1st May 2007 07:03
Punch Taverns PLC01 May 2007 PUNCH TAVERNS PLC ("Punch" or "the Group") Interim Results for the 28 weeks ended 3 March 2007 Active period, excellent results, profitability per pub increased Punch Taverns plc, the UK's leading pub operator, today announces interimresults for the 28 weeks ended 3 March 2007. Highlights Financial Results (before exceptional items) • EBITDA increased by 26% to £340 million (2006: £269 million) • Profit before tax and asset sales up 12% to £130 million (2006: £116 million) • Basic earnings per share up 10% to 38.5p (2006: 35.1p) • Interim dividend up 16% to 5.1p (2006: 4.4p) Statutory Results (after exceptional items) • Profit before tax up 28% to £138 million (2006: £108 million) • Basic earnings per share up 11% to 42.9p (2006: 38.8p) Operational • Unprecedented levels of activity in the leased estate - EBITDA increased 7% to £249 million, average profit per pub up 8% - 50 pubs acquired, 260 pubs transferred from managed, and 37 sold - £46 million invested at 571 pubs, 308 rent reviews and 818 new lettings - Post the period end 869 pubs agreed to be sold to Admiral Taverns further enhancing overall estate profit per pub and quality - Recently announced Matthew Clark joint venture to increase product range and expertise • Portfolio of high quality managed pubs performing well - Core estate outlet EBITDA increased 2% to £83 million with like for like revenue growth up 5% - Focused estate structure with food sales up 7% - Complementary acquisition of Mill House Inns with 82 quality managed pubs Outlook • Transfer to lease programme on track to complete by August 2007 with 519 lettings now agreed • Second half trading is in line with expectations Giles Thorley, Chief Executive of Punch Taverns plc, commented: "This is an excellent set of results in what has been an extremely active periodfor Punch. Both our leased and managed estates continue to perform well andwill be further enhanced by the completion of the transfer to lease process andrecently announced corporate transactions. "We now have in place an estate of the highest quality. We remain confident ofanother year of progress for the Group as we continue to build the UK's leadingpubco and to maximise value for shareholders." 1 May 2007 Enquiries: Punch Taverns plc Today: 020 7457 2020 Giles Thorley, Chief Executive Thereafter: 020 7255 4002Robert McDonald, Finance Director College Hill Tel: 020 7457 2020 Justine WarrenMatthew Smallwood Punch Taverns plcInterim Results for 28 weeks ended 3 March 2007 Overview This has been another successful period of growth for Punch Taverns. Ouroperating businesses have performed well and we have continued to activelydevelop our estate to make best use of our portfolio of property assets. The interim period comprises 28 weeks to 3 March 2007, during which time, beforeexceptional items, we have generated EBITDA of £340m, an increase of 26%, andprofit before tax and fixed asset sales of £130m, an increase of 12%. Basicearnings per share before exceptional items have risen 10% to 38.5p. In view ofthis continued growth we will make an interim dividend payment of 5.1 pence perordinary share, an increase of 16% on last year. The acquisition of Spirit Group in January 2006 has contributed well to thisprofit growth. We have made good progress with our strategy to refocus theacquired estate into a core group of top quality managed pubs. In particularthe programme to transfer smaller managed pubs to lease has progressed well,with terms now agreed for 519 pubs, and the transfer programme is on track tocomplete by August 2007. During the period we have also bolstered the managedpub operation with the acquisition of Mill House Inns. As at 3 March 2007 we owned 9,304 pubs across the UK, of which 8,119 wereoperated on a leased basis and 1,185 under direct management. Since the periodend we have announced a further disposal of 869 smaller leased pubs, which donot fit our growth model, to Admiral Taverns. Coupled with the transfers fromthe managed estate, this significantly increases the average profitability andresilience of our