4th May 2006 07:00
Enterprise Inns PLC04 May 2006 4 May 2006 Enterprise Inns Plc Re-statement of financial information under International Financial Reporting Standards Enterprise Inns Plc ('the Group') today releases its re-stated financial resultsfor the year ended 30 September 2005 and the six months ended 31 March 2005using International Financial Reporting Standards ('IFRS'). Results for theseperiods were previously released and reported under UK GAAP and are available onthe Group's website along with the full text of this announcement at http://www.enterpriseinns.com/investor_zone/ Enquiries: David George, Finance Director 0121 256 3040 Enterprise Inns Plc Re-statement of financial information under International Financial Reporting Standards The impact of the adoption of IFRS is consistent with previous guidance providedby the Group in the Report and Accounts for the years to 30 September 2004 and30 September 2005. As outlined previously, the key adjustments are in relationto property, plant and equipment, interest rate swaps and deferred tax. Summary of impact For the year ended 30 September 2005 IFRS UK GAAPEBITDA (1) £528.0m £528.1mOperating profit £517.9m £520.2mProfit before tax and exceptional items £290.2m £305.6mProfit after tax £206.5m £211.8m Earnings per share 60.3p 61.9pAdjusted earnings per share (2) 58.3p 63.2p Net Assets at 30 September 2005 £1,573.4m £1,740.9m (1) Earnings before interest, tax, depreciation and amortisation(2) Excludes exceptional items - see section 7 for details The adoption of IFRS has no impact on the Group's cash flows or debt covenants. Key adjustments Income Statement - Interest rate swaps •Reversal of fair value release recognised as a credit to interest under UK GAAP (£12.7 m) •Mark to market of interest rate swaps through Income Statement (£19.6 m) Income Statement - Deferred tax •Reduction in deferred liability tax due to indexation £19.2m Net assets - Deferred tax •Deferred tax provided on revalued pubs and rolled over gains (£195.3m) Other adjustments Income Statement •Increased charge for depreciation of property, plant and equipment (£5.9m) •Ceasing to amortise goodwill £4.3m •Unrealised gain relating to the revaluation of the pub estate £2.7m •Increased charge for share-based payments (£0.5m) •Increased charge relating to leases (£0.6m) •Tax effect of IFRS adjustments £7.8m Net assets •Interest rate swaps measured at fair value (£50.8m) •Reversal of accrual for proposed dividends £42.2m •Reversal of accumulated goodwill amortisation £11.1m •Accounting for leases (£3.4m) •Tax effect of IFRS adjustments £28.7m Enterprise Inns Plc Re-statement of financial information under International Financial Reporting Standards Contents 1. Introduction 2. Basis of preparation 3. IFRS 1 First-time adoption decisions 4. Description of IFRS adjustments 5. Re-stated Group financial statements •Group Income Statements for the periods ended 31 March 2005 and 30 September 2005 •Group Statements of Recognised Income and Expense for the periods ended 31 March 2005 and 30 September 2005 •Group Balance Sheets at 1 October 2004 (the date of transition to IFRS), 31 March 2005 and 30 September 2005 •Group Cash Flow Statements for the periods ended 31 March 2005 and 30 September 2005 •Selected notes to the re-stated Group financial statements 6. Reconciliation of Group financial statements from UK GAAP to IFRS: •Reconciliation of Group Income Statements for periods ending 30 September 2005 and 31 March 2005 •Reconciliation of Group Balance Sheet at 1 October 2004, the date of transition to IFRS •Reconciliation of Group Balance Sheets at 30 September 2005 and 31 March 2005 •Group Cash Flow Statements at 30 September 2005 and 31 March 2005. 7. Re-statement of Earnings per Share under IFRS 8. Re-statement of net debt under IFRS 9. Accounting Policies 10. Independent Auditors' Report 1. Introduction With effect from 1 October 2005, Enterprise Inns Plc ('the Group') has adoptedInternational Financial Reporting Standards ('IFRS') for the preparation of theGroup accounts. This move is in common with all other European listed companiesand is required by EC regulations. The first results published using IFRS willbe those for the six months to 31 March 2006 which will be released on 16 May2006 and the first full set of IFRS financial statements will be for the yearended 30 September 2006. The Group is required to produce one year ofcomparative information which results in a date of transition to IFRS of 1October 2004. The IFRS financial statements included in this document will form the basis ofthe comparative information for the results for the six months ended 31 March2006 and the year ended 30 September 2006. The IFRS financial statements for theyear ended 30 September 2005 have been audited by Ernst & Young LLP. The interimIFRS financial information for the period to 31 March 2005 has been reviewed byErnst & Young LLP. The adoption of IFRS has no impact on the operation of the Group, on cashgeneration or debt covenants. However, there may be increased volatility inreported earnings due to revised accounting for interest rate swaps and pubrevaluations. 2. Basis of preparation The financial information presented in this document has been prepared inaccordance with IFRS, on the basis of the standards expected to be in force at30 September 2006. New standards or interpretations may be issued and/or adoptedbetween the date of this announcement and 30 September 2006. It is thereforepossible that the financial information presented in this document could bemodified by the time the Group publishes IFRS financial statements for the yearended 30 September 2006. In November 2005, the European Commission adopted an amended version of IAS 39'Financial Instruments: Recognition and Measurement' rather than the fullversion of the standard. The Group is unaffected by the amendments made by theEuropean Commission and the IFRS financial statements included in this documenttherefore comply with both versions. A full set of accounting policies is set out in section 9 of this document. The financial information contained in this document does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Theauditors have issued unqualified opinions on the Group's UK GAAP financialstatements for the years ended 30 September 2005 and 30 September 2004 and thesehave been delivered to the Registrar of Companies. 3. IFRS 1 - First-time adoption decisions IFRS 1 'First-time adoption of International Financial Reporting Standards'provides certain exemptions on transition to IFRS. The significant decisionsmade by the Group under IFRS 1 are set out below: Business combinations The Group has chosen to re-state business combinations that have taken placesince 1 January 1999 in accordance with IFRS 3 'Business Combinations'. Theeffect of this has been to increase goodwill for deferred tax liabilitiesrelating to property, plant and equipment and rolled over gains that would haveexisted at the date of acquisition had IFRS been in place. Valuation of properties IFRS 1 provides the option to use a previous revaluation of property, plant andequipment as 'deemed cost' at the date of transition to IFRS. The Group hasdecided not to take this option and will also continue to revalue propertiesunder IAS 16. This treatment is consistent with that adopted under UK GAAP. TheBoard considers it is appropriate to continue to adopt this treatment under IFRSto enable the accounts to reflect an up to date valuation of the pub estate. Employee benefits The Group has elected to recognise all cumulative actuarial gains and losses inrelation to its defined benefit pension scheme on transition to IFRS. Actuarialgains and losses arising after the date of transition will also be recognised infull in accordance with the Amendment to IAS 19. This treatment is consistentwith that adopted under UK GAAP (FRS 17). This scheme is now closed to newmembers and for the future accrual of benefits. Share-based payment transactions The Group has elected to apply IFRS 2 'Share-based payments' to awards grantedafter 7 November 2002 but not vested at 1 January 2005. Pubs held for sale The Group has chosen to apply IFRS 5 'Non-current assets held for re-sale anddiscontinued operations' from the date of transition to IFRS. This is permittedby IFRS 1 as the information required to identify assets held for re-sale wasavailable at the date of transition. This decision has been taken to ensureconsistency between accounting policies for the years to 30 September 2005 and30 September 2006. Comparative information - IAS 32 and IAS 39. The Group has decided not to take the exemption allowed by IFRS 1 in relation toIAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39'Financial Instruments: Recognition and Measurement'. As a result, these twostandards have been applied from the date of transition to IFRS. This decisionhas been taken to ensure consistency between accounting policies for the yearsto 30 September 2005 and 30 September 2006. The Group has elected not to adopt hedge accounting in relation to existinginterest rate swaps. A significant proportion of the Group's swaps are notclassified as 'effective' under IAS 39 and therefore do not qualify for hedgeaccounting and it has been decided to apply the same accounting treatment to allexisting swaps. In addition, the administration and cost of monitoring andassessing the interest rate swaps for effectiveness on a periodic basis will beavoided. 