. Interim 5.25p) per (2013: dividend share for weeks the 52 ended 6.10p of December 28 2014 Goodwill arising on business combinations is not amortised but is subject an impairment to review annually, or more frequently if events orchanges in circumstances indicate that it might be impaired. Therefore, goodwill arising on acquisition is monitored and animpairment test is carried out which compares the value in use each of cash generating unit (“CGU”) to its carrying value. The intangible assets reported on the balance sheet represent goodwill arising on the acquisition of Blubeckers Limited and Brunning and Price Limited, whichnow trade as Pub restaurants. Amounts recognised as distributions equity to holders during the year: Final per share dividend 7.30p) for weeks (2012: the 52 ended December 29 8.75p of 2013 9 Dividend 9 The proposed final dividend is subjectto approval by shareholders at the Annual General Meeting14 2015 May to be held on and is not recognised as a liability in these financial statements. The proposed final dividendpayable reflects the number of shares in issue shares adjusted December on for 28 owned the 1.6m the by employee 2014, benefit trustfor which dividends have been waived. Further details are provided in 19. note assets Intangible 10 Special dividend per 3.45p of share paid on 9 July 2014 dividendsTotal paid in the year Proposed final dividendfor weeks52 the 9.30pendedof 28 December 2014 72 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

11 Property, plant and equipment Fixtures, Land and equipment buildings and vehicles Total £’000 £’000 £’000 Cost At 31 December 2012 359,091 140,391 499,482 Additions 56,693 19,933 76,626 Disposals (6,670) (11,941) (18,611) At 29 December 2013 409,114 148,383 557,497 Accumulated depreciation and impairment At 31 December 2012 119,784 85,913 205,697 Provided during the year 17,3 4 0 15,535 32,875 Disposals (6,670) (11,924) (18,594) At 29 December 2013 130,454 89,524 219,978 Cost At 30 December 2013 409,114 148,383 5 57,497 Additions 48,838 21,232 70,070 Disposals (10,549) (6,675) (17, 224 ) At 28 December 2014 447,403 162,940 610,343 Accumulated depreciation and impairment At 30 December 2013 130,454 89,524 219,978 Provided during the year 19,406 17,116 36,522 Disposals (8,313) (6,420) (14,733) At 28 December 2014 141,547 100,220 241,767 Net book value as at 29 December 2013 278,660 58,859 3 37,519 Net book value as at 28 December 2014 305,856 62,720 368,576

2014 2013 £’000 £’000 Net book value of land and buildings: Freehold 97,482 88,482 Long leasehold 5,291 5,446 Short leasehold 203,083 184,732 305,856 278,660

2014 2013 £’000 £’000 Assets held under finance leases Costs at the beginning and the end of the year 1,961 1,961 Depreciation At the beginning of the year 1,199 1,174 Provided during the year 25 25 At the end of the year 1,224 1,199 Net book value at the end of the year 737 762

Overview Strategic report Governance Financial statements

2013 2013 £’000 £’000 7,79 4 1,723 6,312 6,071 47,197 16,040 34,231 103,780 Annual Report73 2014

2014 2014 £’000 £’000 7,487 6,447 1,504 8,991 36,795 50,977 18,035 112,254 The Restaurant Group plc Group Restaurant The

Other creditors Other debtors Other tax and social security Trade creditorsTrade Trade debtors Trade Accruals

Trade and15 other payables

Amounts falling due within one year: Amounts falling due within one year: 14 Trade and14 other receivables 13 Stock Stock comprises raw materials and consumables and has been valued at the lower cost of and estimated net realisable value. The replacement cost is not December considered at 28 the by 2014 Directors be materially to different from the balance purchases of £129.7m). sheet (2013: value. as an The expense Group in recognised2014 £139.1m Interest was receivable from BHR Finance LIBOR of at a rate + 1%. In Limited weeks the 52 ended on a loan £10.4m of note interest of accrued (to the disposal) date of £0.1m December28 which of 2014 the Group recognised £0.1m £0.2m which of (2013: the Group recognised £0.2m). 12 Investment in associate in Investment 12 The investment Restaurant in BH April Restaurants Group 2014, Until held 17 Limited a 37.4% (formerly Living Ventures Restaurants Group Limited) and this investment was accounted for using The the equity Restaurant April method. 2014 On 17 Group disposed part of its of interest in BH Restaurants Limited following the salethe of Gusto business (further details are provided 5). in note Following the disposal, only remaining TRG’s interest in the residual business is loan a £4m which note has been fully provided against as a result a detailed of review the of trading performance BH of Restaurants Limited. 74 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

16 Provisions 2014 2013 £’000 £’000 Provision for onerous lease contracts and property exit costs: Balance at the beginning of the year 4,366 5,782 Additional provisions made 238 474 Amounts utilised (1,173 ) (1,692) Provisions released (183) (366) Adjustment for change in discount rate 257 (229) Unwinding of discount 414 397 Balance at the end of the year 3,919 4,366 Analysed as: Amount due for settlement within one year 993 1,120 Amount due for settlement after one year 2,926 3,246 3,919 4,366

The provision for onerous contracts is in respect of lease agreements and covers the element of expenditure over the life of those contracts which are considered onerous, expiring in 1 to 32 years. The provision for property exit costs is anticipated to be short-term and settled within one year.

