26th May 2006 07:01
Wolverhampton& Dudley Breweries PLC26 May 2006 26 May 2006 THE WOLVERHAMPTON & DUDLEY BREWERIES, PLC INTERIM RESULTS FOR THE 26 WEEKS ENDED 1 APRIL 2006 • Turnover and operating profit growth in each trading division • Record underlying* earnings per share up 10.0% to 36.2p (2005: 32.9p) • Interim dividend up 10.0% to 14.52p (2005: 13.20p) • Underlying operating margin up by 1.0% to 23.6% (2005: 22.6%) • Underlying profit before taxation up 12.9% to £40.2m (profit before taxation after exceptional items up 20.2% to £41.0 million) • Pathfinder Pubs like-for-like sales** up by 1.0%: up by 2.5% in the last 9 weeks to 20 May 2006 • The Union Pub Company average profit per pub up 4.4% • Integration of Celtic Inns completed at the end of March • Cashflow from operating activities up 72.2% to £99.2m Ralph Findlay, Chief Executive, commented: "These good results are the product of combining value adding acquisitions andorganic development in each of our trading divisions. Current trading in TheUnion Pub Company, Pathfinder Pubs and W&DB Brands has been satisfactory and inline with expectations" All figures have been reported under IFRS and prior years restated. * The underlying results reflect the performance of the Group before exceptionalitems. The Directors consider that these figures provide a useful indication ofthe underlying performance of the Group. ** First half like-for-like sales include the period for 24 weeks to 18 March2006. This year, the Easter bank holiday, which fell in the first half-year lastyear, falls in the second half-year. ENQUIRIES: The Wolverhampton & Dudley Breweries, PLC Tel: 020 7796 4133 on Friday 26 May 2006 onlyRalph Findlay, Chief Executive 01902 329516 thereafterPaul Inglett, Finance Director Hudson SandlerAndrew Hayes/Nick Lyon/James White Tel: 020 7796 4133 To access interviews with Ralph Findlay and Paul Inglett, available in video,audio and text, go to www.cantos.com. High quality images for the media toaccess and download free of charge are available from Visual Media Online at www.vismedia.co.uk Chairman's Statement These first half-year results include strong growth in turnover and profitsreflecting the organic development of the business and acquisitions made overthe last 18 months. Good progress has been achieved despite weaker consumerconfidence and the impact of higher energy and employment costs as we haveexploited the flexibility inherent in our model. Our acquisitions strategy has brought benefits of additional scale, with our pubestate now numbering 2,358 mainly freehold pubs. This expansion has enabled usto reduce purchasing costs significantly and spread our overheads, as well as toincrease our trading geography across England and Wales. We have maintained our focus on investment across the business, both in pubs andbeer brands. As a result, we continue to realise the trading benefits of havingone of the highest quality pub estates in the industry whilst our brandsbusiness continues to capture market share. Results Turnover increased by 9.2% to £281.4 million, reflecting good progress in bothpub divisions, and the acquisitions of Burtonwood PLC in January 2005, JenningsBrothers PLC in May 2005 and English Country Inns PLC in September 2005. Theacquisition of Celtic Inns in March 2006 did not have a significant impact onthese interim results. Turnover and profit growth was achieved in each of our three trading divisions. Underlying operating margin increased to 23.6% (2005: 22.6%) despite costpressure across the business. Good management of costs and acquisition synergiescontributed to this improvement. Underlying profit before taxation increased by 12.9% to £40.2 million. Profitafter exceptional items (principally profits relating to property disposals) was£41.0 million (2005: £34.1 million). Underlying earnings per share increased by 10.0% to 36.2 pence per share (2005:32.9 pence). Basic earnings per share after exceptional items was 36.2 pence pershare (2005: 32.8 pence). Cashflow from operating activities increased by 72.2% to £99.2 million. Dividend The Board declares an interim dividend of 14.52 pence per share (2005: 13.20pence) which will be paid on 30 June 2006 to those shareholders on the registerat the