Annual Report 2020 The Restaurant Group Annual Report 2020 The Restaurant Group plc operates approximately 400 restaurants and pub restaurants. Its principal trading brands are Wagamama and Frankie & Benny’s. The Group also operates Pub restaurants and a Concessions business which trades principally at UK airports. Contents Overview Governance Financial statements Our brands 02 Corporate governance report 28 Independent auditor’s report 72 Board of Directors 38 Consolidated income statement 83 Strategic report Audit Committee report 40 Consolidated balance sheet 84 Chairman’s statement 04 Nomination Committee report 45 Consolidated statement of changes Business review 06 Directors’ remuneration report 48 in equity 86 TRG’s response to the Covid-19 Directors’ report 66 Consolidated cash flow statement 87 pandemic 10 Senior management Risk Committee 69 Notes to the consolidated accounts 88 Financial review 12 Directors’ responsibility statements 71 Company balance sheet 136 Section 172 statement 18 Statement of changes in equity 137 Corporate social responsibility 20 Notes to the Company accounts 138 Group financial record 142 Glossary 143 Shareholder information 144 Overview Summary The Covid-19 pandemic has presented • Encouraging trading performance in enormous challenges for our sector all periods when permitted to trade but the TRG team has responded – Wagamama and Pubs businesses decisively to re-structure our business particularly strong whilst preserving the maximum number • Leisure and Concessions estate right- of long term roles for our colleagues. sized with the exit of approximately TRG is operationally a much stronger 250 sites through restructuring actions business than 12 months ago. I would • Long-term financing secured with £500m like to sincerely thank each and every report Strategic of new debt facilities in place and a TRG colleague for their enormous flexible covenant package efforts throughout this period.” • Capital raise of £175m to enhance liquidity, accelerate deleveraging and support selective growth • Business well positioned for relaunch Andy Hornby when restrictions eased Chief Executive Officer Governance Financial statements Financial The Restaurant Group plc Annual Report 2020 01 Our brands TRG operates a diverse portfolio of popular brands, each with their own unique and differentiated offering, but all with great hospitality at their core. Our portfolio offers something for everyone. 149* Sites Wagamama first opened its doors in 1992 in London’s Bloomsbury. Inspired by fast- paced, Japanese ramen bars and a celebration of Asian food, Wagamama burst into life creating a unique way of eating. Bringing the fresh, nourishing, flavours of Asia to all. * This relates to UK full-service restaurants as well as five delivery kitchens. Trading estate as at 27 December 2020. 78* Sites Set mostly in rural locations, each pub within the Brunning & Price family is unique, but all share a common love of local cask ales, decent, affordable wines, genuine hospitality and wholesome dishes cooked using the freshest ingredients. Our characterful buildings are often set in beautiful surroundings and we go to great lengths to restore and preserve them, offering a timeless, calm, informal setting for people who like to meet, eat, drink and talk in a relaxed, friendly atmosphere. Our Managers look upon the pub as their own, making local decisions to reflect what their customers favour, making us very much the heart of the community. * Trading estate as at 27 December 2020. 105* Sites Welcome to a place where genuine Italian passion blends with the confidence of New York City, the fusion that created the Frankie & Benny’s we all know and love today. Our passion for great Italian American food, a welcoming atmosphere and warm and friendly service is second to none. Welcome to Frankie & Benny’s – where ‘have a nice day’ meets ‘la dolce vita’. * Expected trading estate as at 27 December 2020. 02 The Restaurant Group plc Annual Report 2020 Overview 35* 22* Sites Sites report Strategic TRG Concessions has over 25 years’ experience of providing Chiquito has been delivering the best of Mexican cuisine exceptional hospitality to the travelling public and beyond. for 30 years. Delivering fantastic food in a fun, fiesta-style Our brand portfolio includes table service, counter service, environment is what the team are passionate about. Whether sandwich shops, pubs and bars. We deliver existing TRG you want to embrace our Mexican heritage by wearing our brands, create bespoke concepts and establish partnerships iconic sombreros or just enjoy some classic dishes and to franchise third-party brands. Our record of innovation, drinks, Chiquito offers a fantastic experience for all. partnership, and performance ahead of sector growth will * Expected trading estate as at 27 December 2020. ensure we remain a market leader in this industry. * Expected trading estate as at 27 December 2020. Governance 3* 2* statements Financial Sites Sites At Firejacks our mantra is simple ‘Meat. Fire. Friends’. We pride ourselves on delivering an unparalleled restaurant experience where food innovation is at the heart. 