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PIZZAEXPRESS FINANCING 1 PLC Interim financial report for the 52 weeks ended 26 June 2016

PIZZAEXPRESS FINANCING 1 PLC

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Contents Operating and financial review

3

Condensed consolidated statement of comprehensive income 4 Condensed consolidated statement of financial position

5

Condensed consolidated statement of changes in equity

6

Condensed consolidated cash flow statement 7

Notes to the interim financial report 8


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Operating and financial review

Review of business The Group delivered a solid trading performance with turnover growing ahead of the same period in the prior year on a pro forma* basis by 14.1% and EBITDA** increasing slightly from the prior pro forma period by 0.1%. UK and Ireland LFL** was -1.3% on a constant currency basis (-1.4% at actual rates) which reflects the continuation of challenging market conditions. Lower volumes in our core UK and Ireland market impacted profitability during the period and this is reflected in the 90 basis points reduction in UK EBITDA margin. The larger decline in the Group EBITDA margin of 280 basis points is principally explained by the change to full consolidation of turnover and costs from our former franchise businesses in the UAE and China compared with franchise income only for the majority of the previous year. In the UK and Ireland we opened 18 new sites and closed 6 (including Kettner’s) and in our international markets, we opened 12 new sites and closed 2 in territories where we operate as a wholly-owned business. We continue to establish foundations in our key international markets and remain confident of the medium to long term prospects for these businesses. A further 5 sites were opened by our partners in markets where we operate as a franchise. Interest expense in the period principally comprises interest on the Senior Secured and Senior Notes of £47.5m (including premium amortisation), interest on the shareholder loan of £33.3m and amortisation of financing fees incurred on acquisition of £2.6m. Adjusted Net Debt* was £644.5m at the end of the period, with cash of £39.9m and Senior Secured Notes and Senior Notes of £684.4m (including accrued interest of £19.4m). Adjusted Net Debt : Adjusted EBITDA* stands at 6.1x, compared to 5.7x at 28 June 2015, the end of the prior financial year and 6.5x at the time of the original acquisition of the Group by Hony Capital in August 2014. Acquisitions and disposals On 22 February 2016 the Group completed the acquisition of all of the issued share capital of Firezza Holdings Ltd and its subsidiary, Firezza Ltd (“Firezza”) a leading pizza delivery business with 17 sites across London. The acquisition represents an important step in our strategy for the growing home delivery market. Also, on 8 February 2016, we completed the disposal of Kettner’s, our Soho based restaurant business.

*Pro forma as defined on page 13. **Non statutory reporting measures are defined on page 12.


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Condensed consolidated statement of comprehensive income For the 52 weeks ended 26 June 2016

Unaudited

52 weeks ended 26 June 2016

Unaudited 45 weeks ended

28 June 2015

UK and Ireland

International Total UK and Ireland

International Total

Note £000 £000 £000 £000 £000 £000

Turnover 3 430,823 57,154 487,977 364,338 6,661 370,999

Cost of sales (302,598) (44,638) (347,236) (252,899) (3,250) (256,149)

Gross profit 128,225 12,516 140,741 111,439 3,411 114,850

Operating expenses (30,787) (9,648) (40,435) (25,795) (2,387) (28,182)

EBITDA 97,438 2,868 100,306 85,644 1,024 86,668

Share based payment charge (256) - (256) (140) - (140)

Exceptional costs 4 (3,337) - (3,337) (10,578) - (10,578)

Profit on disposal of business 5 1,156 - 1,156 - - -

Depreciation and amortisation (19,310) (5,207) (24,517) (16,106) (349) (16,455)

Operating profit/(loss) 75,691 (2,339) 73,352 58,820 675 59,495

Loss on disposal of fixed assets (1,400) (12) (1,412) (484) - (484)

EBIT 74,291 (2,351) 71,940 58,336 675 59,011

Net interest payable and similar charges

6 (84,645) (69,551)

Loss on ordinary activities before taxation

(12,705) (10,540)

Tax on loss on ordinary activities 8 6,620 (6,027)

Loss for the financial period (6,085) (16,567)

Other comprehensive loss:

Currency translation differences 4,207 (1,467)

Total comprehensive loss (1,878) (18,034)


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Condensed consolidated statement of financial position As at 26 June 2016

Note

Unaudited

26 June 2016 28 June 2015

£000 £000

Non-current assets

Intangible assets 9 901,051 894,042

Property, plant and equipment 10 223,940 209,428

Investments 32 -

1,125,023 1,103,470

Current assets

Inventories

7,822 8,341

Trade and other receivables 11 32,335 29,799

Corporation tax - 529

Cash and cash equivalents

39,855 49,273

80,012 87,942

Current liabilities

Trade and other payables 12 (97,687) (105,311)