close of business on 9 June 2006. This increase of 10.0% is in line withearnings growth and is consistent with a track record of dividend increasesaveraging over 10% for the last 30 years. Prospects The pressures affecting the pub sector, including regulatory and other costpressures are not new, and are set to continue. Specifically, current and futurerisks are presented by the proposed smoking ban in England and Wales (due to beimplemented in the summer of 2007), rising energy costs, and the impact of anincreasing tax burden and other costs on consumers. These are all catalysts for further consolidation in the industry. For our partwe are well positioned with a strong balance sheet and a low cost of debt. Ourintegrated business model provides opportunity to create additional value, afactor which has enabled us to make successful acquisitions whilst remainingdisciplined about our investment criteria. Additionally, we have well developed plans for continued investment and organicdevelopment, providing momentum for future growth. We remain confident ofachieving a satisfactory out-turn for the year as a whole. David ThompsonChairman Chief Executive's review Business development These good results are the product of combining value adding acquisitions andorganic development in each of our trading divisions. The integrations of Burtonwood, Jennings and English Country Inns last year werecompleted quickly, and realised synergy benefits in excess of £6 million peryear - ahead of original targets. We completed the acquisition of Celtic Inns, apredominantly freehold estate of 70 mostly tenanted pubs (including 2 pubsacquired shortly after completion) in south Wales and the south of England inMarch 2006. These acquisitions are consistent with our clear strategy of investment inpredominantly freehold community pubs. It is beneficial that our integratedbusiness model offers opportunities to create additional value. Burtonwoodtenants, which were tied to Burtonwood ales when we bought the business, nowchoose over 60% of their ales from the range brewed by WDB Brands, and have amore extensive choice of lagers and wines and spirits. Similarly, Jennings tenants and lessees have a wider choice of brands, and theJennings range of ales has performed well throughout the rest of the estate. Thesame benefits are being offered to tenants of Celtic Inns. In addition to extending our trading geography, which now covers all of Englandand Wales, the increased scale of the business has enabled us to reducepurchasing costs, most significantly in categories such as factored drinksproducts and food. We now own 2,358 pubs, which means that our buying terms arecompetitive against even the largest operators in the industry. Additionally,central overheads as a percentage of turnover continue to decline. Our acquisition strategy and the flexibility of our business model have enabledus to respond effectively to rising costs and regulatory change. Operatingmargin increased despite the impact of an extra £1 million of employment costsas a result of the higher national minimum wage, and the rise in electricity andgas prices which increased costs by £3 million in the first half-year. As aconsequence of these cost increases, 93 smaller managed pubs are beingtransferred to tenancy or lease during the second half of this financial year. The implementation of new licensing legislation in November 2005 has not so farproduced a significant change in consumer spending patterns, but more civilisedclosing time arrangements are welcome and relationships with local authoritieshave been constructive. In anticipation of the introduction of the proposed smoking ban in England andWales next summer, we will have invested £8 million in patios, gardens andshelters by the end of this financial year. We have clear plans to invest afurther £12 million in the next financial year, and expect to be well preparedto neutralise risks and maximise opportunities. Pathfinder Pubs - 543 managed pubs (2005: 537 pubs) Turnover increased by 3.9% to £153.1 million. Total like-for-like salesincreased by 1.0% in the 24 weeks to 18 March 2006 compared to a 3.1% increaseat the same stage last year. Underlying operating margin was 16.9% compared to 17.5% last