Final Results

RNS Number : 6036O

Greene King PLC

01 July 2010

 

1 July 2010

GREENE KING plc

 

Preliminary results for the 52 weeks ended 2 May 2010

 

Record revenue and strong progress across all businesses;

 accelerated retail expansion strategy

 

52 Weeks	08/09	09/10	Change
Revenue	£954.6m	£984.1m	+3.1%
Operating profit*	£216.2m	£211.3m	-2.3%
Operating margin*	22.6%	21.5%	-1.1%pts
Profit before tax*	£118.5m	£123.0m	+3.8%
Adjusted basic earnings per share**	53.4p	43.4p	-18.7%
Dividend per share**	21.0p	21.5p	+2.4%

 

Financial Highlights

 

n Record revenue of £984.1m, up 3.1% on last year

n Retail like-for-like sales growth of 3.5%; H2 margins maintained

n Pub Partners stabilising; strong H2, growth in average EBITDA per pub

n Continued Brewing Company outperformance; own-brewed volume growth of 3.6%

n Another record year at Belhaven; strong retail and Belhaven Best beer volume growth

n Positive free cashflow after scheduled debt repayments, dividends and capital investment

n Dividend per share up 2.4%; underpins confidence

n Invested over £100m of the rights issue proceeds; returns well ahead of WACC

 

Strategy Update

 

n Retail expansion plan; target 1,100 outlets across UK in three to five years, currently 888

n Improve quality and retailing standards of tenancies; reduce UK estate from 1,584 to c. 1,200

n Increase investment in core beer brands; drive further growth

 

Rooney Anand, Greene King chief executive, comments:

 

"These results highlight the strength, agility and resilience of Greene King. We have delivered record revenue in an uncertain and challenging environment, making good progress in all of our businesses. We have generated incremental cash after reducing our debt, paying healthy dividends to our shareholders and funding increased investment in our estate. We have also had an encouraging start to the new financial year with trading to date better than we were expecting.

 

"Over the last year, we have built on the strengths of the business, in particular through successful investment in both new and existing pubs. We are today announcing plans to accelerate the pace of change and growth towards a more retail and branded focus. We plan to grow our branded, food-led, managed estate by a quarter, create a smaller, more customer focused tenanted business and provide additional investment to our leading beer brands. This strategy will generate faster, profitable sales growth and increase our exposure to the long-term growth of the eating out market."

 

* before exceptional items

**08/09 earnings and dividend per share adjusted to reflect the impact of the bonus element of the rights issue in the year

 

 

A copy of the results presentation is available on our website: www.greeneking.co.uk.

 

For further information:

Greene King plc	Rooney Anand, chief executive Ian Bull, group finance director	Tel: 01284 763222
Financial Dynamics	Ben Foster	Tel: 020 7831 3113

 

Notes for Editors

§	Greene King was founded in 1799 and is headquartered in Bury St. Edmunds, Suffolk. It currently employs over 18,000 people across its main trading divisions: Retail, Pub Partners, Brewing Company and Belhaven.
§	It operates 2,472 pubs and restaurants across England, Wales and Scotland, of which 888 are retail pubs and restaurants and 1,584 are tenanted or leased pubs. Its leading retail brands are Hungry Horse, Old English Inns, Loch Fyne Restaurants and Eating Inn. 96% of the estate is either freehold or long leasehold.
§	Greene King also brews quality ale brands from its Bury St. Edmunds and Dunbar breweries. Its leading ale brands are Greene King IPA, the no.1 cask ale in the UK, Old Speckled Hen, the no.1 premium ale in the UK, Abbot Ale, the no.2 premium cask ale in the UK and Belhaven Best, the no.1 ale brand in Scotland.

Chairman's Statement

 

Results

In another year of challenging conditions, we have once more delivered successful trading performances across our businesses. I am pleased to report that we have grown our revenue by 3.1% to a record level of £984.1m. While our operating profit was 2.3% below last year at £211.3m*, our profit before tax and exceptional items was up 3.8% at £123.0m*. The earnings per share figure of 43.4p* is 18.7% below last year's, principally because of the higher number of shares following the rights issue.

 

Dividend

Once again, our healthy cash generation has enabled the board to recommend a final dividend payment of 15.6p per share. This will take the total dividend for the year to 21.5p per share, 2.4% ahead of the adjusted dividend per share for the period last year. The dividend cover of 2.0x is in line with the board's policy. The final dividend will be paid on 13 September 2010 to those shareholders on the register at the close of business on 13 August 2010.

 

Acquisitions

During the year we took the opportunity to purchase three small packages of high quality pubs, situated in attractive locations in England and Scotland. Altogether, including single sites, we acquired 28 properties, all of which are freehold and being run under management, for a total consideration of £67.4m. We are very pleased with their trading performance post-acquisition. Since the year end, we have acquired a further six outlets for £7.9m.

 

Disposals

We have also continued to dispose of our non-core assets. During the year, we sold 105 properties for £27.2m, against a combined book value of £26.2m.

 

Board

After serving on our board for eleven years as managing director of Pub Partners, David Elliott left us at the end of January. The size and scope of our tenanted and leased pub business grew significantly under his responsibility and I would like to express my thanks to him for the contribution he made to the company.

 

Towards the end of the year the board took the decision to reduce its size. This was precipitated by the fact that we had two managing directors who were members of the board and three who were not and we wanted to achieve parity in the management structure. Justin Adams and Jonathan Lawson agreed to step down from the board at the end of April, but their responsibilities for Brewing Company and Local Pubs remain exactly as they were.

 

People

I would like to thank everyone for the role they have played in achieving another successful year. More customers have frequented our pubs and restaurants and enjoyed our own-brewed ales than ever before and this is testament to the dedication and drive of our people.

 

Specifically, I would like to thank the many thousands of Greene King employees who work across the country in our pubs and restaurants, playing a vital role in demonstrating high quality standards in the marketplace. They should feel proud of their efforts in helping us to trade successfully through two difficult years of economic recession.

 

 

Tim Bridge Chairman

30 June 2010

 

*As throughout this document, profit figures are shown before exceptional items

 

 

Chief Executive's Review

 

Greene King has delivered another strong performance. For the 52 weeks to 2 May 2010, we achieved record revenues of £984.1m, up 3.1% on last year, despite the difficult trading environment. Operating profit of £211.3m was 2.3% below last year but profit before tax was 3.8% up on last year at £123.0m. Adjusted earnings per share was down 18.7% at 43.4p, due primarily to the higher number of shares following the rights issue. The board has recommended a final dividend of 15.6p per share, 3.3% ahead of last year.

 

Market and business overview

 

Our performance was delivered in another year of challenging market conditions. Although the UK consumer was better off than in the previous year following various government stimuli, bank lending remained low and the savings ratio grew. In addition, we had a tough winter, duty and VAT rises and the increasing consumer uncertainty over the election. The overall eating out market remained subdued and on-trade beer volumes again fell. 

