28th Apr 2005 07:01
Punch Taverns PLC28 April 2005 PUNCH TAVERNS PLC("Punch" or "the Group") Interim Results for the 28 Weeks ended 5 March 2005 Punch Taverns plc, the operator of 7,800 leased and tenanted pubs throughout theUK, today announces interim results for the 28 weeks ended 5 March 2005. Highlights • Group turnover up 33% to £404 million (2004: £303 million) • Profit before tax, amortisation and exceptionals up 39% to £103 million (2004: £74 million) • Profit before tax and exceptionals up 37% to £99 million (2004: £73 million) • Adjusted earnings per share up 29% to 29.6p (2004: 23.0p) - up 36% with a 30% normalised tax charge • Interim dividend increased by 28% to 3.7p (2004: 2.9p) • Continued organic growth in sales and profit - like for like turnover up 3.4% • Both the Pubmaster and InnSpired estates trading well • Continued investment in estate: £26 million on 397 developments • Satisfactory start to trading in the initial weeks of the second half Giles Thorley, Chief Executive of Punch Taverns plc, commented: "The Group has had an excellent first half and these results are testament tocontinued underlying organic growth in sales and profit across the estate,together with a strong performance from both the Pubmaster and InnSpiredacquisitions. We continue to see good potential for further sectorconsolidation and remain well placed to take advantage of future acquisitionopportunities. "Punch has proven the resilience of its business model and whilst there are somesuggestions of a more challenging consumer market the Directors remain confidentof a satisfactory outcome for the year." 28 April 2005 Enquiries:Punch Taverns plc Today: 020 7457 2020 Giles Thorley, Chief Executive Thereafter: 020 7868 8903Robert McDonald, Finance Director College Hill Tel: 020 7457 2020Justine WarrenMatthew Smallwood Punch Taverns plc Interim Results for the 28 Weeks to 5th March 2005 Overview This has been another successful period for Punch Taverns. We have continued tobuild and refine our estate, which now numbers 7,800 pubs, and to work with ourretailers to enhance their businesses to mutual advantage. This has delivered another excellent set of results, with turnover rising by 33%to £404m and profit before tax and exceptional items increasing by 37% to £99m.Despite a rising tax charge, adjusted earnings per share rose by 29% to 29.6p.These results have been driven from both organic business growth and theearnings enhancing acquisitions of Pubmaster and InnSpired. Our strategy focuses on the recruitment of quality retailers and helping them tobuild better businesses, by supporting those that need it, and by providing anopportunity for entrepreneurs to flourish. At the same time we have grown ourestate through selective acquisitions, most notably in this period theacquisition of InnSpired Group, from which we were able to retain the best pubsinexpensively whilst disposing successfully of the remainder. We continue to see many opportunities to acquire quality pubs and to investprofitably in our estate, and this is the primary use of cash generated by thebusiness. Nevertheless our growing scale gives us capacity to increase ourinterim dividend by 28% to 3.7p per ordinary share. The interim dividend willbe payable on 1st July 2005 to shareholders on the register on 10th June 2005. Organic Growth Like for like turnover in the original Punch estate increased by 3.4% in thefirst half, driven primarily by increasing beer sales income and rent, andleading to a 2.4% like for like increase in pub contribution. All of our incomestreams continue to make steady progress. It is too soon since acquisition to calculate full like for like results forPubmaster and InnSpired. However, on an informal basis using managementaccounts pre-acquisition, in the first half average turnover increased by 3.1%in the Pubmaster estate, and by 2.1% in the InnSpired estate. Average marginsimproved in both estates. We work in partnership with our retailers, as demonstrated by our approach tolicensing, where we have launched a comprehensive support package to help theretailer apply for the optimum licensing arrangements. We are managing theapplication process and subsidising the cost, enabling retailers to spreadpayments over three years. This reduces our risk, optimises the opportunity,and helps retailers through a difficult process. We have trained more retailers than ever before. In the first half we havetrained 940 retailers across 7,146 training days on core courses coveringinduction, marketing and investment. We have successfully piloted a RetailExperience programme for our retailers, emphasising retailing skills andcustomer service, and are now rolling this out across the estate. We have undertaken 397 pub development schemes in the first half, investing£26m, and achieving an ROI of 25%. Some £9m of our investment was in thePubmaster estate, where there is now a strong pipeline of future investment. There are excellent opportunities to invest throughout the estate, butespecially in the newly acquired pubs from Pubmaster and InnSpired. Acquisitions and Disposals Results for the half year include a full 28 week contribution from the Pubmasterestate (14 weeks last year) and 25 weeks from the 471 pubs acquired fromInnSpired in September 2004. Both acquisitions were funded entirely frominternally generated cash and from debt. InnSpired was acquired on 10th September 2004 for £335m including debt. It wasa privately owned and well managed group, with 1,064 pubs of mixed qualitylocated primarily in the south of England. 