leased estate. Leased Estate This has been a period of intense activity in our leased estate, as we havecontinued to further improve the quality of our portfolio and to help ourretailers build their businesses, particularly in preparation for the imminentsmoking ban. During the 28 weeks we acquired 50 new pubs, transferred 260 in from the managedestate, and sold 37. We completed capital developments at 571 pubs, investing£46m, agreed 308 rent reviews, and formalised 818 new lettings. These areunprecedented levels of activity. Overall EBITDA in the leased estate improved by 7% to £249m EBITDA, with averageprofit per pub rising 8% over prior year. Average profitability will risefurther as the transfer to lease and the disposal programmes are completed.Underlying like for like profit growth in the core leased estate (excludingannounced disposals) increased by 3.1%. Our strategy is to assist and support our leased retailers whilst recognisingtheir independence as entrepreneurial business people. Our recently updatedRetailer Charter has been accredited by the British Institute of InnkeepersBenchmarking and Accreditation Services and sets out our commitment to highstandards of professional conduct. In addition, we work closely with retailersin offering training, investment, and other support that might be appropriatefor their business. We are particularly pleased by evidence that our retailersare increasingly profitable, as they continue to adapt well to change as the pubmarket evolves. Our ability to support our retailers will be further enhanced by the 50% JointVenture ownership of Matthew Clark, the leading independent drinks distributorin the UK, which was announced after the period end. This Joint Venture, inwhich we have invested £35m, will be profitable in its own right and willsupplement our existing supplier base, adding significant product range andexpertise to our retailers across a much wider spectrum of drinks. Managed Estate Our managed estate was acquired with the Spirit Group in January 2006 andcontinues to perform well through transition which has seen significant changesin the estate and a refocus on a smaller core business. In September we completed the disposal of 31 Old Orleans pub restaurants toRegent Inns, as well as the acquisition of Mill House Inns with 82 pubs whichclosely complement our core estate. During the period, other pubs remained intransition, as the lease transfer programme progressed. With terms now agreedfor the transfer of 519 pubs, we will complete the lease transfer programme thissummer, with any remaining transition handled through the normal course ofbusiness. Meanwhile the core estate has been focused onto four segmentscomprising Value Food, Quality Food, City and Locals, enabling us to furtherstreamline operations, menus and pub services. Overall EBITDA from the managed estate was £91m in the period, with nearly 70%derived from the core estate at outlet level. The core estate of 684 pubs hasperformed particularly well, with like for like sales revenue up 4.9% year onyear and profit growth of 2.2%. Within this we have seen further growth of foodsales (up 7%) but somewhat offset by increased costs, especially utilities. Our strategy to focus the managed estate on a smaller core portfolio of fooddriven pubs or top quality locals will complete later this year and position theestate to take advantage of the evolution of the pub market in the light of thesmoking ban. The core estate already earns 39% of sales from food, and is ableto capitalise on a growing market for informal dining. Industry Issues These interim results reflect the effects of the more liberal licensing regimeintroduced in November 2005. The ongoing effects of the licensing changes onindividual pub profitability have been modest, but we share the Government'scommitment to tackle irresponsible drinking and we are pleased that theincreased flexibility in opening hours has helped to reduce alcohol relateddisorder. We continue to work in partnership with our individual licensees andwith national and local government to promote responsible retailing and