Half Yearly Report

PRESS RELEASE

GREENE KING plc

Interim results for the 24 weeks to 14 October 2012

STRONG GROWTH AND RETAIL MOMENTUM

DRIVING ATTRACTIVE RETURNS

PERFORMANCE HIGHLIGHTS

·; Retail like-for-like sales up 4.3%; total Retail sales up 10.9%.

·; Retail profit up 17.4%; margin increased 120 basis points to 20.4%.

·; Average EBITDA per pub up 3.9% in Pub Partners.

·; Brewing & Brands revenue up 2.2%; market share up 50 basis points to 9.9%.

·; Strong earnings & dividend growth; cashflow & balance sheet strengthened.

·; Further improvement in group ROCE; up 20 basis points to 8.7%.

·; Current trading resilient; Retail like-for-like sales up 2.2% in the last six weeks.

STRATEGIC PROGRESS

·; Further retail expansion; additional 20 sites acquired or transferred from Pub Partners.

·; Pub Partners estate down by 58 sites; influencing the offer in 26% of the estate.

·; Brand investment maintained despite cost challenges in Brewing & Brands.

* before exceptional items

Rooney Anand, Greene King chief executive officer, comments:

"Our team has delivered another strong trading performance driven by 17% profit growth in our retail division. We have continued to focus on providing excellent value, service and quality to our customers, while improving productivity and keeping tight control of costs. This has led to strong sales and profit growth, increased cashflow, improved returns and a stronger balance sheet.

While we continue to see a challenging environment for the UK consumer, our strategy has been tailored for these conditions - we provide our customers with 'everyday treats' and value for money. We are confident we can generate further success and deliver sustainable earnings and dividend growth for our shareholders."

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

For further information:

NOTES FOR EDITORS

·; Greene King was founded in 1799 and is headquartered in Bury St. Edmunds, Suffolk. It currently employs over 21,000 people across its main trading divisions: Retail, Pub Partners and Brewing & Brands.

·; It operates 2,298 pubs, restaurants and hotels across England, Wales and Scotland, of which 972 are retail pubs, restaurants and hotels, and 1,326 are tenanted, leased and franchised pubs. Its leading retail brands are Hungry Horse, Old English Inns, Eating Inn and Loch Fyne Restaurants. 94% of the estate is either freehold or long leasehold.

·; Greene King also brews quality ale brands from its Bury St. Edmunds and Dunbar breweries, and is the UK's leading cask ale brewer and premium ale brewer. Its core 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.1 premium cask ale in the UK and Belhaven Best, the no.1 ale brand in Scotland.

GREENE KING plc

CHAIRMAN'S STATEMENT

RESULTS

In a strong first half of this financial year, we achieved revenue of £566.2m, up 7.3% on last year. Operating profit before exceptionals was £122.7m, up 6.1%, and profit before tax and exceptional items was £82.7m, up 7.1%. Adjusted earnings per share was 29.2p, up 8.6%.

DIVIDEND

As a result of the strong performance, the board has declared an interim dividend of 7.15p per share, up 6.7% on last year. This will be paid on 25 January 2013 to those shareholders on the register at the close of business on 21 December 2012.

ACQUISITIONS

We continue to expand our retail estate. During the first half of the year we acquired eight pubs for £5.9m and exchanged or completed on six additional sites for development.

DISPOSALS

We are also focused on reducing the size of our tenanted estate. During the first half of the year, we disposed of 55 non-core pubs and other properties for £13.6m, ahead of the book value of the assets concerned.

BOARD

At the end of December, we will bid farewell to Norman Murray, who will have been on our board as a non-executive director for nine years. He has served as chairman of both the audit and the remuneration committee during that time. I would like to express my sincere thanks to him for the substantial contribution he has made to the board and wish him well for the future.

In October, we welcomed Lynne Weedall to our board as a non-executive director and member of the remuneration committee. She is the HR and strategy director at Carphone Warehouse and her business background will be a great asset to us.

GOVERNANCE

As well as being the current chairman of the remuneration committee, Norman Murray is also our senior independent director. When he retires at the end of the year, Ian Durant will take over as senior independent director and Lynne Weedall as chairman of the remuneration committee.

PEOPLE

I would like to convey my sincere thanks to all of those who make Greene King the successful company it is: our employees and our partners throughout our tenanted and leased estate have again worked very hard to deliver these strong results. Everyone associated with Greene King has made a contribution to our success and should feel very proud of these results and our continued progress.

Tim BridgeChairman

03 December 2012

CHIEF EXECUTIVE'S REVIEW

PERFORMANCE SUMMARY

We have delivered a successful trading performance, fuelled by an outstanding result from our largest and fastest growing business, Retail, which achieved 17% profit growth: -

·; Group revenue was £566.2m, up 7.3% over the same period last year.