 

Within this environment there were excellent achievements in all of our businesses; we delivered record revenues close to £1bn, strong Retail like-for-like-sales growth, second half profit per pub growth in Pub Partners, own-brewed volume growth and another record profit from Belhaven. We successfully balanced our revenue growth with effective cost mitigation and margin management to protect our margins and we generated sufficient cash to reduce our debt, pay an attractive dividend and increase our targeted investment in our assets, brands and people.

 

We are operationally focused on delivering outstanding value, exceptional service and unbeatable quality throughout Greene King. We have consciously enhanced the value proposition to our customers over the last two years and while the UK consumer continues to demand exceptional value, we will deliver it, at the same time maintaining our commitment to generating healthy cash margins.

 

Strategy update

 

Greene King has been providing its customers with authentic pub and beer experiences for over 200 years and central to this longevity is our ability to develop our business to reflect changing consumer preferences and economic conditions. This has been particularly true in the last three years as we successfully adapted to the challenges of the smoking ban, the banking crisis and the recession.

 

We have a strong business which has been augmented in the last two years by two significant initiatives. Firstly, we have invested over £100m from our rights issue in high quality, freehold, retail outlet acquisitions from our competitors and below par debt buybacks. To date, the average return on the capital invested in the acquisitions is 19.4%, as we use our operating expertise and brand strength to drive material uplifts in sales and profit. Secondly, we have continued investing in our estate, particularly in our leading pub restaurant brands, which has delivered exceptional returns in recent years. 

 

The success of these initiatives has enabled Greene King to emerge from the recession in a stronger position to take advantage of the further opportunities for growth and market share gains that exist. Whilst risks still remain, this success gives us confidence to accelerate the pace of change and growth at Greene King towards a more retail and branded focus.

 

The main elements of our strategy over the next three to five years are: -

 

1. Expand branded retail

 

Drive growth through expanding our branded, food-led, retail estate. We are targeting 1,100 outlets, from our current base of 888, through a combination of acquisitions and internal transfers from tenancy. We see opportunities for growth in our destination pubs and restaurants, pubs with rooms and traditional suburban pubs.

 

2. Improve quality and reduce size of tenanted estate

 

Generate sustainable and improved rates of cash returns from a higher quality, more customer focused, tenanted estate. As part of this process, we will reduce the estate from our current base of 1,584 outlets to c. 1,200 through a combination of disposals and transfers to retail. We will further leverage our purchasing scale and retail infrastructure to deliver higher returns for our licensees and our shareholders.

 

3. Increase core beer brand investment

 

Deliver continued profitable growth in our branded beer business through additional investment in Greene King IPA, the UK's leading cask ale, Old Speckled Hen, the UK's leading premium ale and Belhaven Best, Scotland's leading ale brand.

 

Overall, our aim is to be the best pub and beer business in Britain and we believe this retail expansion and brand investment strategy will help us achieve that over the next three to five years. It will generate faster, profitable sales growth, supported by enhanced purchasing and operating synergies, to deliver a step change in our focus on retail and increase our exposure to the long-term growth of the eating out market. This acceleration in our retail expansion will be financed through our existing funding headroom, the remaining rights issue proceeds and the accelerated tenanted disposal programme. We will continue to generate strong trading cashflows to maintain our ongoing investment requirements, meet our debt obligations and pay dividends to shareholders.

 

Greene King Retail

 

52 weeks	08/09	09/10	Change
Average number of sites trading	779	778	-0.1%
Revenue	£569.5m	£589.2m	+3.5%
EBITDA	£139.8m	£141.9m	+1.5%
Operating profit	£105.6m	£106.4m	+0.8%
Operating profit margin	18.5%	18.1%	-0.4%pts
EBITDA per site	£179.5k	£182.4k	+1.6%

Greene King Retail achieved record revenue of £589.2m, 3.5% above last year, and operating profit of £106.4m, up 0.8% on last year. Like-for-like (LFL) sales were also strong at +3.5%. This was driven by the repositioning of the estate towards food, in which we achieved LFL sales growth of 8.8%. As a result, food has grown a further 200bps to 37% of sales. We also achieved full year growth in LFL drink sales and second half growth in machine income. Although operating margins fell 40bps in the year, due to mix and first half cost pressures, second half margins were in line with last year. A key element of our operational strategy in Retail is to reposition the business towards long-term growth categories and all of our target product categories achieved growth in the year. On a per pub basis, food sales were up 10%, wine sales were up 7%, soft drink sales were up 5% and coffee sales were up 2%.

 

We direct the greatest share of our capital investment programme towards Retail as we focus on driving profitable sales growth via the expansion of our food-led pub restaurant brands. In the year, we invested £20.6m of expansionary capital, a further £24.4m was invested in maintaining our pubs and restaurants and £9.0m was spent on repairs from the revenue account. We invested £13.4m in 43 Hungry Horse outlets, taking the total number of Hungry Horse outlets to 147, and we invested over £2m in 12 Old English Inns outlets, as we step up the pace of our redevelopment programme. The Local Pubs 'sparkle' programme has now covered 160 outlets with an average investment of £49k per outlet. We have now invested in 54% of the Retail estate in the last three years, still leaving a significant opportunity for further investment and brand expansion.

 

Our operational focus in Retail is on delivering outstanding value, exceptional service and unbeatable quality (VSQ) across the different segments of our business. Within both of our Retail divisions we have tailored our offer by brand or operating template. This approach enables us to consistently deliver a compelling customer offer, whilst ensuring local fit where necessary.

 

Hungry Horse (147 outlets)

 

Hungry Horse has had another exceptional year, in which the brand has grown from 119 outlets at the start of the year to 147 by the year-end. It has delivered LFL sales growth of 11.6% this year, following growth of 8.4% last year and the average weekly turnover (AWT) grew 7.7% to £18.3k. We have further improved our value offer this year, with '2 for £8' meal deals in the week and a '2 for £10' Sunday lunch deal. This has helped to drive cover growth of 28%. Food is now almost 50% of the sales mix. We have introduced new technology to ensure consistent 15 minutes food service time, which has helped to push Hungry Horse mystery guest scores above 90% for the first time, and we have continued to innovate our food offer with new, quality dishes such as the 'Hell's Chicken Burger'.

 

Old English Inns (101 outlets)

 

Old English Inns (OEI) has also performed well this year. Following our investment in 'beds, breakfasts and bathrooms' within our accommodation sites, the introduction of a '2 for £9.95' meal offer across the estate and the redesign and redevelopment of the brand, OEI has delivered strong LFL sales growth of 4.6%. Total cover growth of 13.0% more than offset an 8.0% decline in average spend per head. We added further value to our meal offer by including starters and desserts and to our function room offer through our 'Grand Wedding' package, starting at £999. We improved service standards by introducing a 'part-table service' operational standard and we improved the quality of the specialist whisky and gin ranges.

 

Loch Fyne Restaurants (44 outlets)

 

Midway through the first half of the year, we completed the integration of Loch Fyne Restaurants (LFR) into the Destination Division. LFR has performed in line with the UK restaurant sector this year with LFL covers down and spend per head up. In line with our other brands, we have selectively introduced additional value to our menu to drive cover growth at the planned expense of the average meal price, while ensuring we continue to deliver the high quality standards and service our customers expect from LFR.

