RNS Number:3868Q
Paramount PLC
01 October 2003
1 October 2003
Paramount plc
Preliminary Results for the 56 Weeks ended 29 June 2003
Paramount plc today announces its first results following the acquisition of
Groupe Chez Gerard Plc ("Groupe Chez Gerard") on 14 April 2003. Groupe Chez
Gerard represents the sole operating subsidiary of Paramount plc ("Paramount" or
"the Group").
These results primarily reflect the trading performance of Groupe Chez Gerard
for the 77 days from 14 April to 29 June 2003. The Group operated 23 premium
restaurants during the period under the Chez Gerard, Livebait and Bertorelli
brands.
Highlights
* The focus has been upon accelerating the turnaround programme to return
Groupe Chez Gerard to profitability
* The Group is profitable since the period end
* For the period, Group turnover is #6.7 million, EBITDA is #0.2 million
before non- recurring re-organisation costs of #0.4 million, and loss before
taxation is #0.8 million
* Actions taken to strengthen future Group cash flows
- three restaurants sold ahead of schedule at net book value post year end
- remaining restaurants now cash positive
- significant reduction of cost base at both restaurant and support office
levels
- strengthening performance of core Chez Gerard brand
* 0.5% increase in like for like sales since the year end reversing 4.0%
like for like sales decline for the 77 days between 14 April and 29 June
2003
Commenting on the results, Nick Basing, Group Chief Executive of Paramount plc,
said: "Since taking over the business, we are on track towards establishing a
strong base from which to develop the Group. We have taken rapid steps to create
a much stronger portfolio of restaurants, by directly supporting sales growth of
key sites; disposing of non-core restaurants; and significantly reducing the
cost base. The Group is now profitable and we are confident will continue to
generate sustained profitability going forward."
Further Enquiries:
Paramount plc,
Nick Basing, Chief Executive Telephone: 020 7257 8403
Cardew Chancery, Telephone: 020 7930 0777
Tim Robertson/Jeanette Hamster
Paramount plc
Preliminary Results for the 56 weeks ended 29 June 2003
CHAIRMAN'S STATEMENT
I am pleased to present Paramount's first trading results, following the
acquisition of Groupe Chez Gerard plc, for the period ended 29 June 2003 and I
would like to welcome to the Company all new Paramount shareholders who accepted
our Share Offer for Groupe Chez Gerard in April.
I am very encouraged by the actions that we have taken to improve the trading
performance of our sole subsidiary Groupe Chez Gerard in the short time since
the acquisition.
The results reported in this statement only include 77 days of actual trading
and therefore do not reflect the positive actions we have taken since April.
Total sales for the period under review were #6.7 million. This resulted in an
EBITDA of #0.2 million before #0.4 million of one off costs relating to the
acquisition and restaurant disposals. The Group reported a loss before taxation
of #0.8 million.
The reported loss in earnings per share has been affected by one off costs such
as the termination of Director contracts, and the issuance of 56.4 million
shares as part of the acquisition consideration. In line with the Board's
previous statements no dividend is payable.
Prior to April 2003, the Board of Directors spent 18 months assessing potential
acquisitions. The Board identified an opportunity to acquire the businesses of
Groupe Chez Gerard at a low point in the market created by the cyclical downturn
affecting the restaurant sector. Extensive due diligence revealed the existing
business had significant further potential. The Directors believe that the
acquisition of Groupe Chez Gerard has the potential to create significant
shareholder value.
Paramount has moved from a full listing on the London Stock Market to the
Alternative Investment Market, benefiting from the reduced cost structure and
greater flexibility this allows. At the same time we strengthened our management
team by the appointment of Nick Basing, as Group Chief Executive and Ian Neill,
as Non-Executive Director.
Since April, the new team have made rapid progress in implementing the
initiatives identified at the time of the acquisition to improve the cash flow
of the enlarged Group's trading operations. The most significant of these has
been the reduction in costs, introduction of a new bonus scheme with which to
incentivise the management team and the disposal of non-core restaurants.
Three sites have been sold at a combined price equal to net book value, a
further three sites have been closed and negotiations for their sale are
progressing satisfactorily. The rapid reduction in the cost base has come from a
mix of reduced costs in restaurants and the support office.
