Annual Report 2015

Transcription

Annual Report 2015

Annual Report 2015
Contents
Contents
Overview
Business review
Governance
Financial statements
The Azzurri Group is a market leader in the Italian casual dining sector,
operating ASK Italian and Zizzi. For the period under review, the Group
employed approximately 5,600 people, serving around 14 million meals
a year in its growing estate of around 250 restaurants.
1
www.askitalian.co.uk
Azzurri’s core brands are highly complementary, appealing to a broad
customer base and lending themselves to different occasions. Both ASK
Italian and Zizzi offer a memorable dining experience and great value
for money, with typical spend per head (including value added tax)
averaging £19.
During the financial period under review, the Azzurri Group purchased
the ASK Italian and Zizzi businesses from the Gondola Group. Further
details are provided on page 48. References throughout this report
are made to the full year performance of ASK Italian and Zizzi to allow
meaningful comparison.
Following the period under review, the Azzurri Group extended its
portfolio of brands through the acquisition of Coco di Mama, one
of London’s fastest growing quick service food brands, offering a range
of quality hot and cold Italian grab-and-go food, with a speciality in
hot pasta and quality coffee. Further details are provided on page 49.
Overview
2 2015 highlights
3 Azzurri’s brands
4Azzurri’s strategy
5Chairman’s statement
Business review
6 Ask Italian
10Zizzi
14Financial review
Azzurri Group Limited Annual Report and Accounts 2015
Governance
16Board of Directors
17 Strategic report
19Directors’ report
21Corporate governance report
23 Independent auditors’ report
24Consolidated profit and
loss account
25Consolidated statement
of total recognised gains
and losses
26Consolidated balance sheet
www.zizzi.co.uk
www.cocodimama.co.uk
27Company balance sheet
28Consolidated reconciliation
of movements in
shareholders’ deficit
29Consolidated cash flow statement
30Notes to the financial statements
50Corporate directory
2015 highlights
Financial summary
Total sales
EBITDA
Capital Investment
Contents
Overview
Business review
Governance
Azzurri Group1
Azzurri Restaurants2
£93.9m
£217.7m
£13.2m
£31.8m
£10.2m
(52 weeks to 28 June 2015)
+6.5% growth
+16.5% growth
£18.6m
7 new restaurants, 35 refurbishments & transformations
Business highlights
Acquisition
£120m
On 21 January 2015, Bridgepoint acquired ASK Italian
& Zizzi via the Azzurri Group
New senior bank facilities secured
1 The results of Azzurri Group Limited include those of the trading company from the date of acquisition on 21 January 2015
2 To allow a meaningful comparison of the business performance the results of the trading company, Azzurri Restaurants Limited, is shown for the 52 weeks ending 28 June 2015
2
Azzurri’s brands
Contents
Overview
Business review
Governance
3
112
Restaurants
4
New this year
Everything we do here is inspired by Italy from the
authentic Italian food to the easy going atmosphere,
warm service and fresh design.
Employees
2,300
£19
Average spend per head
To read more about ASK Italian restaurants please go to pages 6-9
136
Restaurants
3
New this year
Employees
Our passion is to bring simple, quality ingredients
together with great service and give you the
opportunity to discover playful individual touches
and local artwork in each venue.
Simple, flavoursome and delightful dishes, great
service – we’re confident you won’t find such value
anywhere else.
3,200
£19
To read more about Zizzi restaurants please go to pages 10-13
Shops
6
New this year
1
Employees
70
£4
To read more about the acquisition of Coco di Mama please go to page 49
Azzurri’s strategy
Contents
Overview
Business review
Governance
Our strategy is simple...
– to strive to be the leading Italian Food business in the UK, through:
Azzurri’s strengths
Outstanding:
• Brands
Running great restaurants
Expansion
Innovation
Drive growth in profits from existing
restaurants through:
–continual innovation and evolution
of the proposition
–improved operational focus on ‘restaurant basics’ to deliver quality
and value to our customers
– use of increasingly sophisticated marketing techniques to engage with our customers and encourage loyalty
–proactive management of our cost base to continually improve margins
Grow the core business through the
roll-out of our key brands as well as
exploring new and international markets
Seek to add further incremental business
through new concepts and other revenue
streams
• Quality
• Service
• Value
• People & culture
• Trading record
• Growth potential
4
Chairman’s statement
Contents
The newly formed Azzurri Group has become
a major player in the UK casual dining sector,
having acquired the ASK Italian and Zizzi
businesses from the Gondola Group in January
2015 for approximately £250 million. With
over 250 sites in the UK, it is a market leader
in full Italian casual dining, with two highly
complementary brands appealing to a broad
customer base across diverse locations. The
existing management team has remained
with the business following the transaction,
enabling the Group to capitalise on the
significant progress made in the last few
years under Gondola’s stewardship.
Overview
Business review
Governance
Zizzi, a contemporary, stylish brand, is now
a major player in UK casual dining, operating
out of 136 locations across the UK. Alongside
3 new Zizzi openings, 14 restaurants were
transformed during the year and Zizzi is now in
the unique position of having invested in every
single restaurant within the last 6 years.
The repositioning of ASK Italian has continued,
with 21 restaurants being refurbished during
the year. Since 2012, 85 restaurants have been
converted to the new format, which represents
over 85% of the estate, in addition 11 new
restaurants have been added. The refurbishment
cycle will be fully complete by the end of the
It has been a year of exceptional results and
next financial year. Following the success of
achievements. The ASK Italian and Zizzi
its repositioning, ASK Italian has moved back
businesses grew their EBITDA by over 16%
on to the acquisition trail, with four openings
from the previous year, with strides being
in the last 6 months including major city
made through like-for-like growth, new openings centre locations.
and margin expansion. Credit must go to our
In July 2015, in a deal which completed shortly
teams who contributed significant effort
towards the acquisition, and ensured a smooth after the year end, Azzurri acquired Coco di
Mama, one of London’s fastest growing quick
transition, successfully separating teams and
service food brands, offering a range of quality
infrastructure from Gondola. Additionally,
hot and cold Italian grab-and-go food, with
during the year, the Group moved to new
a speciality in hot pasta and quality coffee.
headquarters in Chapel Street, Marylebone.
5
The acquisition further complements Azzurri’s
core brands. Coco di Mama is a well-run
business with dedicated founders who share
our ambition for brand evolution and growth.
The founders have developed a unique brand
offering quality Italian food, which is a product
we know well.
The year has seen an enormous amount of
positive change for our businesses, which
our management and restaurant teams have
delivered brilliantly and for which they deserve
a huge amount of thanks and credit. We look
forward to building on this during the year
ahead, with our two core brands, ASK Italian
and Zizzi, in great shape and a young,
complementary business in Coco di Mama.
Harvey Smyth
Chairman
Serving around 30,000 customers a week at
We operate in a competitive and highly
an average spend of £4, Coco di Mama now
attractive growth sector, and our two core
brands are well positioned to capitalise on that. operates from 7 sites, 1 of which opened since
acquisition, with an ever increasing pipeline.
“The year has seen an enormous amount of positive change for our businesses, which our management and restaurant teams have delivered brilliantly and for which they deserve
a huge amount of thanks and credit.”
Contents
Overview
Business review
Governance
www.askitalian.co.uk
6
Contents
A revitalised brand ready for future
growth
It has been another strong year for ASK Italian
on a number of fronts as we continued with the
major transformation programme that started
with the repositioning work in 2010.
Through the on-going sophistication of our
CRM tools we were able to better engage with
our customers and drive trade with our
targeted offers and promotions. With a focus
on restaurant basics and strong operational
controls we were able to deliver another
strong year of profit growth.
Refurbishment of the restaurants to reflect
Growing the estate
this Milanese inspired design continued at
With a further 4 new openings we finished the
pace throughout the year, continues to deliver
excellent returns and is now nearing completion. year with 112 ASK Italian restaurants trading
across the UK. We opened 2 in previously
Building on the success of the new opening
unrepresented major city centres with a site
in Birmingham the previous year, we are now
in Manchester Piccadilly Gardens and at the
confident that we can open in urban city
end of Princes Street in Edinburgh. Further
centres and so opened a further 4 new
openings in the major town of Maidstone
restaurants in similar high profile locations.
and a new cinema development in Swindon
All new sites opened well and are trading
completed the line-up for the year. We
comfortably in line with expectations.
transformed a further 21 of our restaurants
and now have over 85% of the estate reflecting
Continued investments in the proposition
the latest look and feel.
including food, people and service have
resulted in further progression on all our
Each one embodies the brand design aesthetic
key brand metrics. Both our online customer
which is fresh, contemporary Italian, yet warm
survey and 3rd party studies have shown
and inviting. We have continued to evolve our
further significant strengthening of the brand
look and push the design further, and this year
across a wide variety of brand measures.
we have incorporated striking new features,
such as white neon signage and Italy maps,
We were also delighted to receive further
along with the introduction of some classic
recognition adding the Menu Innovation &
Italian finishes such as cork, brass, marble,
Development award for best Mediterranean
and terrazzo.
Casual Dining Menu to our collection.
“With the success of new openings now
proven in premium locations we are
very well positioned for future growth.”
Overview
Business review
Governance
We have also introduced more ‘foodie’ touches
in the form of in store messaging and displays
of coffee and our 100% Italian wine offer.
Authentic Italian food
Our menu innovation is driven by our passion
for authentic Italian food made with the finest
quality ingredients, shaped by the knowledge
of our expert friends, acclaimed chef Theo
Randall and Italy expert Carla Capalbo.
Inspiration following a trip to Bologna helped
to shape the launch of a new range of
sourdough pizzas as well as unearthing
authentic ways of adding depth to the
Bolognese based dishes.
These classic, high volume dishes have been
improved and are now truly outstanding.
A focus on the role of specials as an opportunity
to reflect the ingredients of the season as
well as bring something truly interesting and
exciting for customers to enjoy led to popular
dishes such as Pistachio & Olive Oil Cake,
Tortelloni Mortadella and Cioccolato Supremo.
7
Other menu highlights this year included the
introduction of Souffle con Funghi and, Zuppa
di Fagioli con Pancetta as well as the return
of the popular Duck Valpolicella to ensure
truly special Christmas menus. Our Italian
cocktails continue to grow in popularity and
are particularly popular at Christmas and in
the Summer.
Contents
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Restaurants
Overview
Business review
Governance
8
Contents
Reaching our customers
Building on the successful 2014 Spring ‘Respect
the Pasta’ campaign a second burst of Respect
the Pasta activity was activated in the Autumn.
National awareness was achieved through a
radio campaign fronted by Theo Randall and
utilizing the pasta survey results to ensure
coverage for ASK Italian. At a restaurant level and
on social media we utilised World Pasta Day and
our 21st birthday as tools to engage customers.
Ask Italian were the only restaurant group
to capitalise on the Black Friday phenomenon,
by using ‘random act of kindness’ to become
part of the social conversations on the day.