51 pubs were sold on immediately ina pre-arranged deal, and 3 others were subsequently acquired. We repaid thelong term InnSpired debt in November, and in January completed the disposal of545 of the lower quality pubs and integrated the remaining 471 pubs, cherrypicked for their quality, into the Punch infrastructure. These pubs earned£10.8m EBITDA in the half year and will enable further synergy benefits ofapproximately £2m per annum to be achieved over time. In addition to InnSpired, we have invested £40m in acquiring 72 individual pubsin the first half, and raised £22m by selling 74 pubs. We have a skilled teamof specialists looking to buy, sell and enhance our quality estate, and we seegood opportunities to extend our property portfolio. Finance Exceptional costs of £10.8m were incurred in the period, primarily relating tothe InnSpired acquisition and the removal of the debt structure. Theprovisional goodwill arising from the acquisition was £12.3m, which under UKGAAP will be amortised over 20 years, and led to an amortisation charge in theperiod of £0.3m. The overall taxation charge was 23%, post exceptional items. Our business continues to generate cash, with over 47% of our turnover beingavailable to invest or to service our capital structure. Our debt has increasedto fund acquisitions, but profit growth means interest cover continues to riseand is now 2.1x. The majority of our debt is securitised at fixed rates andslowly amortising over periods of up to 28 years, with no refinancing risk. Weare currently reviewing options to refinance the remainder of our debt, some£190m mostly arising from the InnSpired acquisition, onto a similar long termbasis. In common with all other listed companies, we are preparing for the introductionof IFRS. This will affect our reported results from next financial year withthe first results announcement on this basis due in April 2006. We are workingwith our auditors to determine the likely impact on the Punch reported results,but at the present time we anticipate only minor impact on earnings. Therewill be no impact on cash flows in the business or on our debt covenants.Further information will be provided when our results for the year to 20thAugust 2005 are restated onto an IFRS basis, expected in early 2006. Industry Watch The industry continues to endure a significant degree of new regulation, but thepub is a longstanding feature of British life and always evolves verysuccessfully. Our business model remains extremely resilient. Licensing reform is now underway and we have adopted a very active role inhelping our retailers take advantage of the increasing flexibility that willbecome available. Whilst the licensing process is certainly burdensome, we believe that thechanges will bring benefits for ourselves and our retailers in the medium term.The majority of our retailers are seeking modest but important extensions toopening hours, to be able to meet their customer needs more closely. Similarly, we have taken a pro-active approach to smoking reform, encouragingour retailers to provide non-smoking facilities where practical, and toeliminate smoking at the bar. We believe these steps will help attract newcustomers whilst simultaneously preparing the way for more severe regulationthat may arise in the future. Outlook We are enjoying record numbers of applications to Punch to become a pub retailerand we continue to witness the tremendous success of many of our entrepreneurialretailers in developing their businesses. Whilst there are some recent suggestions that consumer demand has cooled, Punchhas a model which has proven its resilience over many years and we are confidentof a satisfactory outcome for the year. GROUP PROFIT & LOSS ACCOUNTfor the 28 weeks ended 5 March 2005 28 weeks ended 5 March 2005 28 weeks ended 6 March 2004 52 weeks ended 21 August 2004Turnover Total Non-recurring Before Total Non-recurring Before Total Non- Before exceptional exceptional exceptional exceptional recurring exceptional items items items items exceptional items items (note 4) (note 4) (note 4) £m £m £m £m £m £m £m £m £m Ongoing 382.8 - 382.8 303.2 - 303.2 637.6 - 637.6Acquisitions1 20.8 - 20.8 - - - - - - Group turnover 403.6 - 403.6 303.2 - 303.2 637.6 - 637.6Cost of sales (153.1) - (153.1) (114.1) - (114.1) (240.9) - (240.9) Gross profit 250.5 - 250.5 189.1 - 