The result of these actions has meant that the Group is now profitable and has
generated a 0.5% increase in like for like sales since the year end, creating a
solid platform from which to grow the business and increase its long-term
profitability.
I am particularly encouraged by the strength of the Chez Gerard brand and I look
forward to developing it in the future. In the coming year the Board will also
be looking at performing a capital reconstruction that would enable the Group to
do share buy-backs and/or return to the dividend list.
GA Naggar
Chairman
CHIEF EXECUTIVE'S STATEMENT
Introduction
I am pleased to present my first set of results as your Group Chief Executive of
Paramount. In the short time since we acquired Groupe Chez Gerard we have made
good progress. The change of ownership process, which necessitated various one
off costs, was executed efficiently with minimal disruption. The operational
management have responded positively to the targets set as part of our plan to
return the Group to profitability.
The results in this review only include 77 days of turnover, however, I am
particularly encouraged, by the performance of the Chez Gerard restaurants.
These continue to perform strongly in their own area of the premium dining
market and attract a loyal customer following. The continued development of the
Chez Gerard brand will be key to the future performance of the Group.
Financial results
Paramount acquired Groupe Chez Gerard on 14 April 2003. The Company started the
period under review with #4.8 million cash on deposit and generated #0.1 million
net interest receivable during the year. As a result of the relatively short
period of ownership, there are no financial comparisons available for these
results.
Group sales between 14 April and 29 June 2003 were #6.7 million. The Group
generated an EBITDA of #0.2 million before non-recurring re-organisation costs
of #0.4 million. The immediate actions that we have taken to improve sales and
restaurant contribution margins have had a positive like for like impact. Whilst
like for like sales for the period were down by 4.0% for the two and a half
months, this was an improvement against the trend for the full year.
Encouragingly like for like comparisons since the year end are up 0.5% and the
Group is now cash positive. Restaurant contribution margins have also shown a
positive like for like improvement towards the end of this initial period of our
ownership.
Transition Plan
Our plan for realising the potential of Groupe Chez Gerard is based around five
initiatives:
- focusing on the core brand, Chez Gerard
- improving the yield from our existing portfolio of restaurants
- enhancing the dining experience of each customer
- improving Group wide efficiencies
- strengthening Group cash position
Chez Gerard represents the Group's core brand. Operating from 10 venues it
generated 55% of the total turnover and 84% of restaurant contribution for the
period of our ownership. Since April of this year we have performed a thorough
review of all aspects of the business. Subtle changes have been made to the menu
due to be re-launched this autumn. A separate menu format has been developed for
the Gatwick and Heathrow restaurants to reflect the more diverse tastes of their
international customer base. Over the next 6 months we will be introducing a
number of initiatives to further strengthen the Chez Gerard brand.
There have been some immediate opportunities to improve the yield from our
restaurant portfolio. Since April we have added an extra 140 covers through a
mixture of better utilisation of restaurant space and the addition of several
outside dining areas in time to benefit from the hot weather during the summer.
Restaurant bars were identified as another opportunity to improve the yield.
They are currently under-utilised and so the pricing and marketing of the bars
is being reviewed for a re-launch later this year. In addition, we addressed the
need for minor and immediate refurbishments across the portfolio and recommenced
a capital expenditure programme for 2004 to ensure that the restaurant portfolio
is able to maintain its premium dining status over the long term.
Enhancing the dining experience for each customer has become a focus throughout
the Group. As a key part of the customer experience is dependent on the
restaurant staff, the budget for staff training has been substantially
increased. Customer research was commissioned to obtain a closer understanding
of how our Chez Gerard, Livebait and Bertorelli brands are perceived by current,
past and lapsed customers. The results of these surveys will help guide some of
our future decisions on enhancing the dining experience.
Improving Group wide efficiency has been an important part of the turnaround in
performance. Under a new structure managers are now reporting more often against
clear bonus related targets. A new IT outsourcing contract has been agreed and
implemented. Further initiatives are being put in place to use IT in ways that
will provide additional information to managers and aid effective
decision-making. A thorough review of procurement across all categories of
expenditure will produce further margin improvements without compromising the
quality of the product. New charter agreements with suppliers will assist in
maintaining operational and product standards. Two important changes have
resulted from the review of supplier relationships, with a contract to supply
beef being awarded to the prestigious Duke of Buccleuch Estates and a single
supplier, Matthew Clark Ltd, appointed to source wine & spirits replacing the
multiple suppliers previously used.
