ACCOUNTING POLICIES

GENERAL INFORMATION 

The Fulham Shore PLC is a public company limited by shares incorporated and domiciled in England and Wales with registration number 07973930 and registered office at 1^st Floor, 50-51 Berwick Street, London, W1F 8SJ, United Kingdom. The Company's ordinary shares are traded on the AIM Market.

BASIS OF PREPARATION 

The above audited financial information does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The above figures for the period ended 28 March 2021 have been extracted from the Group's financial statements which have been reported on by the Group's auditors and received an audit opinion which was unqualified. The Group's statutory financial statements for the year ended 29 March 2020 have been lodged with the Registrar of Companies. These financial statements received an audit report which was unqualified and did not include any reference to matters to which the auditors drew attention by way of emphasis without qualifying their report or a statement under section 498(2) or section 498(3) of the Companies Act 2006. The financial statements for the year ended 28 March 2021 will be dispatched to the shareholders and filed with the Registrar of Companies. The preliminary announcement was approved by the Board and authorised for issue on 16 August 2021.

The accounting year for the Group runs to a Sunday within seven days of 31 March each year which will be a 52 or 53 week period. The year ended 29 March 2020 was a 52 week period, with the comparative year to 31 March 2019 being a 53 week period.

The Company accounts have been prepared for the same periods as the Group.

The financial statements have been prepared under the historical cost convention and, in accordance with international accounting standards in conformity with the requirements of Companies Act 2006.

The financial statements for the year ended 28 March 2021 are presented in Sterling which is also the functional currency of the Group. The functional currency is the currency of the primary economic environment in which the Group operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.

The parent company has not presented its own income statement, statement of total comprehensive income and related notes as permitted by section 408 of the Companies Act 2006.

NEW STANDARDS

The following new accounting standards are effective for the year ended 28 March 2021 and have been adopted in these financial statements:

Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark Reform Phase 1 (became effective for accounting periods commencing on or after 1 January 2020)

These amendments provide relief from certain hedge accounting requirements in order to avoid unnecessary discontinuation of existing hedge relationships during the period before replacement of an existing interest rate benchmark with an alternative interest rate. These amendments have had no impact on the financial statements.

Amendments to IFRS 3 - Definition of a business (became effective for accounting periods commencing on or after 1 January 2020)

These amendments clarified the definition of a business to help determine whether a transaction should be accounted for as a business combination or an asset acquisition and permits, in certain circumstances, a simplified assessment that an acquired set of activities and assets is not a business.   These amendments have had no impact on the financial statements.

Amendments to IAS 1 and IAS 8 - Definition of material (became effective for accounting periods commencing on or after 1 January 2020)

The changes clarifies the definition of material and aligns the definitions used across IFRSs and other IASB publications.  These amendments have had a minimal impact on the financial statements.

Amendments to IFRS 16 - Covid-19-related rent concessions (became effective for annual periods beginning on or after 1 June 2020 but has been adopted early in these accounts)

These amendments provides an option to apply a simplified accounting treatment for lessees not to treat eligible rent concessions that are a direct consequence of the COVID-19 as lease modifications.  The amendment has had no impact on retained earnings in the financial statement for the year.

NEW STANDARDS THAT ARE NOT YET EFFECTIVE

At the date of authorisation of these financial statements, the following amendments in Standards relevant to the Group operations that have not been applied in these financial statements were in issue but not yet effective:

IFRS 9 (Amendment)     Interest rate benchmark reform phase 2

IAS 39 (Amendment)      Interest rate benchmark reform phase 2

IFRS 7 (Amendment)     Interest rate benchmark reform phase 2

IFRS 4 (Amendment)     Interest rate benchmark reform phase 2

IFRS 16 (Amendment)    Interest rate benchmark reform phase 2

IFRS 3 (Amendment)     Reference to the conceptual framework

IAS 16 (Amendment)      Proceeds before intended use

IAS 37 (Amendment)      Cost of fulfilling a contract

IAS 1 (Amendment)       Classification of liabilities as current or non-current

The Directors anticipate that the adoption of these amendments in Standards as appropriate in future years will have no material impact on the financial statements of the Group.

GOING CONCERN

The consolidated financial statements have been prepared on a going concern basis. The Board has reviewed the risk analysis set out in the Financial Review, the Group's net current liabilities position as at 28 March 2021, the forecasts for the next financial year, other longer term plans, financial resources including undrawn but available short term and long term facilities described in note 14, the availability of future equity funding if required and operational cash flow where cash from revenues are received within 7 days. Although negotiations on renewal of the Revolving Credit Facility, which expires in March 2022, is ongoing, the forecasts were prepared with the assumption that such facility will not be renewed.