Targeting fatigued shoppers who were also
social influencers with a chance to enjoy treats
from the Christmas menu provided positive
reviews and social reach.
Customer satisfaction
Service across the business has improved
materially over the year with significant
progression seen on our internal service
measures as well as on public sites. To support
this, customer compliments received in the
year reached a record high and our average
Trip Advisor score is now higher than ever.
Our unique service proposition, AMICI, has
continued to evolve and as well as become
known for a friendly and welcoming service,
is now focussed more on the consistency of
customer experience.
Investing in our teams for the future
We continue to invest in training and
development via our bespoke learning
framework, the ASK Italian Journey. As well
as providing robust and structured training
To launch the new sourdough pizza category,
for all roles it has evolved this year to include
a flaring competition was launched to gain local specific modules to prepare managers for
media coverage as well as create noise on social training others and for working in high volume
platforms, together with a sampling campaign sites; to better support our growth plans.
under the banner ‘It’s all about the base’.
We have completed our fourth Avanti
restaurant manager leadership programme
which has again provided succession for
key roles in our new openings and in the
Operations field team.
Overview
Business review
We ran our first Head Chef Avanti leadership
programme to develop our key Head Chefs’
leadership and commercial skills and to give
them an understanding of how to develop
a menu. The highlight was an inspirational trip
to Puglia with Theo Randall, culminating in
cooking lunch for our Olive Oil suppliers the
Esposito brothers.
Our unique Italian Education programme
provides inspiration for our team members on
the seasons, ingredients and culture of Italy
and their knowledge shines through in our
Primo Competitions where we crowned Laura
from Billericay our Primo Waiter and Norbert
from Park Street our Primo Chef. We
experienced Italy for ourselves taking some
managers and head chefs on a winners trip to
Bologna meeting suppliers and experiencing
their very own Italian Education led by Carla
Capalbo, our Expert friend.
Making a difference
We have made a significant step towards our
£1 million fundraising goal in support of Great
Ormond Street Hospitals Children’s Charity
(GOSHCC) having reached over £675,00 by the
period end.
£1 million fundraising goal
“Our regular fundraising initiatives such as our Easter egg (where we give away
a beautiful designer Italian egg in every site) and Pennies, (where we ask every
customer paying by card to donate 25p) continue to deliver.”
Governance
9
Our regular fundraising initiatives such
as our Easter egg (where we give away a
beautiful designer Italian egg in every site)
and Pennies, (where we ask every customer
paying by card to donate 25p) continue to
deliver. Building on the success of the ‘ASK
Italian Grand Tour’ the previous year, in July
we held the ‘ASK Italian triathlon’. This event
was well supported by restaurant teams,
head office staff and suppliers and generated
further additional fundraising.
Looking ahead
It has been another successful and eventful
year for ASK Italian. The step forward in
customer scores and the on-going success of
our transformations demonstrates the strength
of our proposition. With the success of new
openings now proven in premium locations
we are very well positioned for future growth.
We look forward to a year where we aim to
complete the estate transformations, continue to
evolve the proposition and then push the brand
forward into new locations and opportunities.
Contents
Overview
Business review
Governance
www.zizzi.co.uk
10
Contents
Leading Italian brand with continued
momentum
Growing and strengthening our estate
This year we have opened 3 new restaurants
in prime locations taking our estate to 136
restaurants. The evolution of our restaurant
designs is helping to deliver exceptional results
and we’re proud to be one of the only major high
street chains to have a fully invested estate.
We completed our transformation cycle this
year with 14 refurbishments using the new,
modern, rustic design evolution and striking
new shop front design. The combination of
hague blue shop fronts with vibrant pink
awnings and illuminated Zizzi signage has
created real stand-out on the high street.
During the year we opened three new
In the last year the Zizzi brand has seen
restaurants in Stratford upon Avon, Telford
significant growth and is gaining momentum.
and Glasgow Silverburn. We individually
This achievement has been made possible
design each of our restaurants to reflect the
behind a fully transformed estate, delivering
personality of the location using local artists
an improved customer experience across all
and inspiring features to deliver a depth of
measures and ever increasing brand awareness character in our restaurants not seen in other
and consideration.
high street chains.
In food, we continue to differentiate our
offering in a crowded market place by tirelessly
focusing on every element of the dish from the
vibrancy and freshness of the ingredients to
the stylish presentation.
Zizzi’s successful brand evolution across all
elements of the proposition has confirmed our
view that we can take our offering not only
to new customers in the UK, but also extend
our reach into new geographies.
“WE’RE PROUD TO HAVE A FULLY INVESTED
ESTATE WITH A NEW DESIGN EVOLUTION
THAT IS DELIVERING OUTSTANDING RESULTS.”
Overview
Business review
Governance
Passion for great food and drinks
The pace of innovation in food is ever
increasing and customers are becoming more
demanding for high quality, interesting and
tempting food. At Zizzi, a dedicated food team
monitors trends in ingredients, eating habits
and presentation to ensure our menu delivers
the perfect balance between our much loved
favourites and new on-trend dishes that are
fun and interesting to try.
During the year we launched two new menus
as well as a series of seasonal specials. The
summer saw the launch of a range of cocktails,
served in jar style glasses, and a dessert pizza
with melted chocolate, marshmallows and
strawberries, both were an instant hit.
Our Autumn menu saw the introduction of
a Pulled Pork Rustica pizza which became
a firm favourite. For the chocolate lovers, the
Chocolate Praline and Sea Salt Torte was a
strong addition to our dessert menu. We were
delighted to win a Great Taste award for our
new Honey, Sea Salt and Mascarpone Gelato.
11
Contents
136
Restaurants
Overview
Business review
Governance
12
Contents
Building capability
Our people are critical to the success of
Zizzi and we are committed to building the
capability of our people and harnessing
every individual’s talent to drive our business
forward. This year has seen the nationwide
launch of the Zizzi Head Chef Academy and
we were thrilled to win a bronze award at
The Training Journal awards in 2015 for
this program.
We have also launched internal development
programs for Supervisors and Assistant
Managers, providing clear development paths
for progression and succession planning that
have been positively received by our teams.
During the year we successfully piloted a new
apprenticeship programme with 20 employees
that leads to nationally recognised vocational
qualifications. Based on the success of this
pilot we now aim to roll out this programme
nationally in January 2016.
Driving awareness and engagement
Zizzi has an offer that is well defined and
recognised, resonating with both new and
existing customers. This is reflected in our
brand health scores which show highest
ever level of awareness and consideration
for the brand.
We have made strong progress in building
brand awareness and engagement through
our digital channels. Through the year we
have seen improved engagement with email
marketing from triggered campaigns and
responsive design. On social platforms, our
focus on creativity and linking to newsworthy
events has driven strong engagement with our
content and 25% growth in fans and followers.
“OUR NEW HONEY, SEA SALT AND MASCARPONE
GELATO WON A GREAT TASTE AWARD.”
Overview
Business review
Governance
Standing Up for our community
This year has seen us partner with Stand Up To
Cancer, a joint national fund raising campaign
from Cancer Research UK and Channel 4 that
is focused on accelerating ground-breaking
research and saving more lives.
In our first year we have raised £250,000
as part of our overall commitment to raise
£1 million within 3 years for this incredibly
worthwhile cause. Last September a group
climbed the UK’s highest 3 peaks in the
fund-raising effort and we have also added
a dish to our menu, the Skinny Pollo Roquito
pizza where 25 pence from each dish sold
is donated to Cancer Research UK.
Looking ahead
13
The Zizzi business is in great shape and
building in momentum behind a fully
transformed estate, a differentiated and strong
proposition that is growing in awareness. We
have a strong pipeline of new openings for the
UK in the next year as well as plans to expand
our geographical reach making Zizzi accessible
to more customers. Zizzi is one of the leading
Italian restaurant chains in the market and
we’re confident in the long term growth
potential of the brand.
Financial review
Contents
Azzurri Group Limited
Overview
Business review
2014/15
3 July 2014 to
28 June 2015
£m
93.9
Total restaurant sales
EBITDA1
13.2
EBITDA
Margin
14.1%
Margin
9.6%
EBITA
Goodwill amortisation
EBIT
3
Exceptional items
Operating profit
(4.7)
8.5
(3.3)
5.2
(4.7)
0.7
The above results include those of the trading company, Azzurri Restaurants Limited,
from the date of the acquisition of Azzurri Central Limited by Azzurri Trading Limited
on 21 January 2015.
1 EBITDA is defined as EBITA plus depreciation and amortisation (excluding exceptional items)
2 EBITA is defined as EBIT plus goodwill amortisation. Goodwill of approximately £154 million was established following the acquisition
of the business in January 2015 and this is being amortised over 20 years
3 EBIT is defined as operating profit excluding exceptional costs
14
To allow a meaningful comparison of the business performance the results of the trading
company for the 52 weeks ending 28 June 2015 is compared with its prior year below.
Total restaurant sales
2
Azzurri Restaurants Limited
The reported statutory results cover the period 3 July 2014 to 28 June 2015 for the
consolidated Group. This is the first period in which the Group operated, therefore no
comparisons against the prior year can be made.
Depreciation
Governance
2014/15
52 weeks
2013/14
52 weeks
£m
£m
217.7
204.3
31.8
16.9
23.7%
13.4%
Margin
9.6%
8.2%
EBITA
Goodwill amortisation
EBIT
Exceptional items
Operating profit
20.9
–
20.9
(2.1)
18.8
6.5%
16.5%
14.6%
(10.9)
%
27.3
Margin
Depreciation
52 week
Change
(10.4)
–
16.9
(0.2)
16.7
4.8%
0.0%
26.0%
810.6%
20.4%
Financial review
Performance summary
Total sales for the period since acquisition
of the ASK Italian & Zizzi business were
£93.9 million with EBITDA of £13.2 million.
Contents
Market update
UK GDP and consumer confidence have
continued to increase during the year, and this
is reflected in positive trends across the eating
out market. The restaurant sector has continued
The results of the trading company for the
to grow, both in terms of new space created
full year included total restaurant sales of
and in organic, like-for-like revenue. Branded
£217.7 million which is 6.5% year on year
restaurants, rather than independent
growth. EBITDA margin increased by 1.2%
restaurants, are spearheading this growth,
to 14.6% and total EBITDA increased by
with 20 of the UK’s core casual dining brands
16.5% to £31.8 million.
registering like-for-like growth of 3.5% in
Both brands saw a year of good growth, despite the year to June 2015 (source: Coffer Peach
Business Tracker), while growth from pubs
a slight market softening across the industry
in the second half of the year. Sales momentum and pub-restaurants remains slower.
in both brands has been underpinned by the
Input price inflation has remained low, due
continued development of the core proposition to a number of factors including good global
and further investment in our estate.
food harvests and a significant strengthening
Azzurri’s determination to be the leading Italian of sterling against the Euro. Wage inflation
looks set to rise at significant levels, with the
Food business in the UK steered our focus
National Minimum Wage increasing 19 pence
towards continued menu innovation, ongoing
in October 2014, and a further 20 pence in
design evolution of our restaurants, as well as
October 2015 prior to the introduction of a
an improved customer experience. Greater
National Living Wage for over 25’s in April 2016
customer engagement was achieved through
at £7.20 initially but increasing to £9.00 by
better leverage of social media platforms and
2020. The strengthening of the economy,
targeted promotional activity, as well as a
together with competition for sites, is leading
stronger focus on customer feedback.
to the highest rate of rental inflation seen for
several years.