17 Deferred taxation 2014 2013 £’000 £’000 Balance at the beginning of the year 12,524 15,712 Depreciation in advance of capital allowances credited to the income statement (290) (461) Other temporary differences 192 (157) Credit in respect of rate change – (2,089) Deferred tax taken directly to the income statement (see note 7) (98) (2,707) Tax on share-based payments 521 (691) Credit in respect of rate change – 210 Deferred tax taken through equity 521 (481) Balance at the end of the year 12,947 12,524

2014 2013 £’000 £’000 Deferred tax consists of: Capital allowances in advance of depreciation 14,579 14,869 Capital gains rolled over 388 388 Other temporary differences (2,020) (2,733) 12,947 12,524 Overview Strategic report Governance Financial statements

1 98 £’000 £’000 5,272 2,291 56,432 56,433 56,334 Annual Report75 2014

1,678 349,011 Number Number 750,000 500,000 3,147,953 2,481,133 (1,166,820 ) (1,676,205) 1,554,928 200,647,143 200,298,132 200,648,821 The Restaurant Group plc Group Restaurant The

(29 December shares). 2.5m 2013:

Exercise share of options Exercise share of options 19 Employee benefit trust benefit Employee At 28 December 2014 19 An employee benefit trust (“EBT”)was established 2007 in in orderto satisfy theexercise vestingor existingof and future share Incentive awards under Plan. The the Long-Term purchases EBT shares in the market, using funds provided the by basedCompany, on expectations future of requirements. Dividends the December 28 At are waived 2014, the by EBT. Appleby (Jersey)Trustees, Trust Limited, shares held in the 1.6m Company Net cash outflow weeks52 in the endedwas 28 December inclusive£5.3m, 2014 of costs weeks (52 ended December29 £2.3m, inclusive 2013: costs). of

At 29 and 30 December 2013 Purchase shares of at an average on 8 April price 2013 455 of pence per share shares of Transfer satisfy to the exercise shareof awards At 29 and 30 December 2013 at an averagePurchase price March shares of 698 of 2014 pence on 17 per share shares of Transfer satisfy to the exercise shareof awards At 28 December 2014 Details options of granted under share the schemes Group’s are given in 20. note At 31 DecemberAt 31 2012 Authorised, issued and fully paid fully and issued Authorised, DecemberAt 31 2012 18 Share capital Share 18 76 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

20 Share-based payment schemes The Group operates a number of share-based payment schemes, details of which are provided in the Directors’ remuneration report. The Group has taken advantage of the exemption under IFRS 2 “Share-based payments” not to account for share options granted before 7 November 2002.

The charge recorded in the financial statements of the Group in respect of share-based payments is £2.8m (2013: £2.9m).

The other reserves account in the balance sheet reflects the credit to equity made in respect of the charge for share-based payments made through the income statement and the purchase of shares in the market in order to satisfy the vesting of existing and future share awards under the Long-Term Incentive Plan (see note 19).

Long-Term Incentive Plan The Group operates the 2005 Long-Term Incentive Plan (“LTIP”), details of which are provided in the Directors’ remuneration report. Awards under the LTIP are granted to executive Directors and senior management in the form of nil cost options.

Conditional Award share options and Matching Award share options are granted to Directors and selected employees. In respect of the Matching Award share options, the respective Director or employee is required to acquire a number of shares by a specified date, known as “deposited shares”, and retain these shares until the Matching Award share options vest, for these Matching Award share options to be valid. The table below summarises the dates of awards under the LTIP and the dates by which Directors and employees were required to acquire their deposited shares.

Date of Award Date by which Deposited Shares must be acquired 1 March 2012 30 June 2012 28 February 2013 30 June 2013 27 February 2014 30 June 2014

Vesting of share options under the LTIP is dependent on continuing employment or in accordance with “good leaver” properties as set out in the scheme rules. In exceptional circumstances, employees may be permitted to exercise options before the normal period in which they are exercisable.

The Conditional and Matching Awards granted on 16 March 2011 became exercisable on 17 March 2014. The performance criteria was based on total shareholder return (“TSR”) and earnings per share (“EPS”). For the TSR element of the award, The Restaurant Group plc was ranked in the upper quartile against its comparator group and consequently the TSR element of the award vested in full. In respect of the EPS element of the award, the growth in EPS was between RPI +4% and RPI +10% and 88% of this part of the award vested.