COVID-19 and government action from 20 March 2020 has significant impact on trading and therefore forecasts used for going concern analysis. Since 19 July 2021, trading restrictions previously in place on dine in trade have been lifted. The Directors have reviewed the rapidly evolving situation relating to  COVID-19 and have modelled a series of downside case scenarios. These downside cases represent  increasingly severe scenarios and include assumptions relating to the estimates of the impact of:

-     The closure of all restaurants to dine-in for a period of 13 weeks and then a reopening programme over 2 months;

-     The closure of all restaurants to dine-in for a period of 26 weeks and then a reopening programme over 2 months;

These downside cases, whilst considered by the Directors to be extremely prudent, as to date the Government has not fully closed restaurants to takeaway and delivery sales, have a significant  adverse impact on sales, margin and cash flow. In response, the Directors have taken immediate and significant actions, all within management's control, to reduce costs and optimise the Group's cash flow and liquidity. Amongst these are the following mitigating actions: reducing capital and investment expenditure through postponing or pausing projects and change activity; deferring or cancelling discretionary spend; freezing non-essential recruitment and reducing marketing spend; and reducing indirect costs and central costs. Even in the most severe scenario where restaurants are closed for 26 weeks, the Group has adequate liquidity to cover the losses and recommence trading as we have done following the initial lockdown. Any other scenario where the Group is only closing restaurants to dine-in and allowed to be open for takeaway and delivery service, the impact on cash flow is significantly lower.

Taking the reviews and analysis, the Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore the Board is satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements.

SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate those of The Fulham Shore PLC and all of its subsidiary undertakings for the period. Subsidiaries acquired are consolidated from the date that the Group has the power to control, exposure or rights to variable returns, and the ability to use its power over the returns and will continue to be consolidated until the date that such control ceases.

Although the legal form of the transaction during the period ended 29 June 2015 was an acquisition of Kefi Limited by The Fulham Shore PLC, the substance was the reverse of this. Accordingly the business combination was accounted for using reverse acquisition accounting.

The acquisition of other subsidiaries is accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are expensed to the Statement of Comprehensive Income. The acquiree's identifiable assets and liabilities are recognised at their fair values at the acquisition date.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.

INTANGIBLE ASSETS

Goodwill

Goodwill arising on the acquisition of an entity represents the excess of the cost of an acquisition over the Group's interest in the fair value attributed to the identifiable net assets at acquisition. Goodwill is not subject to amortisation but is tested for impairment at least annually. After initial recognition, goodwill is stated at cost less any accumulated impairment losses. Any impairment is recognised immediately in profit or loss and is not subsequently reversed. Goodwill is allocated to an associated operating segment made up of a group of cash generating units for the purpose of impairment testing. Each of these groups of cash generating units represents the Group's investment in a subsidiary which is equivalent to an operating segment of the Group. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Trademarks and licences

The fair value of the intangible assets acquired through the reverse acquisition was determined using discounted cash flow models. The key assumptions for the valuation method are those regarding future cash flows, tax rates and discount rates. The cash flow projections were based on management forecasts for the subsequent four years period. The estimated useful lives range from 4 to 20 years, amortised on a straight-line basis.

Brand

The fair value of the brand intangible assets acquired through an acquisition of a subsidiary was determined using discounted royalty relief models. The key assumptions for the valuation method are those regarding future cash flows, tax rates and discount rates. The cash flow projections were based on management forecasts for the subsequent ten year period.

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of brand from the beginning of the financial year that they are available for use. The estimated useful lives are 10 years on a straight-line basis.

Computer software

Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised on a straight line basis over their estimated useful lives, being between 3 and 5 years. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development, employee costs and directly attributable overheads. Software integral to a related item of hardware equipment is accounted for as property, plant and equipment. Costs associated with maintaining computer software programmes are recognised as an expense when they are incurred.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at historical cost less depreciation and any recognised impairment loss.  The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.

Depreciation is provided on property, plant and equipment at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life, as follows:-

Leasehold properties and improvements      over lease term or renewal term

Plant and equipment                                    20% to 33% straight line

Furniture, fixtures and fittings                       10% to 20% straight line

Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.