Corporation tax (533) -

(98,220) (105,311)

Net current liabilities (18,208) (17,369)

Total assets less current liabilities

1,106,815 1,086,101

Non-current liabilities

Borrowings 14 (1,016,555) (981,051)

Trade and other payables 13 - (1,037)

Provisions for liabilities and charges 15 (1,450) (2,003)

Deferred tax liability 16 (103,826) (115,404)

(1,121,831) (1,099,495)

Net liabilities (15,016) (13,394)

Equity

Share capital 17 50 50

Share premium 4,450 4,450

Retained earnings (19,516) (17,894)

Total equity (15,016) (13,394)


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Condensed consolidated statement of changes in equity For the 52 weeks ended 26 June 2016

Share capital Share premium Retained earnings Total

£000 £000 £000 £000

At 29 June 2015 50 4,450 (17,894) (13,394)

Loss for the financial period - - (6,085) (6,085)

Share based payment charge - - 256 256

Currency translation differences - - 4,207 4,207

At 26 June 2016 (unaudited) 50 4,450 (19,516) (15,016)

Share capital Share premium Retained earnings Total

£000 £000 £000 £000

At 4 July 2014 - - - -

New share capital subscribed 50 4,450 - 4,500

Loss for the financial period - - (16,567) (16,567)

Share based payment charge - - 140 140

Currency translation differences - - (1,467) (1,467)

At 28 June 2015 50 4,450 (17,894) (13,394)


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Condensed consolidated cash flow statement For the 52 weeks ended 26 June 2016

Note

Unaudited Unaudited

52 weeks ended 26

June 2016

45 weeks ended 28

June 2015

£000 £000

Cash flows from operating activities

Cash generated from operations 18 94,668 79,646

Taxation paid (4,163) (4,344)

Interest paid (48,353) (22,477)

Net cash inflow from operating activities

42,152 52,825

Cash flows from investing activities

Purchase of property, plant and equipment (38,761) (27,593)

Cost of disposal of property, plant and equipment (172) -

Purchase of intangible assets (267) (397)

Purchase of subsidiary undertakings, net of cash acquired

(16,357) (629,288)

Disposal of business 2,471 -

Interest received 168 86

Repayment of existing loan borrowings - (304,054)

Purchase of unlisted shares (32) -

Net cash outflow from investing activities (52,950) (961,246)

Cash flows from financing activities

Proceeds from the issue of share capital - 4,500

Facility arrangement fee - (625)

Shareholder loan issued - 307,617

Loan notes issued - 669,143

Debt issue costs (490) (22,626)

Net cash (outflow)/inflow from financing activities (490) 958,009

Net (decrease)/increase in cash and cash

equivalents (11,288) 49,588

Cash and cash equivalents at the beginning of the period

49,273 -

Exchange gain/(loss) on cash and cash equivalents 1,870 (315)

Cash and cash equivalents at the end of the period

39,855 49,273


Notes to the interim financial report

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1 Accounting policies

This financial information is the unaudited condensed consolidated interim financial information (hereafter the 'Interim Financial Information’) of PizzaExpress Financing 1 plc (the “Company”) and its subsidiaries (collectively, the “Group”) for the 52 week period ended 26 June 2016 as required by the Offering Memorandum for the Senior Secured and Senior Notes dated 24 July 2014.

Basis of preparation This Interim Financial Information contains condensed financial information for the 52 weeks ended 26 June 2016, and should be read in conjunction with the Annual Report and Consolidated Financial Statements for the period ended 28 June 2015 for the Group (the “Annual Report 2015”), which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union. This Interim Financial Information has been prepared applying consistent accounting policies to those applied by the Group in the Annual Report 2015 with the condensed consolidated statement of comprehensive income presented in a non-statutory format. . l This Interim Financial Information does not constitute statutory accounts for the Group within the meaning of sections 434(3) and 435(3) of the Companies Act 2006. The Annual Report 2015 has been delivered to the Registrar of Companies. The report of the independent auditors was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

Basis of consolidation The consolidated financial statements of the Group incorporate the financial statements of the Company and those entities controlled by the Company. The accounting reference date for the Group is currently 30 June and the financial statements are prepared to the Sunday falling nearest this date each year. The Group is in the process of changing its accounting reference date to 31 December.