year. Thisreduction was principally due to higher electricity and gas prices, higheremployment costs as a consequence of above inflationary increases in thenational minimum wage, and higher Sky TV costs. Underlying operating profit increased to £25.9 million (2005: £25.8 million). We aim to develop our estate through organic investment as well as throughacquisition. Seven new pubs were opened in the first half-year: The Elms,Lutterworth; West Meon, Hampshire; The Willows, Blackburn; The Talbot, Wigan;The Crows Nest, Seaham; The Cheshire Tavern, Congleton; and The Nags Head,Routh. Pathfinder Pubs is a market leader in new build pub development, acquiring sitessuitable for a range of formats from good value community pubs to Pitcher &Piano bars. Sites acquired are generally freehold, with subsequent returns oninvestment exceeding 15%. We expect to open 8 more pubs in the second half-yearand around 20 in 2006/7. In the first half-year we also completed 40 major refurbishments, investing anaverage £327,000 per pub, with expected cash returns on capital invested of atleast 20%. This significant investment included 8 pubs from the former WizardInns estate, 1 from English Country Inns and 4 Burtonwood managed houses. Pitcher & Piano, comprising 27 bars, performed strongly. In the first half-yearwe re-opened 5 bars, having refurbished units in London (Cornhill), York,Swansea, Harrogate and Taunton, the last being the conversion of a former Wizardoutlet. The Union Pub Company - 1,815 pubs (2005: 1,610 pubs) Total turnover increased by 22.7% to £86.4 million. Like-for-like sales were1.0% ahead of last year in the 24 weeks to 18 March 2006, with average profitper pub up by 4.4%. As we increase the number of pubs let on longer term leaseagreements, profit measures better reflect the overall impact of higherdiscounts and rent. Underlying operating margin was 43.9% compared to 42.3% last year. Underlyingoperating profit increased by 27.2% to £37.9 million. This increase was achievedthrough the effective integration of the Burtonwood and Jennings estates lastyear. The estate now includes 730 leased pubs and 1,085 pubs on shorter termagreements. We will continue to offer leases to tenants of suitable pubs, and weexpect that the proportion of our estate let on longer term agreements willsteadily increase to around 60%. For the right pubs, security, the ability toassign, and high discounts are particularly attractive features of our 'OpenHouse' lease. Within the former Burtonwood estate, which was mainly let on shortterm agreements when we acquired the business, new Union Pub Company agreementsare being processed in respect of 70% of the tenants. During the period we completed 37 investment schemes across the estate,investing £7.4 million in total in the tenanted estate. Three trading pubs wereacquired for £1.6 million, and 8 pubs were sold, realising proceeds of £5.2million. In March, we acquired Celtic Inns for £43.1 million. Of the 70 pubs acquired, 63are now operated by The Union Pub Company. This acquisition has extended ourtrading geography for leased and tenanted pubs further southwards, and isconsistent with our strategy of investing in good quality freehold pubs. WDB Brands Total turnover increased by 5.0% to £41.9 million. Underlying operating marginwas 19.3% compared to 20.1% last year as a consequence of higher energy pricesand a competitive market. Underlying operating profit increased to £8.1 million(2005: £8.0 million). The UK beer market has declined by 2% in the last twelve months. We have,however, continued to gain market share. Over the last twelve months our premiumale range, which includes Marston's Pedigree, Cumberland Ale and Old Empire, hasgrown by over 12%. Our standard ales, comprising Banks's, Mansfield, andMarston's beers, have outperformed the market with particularly strong growth inMarston's Smooth. Market share increased in both on-trade and off-trade and isnow 7.6% of the UK ale market. Investment in marketing was similar to last year, being maintained at £2.6million, with particular emphasis on the Marston's Pedigree 'Don't Compromise'campaign and 'Caskforce' quality initiative. Current trading Current trading in The Union Pub Company, Pathfinder Pubs and