A principal strength of the business is its ability to generate high levels of
cash and the Board expects to be able to significantly reduce debt during 2004.
Net debt at the end of the year was #3.5 million. After the year end the Group
sold three restaurants generating proceeds of #0.57 million. The sale of other
sites will further reduce our net debt position.
Disposal programme
Since April 2003, we have been reviewing the portfolio of businesses we
acquired. This review resulted in the disposal of Livebait, Oxford and Notting
Hill, and Chez Gerard, Roseberry Avenue after the year-end. The combined
proceeds approximated to book value. In addition, we decided to close two Chez
Gerards in Bristol and Manchester and we are advancing the sale of these two
sites, plus a Livebait in Wandsworth which was closed under the previous
management in 2002.
People
My colleagues at the Group's restaurants and support office represent our most
valuable asset. The Board is very grateful to all of them for their continued
support during the change of ownership and would like to thank them for their
commitment to the business.
Outlook
While the UK restaurant sector remains very competitive, we have experienced a
slight increase in like for like sales since the year-end. The London market
appears to have experienced some benefit from increased tourism, the good
weather and the slightly more positive economic outlook compared to the start of
2003. Looking ahead, we expect the trading environment to remain competitive but
we are confident of maintaining the momentum of change and recovery begun since
April and that the Group will generate sustained profitability going forward.
Nick Basing
Chief Executive
GROUP PROFIT AND LOSS ACCOUNT
Period ended 29 June 2003 Year ended
31 May 2002
Notes Continuing Acquisitions Total Total
Operations
#'000 #'000 #'000 #'000
Turnover 3 - 6,671 6,671 -
Cost of sales - (4,266) (4,266) -
Gross profit - 2,405 2,405 -
Administrative expenses
Goodwill amortisation - (82) (82) -
Restaurant expenses - (1,847) (1,847) -
Support office costs (479) (477) (956) (183)
Re-organisation costs - (412) (412) -
(479) (2,818) (3,297) (183)
Other operating income 20 22 42 -
Operating loss (459) (391) (850) (183)
Net interest receivable 90 209
(Loss)/profit
on ordinary activities
before taxation (760) 26
Tax on (loss)/profit
on ordinary
activities 4 92 86
(Loss)/profit
on ordinary activities
after taxation (668) 112
Dividends - -
(Loss)/profit
retained 7 (668) 112
Basic and
diluted earnings
per share 5 (2.02)p 0.42p
All recognised gains and losses are included in the profit and loss account.
GROUP BALANCE SHEET
29 June 31 May
2003 2002
Notes #'000 #'000
FIXED ASSETS
Intangible assets 3,847 -
Tangible assets 18,421 -
Investments - 1
22,268 1
CURRENT ASSETS
Stocks 651 -
Debtors 1,758 30
Investments - 372
Cash at bank and in hand 158 4,815
2,567 5,217
CURRENT LIABILITIES
Creditors: amounts falling due within one year (6,511) (35)
NET CURRENT (LIABILITIES)/ASSETS (3,944) 5,182
TOTAL ASSETS LESS CURRENT LIABILITIES 18,324 5,183
CREDITORS: amounts falling due after more than one
year (3,580) -
PROVISION FOR LIABILITIES AND CHARGES (245) -
NET ASSETS 14,499 5,183
CAPITAL AND RESERVES
Called up share capital 7 4,011 1,340
Share premium account 7 4,256 -
Merger reserve 7 3,363 -
Capital redemption reserve 7 3,446 3,297
Profit and loss account 7 (577) 546
EQUITY SHAREHOLDERS' FUNDS 7 14,499 5,183
GROUP CASH FLOW STATEMENT
Period ended Year ended
29 June 2003 31 May 2002
Notes #'000 #'000
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES 8(a) 343 (165)
RETURNS ON INVESTMENT AND SERVICING OF
FINANCE 127 239
TAXATION - 17
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT (75) -
ACQUISITIONS AND DISPOSALS 8(b) (13,826) -
EQUITY DIVIDENDS PAID - (33)
CASH (OUTFLOW)/INFLOW BEFORE USE OF LIQUID
RESOURCES AND FINANCING (13,431) 58
MANAGEMENT OF LIQUID RESOURCES - (372)
FINANCING 8(c) 8,774 -
DECREASE IN CASH IN THE PERIOD (4,657) (314)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Period ended Year ended
29 June 2003 31 May 2002