Going concern The Directors note that whilst the Group is in a net current liabilities position at the end of the period, the first repayments of the Group’s borrowings are not due until August 2021. In making their assessment of going concern, the Directors have also considered the availability of additional financing and note that there is a undrawn Revolving Credit Facility of £20 million available to the Group. On the basis of these combined factors, the Directors believe it is appropriate to prepare the Interim Financial Information on a going concern basis. The principal accounting policies used in the preparation of the Interim Financial Information are as follows:

Critical accounting estimates and areas of judgment

The preparation of the Interim Financial Information requires management to make estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related disclosures. The estimates and underlying assumptions are based on historical experience and other relevant factors. This approach forms the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information. Such changes are recognised in the period in which the estimate is revised.

The key assumptions about the future and key sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying value of assets and liabilities within the next 12 months, are described below.

Onerous lease and dilapidation provisions Provisions for onerous leases and dilapidations include estimates such as the length of time a property may be empty for and the value of any make good costs at the end of a lease. Provisions are discounted to present value which requires the use of a discount rate. Provisions are reviewed regularly and adjusted as appropriate. Useful lives of property, plant and equipment Depreciation is provided in order to write down to estimated residual values the cost of each asset over its estimated useful economic life. These useful economic lives require the use of management judgement. These estimates are regularly reviewed.



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Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Acquisition related costs are expensed as incurred. Intra-Group transactions, balances, and unrealised gains and losses on transactions between Group companies are eliminated on consolidation. With the exception of the subsidiaries incorporated in China, Hong Kong and UAE, all subsidiaries have coterminous accounting reference dates of 30 June, The accounting reference date for these subsidiaries is in process of being changed to 31 December to bring all subsidiaries in line with the proposed change of the Group’s accounting reference date to 31 December. Where subsidiaries do not currently have a coterminous period end, financial information is prepared by the subsidiaries for a period equal to that of rest of the Group.

Business combinations All acquisitions are accounted for using the acquisition method of accounting. The cost of an acquisition is the aggregate of the fair values of the assets transferred, liabilities incurred or assumed and equity instruments in issue at the date of acquisition. Costs directly relating to an acquisition are expensed to the income statement. The identified assets and liabilities and contingent liabilities are measured at their fair value at the date of acquisition. The excess of the fair value of consideration to acquire the business over the aggregate fair value of the Group's share of the net identified assets and liabilities is recorded as goodwill.

Turnover Turnover represents net invoiced sales of food and beverages, royalties from retail sales, sales of dough products and franchise fees, all excluding value added tax. Turnover of restaurant services is recognised when the services have been delivered. Royalties from retail sales are recognised in turnover on product delivery or when due under the terms of the relevant retail sales agreements. Turnover from the sale of dough products is recognised on despatch, as this is when the risks and rewards of ownership transfer to the third party. Franchise fees arising outside the United Kingdom are recognised when they fall due under the terms of the relevant franchise agreements.

Allocation of costs Cost of sales includes the cost of goods sold, direct labour costs and restaurant overheads. Administrative expenses include central and area management, administration and head office costs.

Holiday pay accrual A liability is recognised to the extent of any unused holiday pay entitlement which is accrued at the statement of financial position date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday entitlement so accrued at the statement of financial position date.

Property, plant and equipment Property, plant and equipment assets are stated at original historical purchase cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided at the following annual rates in order to write down the cost of each asset over its estimated usefu l economic life on a straight line basis: Equipment 20% per annum Fixtures and fittings 10% per annum Short leasehold improvements are depreciated over the length of the lease except where the anticipated renewal or extension of the lease is sufficiently certain so that a longer estimated useful life is appropriate. Current legislation and the terms of the lease contracts are such that the majority leases are readily extendable. The maximum depreciation period for short term leasehold properties is 30 years. Assets under construction includes property, plant and equipment acquired for restaurants under construction including costs directly attributable to bringing the asset into use. Assets are transferred to short leasehold, equipment or fixtures and fittings when the restaurant opens. No depreciation is provided on assets under construction as these assets have not been brought into working condition for intended use by the Group.



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Intangible assets (excluding goodwill and brand) Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation is provided at the following annual rates in order to write down to estimated residual values the cost of each asset over its estimated useful economic life on a straight line basis: Computer software and trademarks 6.66% - 20% per annum

Goodwill Goodwill arising on consolidation represents the excess of consideration transferred over the interest in the net fair value of the net assets acquired. The carrying value of the goodwill allocated to each cash generating unit is compared to its recoverable amount being the higher of its value in use and its fair value less costs to sell. An impairment review is carried out annually or when circumstances arise that may indicate an impairment is likely. Any impairment is charged immediately to the income statement.

Brand The Group carries assets on the balance sheet for brands that have been acquired. Internally generated brands are not recognised. Cost is determined at acquisition as being directly attributable cost or, where relevant, by using an appropriate valuation method. Acquired brands with an indefinite useful economic life are tested for impairment annually. The acquired brand shown in these financial statements is considered to have an indefinite useful economic life due to the history, profit and market position of the trade name.