·; Operating profit before exceptional items was up 6.1% at £122.7m.

·; The on-going change in business mix led to a slight drop in operating margin to 21.7%.

·; Profit before tax and exceptional items was £82.7m, up 7.1%.

·; Adjusted earnings per share grew 8.6% to 29.2p.

·; The board has declared an interim dividend of 7.15p per share, up 6.7% on last year.

·; Return on capital employed was 8.7%, up 20 basis points.

Our strong trading momentum has continued with revenue growth of over 7%, driven by double digit revenue growth in Retail. Our consistent focus on providing customers with industry-leading value, service and quality drove like-for-like (LFL) sales of 4.3% in Retail, supported by a positive contribution from acquisitions. Retail now generates 72% of group sales. Labour productivity improvements, tight cost control and acquisition synergy benefits drove strong margin growth in Retail, which helped to offset much of the negative impact of our changing business mix on the group operating margin in the period.

The strong trading performance has delivered attractive returns to our shareholders with earnings growth of 8.6% and dividend growth of 6.7%. We are now in the third year of our strategic plan and the impact of our estate changes, growing the size and quality of our retail estate and reducing the size and improving the quality of our tenanted and leased estate, is continuing to drive improvements in our return on capital employed (ROCE). On a rolling 12 months basis, ROCE has risen 20 basis points (bps) to 8.7%, well ahead of our cost of capital.

OVERVIEW

We have achieved this strong result in the context of challenging economic conditions, a difficult regulatory environment and prudent and judicious consumers. Our growth has also been achieved despite the adverse weather conditions, which negatively impacted on trading throughout the summer, including at big events such as the Diamond Jubilee.

Since the partial economic recovery in 2010, the last two years have been lacklustre economically with limited output growth and real incomes in decline. In addition, there are a number of external risks holding back economic and consumer confidence, such as the on-going issues in the Eurozone.

Whether it is the duty escalator, machine gaming tax or further red tape, the regulatory environment remains a challenge for the pub and beer sectors. However, we do support the government's planned introduction of a minimum unit price (MUP) for alcohol as we believe it is a well-targeted measure for helping to reduce irresponsible retailing and consumption of alcohol. Supermarkets and convenience stores continue to sell alcohol at below cost price, protected by their ability to cross subsidise alcohol losses and their tax advantages over pubs and clubs. In our view, any well considered measure, like MUP, that could reduce the negative impact of alcohol on society, should be supported by responsible producers and retailers of alcohol.

Demographic and consumer trends are constantly changing and adapting, particularly in the current environment, and can provide significant opportunities for competitive advantage and growth, when we are able to move quickly.

For example, the UK population size is expected to rise 8%, or 5m, between now and 2020 with London, the East of England and the South East expected to experience the largest increases. These are areas where we are well represented and well positioned to benefit.

The most important consumer trend, as shown by a propensity for 'everyday treats', is the flight to value. This has helped us to flourish through the last few years, using our brands, our scale and our efficiency to successfully deliver great value at all times. We expect this trend to continue and therefore will maintain our focus on growing our Hungry Horse and Cloverleaf brands in particular.

Our growing digital platform provides us with an effective way to meet a number of consumer trends, including value, rising consumer empowerment and increasingly hectic lifestyles. Whether it be targeted voucher offers, regular dialogue with customers via social media, or the ability to find the nearest Greene King pub and book a table for dinner, digital will continue to grow in importance for all successful hospitality businesses. We are well placed to benefit as our investment in digital, and our success, continues to build.

STRATEGIC PROGRESS

We are now into the third year of our focused strategy to improve growth and returns to shareholders through increasing our exposure to the more attractive categories in our markets. We have made further progress in all areas as we continue to invest in a successful future for Greene King: -

1. Expanding Retail to 1,100 sites and improving estate quality. We acquired or transferred in 20 sites in the first half of this year to take the estate to 972 pubs, restaurants and hotels, up from 888 when we began our accelerated Retail expansion strategy. Hungry Horse, our largest and most successful brand, is now up to 188 trading sites with eight either under development or acquired and in planning. The return on our acquisitions, since we commenced our strategy, is on an improving trend and has reached an average house EBITDA ROI of 14.1%.

2. Reducing the Pub Partners estate, improving estate quality and increasing our offer influence. In Pub Partners, we disposed of 48 non-core sites and transferred ten sites to Retail. Average EBITDA per pub grew by 3.9% and there were 35 franchise and franchise-style sites at the period-end. There are now 341 sites, or 26% of the Pub Partners estate, under central offer influence.