sensibledrinking, including through the Alcohol Misuse Enforcement Campaign. Ourretailers are encouraged to tackle specific instances of underage drinking andantisocial behaviour. The ban on smoking in enclosed public places took effect in Wales on 2 April2007 and will take effect in England on 1 July 2007. It is too early to assessthe effect on our pubs in Wales; however, we have continued to learn from ourexperience in Scotland, where a ban on smoking was introduced in March 2006.The Scottish market differs markedly from both England and Wales, but experiencehas shown that pubs which were well prepared for the ban, as well as those thathave developed their food offering, have subsequently performed well. Overall,we are confident that the significant investment made in our estate both byourselves and by our licensees, in the provision of outside facilities forsmokers and in increasing the overall appeal of our pubs for the majority whoare non-smokers, will improve future prospects for our pubs. Financial Profit for the period totalled £114m post tax which included a net exceptionalcredit of £12m. This net exceptional credit represented one-off expenditure of£15m primarily associated with the transfer of pubs to lease, offset by areduction in property liabilities in the acquired Spirit business, and some taxadjustments. The effective tax charge in the period of 23% remains below the standard ratedue to indexation of acquired asset base costs, and is expected to be at thislevel for the full year. Cash tax paid in the period was £11m. Basic earnings per share, after exceptional items, were 42.9 pence and up 11% onprior year, whilst diluted earnings of 42.4 pence also rose 11%. It should benoted that the convertible bond was not dilutive in this period. Net debt at 3 March 2007 was £5,284m, £222m higher than last year endprincipally due to the acquisition of Mill House Inns for £164m in September2006 and further investment in the estate. Our debt is all at fixed rates ofinterest and predominantly long term investment grade securitised debt, anexcellent match for our steady income streams. We have recently commenced arefinancing project which includes proposals to redeem the Avebury securitiseddebt structure which, together with disposal proceeds, will lead to a reductionin our short term bank debt which totalled £674m at the interim date. Outlook Trading in the second half has continued to follow established trends and we areconfident that results will be in line with our expectations. Both estates have continued to perform well, and activity in the businessremains high as we prepare for the ban on smoking. Whilst this will undoubtedlyhave some impact on trading levels in some pubs, we are well prepared tooptimise this and ultimately to benefit from changes in consumption patterns. The value of our property and the opportunity it presents is now betterrecognised by the investment markets and we consider actively all ideas that mayadd further value, including the new opportunity presented by REITs. At presentour view remains that best long term returns for shareholders are provided byour current business structure, but we continue to keep all options underreview. The first half has been a particularly active period for Punch Taverns. Ourbusiness has continued to be successful and produce excellent results. We arewell prepared to take advantage of operational opportunities, in particular thegrowth in casual dining, and continue to review promising opportunities toinvest. We believe our business is well placed to grow further to the benefitof our shareholders. CONSOLIDATED INCOME STATEMENTfor the 28 weeks ended 3 March 2007 28 weeks to 3 March 2007 28 weeks to 4 March 2006 Before Exceptional Total Before Exceptional Total items exceptional items exceptional items items (note 3) (note 3) £m £m £m £m £m £m Revenue 921.1 - 921.1 618.9 - 618.9Operating costs before (581.5) 7.0 (574.5) (350.2) (3.5) (353.7)depreciation and amortisation EBITDA1 339.6 7.0 346.6 268.7 (3.5) 265.2Depreciation and amortisation (29.4) - (29.4) (15.1) - (15.1) Operating profit 310.2 7.0 317.2 