 

Hardy's House (37 outlets)

 

Hardy's House is a suburban, destinational food-led brand, located predominantly in the Midlands and the north of England. As with our other destination pub brands, Hardy's House grew its covers strongly, up 11.6%, with average spend per head in line with last year. Initiatives in the year included Fish and Chips 'your way', adding flexibility to the customer offer and free side dishes for customers who were not offered one when they ordered their meal, driving better service. 

 

Premium Locals (123 outlets)

 

Premium Locals achieved total sales growth of 9.0% in the year driven by LFL sales growth, a strong underlying performance in our London pubs and the acquisition of eight pubs from Punch Taverns. LFL food sales grew 10.6% and food participation is now 27%. Food growth was due to both average cover growth of 5.7% and spend per head growth of 4.5% as we introduced better quality and targeted menus and incentivised employees on selling up starters, desserts and side orders. We improved our female appeal through a more attractive product range including Prosecco, sharing platters and our exclusive and award-winning wine list.

 

Mainstream Locals (193 outlets)

 

Mainstream Locals achieved LFL food sales up and LFL drink sales down. Food participation is now 17.0%, up 1.5%pts on last year, and we grew both covers and spend per head in the year. Our Mainstream Locals segment benefits from its convenience to our customers with particularly strong community and high street locations. We introduced additional value through a food 'Rhythm of the Week' offering daily meal deals and offering Carlsberg at £1.99 per pint during selected sports events and we completed a comprehensive upgrade of our television screens, both internally and externally, well ahead of the World Cup.

 

Value Locals (120 outlets)

 

During the year, we took the most successful elements of our Local Savers 'Every Day Low Pricing' promotion and extended them across the whole Value Locals estate. For example, we introduced 'known-value item' pricing such as Carlsberg at £1.79 per pint, Ruddles at £1.59 per pint and Blossom Hill at £5.99 per bottle. Machine income was much improved in the year, helped by the speed of our implementation and the quality of our merchandising around the £70 jackpot introduction. 

 

Pub Partners

 

52 weeks	08/09	09/10	Change
Average number of pubs trading	1,445	1,372	-5.1%
Revenue	£155.2m	£145.1m	-6.5%
EBITDA	£78.1m	£71.8m	-8.1%
Operating profit	£70.9m	£64.6m	-8.9%
Operating profit margin	45.7%	44.5%	-1.2%pts
EBITDA per pub	£54.0k	£52.3k	-3.2%

On an estate with 5.1% fewer pubs, revenue was down 6.5% at £145.1m and operating profit was down 8.9% to £64.6m. Average EBITDA per pub was down 3.2% but, in the second half of the year, due to better volume trends, tighter controls and the impact of the non-core disposal programme, average EBITDA per pub was +0.2%. During the year, £8.7m was invested in the estate, the majority in the second half, of which £4.7m was maintenance capex and £4.0m was expansionary capex, including our investment in Brulines' i-draught technology. An additional £2.0m was spent on repairs through the revenue account. An average of 1,372 sites traded over the period. At the start of the financial year, 1,391 sites were trading, nine were transferred to Retail and 65 were sold, of which 38 were closed. The closing balance was therefore 1,355 sites.

 

The inherent strengths of Pub Partners include: our geographic bias to the South East, which offers relative protection from economic downturns; our preference for tenancies over leases, which facilitated the changes required to stabilise the business; our high quality assets; our relationship with our beer brands and our corporate brand, which ensures a consistently high level of service and quality to our licensees; and our high standards of recruitment and training, which aims to ensure all of our pubs are run by talented, professional licensees.

 

The simplicity and flexibility of our agreements is also an attraction to prospective licensees. We offer three substantive agreements: a one year foundation agreement for first-time licensees (20%); a three year rolling tenancy agreement with built-in tie flexibility (53%); and a ten to 25 year assignable lease, free of all wine, spirits and minerals (WSM) ties (20%). As a result, 52% of all agreements are free of any WSM tie and only 55% of our licensees use a machine tie.

 

Building on these strengths, we are now around halfway through our turnaround programme for Pub Partners, having made excellent progress, particularly in the last six months, and we believe Pub Partners is now leading the sector on performance and stability. There are clear indications of the business beginning to stabilise and this is directly linked to a number of key initiatives we have taken through the recession and in the last six months, including: -

 

§	Creating the Independence Pub Company (IPC) to separate out those pubs that required a more flexible, focused and practical approach. There are currently 256 pubs in IPC, down from 404 at its launch, of which 83 have been disposed, eleven are closed for disposal and 54 have returned to the core estate. We will re-integrate IPC back into the core estate during this year.
§	Investing an industry-leading level of tenant financial support, totalling £5.1m or £3.7k per pub this year, split between our Crunch Time price initiative to drive licensee volume growth through enhanced value to their customers, and selective rent concessions and reductions to improve licensee profitability and cashflow. Further product enhancements to Crunch Time, which we have now rebranded 'Love Your Local', have also been introduced, including an updated range of value-for-money food offers.
§	Investing in Brulines i-draught technology, being rolled out across 900 pubs in our estate, which has been mutually beneficial for us and our licensees. This has helped drive improved beer volumes for Pub Partners and it has been instrumental in helping our licensees better manage product quality, improve yield management and limit staff issues. Post deployment, volume uplifts are 5% ahead of our expectations.
§	Investing in improving the calibre of our senior operations team, combined with the introduction of PDAs across the operations team, which has enabled a step change in the ways of working, effectiveness and efficiency in the field.

The benefits from these initiatives and the strengths of the model have not only delivered an improved financial performance trend for Pub Partners, they have also helped to improve our key licensee health measures. An industry-leading 93% of the estate is now on substantive agreements, with 74 temporary agreements at the year-end, the reduction over the second half helping to reduce the level of tenant support required. There was just one pub closed for reopening at year-end, against 30 12 months ago, bad debts have reduced 40bps in 12 months to 1.1% of sales and the average tenure of our licensees has grown to three years and nine months.

 

Even though Pub Partners is now leading the industry in terms of performance and key licensee health measures, we believe there are still two specific challenges that Pub Partners is facing in common with the whole tenanted sector; the ongoing regulatory pressures on the tied model and the long-term viability of many tenanted and leased pubs, given their comparatively weak offer against managed pubs, branded restaurants and the supermarkets. We have therefore decided to implement two specific strategies to further cement Pub Partners' position as the best tenanted and leased operator in the UK: -

 

1. Use our new Code of Practice as a catalyst for organisational change within Pub Partners. Our aim is to create the most customer-focused tenanted business with the strongest retail skills in the sector. We will drive significant improvements amongst our licensees, our offers and our pubs to enhance Pub Partners' competitiveness through a repositioning towards a more retail-led approach.