In line with our longer term investment plan,
Azzurri has:
Group cash flow
• continued to invest in new openings across
Net cash inflow from operations since the date
the Group – a total of 7 new restaurants
of acquisition of the ASK and Zizzi businesses
opened during the financial year, 4 of which
totalled £4.0 million.
opened under Azzurri’s ownership
• continued to invest in maintaining the quality During the period, the key components of
of our estate through 35 transformations and cash flow were:
refurbishments, 10 of which were completed • net investment of £10.2 million in new
under Azzurri’s ownership (the Zizzi estate
restaurants and the maintenance of the
is now fully invested and the ASK estate will
existing estate
be by the end of next year)
Overview
Business review
Governance
• cash flow from financing activities included
proceeds from bank debt of £120 million,
proceeds from shareholder debt of £100
million, issue of preference and ordinary
share capital of £46.0 million
• t he above proceeds were used to finance
the acquisition of Azzurri Central Limited
for net cash of £249.0 million
Group financing
The Group’s financing structure, implemented
during the period, comprises three main
components:
• external bank debt
• shareholder loan notes
• shareholder equity
The Group’s external senior debt was
syndicated to a number of participating
financial institutions with maturity dates
of June 2020 and June 2021. Further details
are provided in notes 15 and 23 to the
financial statements. In addition, the Group
has a revolving credit facility of £10 million,
£8 million of which was undrawn at the
year end and a £15 million undrawn capex
facility. The external bank debt facilities are
subject to certain covenants commencing
September 2015.
The loan notes and equity were provided
primarily by Bridgepoint, together with smaller
investments by Hermes and management.
Interest on the shareholder loan notes rolls up
into the principal balance and is not due for
payment until the maturity or repayment of
the respective loan.
15
Group taxation
The Group paid no corporation tax in relation
to the period. Two key features of its business
act to reduce taxable profits:
• significant capital expenditure investment,
which qualifies for capital allowances that
are designed to encourage such investment
• interest payments on external debt and
shareholder loans, a proportion of which
will be agreed as deductible for tax purposes
with HMRC
Although no corporation tax arose during
the period, the Group’s contribution to the
UK Exchequer is significant, contributing over
£26 million during the financial period since
the acquisition of the ASK Italian and Zizzi
businesses in January.
■ Rates and council tax
■ Stamp duty land tax
■ Employers’ NIC
■ Employees’ PAYE/NIC
■ VAT paid
£3.7 million
£0.1 million
£2.4 million
£5.8 million
£14.0 million
Board of Directors
Contents
Overview
Business review
Governance
16
Steve Holmes
Chief Executive Officer
Harvey Smyth
Chairman
Steve was appointed Chief Executive Officer of the Group in
January 2015, prior to which he was Chief Executive Officer
of ASK Italian & Zizzi since 2014 and Managing Director of
ASK Italian since 2012. Prior to joining ASK Italian, Steve
held a number of senior operational roles in various casual
dining brands, including 8 years at PizzaExpress.
Harvey became Chairman of the Group in January 2015. He
was previously Chief Executive Officer of the Gondola Group
and PizzaExpress, Deputy Chief Executive Officer and UK
Managing Director of Pret A Manger. Harvey has a degree in
biochemistry from Bristol University and is also a qualified
Chartered Accountant.
Jim Pickworth
Chief Financial Officer
Mike Black
Non-Executive Director
Jim was appointed Chief Financial Officer of the Group in
January 2015, following his role as Chief Financial Officer of
ASK Italian & Zizzi since 2013 and for 6 years prior to that,
he was Finance Director at Zizzi. He was previously Finance
Director for Yo! Sushi and Group Finance Director for Pret A
Manger, and held a number of finance roles at McDonalds. He
qualified as a Chartered Accountant at Ernst & Young.
Kieran Pitcher
Group Property Director
Kieran was appointed Group Property Director in January
2015, having been Group Property Director of the Gondola
Group since 2007. Prior to this he was Property Director
at the Restaurant Group and Laurel Pub Company. Kieran
graduated with a degree in estate management and was
appointed a member of the Royal Institute of Chartered
Surveyors in 1993.
Mike became a Non-Executive Director of the Group in
January 2015. He is Managing Partner of Bridgepoint
Development Capital, a partner of Bridgepoint and a
member of the Firm’s Group Board, having joined them in
1996. Prior to joining Bridgepoint Mike worked at Natwest
Markets for seven years, gaining broad experience in
the capital markets, investment banking and acquisition
finance divisions. He is an Economics graduate from the
University of York.
Jason McGibbon
Non-Executive Director
Jason became a Non-Executive Director of the Group in
January 2015 after being involved in the acquisition.
He is a Partner of Bridgepoint and leads their Consumer
team. Jason joined Bridgepoint in 2000 and was formerly
responsible for Bridgepoint’s investment activities in Turkey
and spent time based in Frankfurt and the Nordic region.
He has a degree from the University of Strathclyde Business
School and is a qualified Chartered Accountant.
Strategic report for the period 3 July 2014 to 28 June 2015
The Directors present their first strategic
report for Azzurri Group Limited (‘the
Company’) and its subsidiaries (together
‘the Group’) for the period from 3 July 2014
to 28 June 2015 (‘the period’).
Principal activities, business review
and future developments
The Company was incorporated on 3 July 2014,
as De Facto 2131 Limited, to carry out its
activity as an investment company, on
11 March 2015 the Company changed its
name to Azzurri Group Limited.
During the period the Group acquired the
ASK and Zizzi business via a number of holding
companies. The business was acquired via the
purchase of Azzurri Central Limited (formerly
Gondola Central Limited) from Gondola
Holdings on 21 January 2015.
Azzurri Central Limited holds a 100 per cent
share in its trading subsidiary, Azzurri
Restaurants Limited (‘the trading company’),
which operates the ASK Italian and Zizzi
restaurant brands.
Together, this group of companies forms the
Azzurri Group of companies (together ‘the
Group’), the principal activity is operating
restaurants.
Contents
The Group measures performance using the
following three key performance indicators
(‘KPIs’), for purposes of meaningful
comparison KPI’s were measured for the
trading company:
• Sales versus prior year;
• Pre-exceptional EBITDA (earnings before
tax, depreciation, amortisation and
exceptional items) versus prior year; and
• The number of open restaurants versus
prior year.
A review of the Group’s operations and
performance during the period and of future
developments is included in the Business
Review on pages 6 to 15, which forms part
of this report.
Results and performance of the Group
The results of the Group for the period are set
out on page 24 and show a loss on ordinary
activities before taxation of £10.2 million. The
total shareholders’ deficit as at 28 June 2015
is £9.5 million.
These results, however, only include those
of the trading company from the date of
acquisition of Azzurri Central Limited. In
addition, as this is the first period in which
the Group as a whole has operated, no prior
year comparisons are able to be made. As such,
the Directors have deemed it appropriate to
measure performance of the Group using the
52 week results of the trading company, even
though it was only under the ownership of the
Company since 21 January 2015. The results
of the trading company for the period
30 June 2014 to 28 June 2015 is compared
with the 52 weeks ended 29 June 2014 below.
Overview
Business review
Governance
Results and performance of the
trading company
The trading company implemented various
successful initiatives in line with its strategy
to improve; and its current year trading has
also been assisted by the improving macroeconomic environment in the UK market.
Sales and sales growth – The trading company
increased sales to £217.7 million during the
period (2014: £204.3 million) representing
sales growth of 6.6% (2014: 5.3%).
Gross profit – The trading company increased
its gross profit during the period to 17.4%
(2014: 14.0%).
Pre-exceptional EBITDA – The trading
company’s total EBITDA increased to
£31.8 million (2014: £27.3 million).
Exceptional costs – The trading company
incurred exceptional costs during the year of
£0.8 million (2014: £0.2 million) relating to its
separation from the Gondola Group.
Despite the market softening across the industry
in the second half of the year, the Group remains
a positive outlook on trading conditions. Both
ASK Italian and Zizzi performed well and saw a
good year of growth. The continued development
of the core proposition with a focus on menu
innovation, ongoing design evolution and an
improved customer experience, together with
clear plans for further growth through the
opening of new restaurants in the near future,
Azzurri’s brands are well positioned to
continue their strong performance.
17
Key performance indicators
The performance of the trading company is
measured through the use of key performance
indicators as follows:
Performance
indicator
Sales
Preexceptional
EBITDA
Number of
restaurants
Actual
2015
£31.8m
Actual
2014
£27.3m
Growth
%
248
243
2.1%
£217.7m £204.3m
6.6%
16.5%
Other key indicators used by the Board and
executive management include:
New sites opened – Expansion is a key driver
and potential new sites are subject to a
rigorous appraisal process before approval.
Financial indicators – Notably, like-for-like
sales growth, and labour and food margins.
People measures – Including staff and
management turnover, tenure and stability.
Customer satisfaction – Measures from both
third party sources and our own on-line
customer surveys.
Strategic report for the period 3 July 2014 to 28 June 2015
Principal business risks and uncertainties
The Board of Directors (‘the Board’) has the
primary responsibility for identifying the
principal risks which the business faces and
for developing appropriate policies to manage
those risks. To assist with this process, the
Group maintains a risk register which is
regularly reviewed and an annual Risk Review
summary is presented to the Board.
Given the nature of the Group’s businesses,
the principal business risks are as follows:
Economic conditions – Adverse economic
conditions and uncertainty can lead to
challenging market conditions which could
result in pressure on all functions of the
business. A medium term business plan coupled
with regular forecasting allows us to pre-empt
any periods of difficulty and act early.
Employee retention – With our biggest asset
being our employees, it is critical to attract
and retain the best people at all levels.
We review our employment policies regularly
and are committed to investing in our teams
with competitive reward structures and
comprehensive training and development
programmes.
Health & Safety – The Group maintains a strong
focus on its food safety and health and safety
standards, with the wellbeing of our teams and
customers being paramount. Standards are
monitored regularly across all of our sites, and
compliance with legislation and best practice
taken very seriously across the business.
Contents
Continuity of supply chain – Our operations
remain heavily dependent on key suppliers and
distributors. We closely monitor against key
supplier service level agreements, with
contingent arrangements in place where
necessary.
Reputation – Failure to maintain the high
standards we have set can quickly affect public
perception and could damage our brands. We
monitor our customer service and operating
standards regularly, and have dedicated quality
and safety, and customer services teams. A
crisis management process is also in place in
the event of serious incidents.