253.6 (3.5) 250.1Profit on sale of non-current 2.0 - 2.0 0.4 - 0.4assetsFinance income 13.2 - 13.2 9.0 - 9.0Finance costs (193.6) - (193.6) (146.6) (0.1) (146.7)Movement in fair value of - (0.7) (0.7) - (4.4) (4.4)interest rate swapsShare of post-tax loss from - - - (0.1) - (0.1)joint ventures Profit before taxation 131.8 6.3 138.1 116.3 (8.0) 108.3UK income tax (charge) / (29.9) 5.6 (24.3) (25.9) 17.4 (8.5)credit (note 4) Profit for the financial 101.9 11.9 113.8 90.4 9.4 99.8period attributable to equityshareholders Basic earnings per share 38.5p 42.9p 35.1p 38.8p Diluted earnings per share 38.0p 42.4p 34.5p 38.1pDividend per share paid or 5.1p 4.4pdeclared in respect of theperiod Total dividend paid or 13.5 11.6declared in respect of theperiod (£m) 1 EBITDA represents earnings before finance income, finance costs, movement infair value of interest rate swaps, tax, depreciation, amortisation, profit onsale of non-current assets and share of post-tax loss from joint ventures. CONSOLIDATED INCOME STATEMENT continued for the 28 weeks ended 3 March 2007 52 weeks to 19 August 2006 Before Exceptional Total exceptional items items (note 3) £m £m £mRevenue 1,546.1 - 1,546.1Operating costs before depreciation and (939.8) (8.2) (948.0)amortisation EBITDA1 606.3 (8.2) 598.1Depreciation and amortisation (46.1) - (46.1) Operating profit 560.2 (8.2) 552.0Profit on sale of non-current assets 1.4 - 1.4Finance income 19.1 - 19.1Finance costs (331.1) (0.1) (331.2)Movement in fair value of interest rate swaps - 39.7 39.7Share of post-tax loss from joint ventures - - - Profit before taxation 249.6 31.4 281.0UK income tax (charge) / credit (note 4) (54.8) 20.6 (34.2) Profit for the financial period attributable to 194.8 52.0 246.8equity shareholders Basic earnings per share 74.9p 94.9pDiluted earnings per share 73.6p 92.4pDividend per share paid or proposed in respect of 13.4pthe period Total dividend paid or declared in respect of the 35.3period (£m) 1 EBITDA represents earnings before finance income, finance costs, movement infair value of interest rate swaps, tax, depreciation, amortisation, profit onsale of non-current assets and share of post-tax loss from joint ventures. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the 28 weeks ended 3 March 2007 28 weeks to 28 weeks to 52 weeks to 3 March 4 March 19 August 2007 2006 2006 £m £m £m Income and expense recognised directly in equity:Actuarial gains on defined benefit pension schemes 16.5 15.0 33.8Gains / (losses) on cash flow hedges 12.7 (4.8) 48.8Tax on equity component of convertible bonds - (9.0) (9.0)Tax credit related to indexation on revalued properties 3.6 2.0 5.9 32.8 3.2 79.5Transfers to the income statement:On cash flow hedges (3.8) (6.6) (13.3) 29.0 (3.4) 66.2Tax on items taken directly to equity (7.7) (1.1) (20.8) Net gain / (loss) recognised directly in equity 21.3 (4.5) 45.4Profit attributable to shareholders 113.8 99.8 246.8 Total recognised income for the period attributable to equity shareholders 135.1 95.3 292.2 Effects of changes in accounting policy attributable toequity shareholders: Net loss on recognition of derivative financial instruments - (68.6) (68.6)at fair value on first-time application of IAS 39 - (68.6) (68.6) CONSOLIDATED BALANCE SHEETat 3 March 2007 3 March 4 March 19 August 2007 2006 2006 £m £m £mAssetsNon-current assetsProperty, plant and equipment 6,750.7 6,983.6 6,506.0Goodwill 557.5 516.8 503.4Intangible assets 166.1 229.6 163.3Receivables 0.7 6.1 1.4Retirement benefit assets 4.5 - -Deferred tax assets 180.2 157.5 175.4Investments in joint ventures - 5.3 -Derivative financial instruments 6.2 1.6 5.8 7,665.9 7,900.5 7,355.3 Current assetsInventories 9.1 16.7 12.2Trade and other receivables 104.4 130.3 107.4Cash deposits used as security for loan notes 27.1 31.8 15.8Cash and cash equivalents 365.0 448.1 562.4 505.6 626.9 697.8Non-current assets classified as held for sale 10.6 8.1 28.5 Total assets 8,182.1 8,535.5 8,081.6 LiabilitiesCurrent liabilitiesTrade and other payables (349.4) (395.7) (444.9)Short-term borrowings (552.6) (644.8) (85.1)Current income tax liabilities (9.9) (19.0) (15.8)Provisions (20.2) (7.2) (22.5) (932.1) (1,066.7) (568.3) Non-current liabilitiesBorrowings (4,702.6) (5,150.4) (5,128.5)Convertible bonds (248.1) (237.9) (242.5)Derivative financial instruments (178.8) (279.6) (189.8)Deferred tax liabilities (495.2) (400.6) (428.8)Retirement benefit obligations (10.2) (76.2) (24.7)Provisions (61.4) (80.9) (60.6)Other liabilities (13.8) (6.8) (11.8) (5,710.1) (6,232.4) (6,086.7) Total liabilities (6,642.2) (7,299.1) (6,655.0) Net assets 1,539.9 1,236.4 1,426.6 Shareholders' equityCalled up share capital 0.1 0.1 0.1Share premium 453.4 448.4 452.4Equity component of convertible bonds 21.0 21.0 21.0Hedge reserve (31.3) (70.5) (37.6)Other reserves 5.5 3.5 4.3Retained earnings 1,091.2 833.9 986.4 Total shareholders' equity 1,539.9 1,236.4 1,426.6 CONSOLIDATED CASH FLOW STATEMENTfor the 28 weeks ended 3 March 2007 28 weeks to 28 weeks to 52 weeks to 3 March 4 March 19 August 2007 2006 2006 £m £m £mCash flows from operating activitiesOperating profit 317.2 250.1 552.0Depreciation and amortisation 29.4 15.1 46.1Decrease / (increase) in inventories 3.3 (0.8) 0.9Decrease in trade and other receivables 5.3 24.2 47.2Decrease in trade and other payables (110.6) (94.8) (32.8)Difference between pension contributions paid and amounts (0.4) (0.4) (34.0)recognised in the income statementDecrease in provisions and other liabilities (3.9) (8.1) (12.0) Cash generated from operations 240.3 185.3 567.4Income tax paid (10.9) (21.1) (32.3) Net cash from operating activities 229.4 164.2 535.1 Cash flows from investing activitiesAcquisition of subsidiary, net of cash acquired (21.1) (205.3) (205.5)Purchase of property, plant and equipment- acquisitions (54.3) (35.5) (65.1)- investments (97.6) (57.5) (139.0)Proceeds from sale of property, plant and equipment 31.9 215.5 348.7Proceeds from sale of other non-current assets 27.6 2.2 479.5Purchase of intangible assets (3.6) (0.5) (2.0)Proceeds from sale of joint venture - - 6.8 Net cash (used in) / generated from investing activities (117.1) (81.1) 423.4 Cash flows from financing activitiesNet proceeds from issue of ordinary share capital 1.0 75.4 79.4Proceeds from issue of new borrowings 350.0 1,201.1 1,216.0Issue costs paid (0.3) (20.9) (20.9)Proceeds from issue of convertible bonds - 275.0 275.0Costs of issuing convertible bonds - (9.3) (9.3)Net proceeds from issue of derivative financial instruments - 50.0 50.0Repayment of borrowings (448.6) (1,368.2) (1,966.5)Interest paid (183.7) (127.7) (319.1)Interest received 10.8 9.7 19.4Repayments of obligations under finance leases (2.7) (1.2) (4.6)Interest element of finance lease rental payments (0.8) (0.6) (1.6)Costs of terminating financing arrangements1 (0.2) (115.0) (115.1)(Increase) / decrease in cash deposits used as security for loan notes (11.3) 171.0 187.0Dividends paid (23.9) (20.0) (31.5) Net cash (used in) / generated from financing activities (309.7) 119.3 (641.8) Net (decrease) / increase in cash and cash equivalents (197.4) 202.4 316.7 Cash and cash equivalents at beginning of period 562.4 245.7 245.7 Cash and cash equivalents at end of period 365.0 448.1 562.4 1 In the prior period, costs of terminating financing arrangements includeoutflows of £114.6m on the redemption of swaps following the repayment of£525.0m of bank loans on the acquisition of the Spirit group. NOTES TO THE FINANCIAL STATEMENTSfor the 28 weeks ended 3 March 2007 1. ACCOUNTING POLICIES Basis of preparation These interim financial statements have been prepared in accordance with IAS 34"Interim Financial Reporting" using, on a consistent basis, the accountingpolicies set out in the Group's Annual Report and Financial Statements 2006, andwhich are expected to apply at 18 August 2007. These interim financial statements are unaudited but have been reviewed by theauditors. The figures for the period ended 19 August 2006 have been extractedfrom the Annual Report and Financial Statements 2006, which have been filed withthe Registrar of Companies and on which the auditors gave an unqualified opinionand did not make any statement under sections 237 (2) or (3) of the CompaniesAct 1985. The interim report, which was approved by the Board of Directors on 1 May 2007,does not constitute statutory accounts within the meaning of section 240 of theCompanies Act 1985. 