For those awards granted on 1 March 2012 that vest in 2015, the performance criteria were based on TSR and EPS. For the TSR element of the award, The Restaurant Group plc was ranked in the upper quartile against its comparator group and consequently the TSR element of the award will vest in full. In respect of the EPS element of the award the growth in EPS was between RPI +4% and RPI +10% and 88% of this part of the award will vest.

The options from the LTIP scheme will be satisfied through shares purchased via a trust. Further details are provided in note 19. Overview Strategic report Governance Financial statements

– – – – – – – – – – – – – – – – at the end of the year Exercisable – – – Annual Report77 2014

97,4 57 97,46 0 79,015 79,018 63,574 63,575 205,120 205,120 205,120 205,120 182,992 182,993 256,656 256,656 256,654 256,654 1,769,634 at the end of the year Outstanding (1,381) (8,715) ( 8,743 ) ( 50,137) (32,721) ( 32,749 ) (69,731) (61,793) (18,932) Lapsed (36,571) (68,851) (68,851) (18,936) (69,732) (36,569) (584,412) The Restaurant Group plc Group Restaurant The

(3,951) (3,951) (11,854) (11,854) (18,361) (18,361) (58,591) (58,618) (56,226) (56,226) (416,492) (367,736) (166,810) (166,783) (260,391) Exercised (1,676,205) – – – – – – – – – – – 264,578 264,578 Granted 104,095 104,095 104,096 104,096 737,347 – – – – at the 417,873 417,873 116,311 116,312 322,184 456,187 330,197 330,197 164,791 456,186 164,793 beginning beginning of the year 3,292,904 Outstanding 124.5p 124.5p 418.9p 418.9p 214.9p 214.9p 431.8p 431.8p 283.5p 283.5p 295.5p 295.5p 209.8p 658.5p 658.5p Fair value Fair

Conditional Conditional – TSR element Conditional – EPS element Conditional – EPS element Type of award Matching Conditional – TSR element Matching – TSR element Matching – EPS element Conditional – TSR element Conditional Conditional – EPS element Matching Matching – TSR element Matching Matching – EPS element Conditional Conditional – TSR element Conditional – EPS element Matching Matching – EPS element Matching Matching – TSR element 2014 2014 2015 Period during during Period options which exercisable are Year endedYear 28 December 2014 2014 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017

2017 Total number Total 78 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

20 Share-based payment schemes continued Year ended 29 December 2013 Outstanding Period during at the Outstanding Exercisable which options beginning at the end at the end are exercisable Type of award Fair value of the year Granted Exercised Lapsed of the year of the year Conditional 2013 – TSR element 144.0p 497,774 – ( 497,774 ) – – – Conditional 2013 – EPS element 208.9p 497,775 – (356,526) (141,249) – – 2013 Matching 208.9p 365,954 – (260,348) (105,606) – – Conditional 2014 – TSR element 209.8p 446,764 – (14,002) (14,889) 417,873 – Conditional 2014 – EPS element 295.5p 446,765 – ( 7,6 58 ) (21,234) 417,873 – 2014 Matching 295.5p 354,087 – (11,082) (20,821) 322,184 – Conditional 2015 – TSR element 124.5p 502,963 – (7,439) (39,338) 456,186 – Conditional 2015 – EPS element 283.5p 502,962 – (5,521) (41,254) 456,187 – Matching 2015 – TSR element 124.5p 180,719 – (3,716) (12,212) 164,791 – Matching 2015 – EPS element 283.5p 180,719 – (2,754) (13,172) 164,793 – Conditional 2016 – TSR element 214.9p – 344,556 – (14,359) 330,197 – Conditional 2016 – EPS element 418.9p – 344,556 – (14,359) 330,197 – Matching 2016 – TSR element 214.9p – 143,756 – (27,444) 116,312 – Matching 2016 – EPS element 418.9p – 143,755 – (27,444) 116,311 – Total number 3,976,482 976,623 (1,166,820) (493,381) 3,292,904 –

Save As You Earn Scheme Under the Save As You Earn (“SAYE”) scheme, the Board may grant options over shares in The Restaurant Group plc to UK-based employees of the Group. Options are granted with a fixed exercise price equal to 80% of the average market price of the shares for the five days prior to invitation. Employees pay a fixed amount from their salary into a savings account each month for the three-year savings period. At the end of the savings period, employees have six months in which to exercise their options using the funds saved. If employees decide not to exercise their options, they may withdraw their funds saved and the options expire. Exercise of options is subject to continued employment within the Group. In exceptional circumstances, employees may be permitted to exercise these options before the end of the three-year savings period. Options were valued using the Stochastic share pricing model.