4. Description of IFRS adjustments Adjustments made to the Income Statement 1. Re-classification of 'other operating income' (IAS 18) Income previously shown as 'other operating income', which predominantlyrepresents income from amusement and other machines, has been re-classified asrevenue. This follows a review of the Group's income streams under IAS 18'Revenue'. 2. Presentation of dividends (IAS 1) Under UK GAAP, dividends payable were shown in the Profit and Loss Account. IAS1 'Presentation of Financial Statements' states that dividends payable are shownin equity. The 'dividends' line has therefore been removed from the face of theIncome Statement so that the statement ends with profit after tax. 3. Goodwill (IFRS 3) Under UK GAAP, goodwill was amortised on a straight line basis over a usefuleconomic life of 20 years. IFRS 3 'Business Combinations' states that goodwillshould not be amortised. Instead it is tested annually for impairment. As aresult, the amortisation charged during 2005 has been reversed. 4. Interest rate swaps - reversal of UK GAAP accounting (IAS 39) Under UK GAAP, the interest rate swaps that the Group inherited upon acquisitionof subsidiary companies were held on the balance sheet at their fair value atthe date of acquisition. This fair value balance was amortised over the life ofthe swap with the amortisation being credited to the Profit and Loss Account.The interest rates swaps are now accounted for under IAS 39. As a result, thecredit arising from the amortisation of the UK GAAP fair value balance has beenreversed. 5. Interest rate swaps - introduction of IFRS accounting (IAS 39) IAS 39 'Financial Instruments: Recognition and Measurement', states that theswaps must be held on the balance sheet at fair value. Fair value is re-measuredat each balance sheet date and the movement is shown in the Income Statementunless hedge accounting is adopted. The Group has elected not to adopt hedgeaccounting in relation to its existing interest rate swaps. A significantproportion of the Group's swaps are not classified as 'effective' under IAS 39and therefore do not qualify for hedge accounting and it has been decided toapply the same accounting treatment to all existing swaps. In addition, theadministration and cost of monitoring and assessing the interest rate swaps foreffectiveness on a periodic basis will be avoided. As a result, the movement in the fair value of the swaps during 2004/05 has beencharged to the Income Statement. It should be noted that the movement inrelation to these swaps will vary periodically and could result in increasedvolatility in the Income Statement. 6. Depreciation (IAS 16) Under UK GAAP, no depreciation was charged on any element of the pub estate onthe grounds of materiality. Instead an annual impairment test was carried out onthe estate. IAS 16 'Property, Plant and Equipment' ('PPE') contains no provisionallowing non-depreciation on the grounds of materiality. Instead, each part ofPPE that has a cost that is significant in relation to the total cost must bedepreciated separately. The Group has concluded that an additional depreciation charge should beincurred under IAS 16 in relation to landlords' fixtures and fittings andcertain improvements made to buildings. No depreciation is charged on land.Freehold buildings are depreciated to write off the difference between theircarrying value and residual value over their useful economic life of 50 years.However, no depreciation charge arises in respect of 2004/05 as the residualvalue of freehold properties is at least equal to their carrying value. 7. Pub revaluations (IAS 16) Under UK GAAP, all revaluation uplifts were credited to the revaluation reserve.If a pub fell in value the revaluation deficit was debited to the revaluationreserve to the extent that there was a revaluation credit in relation to thatpub and thereafter if it could be shown that the value in use exceeded thevaluation. Under IAS 16, any revaluation that causes the book value of a pub to fall belowhistoric cost will lead to a charge in the Income Statement. The charge willrepresent the amount by which the pub falls below depreciated historic cost. Ifthis same pub later recovers in value so that its book value exceeds depreciatedhistoric cost, the increase in value is credited to the Income Statement to theextent that a debit was previously recognised. The Income Statement will therefore contain a new line entitled 'movements fromrevaluation of pub estate' showing the impact on the Income Statement of theyear-end revaluation exercise. 8. Leases (IAS 17) The Group leases a number of pubs from landlords. Under UK GAAP most of thesewere accounted for within tangible fixed assets as the Group had attributed afair value to them on acquisition. Rent was charged to the Profit and LossAccount as incurred. The Group's net interests in leasehold assets were held atvaluation. Under IAS 17, most leases have been re-classified as finance leases. The financelease creditor, representing the present value of future minimum lease payments,has been reclassified and is shown on the balance sheet under 'financialliabilities'. The carrying value of these properties has been increased by thesame amount so that they are now held at fair value. The properties continue tobe held at valuation but one that no longer takes account of the remaining leasepayments. The remaining leasehold pubs have been classified as held under operatingleases. The amount held on the balance sheet in respect of amounts paid forthese pubs has been re-classified from tangible fixed assets to intangibleassets: lease premiums. The revaluation surplus relating to these properties hasbeen reversed as IAS 17 does not permit the revaluation of assets held underoperating leases. As a result of these changes, some rent payable in the Income Statement has beenreclassified as interest payable. The depreciation charged on short-leaseholdproperties that have been reclassified as finance leases has increased as thevalue of the properties being depreciated has increased to fair value. Operatinglease premiums that have been reclassified on the Balance Sheet are nowamortised over the life of the lease. 9. Share-based payments (IFRS 2) Under UK GAAP, the costs of shares awarded under the Short-Term Incentive Plan('STIP') and Long-Term Incentive Plan ('LTIP') were recognised based on theintrinsic value of the shares at the date of grant. This cost was spread overthe performance period of the scheme. No charge was recognised for the EmployeeShare Option Scheme (ESOS) as these options have no intrinsic value. Anexemption was also in place which meant that no charge was made for Save as YouEarn (SAYE) schemes. Under IFRS 2 'Share-based payments', the fair value of share schemes arecalculated and the cost is then spread over the vesting period of each scheme.This results in a new charge for SAYE and ESOS schemes and a revised charge forthe STIP and LTIP. As a result, an additional charge has been recognised in theIncome Statement for share-based payments. 10. Tax - deferred tax on pub estate (IAS 12) Under IAS 12, a deferred tax liability has been recognised on the balance sheetrelating to the revaluation of the pub estate and gains previously rolled over,or due to be rolled over, into other assets. The deferred tax liability thatwould have been in place at the time of business combinations that have occurredsince 1 January 1999 has resulted in the recognition of additional goodwill asthe fair value of the net assets acquired has been reduced. As thispre-acquisition liability reduces due to capital gains indexation relief, acredit is recognised in the Income Statement. This has been classified as anexceptional tax item due to its size and because it does not relate to anyincome or expense recognised in the Income Statement in the same period. 11. Tax (IAS 12) An adjustment has been made to the tax charge on ordinary activities to reflectthe tax effect of the other IFRS adjustments where relevant. The two tax adjustments do not affect the amount of tax payable in respect ofthe year ended 30 September 2005. Other changes relating to the Income Statement Exceptional items Exceptional items are classified as those which are separately identified byvirtue of their size or nature to allow a full understanding of the underlyingperformance of the Group. Earnings per share (IAS 33) The calculation of the number of shares for use in the diluted earnings pershare calculation is different under IAS 33 'Earnings per Share' to that usedunder UK GAAP. This is due to the treatment of contingently issuable shares andthe effects of IFRS 2 'Share-based payments'. This has resulted in a reductionin the number of shares being used in this calculation. Other formatting adjustments The Group has taken the opportunity to re-format the Income Statement in orderto show Earnings before interest, tax, depreciation and amortisation (EBITDA) asa line item. Adjustments made to the Balance Sheet 1. Presentation of creditors (IAS 1) IAS 1 states that current tax payable and financial liabilities should be shownseparately as line items in the balance sheet. These items have therefore beensplit out from creditors and shown separately 2. Presentation of deferred tax (IAS 1) IAS 1 states that deferred tax should be shown separately as a line item in thebalance sheet. This has therefore been split out from 'provisions forliabilities and charges' and shown separately. 