3. Maintain industry-leading brand investment to strengthen leadership position. We continued to invest in our core ale brands and Brewing & Brands again outperformed the UK ale market. Our Greene King IPA 'crafted for the moment' national TV campaign ran throughout May, with 25% of people who saw the advertisement 'buying more as a result'.* Also, our 'Love GB, Great Beer' campaign included the launch of our Headbrewers Selection, the most successful ale launch in the off-trade this year*.

* Nielsen Scantrack

GREENE KING RETAIL

OVERVIEW

Momentum in Greene King Retail has been maintained after another strong trading performance. LFL sales growth was 4.3%, more than 3%pts above the sector average*. This growth was a healthy blend of volume growth of 1.7% and price, mix and spend per head improvements of 2.6%. All our major sales categories performed well with food LFL sales up 4.9%, drink LFL sales up 3.8% and room LFL sales up 4.3%. In London, where we have been extending our presence over the last three years, LFL sales were up 8.6%.

Total revenue was £407.4m, up 10.9%, on 4.6% more sites. As a result, the average weekly take grew by £1,000, or 6.0%, to £17.6k. We also delivered strong profit growth. Operating profit was £83.0m, up 17.4%. The operating margin was 20.4%, an improvement of 120bps over last year, driven by strong operational gearing, improved labour productivity and the delivery of acquisition synergies.

* Peach Tracker

There are a number of key factors driving the continued strong trading momentum in Retail: -

1. OUR FOCUS ON DELIVERING THE BEST VALUE, SERVICE & QUALITY

The flight to value by UK consumers, as they seek out 'everyday treats', has continued through the first half of this financial year. In this environment, we maintained our value offer to customers without diluting margins.

In Hungry Horse, our weekly offers are now 27% of all food covers sold and our loyalty programme, being trialled in 40 sites, now has over 22,000 members. In Eating Inn, we made a strategic move to reduce average retail selling prices by 5%, while in Loch Fyne Restaurants (LFR) we increased the average portion size of our 'fish your way' dish. In Belhaven, we introduced Carling as a value lager, priced below the market leader, while in Local Pubs, we re-launched our 'Season Ticket' sports loyalty programme, doubling the number of members able to take advantage of the available food and drink offers.

We are committed to continuous service improvement in our business.

Our tailored service enhancement programmes across Destination Pubs continued and evolved through the period. We launched 'Keeping it Reel' within LFR, which saw immediate benefits with record Net Promoter Scores (NPS), a halving of customer complaints and a doubling of customer compliments. In Hungry Horse, we launched 'Hungry for Feedback', a guest satisfaction programme, to complement the existing service measurement programme. So far, we have had 30,000 responses delivering an NPS score of 52.8%. Overall, the NPS score for Retail averaged 50.7%, 160bps better than last year.

We are also focused on giving our customers the highest possible quality of food, drink and accommodation.

In both Eating Inn and Belhaven, we have increased the number of fresh, homemade dishes on the menus, focusing on the key menu items in particular. In Old English Inns (OEI), we are selling over 16,000 portions each week of our award-winning fish & chips and we have introduced 'superior' bedrooms to a number of our refurbished hotels. We have also rolled out 'try before you buy' across the Local Pubs estate and on all cask ales in Belhaven.

2. INCREASING EXPOSURE TO GROWTH CATEGORIES SUCH AS FOOD, WINE & COFFEE

Growing our share of the £41bn* informal dining market is a key pillar of our retail growth strategy. We do this by broadening the appeal of our food offers to drive cover growth, alongside price and mix improvements to help offset annual cost inflation.

Against a market that is growing value at around 3%, food sales in Greene King Retail were up 12.0% in the period, taking food's share of total sales to 40%, up 50bps on last year. Food LFL sales were up 4.9% with cover growth of 2.0%.

During the period, we launched a pizza range in Hungry Horse and our innovative 'cakeaway' product continues to grow in both Hungry Horse and Cloverleaf. We launched a 'British Classics' range for the summer in OEI, and in Eating Inn, we launched a new and extensive kids menu with a 'pick 'n' mix' option. Our new menus in Local Pubs are now more clearly differentiated by segment and include more specific 'occasion-led' dishes.

Wine and coffee are also very important long-term growth categories.

Wine sales were up 22% on the same period last year and are up 57% in the last four years. Wine sales per site grew 16.4%. Not only is the size of our wine offer growing, but the quality continues to improve with 14 awards won at the recent International Wine Challenge. In Metropolitan, our premium local pubs estate, we have introduced a dedicated wine specialist and developed our own premium, directly sourced, own-label brand, Piazzi, which is selling well in 50 sites.