Operating leases Rentals paid under operating leases are charged to the income statement on a straight line basis over the term of the lease. The benefits of lease incentives are taken to the income statement on a straight line basis over the lease term. Contributions received from landlords as an incentive to enter into a lease are treated as deferred income within creditors and are taken to the income statement on a straight line basis over the lease term. Rentals received under operating leases are credited to the income statement on a straight line basis over the term of the lease.

Exceptional items Exceptional items are material items of income and expense that, because of the unusual nature and expected infrequency of the events giving rise to them, merit separate presentation to allow an understanding of the Group’s financial performance.

Pensions Contributions to defined contribution personal pension schemes are charged to the income statement in the period in which they become payable.



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Taxation Current taxation For the purposes of the Interim Financial Information, the current taxation charge is calculated using the estimated effective rate of taxation calculated using the expected full year result. Deferred taxation Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transact ion which affects neither the taxable profit nor the accounting profit. Deferred tax is calculated at the substantively enacted tax rates at the balance sheet date that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited to the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is dealt with in equity, or items charged or credited directly to other comprehensive income, in which case the deferred tax is also recognised in other comprehensive income. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets and liability and when the Group intends to settle its current tax assets and liabilities on a net basis.

Inventory Inventories are valued at the lower of cost and net realisable value. Cost is based on the purchase cost on a first-in, first-out basis. Inventories comprises food and drink and items that are utilised in the rendering of services to customers.

Rebates receivable from suppliers Where a rebate agreement with a supplier covers more than one period the rebates are recognised in the financial statements in the period in which they are earned.

Foreign currency transactions Transactions denominated in foreign currencies are recorded at the spot rate applicable at the date of the transaction. Monetary assets and liabilities expressed in foreign currencies held at the balance sheet date are translated at the closing rate. The resulting exchange gain or loss is dealt with in the income statement. The results of foreign subsidiaries are translated at the average rate. The balance sheets of foreign subsidiaries are translated at the closing rate. The resulting exchange differences are dealt with through reserves and are reported in the consolidated statement of changes in equity.

Financial instruments Financial assets and financial liabilities are recognised when the Group has become a party to the contractual provisions of the instrument. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less any provision for impairment. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flows discounted using the original effective interest rate. The carrying value of the receivable is reduced and any impairment loss is recognised in the income statement. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and other short term deposits held by the Group with maturities of less than three months. Bank overdrafts are presented within current liabilities. Borrowings Borrowings are initially stated at the fair value of consideration received after deduction of issue costs and including any premium received on issue. The issue costs and interest payable on borrowings are charged to the income statement over the term of the borrowings using the effective rate of interest, or over a shorter period where it is more likely than not that the lender will require earlier repayment or where the borrower intends or is required to redeem early. Facility fees on revolving credit facilities are included within prepayments and amortised over the term of the facility. Trade payables Trade payables are not interest bearing and are recognised initially at fair value and subsequently measured at amortised cost.



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Derivative financial instruments Where the Group enters into contracts meeting the definition of derivative financial instruments, these are measured at fair value through profit or loss. The fair value of such instruments is calculated using observable market inputs.

Provisions Provisions are recognised when the Group has a present legal obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated. Where the effect of the time value of money is material, the provision is based on the present value of future outflows, discounted at the pre-tax discount rate that reflects the risks specific to the liability. Provisions for onerous leases are recognised when there are foreseeable net cash outflows on a lease which has more than one year before expiring or option to exercise a break.

Share-based payments The Group operates shares scheme under which shares and share options are granted to certain employees. The schemes meet the definition of equity-settled and cash-settled share-based payment schemes. The costs of equity-settled transactions are measured at fair value at the date of grant. The costs of cash-settled transactions are measured at fair value at the date of grant and then revalued at each reporting date. The costs are expensed on a straight line basis over the vesting period and are adjusted to reflect the actual number of share that are expected to vest.

Employee benefit trust The Group operates an employee benefit trust (EBT) in conjunction with the share schemes in place. As the Group is considered to have control over the EBT it is consolidated as a subsidiary and the shares held by the trust are shown as an investment, as they relate to an entity outside the Group which is consolidated in this Interim Financial Information.

Pre-opening costs Pre-opening costs, which comprise site operating costs, are held on the balance sheet as prepayments and released to the income statement when the restaurant the costs relate to is opened.

Non-statutory reporting measures

LFL sales Like-for-like (“LFL”) sales growth is defined as sales from wholly owned restaurants that have traded for a full financial year at the start of each financial year. LFL sites that are closed or disposed during a financial year are excluded from the LFL calculation. Growth is measured by reference to the sales generated from LFL restaurants in the same period in the prior financial year.