These are the principal risks affecting the
Group operations, but is not an exhaustive list.
The comprehensive risk register ensures the
Board are appraised of all risks, and contingent
actions to mitigate them.
By order of the Board
James Pickworth
Company secretary
14 October 2015
Overview
Business review
Governance
18
Directors’ report
The Directors present their Annual Report for
the Company and the Group together with their
audited consolidated financial statements for
the period from 3 July to 28 June 2015. As this
is the first period of operation for the Group,
no comparative information is presented. The
basis of preparation of the financial statements
is set out in note 2 on pages 30 and 31.
Contents
Charitable and political donations
The Group makes significant contributions to
community related initiatives and uses the sale
of certain menu items to raise funds for specific
causes as described in the Business Review set
out on pages 6 to 15.
Overview
Business review
Governance
Our employees have a performance review at
least once a year, which includes consideration
of skills development and career prospects.
We aim to retain, develop and promote our
best staff, offering a variety of training courses
and development opportunities.
Environment
19
The Azzurri Group has continued to reduce its
impact on the environment by reducing its
carbon footprint. There are a number of
on-going environmental programmes that
work to do this and include the following:
• Separating Food Waste is in operation in
Informal, frank and open dialogue is
The Group made no political donations in
164 restaurants across both brands with
encouraged at all levels of the Group. We aim to
the period.
a target for the majority of the Group by the
Results and dividends
keep our employees informed of any changes
end of December 2015. This will increase our
Going
concern
The results of the Group for the period are
and progress with the business on a regular
total recycling to 85%. This is in partnership
The Group’s financial performance and
set out on page 24.
basis in an engaging way.
with our national waste contractor, SWR.
position is described in the Financial review on
•
Each brand has its own Energy Efficiency
The Directors do not recommend the payment pages 14 and 15. The Directors have reviewed
Communication flows both ways, as we take
programme, which is aimed at reducing
of a dividend.
the views of our employees seriously. Our aim
cash flow forecasts for a five year period from
energy and water usage by both design and
has been to make it as easy as possible for our
the year end date which indicate the Group
user campaigns.
Directors
will be able to meet all its liabilities when they employees to air their opinions, express their
•
The Group continues to introduce Smart
The Directors of the Company during the period fall due. Projected covenant compliance and
ideas and voice any problems they may have.
Meters monitoring them remotely to ensure
and up to the date of signing the financial
Examples include a cascade process of meetings
liquidity is also monitored, and the directors
equipment is not over-used or utilised too
statements, unless otherwise stated, are:
are satisfied, having taken into account current to communicate key messages throughout the
early or inappropriately.
organisation,
a
weekly
feedback
process
for
and
expected
market
conditions,
that
sufficient
• Harvey Smyth (appointed 21 January 2015)
•
ASK are members of the SRA (Sustainable
operational issues and a bright ideas scheme.
• Stephen Holmes (appointed 21 January 2015) headroom in the forecast exists at all levels.
Restaurant Association) to further assist
In addition,
the
maturity
dates
for
all
of
the
• James Pickworth (appointed 21 January 2015)
them in their sustainability journey.
We
have
a
diverse
workforce
and
an
equal
Group’s banking arrangements are to 2020
• Kieran Pitcher (appointed 21 January 2015)
opportunities policy in place. We aim to employ • A ll light bulbs are being replaced with energy
and later.
The
Directors
have
therefore
• Michael Black (appointed 21 January 2015)
efficient bulbs and energy efficiency of
people who reflect the diverse nature of society
• Jason McGibbon (appointed 19 November 2014) continued to adopt the going concern basis
equipment is considered in relation to all
and value people and their contribution
in preparing
the
financial
statements.
• Benoit Alteraic (appointed 19 November
new purchases.
irrespective of age, sex, disability, sexual
2014, resigned 21 January 2015)
orientation, race, colour, religion, marital status
Post balance sheet events
Financial risk management
• Ihor Shershunovych (appointed, 3 July 2014,
or ethnic origin.
Subsequent to the balance sheet date, on
The Group’s activities expose it to a variety of
resigned 19 November 2014)
8 July 2015, Azzurri Central Limited set up
financial risks: foreign exchange risk, credit
• Travers Smith Limited (appointed,
We do not tolerate harassment or bullying
CDM Group Limited and its subsidiary CDM
risk, liquidity risk, cash flow risk, interest rate
3 July 2014, resigned 19 November 2014)
in any
shape
or
form.
Procedures
are
in
place
Holdco Limited to acquire CDM Trading Limited
risk and price risk. The Group’s overall risk
• Travers Smith Secretaries Limited
(previously Tenfour Ventures Limited), trading to respond to accusations of workplace
management focuses on the unpredictability
(appointed, 3 July 2014, resigned
discrimination,
harassment
and
victimisation.
as Coco di Mama. See note 26 for further details
of financial markets and seeks to minimise
19 November 2014)
An effective employee grievance procedure
on this.
potential adverse effects on the Group’s
is in operation, and the policy is properly
A brief summary of the experience of each
financial performance. Risk management is
communicated to our people.
Employees
Director is provided on page 16.
carried out by the Group under guidance by
Serving around 14 million meals a year to
Applications from disabled persons are given
the Board. The Group identifies, evaluates and
customers in our restaurants, our people
full consideration providing the disability does addresses financial risks in close co-operation
truly are our greatest asset and we believe in
not seriously affect the performance of their
with the Group’s operating units.
treating them as such: with respect, looking
duties. Such persons, once employed, are given
after their welfare and allowing them the
appropriate training and equal opportunities.
freedom to be themselves and to flourish.
We encourage a work environment that is fair,
open and communicative, with many benefits
for our employees.
Directors’ report
(a) Foreign exchange risk
Contents
(e) Price risk
Overview
Business review
Governance
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Company’s
transactions, and disclose with reasonable
accuracy at any time the financial position of
Foreign exchange risk may however arise
the Company and the Group, and enable them to
from commercial transactions, as the Group
ensure that the financial statements comply
purchases certain goods from European
with the Companies Act 2006. They are also
suppliers. The Group has hedging agreements
responsible for safeguarding the assets of the
in place to protect itself from the risks as a
Directors’ responsibilities statement
Company and the Group and hence for taking
result in any adverse movements in the Euro.
The Directors are responsible for preparing the reasonable steps for the prevention and
Strategic Report, the Directors’ Report and the detection of fraud and other irregularities.
The finance function is responsible for managing financial statements in accordance with
the net position in each foreign currency
Electronic publication
applicable law and regulations.
(namely Euros). This currency exposure is not
The maintenance and integrity of the Azzurri
material as at the date of this report. Currency Company law requires the Directors to prepare Group website is the responsibility of the
exposures are reviewed regularly.
financial statements for each financial period.
Directors; the work carried out by the auditors
Under that law the Directors have prepared the does not involve consideration of these matters
(b) Credit risk
Group and Parent Company financial
and, accordingly, the auditors accept no
The Group has no significant concentrations of statements in accordance with United Kingdom
responsibility for any changes that may have
credit risk. The nature of its operations results Generally Accepted Accounting Practice
occurred to the financial statements since they
in a large and diverse customer base and a
(United Kingdom Accounting Standards and
were initially presented on the website.
significant proportion of cash sales. The Group applicable law). Under company, law the
Legislation in the United Kingdom governing
has policies that limit the amount of credit
Directors must not approve the financial
the preparation and dissemination of financial
exposure to any financial institution.
statements unless they are satisfied that they
statements may differ from legislation in other
give a true and fair view of the state of affairs of jurisdictions.
(c) Liquidity risk
the Group and the Company and of the profit or
The Group manages its exposure to liquidity
Directors’ indemnities
loss of the Group for that period. In preparing
risk through a naturally low level of debtors,
Qualifying third party indemnity provisions for
maintaining a diversity of funding sources and these financial statements, the Directors are
the benefit of Directors, as defined by the
required
to:
the spreading of debt repayments over a range
Companies Act 2006, have been in force during
of maturities.
• select suitable accounting policies and then
the period and at the date of approval of the
apply them consistently;
Annual Report.
(d) Cash flow and interest rate risk
• make judgements and accounting estimates
The Group’s income and operating cash flows
Provision of information to auditors
that are reasonable and prudent;
are substantially independent of changes in
Each of the persons who is a Director at the
•
s
tate
whether
applicable
UK
Accounting
market interest rates. The Group’s interest rate
date of approval of this report confirms that:
Standards
have
been
followed,
subject
to
any
risk arises from long term borrowings.
(1) so far as the Director is aware, there is no
material
departures
disclosed
and
explained
Borrowings issued at variable rates expose the
relevant audit information of which the
in
the
financial
statements;
Group to cash flow interest rate risk.
Company’s auditors are unaware; and
•
p
repare
the
financial
statements
on
the
going
Borrowings are fixed for 6 months from
concern
basis
unless
it
is
inappropriate
to
February 2015 and majority hedged from
(2)each Director has taken all the steps that
presume that the Company and the Group
August 2015.
he ought to have taken as a Director in
will continue in business.
order to make himself aware of any relevant
audit information and to establish that the
Company’s auditors are aware of that
information.
The Group operates in the United Kingdom
only and is therefore not susceptible to foreign
exchange risk in the normal course of trading.
The Group is exposed to the variability in the
price of commodities used in the running of our
restaurants, this includes exposure to price
fluctuations in ingredients purchased. The
Group mitigates this risk by entering into price
negotiations with suppliers to fix and reduce
costs where possible.
20
This confirmation is given and should be
interpreted in accordance with the provisions
of s418(2) of the Companies Act 2006.
Independent auditors
PricewaterhouseCoopers LLP have indicated
their willingness to continue in office and a
resolution concerning their re-appointment will
be proposed at the Annual General Meeting.
By order of the Board
James Pickworth
Company secretary
14 October 2015
Corporate governance report
The Group is committed to high standards of
corporate governance appropriate for a large,
private company and the Board is accountable
to all of the Group’s shareholders, including
minority shareholdings held by management
and employees, for good corporate governance.
The Board
The current board was put in place, following
the acquisition of Azzurri Central Limited in
January 2015. The Board considers that it is of
an appropriate size for the requirements of the
business, and that it has the appropriate
balance of skills, knowledge and experience.
The Board comprises a chairman, two
Non-Executive Directors and three executive
Directors, who were part of the management
team of the trading company prior to acquisition.
Contents
The Board is scheduled to meet between
eight and twelve times each financial period.
The executive responsibility for overseeing
the day-to-day management of the Group is
delegated to Stephen Holmes, the Chief
Executive, together with his executive team.
There is a clear division of responsibility
between the Non-Executive Chairman and
the executive Directors.
The Chairman is responsible for:
• t he leadership of the Board, ensuring its
effectiveness and setting its agenda; and
• facilitation of the effective contribution
of Non-Executive Directors, and ensuring
constructive relations between them and
the executive Directors.