2. SEGMENTAL ANALYSIS The Group operates in two business segments; a leased estate and a managedestate. Between 19 August 2006 and 3 March 2007, 260 pubs with a fair value of£360.1m have transferred from the managed to the leased estate. Leased Managed Total £m £m £m28 weeks to 3 March 20071:Revenue 440.0 481.1 921.1Operating costs before depreciation and amortisation (191.5) (390.0) (581.5)EBITDA 248.5 91.1 339.6Depreciation and amortisation (9.4) (20.0) (29.4)Operating profit before exceptional items 239.1 71.1 310.2 28 weeks to 4 March 20061:Revenue 430.4 188.5 618.9Operating costs before depreciation and amortisation (198.8) (151.4) (350.2)EBITDA 231.6 37.1 268.7Depreciation and amortisation (7.9) (7.2) (15.1)Operating profit before exceptional items 223.7 29.9 253.6 52 weeks to 19 August 20061:Revenue 803.3 742.8 1,546.1Operating costs before depreciation and amortisation (367.6) (572.2) (939.8)EBITDA 435.7 170.6 606.3Depreciation and amortisation (15.3) (30.8) (46.1)Operating profit before exceptional items 420.4 139.8 560.2 1 pre-exceptional items. 3. EXCEPTIONAL ITEMS In order to provide a trend measure of underlying performance, profit isadjusted to exclude items which management consider will distort comparability,either due to their significant non-recurring nature or as a result of specificaccounting treatments. Included in the income statement are the followingexceptional items: 28 weeks 28 weeks 52 weeks ended ended ended 3 March 4 March 19 August 2007 2006 2006 £m £m £mOperatingLicensing reform costs, redundancy, costs to integrate acquisition of subsidiaries and other related one-off costs (14.5) (3.5) (8.2)Movement on liabilities1 21.5 - - 7.0 (3.5) (8.2)Finance costsSecured loan interest - (0.1) (0.1) - (0.1) (0.1) Movement in fair value of interest rate swaps2 (0.7) (4.4) 39.7 (0.7) (4.4) 39.7 Total exceptional items before tax 6.3 (8.0) 31.4 TaxTax impact of exceptional items 6.5 2.4 (9.4)Adjustments to tax in respect of prior periods (0.9) - 15.0Release of tax provision - 15.0 15.0 5.6 17.4 20.6 Total exceptional items after tax 11.9 9.4 52.0 1 Represents the movement in property liabilities in respect of which therelevant statutory limitation period has expired and the reversion of onerousleases to the Group. 2 Represents the movement in the fair value of interest rate swaps which do notqualify for hedge accounting. Whilst the interest rate swaps are considered tobe effective in matching the amortising profile of existing or planned floatingrate borrowings, they do not meet the definition of an effective hedge due tothe relative size of the mark to market difference of the swap at the date ofacquisition or inception. 4. TAXATION The effective taxation charge applied in these interim results of 23.0%, beforeprofit on sale of non-current assets, exceptional items and share of post-taxearnings from joint ventures, reflects the estimated tax rate for the 52 weeksending 18 August 2007. The effective rate of taxation for the comparativeperiod was 22.3%. The total tax charge of £24.3m (March 2006: £8.5m; August 2006: £34.2m) includesan exceptional tax credit of £5.6m (March 2006: £17.4m; August 2006: £20.6m). 5. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the year, excluding those held in the employee share trust,which are treated as cancelled. Diluted earnings per share is calculated by dividing the earnings attributableto ordinary shareholders (after adding back interest on dilutive convertiblebonds) by the weighted average number of ordinary shares outstanding during theyear (adjusted for the effects of dilutive options and dilutive convertiblebonds). The equity portion of the convertible bond has been assessed and its impact isnot dilutive on both basic earnings and adjusted earnings at 3 March 2007 and 4March 2006. At 19 August 2006 its impact was dilutive on basic earnings and notdilutive on adjusted earnings. Reconciliations