EBITDA EBITDA is a non-statutory measure and is calculated as the result for the period excluding taxation, interest, depreciation and amortisation and before deducting share based payment charges, exceptional costs, profit/loss on disposal of fixed assets and profit/loss on disposal of businesses Adjusted EBITDA Adjusted EBITDA is the EBITDA for the preceding 52 week period inclusive of an adjustment for expected run rate trading for all restaurants open less than 18 months as management believe the first 6 months of a restaurant’s trading are not representative of run rate trading.

EBIT EBIT is a non-statutory measure and is calculated as the result for the period excluding taxation and interest. Adjusted net debt Adjusted net debt is defined as being the outstanding liability in relation to the Senior Secured and Senior Loan Notes (excluding any capitalised debt issue costs) plus the accrued interest on these Loan Notes and the cash balance at the balance sheet date.



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2 Pro forma financial information of the Group

PizzaExpress Financing 1 plc acquired the “New PizzaExpress Group” (being PizzaExpress Franchises Limited, Gondola Investments Limited (now PizzaExpress Operations Limited) and its subsidiaries and PizzaExpress Greater China Limited) on 18 August 2014 and as a result the comparative financial information shown in the primary income statement is for the 45 week period from 18 August 2014 to 28 June 2015. To facilitate prior period comparison, this note is voluntarily disclosed to provide the pro-forma condensed consolidated statement of comprehensive income with prior period comparatives of the “Old PizzaExpress Group” for the period from 30 June 2014 to 28 June 2015. The Old PizzaExpress Group is considered to comprise PizzaExpress Franchises Limited, Gondola Investments Limited (now PizzaExpress Operations Limited) and its subsidiaries and PizzaExpress Greater China Limited. The comparative pro forma financial information therefore represents 7 weeks trading of the Old PizzaExpress Group (up to and including 17 August 2014) followed by 45 weeks trading of the New PizzaExpress Group (up to and including 28 June 2015). Prior period information represents the results and the position of the Old PizzaExpress Group at the relevant date prepared under consistent accounting policies as set out in note 1. The pro forma financial information for the 52 weeks ended 26 June 2016 includes the trading of the acquired Firezza business (see note 21) from 22 February 2016, the date of acquisition.

Pro forma condensed consolidated statement of comprehensive income for the 52 weeks ended 26 June 2016

Unaudited Unaudited

52 weeks ended 26 June 2016 52 weeks ended 28 June 2015

UK and

Ireland International Total

UK and

Ireland International Total

£000 £000 £000 £000 £000 £000

Turnover 430,823 57,154 487,977 420,564 7,182 427,746

Cost of sales (302,598) (44,638) (347,236) (291,821) (3,404) (295,225)

Gross profit 128,225 12,516 140,741 128,743 3,778 132,521

Operating expenses (30,787) (9,648) (40,435) (29,709) (2,656) (32,365)

EBITDA 97,438 2,868 100,306 99,034 1,122 100,156

Share based payment charge (256) - (256) (140) - (140)

Exceptional costs (3,337) - (3,337) (10,715) - (10,715)

Profit on disposal of business 1,156 - 1,156 - - -

Depreciation and amortisation (19,310) (5,207) (24,517) (18,495) (349) (18,844)

Operating profit/(loss) 75,691 (2,339) 73,352 69,684 773 70,457

Loss on disposal of fixed assets (1,400) (12) (1,412) (376) - (376)

EBIT 74,291 (2,351) 71,940 67,571 773 70,081

Net interest payable and similar charges

(84,645)

(71,200)

Loss on ordinary activities before taxation

(12,705) (1,119)

Tax on loss on ordinary activities 6,620 (6,858)

Loss for the financial period (6,085) (7,977)



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3 Turnover

Business sector analysis The split of turnover by sector during the period is as follows: 52 weeks

ended 26 June 2016

45 weeks ended 28

June 2015 £000 £000 Restaurant income 472,828 356,415

Wholesale income 4,090 3,428

Overseas franchise income 1,036 2,524

Merchandising income 10,023 8,632

487,977 370,999

Geographical sector analysis The split of turnover by geography during the period is as follows:

52 weeks ended 26 June

2016

45 weeks ended 28

June 2015 £000 £000 UK and Ireland 430,823 364,338

International 57,154 6,661

487,977 370,999

4 Exceptional items Exceptional items relate to one-off costs that, in line with the Group’s accounting policy, are items of an unusual nature which are not expected to reoccur. The exceptional items in the comparative period relate to the acquisition of the PizzaExpress Group and include legal and professional fees incurred as part of the purchase process, such as stamp duty, fees for due diligence and drafting and review of legal documents. The exceptional items incurred in the 52 weeks ended 26 June 2016 comprise mainly costs in relation to acquisitions that completed in the current and prior financial year (£2,137,000) in addition to a non-cash inventory write down (£1,200,000).

