PIZZAEXPRESS FINANCING 1 PLC. Interim financial report for the 40 weeks ended 3 April 2016

Transcription

1 Interim financial report for the 40 weeks ended 3 April

2 Contents Operating and financial review 3 Condensed consolidated statement of comprehensive income 4 Condensed consolidated statement of financial position 5 Condensed consolidated statement of changes in equity 6 Condensed consolidated cash flow statement 7 8 2

3 Operating and financial review The Group delivered a solid trading performance with turnover growing ahead of the same period in the prior year on a pro forma basis by 15.2%. EBITDA remained in line with the prior pro forma period. UK LFL* was -0.5% on a constant currency basis (-0.7% at actual rates) which reflects the continuation of challenging market conditions in this market. Lower volumes in our core UK market continue to impact profitability and this is reflected in the 100 basis points reduction in UK EBITDA margin. The larger decline in the Group EBITDA margin of 310 basis points is explained by the change from recognising franchise income only to full consolidation of turnover and costs for the former franchise businesses in the UAE and China. In the UK during the quarter we completed the acquisition of Firezza, a leading pizza delivery business with 17 sites across London. We also completed the disposal of Kettner s, our Soho based restaurant business. In our international markets, we opened two new sites in territories where we operate as a wholly-owned business with one restaurant opened by our franchise partners. We continue to establish foundations in our key international markets and remain confident of the medium to long term prospects for these businesses. Interest expense in the period principally comprises interest on the Senior Secured and Senior Notes of 36.5m (including premium amortisation), interest on the shareholder loan of 25.5m and amortisation of financing fees incurred on acquisition of 2.0m. Adjusted Net Debt* was 635.0m at the end of the period, with cash of 38.3m and Senior Secured Notes and Senior Notes of 673.3m (including accrued interest of 8.3m). Adjusted Net Debt : Adjusted EBITDA* stands at 5.9x, compared to 5.7x at 28 June 2015, the end of the prior financial year. *Non statutory reporting measures are defined on page 12. 3

4 Condensed consolidated statement of comprehensive income For the 40 weeks ended 3 April 2016 UK and Ireland International Unaudited 40 weeks ended 3 April 2016 Total UK and Ireland International Unaudited 33 weeks ended 5 April 2015* Total Note Turnover 3 334,107 42, , ,705 2, ,404 Cost of sales (234,098) (33,313) (267,411) (186,377) (615) (186,992) Gross profit 100,009 9, ,198 81,328 2,084 83,412 Operating expenses (25,022) (7,484) (32,506) (19,000) (1,190) (20,190) EBITDA ** 74,987 1,705 76,692 62, ,222 Share based payment charge (210) - (210) (74) - (74) Exceptional costs 4 (2,011) - (2,011) (9,511) - (9,511) Profit on disposal of business 5 1,156-1, Depreciation and amortisation (14,746) (3,993) (18,739) (11,862) (108) (11,970) Operating profit/(loss) 59,176 (2,288) 56,888 40, ,667 Loss on disposal of fixed assets (668) (12) (680) (137) - (137) EBIT ** 58,508 (2,300) 56,208 40, ,530 Net interest payable and similar charges Loss on ordinary activities before taxation 6 (64,922) (51,237) (8,714) (9,707) Tax on loss on ordinary activities 8 6,634 (7,759) Loss for the financial period (2,080) (17,466) Other comprehensive income: Currency translation differences 2,685 (663) Total comprehensive income 605 (18,129) *Restated for the impact of transition to IFRS as set out in note 22. **EBITDA and EBIT are non-statutory measures as defined on page 12. 4

5 Condensed consolidated statement of financial position As at 3 April 2016 Note Unaudited 3 April June 2015 Non-current assets Intangible assets 9 900, ,042 Property, plant and equipment , ,428 1,120,530 1,103,470 Current assets Inventories 9,141 8,341 Trade and other receivables 11 29,489 29,799 Corporation tax Cash and cash equivalents 38,328 49,273 76,958 87,942 Current liabilities Trade and other payables 12 (93,341) (105,311) Corporation tax (1,648) - (94,989) (105,311) Net current liabilities (18,031) (17,369) Total assets less current liabilities 1,102,499 1,086,101 Non-current liabilities Borrowings 14 (1,008,201) (981,051) Trade and other payables 13 (1,229) (1,037) Provisions for liabilities and charges 15 (1,828) (2,003) Deferred tax liability 16 (103,820) (115,404) (1,115,078) (1,099,495) Net liabilities (12,579) (13,394) Equity Share capital Share premium 4,450 4,450 Retained earnings (17,079) (17,894) Total equity (12,579) (13,394) 5

