Interim Results

PUNCH TAVERNS PLC

("Punch" or "the Group")

Interim Results for the 28 weeks to 2 March 2013

Underlying financial performance* - in line with management expectations

·; EBITDA of £117 million

·; Profit before tax of £26 million

·; Basic earnings per share of 3.0p

·; £254 million of cash reserves

·; On track to meet full year profit expectations

Operational highlights* 

·; Improvement in core estate like-for-like net income** down 3.5% in the second quarter, compared to a decrease of 5.2% for the first quarter

·; Core estate at 94% let, up from 91% at March 2012

·; Investment in 270 core pubs completed in the half year at an average spend of c.£100k per pub

·; Punch Buying Club membership increased to 3,300 Partners (March 2012: 2,200)

·; 164 pubs sold, together with other assets for £55 million, above book value and at a multiple of 18 times EBITDA

Capital structure review

·; Since announcing the restructuring proposal on 7 February 2013 we have continued to engage with the many stakeholders who will need to approve the restructuring proposal.

·; While discussions remain ongoing and a range of views have been expressed, the Board believes that a consensual restructuring can be launched in the first half of 2013.

Stephen Billingham, Executive Chairman of Punch Taverns plc, commented:

"Our profit performance for the first half of the year has been in line with management expectations, with improving trends in the underlying business. We expect to make further progress in the second half of the financial year and are on track to meet our full year profit expectations.

We are progressing with our discussions with stakeholders on our capital restructuring and while discussions remain ongoing, we continue to believe a consensual restructuring can be launched in the first half of 2013."

05 April 2013

_______________________

* before non-underlying items

** net income represents revenue less cost of drink sales (gross profit)

Enquiries:

The interim results presentation will be available on the Punch website www.punchtavernsplc.com from 9.00 BST. An audio cast of the presentation will also be available.

Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting as financial adviser to Punch and for no one else in connection with the capital structure review and will not be responsible to anyone other than Punch for providing the protections afforded to clients of Goldman Sachs International nor for providing advice in connection with the capital structure review, the content of this announcement or any matter referred to herein.

The Blackstone Group International Partners LLP, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting as financial adviser to Punch and for no one else in connection with the capital structure review and will not be responsible to anyone other than Punch for providing the protections afforded to clients of The Blackstone Group International Partners LLP nor for providing advice in connection with the capital structure review, the content of this announcement or any matter referred to herein.

Forward-looking statements

This report contains certain statements about the future outlook for Punch. Although we believe our expectations are based on reasonable assumptions, any statements about future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.

EXECUTIVE CHAIRMAN'S REVIEW

Market positioning

Punch is a leading operator of leased and tenanted pubs in the United Kingdom. As at 2 March 2013, the Punch estate comprised 4,357 pubs located across the UK, 96% of which were held on a freehold or long leasehold basis. In addition, Punch owns 50% of Matthew Clark (Holdings) Limited, the holding company of the Matthew Clark business, a leading drinks wholesaler and distributor.

Punch's long-term aim is to become the UK's highest quality, most trusted and best value leased pub company. As part of this aim, the estate was reorganised in 2011 into two separate divisions, a core division which consisted, as at 2 March 2013, of 2,912 pubs and a non-core division of 1,445 pubs. The core estate represents a higher quality, geographically well-located portfolio which is suitably positioned to adapt to changing market conditions and support sustainable long-term growth for Punch and our Partners.

The plan for the core division is to build on the platform created by the Pathway to Partnership programme to drive sustainable growth. The core division will aim to attract the right Partners through new lease offers, expansion of the Punch Buying Club, further development of the skills of its specialist field support teams, and investment to drive sales, including food.

The plan for the non-core division is to maximise short-term returns with a clear focus on costs and cash flow. It is expected that these pubs will be disposed over a five year period and that disposals will be phased to ensure a balance between speed of disposal and value achieved. The majority of these pubs are on substantive agreements and will therefore continue to have access to the same operational support infrastructure as our core pubs to drive operational performance until the decision is made to dispose of them.

Business review

Overall profit performance is in line with management expectations and we remain on track to meet our full year profit expectations of generating underlying EBITDA of between £210 million and £220 million in the current financial year.