3. Presentation of provisions (IAS 1) Under UK GAAP, 'provisions for liabilities and charges' were shown after'creditors falling due after more than one year'. IAS 1 states that all assetsand liabilities should be classified as either 'current' or 'non-current'. As aresult, the provisions in place that relate to a period of one year or less fromthe balance sheet date have been identified and moved to current liabilities. 4. Presentation of pension liability (IAS 19) Under UK GAAP, the pension liability was shown net of deferred tax. Under IFRS,the pension liability is shown gross with the related deferred tax asset shownwithin 'deferred tax'. As a result, the deferred tax relating to the pensionliability has been reclassified on the balance sheet. 5. Depreciation (IAS 16) Under UK GAAP, no depreciation was charged on any element of the pub estate onthe grounds of materiality. Under IFRS, the Group has concluded that adepreciation charge should be incurred on landlord's fixtures and fittings andcertain improvements made to buildings. No depreciation is charged on land.Freehold buildings are depreciated to write off the difference between theircarrying value and residual value over their useful economic life of 50 years.However, no depreciation charge arises as the residual value of these propertiesis at least equal to their carrying value. As a result, an adjustment has been made to reflect the charge that would havebeen recognised under IFRS in relation to landlord's fixtures and fittings andcertain improvements to buildings. This adjustment is a transfer between theprofit and loss account reserve and the revaluation reserve. 6. Pub revaluations below historic cost (IAS 16) Under UK GAAP, all revaluation uplifts were credited to the revaluation reserve.If a pub fell in value the revaluation deficit was debited to the revaluationreserve to the extent that there was a revaluation credit in relation to thatpub and thereafter if it could be shown that the value in use exceeded thevaluation. Under IAS 16, any revaluation that causes the book value of a pub to fall belowhistoric cost will lead to a charge in the Income Statement. The charge willrepresent the amount by which the pub falls below historic cost. If this samepub later recovers in value so that its book value exceeds historic cost, theincrease in value is credited to the Income Statement to the extent that a debitwas previously recognised. As a result, on transition to IFRS all deficit balances held in the revaluationreserve were transferred to the profit and loss account reserve as under IAS 16,these would have been charged to the Income Statement. It should be noted thatthis is not a realised loss. 7. Pubs held for sale (IFRS 5) Under UK GAAP, all pubs were held within 'tangible fixed assets'. IFRS 5'Non-current assets held for re-sale and discontinued operations' creates a newcategory of asset that is neither a current asset nor a non-current asset. Pubsthat are considered to be held for sale rather than held for trading, and thatmeet the criteria laid out in IFRS 5, are moved to this new category and shownseparately on the balance sheet. 8. Deferred tax on revaluations and rolled over gains (IAS 12) Under UK GAAP, no deferred tax was recognised in respect of the unrealisedsurplus on the revaluation of tangible fixed assets unless there was a bindingcommitment to sell the properties at the balance sheet date. In addition, noprovision was included for capital gains on the disposal of properties where thegain was deferred through the application of capital gains rollover relief as noliability was expected to crystallise. IAS 12 'Income Taxes' states that deferred tax must be provided on all temporarydifferences between the tax base cost and carrying value of assets. As a result,a deferred tax liability has been recognised relating to the revaluation of thepub estate and gains previously rolled over, or due to be rolled over, intoother assets. It should be noted that this liability is not expected tocrystallise in the foreseeable future. The deferred tax liability that would have been in place at the time of businesscombinations that have occurred since 1 January 1999 has resulted in therecognition of additional goodwill as the fair value of the net assets acquiredhas been reduced. The amount of indexation that would have been credited to theIncome Statement in relation to these pubs is reflected in the Profit and LossAccount Reserve. The deferred tax arising from revaluations carried out by theGroup (i.e. post-acquisitions) is charged to the revaluation reserve. 9. Goodwill (IFRS 3) Under UK GAAP, goodwill was amortised on a straight line basis over a usefuleconomic life of 20 years. IFRS 3 'Business Combinations' states that goodwillshould not be amortised. Instead it is tested annually for impairment. Goodwillamortisation that was charged under UK GAAP all relates to business combinationsthat have been re-stated under IFRS 3. The accumulated amortisation hastherefore been reversed. Goodwill was tested for impairment on transition toIFRS and at 30 September 2005 and no impairment was identified. 10. Proposed dividends (IAS 10) Under UK GAAP, dividends were accrued and shown as a liability when they wereproposed. They were therefore accounted for in the period to which they related. IAS 10 'Events after the Balance Sheet Date' states that dividends declaredafter the balance sheet date should not be recognised as a liability. As aresult, the liability for proposed dividends has been reversed. Final dividendswill now only be recognised when they are approved at the AGM and interimdividends when they are paid. 11. Interest rate swaps (IAS 39) Under UK GAAP, the interest rate swaps that the Group inherited upon acquisitionof subsidiary companies were held on the balance sheet at their fair value atthe date of acquisition. This fair value balance was amortised over the life ofthe swap with the amortisation being credited to the profit and loss account. IAS 39 'Financial Instruments: Recognition and Measurement', states that theseswaps must be held on the balance sheet at fair value. Fair value is re-measuredat each balance sheet date. As a result, the UK GAAP book value of the swaps hasbeen replaced by their fair value at the balance sheet date. 12. Leases (IAS 17) The Group leases a number of pubs from landlords. Under UK GAAP the Groupaccounted for all leases as operating leases and rent was charged to the Profitand Loss Account as incurred. Leasehold assets were held on the balance sheetwithin tangible fixed assets at valuation. Under IAS 17, most leases have been re-classified as finance leases. The financelease creditor, representing the present value of future minimum lease payments,has been reclassified and is shown on the balance sheet under 'financialliabilities'. The value of these properties has been increased by the sameamount so that they are now held at fair value. The remaining leasehold pubs have been classified as held under operatingleases. The amount held on the balance sheet in relation to these pubs has beenre-classified from tangible fixed assets to intangible assets: lease premiums.The revaluation surplus relating to these properties has been reversed as IAS 17does not permit the revaluation of assets held under operating leases. 