2. Accelerate the rate of disposals and transfers, across both Pub Partners and Belhaven, to retail to reduce the overall tenanted estate from 1,584 outlets currently to c. 1,200 outlets, ensuring a capability to deliver sustainable cash returns for both our licensees and our shareholders.

 

We believe a smaller, more retail-focused business can ensure a profitable long-term future for Pub Partners, allowing it to take an active role in the development of Greene King. Our plan to only operate high quality, sustainable pubs run by customer-focused licensees and supported by better control and direction from Pub Partners, should see Pub Partners move back into sustainable per pub profit growth over the next 12 to 18 months.

 

Belhaven

 

52 weeks	08/09	09/10	Change
Revenue	£136.0m	£151.9m	+11.7%
EBITDA	£34.9m	£38.4m	+10.0%
Operating profit	£30.2m	£32.7m	+8.3%
Operating profit margin	22.2%	21.5%	-0.7%pts

 

In the last 18 months, there has been more change at Belhaven than in all the previous years of Greene King's ownership combined, including senior management transition, the closure of the bottling plant and a critical back-office integration project. Yet, notwithstanding this, Belhaven again delivered a record result. Revenue was up 11.7% to £151.9m with operating profit up 8.3% to £32.7m. The operating margin was marginally behind last year in the second half of the year and ended the year at 21.5%, 70bps down on last year, entirely due to changes in the channel mix. Profits grew strongly in both retail and brewing with underlying profit per pub only marginally down in tenancies. The number of pubs trading grew from 325 to 334 and, on average, 331 were trading during the year.

 

Belhaven's continued success in Scotland is built upon its unique focus on the Scottish market, operating a high quality pub estate in a fragmented market, supplemented by quality acquisitions, selling the leading ale and lager brands both within the Belhaven estate and to its free trade customers, a strong and stable management team, the ongoing support and investment from Greene King and, most crucially, a retention of its Scottishness in a market in which this is highly valued.

 

In retail, Belhaven achieved LFL sales growth of 5.5%. This was led by the strong performance from our destination food-led pub restaurant brand, Eating Inn. Both drink and food LFLs were positive, with food up 15% in the year taking food participation to 29% of sales. Including the impact of acquisitions, total sales grew 20% in the year, driven by strategically important categories such as food +28%, wine +29%, soft drinks +19% and coffee +21%. We made a total of fourteen acquisitions in the year including packages from Punch and Mitchells & Butlers. They are trading well and in line with our expectations. 

 

Our tenanted and leased business in Scotland has delivered a solid performance. Although LFL volumes were down, the wholesale margin per barrel and rent were both up, leading to gross profits in line with last year. We have shared many of the learnings from Pub Partners' experiences since the recession hit and Belhaven's tenanted business is well prepared for any further economic pressure in Scotland. Licensee health measures have remained stable throughout the year.

 

Belhaven Best, Scotland's no.1 ale brand, has again led a strong performance from Belhaven's brewing division. Best volumes grew 15.4% in the year, whilst our other own-brewed volumes grew 28%. We therefore made significant market share gains and increased the awareness of the Belhaven Best brand. We grew the number of free trade accounts by 8% to over 2,100 and we again came first in the annual Dram customer service survey.

 

Brewing Company

 

52 weeks	08/09	09/10	Change
Revenue	£93.9m	£97.9m	+4.3%
EBITDA	£25.4m	£25.6m	+0.8%
Operating profit	£21.2m	£21.4m	+0.9%
Operating profit margin	22.6%	21.9%	-0.7%pts

 

Brewing Company has once again strongly outperformed the UK ale market over the last 12 months. Our own-brewed ale brands achieved volume growth of 3.6% against a market down 6.3%, according to the BBPA. As a result, our share of the ale market rose 90bps to over 9%. Sales to external channels account for 80% of our own-brewed volumes and all channels achieved volume growth in the year, with particularly strong performances from Free Trade and Take Home. Our volume growth translated into revenue of £97.9m, 4.3% above last year, and operating profit of £21.4m, 0.9% above last year. Margins fell 70bps due to mix and higher input prices from third party suppliers.

 

Our aim is to be the best branded beer company in England by delivering the best value, service and quality to our customers across all trade channels. Our success can be measured by the fact that we produce three of the top ten ales in the on trade* and three of the top ten premium ales in the off trade.** Additionally, we won Cask Brewer of the Year in the Morning Advertiser's Supplier Awards, and more recently, we earned six Gold medals in the prestigious Monde Quality Awards.

 

We are strengthening our position through continued market-leading investment; our support of England Rugby; our focus on local provenance; and our advertising on Dave TV Channel. We concentrate brewing in one historic but highly efficient brewery in Bury St Edmunds and focus our brand investment in Greene King IPA, the country's no.1 cask ale; Old Speckled Hen, the nation's no.1 premium ale; and Abbot Ale, the UK's no.2 premium cask ale.

 

We are well positioned to capture the benefits of the increasing interest in provenance and quality given our historic and long-term commitment to best ingredients and traditional brewing. Over 85% of our barley is grown locally and malted within two miles of the brewery; our water is drawn from artesian wells below the brew house; our unique yeasts are cultivated on site and 98% of the hops we use are English. We are the only brewer to have Red Tractor status across all of our brands.

 

Greene King IPA continues to expand its national footprint, whilst maintaining its traditional heartland in the south east of England. Our innovative Cask Revolution font is now installed in over 1000 outlets and we are planning to double that number this year. It is generating a strong return on investment and, on average, increasing Greene King IPA outlet rate of sale by 9% over traditional fonts. The brand's status as 'Official Beer of England Rugby' has been extended to 2012 and we continue to sponsor Sale Sharks, Wasps, Harlequins and grass roots rugby across the country.

 

Old Speckled Hen, which last year celebrated its 30th anniversary, continues to strengthen its position, particularly through its advertising campaign on the Dave TV channel. It is 'the brand that ale drinkers most want to see on the bar next time they go to the pub and on the shelves next time they go to the supermarket'***, and it achieved volume growth of over 7% this year. In Take Home it has reached a 12% value share and the brand now accounts for two thirds of our exports, growing particularly strongly in the important US craft beer market.

 

** Publican Brands Report, May 10

** Nielsen, MAT value, Grocery Multiples12.6.10

*** HPI Cardinal Brand Tracking, Apr 10

Financial Review

 

Group revenue grew 3.1% during the year to £984.1m, helped in particular by a 3.5% growth in our Retail businesses. This growth was achieved despite an estate 2.7% smaller in absolute size and in an environment that continued to be challenging. Our gross margins held up well and, through our consistent focus on costs and cash, we were able to more than offset the year-on-year increase of £11.8m non-wage costs and inflation, particularly in drinks and utilities. Operating margins were held to within 1.1% of last year, with the change in mix across our business units, net inflation and share-based payment charge accounting for almost all of the change in margin. Operating profit before exceptionals of £211.3m was down 2.3% on last year, with H2 stronger than H1. Interest costs of £88.3m were 9.6% lower than last year, despite the inclusion of £3.3m of pension interest, reflecting our strong positive cash flows, net of capex, and the use of proceeds from our successful rights issue. Profit before tax and exceptionals was £123.0m, an increase of 3.8% on last year, delivering earnings per share of 43.4p per share, down 18.7% on last year from the higher number of shares post rights issue.