Year ended 28 December 2014 Outstanding Period during at the Outstanding Exercisable which options beginning at the end at the end are exercisable Exercise price of the year Granted Exercised Lapsed of the year of the year 2015 – 2016 283.0p 484,404 – (1,678) (43,215) 439,511 – 2017 – 2018 525.0p – 1,296,434 – (10,968) 1,285,466 – Total number 484,404 1,296,434 (1,678) (54,183 ) 1,724,977 – Weighted average exercise price 283.0p 525.0p 283.0p 332.0p 463.3p –

Overview Strategic report Governance Financial statements

– – – – – – 17,000 17,000 21,000 21,000 17,000 17,000 39,000 39,000 121.6p 134.4p 60,000 at the end at the end at the end of the year of the year of the year Exercisable Exercisable Exercisable Exercisable Exercisable – – – Annual Report79 2014

17,000 17,000 21,000 21,000 17,000 17,000 39,000 39,000 121.6p 134.4p 60,000 283.0p 484,404 484,404 484,404 484,404 at the end at the end at the end of the year of the year of the year Outstanding Outstanding Outstanding Outstanding Outstanding – – – – – (9,072) 116.5p 274.0p Lapsed Lapsed Lapsed (21,000) (22,000) (90,659) (99,731) (43,000) The Restaurant Group plc Group Restaurant The

– – – – – (7,034) 127.2p 184.0p (15,000) (120,000) (206,977) (142,034) (206,977) Exercised Exercised Exercised – – – – – – – – – – – – – Granted Granted Granted 7,0 3 4 at the at the at the 21,000 21,000 39,000 39,000 36,000 36,000 121.6p 125.5p 60,000 256.0p 791,112 216,049 216,049 575,063 159,000 159,000 202,034 beginning beginning beginning beginning beginning beginning of the year of the year of the year Outstanding Outstanding Outstanding Outstanding Outstanding Outstanding 97.7p 97.7p 67.4p 134.4p 134.4p 184.0p 283.0p Exercise price Exercise Exercise price Exercise Exercise price Exercise Period during during Period options which exercisable are 2006 – 2013 2007 – 2014 Period during during Period options which exercisable are Total number Total 2013 Period during during Period options which exercisable are Year endedYear 29December 2013 2015 – 2016 number Total 2007 – 2014 average Weighted price exercise Year ended 29 December 2013 December 29 ended Year number Total theThere weighted During were average no exercises market 2013, price during exercise at date of 2014. was 459.7p. 2008 – 2015 average Weighted price exercise Weighted average average Weighted price exercise Executive Share Option Plans (“ESOPs”) Under the 2003 ESOP scheme, the Remuneration Committee may grant options over shares in The Restaurant Group plc to employees the of Group. The contractual life an of option is ten years. Options granted under ESOPs become exercisable on the third anniversary the of grant, date of subject growth to in earnings per share exceeding RPI growth more by than 2.5%. Exercise options of is subject continued to employment within the Group. Options were valued using a Stochastic option pricing model. No performance conditions were included in the fair value calculations. endedYear 28December 2014 the weighted averageDuring market price 2014, exercise atof date was 608.0p per share 513.8p). (2013: 2008 – 2015 80 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

20 Share-based payment schemes continued Assumptions used in valuation of share-based payments granted in the year ended 28 December 2014:

Scheme 2014 LTIP Conditional Award 2014 LTIP Matching Award 2014 SAYE TSR element EPS element TSR element EPS element Grant date 27/02/2014 27/02/2014 27/02/2014 27/02/2014 24/10/2014 Share price at grant date 658.5p 658.5p 658.5p 658.5p 661.0p Exercise price n/a n/a n/a n/a 525.0p No. of options originally granted 264,578 264,578 104,096 104,095 1,296,434 Minimum vesting period 3 years 3 years 3 years 3 years 3 years Expected volatility1 22.5% – 22.5% – 23.3% Contractual life 3.5 years 3.5 years 3.5 years 3.5 years 3.5 years Risk free rate 0.99% – 0.99% – 1.10 % Expected dividend yield 0.00% 0.00% 0.00% 0.00% 2.25% Expected forfeitures 15% 15% 40% 40% 30% Fair value per option 431.8p 658.5p 431.8p 658.5p 157.3 p 1 Expected volatility is the measure of the amount by which the share price is expected to fluctuate during a period. In order to calculate volatility, the movement in the return index (share price plus dividends re-invested) over a period prior to the grant date equal in length to the remaining period over which the performance condition applies has been calculated. For the discount for the TSR performance condition for the relevant Conditional and Matching Awards, the calculated volatility based on the movement in the return index over a period of 3 years prior to the grant has been used. For the discount for the SAYE scheme, the calculated volatility based on the movement in the return index over a period of 3.25 years prior to the grant has been used.