13. Tax (IAS 12) An adjustment is made to reflect the tax impact of the other IFRS adjustmentswhere relevant. Other changes relating to the Balance Sheet Net debt The amount of underlying net debt, defined as the amount repayable to banks andother lenders, net of cash retained within the business, is unchanged by theadoption of IFRS. However, net debt as presented in the balance sheet haschanged due to the treatment of interest rate swaps under IAS 39 and leasesunder IAS 17. A reconciliation between underlying net debt and net debt aspresented in the balance sheet under IFRS is included in section 8 of thisdocument. Adjustments to cash flow statement The transition to IFRS has no impact on the cash generation of the business.However, the format of the cash flow statement is different under IAS 7 'Cashflow statements'. IAS 7 only allows three classifications of cash flow beingoperating, investing and financing. As a result, the cash flow items disclosedunder UK GAAP have been re-classified under the most appropriate heading. The IFRS adjustments made to operating profit in the Income Statement arereflected within the reconciliation of operating profit to cash flow fromoperations. As a result, the items in this reconciliation relating todepreciation and amortisation and share-based payments have been adjusted. Inaddition, the reclassification between rent and interest payable relating to theadjustment for finance leases has been reflected in the cash flow statement. Theoverall movement in the cash balance for the year does not change under IFRS. 5. Re-stated Group financial statements Group Income Statement For the year ended 30 September Unaudited 2005 For the period ended 31 March 2005----------------------------------------------------------------------------------------------- Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total items items items items £m £m £m £m £m £m-----------------------------------------------------------------------------------------------Revenue 952.1 - 952.1 470.5 - 470.5Cost of sales (384.7) - (384.7) (191.9) - (191.9)-----------------------------------------------------------------------------------------------Gross profit 567.4 - 567.4 278.6 - 278.6 Administrative expenses (39.4) - (39.4) (21.3) - (21.3)-----------------------------------------------------------------------------------------------EBITDA * 528.0 - 528.0 257.3 - 257.3 Depreciation and amortisation (10.1) - (10.1) (5.3) - (5.3)-----------------------------------------------------------------------------------------------Group operating profit 517.9 - 517.9 252.0 - 252.0 Profit on sale of - 0.2 0.2 - - -associated undertakingNet profit on sale of property - 2.7 2.7 - 0.5 0.5Movements from revaluation - 2.7 2.7 - - -of pub estate Interest receivable 8.9 - 8.9 5.1 - 5.1 Interest payable (236.6) - (236.6) (120.6) - (120.6)Write off of - (4.6) (4.6) - (4.6) (4.6)unamortised issue costsMovement in fair value - (19.6) (19.6) - (3.9) (3.9)of interest rate swaps-----------------------------------------------------------------------------------------------Total finance costs (236.6) (24.2) (260.8) (120.6) (8.5) (129.1)-----------------------------------------------------------------------------------------------Profit before tax 290.2 (18.6) 271.6 136.5 (8.0) 128.5 Tax on profit on (90.5) 25.4 (65.1) (43.0) 11.7 (31.3)ordinary activities-----------------------------------------------------------------------------------------------Profit after tax and 199.7 6.8 206.5 93.5 3.7 97.2attributable to membersof the parent company-----------------------------------------------------------------------------------------------Earnings per ShareBasic 60.3p 28.3pDiluted 59.6p 28.0p Adjusted 58.3p 27.2pAdjusted diluted 57.7p 26.9p * Earnings before interest, tax, depreciation and amortisation Group Statement of Recognised Income and Expense Unaudited For the year ended For the period 30 September ended 31 March 2005 2005 £m £m ----------------------------------Unrealised surplus on revaluation of licensed estate 272.5 -Movement of deferred tax liability related to (74.0) 3.5revalued licensed estateActuarial gain on defined benefit pension scheme 1.3 -Movement of deferred tax asset related to pension (0.4) -scheme deficitDeferred tax relating to share schemes recognised 7.2 4.5directly in equity ----------------------------------Net income recognised directly in equity 206.6 8.0 Profit for the period 206.5 97.2 ----------------------------------Total recognised income and expense 413.1 105.2 ---------------------------------- Group Balance Sheet Unaudited At 30 September At 31 March At 1 October 2005 2005 2004 £m £m £m ----------------------------------------------Non-current assetsGoodwill 416.9 416.9 416.9Intangible assets: lease premiums 27.1 27.9 28.4Property, plant and equipment 5,156.7 4,876.7 4,872.8Investments - 0.2 0.2Financial assets - - 0.3 ---------------------------------------------- 5,600.7 5,321.7 5,318.6 Pubs held for sale 35.9 24.8 32.5 Current assetsAssets held for sale 7.1 5.0 4.6Debtors 81.4 85.0 85.7Cash 95.5 100.5 146.7 ---------------------------------------------- 184.0 190.5 237.0 ----------------------------------------------Total assets 5,820.6 5,537.0 5,588.1 ----------------------------------------------Current liabilitiesCreditors (217.2) (209.0) (222.0)Current tax payable (46.0) (44.3) (31.8)Financial liabilities (34.7) (35.9) (30.6)Provisions (1.2) (0.8) (0.4) ---------------------------------------------- (299.1) (290.0) (284.8)Non-current liabilitiesFinancial liabilities (3,347.2) (3,428.2) (3,530.3)Accruals and deferred income (5.0) - -Provisions (6.5) (3.7) (5.6)Deferred tax (589.3) (515.2) (523.9)Pension liabilities (0.1) (2.1) (3.8) ---------------------------------------------- (3,948.1) (3,949.2) (4,063.6) ----------------------------------------------Total liabilities (4,247.2) (4,239.2) (4,348.4) ---------------------------------------------- ----------------------------------------------Net assets 1,573.4 1,297.8 1,239.7 ----------------------------------------------EquityCalled up share capital 17.5 17.5 17.5Share premium account 485.5 485.5 485.5Revaluation reserve 666.7 474.0 472.4Capital redemption reserve 7.6 7.6 7.6Merger reserve 77.0 77.0 77.0Other reserve (55.6) (43.7) (28.1)Profit and Loss Account 374.7 279.9 207.8 ----------------------------------------------Total equity 1,573.4 1,297.8 1,239.7 ---------------------------------------------- Group Cash Flow Statement Unaudited For the year ended For the period 30 September 2005 ended 31 March 2005 £m £m -------------------------------------- Cash flow from operationsOperating profit 517.9 252.0Depreciation and amortisation 10.1 5.3Share-based expense recognised in profit 2.8 1.5Decrease in debtors 5.3 1.7Decrease in creditors (12.0) (4.0)Increase/(Decrease) in provisions 1.7 (1.2)Increase in current assets held for sale (2.5) (0.4) -------------------------------------- 523.3 254.9Tax paid (52.8) (20.0) --------------------------------------Net cash flows from operating activities 470.5 234.9 Cash flows from investing activitiesPayments to acquire public houses (14.3) (6.5)Payments made on improvements to public houses (48.8) (24.8)Payments to acquire other property, plant (0.8) (0.4)and equipmentReceipts from sale of property, plant and 47.0 27.1equipmentNet cash flows from investing activities (16.9) (4.6) -------------------------------------- Cash flows from financing activitiesInterest paid (244.4) (129.2)Interest received 8.9 6.2Issue costs of long-term loans (1.9) (1.1)Equity dividends paid (47.9) (28.9)Payments to acquire shares held in employee (22.6) (22.3)benefit trustReceipts from exercise of share options 3.3 2.4Debt due within one year - repayment of - (30.0)short term loansDebt due beyond one year - new long term loans 770.9 680.9Debt due beyond one year - repayment of long (971.1) (754.5)term loans --------------------------------------Net cash flows from financing activities (504.8) (276.5) Net decrease in cash (51.2) (46.2)Cash at 1 October 2004 146.7 146.7 --------------------------------------Cash at 30 September 2005/ 31 March 2005 95.5 100.5 -------------------------------------- Selected notes to the re-stated Group financial Statements 1. Statement of changes in equity Unaudited For the year ended 30 For the period ended September 2005 31 March 2005 £m £m -------------------------------------------Total equity at 1 October 2004 1,239.7 1,239.7Total recognised income and expense for 413.1 105.2the periodEquity dividends paid (47.9) (28.7)Consideration paid for purchase of own shares (37.6) (22.3)Proceeds received from exercise of 3.3 2.4employee share optionsShare-based expense recognised in 2.8 1.5operating profit -------------------------------------------Total equity at 30 September 2005/31 1,573.4 1,297.8March 2005 ------------------------------------------- 2. Reconciliation of net cash flow to movement in net debt Unaudited For the year to 30 For the period to September 2005 31 March 2005 £m £m -------------------------------------------Decrease in cash in the period (51.2) (46.2)Cash outflow from change in debt 200.2 103.6Issue costs of new long term loans 1.9 1.1Finance lease payments 0.1 0.1 -------------------------------------------Change in net debt resulting from cash flows 151.0 58.6 Amortisation of issue costs and discounts/ (4.3) (2.3)premiums on long-term loansAmortisation of securitised bonds 5.0 2.5Change in fair value of interest rate swaps (19.6) (3.9)Write off of unamortised issue costs (4.6) (4.6) -------------------------------------------Movement in net debt in the period 127.5 50.3 Net debt at 1 October 2004 (3,413.9) (3,413.9) -------------------------------------------Net debt at 30 September 2005 / 31 March 2005 (3,286.4) (3,363.6) ------------------------------------------- 6. Reconciliation of Group financial statements from UK GAAP to IFRS Reconciliation of Group Income Statement for the year ended 30 September 2005 ----------------------------------------------------------------------------------------- Reclassi- Presen- fication tation Adjustments UK GAAP 1 2 3 4 5 6 7 8 9 10 11 IFRS Divi- Good- Swaps