5 Profit on disposal of business On 8 February 2015, the Group completed the disposal of the restaurant operating as Kettner’s, situated on Romilly Street in Soho, London. The profit on disposal represents the proceeds received on the sale, less the book value of assets disposed and costs directly attributable to the sale.



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6 Net interest payable and similar charges

52 weeks

ended 26 June 2016

45 weeks ended 28

June 2015 £000 £000 Interest on loan notes (including premium amortisation) 47,491 40,571

Interest on shareholder loan 33,320 26,536

Amortisation of debt finance costs 2,634 2,100

Other finance costs 1,369 430

Bank interest receivable (169) (86)

84,645 69,551

7 Quarterly key performance indicators Summarised below are the main key performance indicators that management use to analyse the performance of the Group.

2015/16 2015/16 2015/16 2015/16 2015/16

Q1 Q2 Q3 Q4 Total

£000 £000 £000 £000 £000

Turnover 114,596 152,555 109,458 111,368 487,977

UK and Ireland LFL sales % 2.3% -1.5% -2.8% -4.0% -1.4%

Net rent payable 11,971 15,342 12,235 12,177 51,724

EBITDA 24,461 31,897 20,334 23,614 100,306

EBITDA % 21.3% 20.9% 18.6% 21.2% 20.6%

UK and Ireland EBITDA % 23.4% 23.1% 20.5% 23.2% 22.6%

Adjusted EBITDA 113,609 109,762 108,007 106,271 n/a

Adjusted net debt (619,168) (625,261) (634,971) (644,497) n/a

Adjusted net debt : adjusted EBITDA

5.5 5.7 5.9 6.1 n/a

2014/15 2014/15 2014/15 2014/15 2014/15

Q1 Q2 Q3 Q4 Total

Pro forma

£000 £000 £000 £000 £000

Turnover 97,060 133,536 96,392 100,758 427,746

UK and Ireland LFL sales % 6.7% 6.8% 5.4% 2.8% 5.6%

Net rent payable 8,499 12,279 7,444 8,536 36,750

EBITDA 22,493 32,247 21,973 23,444 100,156

EBITDA % 23.2% 24.1% 22.8% 23.3% 23.4%

UK and Ireland EBITDA % 23.1% 24.0% 22.7% 24.1% 23.5%

Adjusted EBITDA 95,642 100,264 103,601 111,620 n/a

Adjusted net debt (589,128) (582,432) (586,737) (635,251) n/a

Adjusted net debt : adjusted EBITDA

6.2 5.8 5.7 5.7 n/a



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8 Tax on loss on ordinary activities

Corporation tax expense is recognised using management’s estimate of the Group’s expected tax charge for the full financial period. The tax expense includes both current and deferred tax. The tax charge in the Interim Financial Information is calculated using management’s estimate of the Group’s effective tax rate for the full financial period of 52.1%. Details of the deferred tax balance at the period end are included within note 16.

9 Intangible assets

Trademarks

£000

Computer software

£000

Brand £000

Goodwill £000

Total £000

Cost

At 29 June 2015 199 1,687 515,000 377,697 894,583

Additions 203 64 - - 267

Acquisition of Firezza - 28 - 4,203 4,231

Adjustment to fair values on acquisition - - - 750 750

Adjustment to consideration - - - (74) (74)

Disposals (6) (42) - - (48)

Transfers - 1,578 - - 1,578

Foreign exchange movement - (4) - 807 803

At 26 June 2016 396 3,311 515,000 383,381 902,065

Accumulated amortisation

At 29 June 2015 - (541) - - (541)

Charge for the period (8) (533) - - (541)

Eliminated on disposals - 48 - - 48

Foreign exchange movement - (3) - - (3)

At 26 June 2016 (8) (1,029) - - (1,037)

Net book value

At 26 June 2016 388 2,282 515,000 383,381 901,051

At 28 June 2015 199 1,146 515,000 377,697 894,042

Goodwill The goodwill recognised relates to the acquisition of the ordinary share capital of PizzaExpress Operations Limited (formerly Gondola Investments Limited), PizzaExpress (Franchises) Limited and PizzaExpress Greater China Limited, PizzaExpress (Hong Kong) Limited, Jordana Restaurants LLC and Firezza Holdings Limited which are each considered to be cash generating units (“CGU”). The goodwill balance is tested annually for impairment.