Hot beverage sales, of which coffee is 75%, were up 8.3% in the period. Three quarters of our offer is now through illy, who we began partnering with in 2010. On an annualised basis, we are now selling over 100 cups per site, per week.

* Allegra Strategies

3. IMPROVING THE SIZE & QUALITY OF OUR ESTATE THROUGH TARGETED ACQUISITIONS

A key part of our strategy is to grow our retail estate to around 1,100 sites, which remains on track. During the period, we acquired or transferred in 20 sites and disposed of two non-core sites, taking the period-end estate to 972 pubs, restaurants and hotels. Of those new sites, seven were single-site acquisitions and three were new-build sites, including our first Hungry Horse leasehold site, on the Wirral, and ten were transfers from Pub Partners, including seven Meet & Eat sites. These transfers are supporting the expansion of the Meet & Eat brand within Retail. In addition, our pipeline for further expansion is healthy and in the period we exchanged or completed on a further six sites.

4. EMPLOYING THE BEST TRAINED & MOTIVATED PEOPLE IN THE SECTOR

Every year we increase investment in our people as we aim to ensure Greene King is a great place to work. We have over 21,000 employees across all of our businesses, with 93% working within Retail, of which 28% are part-time. They are the heartbeat of our business and responsible for most of our customer interactions on a day to day basis. Recruiting well, developing them and retaining them for longer is a clear focus for us as we try to deliver industry leading customer service.

At the cornerstone of our approach is our Discovery Apprentice scheme, which we began in January 2011. Since we began supporting apprenticeships, the culture within Retail has improved as team members can more easily see a career path in hospitality ahead of them. The growth of the scheme and its results are excellent: at the period-end, we had over 2,300 apprentices in Retail, of which 1,900 were 'in learning' and over 400 were fully trained, equating to 16% of our full-time Retail team and over four times the total one year ago. Most importantly, 82% of our apprentices have successfully completed the programme, well ahead of the national average of 62%.

This focus on, and success of, our apprenticeship scheme has positively influenced team turnover employee engagement, up 3%pts to 74%, and labour productivity, which was 3% better than last year.

5. CONTINUED INVESTMENT IN OUR BRANDED & SEGMENTED ESTATE

In Retail, we only operate branded sites or sites clearly segmented by customer occasion and demographics. Fully branded pubs, restaurants and hotels represent 41% of our Retail estate, with our leading brand, Hungry Horse, up to 188 trading sites at the period-end. This remains our main growth brand, reflecting the consumer's propensity to seek out value, and we expect to open our 200th Hungry Horse during the second half of the year. Other brands within our estate include Old English Inns (107 sites), Loch Fyne Restaurants (42 sites), Eating Inn (28 sites) and Cloverleaf (15 sites).

Metropolitan, our premium London estate, continues to trade well. There are currently 51 sites in this division, entirely located within the M25, following two further redevelopments from Greene King pubs to Realpubs at the King's Stores in Whitechapel and St. Margaret's in Twickenham. All four of the transfers to date have performed well above expectations and we anticipate a further four sites to be redeveloped in the remainder of the financial year.

In total, we spent £31.4m on repairing, maintaining and improving the quality of our retail estate. £14.4m of this was expansionary capital, split fairly equally across Destination Pubs and Local Pubs. This was invested in 78 sites, or 8.1% of the estate, and achieved an EBITDA ROI of 32.1%.

6. INCREASING INVESTMENT IN OUR EXPANDING DIGITAL PLATFORM

Investment in our digital platform has continued as we increase our customer understanding and use their direct feedback to improve the offer across Retail. Website 'hits' across the business grew 64% to reach 129,000 per week. Of these, 30% were via mobile devices, up from 11% in the first half of last year. On-line reservations grew 9% and now generate 9% of all reservations in LFR. We now have 174,000 facebook followers, up from 23,000 this time last year, our email database increased 64% and we received 80,000 service feedback forms from our customers during the period. We also launched a free Wi-Fi service and, by the period-end, this had been rolled out into 82% of the estate.

PUB PARTNERS

OVERVIEW

The tenanted and leased model has become increasingly challenged over the last five years and our response has been to reduce the size of our Pub Partners' estate and to enhance our influence over the customer offer in order to improve licensee and pub sustainability. We are not investing in Pub Partners to deliver material growth but to maintain its important role within Greene King. It generates significant cash for the group, it adds material purchasing scale and it gives us an attractive yield on smaller pub sites.

On almost 10% fewer pubs, Pub Partners achieved revenue of £73.9m in the period, down 3.9%. Beer volume and rental income per pub were both ahead of last year. EBITDA was £36.2m, down 5.7%, with average EBITDA per pub up 3.9%. LFL EBITDA in the core estate was down 0.2% and total LFL EBITDA was down 0.8%. Operating profit was £32.4m, 6.6% down, with the operating margin 1.3%pts lower, mainly due to the impact of our franchised model.