Swaps Depreci- Revalua- Share Tax Tax Revenue dends will IAS IAS ation ations Leases schemes IAS IAS £m IAS 18 IAS 1 IFRS 3 39 39 IAS 16 IAS 16 IAS 17 IFRS 2 12 12 £m ----------------------------------------------------------------------------------------- Revenue 919.9 32.2 952.1Cost of sales (385.1) 0.4 (384.7)Gross profit 534.8 567.4 Administrative (38.9) (0.5) (39.4)expensesOther operating 32.2 (32.2) 0.0incomeEBITDA 528.1 528.0 Depreciation of (1.4) (5.9) (7.3)owned property,plant andequipmentDepreciation (2.2) (0.6) (2.8)and amortisation of leaseholdpropertiesAmortisation of (4.3) 4.3 0.0goodwillGroup operating 520.2 517.9profit Interest 8.9 8.9receivableInterest (223.5) (12.7) (0.4) (236.6)payableProfit before 305.6 290.2tax andexceptionalitems Exceptionalfinance costs:Write-off of (4.6) (4.6)unamortisedissue costsMovement in 0.0 (19.6) (19.6)fair value ofinterest rateswaps Otherexceptionalitems:Profit on 0.2 0.2disposal ofassociatedundertakingNet profit on 2.7 2.7disposal ofproperty, plantand equipmentMovements 0.0 2.7 2.7arising fromrevaluation ofpub estateProfit before 303.9 271.6tax Tax on profit (92.1) 7.8 (84.3)on ordinaryactivitiesExceptional tax 0.0 19.2 19.2item :Reduction indeferred taxliability dueto indexation ------------------------------------------------------------------------------------------------------Group profit on 211.8 0.0 0.0 4.3 (12.7) (19.6) (5.9) 2.7 (0.6) (0.5) 19.2 7.8 206.5ordinaryactivitiesafter tax ------------------------------------------------------------------------------------------------------ Dividends (61.4) 61.4 -Retain profit 150.4 -for the period Reconciliation of Group Income Statement for the six months to 31 March 2005 ----------------------------------------------------------------------------------------- Reclassi- Presen- fication tation Adjustments UK GAAP 1 2 3 4 5 6 7 8 9 10 11 IFRS Divi- Good- Swaps Swaps Depreci- Revalua- Share Tax Tax Revenue dends will IAS IAS ation ations Leases schemes IAS IAS £m IAS 18 IAS 1 IFRS 3 39 39 IAS 16 IAS 16 IAS 17 IFRS 2 12 12 £m ---------------------------------------------------------------------------------------- Revenue 453.9 16.6 470.5Cost of sales (192.1) 0.2 (191.9)Gross profit 261.8 278.6 Administrative (21.0) (0.3) (21.3)expenses Other operating 16.6 (16.6) 0.0incomeEBITDA 257.4 257.3 Depreciation of (0.8) (3.1) (3.9)owned property,plant andequipmentDepreciation (1.1) (0.3) (1.4)and amortisation of leaseholdpropertiesAmortisation of (2.2) 2.2 0.0goodwillGroup operating 253.3 252.0profit Interest 5.1 5.1receivableInterest (114.8) (5.6) (0.2) (120.6)payableProfit before 143.6 136.5tax andexceptionalitems Exceptionalfinance costs:Write-off of (4.6) (4.6)unamortisedissue costsMovement in 0.0 (3.9) (3.9)fair value ofinterest rateswaps Otherexceptionalitems:Net profit on 0.5 0.5disposal ofproperty, plantand equipmentMovements 0.0 0.0arising fromrevaluation ofpub estate Profit before 139.5 128.5tax Tax on profit (42.7) 2.2 (40.5)on ordinaryactivitiesExceptional tax 0.0 9.2 9.2item :Reduction indeferred taxliability dueto indexation ------------------------------------------------------------------------------------------------------Group profit on 96.8 0.0 0.0 2.2 (5.6) (3.9) (3.1) 0.0 (0.3) (0.3) 9.2 2.2 97.2ordinaryactivitiesafter tax ------------------------------------------------------------------------------------------------------ Dividends (19.2) 19.2 -Retain profit 77.6 -for the period Reconciliation of Group Balance Sheet at 1 October 2004 (date of transition) ------------------------------------------------------------------------------------------- Re-classifications Adjustments UK GAAP 1 2 3 4 5 6 7 8 9 10 11 12 13 IFRS Pubs Def- Divi- Presentation of Deprec- Revalu- for ferred Good- dends Swaps Leases Tax financial statements Pensions iation ations sale tax will IAS IAS IAS IAS £m IAS 1 IAS 1 IAS 1 IAS 19 IAS 16 IAS 16 IFRS 5 IAS 12 IFRS 3 10 39 17 12 £m -------------------------------------------------------------------------------------------- Non-currentassetsGoodwill 79.6 330.5 6.8 416.9Intangible 0.0 28.4 28.4assets:leasepremiumsProperty, 4,931.8 (32.5) (26.5) 4,872.8plant andequipmentInvestments 0.2 0.2Financial 0.0 0.3 0.3assets ------- ------- 5,011.6 5,318.6 Pubs held 0.0 32.5 32.5for sale CurrentassetsAssets held 4.6 4.6for saleDebtors 85.7 85.7Cash 146.7 146.7 ------- ------- 237.0 237.0 -------------------------------------------------------------------------------------------------------------Total 5,248.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 330.5 6.8 0.0 0.3 1.9 0.0 5,588.1assets -------------------------------------------------------------------------------------------------------------CurrentliabilitiesCreditors (309.4) 58.7 28.7 (222.0)Current tax 0.0 (31.8) (31.8)payableFinancial 0.0 (26.9) (3.7) (30.6)liabilitiesProvisions 0.0 (0.4) (0.4) ------- ------- (309.4) (284.8) Non-currentliabilitiesFinancial (3,509.2) (15.1) (6.0) (3,530.3)liabilitiesProvisions (73.7) 67.7 0.4 (5.6)Deferred 0.0 (67.7) 1.1 (469.9) 12.6 (523.9)TaxPension (2.7) (1.1) (3.8)liabilities ------- ------- (3,585.6) (4,063.6) -------------------------------------------------------------------------------------------------------------Total (3,895.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (469.9) 0.0 28.7 (18.8) (6.0) 12.6(4,348.4)liabilities ------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------Net Assets 1,353.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (139.4) 6.8 28.7 (18.5) (4.1) 12.6 1,239.7 -------------------------------------------------------------------------------------------------------------EquityCalled up 17.5 17.5sharecapitalShare 485.5 485.5premiumaccountRevaluation 541.8 39.4 67.5 (163.6) (4.1)(8.6) 472.4reserveCapital 7.6 7.6redemptionreserveMerger 77.0 77.0reserveOther (28.1) (28.1)reserveProfit and 252.3 (39.4) (67.5) 24.2 6.8 28.7 (18.5) 21.2 207.8Loss Account -------------------------------------------------------------------------------------------------------------Total 1,353.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (139.4) 6.8 28.7 (18.5) (4.1) 12.6 1,239.7equity ------------------------------------------------------------------------------------------------------------- Reconciliation of Group Balance Sheet as at 30 September 2005 -------------------------------------------------------------------------------------------- Re-classifications Adjustments UK GAAP 1 2 3 4 5 6 7 8 9 10 11 12 13 IFRS Pubs Def- Divi- Presentation of Deprec- Revalu- for ferred Good- dends Swaps Leases Tax financial statements Pensions iations ations sale tax will IAS IAS IAS IAS £m IAS 1 IAS 1 IAS 1 IAS 19 IAS 16 IAS 16 IFRS 5 IAS 12 IFRS 3 10 39 17 12 £m -------------------------------------------------------------------------------------------- Non-currentassetsGoodwill 75.3 330.5 11.1 416.9Intangibleassets:lease 0.0 27.1 27.1 premiumsProperty,plant andequipment 5,217.2 (35.9) (24.6) 5,156.7 ------- ------- 5,292.5 5,600.7 Pubs heldfor sale 0.0 35.9 35.9 CurrentassetsAssets heldfor sale 7.1 7.1Debtors 81.4 81.4Cash 95.5 95.5 ------- ------- 184.0 184.0 --------------------------------------------------------------------------------------------------------------Total 5,476.5 0.0 0.0 0.0 0.0 0.0 0.0 330.5 11.1 0.0 0.0 2.5 0.0 5,820.6assets --------------------------------------------------------------------------------------------------------------CurrentliabilitiesCreditors (331.1) 71.7 42.2 (217.2)Current taxpayable (46.0) (46.0)Financialliabilities (25.7) (9.0) (34.7)Provisions (1.2) (1.2) ------- ------- (331.1) (299.1) Non-currentliabilitiesFinancialliabili-ties (3,299.5) (41.8) (5.9) (3,347.2)Accrualsanddeferred (5.0) (5.0)incomeProvisions (99.9) 92.2 1.2 (6.5)Deferred (92.2) 0.0 (525.8) 28.7 (589.3)TaxPensionliabili-ties (0.1) 0.0 (0.1) ------- ------- (3,404.5) (3,948.1) --------------------------------------------------------------------------------------------------------------Totalliabili-ties (3,735.6) 0.0 0.0 0.0 0.0 0.0 0.0 0.0(525.8) 0.0 42.2(50.8) (5.9)28.7(4,247.2) -------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------Net Assets 1,740.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0(195.3) 11.1 42.2(50.8) (3.4)28.7 1,573.4 --------------------------------------------------------------------------------------------------------------EquityCalled upshare 17.5 17.5capitalSharepremium 485.5 485.5accountRevaluationreserve 810.0 45.3 60.4 (238.7) (2.8)(7.5) 666.7Capitalredemptionreserve 7.6 7.6Merger 77.0 77.0reserveOther (55.6) (55.6)reserveProfit andLoss 398.9 (45.3) (60.4) 43.4 11.1 42.2(50.8) (0.6)36.2 374.7Account --------------------------------------------------------------------------------------------------------------Total 1,740.