Brand The brand recognised as an intangible asset relates to the PizzaExpress brand. The brand was valued using the discounted five year cash flow forecast and after the five years the cash flows were taken into perpetuity. The brand is considered to have an indefinite life due to the history, profit and market position of the trade name.



17

10 Property, plant and equipment

Assets under

construction

Short

leasehold

Fixtures and

fittings Equipment Total

£000 £000 £000 £000 £000

Cost

At 29 June 2015 2,594 165,856 39,568 14,658 222,676

Acquisition of Firezza - 914 - 447 1,361

Foreign exchange movement 6 3,179 872 1,019 5,075

Additions 25,747 4,769 4,625 3,646 38,787

Disposals - (7,393) (1,746) (2,170) (11,309)

Transfers (23,398) 11,468 9,314 1,038 (1,578)

At 26 June 2016 4,949 178,793 52,633 18,637 255,012

Accumulated depreciation

At 29 June 2015 - (6,738) (3,979) (2,531) (13,248)

Charge for the period - (12,571) (6,470) (4,935) (23,976)

Foreign exchange movement - (1,488) (457) (658) (2,603)

Eliminated on disposals - 5,589 1,083 2,083 8,755

At 26 June 2016 - (15,208) (9,823) (6,041) (31,072)

Net book value

At 26 June 2016 4,949 163,585 42,810 12,596 223,940

At 28 June 2015 2,594 159,118 35,589 12,127 209,428

For the purposes of tangible asset impairment reviews, the Group considers each trading outlet to be a cash generating unit (CGU) and each CGU is reviewed annually for indicators of impairment of tangible assets. In assessing whether an asset has been impaired, the carrying value of the CGU is compared to its recoverable amount. The recoverable amount is the higher of its fair value and its value in use. The Group estimates value in use using a discounted cash flow model. Future cash flows are based on assumptions from the business plans and cover a five year period. A breakdown of the capital expenditure for the period to date is shown below.


Pre-acquisition 7 weeks ended 17 August 2014

Post-acquisition 45 weeks ended 28 June

2015 52 weeks ended

28 June 2015

£000 £000 £000 £000

New restaurants 21,904

2,230 13,955

16,185

Other capital expenditure 16,883

2,288 14,930

17,218

38,787

4,518 28,885 33,403



18

11 Trade and other receivables

26 June 2016 £000

28 June 2015 £000

Trade receivables

5,476 5,688

Other receivables

7,446 5,423

Prepayments and accrued income

19,413 18,688

32,335 29,799

12 Trade and other payables: amounts falling due within one year

26 June 2016 £000

28 June 2015 £000

Trade payables 16,308 14,832

Accruals and deferred income 55,849 63,887

Other payables 10,730 10,662

Social security and other taxes 14,800 15,930

97,687 105,311

13 Trade and other payables: amounts falling due after one year

26 June 2016 £000

28 June 2015 £000

Accruals - 1,037

- 1,037

Accruals falling due after one year at 28 June 2015 related to deferred consideration for the acquisition of PizzaExpress (Hong Kong) Limited and subsidiaries.



19

14 Borrowings

26 June 2016 £000

28 June 2015 £000

Loan from parent 367,473 334,153

Senior Notes and Senior Secured Notes – secured

649,082 646,898

1,016,555 981,051

Loan from Parent The loan from parent of £307,617,000 accrues interest at a compound fixed rate of 10% per annum and is due for repayment at the maturity date in August 2024. Interest of £33,320,000 was accrued against the loan during the period. The loan includes a total of £26,536,000 accrued during the financial period ended 28 June 2015. Interest shall accrue and be aggregated with the principal balance until such time that the loan is repaid. The loan from the parent company and related accrued interest are not considered to form part of adjusted net debt for non-statutory reporting purposes as it has a maturity beyond all other senior debt, is subordinated in terms of all payments to a ll existing and future senior and senior subordinated debt and contains no covenants, defaults or cross default clauses.