WDB Brands hasbeen satisfactory and in line with expectations. In the 9 weeks to 20 May 2006like-for-like sales in Pathfinder Pubs were 2.5% ahead of last year. Ralph FindlayChief Executive Financial review International Financial Reporting Standards (IFRS) W&DB has adopted IFRS in preparing its group accounts for 2005/06. Restatedcomparisons for the year ended 1 October 2005 have already been published on ourwebsite www.wdb.co.uk. Accounting policies used in the preparation of these accounts are consistentwith the polices adopted on transition, with the exception of IAS 32 and 39 andIFRS 5, which were all effective and have been applied by W&DB from 2 October2005. Trading overview Turnover Underlying Margin operating profit (see note 2) 2006 2005 2006 2005 2006 2005 £m £m £m £m % %Pathfinder Pubs 153.1 147.3 25.9 25.8 16.9 17.5The Union Pub Co. 86.4 70.4 37.9 29.8 43.9 42.3WDB Brands 41.9 39.9 8.1 8.0 19.3 20.1Central costs - - (5.5) (5.3) (2.0) (2.1)Group 281.4 257.6 66.4 58.3 23.6 22.6 All of the key financial measures have shown strong growth, including a 9.2%increase in turnover, a 13.9% increase in underlying operating profit, a 12.9%increase in underlying profit before tax, and a 10.0% increase in underlyingearnings per share. As a consequence, the dividend per share has increased by10.0% to 14.52 pence per share, and the dividend is covered 2.5 times byearnings per share. The impact of Easter falling into the second half this year compared to thefirst half last year has resulted in moving approximately £3.0 million ofturnover and £1.2 million of operating profit into the second half of the year. Increased margin The underlying operating margin of the Group increased by 1.0% to 23.6%. Thisincrease was achieved despite some significant cost pressures, including a £3million increase in utility costs across the Group. These cost increases havebeen more than offset by the synergy benefits achieved from successfullyintegrating our recent acquisitions and excellent cost management. Also theincreased proportion of longer leases in the Union Pub Company has led to highermargins in this part of the business. Strong cashflow The business continues to be strongly cash generative - with cashflow fromoperating activities increasing by 72.2% to £99.2 million. Free cashflow, afterthe payment of interest, tax and maintenance capital, increased by 177.9% to£64.2 million. Acquisition of Celtic Inns Celtic Inns was acquired on 17 March 2006 for £43.1 million including aconsideration of £18.1 million and net debt acquired of £25.0 million. Theacquisition was funded from existing bank facilities. The Celtic Inns propertieshave subsequently been independently valued at £31.0 million. Goodwill arisingas a result of the acquisition was £15.9 million (see note 7). Financing and Balance sheet The balance sheet remains very strong, supported by a property portfolio ofpredominantly freehold, community pubs valued at around £1.6 billion. On a12-month pro-forma basis to 1 April 2006 the ratio of net debt to EBITDA(earnings before interest, taxation, depreciation and amortisation) was 4.7times and interest cover 3.0 times. Headroom in our bank facility as at 1 April2006 was £112 million. Taxation The underlying rate of taxation (before exceptional items) has decreased from31.5% in 2005 to 30.3% in 2006. Exceptional items There was a nil after tax impact from exceptional items. This comprised a £0.8million profit on the sale of fixed assets offset by a taxation cost of £0.8million representing the tax charge associated with the sale of these assets, ofwhich £0.5 million relates to a prior period adjustment. Paul InglettFinance Director GROUP INCOME STATEMENT (UNAUDITED) for the 26 weeks ended 1 April 2006 26 weeks to 1 April 2006 26 weeks to 2 April 2005 52 weeks to 1 October 2005 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total Total £m £m £m £m £m £m £mRevenue 281.4 - 281.4 257.6 - 257.6 556.1Operating expenses (215.0) 0.8 (214.2) (199.3) (1.5) (200.8) (421.3)Operating profit 66.4 0.8 67.2 58.3 (1.5) 56.8 134.8Finance costs- Excluding retirement benefits (25.5) - (25.5) (21.5) - (21.5) (78.2)- Retirement benefits (1.3) - (1.3) (1.3) - (1.3) (2.6) (26.8) - (26.8) (22.8) - (22.8) (80.8)Finance