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0(195.3) 11.1 42.2(50.8) (3.4)28.7 1,573.4equity -------------------------------------------------------------------------------------------------------------- Reconciliation of Group Balance Sheet as at 31 March 2005 --------------------------------------------------------------------------------------------- Re-classifications Adjustments UK GAAP 1 2 3 4 5 6 7 8 9 10 11 12 13 IFRS Pubs Def- Divi- Presentation of Deprec- Revalu- for ferred Good- dends Swaps Leases Tax financial statements Pensions iation ations sale tax will IAS IAS IAS IAS £m IAS 1 IAS 1 IAS 1 IAS 19 IAS 16 IAS 16 IFRS 5 IAS 12 IFRS 3 10 39 17 12 £m --------------------------------------------------------------------------------------------- Non-currentassetsGoodwill 77.5 330.5 8.9 416.9Intangibleassets:lease 0.0 27.9 27.9premiumsProperty,plant andequipment 4,931.0 (3.1) (24.8) (26.4) 4,876.7Investments 0.2 0.2 ------- ------- 5,008.7 5,321.7 Pubs heldfor sale 0.0 24.8 24.8 CurrentassetsAssets heldfor re-sale 5.0 5.0Debtors 85.0 85.0Cash 100.5 100.5 ------- ------- 190.5 190.5 --------------------------------------------------------------------------------------------------------------Total 5,199.2 0.0 0.0 0.0 0.0 (3.1) 0.0 0.0 330.5 8.9 0.0 0.0 1.5 5,537.0assets --------------------------------------------------------------------------------------------------------------CurrentliabilitiesCreditors (304.4) 76.2 19.2 (209.0)Current taxpayable 0.0 (44.3) (44.3)Financialliabilities 0.0 (31.9) (4.0) (35.9)Provisions 0.0 (0.8) (0.8) ------- ------- (304.4) (290.0) Non-currentliabilitiesFinancialliabili-ties (3,398.3) (24.0) (5.9) (3,428.2)Provisions (82.5) 78.0 0.8 (3.7)Deferred 0.0 (78.0) 0.6 (457.5) 19.7(515.2)TaxPensionliabilities (1.5) (0.6) (2.1) ------- ------- (3,482.3) (3,949.2) --------------------------------------------------------------------------------------------------------------Totalliabili-ties (3,786.7) 0.0 0.0 0.0 0.0 0.0 0.0 0.0(457.5) 0.0 19.2 (28.0) (5.9)19.7(4,239.2) -------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------Net Assets 1,412.5 0.0 0.0 0.0 0.0 (3.1) 0.0 0.0(127.0) 8.9 19.2(28.0) (4.4)19.7 1,297.8 --------------------------------------------------------------------------------------------------------------EquityCalled upshare 17.5 17.5capitalSharepremium 485.5 485.5accountRevaluationreserve 541.1 39.4 66.3 (160.4) (4.1)(8.3) 474.0Capitalredemptionreserve 7.6 7.6Merger 77.0 77.0reserveOther (43.7) (43.7)reserveProfit andLoss 327.5 (42.5) (66.3) 33.4 8.9 19.2(28.0) (0.3)28.0 279.9Account --------------------------------------------------------------------------------------------------------------Total 1,412.5 0.0 0.0 0.0 0.0 (3.1) 0.0 0.0(127.0) 8.9 19.2(28.0) (4.4)19.7 1,297.8equity -------------------------------------------------------------------------------------------------------------- Group Cash Flow Statement for the year ending 30September 2005 UK GAAP presentation £m IFRS presentation £m Reconciliation of operating profit to operating Cash flows from operationscash flowsOperating profit 520.2 Operating profit 517.9Depreciation and amortisation 7.9 Depreciation and amortisation 10.1Share-based expense recognised in profit 2.3 Share-based expense recognised in profit 2.8Decrease in debtors 5.3 Decrease in debtors 5.3Decrease in creditors (12.0) Decrease in creditors (12.0)Increase in provisions 1.7 Increase in provisions 1.7Increase in current assets held for re-sale (2.5) Increase in current assets held for re-sale (2.5) ------- -------Net cash inflow from operating activities 522.9 523.3 Return on investments and servicing of financeInterest received 8.9Interest paid (244.0)Issue costs of long-term loans (1.9) ------- (237.0) Taxation (52.8) Tax paid (52.8) ------- Net cash flows from operating activities 470.5 Capital expenditure and servicing of finance Cash flows from investing activitiesPayments to acquire public houses (14.3) Payments to acquire public houses (14.3)Payments made on improvements to public houses (48.8) Payments made on improvements to public (48.8) housesPayments to acquire other fixed assets (0.8) Payments to acquire other property, (0.8) plant and equipmentReceipts from sales of tangible fixed assets 47.0 Receipts from sales of property, plant and 47.0 equipment -------Payments to acquire shares held in (22.6) Net cash flows from investing activities (16.9)employee benefit trust Receipts from exercise of employee share options 3.3 ------- (36.2) Cash flows from financing activities Interest paid (244.4) Interest received 8.9 Issue costs of long term loans (1.9)Equity dividends paid (47.9) Equity dividends paid (47.9) Payments to acquire shares held in (22.6) employee benefit trustFinancing Receipts from exercise of employee 3.3 share optionsDebt due within one year - new short term loans 0.0 Debt due within one year - new short term loans 0.0Debt due within one year - repayment of 0.0 Debt due within one year - repayment 0.0short term loans of short term loansDebt due beyond one year - new long term loans 770.9 Debt due beyond one year - new long term 770.9 loansDebt due beyond one year - repayment of (971.1) Debt due beyond one year - repayment (971.1)long term loans of long term loans ------- ------- (200.2) Net cash flows from financing activities (504.8) Decrease in cash (51.2) Net decrease in cash (51.2)Cash at 1 October 2004 146.7 Cash at 1 October 2004 146.7Cash at 30 September 2005 95.5 Cash at 30 September 2005 95.5 Cash Flow Statement for the six monthsending 31 March 2005 UK GAAP presentation £m IFRS presentation £m Reconciliation of operating profit to Cash flows from operationsoperating cash flowsOperating profit 253.3 Operating profit 252.0Depreciation and amortisation 4.1 Depreciation and amortisation 5.3Share-based expense recognised in profit 1.2 Share-based expense recognised in profit 1.5Decrease in debtors 1.7 Decrease in debtors 1.7Decrease in creditors (4.0) Decrease in creditors (4.0)Decrease in provisions (1.2) Decrease in provisions (1.2)Increase in current assets held for re-sale (0.4) Increase in current assets held for re-sale (0.4) ------- -------Net cash inflow from operating activities 254.7 254.9 Return on investments and servicing of financeInterest received 6.2Interest paid (129.0)Issue costs of long-term loans (1.1) ------- (123.9) Taxation (20.0) Tax paid (20.0) ------- Net cash flows from operating activities 234.9 Capital expenditure and servicing of finance Cash flows from investing activitiesPayments to acquire public houses (6.5) Payments to acquire public houses (6.5)Payments made on improvements to (24.8) Payments made on improvements to (24.8)public houses public housesPayments to acquire other fixed assets (0.4) Payments to acquire other property, (0.4)Receipts from sales of tangible fixed assets 27.1 plant and equipmentPayments to acquire shares held in (22.3) Receipts from sales of property, 27.1employee benefit trust plant and equipment -------Receipts from exercise of employee 2.4 Net cash flows from investing activities (4.6) share options ------- (24.5) Cash flows from financing activities Interest paid (129.2) Interest received 6.2 Issue costs of long term loans (1.1)Equity dividends paid (28.9) Equity dividends paid (28.9) Payments to acquire shares held in (22.3) employee benefit trustFinancing Receipts from exercise of employee 2.4 share optionsDebt due within one year - new 0.0 Debt due within one year - new 0.0short term loans short term loansDebt due within one year - (30.0) Debt due within one year - (30.0)repayment of short term loans repayment of short term loansDebt due beyond one year - new long 680.9 Debt due beyond one year - new long 680.9term loans term loansDebt due beyond one year - (754.5) Debt due beyond one year - (754.5)repayment of long term loans repayment of long term loans ------- ------- (103.6) Net cash flows from financing activities (276.5) Decrease in cash (46.2) Net decrease in cash (46.2)Cash at 1 October 2004 146.7 Cash at 1 October 2004 146.7Cash at 31 March 2005 100.5 Cash at 31 March 2005 100.5 7. Re-statement of Earnings per Share under IFRS Calculation of revised earnings per share Unaudited For the year to 30 For the period to 31 March September 2005 2005 ----------------------------------------------------- IFRS UK GAAP IFRS UK GAAP -----------------------------------------------------Profit after tax £206.5m £211.8m £97.2m £96.8m Basic weighted average number of 342,456,660 342,456,660 343,397,210 343,397,210shares -----------------------------------------------------Earnings per share 60.3p 61.9p 28.3p 28.2p ----------------------------------------------------- Calculation of revised adjusted earnings per share The measure of adjusted earnings per share is included as the directors believeit better reflects the underlying performance of the Group. Unaudited For the year to 30 For the period to 31 September 2005 March 2005 ----------------------------------------------------- IFRS UK GAAP IFRS UK GAAP £m £m £m £m -----------------------------------------------------Profit after tax 206.5 211.8 97.2 96.8Goodwill amortisation - 4.3 - 2.2Exceptional finance costs:Interest payable and similar charges 4.6 4.6 4.6 4.6Movement in fair value of interest 19.6 - 3.9 -rate swapsOther exceptional items:Net profit on disposal of property, (2.7) (2.7) (0.5) (0.5)plant and equipmentProfit on sale of associated undertaking (0.2) (0.2) - -Movements