 

Positive free cash flow maintained 

 

We again continued our focus on cash. The group delivered £264.4m EBITDA, down only 1% on last year from 2.7% fewer pubs. With another year of strong cash management, including £9.0m of working capital inflow, the group has a strong cash platform. We continued to invest in the core estate for both maintenance and expansionary purposes, to pay down debt (ahead of our normal amortisation) and to pay dividends to shareholders. This has been and remains a very consistent part of our long term financial strategy, particularly so in this challenging climate.

 

Continued investment and disposals

 

£78.5m of capex was spent across the estate as part of an annual plan to keep capex broadly flat on a comparable estate year-over-year. This delivered returns ahead of our cost of capital across over 300 schemes in the year. We firmly believe that continued investment benefits our estate and the business in both the short and the longer term. We also disposed of 105 trading and non-trading assets, realising £27.2m net proceeds, £1.0m ahead of book value.

 

As part of the use of the rights issue proceeds, we purchased 28 high quality, freehold, managed pubs during the year which were quickly integrated into our retail estates. They are trading well against our expectations.

 

Financing and treasury

 

We successfully completed a 3 for 5 rights issue in May 2009 and raised net proceeds of £207.2m to be used for both targeted acquisitions and the opportunistic repurchase of below-par securitised debt. We made total investments of £91.1m, which utilised 44% of the proceeds in under a year from receipt of funds. As well as purchasing pubs as outlined above, we also repurchased £30.3m aggregate principal amount of bonds, at a weighted average purchase price of £524 per £1,000. These bonds have now been cancelled.

 

Net debt at the year end stood at £1,348.1m, down £210.5m from the previous year end. There was no short term debt outstanding at the year end in relation to our £400m bank facility, which remains available until April 2012. Our high quality and primarily freehold assets support £1,380m of securitised bonds. These have a flat debt service profile, with £23.6m amortisation in the year.

 

During the year, there was a further improvement in our overall credit metrics, with interest rate hedges in place for 100% of the group's floating rate debt at an overall blended interest rate of 6.1%. Fixed charge cover improved to 2.4x, up from 2.1x last year, and interest cover likewise improved to 2.5x from 2.2x last year. Net debt/EBITDA was down to 5.1x, in line with our targeted level, and this will continue to move slightly as proceeds are further invested ahead of the earnings stream they generate. Our securitised vehicle had a free cashflow debt service cover ratio of 1.5x at the year end, giving 27% headroom.

 

Dividend

 

The proposed final dividend of 15.6p per share takes the full year dividend to 21.5p per share, an increase of 2.4% against the dividend of 21.0p per share last year, adjusted for the effect of the rights issue. The board continues to adopt a dividend policy targeting dividend cover of around two times underlying earnings.

 

Pensions

 

The group maintains a defined contribution scheme which is open to all new employees. The group's defined benefit schemes are all closed to new entrants. Under IAS19, and recognising the turbulence in both equity markets and corporate bonds, the net pension liability was £78.7m, compared with £91.6m at the previous balance sheet date.

 

The majority of the group pension schemes have completed their triennial valuations since the year end. Following constructive dialogue with the schemes' trustees, the group has increased its overall cash contribution from £6.6m to £13.6m per annum, comfortably within the cashflow expectations for the group.

 

Exceptional items

 

We recorded £21.1m of exceptional charges during the year, as a result of their nature or size. We continue to review the pubs in the tail of our estate and recognised an impairment of £37.3m against the net book value of a small proportion of our estate. The cumulative impairment in the last two years represents 4.6% of NBV, demonstrating the quality of the vast majority of our estate, whilst recognising some adjustments around specific sites. We achieved a profit on disposed properties of £1.0m during the year.

 

We also recognised a net gain of £10.2m on the £30.3m aggregate principal of bonds purchased in the year and the cancellation of associated interest rate swaps.

 

In April 2010, the group received VAT repayments totalling £7.0m from HMRC following a ruling in the Tribunal/Court of Appeal hearings involving Rank plc in relation to the application of VAT on gaming machines. Questions raised during the Rank case have been referred to the European Court of Justice and are due to be heard in 2011. In the meantime, HMRC has issued protective assessments to recover these repayments in the event they are successful with their appeal. The group has appealed these protective assessments but, should HMRC be successful on appeal, the group would be required to repay the £7.0m of VAT with interest. An exceptional gain of £6.8m net of associated costs has been recognised.

 

Impact of the Budget

 

The reduction in the rate of corporation tax by 1% per year for the next four years is welcomed. We hope this is alongside continued support, via appropriate capital expenditure and other allowances, for businesses such as ours to be encouraged to maintain investment levels.

 

Post balance sheet events

 

On 11 June we announced the purchase of four additional freehold managed sites from Punch Taverns PLC for £5.3m, bringing the total number of pubs purchased with the rights issue proceeds to 34 sites. We have now invested a total of £103.3m, or 50%, of the right issue proceeds. We continue to focus on accretive opportunities in both acquiring pubs and repurchasing below-par debt.

 

Current trading and outlook

 

We have continued to trade strongly in the first eight weeks of the new financial year to 27 June, particularly in our retail operations. Retail LFL sales are +6.0% and Belhaven retail LFL sales are +1.5%. Pub Partners continues to stabilise with average EBITDA per pub broadly in line with last year. Brewing Company total volumes are +3.6%, own-brewed volumes are -2.7% and Belhaven Best volumes remain strong at +7.1%. The overall Greene King performance in the first two months of the year has been encouraging and ahead of our expectations for the period.

 

Looking ahead, we are hopeful that the coalition government will be more supportive of our industry and look forward to working closely with them on responsible drinking, the tie and alcohol duty. Given the possible impact of the emergency budget on consumer spending, trading conditions are likely to remain challenging. However, we are confident that our current trading momentum and our plans for future growth, underpinned by our high quality assets, industry leading brands and talented people, will ensure that we deliver another successful year for Greene King and its shareholders.