income 0.6 - 0.6 0.1 - 0.1 0.2Net finance costs (26.2) - (26.2) (22.7) - (22.7) (80.6)Profit before taxation 40.2 0.8 41.0 35.6 (1.5) 34.1 54.2Income tax expense (12.2) (0.8) (13.0) (11.2) 1.4 (9.8) (15.1)Profit for the period 28.0 - 28.0 24.4 (0.1) 24.3 39.1attributable to equityshareholders All results relate to continuing operations. Earnings per share:Basic earnings per share 36.2p 32.8p 51.9pBasic earnings per share 36.2p 32.9p 81.7pbefore exceptional itemsDiluted earnings per share 35.9p 32.4p 51.2pDiluted earnings per share 35.9p 32.5p 80.7pbefore exceptional items GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) for the 26 weeks ended 1 April 2006 26 weeks 26 weeks to 52 weeks to to 1 2 April 1 October April 2005 2005 2006 £m £m £mProfit for the period 28.0 24.3 39.1(Expense)/income recognised directly in equity:Cash flow hedges - losses taken to equity (3.3) - -Unrealised surplus on revaluation of properties 0.2 0.3 5.8Tax on items taken directly to equity 0.4 - 0.5 (2.7) 0.3 6.3Total recognised income for the period 25.3 24.6 45.4 GROUP CASH FLOW STATEMENT (UNAUDITED) for the 26 weeks ended 1 April 2006 26 weeks to 26 weeks to 52 weeks to 1 April 2006 2 April 2005 1 October 2005 £m £m £mOperating activitiesOperating profit 67.2 56.8 134.8Depreciation and amortisation 20.3 18.9 38.3EBITDA* 87.5 75.7 173.1Working capital and non-cash movements 4.0 (7.4) (54.0)Income tax refunded/(paid) 7.7 (10.7) (19.9)Net cash inflow from operating activities 99.2 57.6 99.2 Investing activitiesInterest received 0.7 0.3 0.5Sales of property, plant and equipment 15.9 8.8 14.8Investment in plant and equipment for existing business (39.1) (35.4) (63.9)Purchase of new pubs/site developments (11.7) (19.3) (34.2)Movements in other non-current assets (0.5) 2.3 5.8Acquisition of subsidiaries, net of cash received (20.4) (78.3) (140.1)Repayment of debt of subsidiary upon acquisition (10.0) - -Net cash outflow from investing activities (65.1) (121.6) (217.1) Financing activitiesEquity dividends paid (19.8) (17.6) (27.8)Issue of shares 1.3 0.8 2.6Sale of own shares from share trust 0.8 0.1 0.3Purchase of own shares by share trust (4.6) - -Interest paid (21.7) (22.8) (50.2)Arrangement costs of new bank facilities - (0.7) (1.8)Proceeds from issue of securitised debt - - 805.0Issue costs paid on securitised debt (0.7) - (12.5)Repayment of securitised debt (4.7) - -Advance/(repayment) of loans 27.8 117.1 (281.2)Settlement of debentures - - (287.9)Repayment of loan notes - - (0.1)Capital element of finance leases repaid (0.1) (0.1) (0.1)Net cash (outflow)/inflow from financing activities (21.7) 76.8 146.3Increase in cash and cash equivalents in the period 12.4 12.8 28.4 Reconciliation of net cash flow to movement in net debtIncrease in cash and cash equivalents in the period 12.4 12.8 28.4Cash inflow from increase in debt (23.0) (116.3) (278.6)Change in debt resulting from cash flows (10.6) (103.5) (250.2)Net debt acquired with subsidiaries (14.2) (43.8) (65.9)Non-cash movements (1.3) (7.0) 4.8Movement in net debt in the period (26.1) (154.3) (311.3)Net debt at beginning of period (871.7) (560.4) (560.4)Net debt at end of period (897.8) (714.7) (871.7) *EBITDA - Earnings before interest, tax, depreciation and amortisation GROUP BALANCE SHEET (UNAUDITED) as at 1 April 2006 1 April 2 April 1 October 2006 2005 2005 £m £m £mAssetsNon-current assetsIntangible assets 5.2 0.9 3.9Goodwill 147.1 117.0 131.0Property, plant and equipment 1,594.3 1,445.3 1,551.0Other non-current assets 24.2 23.4 22.1 1,770.8 1,586.6 1,708.0Current assetsInventories 14.6 13.5 13.6Assets held for resale 2.7 - -Trade and other receivables 50.1 49.8 54.0Current tax assets - - 5.9Cash and cash equivalents 96.9 24.9 76.1 164.3 88.2 149.6LiabilitiesCurrent liabilitiesBorrowings (64.0) (0.2) (53.8)Derivative financial instruments (0.6) (1.8) -Trade and other payables (100.5) (102.8) (92.4)Current tax liabilities (12.7) (10.8) - (177.8) (115.6) (146.2)Non-current liabilitiesBorrowings (930.7) (739.4) (894.0)Derivative financial instruments (17.8) (9.5) (0.9)Pension liabilities (42.6) (69.0) (42.6)Deferred tax liabilities (123.6) (101.5) (118.8)Other non-current liabilities (0.9) (1.9) (0.8)Provisions (2.1) (1.2) (2.2) (1,117.7) (922.5) (1,059.3) Net assets 639.6 636.7 652.1Shareholders' equityEquity share capital 22.9 22.7 22.9Share premium account 186.4 210.7 185.1Merger reserve 41.5 41.5 41.5Revaluation reserve 311.6 306.0 311.2Capital redemption reserve 6.0 6.0 6.0Hedging reserve (17.6) - -Retained earnings 88.8 49.8 83.4Shareholders' equity 639.6 636.7 650.1Minority interest in equity - - 2.0Total equity 639.6 636.7 652.1 NOTES 1 Basis of preparation of accounts These interim financial statements have been prepared in accordance with theGroup's accounting policies as set out in its International Financial ReportingStandards (IFRS) adoption statement released on 28 March 2006, which isavailable at www.wdb.co.uk. The IFRS adoption statement restates theconsolidated financial information as at 2 October 2004 (being the date oftransition), for the year ended 1 October 2005 and for the 26 weeks ended 2April 2005, which were previously reported under UK GAAP. The impact of theIFRS restatement has been summarised in note 12. The financial information contained in these interim financial statements hasbeen prepared on the basis of IFRS that the Directors expect to be applicable asat 30 September 2006. IFRS currently in issue are subject to amendment andinterpretation by the IASB and there is an ongoing process of review andendorsement by the European Commission. For these reasons it is possible thatthe information presented here may be subject to change before its inclusion inthe full year financial statements. The financial information for the year ended 1 October 2005 is extracted fromthe audited financial statements for that year, which have been delivered to theRegistrar of Companies, and subsequently restated for the transition to IFRS.The auditors' report was unqualified and did not contain a statement underSection 237 (2) or (3) of The Companies Act 1985. As permitted under IFRS 1 'First time adoption of International FinancialReporting Standards' the comparative figures have not been adjusted to takeaccount of IAS 32 'Financial instruments: disclosure and presentation' and IAS39 'Financial instruments: recognition and measurement'. These standards havebeen applied from 2 October 2005 and the impact on equity is disclosed in note11. IFRS 5 'Non-current assets held for sale and discontinued operations' hasalso been adopted with effect from 2 October 2005 and has not been appliedretrospectively. Exceptional items are defined as those that are both significant andnon-recurring, whose significance is sufficient to warrant separate disclosurein the financial statements. IAS 34 'Interim Financial Reporting' has not been adopted in the United Kingdomand hence this report is not prepared in accordance with this standard. Actuarial valuations of the Group's defined benefit pension schemes are carriedout on an annual basis and hence the interim financial statements do not reflectany actuarial gains or losses. 2 Segmental analysis 1 April 2006 Operating Operating profit before profit after exceptional items Exceptional items exceptional items Net Revenue assets £m £m £m £m £mContinuing operations:Pathfinder Pubs 153.1 25.9 - 25.9 752.3The Union Pub Company 86.4 37.9 0.1 38.0 816.3WDB Brands 41.9 8.1 (0.1) 8.0 108.3Central - (5.5) 0.8 (4.7) 15.2 281.4 66.4 0.8 67.2 1,692.1Exceptional items - 0.8 - - -Debt, tax and derivatives - - - - (1,052.5) 281.4 67.2 0.8 67.2 639.6 Included in the above is revenue of £0.5m, operating profit before and afterexceptional items of £nil and net assets of £2.2m in relation to Celtic Inns(see note 7) which have not been separately analysed. 2 April 2005 Operating Operating profit before profit after exceptional Exceptional exceptional Net Revenue items items items assets £m £m £m £m £mContinuing operations:Pathfinder Pubs 147.3 25.8 (0.2) 25.6 679.7The Union Pub Company 70.4 29.8 (1.5) 28.3 703.3WDB Brands 39.9 8.0 (0.7) 7.3 75.8Central - (5.3) 0.9 (4.4) 16.2 257.6 58.3 (1.5) 56.8 1,475.0Exceptional items - (1.5) - - -Debt, tax and derivatives - - - - (838.3) 257.6 56.8 (1.5) 56.8 636.7 As described in the financial statements to 1 October 2005, inter-divisionaltransfer terms and the method of allocating central overheads were amendedfollowing the refinancing that occurred during that year. The operating profitcomparatives above have been restated to reflect these changes. In addition, following the transition to IFRS, the goodwill asset has beenreviewed and reallocated between the divisions. This has also been reflected inthe above comparatives. 