arising from revaluation (2.7) - - -of pub estateTax impact of exceptional items (6.2) (1.4) (2.5) (1.4)Exceptional tax item: reduction in (19.2) - (9.2) -deferred tax liability due to indexation ----------------------------------------------------- 199.7 216.4 93.5 101.7 ----------------------------------------------------- Basic weighted average number of 342,456,660 342,456,660 343,397,210 343,397,210shares -----------------------------------------------------Adjusted earnings per share 58.3p 63.2p 27.2p 29.6p ----------------------------------------------------- 8. Re-statement of net debt under IFRS The amount of underlying net debt, defined as the amount repayable to banks andother lenders, net of cash retained in the business, is unchanged by theadoption of IFRS. The amount of underlying net debt reconciles to net debt underIFRS as follows: Unaudited At 30 September At 31 March At 1 October 2005 2005 2004 £m £m £m ---------------------------------------------- Corporate bonds (1,185.0) (1,185.0) (1,185.0)Syndicated bank borrowings (260.0) (350.0) (435.0)Securitised bonds (1,771.8) (1,778.4) (1,649.5)Bridge facility - - (154.9) ---------------------------------------------- (3,216.8) (3,313.4) (3,424.4)Cash 95.5 100.5 146.7 ----------------------------------------------Underlying net debt (3,121.3) (3,212.9) (3,277.7) Capitalised debt issue costs 27.1 28.6 42.3Fair value adjustments on (77.6) (80.4) (83.4)acquisition of bondsFair value of interest rate swaps (108.7) (93.0) (89.1)Finance lease creditors (5.9) (5.9) (6.0) ----------------------------------------------Net debt under IFRS (3,286.4) (3,363.6) (3,413.9) ----------------------------------------------IFRS balance sheet:Non-current financial assets - - 0.3Current financial liabilities (34.7) (35.9) (30.6)Non-current financial liabilities (3,347.2) (3,428.2) (3,530.3)Cash 95.5 100.5 146.7 ----------------------------------------------Net debt under IFRS (3,286.4) (3,363.6) (3,413.9) ---------------------------------------------- 9. Accounting Policies Basis of preparation The accounts are prepared in accordance with International Financial ReportingStandards (IFRS) as adopted by the European Union as they apply to the accountsof the Group. Basis of consolidation The Group accounts consolidate the accounts of Enterprise Inns plc ('theCompany') and all the entities that the Company controls (its subsidiaryundertakings). Control is achieved where the Company has the ability to governthe financial and operating policies of an entity so as to obtain benefit fromits activities. This control is obtained through the direct or indirectownership of voting rights. Subsidiary undertakings are consolidated from thedate that control is achieved until the date that control ceases. Consolidated accounts are drawn up to the 30 September each year and adjustmentsare made to the accounts of the subsidiaries where necessary to bring theaccounting policies used in line with those used by the Group. No profit and loss account is presented for Enterprise Inns plc as permitted bySection 230 of the Companies Act 1985. Goodwill Goodwill represents the excess of consideration over the fair value ofidentifiable assets and liabilities acquired in a business combination. Goodwillis stated at cost less any impairment. Goodwill is tested for impairmentannually, or more frequently where events or changes in circumstances indicatethat the carrying value may be impaired. On disposal of a subsidiary, theattributable amount of goodwill is included in the determination of profit orloss on sale. Goodwill arising on acquisitions prior to 1 October 1998 was written off againstreserves and has not been re-instated. Any such goodwill is not included indetermining any profit or loss on disposal. Property, plant and equipment Licensed premises are held at their fair value and other premises are held atcost. Substantially all of the Group's licensed estate is revalued each year byeither professionally qualified external valuers or employees who areprofessionally qualified to carry out such valuations. Surpluses arising fromthe revaluation exercise are taken directly to the revaluation reserve exceptwhere they reverse a revaluation decrease relating to the same asset which haspreviously been recognised as an expense. Any deficit arising from therevaluation exercise is taken directly to the revaluation reserve to the extentthat there is a surplus in place relating to the same asset. Any furtherdecrease in value is recognised in the Income Statement as an expense. Freehold land is not depreciated. Freehold buildings are depreciated so as towrite off the difference between their carrying value and residual value overtheir useful economic life of 50 years. Residual value is reviewed at least ateach financial year end and there is no depreciable amount if residual value isthe same as book value. Landlords' fixtures and fittings are held at cost less accumulated depreciation.The useful economic life of additions to landlord's fixtures and fittings hasbeen calculated at 30 years. Depreciation is charged on a straight line basis towrite off the total cost less residual value over their useful economic life. Properties held under finance leases are depreciated on a straight line basisover the lower of the remaining lease term and their useful economic life of 50years. Depreciation is provided on other categories of property, plant and equipmentover 3 to 50 years on a straight line basis to residual value. Profits or losses on disposal of property, plant and equipment are calculated asthe difference between the net sales proceeds and the carrying amount of theasset at the date of disposal. Property, plant and equipment are reviewed annually for indications ofimpairment. Where any indications are identified, assets are assessed fully forimpairment. Impairment occurs where the recoverable amount of the asset is lessthan its carrying amount. Recoverable amount is the higher of an asset's fairvalue less costs to sell and value in use. Any impairment loss is treated as arevaluation decrease to the extent that a surplus exists for the same asset, andthereafter as an expense in the Income Statement. Leases Leases where the Group assumes substantially all the risks and rewards ofownership are classified as finance leases. Pubs acquired under finance leasesare capitalised at the lower of their fair value and the present value of futurelease payments. The corresponding liability is included in the balance sheet asa finance lease creditor. Pubs held under finance leases are revalued along withthe freehold estate on an annual basis. Lease payments are apportioned betweenfinance charges and reduction of the lease creditor so as to obtain a constantrate of interest on the remaining balance of the liability. Finance charges arecharged as an expense to the Income Statement. Leases where substantially all the risks and rewards of ownership are retainedby the lessor are classified as operating leases. Rentals paid under operatingleases are charged to the Income Statement over the lease term. The fair valueattributed to pubs acquired as part of business combinations that are held asoperating leases are classified in the balance sheet as 'intangible assets:lease premiums' within non-current assets and are amortised over the lease term. Pubs held for sale Pubs held for sale are held at the lower of their carrying value and expectedsale proceeds, net of selling costs. Pubs are classified as held for sale whenthey have been identified for disposal by the Group. The pub must be availablefor immediate sale in its present condition and the sale should be highlyprobable. These conditions are met when management are committed to the sale,the pub is actively marketed and the sale is expected to occur within one year.Pubs held for sale are not depreciated. Current assets held for sale Current assets held for sale comprises stock items and are held at the lower ofcost and net realisable value. Net realisable value is based on estimatedselling price less further costs expected to be incurred on disposal. Financial instruments i) Cash and cash equivalents Cash comprises cash at bank and in hand. Any short-term deposits with anoriginal maturity date of three months or less are classified as cashequivalents. ii) Borrowings Borrowings which include bank borrowings, syndicated debt finance, debentures,secured bonds and securitised bonds are initially recognised at fair value netof issue costs, premiums and discounts and are subsequently measured atamortised cost. Amortisation of discounts, premiums and issue costs isundertaken using the effective interest rate method. This method is used toensure that the interest charge associated with the debt, combined with theamortisation of the issue costs, premiums and discounts, represents a constantpercentage of the borrowings across the life of the instrument. iii) Derivative financial instruments The Group uses interest rate swaps to manage the exposure to changes in interestrates and these are classified as derivative financial instruments. Interestrate