6 Condensed consolidated statement of changes in equity For the 40 weeks ended 3 April 2016 Share capital Share premium Retained earnings Total At 29 June ,450 (17,894) (13,394) Loss for the financial period - - (2,080) (2,080) Share based payment charge Currency translation differences - - 2,685 2,685 At 3 April 2016 (unaudited) 50 4,450 (17,079) (12,579) Share capital Share premium Retained earnings Total At 18 August New share capital subscribed 50 4,450-4,500 Loss for the financial period* - - (14,045) (14,045) Currency translation differences At 28 June ,450 (14,022) (9,522) *Restated for the impact of transition to IFRS as set out in note 22. 6

7 Condensed consolidated cash flow statement For the 40 weeks ended 3 April 2016 Cash flows from operating activities Note Unaudited 40 weeks ended 3 April 2016 Unaudited 33 weeks ended 5 April 2015* Cash generated from operations 17 74,593 54,361 Taxation paid (3,095) (1,924) Interest paid (48,259) (22,484) Net cash inflow from operating activities 23,239 29,953 Cash flows from investing activities Purchase of property, plant and equipment (30,193) (19,072) Disposal of property, plant and equipment (160) - Purchase of intangible assets (193) - Purchase of subsidiary undertakings, net of cash acquired (6,953) (575,342) Disposal of business 2,471 - Interest received Repayment of existing loan borrowings - (304,054) Net cash outflow from investing activities (34,884) (898,309) Cash flows from financing activities Proceeds from the issue of share capital - 4,500 Facility arrangement fee - (625) Shareholder loan issued - 307,617 Loan notes issued - 610,000 Debt issue costs (374) (21,885) Net cash (outflow)/inflow from financing activities (374) 899,607 Net (decrease)/increase in cash and cash equivalents (12,019) 31,251 Cash and cash equivalents at the beginning of the period 49,273 - Exchange gain/(loss) on cash and cash equivalents 1,074 (162) Cash and cash equivalents at the end of the period 38,328 31,089 *Restated for the impact of transition to IFRS as set out in note 22. 7

8 1 Accounting policies This financial information is the unaudited condensed consolidated interim financial information (hereafter the 'Interim Financial Information ) of PizzaExpress Financing 1 plc (the Company ) and its subsidiaries (collectively, the Group ) for the 40 week period ended 3 April 2016 as required by the Offering Memorandum for the Senior Secured and Senior Notes dated 24 July Basis of preparation This Interim Financial Information contains condensed financial information for the 40 weeks ended 3 April 2016, and should be read in conjunction with the Annual Report and Consolidated Financial Statements for the period ended 28 June 2015 for the Group (the Annual Report 2015 ), which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union. This Interim Financial Information has been prepared applying consistent accounting policies to those applied by the Group in the Annual Report l This Interim Financial Information does not constitute statutory accounts for the Group within the meaning of sections 434(3) and 435(3) of the Companies Act The Annual Report 2015 has been delivered to the Registrar of Companies. The report of the independent auditors was unqualified and did not contain a statement under section 498 of the Companies Act Basis of consolidation The consolidated financial statements of the Group incorporate the financial statements of the Company and those entities controlled by the Company. The accounting reference date for the Group is 30 June and the financial statements are prepared to the Sunday falling nearest this date each year. Going concern The Directors note that whilst the Group is in a net liabilities position at the end of the period, the first repayments of the Group s borrowings are not due until August In making their assessment of going concern, the Directors have also considered the availability of additional financing and note that there is a undrawn Revolving Credit Facility of 20 million available to the Group. On this basis of these combined factors, the Directors believe it is appropriate to prepare the Interim Financial Information on a going concern basis. The principal accounting policies used in the preparation of the Interim Financial Information are as follows: Critical accounting estimates and areas of judgment The preparation of the Interim Financial Information requires management to make estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related disclosures. The estimates and underlying assumptions are based on historical experience and other relevant factors. This approach forms the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information. Such changes are recognised in the period in which the estimate is revised. The key assumptions about the future and key sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying value of assets and liabilities within the next 12 months, are described below. Onerous lease and dilapidation provisions Provisions for onerous leases and dilapidations include estimates such as the length of time a property may be empty for and the value of any make good costs at the end of a lease. Provisions are discounted to present value which requires the use of a discount rate. Provisions are reviewed regularly and adjusted as appropriate. Useful lives of property, plant and equipment Depreciation is provided in order to write down to estimated residual values the cost of each asset over its estimated useful economic life. These useful economic lives require the use of management judgement. These estimates are regularly reviewed. 8