3 Exceptional items 1 April 2 April 2006 2005 £m £mGoodwill impairment following disposals of property, plant and equipment - (0.5)Costs of reorganisation of newly acquired subsidiaries - (2.1)Profit on disposal of property, plant and equipment 0.8 1.1 0.8 (1.5) 4 Finance costs and income 1 April 2 April 2006 2005 £m £mBank interest payable 2.9 12.7Securitised debt/debenture interest payable 21.3 8.3Unwinding of premium - (0.9)Other interest payable 0.7 0.2Amortisation of issue costs on securitised debt 0.5 -Amortisation of issue costs on bank loan 0.1 1.2Net finance expense in respect of retirement benefits 1.3 1.3Total finance costs 26.8 22.8 Finance income (0.6) (0.1) Net finance costs 26.2 22.7 5 Income tax expense The income tax expense for the 26 weeks ended 1 April 2006 is calculated byapplying an estimate of the effective tax rate for the year ending 30 September2006. 1 April 2 April 2006 2005 £m £mCurrent tax 11.4 7.6Deferred tax 1.6 2.2 13.0 9.8 6 Earnings per ordinary share 1 April 2006 2 April 2005 Earnings Weighted average Per share Earnings Weighted Per share no. of shares amount average no. amount of shares £m m p £m m pBasic earnings per share 28.0 77.3 36.2 24.3 74.1 32.8Diluted earnings per share 28.0 77.9 35.9 24.3 75.0 32.4 Underlying earnings per share figures Basic earnings per share before exceptional 28.0 77.3 36.2 24.4 74.1 32.9itemsDiluted earnings per share before 28.0 77.9 35.9 24.4 75.0 32.5exceptional items Basic earnings per share is calculated by dividing the profit after tax by theweighted average number of shares in issue during the period excluding thoseheld in the Employee Share Ownership Plan and Long Term Incentive Plan. Diluted earnings per share is calculated by adjusting the basic earnings pershare to assume the notional exercise of the weighted average number of ordinaryshare options outstanding during the period. The effect of dilutive options isto increase the weighted average number of shares by 0.6m (2005: 0.9m). Underlying earnings per share figures are presented to exclude the effect ofexceptional items. The Directors consider that the supplementary figures providea useful indication of performance. 7 Acquisition of Celtic Inns On 17 March 2006, the Group acquired 100% of Celtic Inns Holdings Limited andits wholly owned subsidiaries. The acquisition has been accounted for underacquisition accounting principles and is therefore included in the consolidatedbalance sheet as at 1 April 2006. Fair value adjustments Provisional Book value Revaluations Other fair value £m £m £m £m Property, plant and equipment 26.6 3.5 - 30.1Intangible assets - lease premiums - 0.9 - 0.9Inventories 0.1 - - 0.1Trade and other receivables 1.4 - - 1.4Cash and cash equivalents 0.1 - - 0.1Bank overdraft (0.9) - - (0.9)Trade and other payables (1.8) - - (1.8)Borrowings (23.3) - (0.9) (24.2)Derivative financial instruments - - (0.1) (0.1)Deferred tax (0.2) (3.6) 0.4 (3.4)Net assets acquired 2.0 0.8 (0.6) 2.2Consideration (including acquisition fees)Cash 17.4Loan notes 0.7Total consideration 18.1Goodwill arising on consolidation 15.9 The attributed fair values are provisional. The revaluation adjustment reflects the valuation of the acquired estate as at17 March 2006. The valuation was carried out by independent chartered surveyorsChristie & Co on an open market basis. Deferred tax on property revaluationshas been recognised on acquisition. The other fair value adjustments reflect the elimination of prepaid financecosts on borrowings, the market value of the swap instrument at acquisitiondate, deferred tax in respect of tax losses which are available for offsetagainst future trading profits and deferred tax on the elimination of financecosts. The net cash outflow in respect of the acquisition of Celtic Inns was: £mAcquisition of equityCash 17.4Net overdrafts of subsidiary 0.8 18.2 Acquisition of debtImmediate repayment of subsidiary's debt 10.0Net cash outflow in respect of the acquisition 