#'000 #'000
Decrease in cash in the period (4,657) (314)
Cash inflow from change in debt and lease
financing (3,554) -
Cash used to increase liquid resources - 372
Change in net debt resulting from cashflows (8,211) 58
Reclassification of liquid resources (372) -
Finance leases acquired (52) -
NET FUNDS AT START OF PERIOD 5,187 5,129
NET (DEBT)/FUNDS AT END OF PERIOD 8(d) (3,448) 5,187
NOTES TO THE PRELIMINARY RESULTS FOR THE 56 WEEKS ENDED 29 JUNE 2003
1 ANNOUNCEMENT
Paramount Plc has changed its accounting period to end on the Sunday nearest to
30 June, and hence reports its results for the period 1 June 2002 to 29 June
2003.
This announcement, which was approved by the Board on 1 October 2003, does not
constitute a full statement of the Group's affairs for the period ended 29 June
2003. The profit and loss account, balance sheet and cash flow statement are
extracted from the statutory accounts for the period ended 29 June 2003. The
auditors' report on these accounts was unqualified and did not contain a
statement under Section 237 of the Companies Act 1985.
The full statutory accounts for the period ended 29 June 2003 will be delivered
to the Registrar of Companies. The annual report and accounts will be posted to
shareholders by 15 October 2003 and the Annual General Meeting of the Company
will be held on 10 November 2003.
2. ACCOUNTING POLICIES
The above figures have been prepared using the same accounting policies as those
adopted by the Group in the year ended 31 May 2002. New accounting policies, as
set out below, have been adopted in respect of the acquisition of Groupe Chez
Gerard Plc in the period.
(a) Purchased Goodwill
Goodwill on acquisition is amortised over 10 years as, in the opinion of the
directors, this represents the period over which the goodwill is effective.
(b) Turnover
Turnover represents amounts invoiced by the Group in respect of goods sold and
services rendered during the period, stated inclusive of service charge and net
of value added tax.
(c) Tangible fixed assets
Depreciation is provided on all fixed assets, except construction in progress,
at rates calculated to write off the cost less estimated residual value of each
asset over their expected useful life as follows:
Leasehold properties and improvements - equally over the unexpired term of the
lease
Fixtures and fittings - 5 years straight line
Computer equipment - 3 years straight line
(d) Impairment of fixed assets and goodwill
The need for any fixed asset impairment is assessed by comparing the carrying
value of the asset against the higher of realisable value and value in use.
(e) Stocks
Stocks are valued on a first in, first out basis at the lower of cost and net
realisable value.
Net realisable value is based on the estimated selling price less further costs
expected to be incurred to subsequent sale.
(f) Leases
Assets held under finance leases or hire purchase agreements and the related
obligations are recorded in the balance sheet at the fair value of the assets at
the inception of the agreements. The excess of the payments over the recorded
obligations are treated as finance charges which are amortised over the term of
each agreement to give a constant rate of charge on the remaining balance of the
obligation. Rental costs under operating leases are charged to the profit and
loss account in equal annual amounts over the period of the leases.
(g) Pensions
The Group makes contributions to personal plans for certain of its permanent
employees which are charged against profit.
(h) Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the Group's taxable profits and its results
as stated in the financial statements.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which timing differences are expected to reverse, based on tax
rates and laws that have been enacted or substantially enacted by the balance
sheet date. Deferred tax is measured on a non-discounted basis.
3. TURNOVER
The turnover and loss for the period are attributable to the principal
activities of the Group, which are carried on entirely within the United
Kingdom.