Residual values, useful lives and methods of depreciation are reviewed and adjusted if appropriate on an annual basis. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Right-of-use assets arising from the Group's lease arrangements are depreciated over the earlier of the useful life or their reasonably certain lease term, as determined under the Group's leases policy.

IMPAIRMENT OF ASSETS

Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is an indication that the asset may be impaired. For the purpose of impairment testing, assets which have separately identifiable cash flows, known as cash generating units, are grouped into their operating segment. If the recoverable amount of a group of cash generating units is less than the carrying amount of that group's assets, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the group of cash generating units and then to the other assets of the group pro-rata on the basis of the carrying amount of each asset in the group. Impairment losses recognised for goodwill are not reversed in a subsequent period. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

IMPAIRMENT OF ASSETS (continued)

At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit, predominantly an individual restaurant for the purposes of property, plant and equipment, to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement.

OTHER INVESTMENTS

Other investments comprising debt and equity instruments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe. Other investments are initially measured at fair value, including transaction costs and subsequently remeasured less any impairment.

Debt securities that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost using the effective interest method, less any impairment. Debt securities that do not meet the criteria for amortised cost are measured at fair value through profit and loss.

Equity securities are classified and measured at fair value through other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following derecognition of the investment.

FINANCIAL INSTRUMENTS

Financial assets and financial liabilities, in respect of financial instruments, are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument.

INVENTORIES

Inventories are valued at the lower of cost and net realisable value. Cost is determined on a first in, first out basis.  Net realisable value is based upon estimated selling price less further costs expected to be incurred to completion and disposal.  Provision is made for obsolete and slow-moving items.

TRADE AND OTHER RECEIVABLES

Trade receivables represent amounts owed by customers where the right to payment is conditional only on the passage of time and are recorded at amortised cost. Other receivables represent amounts owed by third parties and intra group balances in the parent company where the right to payment is conditional on the passage of time and the occurrence of certain event. The carrying value of all trade and other receivables recorded at amortised cost is reduced by allowances for lifetime estimated credit losses other than expected credit losses on group balances which are based on expected 12 month credit losses. Estimated future credit losses are first recorded on the initial recognition of a receivable and are based on the ageing of the receivable balances, historical experience and forward looking considerations. Individual balances are written off when management deems them not to be collectible.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash in hand and call deposits and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

TRADE AND OTHER PAYABLES

Payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.
 

SHARE CAPITAL

Share capital represents the nominal value of ordinary shares issued.

SHARE PREMIUM

Share premium represents the amounts subscribed for share capital in excess of nominal value less the related costs of share issue.

MERGER RELIEF RESERVE

In accordance with Companies Act 2006 S.612 'Merger Relief', the company issuing shares as consideration for a business combination, accounted at fair value, is obliged, once the necessary conditions are satisfied, to record the excess of the consideration received over the nominal value of the shares issued to the merger relief reserve.

REVERSE ACQUISITION RESERVE

Reverse accounting under IFRS 3 'Business Combinations' requires the difference between the equity of the legal parent and the issued equity instruments of the legal subsidiary pre-combination to be recognised as a separate component of equity.

RETAINED EARNINGS

Retained earnings represents the cumulative profit and loss net of distributions.

NON-CONTROLLING INTERESTS

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder's share of changes in equity since the date of the combination. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

FOREIGN CURRENCIES

Assets and liabilities denominated in foreign currencies are translated into sterling, the presentational and functional currency of the Group, at the rate of exchange ruling at the balance sheet date.  Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction.  All differences are taken to profit or loss.

FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities and includes no obligation to deliver cash or other financial assets. Interest bearing loans and overdrafts are initially measured at fair value (which is equal to cost at inception), and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowing. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

TAXATION

Income tax expense represents the sum of the current tax payable and deferred tax.

Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because some items of income or expense are taxable or deductible in different years or may not be taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

TAXATION (continued)

Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit or the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis.

Tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the tax is also recognised directly in equity.

LEASES

When the Group leases an asset, a right of use asset is recognised for the leased item and a lease liability is recognised for any lease payments to be paid over the lease term at the lease commencement date. The right of use asset is initially measured at cost, being the present value of the lease payments paid or payable, plus any initial direct costs incurred in entering the lease and less any lease incentives received. Right of use assets are depreciated on a straight-line basis from the commencement date to  the earlier of the end of the asset's useful life or the end of the lease term. The lease term is the non-cancellable period of the lease plus any periods for which the Group is reasonably certain to exercise any extension options. The useful life of the asset is determined in a manner consistent to that for owned property, plant and equipment.  If right of use assets are considered to be impaired, the carrying value is reduced accordingly. Lease liabilities are initially measured at the value of the lease payments over the lease term that are not paid at the commencement date and are discounted for the portfolio of leases using the incremental borrowing rate of the Group as the rate implicit in individual leases is not readily ascertainable. After initial recognition, the lease liability is recorded at amortised cost using the effective interest method. It is remeasured when there is  a change in future lease payments arising from a change in an index or rate or if the Group's assessment of the lease term changes; any changes in the lease liability as a result of these changes also results in a corresponding change in the recorded right-of-use asset. 