The executive Directors are responsible for:
• setting the strategic direction of the Group;
• preparing annual budgets and medium term
projections for the Group and monitoring
performance against plans and budgets;
• overseeing the day-to-day management
of the Group;
The Board meets regularly throughout the year • effective communication with shareholders;
and, in addition to the routine reporting of
and
financial and operational issues, reviews the
• preparing the annual financial statements.
performance of each of the brands in detail.
There is a schedule of matters reserved for the The Company Secretary acts as secretary to the
Board and certain matters are delegated to the Board and its committees. He is responsible for
ensuring that the Directors receive appropriate
Board’s Committees and the executive
information prior to meetings, and for ensuring
Directors. The schedule of reserved matters
that governance requirements are considered
includes approval of annual budgets, strategic
and implemented.
plans, senior management appointments,
dividend policy and capital structure, major
The Remuneration Committee has undertaken
contracts and major capital expenditure. Items a review of the effectiveness of the executive
delegated to the executive Directors include the Directors during the year, reporting to the
approval of capital or other expenditure below Chairman. Executive Directors are included in
the limits required for board sign off, disposal
the annual performance evaluation of all senior
of low value assets and approval of minor
management, which includes a review of
contracts or less senior appointments.
performance against a range of specific
The Board’s role is to provide leadership to,
and to set the strategic direction of, the Group.
The Board monitors operational performance
and is also responsible for establishing Group
policies and internal controls to assess and
manage risk.
objectives.
Overview
Business review
Governance
Relations with Shareholders
The Group is committed to maintaining
effective communication with all of its
shareholders in order to maintain a clear
understanding of its objectives and its
performance against those objectives.
The two Non-Executive Directors are appointed
by the largest shareholders of the Group, the
Bridgepoint Funds. The remaining
shareholders of the Group include Hermes GPE
PEC II L.P, senior management and employees
of the Group who hold shares through the
‘Azzurri Equity Plan’ and ‘Azzurri Investment
Plan’ which were established following the
acquisition of Azzurri Central Limited.
Employees receive regular communication
about the performance of the Group, as
described on page 19.
Remuneration Committee
This committee comprises the Chairman, the
Chief Executive and two of the Non-Executive
Directors and is chaired by Michael Black.
The Remuneration Committee is responsible
for the following key areas:
• determining the participation of Directors
and employees in the Azzurri Equity Plan and
Azzurri Investment Plan;
• agreeing the framework for the remuneration
of the executive Directors and other senior
executives, and determining the total
individual remuneration packages of each
person, including pension arrangements. The
Chief Executive is not present when his own
remuneration package is determined;
• determining specific incentives for the
executive Directors and senior management
to encourage enhanced performance by being
rewarded in a fair manner for their individual
contributions to the success of the Group;
21
• ensuring that contractual terms on
termination and any payments made are fair
to the individual and to the Group (and that
failure is not rewarded); and
• evaluating the performance of the executive
Directors against objectives set.
Audit Committee
This committee comprises the Chairman,
the Chief Financial Officer and two of the
Non-Executive Directors and is chaired by
Harvey Smyth. Relevant senior management
are invited to attend audit committee meetings
as required.
The Audit Committee is responsible for all
matters relating to the regulatory and
accounting requirements that may affect the
Group, together with the financial reporting
and internal control procedures adopted by
the Group. In addition, the committee is
responsible for ensuring that an objective and
professional relationship is maintained with
the external auditors.
Key areas for which the committee is
responsible include:
• reviewing the Group’s financial statements
prior to approval on behalf of the Board and
reviewing the external auditors’ reports
thereon;
• establishing procedures to ensure that the
Group monitors and evaluates risks
appropriately;
• reviewing internal controls and establishing
an internal audit plan to monitor the
effectiveness of those controls;
• considering the consistency of accounting
policies across the Group and the accounting
for any significant or unusual transactions
where different approaches are possible; and
• assessing the effectiveness, independence
and objectivity of the external auditors.
Corporate governance report
Taxation policy
In line with its overall approach to corporate
governance, Azzurri is committed to suitably
strong governance in relation to all of its
tax affairs.
The Group seeks to:
• structure its affairs in a tax efficient way,
as would be expected in order to ensure
commercial effectiveness, but using a
straightforward and transparent approach
without use of any aggressive tax planning
strategies;
• ensure that it pays all taxes which are due
(and to do so promptly);
• maintain adequate systems, processes and
adequately experienced staff in order to
achieve the above; and
• maintain a transparent and constructive
relationship with HMRC.
Contents
The Group is currently reconfirming
agreements with HMRC to agree appropriate
treatment of the following major areas:
• capital allowances – representing the
amortisation for tax purposes of the
significant capital investments we make in
our estate (to open new restaurants and
maintain the condition of existing ones);
• interest on external bank debt and
shareholder loans – to determine the amount
of interest which should be deductible for tax
purposes; and
•VAT treatment for specific revenue categories
– to clarify the VAT treatment of nonstandard sales transactions, property
transactions, membership subscriptions or
sales of gift cards/vouchers.
Azzurri’s tax affairs are relatively straightforward, given that it is UK domiciled and that
it operates in a sector which does not have
inherent complexity – i.e. consumer-facing, with
no long term or complicated revenue streams
and relatively predictable cost structures.
In managing its affairs, the Group’s aim is to
limit tax related uncertainty. Our approach is
to discuss significant transactions openly with
the tax authorities in ‘real time’, as far as is
commercially practicable. Where there is
uncertainty in relation to a material tax issue,
we will seek to obtain tax authority agreement/
clearance in advance where practicable.
Overview
Business review
Governance
22
Independent auditors’ report
to the members of Azzurri Group Limited
Report on the financial statements
Our opinion
In our opinion, Azzurri Group Limited’s group
financial statements and company financial
statements (the ‘financial statements’):
• give a true and fair view of the state of the
Group’s and of the Company’s affairs as at
28 June 2015 and of the Group’s loss and
cash flows for the period 3 July 2014 to
28 June 2015 (‘the period’);
• have been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
What we have audited
The financial statements comprise:
• the consolidated and company balance sheets
as at 28 June 2015;
• the consolidated profit and loss account
and the consolidated statement of total
recognised gains and losses for the period
then ended;
• the consolidated cash flow statement for the
period then ended;
• the consolidated reconciliation of movements
in shareholders’ deficit for the period then
ended; and
• the notes to the financial statements, which
include a summary of significant accounting
policies and other explanatory information.
The financial reporting framework that has
been applied in the preparation of the financial
statements is applicable law and United Kingdom
Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
In applying the financial reporting framework,
the directors have made a number of subjective
judgements, for example in respect of
significant accounting estimates. In making
such estimates, they have made assumptions
and considered future events.
Contents
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion the information given in the
Strategic Report and the Directors’ report for
the financial year for which the financial
statements are prepared is consistent with the
financial statements.
Other matters on which we are required
to report by exception
Adequacy of accounting records and
information and explanations received
Overview
Business review
Governance
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) (‘ISAs (UK & Ireland)’). Those
standards require us to comply with the
Auditing Practices Board’s Ethical Standards
for Auditors.
This report, including the opinions, has been
prepared for and only for the Company’s
members as a body in accordance with Chapter
Under the Companies Act 2006 we are required 3 of Part 16 of the Companies Act 2006 and for
no other purpose. We do not, in giving these
to report to you if, in our opinion:
• we have not received all the information and opinions, accept or assume responsibility for
any other purpose or to any other person to
explanations we require for our audit; or
whom this report is shown or into whose hands
• adequate accounting records have not been
it may come save where expressly agreed by
kept by the parent company, or returns
adequate for our audit have not been received our prior consent in writing.
from branches not visited by us; or
What an audit of financial statements
• t he Company financial statements are not
involves
in agreement with the accounting records
We conducted our audit in accordance with
and returns.
ISAs (UK & Ireland). An audit involves
obtaining evidence about the amounts and
We have no exceptions to report arising from
disclosures in the financial statements
this responsibility.
sufficient to give reasonable assurance that the
Directors’ remuneration
financial statements are free from material
Under the Companies Act 2006 we are required misstatement, whether caused by fraud or
to report to you if, in our opinion, certain
error. This includes an assessment of:
disclosures of directors’ remuneration specified • whether the accounting policies are
by law are not made. We have no exceptions to
appropriate to the Group’s and the Company’s
report arising from this responsibility.
circumstances and have been consistently
applied and adequately disclosed;
Responsibilities for the financial
• t he reasonableness of significant accounting
statements and the audit
estimates made by the directors; and
Our responsibilities and those of the
• t he overall presentation of the financial
directors
statements.
As explained more fully in the Directors’
responsibilities statement set out on page 20,
We primarily focus our work in these areas by
the directors are responsible for the
assessing the directors’ judgements against
preparation of the financial statements and
available evidence, forming our own
for being satisfied that they give a true and
judgements, and evaluating the disclosures in
fair view.
the financial statements.
23
We test and examine information, using
sampling and other auditing techniques, to
the extent we consider necessary to provide
a reasonable basis for us to draw conclusions.
We obtain audit evidence through testing the
effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and
non-financial information in the Annual Report
to identify material inconsistencies with the
audited financial statements and to identify
any information that is apparently materially
incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the
course of performing the audit. If we become
aware of any apparent material misstatements
or inconsistencies we consider the implications
for our report.
Simon Bailey (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Gatwick
14 October 2015
Contents
Overview
Business review
Governance
Consolidated profit and loss account
for the period ended 28 June 2015
Group turnover
Cost of sales
Gross profit
Administrative expenses
Exceptional administrative costs
Total administrative expenses
Group operating profit
Loss on disposal of fixed assets
Note
3 July 2014 to
28 June 2015
£m
3
Loss on ordinary activities before taxation
Tax on loss on ordinary activities
Loss for the financial period
(4.7)
(15.3)
0.7
(0.3)
0.4
7
8
The results above all relate to continuing operations.
There is no material difference between the loss on ordinary activities before taxation and the loss for the financial period stated above and
their historical cost equivalents.
As permitted by Section 408 of the Companies Act 2006, a profit and loss account for Azzurri Group Limited has not been presented in these
Financial Statements. For the period from the 3 July 2014 to 28 June 2015 the Company generated a loss of £2.4 million.