28.2 The purchase agreement for Celtic Inns required the immediate repayment ofcertain borrowings, which were included in its balance sheet at the date ofacquisition. The debt repayments have therefore been classified as part of theoverall consideration for the acquisition of Celtic Inns. 8 Acquisition of English Country Inns On 15 September 2005 the Group acquired English Country Inns PLC. The fairvalue adjustments stated in the financial statements for the year ended 1October 2005 are now confirmed. An additional cash consideration of £2.2m was paid in the period to 1 April2006, which increased the Group's holding in the ordinary share capital ofEnglish Country Inns from 85% to 100%, eliminating the minority interest of£2.0m and generating additional goodwill of £0.2m. 9 Working capital and non-cash movements 1 April 2 April 1 October 2006 2005 2005 £m £m £mIncome from fixed asset investments (0.2) (0.1) (0.3)Increase in pension cost provision - (1.4) (32.2)(Increase)/decrease in inventories (1.0) 1.0 1.5Decrease/(increase) in trade and other receivables 3.0 (0.7) (0.8)Increase/(decrease) in trade and other payables 3.0 (5.8) (20.3)Net operating income with no cash impact (0.8) (0.4) (1.9)Working capital and non-cash movements 4.0 (7.4) (54.0) 10 Analysis of net debt 1 April Non- 1 October 2006 Cash flow cash flow Acquisition 2005 £m £m £m £m £mCash and cash equivalentsCash at bank and in hand 96.9 20.8 - - 76.1Bank overdraft (44.0) (8.4) - - (35.6) 52.9 12.4 - - 40.5Debt due within one yearLoan notes (9.9) - (0.7) - (9.2)Bank loans 0.2 14.2 - (14.2) 0.2Securitised debt (10.2) 4.7 (5.8) - (9.1)Finance leases (0.1) 0.1 (0.1) - (0.1) (20.0) 19.0 (6.6) (14.2) (18.2)Debt due after one yearBank loans (153.2) (42.0) (0.1) - (111.1)Securitised debt (777.3) - 5.3 - (782.6)Finance leases (0.2) - 0.1 - (0.3) (930.7) (42.0) 5.3 - (894.0) (897.8) (10.6) (1.3) (14.2) (871.7) Bank loans due within one year represent unamortised issue costs expected to becharged within the next year. 11 Movements in total equity 1 April 2 April 1 October 2006 2005 2005 £m £m £mTotal equity at beginning of the period 652.1 583.7 583.7Effect on equity of adoption of IAS 32 and IAS 39 on 2 October 2005 (14.3) - -Restated total equity at beginning of the period 637.8 583.7 583.7Total recognised income and expense for the period 25.3 24.6 45.4Dividends paid (19.8) (16.9) (27.0)Proceeds of ordinary share capital issued 1.3 2.0 3.8Merger reserve on Burtonwood acquisition - 41.5 41.5Sale of own shares from share trust 0.8 0.1 0.3Purchase of own shares by share trust (4.6) - -Tax in relation to share based payments 0.8 1.7 2.4Equity minority interests (2.0) - 2.0Net movement in total equity 1.8 53.0 68.4Total equity at end of the period 639.6 636.7 652.1 12 Impact of adoption of IFRS on prior periods 26 weeks to 2 April 2005 Year to 1 October 2005 Profit before Profit before Profit before Profit before tax and tax after tax and tax after exceptional exceptional exceptional exceptional items items Net assets items items Net assets £m £m £m £m £m £m As stated under UK GAAP 36.0 32.6 704.3 90.1 47.9 758.5Retirement benefits (0.5) (0.5) (45.8) (0.6) (0.6) (45.9)Share based payments 0.1 0.1 3.2 0.2 0.2 2.5Property revaluations - (1.7) 52.0 - (0.4) -Deferred tax - - (90.7) - - (89.9)Dividends - - 10.1 - - 19.8Goodwill - 3.6 3.6 - 7.1 7.1Total adjustments (0.4) 1.5 (67.6) (0.4) 6.3 (106.4)Restated under IFRS 35.6 34.1 636.7 89.7 54.2 652.1 The impact of deferred tax has been included in each of the individual itemsabove. 13 Post balance sheet event An interim dividend of £11.3m, being 14.52p (2005: 13.20p) per ordinary shareand 3.00p (2005: 3.00p) per preference share, has been proposed and will be paidon 30 June 2006 to those shareholders on the registers at the close of businesson 9 June 2006. These financial statements do not reflect this dividend payable. 14 Interim report The interim report was approved by the Board on 26 May 2006. 15 Copies Copies of this report have been sent to shareholders and are available to thepublic on request from: The Company Secretary, The Wolverhampton & DudleyBreweries, PLC, PO Box 26, Park Brewery, Wolverhampton, WV1 4NY. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Marstons