In the 28 weeks ended 2 March 2013, Punch generated EBITDA of £117 million (excluding non-underlying items):

Core estate - delivering our key strategic initiatives

The core division, comprising 2,912 pubs, accounts for around 80% of Punch outlet EBITDA. With a net income per pub of approximately £73,000, these pubs are of a much higher quality than the non-core division.

Trading has been in line with our expectations despite being adversely impacted by weather. Like-for-like net income showed improvement in the second quarter, being down 3.5% compared to a decline of 5.2% for the first quarter.

The core estate net income is expected to decline in the current financial year by between 3% and 4% as we rebalance rents in the short-term. Trading comparatives are much more challenging in the first half of this year but are expected to improve in the second half of the year when the business will also benefit from the recent improvements in letting, investment and food development as well as the increased field team support.

Management currently expects the core estate to return to growth of between 0% and 1% in the next financial year. The core estate is expected to deliver like-for-like growth in net income of between 1% and 2% in the 2015 financial year before returning to a long-term growth rate of c.2% in the 2016 financial year.

Positioning the core estate for growth is being driven by:

Recruitment: The percentage of core pubs on substantive agreements remains strong at 94% and is in line with our target of having between 93% and 95% of the core estate on substantive agreements. The launch of the new Partner recruitment website has been extremely well received having attracted c.1,200 enquiries in the last 3 months, helping support a further 10% growth in applicant numbers.

Investment: We plan to invest in around two-thirds of the core estate over the next five years focussing on improving the customer environment, targeting £40 million per annum across 400 schemes per year. The increased level of activity in pub investment seen in the final quarter of 2012 has continued into the first half of this year and we have completed investments in 270 core pubs at an average spend of c.£100k per pub. This investment is transforming the customer offering in these pubs and the associated trading uplift is expected in the second half of the year.

Food development: Investments are partly structured to drive increased food sales which represent a significant opportunity to our Partners. Our five year target is to increase the food sales mix from an estimated 22% in 2011 to 35% of Partner revenue. We estimate that food sales now make up 25% of Partner revenue, up 2.4% pts from March 2012. The percentage of our pubs without a food offer has reduced from an estimated 23% in 2011 to just 15% at March 2013.

Regional Launch Managers: We have recently increased the size of our specialist field team support including the introduction of our new Regional Launch Manager team. This team provides dedicated support to our Partners through the successful launch of every investment, ensuring that the right vision is in place for each pub, supported by detailed launch, promotional and operating plans with a focus on the retail offer to the consumer. The feedback received from Partners who have benefited from this new resource has been extremely positive and we are confident that increased support in this area will result in improved trading performance for both our Partners and for Punch.

Punch Franchise Tenancy: We are currently rolling out nationally our new Punch Franchise Tenancy agreement with the expectation of having 50 franchises in place this financial year, with c.200 franchises in place by the end of 2014. These franchises are designed to drive both Punch and Partner profits and reduce the levels of new Partner failures. This fully supported open book agreement is attracting new entrepreneurs from outside the sector. It provides them with a newly refurbished pub, best practice operating standards, marketing and pricing support, food and drink menu set up and a range of business management tools.

Punch Buying Club: The Punch Buying Club continues to grow in popularity with 55% of our drinks orders now being taken online, up from 35% at March 2012. A total of 3,300 Partners across our estate are now signed up, an increase of 1,100 Partners over the last 12 months. Through the Buying Club we are committed to simplifying the administrative burden for our existing and prospective Partners and to drive down the cost of running a pub. We already offer a range of industry leading exclusive offers to our Partners and will continue to build on the success of the Buying Club over the next year as we introduce a wider array of services for the benefit of our Partners.

Punch support: We have increased the size of specialist field teams in the areas of investment, marketing and food development resulting in a ratio of just 18 pubs per field member (down from 20 pubs per field member at August 2012). The mystery visit programme is being rolled out across the core estate to improve retail standards with every pub having at least one visit by the end of 2013. The programme offers detailed feedback from an independent observer, highlighting operating strengths and development opportunities. Free WiFi has now been rolled out across the estate with over 2,500 Partners signing up. At the same time as increasing our specialist field team support, we have made further head office efficiencies, as we continue to focus on cost reduction as the size of the non-core division reduces.