9 Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Acquisition related costs are expensed as incurred. Intra-Group transactions, balances, and unrealised gains and losses on transactions between Group companies are eliminated on consolidation. With the exception of the subsidiaries incorporated in China, Hong Kong and UAE, all subsidiaries have coterminous period ends. The subsidiaries incorporated in China and Hong Kong have a year end of 31 December as this is required under Chinese law. Where subsidiaries do not have a coterminous period end, financial information is prepared by the subsidiaries for a period equal to that of rest of the Group. Business combinations All acquisitions are accounted for using the acquisition method of accounting. The cost of an acquisition is the aggregate of the fair values of the assets transferred, liabilities incurred or assumed and equity instruments in issue at the date of acquisition. Costs directly relating to an acquisition are expensed to the income statement. The identified assets and liabilities and contingent liabilities are measured at their fair value at the date of acquisition. The excess of the fair value of consideration to acquire the business over the aggregate fair value of the Group's share of the net identified assets and liabilities is recorded as goodwill. Turnover Turnover represents net invoiced sales of food and beverages, royalties from retail sales, sales of dough products and franchise fees, all excluding value added tax. Turnover of restaurant services is recognised when the services have been delivered. Royalties from retail sales are recognised in turnover on product delivery or when due under the terms of the relevant retail sales agreements. Turnover from the sale of dough products is recognised on despatch, as this is when the risks and rewards of ownership transfer to the third party. Franchise fees arising outside the United Kingdom are recognised when they fall due under the terms of the relevant franchise agreements. Allocation of costs Cost of sales includes the cost of goods sold, direct labour costs and restaurant overheads. Administrative expenses include central and area management, administration and head office costs. Holiday pay accrual A liability is recognised to the extent of any unused holiday pay entitlement which is accrued at the statement of financial position date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday entitlement so accrued at the statement of financial position date. Property, plant and equipment Property, plant and equipment assets are stated at original historical purchase cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided at the following annual rates in order to write down the cost of each asset over its estimated useful economic life on a straight line basis: Equipment Fixtures and fittings 20% per annum 10% per annum Short leasehold improvements are depreciated over the length of the lease except where the anticipated renewal or extension of the lease is sufficiently certain so that a longer estimated useful life is appropriate. Current legislation and the terms of the lease contracts are such that the majority leases are readily extendable. The maximum depreciation period for short term leasehold properties is 30 years. Assets under construction includes property, plant and equipment acquired for restaurants under construction including costs directly attributable to bringing the asset into use. Assets are transferred to short leasehold, equipment or fixtures and fittings when the restaurant opens. No depreciation is provided on assets under construction as these assets have not been brought into working condition for intended use by the Group. 9

10 Intangible assets (excluding goodwill and brand) Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation is provided at the following annual rates in order to write down to estimated residual values the cost of each asset over its estimated useful economic life on a straight line basis: Computer software 6.66% - 20% per annum Trademarks are considered to have an indefinite useful life and are therefore not depreciated. Goodwill Goodwill arising on consolidation represents the excess of consideration transferred over the interest in the net fair value of the net assets acquired. The carrying value of the goodwill allocated to each cash generating unit is compared to its recoverable amount being the higher of its value in use and its fair value less costs to sell. An impairment review is carried out annually or when circumstances arise that may indicate an impairment is likely. Any impairment is charged immediately to the income statement. Brand The Group carries assets on the balance sheet for brands that have been acquired. Internally generated brands are not recognised. Cost is determined at acquisition as being directly attributable cost or, where relevant, by using an appropriate valuation method. Acquired brands with an indefinite useful economic life are tested for impairment annually. The acquired brand shown in these financial statements is considered to have an indefinite useful economic life due to the history, profit and market position of the trade name. Operating leases Rentals paid under operating leases are charged to the income statement on a straight line basis over the term of the lease. The benefits of lease incentives are taken to the income statement on a straight line basis over the lease term. Contributions received from landlords as an incentive to enter into a lease are treated as deferred income within creditors and are taken to the income statement on a straight line basis over the lease term. Rentals received under operating leases are credited to the income statement on a straight line basis over the term of the lease. Exceptional items Exceptional items are material items of income and expense that, because of the unusual nature and expected infrequency of the events giving rise to them, merit separate presentation to allow an understanding of the Group s financial performance. Pensions Contributions to defined contribution personal pension schemes are charged to the income statement in the period in which they become payable. 10