16.0
(10.6)
5
Profit on ordinary activities before interest and taxation
Net interest payable and similar charges
93.9
(77.9)
(10.6)
(10.2)
(0.4)
(10.6)
24
Contents
Overview
Business review
Governance
Consolidated statement of total recognised gains and losses
28 June 2015
£m
(10.6)
0.1
Foreign exchange gains
Net increase in shareholders’ deficit
(10.5)
Opening shareholders’ deficit
Closing shareholders’ deficit
(10.5)
–
25
Contents
Overview
Business review
Governance
Consolidated balance sheet
as at 28 June 2015
Fixed assets
Intangible assets
Note
9
Tangible assets
10
Stocks
11
Current assets
Debtors
12
Creditors: amounts falling due within one year
14
Cash at bank and in hand
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Provisions for liabilities
Net liabilities
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Total shareholders’ deficit
13
15
16
18
19
20
The financial statements on pages 24 to 49 were approved by the Board of Directors on 14 October 2015 and signed on its behalf by
Stephen Holmes
James Pickworth
Director Director
Company registration number: 09115901
28 June 2015
£m
153.9
130.5
284.4
6.9
9.7
4.8
21.4
(40.0)
(18.6)
265.8
(264.2)
(11.1)
(9.5)
–
1.0
(10.5)
(9.5)
26
Contents
Overview
Business review
Governance
Company balance sheet
as at 28 June 2015
Fixed assets
Investments
Current assets
Debtors
Net current assets
Creditors: amounts falling due after more than one year
Total assets less current liabilities
Net liabilities
Note
28 June 2015
£m
17
46.0
12
0.1
15
46.0
0.1
(47.5)
(1.4)
(1.4)
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Total shareholders’ funds
18
19
20
The financial statements on pages 24 to 49 were approved by the Board of Directors on 14 October 2015 and signed on its behalf by
Stephen Holmes
James Pickworth
DirectorDirector
Company registration number: 09115901
–
1.0
(2.4)
(1.4)
27
Contents
Overview
Business review
Governance
Consolidated reconciliation of movements in shareholders’ deficit
Group
28 June 2015
£m
1.0
Issue of ordinary share capital (note 18)
(10.6)
Foreign exchange gains
(9.5)
(9.5)
Company
Issue of ordinary share capital (note 18)
0.1
–
28 June 2015
£m
1.0
(2.4)
(1.4)
(1.4)
–
28
Contents
Overview
Business review
Governance
Consolidated cash flow statement
Note
Net cash inflow from operating activities
21
Returns on investments and servicing of finance
Interest paid
3 July 2014 to
28 June 2015
£m
4.0
(0.8)
Net cash outflow from returns on investments and servicing of finance
(0.8)
Taxation paid
(1.0)
Capital expenditure and financial investment
(10.2)
Purchase of tangible fixed assets
Net cash outflow from capital expenditure and financial investment
(10.2)
(249.0)
Purchase of subsidiary net of cash
Net cash outflow from acquisitions and disposals
(249.0)
Net cash outflow before financing
(257.0)
Financing
113.8
Issue of bank debt
100.0
Issue of shareholder debt
1.0
Issue of ordinary share capital
45.0
Issue of preference shares
Draw down of Revolver facility
2.0
Net cash outflow from financing
Increase in cash for period
261.8
21 (b), (c)
4.8
29
Notes to the financial statements
1 General information
The principal activity of Azzurri Group
Limited (‘Azzurri’ and the ‘Company’) and
its subsidiaries (together, the ‘Group’)
is operating restaurants.
The consolidated financial information
presented is in respect of the underlying
business of Azzurri Central Limited (including
the ASK Italian and Zizzi businesses), together
with the Group holding companies described
in note 27 for the period ended 28 June 2015.
The results of ASK Italian and Zizzi have been
included from the date of acquisition of
21 January 2015. This is the first period in
which the Group operate, therefore no
comparisons against the prior year can be made.
Contents
market conditions that sufficient headroom
in the forecast exists at all levels. In addition,
the Group banking and debt arrangements
have maturity dates of July 2020 and later.
Basis of consolidation
The consolidated balance sheet includes all
results, cash flows and the assets and liabilities
of all subsidiaries. Subsidiaries acquired during
the period are recorded using the acquisition
method of accounting and their results are
included from the date of acquisition. The cost
of an acquisition is measured as the fair value
of the assets given, equity instruments issued
and liabilities incurred or assumed at the date
of exchange, plus costs directly attributable to
the acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in
a business combination are measured initially
at their fair values at the acquisition date,
irrespective of the extent of any minority
interest. The excess of the cost of acquisition
over the fair value of the Group’s share of the
identifiable net assets acquired is recorded
as goodwill.
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Rental income
Rental income from operating leases is
recognised on a straight line basis over the
term of the relevant lease. It is netted off
against rental costs and is recognised within
administrative expenses.
Tangible fixed assets
Tangible fixed assets are stated at historic
purchase cost less accumulated depreciation.
Cost includes the purchase price of the asset,
together with incidental expenses incurred.
Depreciation 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:
Plant
20% per annum
Fixtures
10% per annum
Motor vehicles
25% per annum
IT equipment
20-33% per annum
30
Assets under construction comprise tangible
fixed assets acquired for restaurants under
construction, including costs directly
attributable to bringing the asset into use.
Assets are transferred to short leaseholds,
plant and fixtures 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.
Sales of properties are recognised in the
financial statements when unconditional
contracts are exchanged.
Impairment of fixed assets
The carrying values of fixed assets are
reviewed for impairment by the Directors at
each balance sheet date and in periods where
events or changes in circumstances indicate
2Accounting policies
that the carrying value may not be recoverable.
Basis of preparation
Any impairment in the value of fixed assets
The financial information has been prepared
below depreciated historical cost is charged to
under the historical cost convention and in
accordance with applicable accounting
Short leasehold properties are depreciated over the profit and loss account. A reversal of an
impairment loss is recognised in the profit and
standards in the United Kingdom and with
the length of the lease except where the
the Companies Act 2006. The most significant
anticipated renewal or extension of the lease is loss account up to the extent that the original
loss was recognised.
accounting policies, which have been applied
sufficiently certain so that a longer estimated
All transactions and balances between the
consistently throughout the period, are
useful life is appropriate. Current legislation
Onerous lease provisions
Group’s businesses have been eliminated in
described below. The Company is exempt
and the terms of the lease contracts are such
Onerous lease provisions are recognised when
the preparation of the consolidated financial
under the terms of FRS8 from disclosing
that the vast majority of leases are readily
the Group has a vacant property, a sublet
information. All subsidiaries have co-terminous extendible by an additional 14 years. The
related party transactions with entities
property for which the Group’s lease obligation
that are part of the Azzurri Group. The accounts year ends and follow uniform accounting policies. maximum depreciation period for short term
cannot be met in full or where a restaurant is
are prepared in £m, rounded to the nearest 0.1,
leasehold properties is 30 years.
Turnover
loss-making for an extended period of time. An
with the exception of notes 6, 15 and 18.
Turnover represents net invoiced sales of food
The cost of freehold and leasehold properties is estimate is made of the period of time and the
and beverages, and excludes value added tax.
extent to which the lease obligations cannot be
Going concern
depreciated over the lesser of 50 years or the
Turnover of restaurant services is recognised
fulfilled and a provision made accordingly.
The Directors have prepared the financial
outstanding term of the lease.
when the goods have been provided.
statements on a going concern basis. As the
Pre-opening costs
Group has total net liabilities of £9.5 million
Allocation
of
costs
Pre-opening costs, which comprise site
at 28 June 2015, management have prepared
Cost of sales includes all direct costs incurred
operating costs, are expensed as incurred.
cash flow forecasts for a five year period from
in
restaurants.
Administrative
expenses
the year end date which indicate that the Group
include central and area management,
will be able to meet its liabilities when they
administration and head office costs, together
fall due and the directors are satisfied, having
with goodwill amortisation.
taken into account current and expected
2 Accounting policies continued
Exceptional costs
Goodwill
Contents
Goodwill represents the difference between
The Group presents a total net figure, on the face the fair value of the purchase consideration
of the profit and loss account, for exceptional
and the fair value of the separable net assets
items. Exceptional items are material items
acquired. Goodwill on the acquisition of
of profit and cost that, because of the unusual
a business is capitalised and amortised over
nature and expected infrequency of the events its useful economic life. The useful economic
giving rise to them, merit separate presentation life is a maximum of 20 years.
to allow an understanding of the Group’s
Goodwill is subject to an impairment review
financial performance.
at the end of the first full year following an
Stocks
acquisition and at any other time when the
Raw materials and consumables are valued
Directors believe that an impairment may have
at the lower of cost and net realisable value.
occurred. Changes in provision for impairment
Cost is based on the purchase cost on a first-in, are taken to the profit and loss account.
first-out basis. The cost for equipment, which
Foreign currency transactions
includes kitchen equipment, crockery and
Transactions denominated in foreign
utensils, is determined by reference to the
currencies are recorded at the spot rate
standard quantity in issue to each restaurant.
applicable at the date of the transaction.
Deferred taxation
Monetary assets and liabilities expressed in
Deferred taxation is recognised in respect of
foreign currencies held at the balance sheet
all timing differences that have originated but
date are translated at the closing rate. The
not reversed at the balance sheet date which
resulting exchange gain or loss is dealt with
are due to transactions or events which have
in the profit and loss account.
occurred at that date and which will result in
an obligation to pay more, or a right to pay less, Operating leases
Rentals paid under operating leases are
tax in the future.
charged to the profit and loss account on a
Resultant deferred tax assets are recognised
straight line basis over the term of the lease.
only to the extent that it is considered more
The benefit of lease incentives are taken to the
likely than not that there will be suitable
profit and loss account on a straight line basis
taxable profits from which the deferred tax
over the shorter of the lease term or the period
assets resulting from the underlying timing
until the first rent review. Contributions
differences can be recovered.
received from landlords as an incentive to
enter into a lease are treated as deferred
Deferred tax is measured on an undiscounted
income within creditors.
basis at the average tax rates that are expected
to apply in the periods in which timing
Pension costs
differences reverse, based on tax rates and
Contributions to defined contribution personal
laws enacted or substantively enacted at the
pension schemes are charged to the profit and
balance sheet date.
loss account in the year in which they become
payable.
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Cash and liquid resources
Cash, for the purpose of the cash flow
statement, comprises cash in hand, cash in
transit and deposits repayable on demand,
less overdrafts payable on demand.
Liquid resources are defined as current asset
investments, given that they are readily
convertible into known amounts of cash
without curtailing or disrupting the business.
Liquid resources comprise term deposits
of less than one year (other than cash).
Restricted cash comprises amounts held
as letters of credit for potential insurance
liabilities.
31
Investments
Investments are held at cost less any provisions
for impairment.
Fixed asset investments
In the Group and Company financial
statements, investments in subsidiary
undertakings are stated at cost plus incidental
expenses less any provision for impairment.
Impairment reviews are performed by the
Directors when there has been an indication
of potential impairment.
Company cashflow statement
The Company has taken advantage of the
exemption provided by Financial Reporting
Standard 1 (revised 1996) not to produce a
Preference shares
cash flow statement on the grounds its cash
Mandatorily redeemable preference share
flows are presented within the Group’s cash
capital are classified as liabilities, the dividends flow statement.
on these shares are recognised in the income
statement as an interest expense.
3 Turnover
Debt finance
All borrowings are initially stated at the fair
value of consideration received after deduction
of issue costs. The issue costs and interest
payable on borrowings are charged to the profit
and loss account over the term of the borrowing,
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.