Non-core estate - disposal programme on track

The non-core division, comprising 1,445 pubs, accounts for around 20% of Punch outlet EBITDA. These pubs have a much lower average net income per pub at approximately £36,000, are predominantly small, with low turnover and are wet led. With limited scope for investment these pubs are more likely to be impacted by the long-term decline in drinking out and as a result are expected in time to generate more value through disposal than retention. The non-core division is segmented into two groups; 'sell now/sell later' and 'protect and grow'.

Maximising short-term returns:While these non-core pubs remain in our portfolio, we remain committed to driving operating performance and maximising the profits from these outlets.

Following the additional segmenting of the non-core division we will be investing in selective 'protect and grow' pubs and re-letting them where it is appropriate to do so. We aim to retain high quality Partners from the non-core estate by offering partnerships in the core estate where this is possible so that we continue to benefit from their expertise. We offer the same support to the non-core division that we do for the core division in order to protect the profit generated by these pubs whilst they remain in the estate.

Maximising value on disposal: The disposal programme is slightly ahead of our target to realise £105 million of net proceeds in the current financial year. During the half year we have sold 164 pubs (including 21 pubs from the core estate), together with other assets for proceeds of £55 million, slightly ahead of book value and at a multiple of 18 times EBITDA.

Matthew Clark joint venture

Matthew Clark, the 50% joint venture with Accolade, owned by Champ Private Equity, continues to perform satisfactorily in a very competitive market providing a post-tax contribution to Punch of £2.4 million for the period, up from £2.0 million in the comparative period. Matthew Clark has significant scale in its marketplace as the largest independent drinks wholesaler and distributor to the UK leisure and hospitality industry, with annual turnover of c.£700 million. Turnover increased by 9% in the joint venture's last financial year and the business has clear plans for continued growth in market share from which Punch will benefit.

Regulation

On 8 January 2013, the Department for Business, Innovation and Skills (BIS) announced plans to establish a new statutory code of practice and an independent adjudicator for the leased and tenanted pub sector.

Punch supports the existing Industry Framework Code and self regulation which includes the benefit of two complaint review bodies available to licensees. PIRRS exists to provide low cost resolution for rent disputes and our Partners are able to take complaints relating to any other part of our Code of Practice to PICAS. We will participate in the formal consultation process which is expected to be launched in the spring.

Pubs play a vital role in the economy providing local employment particularly for young people and we continue to engage with Government on the need for investment in the sector as a key part of the wider growth agenda for the UK economy. While we welcome the recent decision by the Chancellor of the Exchequer to scrap the beer duty escalator, more can be done. We believe the economic case for reduction in VAT in the hospitality sector is compelling with the potential to create thousands of new jobs and we continue to provide our full support to the VAT Club campaign led by Jacques Borel.

Financial review

Net finance costs:

Net underlying finance costs were down £3 million (4%) at £84 million, reflecting a decrease in borrowings. The average cost of funding was 6.9% (March 2012: 6.9%).

Taxation:

The underlying taxation charge is based on an estimated full year effective tax rate of 25.2% before post-tax earnings from joint ventures. This compares with the UK corporation taxation rate of 23.6% for the financial year ending August 2013.

Earnings per share:

Adjusted basic earnings per share, which excludes the effect of non-underlying items, was 3.0 pence per share (March 2012: 3.8 pence). The weighted average number of shares in issue during the period was 665.1 million.

Non-underlying items:

During the period a £39 million non-cash charge was incurred following the reclassification of an interest rate swap as no longer being deemed to be effective for accounting purposes following the announcement of the capital structure proposal in February 2013.

Other non-underlying items include £3 million of refinancing expenses, £2 million of asset impairment, £1 million of attributable goodwill written off relating to core asset disposals, £1 million credit on the disposal of non-current assets and £2 million credit in the value of shares held.

Capital investment and disposals:

Total capital expenditure amounted to £36 million, including the completion of 270 core investments in the period, investments in progress and £3 million spend in the non-core estate. Asset disposals realised £55 million of net proceeds from the sale of 164 pubs together with other assets.