11 Taxation Current taxation For the purposes of the Interim Financial Information, the current taxation charge is calculated using the estimated effective rate of taxation calculated using the expected full year result. Deferred taxation Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit. Deferred tax is calculated at the substantively enacted tax rates at the balance sheet date that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited to the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is dealt with in equity, or items charged or credited directly to other comprehensive income, in which case the deferred tax is also recognised in other comprehensive income. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets and liability and when the Group intends to settle its current tax assets and liabilities on a net asset basis. Inventory Inventories are valued at the lower of cost and net realisable value. Cost is based on the purchase cost on a first-in, first-out basis. Inventories comprises food and drink and items that are utilised in the rendering of services to customers. Rebates receivable from suppliers Where a rebate agreement with a supplier covers more than one period the rebates are recognised in the financial statements in the period in which they are earned. Foreign currency transactions Transactions denominated in foreign currencies are recorded at the spot rate applicable at the date of the transaction. Monetary assets and liabilities expressed in foreign currencies held at the balance sheet date are translated at the closing rate. The resulting exchange gain or loss is dealt with in the income statement. The results of foreign subsidiaries are translated at the average rate. The balance sheets of foreign subsidiaries are translated at the closing rate. The resulting exchange differences are dealt with through reserves and are reported in the consolidated statement of changes in equity. Financial instruments Financial assets and financial liabilities are recognised when the Group has become a party to the contractual provisions of the instrument. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less any provision for impairment. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flows discounted using the original effective interest rate. The carrying value of the receivable is reduced and any impairment loss is recognised in the income statement. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and other short term deposits held by the Group with maturities of less than three months. Bank overdrafts are presented within current liabilities. Borrowings Borrowings are initially stated at the fair value of consideration received after deduction of issue costs and including any premium received on issue. The issue costs and interest payable on borrowings are charged to the income statement over the term of the borrowings using the effective rate of interest, or over a shorter period where it is more likely than not that the lender will require earlier repayment or where the borrower intends or is required to redeem early. Facility fees on revolving credit facilities are included within prepayments and amortised over the term of the facility. Trade payables Trade payables are not interest bearing and are recognised initially at fair value and subsequently measured at amortised cost. 11

12 Provisions Provisions are recognised when the Group has a present legal obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated. Where the effect of the time value of money is material, the provision is based on the present value of future outflows, discounted at the pre-tax discount rate that reflects the risks specific to the liability. Provisions for onerous leases are recognised when there are foreseeable net cash outflows on a lease which has more than one year before expiring or option to exercise a break. Share-based payments The Group operates a share scheme under which shares and share options are granted to certain employees. The scheme meets the definition of an equity-settled share-based payment scheme. The costs of equity-settled transactions are measured at fair value at the date of grant and are expensed on a straight line basis over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number of share that are expected to vest. Pre-opening costs Pre-opening costs, which comprise site operating costs, are held on the balance sheet as prepayments and released to the profit and loss account when the restaurant the costs relate to is opened. Non-statutory reporting measures LFL sales Like-for-like ( LFL ) sales growth is defined as sales from wholly owned restaurants that have traded for a full financial year at the start of each financial year. LFL sites that are closed or disposed during a financial year are excluded from the LFL calculation. Growth is measured by reference to the sales generated from LFL restaurants in the same period in the prior financial year. EBITDA EBITDA is a non-statutory measure and is calculated as the result for the period excluding taxation, interest, depreciation and amortisation and before deducting share based payment charges, exceptional costs and profit/loss on disposal of fixed assets. Adjusted EBITDA Adjusted EBITDA is the EBITDA for the preceding 52 week period inclusive of an adjustment for expected run rate trading for all restaurants open less than 18 months as management believe the first 6 months of a restaurant s trading are not representative of run rate trading. EBIT EBIT is a non-statutory measure and is calculated as the result for the period excluding taxation and interest. Adjusted net debt Adjusted net debt is defined as being the outstanding liability in relation to the Senior Secured and Senior Loan Notes (excluding any capitalised debt issue costs) plus the accrued interest on these Loan Notes and the cash balance at the balance sheet date. 12