Recruitment of quality licensees is the most important element of the Pub Partners' business model. During the period, we reorganised our recruitment team into regions, increasing focus and accountability. Within certain regions, under the recruitment slogans 'Great to be Greene' and 'Better to be Belhaven', we enhanced our local recruitment efforts including re-introducing open days, advertising on petrol pumps and taking out advertisements in local newspapers. As a result, we kept temporary agreements down to 28, against 71 at the same stage last year, and we brought the average time to let down from 196 days to 119 days.

A number of pubs from within the Pub Partners' estate were recognised for their achievements including the Hand and Flowers in Marlow, which remains the only pub in the UK with two Michelin stars, and the White Oak in Cookham, which was one of only 15 pubs to receive its first Bib Gourmand in 2012.

Further innovation was introduced during the period, including a new suite of agreements to broaden our appeal to prospective licensees and to further align our interests: -

1. Touchstone - a six year, fully tied tenancy.

2. Touchstone Plus - a six year, partially tied tenancy with a cash back reward scheme.

3. Access - a six year tenancy for high calibre new industry entrants with limited funding.

4. Horizon - a ten year fully repairing and insuring lease.

Sitting alongside these agreements, we had 35 franchise or franchise-style agreements in place across both Meet & Eat and Local Hero. During the period, we transferred seven Meet & Eat sites into Retail and our focus during the second half of the year will be expanding Local Hero into a further 15 sites. The combined house EBITDA ROI on these developments is 15.3%.

Other business to consumer (B2C) initiatives, driving additional value opportunities to our licensees, included: the continuation of our 'Love your Local' discounted price scheme; the introduction of a Sports Club and a Cask Club with specific central support for key sporting events and cask ale; and the expansion of our buying club, BarGains, utilising our scale advantages to provide licencees with preferential buying terms in key areas such as food. We also now provide digital marketing support to our licensees. In total there are 341 sites, or 26% of the trading estate, under an element of central offer influence.

Recruiting and retaining quality licensees, while supporting them through our B2C initiatives has led to average licensee tenure rising two months to four years and seven months, while bad debts remain low at 0.5% of sales.

Our non-core disposal programme is on track with 48 sites sold during the period. At the period end, Pub Partners had 1,326 trading sites and a further 46 closed for disposal. Over the course of the financial year, we expect c. £1m of lost EBITDA due to declining trade during the disposal process, partly offset by on-going overhead savings as the estate reduces in size.

BREWING & BRANDS

OVERVIEW

Brewing & Brands is a strong business with market-leading ales, supported by industry-leading brand investment and a highly efficient brewing model, combining to deliver the highest ROCE within Greene King. Nevertheless, it is facing some structural headwinds, in the form of: supplier cost increases for third party lager, which is adversely affecting our free trade wholesaling business, particularly in Scotland; declining volume in the traditional parts of the on-trade market, particularly tenanted; above inflation input cost increases; and a reduction of almost 10% in the number of Pub Partners' sites.

However, by maintaining brand investment, our core brands have substantially outperformed the UK ale market and they have all retained their market-leading positions.

Core own-brewed volume (OBV) in Brewing & Brands was down 0.9%, outperforming a UK ale market down 3.0%*. Old Speckled Hen, the UK's no.1 premium ale brand, achieved volume growth of 5.9% in a premium ale market up 1.8%*, Greene King IPA, the UK's no.1 cask ale brand, achieved volume growth of 2.2%, in a standard ale market down 5.0%*, while Belhaven Best remains the clear no.1 ale brand in Scotland. Overall, our value share of the total UK ale market has grown 50bps to 9.9%**.

We continue to reposition Brewing & Brands towards the growth channels of take home and export. Following another period of growth, the share of OBV through these channels is now 37%, up from 27% five years ago.

We generated revenue of £84.9m, up 2.2% on last year, although operating profit fell 13.5% to £14.1m. The operating margin was down 3.0%pts to 16.6%.

Quality remains at the heart of Brewing & Brands. Tolly English Ale won 'best low strength beer' at the World Beer Awards and Old Golden Hen won a bronze award at the International Beer Challenge. We retained our Red Tractor status and both breweries received top awards from the British Retail Consortium for food safety standards.

We also pride ourselves on our consistently high service standards. Belhaven won the Dram magazine customer service award for the 4th year running and we worked hard to maintain service standards throughout the disruptions during the event-driven summer, including London 2012 restrictions.