21 Reconciliation of profit before tax to cash generated from operations 2014 2013 £’000 £’000 Profit before tax 84,927 72,685 Net finance charges 2,385 2,231 Disposal of investment in associate (6,862) – Share-based payments 2,795 2,947 Depreciation 36,522 32,875 Increase in stocks (445) (213) (Increase) / decrease in debtors (605) 21 Increase in creditors 6,275 6,292 Cash generated from operations 124,992 116,838

Major non-cash transactions There were no major non-cash transactions in the 52 weeks ended 28 December 2014 or 52 weeks ended 29 December 2013.

Overview Strategic report Governance Financial statements

– – At 880 ( 311) 2013 2013 2014 £’000 £’000 7,79 4 7,3 07 7,3 07 £’000 (5,572) 15,101 (41,857) ( 35,974) (38,578) (39,458) 28 December 28 – 1 Annual Report81 2014

879 880 (294) (294) 2014 2014 (294) £’000 £’000 £’000 9,871 8,991 (6,427) 10,000 (41,857) (38,578) Non-cash in the year movements £’000 3,573 (6,427) 10,000 The Restaurant Group plc Group Restaurant The Cash flow in the year

movements 2013 £’000 7,307 (41,857) (49,164) At 29 and 30 December 30 – ( 311) ( 311) £’000 Non-cash in the year movements

– £’000

(5,572) (5,572) Cash flow in the year movements At 2012 £’000 12,879 (35,974) (48,853) 31 December 31

ensure sufficient committed loan facilities are in placeto support anticipated business requirements; ensure debt service the Group’s will be supported anticipated by cash flows and that covenants will be complied with; and manage interest exposure rate with a combination floating of rate debt and interest swaps rate when deemed appropriate. due after one year Cash outflow cash equivalents Repayments loan of draw downs Non-cash movements in the year

At the end of the year Trade and other receivablesTrade assets financial Total Bank loans falling

Cash and cash equivalents – Euro Cash and cash equivalents include £0.5m £0.5m) (2013: held on account in respect deposits of paid tenants by under the terms their of rental agreement. Further details on the business risk factors that are considered affect to the Group are included in the Strategic Report and more specific financial risk management (including sensitivity to increases in interest rates) are included in the report of the Directors. Further details on market and economic risk are included in the Strategic Report. Further detail on headroom against covenants is included in the Strategic Report on page 24. liabilities and (a) assets Financial assets Financial 23 Financial instruments and derivatives and instruments Financial 23 The Group finances its operationsthrough equity and borrowings, with the borrowing interest subjectto floating rates. Management pay rigorous attention treasury to management requirements and continue to: • • • The Board closelymonitors treasury the Group’s strategy and the management treasury of risk. Further details the of Group’s capital risk management can be found in the report the of Directors. The financial assetsof the Group comprise:

Cash and Represented by: Represented Movements in the year: Net debt:Net At the beginning of the year 22 Reconciliation of changes in cash to the movement in net debt Cash and cash equivalents – Sterling 82 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

23 Financial instruments and derivatives continued Financial liabilities The financial liabilities of the Group comprise: 2014 2013 £’000 £’000 Trade and other payables excluding tax 94,219 87,74 0 Finance lease debt 332 330 Short-term financial liabilities 94,551 88,070 Long-term borrowings – at floating interest rates* 39,458 49,164 Finance lease debt 2,930 2,885 Long-term financial liabilities 42,388 52,049 Total financial liabilities 136,939 140,119 * Total financial liabilities attracting interest were £40m (2013: £50m). Interest is payable at floating interest rates which fluctuate and are dependent on LIBOR and base rate. The average weighted year end interest rate for these borrowings was 1.75% (2013: 1.74%).

The Group has in place a five year £140m loan facility. This facility provides the Group with medium-term security of funding, additional capacity to take advantage of business opportunities as they become available and the flexibility to optimise the Group’s funding structure. Interest is payable on the amount drawn down at LIBOR plus mandatory cost and the bank’s margin, which is dependent on the debt to EBITDA ratio.

The Group has a £10m overdraft facility, which is repayable on demand, on which interest is payable at the bank’s overdraft rate.

At 28 December 2014 the Group has £100m of committed borrowing facilities in excess of gross borrowings (29 December 2013: £90m) and £10m of undrawn overdraft (29 December 2013: £10m of undrawn overdraft).

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

At 28 December 2014 Trade and other Floating Finance payables rate lease excluding tax loan debt Total £’000 £’000 £’000 £’000 Within one year 94,219 259 332 94,810 Within two to five years – 41,761 1,326 43,087 After five years – – 11,475 11,475 94,219 42,020 13,133 149,372 Less: future interest payments – (2,562) (9,871) (12,433) 94,219 39,458 3,262 136,939

Overview Strategic report Governance Financial statements

Total £’000 11,597 99,037 44,902 (15,417) 140,119 155,536 Annual Report83 2014

330 debt lease £’000 1,318 3,215 11,597 13,245 Finance (10,030) – rate loan £’000 (5,387) 54,551 10,967 49,164 Floating 43,584 The Restaurant Group plc Group Restaurant The

– – – £’000 87,74 0 87,74 0 87,740 payables excluding tax Trade andTrade other the maturity profilesof financial assets and liabilities.