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Covid-19 related rent concessions

The Group has applied COVID-19 related rent concessions - amendment to IFRS16. The Group applies the simplified accounting treatment not to assess whether eligible rent concessions that are a  direct consequence of the COVID-19 pandemic are lease modifications. The Group applies the practical expedient consistently to contracts with similar characteristics and in similar circumstances.  For rent concession in leases to which the Group chooses not to apply the practical expedient, or that do not qualify for the practical expedient, the Group assesses whether there is a lease modification.

PROVISIONS

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted to present value where the effect is material.

RETIREMENT BENEFITS

The amount charged to the income statement in respect of pension costs is the contributions payable to money purchase schemes in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

REVENUE RECOGNITION

The Group's revenue is derived from the sale of food and drink in its restaurants, or as deliveries or takeaways. The performance obligation is fulfilled when control is transferred to the customer at the point of sale. All sales are settled at the point of sale and the group does not, therefore, have any contract assets or liabilities. Revenue is recognised net of VAT, discounts, returns and deferred revenue for the Group's loyalty scheme's unsatisfied performance obligations.

INTEREST INCOME

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

EXCEPTIONAL COSTS

The Group discloses certain financial information excluding exceptional costs. This presentation allows a better understanding of the underlying trading performance of the Group as these exceptional costs are one off non recuring costs. Exceptional costs are identified by virtue of the nature and magnitude of the event giving rise to them through consideration of quantitative and qualitative factors including where related costs or income are current disclosed. Examples of exceptional costs that meet the above definition and which have been presented as exceptional costs include, but are not restricted to: impairment of property, plant and equipment, Changes in fair value of investment, costs of acquisition, one off COVID-19 related costs.

GOVERNMENT GRANTS

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the statement of comprehensive income over the period necessary to match them with the costs that they are intended to compensate.

SHARE BASED PAYMENTS

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured using a Black-Scholes valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of the Group's accounting policies, described above, with respect to the carrying amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting year. These judgements, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, including current and expected economic conditions. Although these judgements, estimates and associated assumptions are based on management's best knowledge of current events and circumstances, the actual results may differ. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future years affected.

The judgements, estimates and assumptions which are of most significance to the Group are detailed below:

Assessment of the recoverable amounts in respect of assets tested for impairment

The Group tests goodwill for impairment on an annual basis or more frequently if there are indications that amounts may be impaired. For property, plant and equipment, including right of use assets and intangible assets, other than goodwill, the Group tests for impairment when there is an indication of impairment and for assets previously impaired. 

The impairment analysis for such assets is principally based upon discounted estimated future cash flows from the use and eventual disposal of the assets (see notes 7 and 8). Such an analysis includes an estimation of the future anticipated results and cash flows, annual growth rates, whether short term or long term, future capital expenditures and the appropriate discount rates (see notes 7 and 8 for key assumptions). Changes in the estimates which underpin the Group's forecasts and selection of appropriate discount rate could have an impact on the value in use of the cash generating units and group of cash generating units being tested. 

Previously impaired assets will be reversed should the original conditions for impairment change and there are strong indicators supporting the estimated future cash flows from its use and eventual disposal of the assets.

Finite lived intangible assets

Intangible assets include amounts spent by the Group acquiring brands and the costs of purchasing and/or developing computer software.

Where intangible assets are acquired through business combinations and no active market for the assets exists, the fair value of these assets is determined by discounting estimated future net cash flows generated by the asset. Estimates relating to the future cash flows and discount rates used may have a material effect on the reported amounts of finite lived intangible assets.

The useful life over which intangible assets are amortised depends on management's estimate of the period over which economic benefit will be derived from the asset. Reducing the useful life will increase the amortisation charge in the consolidated income statement. Useful lives are periodically reviewed to ensure that they remain appropriate. For a one year reduction in useful life of the brand, an additional £91,000 of amortisation would be charged to the income statement. 