13 2 Pro forma financial information of the Group PizzaExpress Financing 1 plc acquired the New PizzaExpress Group (being PizzaExpress Franchises Limited, Gondola Investments Limited (now PizzaExpress Operations Limited) and its subsidiaries and PizzaExpress Greater China Limited) on 18 August 2014 and as a result the comparative financial information shown in the primary income statement is for the 33 week period from 18 August 2014 to 5 April To facilitate prior period comparison, this note is voluntarily disclosed to provide the pro-forma condensed consolidated statement of comprehensive income with prior period comparatives of the Old PizzaExpress Group for the period from 30 June 2014 to 5 April The Old PizzaExpress Group is considered to comprise PizzaExpress Franchises Limited, Gondola Investments Limited (now PizzaExpress Operations Limited) and its subsidiaries and PizzaExpress Greater China Limited. The comparative pro forma financial information therefore represents 7 weeks trading of the Old PizzaExpress Group (up to and including 17 August 2014) followed by 33 weeks trading of the New PizzaExpress Group (up to and including 5 April 2015). Prior period information represents the results and the position of the Old PizzaExpress Group at the relevant date prepared under consistent accounting policies as set out in note 1. Pro forma condensed consolidated statement of comprehensive income for the 40 weeks ended 3 April 2016 UK and Ireland Unaudited Unaudited 40 weeks ended 3 April weeks ended 5 April 2015* International Total UK and Ireland International Total Turnover 334,107 42, , ,768 3, ,988 Cost of sales (234,098) (33,313) (267,411) (225,188) (742) (225,930) Gross profit 100,009 9, ,198 98,580 2, ,058 Operating expenses (25,022) (7,484) (32,506) (22,858) (1,487) (24,345) EBITDA ** 74,987 1,705 76,692 75, ,713 Share based payment charge (210) - (210) (74) - (74) Exceptional costs (2,011) - (2,011) (9,650) - (9,650) Profit on disposal of business 1,156-1, Depreciation and amortisation (14,746) (3,993) (18,739) (14,255) (108) (14,363) Operating profit/(loss) 59,176 (2,288) 56,888 51, ,626 Loss on disposal of fixed assets (668) (12) (680) (31) - (31) EBIT ** 58,502 (2,294) 56,208 51, ,595 Net interest payable and similar charges Loss on ordinary activities before taxation (64,922) (52,882) (8,714) (287) Tax on loss on ordinary activities 6,634 (8,590) Loss for the financial period (2,080) (8,877) *Restated for the impact of transition to IFRS **EBITDA and EBIT are non-statutory measures as defined on page

14 3 Turnover Business sector analysis The split of turnover by sector during the period is as follows: 40 weeks 33 weeks ended 3 April ended 5 April Restaurant income 364, ,464 Wholesale income 3,108 2,530 Overseas franchise income 791 2,118 Merchandising income 7,750 6, , ,404 Geographical sector analysis The split of turnover by geography during the period is as follows: 40 weeks 33 weeks ended 3 April ended 5 April UK and Ireland 334, ,705 International 42,502 2, , ,404 4 Exceptional items Exceptional items relate to one-off project costs that, in line with the Group s accounting policy, are items of an unusual nature which are not expected to reoccur. The exceptional items in the comparative period relate to the acquisition of the PizzaExpress Group and include legal and professional fees incurred as part of the purchase process, such as stamp duty, fees for due diligence and drafting and review of legal documents. The exceptional items incurred in the 40 weeks ended 3 April 2016 comprise mainly costs in relation to acquisitions that completed in the prior financial year. 5 Profit on disposal of business On 8 February 2015, the Group completed the disposal of the restaurant operating as Kettner s, situated on Romilly Street in Soho, London. The profit on disposal represents the proceeds received on the sale, less the book value of assets disposed and costs directly attributable to the sale. 6 Net interest expense payable and similar charges 40 weeks 33 weeks ended 3 April ended 5 April Interest on loan notes (including premium amortisation) 36,533 30,152 Interest on shareholder loan 25,532 19,437 Amortisation of debt finance costs 2,003 1,547 Other finance costs Bank interest receivable (144) (85) 64,922 51,237 14