Cash flow:

Cash flow from operating activities remains strong at £80 million from an EBITDA of £113 million. Due to the timing of the half year date, there is historically a working capital outflow in the first half of the year, with a working capital inflow expected in the second half of the year.

Free Cash Flow before debt service amounted to £99 million, which after £109 million of debt service costs, resulted in a £10 million decrease in the cash balance to £254 million.

Pensions:

Punch maintains a defined contribution scheme which is open to all employees. The Group has one defined benefit scheme (the Pubmaster pension scheme) which is closed to new entrants. Under IAS 19 the net pension liability was £3 million at both March 2013 and August 2012.

Capital structure:

Punch is financed through two whole business securitisations, the Punch A securitisation (£1,463 million of gross debt) and the Punch B securitisation (£899 million of gross debt), as well as certain cash resources held across the Group. As at 2 March 2013 the Group held £254 million of cash resources (of which £93 million was held outside the securitisation structures, which includes £11 million held within the Group supply company).

Although the securitisations have generated underlying profits and positive net cash flow before debt service in the half year, they continue to require financial support through the use of cash resources held outside of the securitisations to maintain compliance with their DSCR (Debt Service Cover Ratio) covenants. Without this support, both the Punch A and Punch B securitisations would breach their respective DSCR covenant levels.

The Group has provided financial support to the securitisations in the half year to allow the completion of the capital structure review, identification of a restructuring solution for each securitisation and discussions with stakeholders in relation to the proposed restructuring. Net support from cash resources held outside of the securitisations amounted to £7 million for the half year, being £50 million of gross support less £43 million of cash payments from the securitisations to the wider Group during the half year. The net cost of continuing financial support in the second half of the financial year, should this take place, would be expected to be significantly higher than the level of the cost incurred in the first half.

The provision of future financial support to the Punch A and Punch B securitisations will continue to be reviewed on an ongoing basis. Failure to effect a restructuring solution for either securitisation in the near-term may result in the Group ceasing to provide financial support to one or both of the securitisations, which in turn would result in a covenant default in the relevant securitisation. In particular, because of the financial linkages between the Punch B securitisation and the Group and the need for the Group, as part of the proposed restructuring solutions, to commit a substantial majority of its cash resources to delevering the Punch B securitisation, the scope for the Group to continue to provide ongoing financial support to the Punch A securitisation beyond the near-term may be constrained.

Going concern

In determining the appropriate basis of preparation of the Interim Report, the Directors are required to consider whether the Group can continue as a going concern for the foreseeable future; that is for at least 12 months from the date of signing of this Report. After making enquiries, and considering the matters which are described in note 1 to this announcement, the Directors have concluded that it is appropriate to prepare the Financial Statements on a going concern basis. However, the Directors are making full disclosure, as required by accounting standards, to indicate the existence of material uncertainties facing parts of the business. Further details are set out in note 1 to this announcement.

Board changes

On 1 February 2013, Roger Whiteside resigned as Chief Executive Officer to take up the position of Chief Executive of Greggs plc.

To ensure continuity in the leadership of Punch, particularly during the ongoing discussions regarding the restructuring proposals, Stephen Billingham was appointed as Executive Chairman and Neil Griffiths was appointed as Chief Operating Officer.

Stephen Billingham has been Non-executive Chairman since September 2011. Neil Griffiths was previously Punch's Property and Turnaround Director and has been with the Group since 2001. He has 25 years' experience in the leisure and hospitality industry having held senior management roles in Warner Brothers and Bass.

On 25 October 2012, John Allkins joined the Board as an Independent Non-executive Director. John brings with him a significant amount of consumer and business development experience to the team, having been Group Finance Director of MyTravel Group plc, and Chief Financial Officer of Equant NV. John has considerable experience in chairing audit committees in a number of public and private companies.

John replaced Ian Fraser, who retired from the Board in December 2012 having served 8 years as an Independent Non-executive Director.

CONSOLIDATED CONDENSED INCOME STATEMENT

for the 28 weeks ended 2 March 2013

1 EBITDA represents earnings before depreciation and amortisation, impairment, goodwill charge, profit on sale of property, plant and equipment and non-current assets classified as held for sale, finance income, finance costs, movement in fair value of interest rate swaps and tax of the Group.