Property, plant and equipment

Property, plant and equipment represents 68.8% (2020: 75.6%) of the Group's total assets; estimates and assumptions made may have a material impact on their carrying value and related depreciation charge. The depreciation charge for an asset is derived using estimates of its expected useful life and expected residual value, which are reviewed periodically. Increasing an asset's expected life or residual value would result in a reduced depreciation charge in the consolidated income statement. Management determines the useful lives and residual values for assets, other than right of use assets, when they are acquired, based on experience with similar assets and taking into account other relevant factors such as any expected changes in technology. The useful life of equipment is assumed not to exceed the duration of restaurant property lease unless there is a reasonable expectation of renewal or ability for the equipment to be transferred for use in another restaurant.

Lease accounting

Lease accounting under IFRS 16 is significantly more complex than under previous reporting requirements under IAS 17 and necessitates the collation and processing of very large amounts of data and the increased use of management judgements and estimates to produce financial information. The most significant accounting judgements are disclosed below:

-     The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by a break clause to terminate the lease, if it is reasonably certain not to be exercised.

-     When the interest rate implicit in the lease is not readily determinable, the Group estimates the incremental borrowing rate ("IBR") based on a risk-free rate adjusted for the effect of the Group's theoretical credit risk. As the Group has external borrowings, judgement is required to compute an appropriate discount rate which was calculated based on UK bank borrowings and adjusted by an indicative credit premium that reflects the credit risk of the Group. This has resulted in a weighted average IBR of 3.3% applied to the leases.

Loyalty programme

The Group operates a loyalty programme in its Franco Manca business. The scheme enables members to earn stamps from each qualifying purchase from a Franco Manca restaurant. Rewards that can be used against future purchases are earnt on collection of a number of stamps. The Group recognises deferred revenue in an amount that reflects the scheme's unsatisfied performance obligations, valued at the stand-alone selling price of the future benefit to the member. The amount of revenue recognised and deferred is impacted by 'breakage'. On an annual basis the Group estimate the number of rewards that will never be consumed ('breakage'). Significant estimation uncertainty exists in projecting members' future consumption activity.

OPERATING SEGMENTS

The Group considers itself to have two key operating segments, being the management and operation of The Real Greek restaurants and the management and operation of Franco Manca restaurants. The Group operates in only one geographical segment, being the United Kingdom.

DEFINITIONS OF ALTERNATIVE PERFORMANCE MEASURES

The Group uses alternative performance measures which are designed to show the normalised underlying trading performance for the period, including an adjustment to take account of property costs on an accruals basis, as below:

OPERATING (LOSS)/PROFIT

Operating (loss)/profit is defined as (loss)/profit before taxation, finance income and finance costs.

HEADLINE OPERATING (LOSS)/PROFIT

Headline operating (loss)/profit is defined as operating profit before amortisation of brand, impairment of property, plant and equipment, impairment of goodwill and intangible assets, impairment and changes in fair value of investments, COVID-19 related costs, restructuring costs, costs of reverse acquisition, cost of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.

HEADLINE (LOSS)/PROFIT BEFORE TAXATION

Headline (loss)/profit before taxation is defined as (loss)/profit before taxation before amortisation of brand, impairment of property, plant and equipment, impairment of goodwill and intangible assets, impairment and changes in fair value of investments, COVID-19 related costs, restructuring costs, costs of reverse acquisition, costs of acquisition, share based payments, loss on disposal of property, plant and equipment and pre-opening costs.

PRE-OPENING COSTS

The restaurant pre-opening costs represent costs incurred up to the date of opening a new restaurant that are recognised in the profit and loss account in the period in which they are incurred.

HEADLINE EBITDA

Headline EBITDA is defined as EBITDA before COVID-19 related costs and grants received against COVID-19 related costs, restructuring costs, costs of reverse acquisition, cost of acquisition, share based payments, loss on disposal of property, plant and equipment, impairment of property, plant and equipment and pre-opening costs.

ADJUSTED HEADLINE EBITDA

Adjusted Headline EBITDA is defined as Headline EBITDA less rent expense calculated on an accrual basis, which excludes the effect of IFRS 16.

EBITDA

EBITDA is defined as Headline EBITDA less share based payments and pre-opening costs.

ADJUSTED EBITDA

Adjusted EBITDA is defined as EBITDA less rent expense calculated on an accrual basis, which excludes the effect of IFRS 16.

HEADLINE EPS

Headline basic EPS and Headline diluted EPS are defined in note 6.