We are at the forefront of innovation and new product development in the sector. The Revolution font is now in 2,200 on-trade accounts, helped by new designs to broaden distribution, Old Golden Hen has been the most successful ale new product development (NPD) launch in the last five years*** and our Headbrewers Selection multi-pack has generated 14% of all NPD value in ale market the last 12 months***. We estimate that, in total, our NPD brands will add 34,000 barrels to our OBV in the full year, 25% ahead of expectations.

* BBPA

** CGA Brand Index, Nielsen Scantrack

*** Nielsen Scantrack

FINANCIAL REVIEW

The benefits of a consistent and clear strategy to deliver earnings and dividend growth, despite the weak economic backdrop, continue to be seen in the performance of the business.

RESULTS

Revenue grew by 7.3% on last year to £566.2m. The biggest driver of this growth came from our retail estate where revenue grew by 10.9% with average revenue per pub rising by 6.0%. Our retail estate now accounts for over 72% of group revenue. Total revenue in Pub Partners was down 3.9%, while average revenue per pub increased by 6.1%. Brewing & Brands grew revenue by 2.2%.

Operating profit before exceptionals was £122.7m, up 6.1% on last year, with the operating margin down 20bps to 21.7%. The main driver of the reduction in group operating margin remains the changing business mix of the group, accounting for 40bps of decline. This was offset, in part, by a 20bps improvement from trading. Control over costs and cash remains strong with the operating margin of the retail estate growing 1.2%pts over last year at 20.4%, despite significant cost inflation.

Net interest costs, before exceptional items, of £40.0m were only 4.2% higher than the same period last year, as a result of strong cash flow management and despite a reduction in the IFRS pension interest credit of £0.5m. Profit before tax and exceptionals was £82.7m, an increase of 7.1% on last year. The tax charge before exceptional items of £19.8m equates to an effective tax rate of 24.0%. Earnings per share before exceptional items of 29.2p was up 8.6%, benefitting from the reduction in the effective tax rate. Statutory profit before tax was £84.3m, up 48.7% on last year.

CASH FLOW

Operating cash flows remain strong. We delivered EBITDA before exceptional items of £149.5m, up 6.2% on last year, from 4.1% fewer pubs. After investing in the core estate, paying interest, tax and dividends, we generated free cash flow of £36.9m, comfortably ahead of our debt service obligation of £13.7m. This remains a consistent part of our long-term financial strategy.

During the period, we disposed of 55 sites as part of our strategy to improve the quality of our estate with the cash proceeds totalling £13.6m.

As outlined below we made good progress towards our target of growing our retail estate to 1,100 sites with cash outflow on acquisitions and acquired sites totalling £21.0m, bringing the net cash inflow in the period to £30.3m.

CAPITAL EXPENDITURE

We also continued to invest in both maintaining and developing our core estate, in addition to growing the size of our retail estate. Total expenditure during the period was £55.3m.

Capital expenditure on the core estate, including maintenance capital, has been maintained at £34.3m, similar to last year. A further £8.7m was invested in acquiring single sites and £12.3m was invested on these and previously acquired sites.

Looking forward we have a strong pipeline of new retail sites and we are on track to open 25 per year from a combination of new builds, single-site acquisitions and transfers.

NET DEBT AND TREASURY

Net debt at the period-end was £1,462.9m, a reduction of £30.3m from the previous year-end, with the key movements being positive free cash flow of £36.9m, disposal proceeds of £13.6m and investment in growing our retail estate of £21.0m.

Our high quality and primarily freehold assets support £1,315.3m of securitised bonds with amortisation of £13.7m in the first half. Our £400m revolving credit facility was £205.0m drawn at the period-end and is available until April 2016. 

Our overall credit metrics remain strong, with interest rate hedges in place for 99% of the variable rate debt and a blended average cost of debt of 6.0%. Fixed charge cover has slightly improved to 2.9x, while interest cover remains at 3.0x. Annualised net debt to EBITDA has reduced to 4.9x and will continue to improve as we maximise the annual EBITDA returns from our investments. Our securitised vehicle had a free cash flow debt service cover ratio of 1.5x at the period-end, giving 27% headroom.

DIVIDEND

The board has declared an interim dividend of 7.15p, up 6.7%. This will be paid on 25 January 2013 to shareholders on the register at the close of business on 21 December 2012.

PENSIONS

The group maintains a defined contribution scheme which is open to all new employees.

The group's three defined benefit schemes are all now closed to new entrants. During the period, the group completed a consultation with the remaining active members of the defined benefit schemes, resulting in the schemes being closed to future accrual and members being invited instead to join the defined contribution scheme. A net exceptional gain of £8.4m has been recognised, comprising a £10.1m gain in respect of past service accrual no longer being linked to future salary growth, less £1.7m of implementation costs.