1 EBITDA represents earnings before depreciation and amortisation, impairment, goodwill charge, profit on sale of property, plant and equipment and non-current assets classified as held for sale, finance income, finance costs, movement in fair value of interest rate swaps and tax of the Group.

CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the 28 weeks ended 2 March 2013

CONSOLIDATED CONDENSED BALANCE SHEET

at 2 March 2013

CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY

for the 28 weeks ended 2 March 2013

CONSOLIDATED CONDENSED CASH FLOW STATEMENT

for the 28 weeks ended 2 March 2013

NOTES TO THE FINANCIAL STATEMENTS

for the 28 weeks ended 2 March 2013

1. ACCOUNTING POLICIES

Basis of preparation

This condensed set of interim financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU. The Group's Annual Report and Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure and Transparency rules of the Financial Conduct Authority, this condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's Annual Report and Financial Statements 2012, and which are expected to apply at 17 August 2013.

This condensed set of interim financial statements have been prepared on a going concern basis. The Directors have prepared detailed operating and cash flow forecasts, which cover a period of more than 12 months from the date of approval of these financial statements. These show that the Group has adequate funds for the foreseeable future to meet its liabilities as they fall due.

The Group is financed through two whole business securitisations, the Punch A Securitisation (£1,463 million of gross debt) and the Punch B Securitisation (£899 million of gross debt), as well as certain cash resources held across the Group. At 2 March 2013, the Group's liquidity position was strong with £254 million of cash resources (of which £93 million was held outside of the securitisation structures, which includes £11 million held within the Group supply company), compared to loan amortisation due within one year of £61 million. The Group is currently in full compliance with the financial covenants contained in its securitisation arrangements.

Whilst the securitisations generated underlying profits and positive net cash flow (before debt

repayments) in the half year, they required financial support through the use of cash resources held outside of the securitisations to maintain compliance with their DSCR (Debt Service Cover Ratio) covenants. Without this support, both securitisations would have breached their respective DSCR covenant levels in the period. Net support from cash resources held outside of the securitisations amounted to £7 million for the half year, being £50 million of gross support less £43 million of cash payments from the securitisations to the wider Group during the half year.

The ability of the Group's securitisations to continue to comply with their DSCR covenants in the near term is dependent on either the continuation of group support or reaching agreement with the relevant stakeholders to amend the terms of the financial covenants.

The Group has proposed a consensual restructuring solution for both securitisations. Detailed operating and cash flow forecasts prepared by the Directors indicate that the proposed restructuring solution would allow the securitisations to comply with their financial covenants without the need for ongoing financial support.

The Group has engaged in discussions with stakeholders to seek support to implement the proposed restructuring solution. Discussions remain ongoing.

If a covenant breach were to occur in a securitisation then this could lead to circumstances in which the lenders to that securitisation may be able to request early repayment of all outstanding borrowings. Were this to occur the relevant securitisation may have insufficient cash resources to repay all of its borrowings, and cease to be a going concern, which in turn would result in a significant reduction in the Group's operations. These circumstances represent a material uncertainty that casts significant doubt on the ability of a significant part of the Group to continue as a going concern and, in such circumstances, part of the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

The Directors of Punch Taverns plc are of the opinion that it is in the best interests of stakeholders to agree to a consensual restructuring for both of the securitisations and that a consensual restructuring is capable of being successfully implemented.

NOTES TO THE FINANCIAL STATEMENTS continued

for the 28 weeks ended 2 March 2013

The comparative figures for the 52 weeks to 18 August 2012 presented in these interim financial statements are not the Group's statutory accounts for that financial period. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was not modified, and did not contain statements under section 498(2) or (3) Companies Act 2006 or equivalent preceding legislation. However in the Group's Annual Report and Financial Statements 2012, the auditor included an emphasis of matter paragraph in its audit report relating to the uncertain outcome of the directors' intention to restructure the securitisation facilities.

The following amendments are effective for the Group for the financial year beginning 19 August 2012:

·; Amendment to IAS 12 'Income Taxes'

·; Amendment to IAS 1 'Presentation of Financial Statements'

The above amendments to the published standards have had no material impact on the results or the financial position of the Group for the 28 weeks to 2 March 2013.