15 7 Quarterly key performance indicators Summarised below are the main key performance indicators that management use to analyse the performance of the Group. 2015/ / / / / / / /15 Q1 Q2 Q3 Total Q1 Q2 Q3 Total Pro forma Turnover 114, , , ,609 97, ,536 96, ,988 LFL sales % 2.3% -1.5% -2.8% -0.7% 6.7% 6.8% 5.4% 6.4% Net rent payable 11,971 15,342 12,235 39,548 8,499* 12,279* 7,444* 28,222* EBITDA 24,461 31,897 20,334 76,692 22,493* 32,247* 21,973* 76,713* EBITDA % 21.3% 20.9% 18.6% 20.4% 23.2%* 24.1%* 22.8%* 23.5%* UK and Ireland EBITDA % 23.4% 23.1% 20.5% 22.4% 23.1%* 24.0%* 22.7%* 23.4%* Adjusted EBITDA 113, , ,007 n/a 95, ,264* 103,601* n/a Adjusted net debt (619,168) (625,261) (634,971) n/a (589,128) (582,432) (586,737) n/a Adjusted net debt : adjusted EBITDA n/a n/a *Restated for impact of conversion to IFRS 8 Tax on loss on ordinary activities Corporation tax expense is recognised using management s estimate of the Group s expected tax charge for the full financial period. The tax expenses includes both current and deferred tax. The tax charge in the Interim Financial Information is calculated using management s estimate of the Group s effective tax rate for the full financial period. Details of the deferred tax balance at period end are included within note

16 9 Intangible assets Trademarks Computer software Brand Goodwill Cost At 29 June , , , ,583 Additions Acquisition of Firezza ,203 4,231 Disposals - (37) - - (37) Transfers - 1, ,263 Foreign exchange movement At 3 April , , , ,110 Total Accumulated amortisation At 29 June (541) - - (541) Charge for the period - (383) - - (383) Eliminated on disposals At 3 April (908) - - (908) Net book value At 3 April , , , ,202 At 28 June , , , ,042 Goodwill The goodwill recognised relates to the acquisition of the ordinary share capital of PizzaExpress Operations Limited (formerly Gondola Investments Limited), PizzaExpress (Franchises) Limited and PizzaExpress Greater China Limited, PizzaExpress (Hong Kong) Limited and Jordana Restaurants LLC which are each considered to be cash generating units ( CGU ). The goodwill balance is tested annually for impairment. Brand The brand recognised as an intangible asset relates to the PizzaExpress brand. The brand was valued using the discounted five year cash flow forecast and after the five years the cash flows were taken into perpetuity. The brand is considered to have an indefinite life due to the history, profit and market position of the trade name. Acquisition of Firezza On 22 February 2016, the Group completed the acquisition of Firezza Holdings Limited and its subsidiary Firezza Limited. The Purchase Price Allocation, including the assessment of the fair values of assets acquired, is currently ongoing and therefore the goodwill value disclosed above is provisional. 16

17 10 Property, plant and equipment Assets under construction Short leasehold Fixtures and fittings Equipment Total Cost At 29 June , ,856 39,568 14, ,676 Added on acquisition ,361 Foreign exchange movement 8 2, ,557 Additions 19,021 3,915 3,418 2,898 29,252 Disposals - (6,328) (991) (1,284) (8,603) Transfers (17,286) 9,113 5,712 1,198 (1,263) At 3 April , ,696 48,328 18, ,980 Accumulated depreciation At 29 June (6,738) (3,979) (2,531) (13,248) Charge for the period - (9,623) (4,873) (3,860) (18,356) Foreign exchange movement - (1,037) (330) (469) (1,836) Eliminated on disposals - 4, ,309 6,788 At 3 April (12,472) (8,629) (5,551) (26,652) Net book value At 3 April , ,224 39,699 13, ,328 At 28 June , ,118 35,589 12, ,428 For the purposes of tangible asset impairment reviews, the Group considers each trading outlet to be a cash generating unit (CGU) and each CGU is reviewed annually for indicators of impairment of tangible assets. In assessing whether an asset has been impaired, the carrying value of the CGU is compared to its recoverable amount. The recoverable amount is the higher of its fair value and its value in use. The Group estimates value in use using a discounted cash flow model. Future cash flows are based on assumptions from the business plans and cover a five year period. A breakdown of the capital expenditure for the period to date is shown below. 40 weeks ended 3 April 2016 Pre-acquisition 7 weeks ended 17 August 2014 Post-acquisition 33 weeks ended 5 April weeks ended 5 April 2015 New restaurants 17,539 2,230 9,745 11,975 Other capital expenditure 11,712 2,288 9,327 11,615 29,252 4,518 19,072 23,590 17