Senior Notes and Senior Secured Notes The Senior Notes of £200,000,000 carry interest at a fixed rate of 8.625% and are due for repayment at the maturity date in August 2022. Interest is paid in arrears every 6 months. The Senior Secured Notes of £465,000,000 carry interest at a fixed rate of 6.625% and are due for repayment at the maturity date in August 2021. Interest is paid in arrears every 6 months. Interest of £47,890,000 (45 weeks ended 28 June 2015: £40,571,000) has been recognised during the period on Senior Notes and Senior Secured Notes and £19,352,000 was included in short-term creditors at 26 June 2016 (28 June 2015: £19,524,000). Debt issue costs of £23,115,000 have been offset against the liability (28 June 2015: £23,065,000) all of which were fully paid as at 26 June 2016 (28 June 2015: £439,000 accrued). These costs have been capitalised and offset against the Senior Notes and Senior Secured Notes principal balance on a proportional basis. The issue costs are being amortised over the term to maturity and at 26 June 2016, unamortised issue costs amounted to £18,382,000 (28 June 2015: £20,965,000). A premium of £2,888,000 was received on the Senior Secured Notes of £55,000,000 issued in June 2015. This premium has been capitalised and included within the Senior Secured Notes principal balance. The premium is being amortised over the term to maturity and at 26 June 2016, the unamortised premium amounted to £2,464,000 (28 June 2015: £2,863,000). The capitalised debt issue costs and debt premium are not considered to form part of adjusted net debt for non-statutory reporting purposes as they impact the book value of the Loan Note liability as required under IFRS but do not impact the outstanding liability to the Loan Note holders. The Senior Secured Notes are secured by a security accession deed and asset list comprising of the share capital and asset base of 12 PizzaExpress Group companies.



20

15 Provision for liabilities

£000

At 29 June 2015 2,003

Amounts utilised (671)

Release of discount 118

At 26 June 2016 1,450

Provisions for liabilities relate to onerous lease and dilapidation provisions. These provisions represent operating leases on properties no longer in use, until the end of their leases or until the Directors estimate the properties can be sublet, as well as an estimate of dilapidations payable on leases held by the Group. This provision is expected to be utilised within the next five years.

16 Deferred tax liability

£000

At 29 June 2015 115,404

Impact of change in tax rates (11,620)

Foreign exchange movement 42

At 26 June 2016 103,826

The deferred tax liability can be analysed as follows:

26 June 2016 £000

28 June 2015 £000

Capital allowances in excess of depreciation 12,206 13,484

Carried forward tax losses (1,080) (1,080)

Fair value of brand on consolidation

92,700 103,000

103,826 115,404

On 26 October 2015, changes to the UK main rate of corporation tax to 19% from 1 April 2017 and to 18% from 1 April 2020 were substantively enacted. Accordingly, the deferred tax balances have been revalued to the substantively enacted rate applicable in the period in which the timing difference is expected to reverse. Further changes to the UK corporation tax rates were announced in the Chancellor's Budget on 16 March 2016. These include a reduction in the main rate of corporation tax to 17% from 1 April 2020. As this change had not been substantively enacted at the balance sheet date, its effect is not included in these financial statements. The overall effect of this change, if it had applied to the deferred tax balance at the balance sheet date, would be to reduce the deferred tax liability by an additional £5,910,000.



21

17 Share capital

26 June 2016 £000

28 June 2015 £000

Allotted and issued:

50,100 Ordinary Shares of £1 each

50 50

50 50

18 Reconciliation of loss for the period to operating cash flows



£000 £000

Loss for the period (6,085) (16,567)

Adjustments for:

Share based payment charge 256 140

Depreciation and amortisation 24,517 16,455

Taxation (credit) / charge (6,620) 6,027

Net finance expense 84,645 69,551

Disposal of business (1,156) -

Loss on the sale of assets 1,412 321

Decrease / (increase) in inventory 732 (407)

Increase in receivables (1,442) (3,329)

(Increase) / decrease in payables (920) 7,608

Decrease in provisions (671) (153)

Cash generated from operations 94,668 79,646

19 Analysis of adjusted net debt

At 26 June 2016

£000 At 28 June 2015

£000

Cash and cash equivalents 39,855 49,273

Senior Secured and Senior Notes (649,082) (646,898)

Loan from parent (367,473) (334,153)

Total statutory net debt (976,700) (931,778)

Exclude loan from parent 367,473 334,153

Exclude unamortised capitalised debt issue costs (18,382) (20,965)

Exclude unamortised debt premium 2,464 2,863

Include accrued interest on Senior Secured and Senior Notes (19,352) (19,524)

Total adjusted net debt (644,497) (635,251)



22

20 Estate summary

UK and Ireland International Total

Open as at 29 June 2015 449 79 528

Opened during period 18 17 35

Acquired during period 17 - 17

Closed during period (6) (4) (10)

Open as at 26 June 2016 478 92 570

21 Acquisition of Firezza

On 22 February 2016, the Group completed the acquisition of Firezza Holdings Limited and its subsidiary Firezza Limited. The Purchase Price Allocation, including the assessment of the fair values of assets acquired, is currently ongoing. The goodwill value disclosed in the Interim Financial Information is therefore provisional and represents the current estimate of consideration of £4,761,000 less unadjusted net assets at acquisition of £558,000.

22 Post balance sheet events

There are no post balance sheet events to disclose.

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