 

 

 

 

Rooney Anand

Chief Executive

30 June 2010

 

 

 

 

		2010				2009
		Before			Before
		exceptional	Exceptional		exceptional		Exceptional
		items	items	Total	items		items	Total
	Note	£m	£m	£m	£m		£m	£m
Revenue		984.1	-	984.1	954.6		-	954.6
Operating costs	3	(772.8)	(32.3)	(805.1)	(738.4)		(55.8)	(794.2)
Profit on disposal of property, plant and equipment	3	-	1.0	1.0	-		3.7	3.7
Operating profit	3	211.3	(31.3)	180.0	216.2		(52.1)	164.1
Finance income	3	8.4	13.5	21.9	5.8		-	5.8
Finance costs	3	(93.4)	(3.3)	(96.7)	(102.6)		(12.1)	(114.7)
Net finance expense from pensions		(3.3)	-	(3.3)	(0.9)		-	(0.9)
Profit before tax		123.0	(21.1)	101.9	118.5		(64.2)	54.3
Tax	4	(31.4)	9.4	(22.0)	(29.6)		14.8	(14.8)
Profit attributable to equity holders of parent		91.6	(11.7)	79.9	88.9		(49.4)	39.5
Earnings per share **
- basic	5		37.8 p					23.7 p
- adjusted basic *	5	43.4 p			53.4 p
- diluted	5		37.7 p					23.6 p
- adjusted diluted *	5	43.2 p			53.1 p
Dividend proposed per share in respect of the period **	6	21.5p			21.0 p		**

 

 

Group statement of comprehensive income

for the fifty-two weeks ended 2 May 2010

 

	2010	2009
	£m	£m
Profit for the period	79.9	39.5
Other comprehensive income
Cash flow hedges:
Gains/(losses) taken to equity	20.3	(144.2)
Ineffective portion transferred to income statement	-	12.1
Losses recycled to income on swap terminations	3.3	5.3
Tax on cash flow hedges	(5.1)	(35.5)
	18.5	(91.3)
Actuarial gains/(losses) on defined benefit pension schemes	12.7	(24.5)
Tax on actuarial (gains)/losses	(3.6)	6.9
	9.1	(17.6)
Other comprehensive income/(loss) for the period, net of tax	27.6	(108.9)
Total comprehensive income/(loss) for the period, net of tax	107.5	(69.4)

 

 

Group balance sheet

as at 2 May 2010

 

		2010	2009
	Note	£m	£m
Non current assets
Property, plant and equipment		2,012.7	1,997.3
Goodwill		679.7	673.8
Financial assets		41.8	40.3
Deferred tax assets		56.2	73.3
Prepayments		3.2	4.2
Trade and other receivables		0.2	0.2
		2,793.8	2,789.1
Current assets
Inventories		21.5	21.9
Trade and other receivables		60.2	62.0
Prepayments		12.7	6.9
Cash and cash equivalents		35.2	120.9
		129.6	211.7
Current liabilities
Borrowings		(40.3)	(38.4)
Derivative financial instruments		(4.3)	(12.7)
Trade and other payables		(205.8)	(195.4)
Income tax payable		(44.5)	(43.3)
		(294.9)	(289.8)
Non current liabilities
Borrowings		(1,343.0)	(1,641.1)
Derivative financial instruments		(104.5)	(131.8)
Deferred tax		(183.8)	(197.6)
Post-employment liabilities		(84.3)	(97.1)
		(1,715.6)	(2,067.6)
Total net assets		912.9	643.4
Issued capital and reserves
Share capital		27.1	17.0
Share premium		247.6	247.5
Capital redemption reserve		3.3	3.3
Hedging reserve		(76.4)	(94.9)
Own shares		(6.6)	(17.5)
Retained earnings		717.9	488.0
Total equity		912.9	643.4
Net debt	11	1,348.1	1,558.6

 

 

Group cashflow statement

for the fifty-two weeks ended 2 May 2010

 

		2010	2009
	Note	£m	£m
Operating activities
Operating profit		180.0	164.1
Operating exceptional items		31.3	52.1
Depreciation and amortisation		53.1	51.1
EBITDA*		264.4	267.3
Working capital and non-cash movements	10	11.9	(6.4)
Interest received		8.4	5.8
Interest paid		(95.0)	(100.3)
Tax paid		(25.8)	(24.9)
Net cashflow from operating activities		163.9	141.5
Investing activities
Purchase of property, plant and equipment		(76.0)	(95.5)
Acquisition of trade and assets	7	(61.6)	-
Purchases of other investments		(0.2)	(0.3)
Advance of trade loans		(7.3)	(15.1)
Repayment of trade loans		6.1	9.1
Sales of property, plant and equipment		27.2	44.2
Net cashflow from investing activities		(111.8)	(57.6)
Financing activities
Equity dividends paid	6	(45.2)	(34.9)
Issue of shares		207.4	0.4
Purchase of own shares		-	(0.4)
Financing costs		(16.0)	(7.7)
Repayment of borrowings		(290.9)	(361.3)
Advance of borrowings		-	349.8
Net cashflow from financing activities		(144.7)	(54.1)
Net (decrease)/increase in cash and cash equivalents		(92.6)	29.8
Opening cash and cash equivalents		120.5	90.7
Closing cash and cash equivalents		27.9	120.5

 

*EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptional items

 

 

 

	Share	Share	Merger	Capital	Hedging	Own	Retained	Total
	capital	premium	Reserve	redemption	reserve	shares	earnings
	£m	£m	£m	£m	£m	£m	£m	£m
At 4 May 2008	17.0	247.2	-	3.3	(3.6)	(17.2)	502.0	748.7
Profit for the period	-	-	-	-	-	-	39.5	39.5
Other comprehensive loss	-	-	-	-	(91.3)	-	(17.6)	(108.9)
Total comprehensive income	-	-	-	-	(91.3)	-	21.9	(69.4)
Issue of ordinary share capital	-	0.3	-	-	-	-	-	0.3
Release of shares	-	-	-	-	-	0.1	-	0.1
Purchase of own shares	-	-	-	-	-	(0.4)	-	(0.4)
Share based payments	-	-	-	-	-	-	(3.2)	(3.2)
Tax on share based payments	-	-	-	-	-	-	2.2	2.2
Equity dividends paid	-	-	-	-	-	-	(34.9)	(34.9)
At 3 May 2009	17.0	247.5	-	3.3	(94.9)	(17.5)	488.0	643.4
Profit for the period	-	-	-	-	-	-	79.9	79.9
Other comprehensive income	-	-	-	-	18.5	-	9.1	27.6
Total comprehensive income	-	-	-	-	18.5	-	89.0	107.5
Issue of ordinary share capital	-	0.1	-	-	-	-	-	0.1
Rights issue	10.1	-	197.1	-	-	-	-	207.2
Transfer	-	-	(197.1)	-	-	-	197.1	-
Release of shares	-	-	-	-	-	10.9	(10.8)	0.1
Share based payments	-	-	-	-	-	-	1.7	1.7
Tax on share based payments	-	-	-	-	-	-	(1.9)	(1.9)
Equity dividends paid	-	-	-	-	-	-	(45.2)	(45.2)
At 2 May 2010	27.1	247.6	-	3.3	(76.4)	(6.6)	717.9	912.9

 

Notes to the accounts

for the fifty-two weeks ended 2 May 2010

 

1. Basis of preparation

 

The financial information for the fifty-two weeks ended 2 May 2010 has been audited and has been prepared in accordance with International Financial Reporting Standards (IFRS) as required by European Union law. The accounting policies are as described in the full 2009 financial statements of Greene King plc, except for the following:

 

IFRS 2 Share-based Payments - Vesting Conditions and Cancellations

 

The amended standard changes the definition of vesting conditions and prescribes the accounting treatment of an award that is effectively cancelled due to non-vesting conditions not being satisfied. The adoption of the amendment had no material impact on the group's results or financial position.