18 11 Trade and other receivables 3 April June 2015 Trade receivables 6,033 5,688 Other receivables 6,454 5,423 Prepayments and accrued income 17,002 18,688 29,489 29, Trade and other payables: amounts falling due within one year 3 April June 2015 Trade payables 14,604 14,832 Accruals and deferred income 53,962 63,887 Other payables 10,948 10,662 Social security and other taxes 13,827 15,930 93, , Trade and other payables: amounts falling due after one year 3 April June 2015 Accruals 1,229 1,037 1,229 1,037 Accruals falling due after one year relate to deferred consideration for the acquisition of PizzaExpress (Hong Kong) Limited and subsidiaries. 18

19 14 Borrowings 3 April June 2015 Loan from parent 359, ,153 Senior Notes and Senior Secured Notes secured 648, ,898 1,008, ,051 Loan from Parent The loan from parent of 307,617,000 accrues interest at a compound fixed rate of 10% per annum and is due for repayment at the maturity date in August Interest of 25,532,000 (33 weeks ended 5 April 2015: 19,437,000) was accrued against the loan during the period. The loan includes a total of 26,536,000 accrued during the financial period ended 28 June Interest shall accrue and be aggregated with the principal balance until such time that the loan is repaid. The loan from the parent company and related accrued interest are not considered to form part of adjusted net debt for nonstatutory reporting purposes as it has a maturity beyond all other senior debt, is subordinated in terms of all payments to all existing and future senior and senior subordinated debt and contains no covenants, defaults or cross defaults. Senior Notes and Senior Secured Notes The Senior Notes of 200,000,000 carry interest at a fixed rate of 8.625% and are due for repayment at the maturity date in August Interest is paid in arrears every 6 months. The Senior Secured Notes of 465,000,000 carry interest at a fixed rate of 6.625% and are due for repayment at the maturity date in August Interest is paid in arrears every 6 months. Interest of 36,838,000 (33 weeks ended 5 April 2015: 30,152,000) has been recognised during the period on Senior Notes and Senior Secured Notes and 8,299,000 was included in short-term creditors at 3 April 2016 (28 June 2015: 19,524,000). Debt issue costs of 23,145,000 have been offset against the liability (28 June 2015: 23,065,000), of which 30,000 were accrued at 3 April 2016 (28 June 2015: 439,000). These costs have been capitalised and offset against the Senior Notes and Senior Secured Notes principal balance on a proportional basis. The issue costs are being amortised over the term to maturity and at 3 April 2016, unamortised issue costs amounted to 19,042,000 (28 June 2015: 20,965,000). A premium of 2,888,000 (28 June 2015: 2,888,000) was received on the Senior Secured Notes of 55,000,000 issued in June This premium has been capitalised and included within the Senior Secured Notes principal balance. The premium is being amortised over the term to maturity and at 3 April 2016, the unamortised premium amounted to 2,558,000 (28 June 2015: 2,863,000). The capitalised debt issue costs and debt premium are not considered to form part of adjusted net debt for non-statutory reporting purposes as they impact the book value of the Loan Note liability as required under IFRS but do not impact the outstanding liability to the Loan Note holders. The Senior Secured Notes are secured by a security accession deed and asset list comprising of the share capital and asset base of 12 PizzaExpress Group companies. 19

20 15 Provision for liabilities At 29 June ,003 Amounts utilised (175) At 3 April ,828 Provisions for liabilities relate to onerous lease and dilapidation provisions. These provisions represent operating leases on properties no longer in use, until the end of their leases or until the Directors estimate the properties can be sublet, as well as an estimate of dilapidations payable on leases held by the Group. This provision is expected to be utilised within the next five years. 16 Deferred tax At 29 June ,404 Impact of change in tax rates (11,620) Foreign exchange movement 36 At 3 April ,820 The deferred tax liability can be analysed as follows: 3 April June 2015 Capital allowances in excess of depreciation 12,200 13,484 Carried forward tax losses (1,080) (1,080) Fair value of brand on consolidation 92, , , ,404 On 26 October 2015, changes to the UK main rate of corporation tax to 19% from 1 April 2017 and to 18% from 1 April 2020 were substantively enacted. Accordingly, the deferred tax balances have been revalued to the substantively enacted rate applicable in the period in which the timing difference is expected to reverse. 17 Share capital Allotted and issued: 3 April June ,100 Ordinary Shares of 1 each