Within one year At 29 December 2013 Within two fiveyears to After fiveyears (e) Interest rate risk Exposure interest to movements rate has been controlled historically through the use floating of rate debt and interest rate swaps achieve to a balanced interest profile. rate The Group does not currently have any interest swaps rate in place as the continued reduction in the level debt of combined with current market conditions results in a low level exposure. of exposureThe Group’s will continue be monitored to and the use interest of swaps rate may be considered in the future. Following any transactional the closure three restaurants the of Group’s or translational in Spain in 2011, exposure changes to in foreign exchange is rate marginal and relates the outstanding to transactions in relation the termination to the of Spanish business. (d) Foreign currency risk The Group is not materially exposed changes to in foreign currency rates and does not use foreign exchange forward contracts. Less: future interest payments loanThe facility, Group’s which matures (as in set October out in (a) note 2016 above) ensures continuity funding, of provided the Group continues meet to its covenant requirements (as detailed in the report the of Directors on page 24). (c) risk Liquidity The Group has built an appropriate mechanism manage to liquidity risk the of short, medium and long-term funding and liquidity management requirements. Liquidity risk is managed through the maintenance adequate of cash reserves and bank facility monitoring by forecast and actual cash flows and matching The carrying amount financial of assets recorded in the financial statements, ofnet any allowances for losses, represent the maximumGroup’s exposure credit to risk. The Group has an outstanding long-term receivable from £4m of BH Restaurants Limited. As a result a detailed of trading review the of business, the Board has made full provision against the loan due note (further details are provided in 12). note As a retail business with trading receipts settled either cash by or credit and debit cards, there is very limited exposure from customer transactions. The Group is exposed credit to risk in respect commercial of discounts receivable from suppliers but the Directors believe adequate provision has been made in respect doubtful of debts and there are no materialamounts past due that have not been provided against. fair value. Fair value of financial assets and liabilities All financial assets and liabilities are accountedfor at cost and the Directors consider the carryingvalue to approximate their fair (b) risk Credit Credit risk refers the risk to that a counterparty will default on its contractualobligations resulting in financial lossesto the Group. Counterparties for cash and derivative balances are with large established financial institutions. The Group exposedis creditto related losses in the event non-performance of the by financial institutions but does expect not themto failto meet obligations. their 84 Annual Report 2014 The Restaurant Group plc

Notes to the accounts continued

24 Lease commitments Future lease payments in respect of finance leases are due as follows: Present value of Minimum lease minimum lease payments payments 2014 2013 2014 2013 £’000 £’000 £’000 £’000 Within one year 332 330 332 330 Within two to five years 1,326 1,318 1,017 1,010 After five years 11,475 11,597 1,913 1,875 13,133 13,245 Less: future interest payments (9,871) (10,030) Present value of lease obligations 3,262 3,215 3,262 3,215 Analysed as: Amount due for settlement within one year 332 330 Amount due for settlement after one year 2,930 2,885 Present value of lease obligations 3,262 3,215

Lease commitments are in respect of property leases where the initial term of the lease is in excess of 25 years and the conditions of the lease are in keeping with a finance lease. There are no finance leases where the Group itself is the lessor. The interest rate applied in calculating the present value of the payments is the incremental borrowing cost of the Group in relation to each lease. The fair value of the lease payments is estimated as £3.3m (2013: £3.2m).

The total future minimum rentals payable and receivable under operating leases over the remaining lives of the leases are:

Payable Receivable Payable Receivable 2014 2014 2013 2013 Payments due: £’000 £’000 £’000 £’000 Within one year 57,902 2,642 55,923 2,866 Within two to five years 200,990 8,523 190,678 9,326 After five years 451,385 20,477 4 37,50 0 25,263 710,277 31,642 684,101 37,4 5 5

The Group has entered into a number of property leases on standard commercial terms, both as lessee and lessor. There are no restrictions imposed by the Group’s operating lease arrangements, either in the current or prior year.

Included within the minimum rentals are amounts payable on properties where the rental payment is based on turnover. For these properties, primarily in the Group’s Concession business, the amount included above is the minimum guaranteed rent as detailed in the concession agreement. Where there is no minimum guaranteed rent, the amount included is based on the estimated amount payable.