2. SEGMENTAL ANALYSIS

1 Unallocated underlying operating costs represent corporate overheads that are not allocated down to the divisional performance.

There are no sales between the segments. Segment assets include property, plant and equipment, operating leases, non-current assets held for sale and goodwill and exclude other intangible assets, receivables, cash, taxation, investments in joint venture and other investments, whilst all liabilities are unallocated.

3. NON-UNDERLYING ITEMS

In order to provide a trend measure of underlying performance, profit is presented excluding items which management consider will distort comparability, either due to their significant non-recurring nature or as a result of specific accounting treatments. Included in the income statement are the following non-underlying items:

1 Represents the goodwill relating to those core pubs disposed of in the period.

2 Represents profit on the purchase of securitised debt together with the write off of related deferred issue costs.

3 Represents movement in fair value of shares held to settle future share schemes and release of provision for share schemes.

4 Represents movement in fair value of shares held as an investment.

5Represents the recycling of the hedge reserve relating to the Punch B C1 loan note following the reclassification of the associated interest rate swap as ineffective during the financial period, due to the announcement of the capital restructuring proposals on 7 February 2013.

6 Represents the movement in the fair value of interest rate swaps which do not qualify for hedge accounting.

4. IMPAIRMENT LOSSES

Property, plant and equipment and operating leases

When any indicators of impairment are identified, property, plant and equipment and operating leases are reviewed for impairment based on each cash generating unit (CGU). The cash generating units are individual pubs. The carrying values of these individual pubs are compared to the recoverable amount of the CGUs, which is the higher of value-in-use (VIU) and fair value less costs to sell (FVLCS).

In the 28 week period to 2 March 2013, the FVLCS of the non-current assets classified as held for sale were reviewed and an impairment of £2.1m was identified. During the 52 week period to 18 August 2012, the FVLCS of the non-current assets classified as held for sale were reviewed, and an impairment of £3.4m was identified, of which £1.8m had been recognised during the 28 week period to 3 March 2012.

The impairments recognised in the current and prior periods are as follows:

Goodwill

Goodwill represents the synergistic benefits of operating a large pub estate and is allocated to groups of CGUs. The estate is organised in separate core and non-core property structures. No goodwill is allocated to the non-core estate due to the low value of the properties in the estate and the low level of synergistic benefits.

During the year ended 18 August 2012, a review for impairment was carried out on the remaining goodwill allocated to pubs in the core estate. This review compared the carrying amount of the goodwill to the net realisable value, being the higher of the FVLCS and VIU, of the core pubs. Cash flows used in the VIU calculation were based on earnings before interest and taxation, and used the forecasted cash flows included within the Group business plan for the first five years, and then the cash flows were extrapolated for a further 45 years, applying a multiple of ten as the terminal value. The pre-tax risk adjusted discount rate applied to cash flow projections was 8.0%. The growth rate applied to cash flows over the 45 year period was 2%. Based on this review, no impairment of goodwill on the core estate was identified.

During the current period, a review completed using the same criteria as the previous period on the remaining goodwill allocated to pubs in the core estate also concluded that no impairment was required.

Whilst considered unlikely neither a 2% decrease in the growth rate assumption, nor a 1% increase in the discount rate assumption would have led to an impairment in either the current or prior period.

5. FINANCE INCOME AND COSTS

6. TAXATION

The effective taxation charge before non-underlying items and share of post-tax profit from the joint venture is 25.2%. The effective rate of taxation for the comparative period was 26.8%.

The total tax credit of £3.4m (March 2012: charge of £5.7m; August 2012: charge of £1.3m) includes a non-underlying tax credit of £9.4m (March 2012: credit of £2.7m; August 2012: credit of £14.7m).

7. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding 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 attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options).

Reconciliations of the earnings used in the calculations are set out below:

The impact of dilutive ordinary shares is to increase weighted average shares by nil (March 2012: nil; August 2012: nil) for employee share options.

8. PROPERTY, PLANT AND EQUIPMENT

9. NET DEBT

(a) Analysis of net debt

(b) Analysis of changes in net debt