As at 14 October 2012, there was an IAS 19 pension deficit of £56.2m, which compares to £67.3m at the previous balance sheet date. The movement is primarily driven by the exceptional gain following the closure of the scheme to future accrual.

Total cash contributions in the period were £6.1m for both past and current service.

The triennial valuation for our main pension scheme has been completed, and annual deficit funding payments will reduce to £6.9m from the 2013 calendar year.

EXCEPTIONAL ITEMS

As set out in note three, we recorded a net exceptional credit of £11.3m during the period, consisting of a £1.6m credit to profit before tax and an exceptional tax credit of £9.7m.

In addition to the £8.4m credit relating to the pension scheme, we achieved a profit over book value on disposed pubs and other properties of £2.0m.

Offsetting these gains is an impairment charge of £7.3m against the carrying value of a small number of our pubs where specific market conditions have impacted trading, with a further impairment of £0.7m recognised in respect of one of our sites damaged by fire. In the period, we received insurance compensation to meet the costs of restoring the site with further amounts receivable as the project progresses. A charge of £1.1m, relating to amounts payable in respect of the acquisitions of Cloverleaf and Realpubs, has also been recognised.

The exceptional tax credit of £9.7m is made up of four items: a credit of £6.0m arising from the reduction in the rate of corporation tax from 24% to 23% effective April 2013; a £3.7m credit on revaluation and rolled-over property gains; a charge of £0.3m in relation to tax on exceptional items; and a £0.3m credit adjustment in relation to prior years.

CURRENT TRADING AND OUTLOOK

Since the end of the period, trading has been slightly slower. In the last six weeks, LFL sales in Retail were up 2.2%, although Christmas is again looking positive as bookings are up 17% with deposits paid on 80% of these bookings. Brewing & Brands core brand volume was down 1.4%. After 30 weeks, average EBITDA per pub in Pub Partners was up 3.7%.

Trading conditions are likely to remain challenging for the rest of this financial year as our customers maintain a prudent approach to spending. However, our strategy is tailored to the conditions, as it provides 'everyday treats' for our customers, and we remain confident that we can continue to deliver sustainable earnings and dividend growth for our shareholders.

Rooney Anand

Chief executive officer

03 December 2012

Unaudited group income statement

for the twenty-four weeks ended 14 October 2012

* Adjusted earnings per share excludes the effect of exceptional items.

Unaudited group statement of comprehensive income

for the twenty-four weeks ended 14 October 2012

Unaudited group balance sheet

as at 14 October 2012

Unaudited group cashflow statement

for the twenty-four weeks ended 14 October 2012

* EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptional items and is calculated as operating profit before exceptionals adjusted for the depreciation charge for the period.

Unaudited GROUP statement of changes in equity

for the twenty-four weeks ended 14 October 2012

Notes to the accounts

for the twenty-four weeks ended 14 October 2012

1 Basis of preparation

This interim report has been prepared in accordance with UK listing rules and with IAS 34 'Interim Financial Reporting'.

The financial information contained in this interim statement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The figures for the year ended 29 April 2012 have been derived from the statutory accounts of the group for that year. These published accounts were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted for use in the European Union, were reported on by auditors without qualification or statement under Sections 498(2) and 498(3) of the Companies Act 2006 and have been filed with the Registrar of Companies.

A combination of the strong operational cashflows generated by the business, and the significant available headroom on its credit facilities, support the directors' view that the group has sufficient funds available to meet its foreseeable working capital requirements. The directors have concluded therefore that the going concern basis remains appropriate.

The accounting polices adopted in the preparation of the interim report are consistent with those applied in the preparation of the group's annual report for the year ended 29 April 2012.

The group does not consider that any standards or interpretations issued by the International Accounting Standards Board (IASB), but not yet applicable, will have a significant impact on the financial statements for the 52 weeks ending 28 April 2013.

Notes to the accounts

for the twenty-four weeks ended 14 October 2012

2 Segment information

The group has determined three 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. The segments include the following businesses:

Retail: Managed houses and restaurants.

Pub Partners: Tenanted houses

Brewing & Brands: Brewing beer, marketing and selling

* EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptional items and is calculated as operating profit before exceptionals adjusted for the depreciation charge for the period.

Notes to the accounts

for the twenty-four weeks ended 14 October 2012

3 Exceptional items

Exceptional 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.

Following the closure of the group's defined benefit pension schemes to future accrual an exceptional credit of £8.4m has been recognised. This comprises a gain of £10.1m in respect of past service accruals no longer being linked to future salary growth less £1.7m for implementation costs and fees.