21 18 Reconciliation of loss for the period to operating cash flows 40 weeks ended 3 April weeks ended 5 April 2015* Loss for the period (2,080) (17,466) Adjustments for: Share based payment charge Depreciation and amortisation 18,739 11,970 Taxation (credit) / charge (6,634) 7,759 Net finance expense 64,922 51,237 Disposal of business (1,156) - Loss on the sale of assets Increase in inventory (627) (748) Decrease / (increase) in receivables 1,042 (2,660) Decrease / (increase) in payables (328) 4,058 Decrease in provisions (175) - Cash generated from operations 74,593 54,361 *Restated for the impact of transition to IFRS as set out in note Analysis of adjusted net debt At 3 April 2016 At 28 June 2015 Cash and cash equivalents 38,328 49,273 Senior Secured and Senior Notes (648,516) (646,898) Loan from parent (359,685) (334,153) Total statutory net debt (969,873) (931,778) Exclude loan from parent 359, ,153 Exclude unamortised capitalised debt issue costs (19,042) (20,965) Exclude unamortised debt premium 2,558 2,863 Include accrued interest on Senior Secured and Senior Notes (8,299) (19,524) Total adjusted net debt (634,971) (635,251) 21

22 20 Estate summary UK and Ireland International Total Open as at 29 June Opened during period Closed during period (2) (4) (6) Open as at 3 April Open as At 5 April Post balance sheet events There are no post balance sheet events to disclose. 22 Impact of conversion to IFRS As discussed in the Operating and Financial Review for the Interim Financial Information for the 45 weeks ended 28 June 2015, the directors elected to prepare the statutory accounts for the period ended 28 June 2015 under IFRS and as such this Interim Financial Information includes comparative financial information for the 33 weeks ended 5 April 2015, that was previously presented under UK GAAP, restated under IFRS. In order to facilitate the comparison of this comparative information from that previously presented, a reconciliation has been provided below between the statement of comprehensive income and statement of cash flows under UK GAAP and IFRS. UK GAAP 33 weeks ended 5 April 2015 Impact of conversion IFRS 33 weeks ended 5 April 2015 Turnover 270, ,404 Cost of sales (186,647) (345) (186,992) Gross profit 83,757 (345) 83,412 Operating expenses (20,190) - (20,190) EBITDA 63,567 (345) 63,222 Share based payment charge (74) - (74) Exceptional costs (182) (9,329) (9,511) Depreciation and amortisation (35,070) 23,100 (11,970) Operating profit 28,241 13,426 41,667 Loss on disposal of fixed assets (137) - (137) EBIT 28,104 13,426 41,530 Net interest payable and similar charges (51,237) - (51,237) (Loss) / profit on ordinary activities before taxation (23,133) 13,426 (9,707) Tax on loss on ordinary activities (7,831) 72 (7,759) Loss for the financial period (30,964) 13,498 (17,466) 22

23 22 Impact of conversion to IFRS (continued) UK GAAP 33 weeks ended 5 April 2015 Impact of conversion IFRS 33 weeks ended 5 April 2015 Loss for the period (30,964) 13,498 (17,466) Share based payment charge Depreciation and amortisation 35,070 (23,100) 11,970 Taxation charge 7,831 (72) 7,759 Net finance expense 51,237-51,237 Loss on the sale of assets Increase in inventory (748) - (748) Increase in receivables (2,660) - (2,660) Increase in payables 3, ,058 Cash generated from operations 63,690 (9,329) 54,272 Taxation paid (1,924) - (1,924) Interest paid (22,484) - (22,484) Net cash inflow from operating activities 39,282 (9,329) 29,953 Cash flows from investing activities Purchase of property, plant and equipment (19,072) - (19,072) Purchase of subsidiary undertakings, net of cash acquired (584,671) 9,329 (575,342) Repayment of existing loan borrowings (304,054) - (304,054) Interest received Net cash outflow from investing activities (907,638) 9,329 (898,309) Cash flows from financing activities Proceeds from the issue of share capital 4,500-4,500 Facility arrangement fee (625) - (625) Shareholder loan issued 307, ,617 Loan notes issued 610, ,000 Debt issue costs (21,885) - (21,885) Net cash inflow from financing activities 899, ,607 Net increase in cash and cash equivalents 31,251-31,251 Cash and cash equivalents at the beginning of the period Exchange gain on cash and cash equivalents (162) - (162) Cash and cash equivalents at the end of the period 31,089-31,089 23