of the earnings used in the calculations are set out below: 28 weeks to 3 March 2007 28 weeks to 4 March 2006 52 weeks to 19 August 2006 Per share Per share Per share amount amount amount Earnings Earnings Earnings p p p £m £m £mBasic earnings per share 113.8 42.9 99.8 38.8 246.8 94.9Effect of dilutive options - (0.5) - (0.7) - (1.6)Effect of dilutive - - - - 12.3 (0.9)convertible bondsDiluted earnings per share 113.8 42.4 99.8 38.1 259.1 92.4 Supplementary earnings pershare figures:Basic earnings per share 113.8 42.9 99.8 38.8 246.8 94.9Effect of:Exceptional items (11.9) (4.4) (9.4) (3.7) (52.0) (20.0)Basic earnings per share 101.9 38.5 90.4 35.1 194.8 74.9before exceptional itemsDiluted earnings per share 113.8 42.4 99.8 38.1 259.1 92.4Effect of:Exceptional items (11.9) (4.4) (9.4) (3.6) (52.0) (19.7)Reverse impact of convertible - - - - (12.3) 0.9bondsDiluted earnings per share 101.9 38.0 90.4 34.5 194.8 73.6before exceptional items The impact of dilutive ordinary shares is to increase weighted average shares by3.3 million (March 2006: 4.6 million; August 2006: 4.6 million) for employeeshare options and nil (March 2006: nil; August 2006: 15.9 million) forconvertible bonds. 28 weeks to 28 weeks to 52 weeks to 3 March 4 March 2006 19 August 2007 2006 No. (000) No. (000) No. (000) Basic weighted average number of shares 264,965 257,312 259,953Discretionary Share Plan and SAYE scheme 2,282 3,826 3,816Long Term Incentive Plan 858 790 687Deferred Bonus Shares 103 70 77Potential dilutive impact of convertible bonds - - 15,902 Diluted weighted average number of shares 268,208 261,998 280,435 6. NET DEBT (a) Analysis of net debt 3 March 4 March 19 August 2007 2006 2006 £m £m £m Secured loan notes (4,347.3) (4,380.8) (4,364.6)Other bank loans (674.1) (1,173.1) (621.9)Convertible bonds (275.0) (275.0) (275.0)Gross debt (5,296.4) (5,828.9) (5,261.5) Cash and cash equivalents 365.0 448.1 562.4 Nominal value of net debt (4,931.4) (5,380.8) (4,699.1) Capitalised debt issue costs 31.2 49.4 37.5Fair value adjustments on acquisition of secured loan notes (205.6) (220.9) (213.8)Fair value of interest rate swaps (172.6) (278.0) (184.0)Equity component of convertible bonds 18.7 28.2 24.3Finance lease obligations (24.1) (29.1) (26.8) Net debt (5,283.8) (5,831.2) (5,061.9) Balance sheet:Borrowings (5,255.2) (5,795.2) (5,213.6)Convertible bonds (248.1) (237.9) (242.5)Derivative financial instruments (172.6) (278.0) (184.0)Cash deposits used as security for loan notes 27.1 31.8 15.8Cash and cash equivalents 365.0 448.1 562.4 Net debt (5,283.8) (5,831.2) (5,061.9) (b) Analysis of changes in net debt At Non-cash At 19 August Acquisitions Cash flow movements 3 March 2006 2007 £m £m £m £m £mCurrent assetsCash at bank and in hand 562.4 4.8 (202.2) - 365.0Cash deposits 15.8 - 11.3 - 27.1 Cash and cash deposits 578.2 4.8 (190.9) - 392.1 DebtBorrowings (5,197.8) (132.5) 100.5 1.7 (5,228.1)Guaranteed loan notes (15.8) - (11.3) - (27.1)Derivative financial instruments (184.0) (0.1) 5.2 6.3 (172.6)Debt component of convertible (242.5) - - (5.6) (248.1)bonds (5,640.1) (132.6) 94.4 2.4 (5,675.9) Net debt per balance sheet (5,061.9) (127.8) (96.5) 2.4 (5,283.8) Net debt incorporates the Group's borrowings, bank overdrafts, derivativefinancial instruments and obligations under finance leases, less cash and cashequivalents and cash deposits. The cash deposits are used as security for loannotes. Non-cash movements relate to amortisation of deferred issue costs and premium onloan notes and convertible bonds, the equity component of convertible bonds andfair value movement in derivative financial instruments. 