Acquisition costs include charges in respect of amounts payable, two years post acquisition and subject to the future profitability of the businesses, to the former owners of Cloverleaf Restaurants and Realpubs, respectively, who have remained employees of the group.

During the 24 week period to 14 October 2012 the group has recognised an impairment loss of £7.3m (2011: £16.2m) in respect of its licensed estate. The impairment has been recognised in respect of pubs where the higher of value-in-use and fair value less costs to sell has fallen below the net book value.

An impairment loss of £0.7m has been recognised in respect of a licensed property damaged by fire. In the period the group has received £0.3m of insurance compensation to meet the costs incurred to date of restoring the property; further compensation is expected to be received as the restoration project progresses.

The net profit on disposal of property, plant and equipment of £2.0m (2011: loss £0.1m) comprises a total profit on disposal of £4.4m (2011: £2.5m) and a total loss on disposal of £2.4m (2011: £2.6m).

Notes to the accounts

for the twenty-four weeks ended 14 October 2012

Exceptional taxThe Finance Act 2012 reduced the rate of corporation tax from 24% to 23% from 1 April 2013. The effect of the new rate is to reduce the deferred tax provision by a net £3.3m, comprising a credit to the Group Income Statement of £6.0m and a debit to Group Statement of Comprehensive Income of £2.7m.

In addition it is proposed that the rate of corporation tax will be reduced to 22% from 1 April 2014. This change has not been substantively enacted at the balance sheet date and consequently is not included in these financial statements. The effect of these proposed reductions would reduce the deferred tax liability by £2.7m.

The adjustment in respect of prior periods is in respect of deferred taxation on revaluation and rolled over gains on land and buildings.

4 Tax

The tax charge before exceptional items is £19.8m which equates to an effective tax rate of 24% which is estimated to be the effective rate before exceptional items for the year ended 28 April 2013. This compares to an effective rate of 25% for the same period last year.

5 Earnings per share

Basic earnings per share has been calculated by dividing the profit after taxation of £74.2 million (2011: £48.1 million) by the weighted average number of shares in issue of 215.6 million (2011: 215.0 million).

Adjusted earnings per share excludes the effect of exceptional items and is presented to show the underlying performance of the group.

Diluted earnings per share has been calculated on a similar basis taking into account 0.7m (2011: 0.6m) dilutive potential shares under option, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 216.3m (2011: 215.6m).

Notes to the accounts

for the twenty-four weeks ended 14 October 2012

6 Dividends paid

7 Working capital and non-cash movements

8 Analysis and movements in net debt

Notes to the accounts

for the twenty-four weeks ended 14 October 2012

9 Post balance sheet events

An interim dividend of 7.15p per share (2011: 6.70p) amounting to a dividend of £15.6m (2011: £14.4m) was declared by the directors at their meeting on 3 December 2012. These financial statements do not reflect this dividend payable.

10 Risks and uncertainties

The principal risks and uncertainties facing the group during the period under review and going forwards for the remainder of this year have not materially changed from those set out on pages 26 to 28 the 2011/2012 annual report and accounts, which can be viewed via the www.greeneking.co.uk website. The risks are summarised as follows:

·; Ability to acquire and build new managed pubs

·; Ability to reduce the size of our tenanted estate

·; Success of investment in our core ale brands

·; UK economic conditions impacting customer spend and causing inflationary cost pressures

·; Failure to meet our financial covenants

·; Financial fraud or material error in our financial statements

·; Changes to the valuation of the group's defined benefit schemes

·; Further legislation in relation to alcohol consumption

·; Non compliance with health and safety legislation

·; Poor service standards leading to poor financial performance

·; Information systems and technology failure

·; Supply chain failure and major supply chain problems

·; Inability to attract, retain, develop and motivate talented employees and tenants

Responsibility statement

The directors confirm that to the best of their knowledge:

a) the condensed set of financial statements has been prepared in accordance with IAS34;

b) the interim management report includes a fair review of the information required by the financial statements Disclosure and Transparency Rules (DTR) 4.2.7R - "indication of important events during the first six months and their impact on the financial statements and description of principal risks and uncertainties for the remaining six months of the year"; and

c) the interim management report includes a fair review of the information required by DTR 4.2.8R - "disclosure of related party transactions and changes therein".

On behalf of the board

Tim Bridge Rooney Anand

Chairman Chief executive

INDEPENDENT REVIEW REPORT TO GREENE KING PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 24 weeks ended 14 October 2012 which comprises the group income statement, group statement of comprehensive income, group balance sheet, group cashflow statement, group statement of changes in equity, and the related explanatory notes that have been reviewed. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 24 weeks ended 14 October 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

Cambridge

3 December 2012

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