3* Sites * Expected trading estate as at 27 December 2020. Coast to Coast offers a unique and authentic take on American home-style dining with an extensive menu spanning the length of the USA. * Expected trading estate as at 27 December 2020. The Restaurant Group plc Annual Report 2020 03 Chairman’s statement As we look forward, despite all of the challenges of the pandemic, the business is well positioned to deliver long-term shareholder value.” 2020 has been an extraordinarily difficult period for the In spite of heroic efforts to reduce our operating costs during hospitality industry, which has arguably been more affected by the year, (reduced to just c£3.5m per month during the first the repercussions of Covid-19 pandemic than almost any other national lockdown), adjusted losses before tax were £87.5m sector. In spite of this, the Group’s leadership acted with pace at (2019: profit of £74.5m). The adjusted Loss per Share (LPS) the onset of this pandemic to protect the business and have was 13.4p per share compared to an adjusted Earnings per rigorously and diligently executed a series of actions to ensure Share (EPS) of 11.9p in 2019. Statutory loss before tax was that we remain well positioned to rebuild trading momentum £127.6m (2019 loss before tax of £37.3m) including once restrictions are lifted in the medium-term and to leverage exceptional charges of £40.1m (2019 £111.8m) relating potential market opportunities in the long-term. primarily to the restructuring charges explained in detail in the Financial Review section. Statutory LPS was 21.3p Our reported results reflect that we have been closed for (2019: EPS 8.2p). These results also reflect the first-time ‘dine-in’ in many of our restaurants for a very significant implementation of IFRS 16 ‘Leases’ in the current year, but proportion of 2020, including two periods of complete comparatives have not been restated. On an IAS 17 basis, lockdown and selective lockdowns through the tiering policy, Adjusted EBITDA was £8.7m (2019: £136.7m) and Adjusted which saw many of our pubs and restaurants categorised as loss before tax was £47.9m (2019: profit of £74.5m). ‘takeaway’ or delivery only. Our Concessions business has, in the main, remained closed throughout the year. Our priority throughout this pandemic has been the safety of our colleagues and customers and the preservation of cash, As a result, total revenues in the year were down 57% to with all non-essential spend avoided. With that as a backdrop, £459.8m. More positively, in the periods where we were the team have taken a range of actions including contract allowed to trade for ‘dine-in’ (which also benefitted from the negotiations with our supportive supplier base, agreement Eat Out to Help Out scheme and VAT reduction), Wagamama of deferred payment plans, a significant reduction in capital continued to deliver exceptional like-for-like (‘LFL’) sales expenditure to £38.9m (2019 £73.3m), accessing Government growth, trading well ahead of its core UK market and ahead support where appropriate and taking voluntary pay and fee of management expectations. Throughout the year the reductions and bonus waivers. business achieved substantial growth through delivery and ‘click and collect’ channels, attracting a number of To strengthen our liquidity, we carried out a placing of shares customers new to delivery and to Wagamama. Similarly, our on 8 April 2020, which raised net proceeds of £54.6m from Pubs business continued to trade consistently ahead of the institutional shareholders. We also achieved flexibility in our pub restaurant sector when open for ‘dine-in’, and our banking facilities from our supportive lending group, adding an restructured Leisure business showed improved LFL sales additional £25m to the Group’s overall committed debt facilities, growth when it was allowed to open, the first time it has as well as extending the majority of facilities to 30 June 2022. shown growth for five years. Post year-end, the Group secured long-term committed financing to ensure the long term security of the business. 04 The Restaurant Group plc Annual Report 2020 We have also significantly restructured our estate through Overview several initiatives, with our total estate now c. 400 sites, compared with 653 at the end of 2019. These initiatives included a CVA in the Leisure business, which resulted in the exit of 128 underperforming sites (primarily relating to the Frankie & Benny’s brand); the administration of Chiquito Limited, resulting in the exit of 45 underperforming sites; the administration of Food & Fuel Limited, which resulted in the exiting of seven underperforming sites; and the exiting of over 30 economically unattractive Concessions sites. During the year, Mike Tye and Allan Leighton stepped down from the Board as Non Executives. We’d like to thank them both for their contribution to the business.