25 Capital commitments 2014 2013 £’000 £’000 Authorised and contracted for: 45,551 40,053

Overview Strategic report Governance Financial statements

Annual Report85 2014

The Restaurant Group plc Group Restaurant The

the income statement). income the Remuneration in respect management key of personnel, defined as the Directorsfor this purpose, is disclosed4. in note Further information concerning the Directors’ remuneration is provided in the Directors’ remuneration report. BH Restaurants Limited (formerly Living Ventures Restaurants Group Limited) was a related party The to Restaurant Group when the Group Aprilholding disposed 2014 until 17 its of investmentplc in through the In 37.4% company. the the Group’s weeks loan of 52 ended interest, the note Group all December which of received 28 cash was and £0.1m £7m 2014, recognised in the income statement (52 weeks ended December 29 £0.2m interest of all 2013: which of was recognised in 27 Related party transactions party Related 27 26 Contingent26 liabilities The Group has assigned a number leases of third to parties that were originally completed prior 1 January to and 1996 are therefore unaffected the by Landlord (Covenants) and Tenant and Act also 1995 a number leases of completed after this date that were the subject an of Authorised Guarantee Agreement. Consequently, should the current tenant default, the landlord has a right recourse of The to Restaurant Group plc, or its subsidiaries, for future rental payments. As and when any liability arises, the Group will take whatever steps necessary mitigate to the costs. 86 Annual Report 2014 The Restaurant Group plc

Company financial statements – under UK GAAP Company balance sheet

At At 28 December 29 December 2014 2013 Note £’000 £’000 Fixed assets Investments in subsidiary undertakings i 140,571 137,776 140,571 137,776 Current assets Debtors Amounts falling due within one year from Group undertakings 273,504 242,787 273,504 242,787 Creditors Amounts falling due within one year to Group undertakings ii (256,329) (214,141) Net current assets 17,175 28,646 Total assets less current liabilities 157,746 166,422 Net assets 157,746 166,422 Capital and reserves Called up share capital v 56,433 56,432 Share premium account v 24,495 24,491 Other reserves v (10,729) ( 7,6 9 8 ) Profit and loss account v 87,547 93,197 Shareholders’ funds 157,746 166,422

The financial statements of The Restaurant Group plc (company registration number SC030343) on pages 86 to 88 were approved by the Board of Directors and authorised for issue on 27 February 2015 and were signed on its behalf by:

Alan Jackson Stephen Critoph ACA Overview Strategic report Governance Financial statements

Total £’000 2,795 1,422 100% 100% 100% 100% 100% 137,776 139,198 141,993 140,571

Annual Report87 2014

534 Proportion of voting voting Proportion of £’000 2,795 Loans at 28 December 2014 50,164 47,369 46,835 49,630 rights and shares held and other and – 888 £’000 90,941 Shares 91,829 91,829 90,941 Holding The Restaurant Group plc Group Restaurant The

Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares

dormant.

Additions – share-based payment schemes Net book value at 28 December 2014 The Company’s operating subsidiaries, listed are held below, an by intermediate holding company (TRG (Holdings) Limited): The Restaurant Group (UK) Limited At 28 December 2014 Amounts written off At 29 December 2013 and 28 December 2014 Cost At 29 December 2013 i) Investment in subsidiary undertakings The value is accounted for as a capital contribution inrelevant Group subsidiaries that employ the staff members whom to awards share of options have been made. The accounts for the Company have been prepared under UK Generally Accepted AccountingPractice, whilst the Group accounts have been prepared under International Financial Reporting Standards. The Company accounts have been prepared under the historical cost convention in accordance with applicable UK accounting standards and on a going concern basis. Investments Investments are valued at cost less any provision for impairment. Dividends In accordancewith “Events FRS after 21 the Balance dividends Sheet Date”, declared after the balance sheet date are not recognised as a liability at that balance sheet and date, are recognised in the financial statements when they receivedhave approval shareholders. by transactionsShare-based payment The share options have been accounted for as an expense in the company in which the employees are employed, using a valuation based on the Stochastic simulation model. In accordancewith an available election in FRS “Share-based 20 awards granted payments”, before 7 November 2002 have not been subject a charge. to An increase in the investment held the by Company in the subsidiary in which the employees are employed, with a corresponding increase in equity, is recognised in the accounts the of Information Company. in respect theof Company’s share-based payment schemes is provided the consolidated to in 20 note financial statements. Net book value at December 29 2013 Limited Chiquito Limited Blubeckers Brunning and Price Limited DPP RestaurantsLimited The Company’s principal operating subsidiaries are registered in England and Wales, and operate restaurants in the United Kingdom. All other subsidiary undertakings are wholly owned the by Company or one its of subsidiaries and are either non-trading or Basis of accounting of Basis Company financial – under UK Company statements GAAP Accounting policies and basis preparation of 88 Annual Report 2014 The Restaurant Group plc

Accounting policies and basis of preparation continued

ii) Creditors – amounts falling due within one year In accordance with FRS 21 “Events after the Balance Sheet Date”, the proposed final dividend in respect of 2014 is not recorded as a liability in these financial statements as it was declared after the balance sheet date and is subject to approval by shareholders. iii) Profit attributable to members of the holding Company As permitted by section 408 of the Companies Act 2006, a separate profit and loss account has not been presented for the holding Company. During the year the Company recorded a profit of £30.7m, representing paid and accrued internal preference dividend income (2013: £30.7m representing paid and accrued internal preference dividend income).