Rebates receivable from suppliers
Where a rebate agreement with a supplier
covers more than one year the rebates are
recognised in the financial statements in
the period in which they are earned.
Financial instruments
The Group does not hold or issue derivative
financial instruments for trading purposes.
Business sector analysis
The Group has operated in one business sector
in the period, being the sale of food and
beverages.
Geographical sector analysis
The Group has operated in one geographical
sector in the period, being the United Kingdom.
Contents
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4 Group operating profit
Group operating profit is stated after charging/(crediting):
3 July 2014 to
28 June 2015
£m
Shown within cost of sales:
Employee costs (note 6)
Depreciation of tangible fixed assets (note 10):
– Plant, fixtures, IT equipment and motor vehicles
– Short leasehold properties
Operating lease rentals:
29.4
2.5
2.0
10.1
3 July 2014 to
28 June 2015
£m
Shown within administrative expenses:
Employee costs (note 6)
Amortisation of goodwill (note 9)
Depreciation of tangible fixed assets (note 10):
– Plant, fixtures, IT equipment and motor vehicles
Operating lease rentals:
Rental income
Auditors’ remuneration:
– Statutory audit fees and expenses
– Advisory services
3.7
3.3
0.2
0.9
(0.8)
0.1
0.2
32
Contents
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Business review
Governance
5 Exceptional costs
3 July 2014 to
28 June 2015
£m
Exceptional costs
– Transaction costs
– Separation costs
– Estate review
Total exceptional costs
3.1
1.0
0.6
4.7
During the period, exceptional costs were incurred as follows:
• An arrangement fee of £2.5 million was paid on completion to Bridgepoint Advisors, and professional fees of £0.6 million were incurred in
relation to management advice relating to the acquisition.
• Post-acquisition costs of £0.6 million were incurred following the separation from Gondola and separation costs of £0.4 million were incurred
relating to the separation from PizzaExpress.
• An estate review following the acquisition of the Azzurri business identified a further £0.6 million of exceptional property related costs.
6 Employees and Directors
Group
3 July 2014 to
28 June 2015
£m
a) Employee costs:
Wages and salaries
Social security costs
Other pension costs
30.8
2.0
0.3
33.1
Disclosed within:
Cost of sales
Administrative expenses
29.4
3.7
33.1
b) Employee numbers (including Directors)
The number of persons employed by the Group during the period was:
Restaurants and distribution
Administration
5,457
102
5,559
33
Contents
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Business review
Governance
6 Employees and Directors continued
Group
Total Directors’ remuneration from the period since acquisition was as follows:
3 July 2014 to
28 June 2015
£’000
824.7
Aggregate emoluments
Included within the emoluments above are pension contributions of £22,700 paid into the individual personal pension plans of three Directors.
Emoluments in respect of the highest paid Director were as follows:
3 July 2014 to
28 June 2015
£’000
295.5
Aggregate emoluments
9.5
Pension contributions
305.0
Jason McGibbon and Michael Black, who represent the Bridgepoint Group, received no remuneration from the Group in respect of their services
as Directors or in respect of any services to the Group. Bridgepoint Partners LLP were not paid a fee during the period, however £0.1 million was
accrued during the period for their services (see note 24), which are subsequently not included in the aggregate emoluments disclosed above.
No Director waived any emoluments in the period.
The Group does not operate a defined benefit pension scheme.
Company
The Company has no employees.
7 Net interest payable and similar charges
Interest payable on bank loans and overdrafts
Bank loans – senior facilities
Amortisation of debt issue costs
Interest payable on shareholder loans
Preference share dividends
Interest payable and similar charges
Note
15
15
15
15
3 July 2014 to
28 June 2015
£m
2.6
0.4
5.2
2.4
10.6
Interest on shareholder loans and dividends accrued on preference shares roll up into the principal balance annually and does not fall due until the
maturity or repayment of the respective loan or preference share capital.
34
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Governance
8 Tax on loss on ordinary activities
3 July 2014
to 28 June 2015
£m
Current tax
–
United Kingdom corporation taxation
Total current tax charge
–
Deferred tax
Origination and reversal of timing differences
0.4
Total deferred tax charge (note 16)
0.4
Tax charge on ordinary activities
0.4
The tax charge for the period is higher than the standard rate of corporation tax in the UK of 20.75%. The differences are explained below:
3 July 2014
to 28 June 2015
£m
Loss on ordinary activities before taxation
(10.2)
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.75%
(2.1)
Timing differences in respect of capital allowances
(0.3)
Effects of:
Expenses for tax purposes non-deductible
Amortisation of goodwill non-deductible
Preference share dividends non-deductible
Total current tax
1.2
0.7
0.5
–
35
Contents
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Business review
Governance
9 Intangible assets
Group
Cost
At 3 July 2014
On acquisition
At 28 June 2015
Note
Goodwill
£m
Total
£m
25
157.2
157.2
–
157.2
–
157.2
Accumulated amortisation:
At 3 July 2014
Charge for the period
At 28 June 2015
–
–
3.3
3.3
3.3
3.3
–
–
Net book value
At 3 July 2014
At 28 June 2015
153.9
153.9
Goodwill is being amortised over 20 years. The Directors believe that the period is appropriate based on a review of the expected future cash flows
of the Group, the fact that the ASK Italian and Zizzi businesses are long standing operations and that the Group continues to have growth
opportunities in the long term future.
Company
The Company has no intangible assets.
36
Contents
Overview
Business review
Governance
10Tangible assets
Group
Cost
At 3 July 2015
Acquisition of subsidiary (see note 25)
Additions
Transfers
Disposals
At 28 June 2015
Assets
under
construction
£m
Short
leasehold
properties
£m
Plant, fixtures,
IT equipment
and motor
vehicles
£m
Total
£m
1.7
95.5
28.1
125.3
(0.9)
(0.5)
–
8.3
(7.8)
–
2.2
–
0.8
4.7
100.1
–
1.1
3.1
31.8
–
10.2
–
(1.4)
134.1
Accumulated depreciation
At 3 July 2015
–
At 28 June 2015
–
Depreciation charge
Disposals
–
–
–
2.0
(0.7)
1.3
–
2.7
(0.4)
2.3
–
4.7
(1.1)
3.6
Net book value
At 3 July 2014
At 28 June 2015
There was no capital expenditure contracted but not provided as at 28 June 2015.
Company
The Company has no tangible fixed assets.
–
2.2
–
98.8
–
29.5
–
130.5
37
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Governance
11 Stocks
Group
28 June 2015
£m
5.3
Equipment
1.6
Food and drink
6.9
There is no material difference between the replacement cost and book value of stock.
Company
The Company holds no stock.
12 Debtors
Trade debtors
Restricted cash
Prepayments and accrued income
Amounts owed by subsidiary undertakings
Amounts owed by subsidiary undertakings are interest-free and are repayable on demand.
Group
28 June 2015
£m
Company
28 June 2015
£m
3.8
–
0.2
–
5.7
–
–
0.1
9.7
0.1
The restricted cash relates to a £0.2 million letter of credit deposited with Barclays in relation to potential insurance liabilities. The restricted cash
does not meet the definition of cash as defined in FRS 1.
All of the debtors stated above are due within one year.
38
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Governance
13 Cash at bank and in hand
Group
28 June 2015
£m
Cash
4.8
4.8
Company
The Company holds no cash.
14Creditors: amounts falling due within one year
Group
28 June 2015
£m
5.0
Trade creditors
Bank loans – senior facility (note 15)
2.3
Revolving facility
Taxation and social security
8.6
Accrued bank interest
Accruals and deferred income
Other creditors
Company
The Company has no creditors falling due within one year.
2.2
2.0
13.2
6.7
40.0
39
Contents
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Governance
15 Creditors: amounts falling due after more than one year
Bank loans – senior facilities
Unsecured shareholder loan notes
Group
28 June 2015
£m
Company
28 June 2015
£m
111.5
–
105.2
Preference shares
–
47.5
47.5
264.2
47.5
Senior debt
On 29 November 2014, the Group entered into borrowing arrangements to finance the purchase of Azzurri Central Limited. The loans were
syndicated to a range of institutions and carry interest at varying rates above LIBOR (see table below), interest being payable in arrears at time
periods of one, three or six months as agreed in advance.
Total issue costs of the senior debt of £6.6 million, are being amortised over the period to the maturity date. At 28 June 2015, the unamortised
cost was £6.2 million.
Banking terms and maturity dates
The outstanding principal loan amount and the maturity dates of the senior facilities at the year end are summarised in the table below:
Senior A facility
Senior B facility
Principal
loan amount
£30.0m
£90.0m
Weighted
average
interest rate
above LIBOR
4.25%
4.75%
Maturity
date
June 2020
June 2021
The above excludes the committed revolving facility of £10.0 million of which £2.0 million was drawn at year end. There is also an undrawn capex
facility of £15.0 million.
Unsecured shareholder loan notes
Azzurri Finance 1 Limited, a subsidiary of the Company, has in issue 100,000,000 £1 shareholder loan notes. The maturity date of the loan notes
is January 2023. The loan notes accrue interest at a compound rate of 12% per annum.
40
Contents
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Governance
15 Creditors: amounts falling due after more than one year continued
Preference shares
28 June 2015
£
Group and Company
Authorised, Allotted, issued and fully paid:
452
45,175,211 12% Cumulative preference shares of 0.001p each
The 12% cumulative preference shares, which do not carry any voting rights, were issued in January 2015 at £1 per share, giving rise to a share
premium of £45.1 million. Shareholders are entitled to receive dividends at 12% per annum on the par value of these shares on a cumulative basis; these
dividends are compounded annually on 1 January and repayable along with the capital, on 1 January 2023. On winding up, the preference shareholders
rank above ordinary shareholders and are entitled to receive £1 per share and any dividends accrued but unpaid in respect of their shares.
Maturity of financial liabilities
The maturity profile of the carrying amount of the group’s liabilities as 28 June 2015 was as follows:
Group
Less than one year
In more than one year but no more than two years
In more than two years but no more than five years
Bank
debt
£m
Loan
notes
£m
Preference
shares
£m
4.3
–
–
5.3
18.5
–
–
–
–
In more than five years
94.1
122.0
105.2
105.2
In more than five years
–
–
47.5
Company
Total
£m
4.3
5.3
18.5
47.5
47.5
274.7
47.5
47.5
Borrowing facilities
246.8
47.5
The Group had a committed revolving facility of £10.0 million, with £8.0 million undrawn at 28 June 2015. The facility is tied to the Senior banking
facilities. The facility, if utilised, would carry interest at LIBOR plus 4.25%. The unused facility incurs commitment fees of 1.7%.
The group had an undrawn capex facility of £15.0 million at 28 June 2015. The facility is also tied to the Senior banking facilities. The facility,
if utilised, would carry interest at LIBOR plus 4.25%. The unused facility incurs commitment fees of 1.7%.