4. TAXATION
2003 2002
#'000 #'000
Current tax
UK Corporation tax :
- on ordinary activities - 5
- utilisation of advance corporation tax brought forward - (5)
Adjustments in respect of previous periods - 86
Total current tax - 86
Deferred tax:
Origination and reversal of timing differences 92 -
Total deferred tax 92 -
Tax on result for the period 92 86
Factors affecting tax charge for period:
The tax assessed for the period is higher than the standard
rate of corporation tax of 30% (2002: 18%) as explained below:
2003 2002
#'000 #'000
(Loss)/profit on ordinary activities before tax (760) 26
(Loss)/profit on ordinary activities multiplied by the
standard rate of corporation tax (228) 5
Effects of:
Expenses not deductible for tax purposes 195 -
Capital allowances less than depreciation 33 -
Utilisation of advance corporation tax brought forward - (5)
Adjustment to tax charge in respect of previous period - 86
Current tax charge for the period - 86
5. EARNINGS PER SHARE
Basic earnings per ordinary share is based on the loss for the period of
#668,000 (2002: profit #112,000) and on 33,061,963 ordinary shares of 5p each
being the weighted average number of ordinary shares in issue during the period
(2002: 26,801,194).
Basic and diluted earnings per share are the same as there are no potentially
dilutive shares in issue in either period.
6. ACQUISITIONS
Acquisition of Groupe Chez Gerard Plc
On 14 April 2003 the Group acquired Groupe Chez Gerard Plc for #15,215,000 paid
by cash and by issue of shares.
In calculating the goodwill arising on acquisition, the fair value of net assets
of Groupe Chez Gerard Plc have been assessed and adjustments from book value
have been made where necessary. These adjustments are summarised in the
following table:
Book value Fair value Fair value
adjustments
#'000 #'000 #'000
FIXED ASSETS
Intangible assets 740 (740) -
Tangible assets 15,641 3,267 18,908
CURRENT ASSETS
Stocks 694 - 694
Debtors 1,357 - 1,357
Cash at bank and in hand 24 - 24
Total assets 18,456 2,527 20,983
CREDITORS
Due within one year (5,438) - (5,438)
Due after more than one year (3,922) - (3,922)
Provision for liabilities
and charges (337) - (337)
Net assets 8,759 2,527 11,286
#'000
Cash consideration (including #372,000 in respect of Groupe Chez
Gerard Plc shares purchased in the prior period) 10,300
Shares issued as consideration 4,915
Net assets acquired (11,286)
Goodwill arising on acquisition 3,929
7. RESERVES AND RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
Share Share Merger Capital Profit Total
Capital Premium Reserve Redemption Loss Share-
Accont Reserve Account holders'
Funds
#'000 #'000 #'000 #'000 #'000 #'000
At 1 June 2002 1,340 - - 3,297 546 5,183
Capital
redemption (149) - - 149 (455) (455)
Shares
issued 2,820 4,256 3,363 - - 10,439
Loss for the
period - - - - (668) (668)
At 29 June
2003 4,011 4,256 3,363 3,446 (577) 14,499
8. NOTES TO THE CASH FLOW STATEMENT
2003 2002
(a) Reconciliation of operating loss to net cash flow #'000 #'000
from operating activities
Operating loss (850) (183)
Depreciation and amortisation 644 -
Decrease in stocks 43 -
(Increase)/decrease in debtors (284) 82
Increase/(decrease) in creditors 790 (64)
Net cash inflow/(outflow) from operating activities 343 (165)
(b) Acquisitions and disposals
Purchase of subsidiary undertakings (9,928) -
Net overdraft acquired with subsidiaries (3,898) -
(13,826) -
(c) Financing
Increase in borrowings 3,580 -
Capital element of finance lease payments (26) -
Cash inflow from change in net debt and finance
leases 3,554 -
Shares redeemed (455) -
Shares issued 5,675 -
Net cash inflow from financing 8,774 -
(d) Analysis of changes in net debt At Cash Non-cash At
1 June Flow movements 29 June
2002 2003
#'000 #'000 #'000 #'000
Cash in hand and at bank 4,815 (4,657) - 158
Current asset investments 372 - (372) -
Debt due after one year - (3,580) - (3,580)
Finance lease obligations - 26 (52) (26)
5,187 (8,211) (424) (3,448)
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