Remuneration of the auditor is borne by a subsidiary undertaking (refer to note 3 in the consolidated accounts). iv) Employee costs and numbers All costs of employees and Directors are borne by a subsidiary undertaking. At 28 December 2014 the Company employed four persons (29 December 2013: three persons). v) Share capital and reserves Share Share Other Profit and capital premium reserves loss account Total £’000 £’000 £’000 £’000 £’000 As at 29 December 2013 56,432 24,491 (7,698 ) 93,197 166,422 Issue of shares 1 4 – – 5 Employee share-based payment schemes – – 2,795 – 2,795 Employee benefit trust – purchase of shares – – (5,272) – (5,272) Other reserve movements – – (554) – (554) Profit for the year – – – 30,717 30,717 Dividends – – – (36,367) (36,367) As at 28 December 2014 56,433 24,495 (10,729) 87,547 157,746

Details of share issues during the year are given in note 20 of the consolidated accounts and details of the dividends paid and proposed during the year are given in note 9 of the consolidated accounts.

Overview Strategic report Governance Financial statements

– 596 2010 2.22 £’000 9.00p ( 2,674) 32.4% 40,125 20.16p 56,478 19.95p 26,433 55,882 58,556 (74,785) (66,518) (16,353) (46,924) 144,713 144,713 465,704 259,583 – Annual Report89 2014

2011 2.08 (902) £’000 17.19 p 61,185 26.4% 21.86p 34,377 10.50p (11,675 ) 26,433 60,283 48,608 (14,231) (75,651) 487,114 (41,593) (62,641) 269,141 157, 282 157, 282 – – 2012 2.04 £’000 (1,874) 19.6% 11.80p 64,561 64,561 24.08p 24.08p (71,102) 26,433 48,227 66,435 ( 35,974) (16,334) (65,268) 532,541 293,785 183,848 183,848 The Restaurant Group plc Group Restaurant The

– – 2013 2.00 £’000 (2,231) 19.4% 74,916 56,190 72,685 72,685 14.00p 28.02p 28.02p 26,433 ( 67,819 ) (41,857) (16,495) ( 80,168 ) 3 37,519 215,965 215,965 579,589 1.95 2014 £’000 6,862 3.45p 15.8% (2,385) 84,927 78,065 80,450 26,433 15.40p 66,999 29.96p 33.39p (17,928 ) (58,261) (38,578) (92,224) 368,576 244,524 244,524 635,225

for the year and special dividends) Underlyinginterest Adjusted profit before tax Revenue Group financial record Profit on ordinary activities before tax Non-trading credits / (charges) Adjusted operating profit Tax Special dividend per share Adjusted earnings per share Profit for the year Proposedordinary total dividend per share Dividend cover (excluding non-trading items finance of Employment Property, plant and equipment Other non-current assets Long-term liabilities Net current liabilities Basic earnings per share Financed by: Financed funds shareholders’ Equity Net debt Gearing 90 Annual Report 2014 The Restaurant Group plc

Shareholder information

Directors Registrar Alan Jackson Equiniti Limited Non-executive Chairman Aspect House Spencer Road Danny Breithaupt Lancing Chief Executive Officer (from 1 September 2014) West Sussex BN99 6DA 0871 384 2030 Stephen Critoph Chief Financial Officer Auditor Deloitte LLP Tony Hughes 2 New Street Square Non-executive London EC4A 3BZ

Simon Cloke Solicitors Non-executive Slaughter and May One Bunhill Row Sally Cowdry London EC1Y 8YY Non-executive (from 1 March 2014) Goodman Derrick LLP Debbie Hewitt (from 1 May 2015) 10 St Bride Street Non-executive London EC4A 4AD Company Secretary Stephen Critoph Brokers JPMorganCazenove Head office (and address for all correspondence) 25 Bank Street 5-7 Marshalsea Road London E14 5JP London SE1 1EP Numis Securities Limited Telephone number The London Stock Exchange Building 020 3117 5001 One Paternoster Square London EC4M 7LT Company number SC030343 Financial calendar Annual General Meeting Registered office Thursday, 14 May 2015 1 George Square Glasgow G2 1AL Proposed final dividend – 2014 Announcement – 27 February 2015 Ex-dividend – 18 June 2015 Record date –19 June 2015 Payment date – 8 July 2015 The Restaurant Group plc Annual Report 2014 91

Notes 92 Annual Report 2014 The Restaurant Group plc

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