41
Contents
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Governance
Business review
16 Provisions for liabilities
Deferred
taxation
£m
At 3 July 2014
–
On acquisition (note 25)
6.8
At 28 June 2015
7.2
Utilised in period
Charged in period
–
0.4
Onerous
leases
£m
Total
£m
–
–
3.5
10.3
3.9
11.1
(0.2)
(0.2)
0.6
1.0
Onerous leases
The onerous lease provision represents operating leases on vacant property, a sublet property for which the Group’s lease obligation cannot be met
in full, or where a restaurant is loss making for an extended period of time, until the end of their lease or until the Directors estimate the properties
can be sublet.
Deferred taxation
As at 28 June 2015, the Group had no unrecognised deferred tax assets. The deferred tax liability of £7.2 million relates to accelerated capital allowances.
A number of changes continue to the UK Corporation Tax system. The main rate of corporation tax was reduced to 20% from 1 April 2015.
17 Investments
During the period the Company made an investment in Azzurri Central Limited, refer to note 24 for further information.
Cost and net book value
Company
£m
Investment in subsidiaries
At 3 July 2014
Additions
At 28 June 2015
The Directors believe the carrying value of the investment is supported by the underlying assets.
A list of the subsidiary companies is provided in note 28.
–
46.0
46.0
42
Contents
Overview
Business review
Governance
18 Called up share capital
Group and Company
28 June 2015
£
Authorised
Equity
825,000 Ordinary A shares of £0.01 each
90,355 Ordinary B shares of £0.01 each
68,000 Ordinary C shares of £0.04 each
8,250
904
2,720
11,874
Allotted, issued and fully paid
Equity
825,000 Ordinary A shares of £0.01 each
90,355 Ordinary B shares of £0.01 each
68,000 Ordinary C shares of £0.04 each
8,250
904
2,720
11,874
• Ordinary A & C shares carry the voting rights and the right to receive notice of meetings and rights to appoint Directors. Ordinary B shares carry
none of these rights.
• Preference shares are classified as liabilities (see note 15).
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Governance
19 Share premium account
Group and Company
28 June 2015
£m
Premium arising on the issue of ordinary share capital (note 18)
1.0
Net increase in share premium account
1.0
Opening share premium account
Closing share premium account
1.0
–
20 Profit and loss account
Group
£m
–
At 3 July 2014
(10.6)
At 28 June 2015
(10.5)
Foreign exchange
Company
At 3 July 2014
At 28 June 2015
0.1
£m
–
(2.4)
(2.4)
44
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Governance
21 Notes to cash flow statement
a) Reconciliation of operating profit to operating cash flows
3 July 2014 to
28 June 2015
£m
Continuing operations
Operating profit
Depreciation of tangible fixed assets
Amortisation of goodwill
Decrease in stocks
Decrease in debtors
Decrease in creditors
Net cash inflow from operating activities
0.4
4.7
3.3
0.1
0.6
(5.1)
4.0
b) Reconciliation of net cash flow to movement in net debt
3 July 2014 to
28 June 2015
£m
Increase in cash (note 13)
Bank fees paid
4.8
6.2
(267.2)
Issue of debt
(256.2)
Net debt at beginning of period
(261.8)
Change in net debt resulting from cash flows
Other non-cash changes
Net debt at end of period
(5.6)
–
45
Contents
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21 Notes to cash flow statement continued
c) Analysis of changes in net debt
Cash at bank and in hand
Bank debt and other borrowings (>1 year)
Bank debt and other borrowings (<1 year)
Total net debt
At
3 July 2014
£m
–
–
–
–
Cashflow
movements
£m
4.8
(256.7)
Non cashflow
movements
£m
(4.3)
(256.2)
The figures for restricted cash and cash on short term deposit are included in the figure for cash on the balance sheet.
–
(5.6)
–
(5.6)
At
28 June 2015
£m
4.8
(262.3)
(4.3)
(261.8)
Other non-cash changes comprise movement in accrued capitalised interest and amortisation of loan issue costs.
22 Operating lease commitments
The Group has annual commitments under non-cancellable operating leases which expire as follows:
28 June 2015
£m
Land and buildings
Within one year
In the second to fifth years inclusive
Over five years
0.2
0.7
25.4
26.3
The financial commitments for operating lease amounts payable as a percentage of turnover have been based on the minimum payment that is
required under the terms of the relevant lease. As a result, the amounts charged to the profit and loss account may be different to the financial
commitment at the period-end.
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23 Contingent liabilities
On 29 November 2014, certain of the Company’s subsidiaries (the ‘Original Obligors’) became guarantors to a Senior Facilities Agreement between
Azzurri Midco 2 Limited and Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (trading as Rabobank International) London Branch. The
facilities were drawn on 21 January 2015 to fund the acquisition of Azzurri Central Limited, at which point, the acquired subsidiaries became
‘Additional Obligors’ to the agreement.
The amounts outstanding at the balance sheet dates for these loans were £124.2 million including accrued interest.
Each Guarantor irrevocably and unconditionally jointly and severally:
• guarantees to each Finance Party punctual performance by each other Obligor of all that Obligor’s obligations under the Finance Documents;
• undertakes with each Finance Party that whenever another Obligor does not pay any amount when due under or in connection with any Finance
Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and
• agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent
and primary obligation, indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of an Obligor
not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document
on the date when it would have been due.
24Related party transactions
No separate disclosure has been made of transactions and balances between companies in the Group that have been eliminated in the preparation
of these financial statements, as is permitted by FRS 8 ‘Related Party transactions’. All other transactions and balances with related parties of the
Group have been detailed below.
Transactions with Bridgepoint
Arrangement fees totalling £2.5 million have been paid to Bridgepoint Partners LLP in relation to the acquisition of the Group (see note 5).
Also £0.1 million of monitoring fees due to Bridgepoint Partners LLP were incurred and remain outstanding at the year end date.
Transactions with Bridgepoint portfolio companies
During the period, the Group engaged Pepco Services LLP to complete a procurement review exercise. No fees were payable during the period.
The group has agreed to pay 20% commission on any cost savings.
During the period, the Group entered into a forward exchange swap contract with TTT MoneyCorp Limited for the following financial year to fund
purchases made in Euro.
Azzurri MidCo 1 Limited loan notes
On acquisition of Azzurri Central Limited, the Group introduced the ‘Azzurri Equity Plan’ for eligible employees and Directors. In addition to the
principal investment made by and on behalf of the Bridgepoint Funds, certain shareholders and Directors purchased Azzurri Midco 1 Limited loan
notes at cost. As detailed in note 15, interest accrues at 12% and is capitalised into the principal on an annual basis.
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25 Acquisition
On 21 January 2015, the Group acquired the share capital of Azzurri Central Limited for cash consideration of £292.2 million including
£81.9 million to fund the settlement of an inter-company loan balance.
The results of the trading company were included within the Group results from this date.
The book values of the assets and liabilities have been taken from the management accounts of Azzurri Central Group on 21 January 2015 (the date
of acquisition). There was a fair value adjustment of £0.7 million at the date of acquisition to bring the stock balance in line with the Group policy.
Additionally there were fair value adjustments of £1.0 million to increase both debtors and creditors which related to the tax losses transferred
from the Gondola Group.
Tangible fixed assets
Stocks
Debtors
Creditors
Provisions:
– Onerous lease
Taxation:
– Deferred
Cash
Net assets acquired
Goodwill
Book value
£m
125.3
7.8
9.5
(39.8)
(3.5)
(6.8)
43.9
136.4
Fair value
£m
125.3
7.1
10.5
(40.8)
(3.5)
(6.8)
43.9
135.7
157.2
Consideration
292.9
Consideration satisfied by:
292.9
Cash
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26 Post balance sheet events
Following the year end date, on 8 July 2015, Azzurri Central Limited set up CDM Group Limited and its subsidiary CDM Holdco Limited to acquire
CDM Trading Limited (formerly Tenfour Ventures Limited), trading as Coco di Mama. The Company purchased a 63.5% share in CDM Group
Limited for consideration of £7.4 million. Acquisition costs of £0.4 million were incurred.
27 Ultimate parent undertakings
Bridgepoint’s shares in Azzurri Group Limited are held in the name of a nominee company, BEV Nominees Limited, which holds the shares as
nominee for the 12 limited partnerships that comprise the Bridgepoint Europe V Fund being Bridgepoint Europe V ‘A1’ LP, Bridgepoint Europe V
‘A2’ LP, Bridgepoint Europe V ‘A4’ LP, Bridgepoint Europe V ‘B1’ LP, Bridgepoint Europe V ‘B2’ LP, Bridgepoint Europe V ‘B3’ LP, Bridgepoint Europe
V ‘B4’ LP, Bridgepoint Europe V ‘B5’ LP, Bridgepoint Europe V ‘C’ LP, Bridgepoint Europe V ‘D’ LP, Bridgepoint Europe V ‘E’ LP and Wigmore Street
Co-Investments No.1 LP (the ‘Partnerships’). The Partnerships each act by their FCA authorised fund manager, Bridgepoint Advisers Limited.
BEV Nominees Limited’s and Bridgepoint Advisers Limited’s ultimate parent company is Bridgepoint Advisers Group Limited. Accordingly,
at 28 June 2015, the Directors consider the Company’s ultimate controlling party to be Bridgepoint Advisers Group Limited.
28 Subsidiary undertakings
The subsidiary undertakings of the Group for the period ended 28 June 2015 were as follows:
Azzurri MidCo 1 Limited (formerly ZASKI MidCo 1 Limited)
Azzurri MidCo 2 Limited (formerly ZASKI MidCo 2 Limited)
Azzurri Trading Limited (formerly ZASKI BidCo Limited)
Azzurri Central Limited (formerly Gondola Central Limited)
Azzurri Restaurants Limited (formerly Gondola Restaurants Limited)
Azzurri ITS Limited (formerly ITS Restaurants Limited)
Azzurri MOF Limited (formerly Mean Ole Frisco Limited)
Azzurri ASK 25 Limited (formerly ASK 25 Limited)
Principal activity
Country of
incorporation
Proportion of
ordinary voting
shares held
and interest in
allotted capital
Management Services
UK
100%
Dormant Company
UK
100%
Holding Company
Holding Company
Holding Company
Restaurant operations
Dormant Company
Dormant Company
UK
UK
UK
UK
UK
UK
100%
100%
100%
100%
100%
100%
49
Corporate directory
Directors James Pickworth
Stephen Holmes Jason MicGibbon
Kieran Pitcher
Harvey Smyth
Michael Black
Company secretary
James Pickworth
Registered office
Third Floor
Capital House
25 Chapel Street
London NW1 5DH
Company number
09115901
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
The Portland Building
25 High Street
Crawley
West Sussex RH10 1BG
Contents
Overview
Business review
Governance
50
Designed and produced by Instinctif Partners www.instinctif.com
Azzurri Group Limited
Third Floor
Capital House
25 Chapel Street
London NW1 5DH

Annual Report 2015

Transcription

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