 

IFRS 7 Financial Instruments: Disclosure

 

The amended standard requires additional disclosures about fair value measurement and liquidity risk. These disclosures have been incorporated in the consolidated accounts for the year ended 2 May 2010.

 

IFRS 8 - Operating Segments

 

The standard includes revised requirements for the identification, measurement and disclosure of segment information. The group has determined that its operating segments are the same as had previously been disclosed in accordance with IAS 14. The revised disclosures are included within note 2.

 

IAS 1 (Revised) Presentation of Financial Statements

 

The revised standard introduces the statement of comprehensive income which presents all items of recognised income and expense, either in one single statement, or in two linked statements. The group has elected to present two statements, showing profit for the period and total comprehensive income respectively. Changes in total equity which are attributable to the owners of the parent company in their capacity as such are shown directly in the statement of changes in equity outside total comprehensive income.

IAS 23 Borrowing Costs (Revised)

 

The revised standard requires the capitalisation of borrowing costs when such costs relate to an asset that necessarily takes a substantial amount of time to get ready for its intended use or sale. The adoption of the revised standard has had no impact on the group's results or financial position.

 

 

2. Segment information

 

2009/10 (52 weeks)	Retail	Pub	Brewing	Belhaven	Corporate	Unallocated	Total
		Partners	Company				operations
	£m	£m	£m	£m	£m	£m	£m
External revenue	589.2	145.1	97.9	151.9	-	-	984.1
Segment operating profit	106.4	64.6	21.4	32.7	(13.8)	-	211.3
Exceptional items							(31.3)
Net finance cost							(78.1)
Income tax expense							(22.0)
Net profit for the period							79.9
Net assets	1,291.2	783.1	208.9	361.6	(18.6)	(1,713.3)	912.9
EBITDA *	141.9	71.8	25.6	38.4	(13.3)	-	264.4

 

2008/09 (52 weeks)	Retail	Pub	Brewing	Belhaven	Corporate	Unallocated	Total
		Partners	Company				operations
	£m	£m	£m	£m	£m	£m	£m
External revenue	569.5	155.2	93.9	136.0	-	-	954.6
Segment operating profit	105.6	70.9	21.2	30.2	(11.7)	-	216.2
Exceptional items							(52.1)
Net finance cost							(109.8)
Income tax expense							(14.8)
Net profit for the period							39.5
Net assets	1222.0	850.5	201.6	338.7	(1.6)	(1,967.8)	643.4
EBITDA*	139.8	78.1	25.4	34.9	(10.9)	-	267.3

 

The group has determined four reportable segments that are largely organised and managed separately according to the nature of products and services provided, brands, distribution channels and profile of customers.

 

Retail: Managed houses and restaurants in England and Wales.

Pub Partners: Tenanted houses predominantly in England.

Brewing Company: Brewing beer, marketing and selling, predominantly in England.

Belhaven: Our Scottish operation which includes managed and tenanted houses and brewing and selling beer.

 

Unallocated assets/liabilities include cash, borrowings, pensions, net deferred tax, net current tax, and derivatives

 

*EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptionals.

 

 

3. Exceptional items

 

	2010	2009
	£m	£m
Operating
Financial systems integration and divisional restructuring	1.8	6.0
Exceptional VAT refund	(6.8)	-
Share based payment credit	-	(3.7)
Impairment of property, plant and equipment	37.3	53.5
Net profit on disposal of property, plant and equipment	(1.0)	(3.7)
	31.3	52.1
Financing
Net gain on repurchase of securitised debt	(13.5)	-
Early termination of interest rate swaps	3.3	-
Ineffective cash flow hedges - transfer from equity	-	12.1
Total exceptional items before tax	21.1	64.2
Tax impact of exceptional items	(5.1)	(16.7)
Tax (credit)/charge on indexation of properties	(4.3)	2.6
Tax credit on abolition of industrial building allowances	-	(0.7)
Total exceptional tax	(9.4)	(14.8)
Total exceptional items after tax	11.7	49.4

 

Exceptional divisional restructuring and financial systems integration costs are items of one-off expenditure incurred in connection with the restructuring of certain trading segments within the group and the review of group-wide financial systems.

 

During the year the group received a refund of £7m from HMRC in respect of VAT on gaming machines which has been recognised as exceptional income. The decisions that resulted in this refund have been referred to the European Court of Justice and should HMRC be successful in their appeal the group would be required to repay the refund with interest, and as such this represents a contingent liability. An exceptional gain of £6.8m net of associated costs has been recognised.

 

The share based payments credit results from the reversal of the previously recognised expense of share based payment schemes which are no longer expected to meet their performance criteria.

 

During the 52 week period to 2 May 2010 the group has recognised an impairment loss of £37.3m (2009: £53.5m) in respect of land and buildings within its licensed and unlicensed estates. The impairment has been recognised in respect of properties where the net book value has fallen below the higher of value-in-use and fair value less costs to sell.

 

The net profit on disposal of property, plant and equipment of £1.0m (2009: £3.7m) comprises a total profit on disposal of £5.0m (2009: £11.1m) and a total loss on disposal of £4.0m (2009: £7.4m).

 

During the year ended 2 May 2010 the group repurchased securitised debt with a nominal value of £30.3m recognising a net gain of £13.5m

 

Following the receipt of the proceeds of the rights issue and the subsequent repurchase of securitised debt certain interest swaps were no longer deemed to be effective hedges. An exceptional cost of £12.1m was recognised in the prior period in respect of the fair value of interest rate swaps no longer qualifying for hedge accounting at 3 May 2009. All ineffective swaps were cancelled during the period to 2 May 2010 resulting in an exceptional charge of £3.3m.

 

The tax (credit)/charge on indexation of properties represents the tax impact of movements in RPI during the period on the tax base cost of properties.

 

The Finance Act 2008 abolished allowances on industrial buildings and hotels on a phased basis which resulted in an exceptional deferred tax credit of £0.7m in the prior period.

 

 

4 Taxation

 

	2010				2009
	Before			Before
	exceptional	Exceptional		exceptional		Exceptional
	items	items	Total	items		items	Total
	£m	£m	£m	£m		£m	£m
Income tax
Corporation tax before exceptional items	33.9	-	33.9	32.3		-	32.3
Payable/(recoverable) on exceptional items	-	0.4	0.4	-		(1.7)	(1.7)
Current income tax	33.9	0.4	34.3	32.3		(1.7)	30.6
Adjustments in respect of prior periods	(3.8)	(3.0)	(6.8)	(1.7)		-	(1.7)
	30.1	(2.6)	27.5	30.6		(1.7)	28.9
Deferred tax
Origination and reversal of temporary differences	1.3	(6.8)	(5.5)	(1.0)		(13.1)	(14.1)
Tax charge in the income statement	31.4	(9.4)	22.0	29.6		(14.8)	14.8

 

 

5 Earnings per share

 

Basic earnings per share has been calculated by dividing the profit attributable to equity holders of £79.9m (2009 - £39.5m) by the weighted average number of shares in issue during the period (excluding own shares held) of 211.3m (2009 - 166.6m).