swaps are initially measured at fair value on acquisition and aresubsequently re-stated to fair value at each reporting date. Any change in thefair value of the instruments is recognised in the Income Statement. Hedgeaccounting has not been adopted for existing interest rate swaps. iv) Equity instruments Equity instruments, being ordinary shares issued by the Company, are recorded atthe fair value of the proceeds received, net of any direct issue costs. Taxation The income tax expense comprises both the income tax payable based on taxableprofits for the year and deferred tax. Deferred tax is provided using thebalance sheet liability method in respect of temporary differences between thecarrying value of assets and liabilities for accounting and tax purposes.Deferred tax assets are recognised to the extent that it is probable that futuretaxable profits will be available against which the asset can be utilised.Deferred tax assets and liabilities are offset where there is a legallyenforceable right to set off current tax assets against current tax liabilities. Both current and deferred tax are recognised in the Income Statement except whenit relates to items recognised directly in equity, in which case thecorresponding tax is also recognised in equity. Tax is calculated using taxrates enacted or substantively enacted at the balance sheet date. Provisions Provisions are recognised when the Group has a present legal or constructiveobligation as a result of past events, it is probable that an outflow ofresources will be required to settle the obligation and the amount can bereliably estimated. If the effect is material, the amount of the provision isdiscounted using a pre-tax rate that reflects current market assessments of thetime value of money and the risks specific to the liability. The amount of theprovision would therefore represent the present value of the expenditureexpected to be required to settle the obligation. Pension obligations The Group has both defined contribution and defined benefit pensionarrangements. The cost of defined contribution payments made to employees' own pension plansis charged to the Income Statement as incurred. The defined benefit scheme is now closed to new members and for the futureaccrual of benefits. The net amount recognised on the balance sheet comprisesthe difference between the fair value of the scheme's liabilities and the fairvalue of the scheme's assets. This is determined annually by qualified actuariesusing the projected unit credit method. Current service cost and past servicecost are charged to operating profit. The net of the expected return on schemeassets and interest on scheme liabilities is recognised within finance income orfinance costs. Actuarial gains and losses are recognised in full in the periodin which they occur in the statement of recognised income and expense. Own shares The cost of own shares held in employee benefit trusts and in treasury arededucted from shareholders' equity until the shares are cancelled, re-issued ordisposed of. Any proceeds received are also taken to shareholders' equity. Nogain or loss is recognised in the Income Statement on the purchase, sale, issueor cancellation of own shares held. Revenue recognition Revenue represents amounts receivable for goods and services provided in thenormal course of business, net of discounts and VAT. Revenue is measured as thefair value of consideration received or receivable. Sales of beverages arerecognised when these goods are delivered to our customers. Rents receivable andmachine income are recognised in the accounting period to which the incomerelates. Share-based payments The Group has applied the transitional provisions of IFRS 2 and applied itsrequirements to those awards granted after 7 November 2002 that were not vestedat 1 January 2005. The Group operates a number of equity-settled share-based payment schemes.Share-based payments are measured at fair value at the date of award and thisvalue is subsequently updated at each balance sheet date for management's bestestimate of the effect of non-market based vesting conditions on the number ofequity instruments that will ultimately vest. The cost is recognised as anexpense over the vesting period by calculating the cumulative expense andrecognising the movement in the cumulative expense in the Income Statement. Acorresponding entry is made to equity. The fair value of share options ismeasured using valuation models. Dividends Final dividends are recognised as a liability when they have been approved byshareholders at the Annual General Meeting. Interim dividends are recognisedwhen they are paid. Exceptional items Exceptional items are those which are separately identified by virtue of theirsize or nature to allow a full understanding of the underlying performance ofthe Group. 10. Independent Auditors' Report Independent Auditors' Report to Enterprise Inns plc on the Preliminary IFRSFinancial Statements for the year ended 30 September 2005 We have audited the accompanying preliminary International Financial ReportingStandards ("IFRS") financial statements of the Group for the year ended 30September 2005. These comprise the opening IFRS Group Balance Sheet as at 1October 2004, the Group Income Statement, Group Statement of Recognised Incomeand Expense and Group Cash Flow Statement for the year ended 30 September 2005,the Group Balance Sheet as at 30 September 2005 and related notes 1 and 2together with the related accounting policies, basis of preparation and IFRS 1First-time adoption decisions set out on pages 4 to 5 and pages 26 to 29. This report is made solely to the Company in accordance with our engagementletter dated 9 September 2005. Our audit work has been undertaken so that wemight state to the Company those matters we are required to state to them in anauditors' report and for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility or liability to anyone other thanthe Company for our audit work, for this report, or for the opinions we haveformed. Respective responsibilities of directors and auditors These preliminary IFRS financial statements are the responsibility of theCompany's directors and have been prepared as part of the Company's conversionto IFRS. They have been prepared in accordance with the basis set out on pages 4to 5, which describes how IFRS have been applied under IFRS 1, including theassumptions management has made about the standards and interpretations expectedto be effective, and the policies expected to be adopted, when managementprepares its first complete set of IFRS financial statements as at 30 September2006. Our responsibility is to express an independent opinion on the preliminary IFRSfinancial statements based on our audit. We read the other informationaccompanying the preliminary IFRS financial statements and consider whether itis consistent with the preliminary IFRS financial statements. This otherinformation comprises the Summary of Impact, Introduction, Description of IFRSAdjustments, Reconciliation of Group Financial Statements from UK GAAP to IFRS,Restatement of Earnings Per Share under IFRS and Restatement of Net Debt underIFRS. We consider the implications for our report if we become aware of anyapparent misstatements or material inconsistencies with the preliminary IFRSfinancial statements. Our responsibilities do not extend to any otherinformation. Basis of audit opinion We conducted our audit in accordance with United Kingdom Auditing Standardsissued by the Auditing Practices Board. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the preliminaryIFRS financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe preliminary IFRS financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as wellas evaluating the overall presentation of the preliminary IFRS financialstatements. We believe that our audit provides a reasonable basis for ouropinion. Emphasis of matter Without qualifying our opinion, we draw attention to the fact that the Basis ofPreparation explains why there is a possibility that the preliminary IFRSfinancial statements may require adjustment before constituting the final IFRSfinancial statements. Moreover, we draw attention to the fact that, under IFRSsonly a complete set of financial statements with comparative financialinformation and explanatory notes can provide a fair presentation of the Group'sfinancial position, results of operations and cash flows in accordance withIFRSs. Opinion In our opinion, the preliminary IFRS financial statements for the year ended 30September 2005 have been prepared, in all material respects, in accordance withthe basis set out in the Basis of Preparation and IFRS 1 - First Time AdoptionDecisions, which describes how IFRS have been applied under IFRS 1, includingthe assumptions management has made about the standards and interpretationsexpected to be effective, and the policies expected to be adopted, whenmanagement prepares its first complete set of IFRS financial statements as at 30September 2006 Ernst & Young LLPBirmingham4 May 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
EI Group