7. RECONCILIATION OF MOVEMENTS IN EQUITY 28 weeks ended 28 weeks 52 weeks 3 March ended ended 2007 4 March 19 August 2006 2006 £m £m £mAt beginning of period 1,426.6 1,122.7 1,122.7Effect of implementing IAS 32 / 39 - (68.6) (68.6) 1,426.6 1,054.1 1,054.1Total recognised income and expense for the period 135.1 95.3 292.2Shares issued - 74.1 74.1Exercise of share options 1.0 1.3 5.3Share based payments 1.1 1.6 2.4Equity dividends (23.9) (20.0) (31.5)Equity component of convertible bonds - 30.0 30.0Total equity at end of period 1,539.9 1,236.4 1,426.6 8. BUSINESS COMBINATIONS Acquisition of subsidiaries in the current period: Mill House On 14 September 2006 the Group acquired the entire share capital of Broomco(3708) Limited, the holding company of the Mill House group which operated amanaged estate of 82 pubs at the date of acquisition. From the date of acquisition to the interim date, the Mill House groupcontributed £22.0m of Group revenues and £4.8m of EBITDA. If the acquisitionhad been completed on the first day of the financial year, Group revenues forthe interim period would have been £3.4m higher and EBITDA would have been £0.8mhigher. The acquisition is summarised as follows: Provisional fair value £mIntangible fixed assets 11.6Property, plant and equipment 138.4Assets held for resale 12.0Inventories 0.6Deferred taxation (3.7)Receivables 2.9Cash and cash equivalents 4.8Payables and provisions (15.1)Loans and swaps (132.6)Net assets acquired 18.9Provisional goodwill arising on acquisition 19.9Total consideration 38.8 Consideration satisfied by:Cash 26.4Loan notes issued 12.4Total consideration 38.8 The provisional fair value adjustments primarily relate to the revaluation offreehold and leasehold trading properties and the recognition of deferred taxliabilities on revalued properties. Fair values are provisional at 3 March 2007 to enable the final assessment ofpotential tax and other liabilities. Acquisition of subsidiaries in the prior period: Spirit Group On 5 January 2006 the Group acquired the entire share capital of Spirit GroupHoldings Limited which operated a managed estate of 1,830 pubs at the date ofacquisition. Fair values have been finalised at 5 January 2007 and the acquisition issummarised as follows: Fair value £mIntangible fixed assets 148.6Property, plant and equipment 2,335.5Assets held for resale 569.8Investments in joint ventures 6.8Inventories 15.9Taxation - current 0.6 - deferred (33.5)Receivables 80.8Cash and cash equivalents 234.1Payables and provisions (456.4)Loans and swaps (2,731.6)Net assets acquired 170.6Goodwill arising on acquisition 269.0Total consideration 439.6 Consideration satisfied by:Cash 439.6 The provisional fair values that were disclosed in the Group accounts for theyear ending 19 August 2006 have been reduced by £34.4m due to the recognition ofadditional deferred tax liabilities on properties following the finalisation oftax base costs. 9. DIVIDENDS An interim dividend of 5.1 pence per share (2006 interim: 4.4 pence; 2006 final:9.0 pence) was declared by the directors on 1 May 2007 and will be payable on 29June 2007 to shareholders on the register of members on 8 June 2007. Thesefinancial statements do not reflect this dividend payable. 10. RELATED PARTY TRANSACTIONS Balances arising from transactions with joint ventures During the period the Group has paid invoices and raised sales invoices onbehalf of Allied Kunick Entertainments Limited which have been recharged via anintercompany account. At the period end, the following balances wereoutstanding from Allied Kunick Entertainments Limited. At 3 March At 4 March At 19 August 2007 2006 2006 £m £m £mUnsecured loan stock receivable 8.3 7.5 7.9Amounts owed from / (to) joint ventures - 0.1 (0.2)Total amounts owed to joint ventures 8.3 7.6 7.7 11. POST BALANCE SHEET EVENTS On 17 April 2007, Punch Taverns (PGE) Limited, a wholly owned subsidiary of theCompany, completed the acquisition of fifty percent of the entire issued sharecapital of Dubwath Limited, the holding company of the Matthew Clark group ofcompanies. Under the terms of the arrangement, Punch and Constellation Europehave each become fifty percent owners of Matthew Clark. The consideration forthe acquisition was £35.0m in cash from existing resources. On 19 April 2007, the Company exchanged contracts for the sale of 869 pubs fromthe leased estate for a total consideration of £326.0m. For the year ended 19August 2006 the pubs being disposed of generated EBITDA of £30.1m. The sale isexpected to complete in mid May 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Punch Taverns PLC