 

The weighted average number of shares in issue for the prior period of 133.7 million has been restated to reflect the bonus element of the rights issue that occurred in the period using a bonus factor of 1.246.

 

Diluted earnings per share has been calculated on a similar basis taking account of 0.9m (2009 - 0.7m) dilutive potential shares under option, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 212.2m (2009 - 167.5m). Where the average share price during the year is lower than the option price or the performance conditions of the option had not been met at the balance sheet date the options become anti-dilutive and are excluded from the calculation. The number of options where the average share price was lower than the option price was 2.4m (2009: 2.6m), the number of options that were anti-dilutive as a result of performance conditions not being met was 2.5m (2009: 2.5m).

 

Adjusted earnings per share excludes the effect of exceptional items and is presented to show the underlying performance of the group on both a basic and dilutive basis.

 

Adjusted earnings per share	Earnings		Earnings per share		Diluted earnings per share
	2010	2009	2010	2009	2010	2009
	£m	£m	p	p	p	p
Profit attributable to equity holders	79.9	39.5	37.8	23.7	37.7	23.6
Exceptional items (note 3)	11.7	49.4	5.6	29.7	5.5	29.5
Profit attributable to equity holders before exceptional items	91.6	88.9	43.4	53.4	43.2	53.1

 

 

6 Dividends paid and proposed

 

	2010	2009
	£m	£m
Declared and paid in the period
Interim dividend for 2010 - 5.9p (2009 - 5.9p*)	12.7	9.8
Final dividend for 2009 - 15.1p (2008 - 15.0p*)	32.5	25.1
	45.2	34.9
Proposed for approval at the AGM
Final dividend for 2010 - 15.6p (2009 - 15.1p)	33.5	32.5
Total proposed dividend for 2010 - 21.5p (2009 - 22.4p)	46.2	42.3
Total adjusted dividend for 2010 - 21.5p (2009 - 21.0p*)	46.2	42.3

 

* Adjusted dividend per share reflects the impact of the bonus element of the rights issue. The unadjusted 2009 interim dividend per share was 7.3p and the unadjusted 2008 final dividend per share was 18.7p.

 

Dividends on own shares have been waived.

 

 

7 Acquisitions

 

During the period the group acquired 3 packages of pubs: 11 pubs were acquired from Punch Taverns on 1 July 2009 for £31.6m, 7 from Mitchells & Butlers on 8 December 2009 for £13.4m and a further 8 from Punch Taverns for £16.6m on 16 February 2010.

 

Fair value of assets acquired:	2010
	£m
Fair value of property, plant and equipment and working capital acquired	53.5
Deferred tax asset	2.2
Goodwill	5.9
	61.6
Satisfied by:
Cash	59.2
Fees and taxes	2.4
Total consideration	61.6

 

 

8 Borrowings

 

		2010				2009
	Current	Non- current	Total		Current	Non- current	Total
	£m	£m	£m		£m	£m	£m
Bank overdrafts	7.3	-	7.3		0.4	-	0.4
Bank loans - floating rate	-	-	-		-	245.0	245.0
Securitised debt	22.9	1,343.0	1,365.9		21.7	1396.1	1,417.8
Loan notes	10.1	-	10.1		16.3	-	16.3
Borrowings	40.3	1,343.0	1,383.3		38.4	1,641.1	1,679.5
Cash and cash equivalents			(35.2)				(120.9)
Net debt			1,348.1				1,558.6

 

 

9 Rights issue

 

On 29 May 2009, a three-for-five rights issue was completed and 80.8m new ordinary shares with an aggregate nominal value of £10.1m were issued for cash consideration of £207.2m, net of issue costs of £10.9m. The rights issue was effected through a structure which resulted in the excess of the net proceeds received over the nominal value of the share capital issued being transferred to retained earnings. 

 

 

10 Working capital and non-cash movements

 

	2010	2009
	£m	£m
(Decrease)/increase in provision against financial assets	(0.1)	0.8
Decrease/(increase) in inventories	0.4	(4.0)
Increase in trade and other receivables	(3.0)	(3.2)
Increase in trade and other payables	11.6	8.1
Share-based payments expense	1.5	0.6
Difference between defined benefit pension contributions paid and amounts charged	(3.4)	(2.1)
Exceptional items	4.9	(6.6)
Working capital and non-cash movements	11.9	(6.4)

 

 

11 Analysis and movements in net debt

 

	2010	2009
	£m	£m
Cash in hand, at bank*	34.1	21.7
Short term deposits*	1.1	99.2
Overdrafts	(7.3)	(0.4)
Current portion of borrowings	(33.0)	(38.0)
Non current portion of borrowings	(1,343.0)	(1,641.1)
Closing net debt	(1,348.1)	(1,558.6)

*included in cash and cash equivalents on the balance sheet

 

Movements in net debt
	2010	2009
	£m	£m
Net (decrease)/increase in cash and cash equivalents	(92.6)	29.8
Proceeds - issue of securitised debt	-	(349.8)
Repurchase of securitised debt	15.9	-
Repayment of principal - securitised debt	23.6	21.2
Repayment of principal - loans and loan notes	251.4	340.1
Financing issue costs	-	7.2
Decrease in net debt arising from cash flows	198.3	48.5
Gain on repurchase of securitised debt	14.2	-
Other non cash movements	(2.0)	(1.6)
Decrease in net debt	210.5	46.9
Opening net debt	(1,558.6)	(1,605.5)
Closing net debt	(1,348.1)	(1,558.6)

 

Securitised debt repurchase

During the period securitised debt with a nominal value of £30.3m was repurchased for cash consideration of £15.9m. After fees, a net gain on repurchase of £13.5m has been recognised as exceptional income.

 

Securitisation tap

In the previous year £349.8 million of bonds (with a nominal value of £350m) were issued as a tap of the original securitisation. The bonds are secured over the properties and their future income streams and were issued by Greene King Finance plc. The funds were used to repay existing bank facilities.

 

 

12 Dividend payments

 

Subject to the approval of shareholders at the annual general meeting, the final dividend will be paid on 13 September 2010 to shareholders on the register at the close of business on 13 August 2010.

 

 

13 Reports and accounts

 

The above financial information is derived from the statutory accounts for the period ended 2 May 2010 on which the auditors have issued an unqualified opinion. The information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

 

The accounts for the period ended 3 May 2009 have been filed with the Registrar of Companies and the auditors of the company made a report thereon under Chapter 3 of Part 16 of the Companies Act 2006. That report was an unqualified report and did not contain a statement under Section 498 (2) or Section 498(3) of the Act.

 

The 2010 Report & Accounts will be posted to shareholders on 30 July 2010 and copies will be available from that date from the Company Secretary at the registered office of the company, Westgate Brewery, Bury St. Edmunds, Suffolk IP33 1QT.

 

 

This information is provided by RNS

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