189.1 396.7 - 396.7Administrative (50.8) (2.9) (47.9) (38.0) (2.4) (35.6) (81.7) (8.2) (73.5)expenses Operating profit(note 3) Ongoing 190.2 (2.2) 192.4 151.1 (2.4) 153.5 315.0 (8.2) 323.2 Acquisitions1 9.5 (0.7) 10.2 - - - - - - Group operating 199.7 (2.9) 202.6 151.1 (2.4) 153.5 315.0 (8.2) 323.2profitProfit / (loss) on 0.2 - 0.2 (10.9) (11.5) 0.6 (12.0) (12.0) -sale of tangiblefixed assets Profit before 199.9 (2.9) 202.8 140.2 (13.9) 154.1 303.0 (20.2) 323.2interest andtaxationInterest receivable 11.4 5.0 6.4 6.2 1.8 4.4 9.9 1.8 8.1Interest payable (122.8) (12.9) (109.9) (90.7) (4.7) (86.0) (179.6) (4.7) (174.9) Profit on ordinary 88.5 (10.8) 99.3 55.7 (16.8) 72.5 133.3 (23.1) 156.4activities beforetaxationTax on profit on (20.7) 4.4 (25.1) (13.1) 2.4 (15.5) (30.8) 4.1 (34.9)ordinary activities(note 5) Profit for the 67.8 (6.4) 74.2 42.6 (14.4) 57.0 102.5 (19.0) 121.5periodOrdinary dividend (9.4) - (9.4) (7.2) - (7.2) (22.5) - (22.5) Retained profit for 58.4 (6.4) 64.8 35.4 (14.4) 49.8 80.0 (19.0) 99.0the period Earnings per share(note 6)Basic (pence) 27.1 17.2 41.2Diluted (pence) 26.4 16.8 40.3Adjusted (pence) 29.6 23.0 48.8 1 Relates to the acquisition of InnSpired Group Limited, ultimate parent of theInnSpired trading companies. The profit and loss account in the current periodincludes 25 weeks of results relating to the acquired InnSpired companies. GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the 28 weeks ended 5 March 2005 28 weeks 28 weeks 52 weeks ended ended ended 5 March 6 March 21 August 2005 2004 2004 £m £m £m Profit for the financial period 67.8 42.6 102.5Unrealised surplus on revaluation of tangible fixed assets - - 84.7Total recognised gains for the period 67.8 42.6 187.2 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 28 weeks ended 28 weeks 52 weeks 5 March ended ended 2005 6 March 21 August 2004 2004 £m £m £mAt beginning of period 799.6 631.3 631.3Total recognised gains 67.8 42.6 187.2Exercise of share options 5.5 3.2 3.2Share based payments 0.5 - 0.4Ordinary dividends (9.4) (7.2) (22.5)At end of period 864.0 669.9 799.6 GROUP BALANCE SHEETat 5 March 2005 5 March 6 March 21 August 2005 2004 2004 £m £m £mFixed assetsGoodwill 140.7 133.2 132.8Negative goodwill (27.3) (28.9) (28.2) 113.4 104.3 104.6Tangible fixed assets 3,811.2 3,459.1 3,569.0 3,924.6 3,563.4 3,673.6Current assetsDebtors due within one year 78.4 82.0 74.4Debtors due after more than one year 9.7 11.7 10.8Cash at bank and in hand1 174.6 211.6 238.3 262.7 305.3 323.5Creditors: amounts falling due within one year (478.3) (328.5) (335.0) Net current liabilities (215.6) (23.2) (11.5)Total assets less current liabilities 3,709.0 3,540.2 3,662.1 Creditors: amounts falling due after more than one year (2,730.3) (2,786.6) (2,759.2)Provisions for liabilities and charges (114.7) (83.7) (103.3) Net assets 864.0 669.9 799.6 Capital and reservesCalled up share capital 0.1 0.1 0.1Share premium 372.2 366.7 366.7Revaluation reserve 184.7 101.6 186.0Profit and loss account 307.0 201.5 246.8Equity shareholders' funds 864.0 669.9 799.6 1Cash at bank and in hand includes £31.6m (March 2004: £73.7m; August 2004:£73.0m) of deposits used as security for guaranteed loan notes. GROUP CASH FLOW STATEMENTfor the 28 weeks ended 5 March 2005 Notes 28 weeks 28 weeks 52 weeks ended ended ended 5 March 6 March 21 August 2005 2004 2004 £m £m £m Net cash inflow from operating activities 8(a) 181.9 148.0 327.5Returns on investment and servicing of financeInterest paid (109.7) (84.3) (181.5)Interest received 5.9 5.3 8.5Cost of terminating financing arrangements1 (25.1) (10.4) (10.4)Deferred issue costs paid (1.2) (14.6) (14.9)Dividends paid to preference shareholders of acquired subsidiary - (6.6) (6.6) (130.1) (110.6) (204.9)Taxation paid (7.8) (1.9) (4.4)Capital expenditure and financial investmentPayments to acquire tangible fixed assets2 (69.7) (59.2) (99.4)Receipts from sales of tangible fixed assets 22.4 63.6 75.6 (47.3) 4.4 (23.8)Acquisitions and disposalsPayments to acquire subsidiary undertakings (37.0) (219.3) (223.0)Net cash acquired on acquisition of subsidiary undertaking 28.4 39.9 39.9Receipts from disposal of assets held for resale 175.5 - - 166.9 (179.4) (183.1)Equity dividends paid (15.3) (10.9) (18.1)Net cash inflow / (outflow) before financing 148.3 (150.4) (106.8) FinancingIssue of Ordinary share capital 5.5 3.2 3.2Loans raised 418.4 1,012.6 1,017.3Loans repaid (635.9) (832.5) (854.1)Decrease in cash deposits3 41.4 0.5 1.2 (170.6) 183.8 167.6(Decrease) / increase in cash 8(b) (22.3) 33.4 60.8 1 Costs of terminating financing arrangements includes £8.4m treated asexceptional within interest payable (note 4) with the remaining £16.7m beingreflected in the fair value of assets acquired at the date of acquisition (seenote 9). 2 Payments to acquire tangible fixed assets includes payments of £39.7m onacquisition of new pubs (March 2004: £27.0m; August 2004: £48.7m). 3 The decrease in cash deposits relate to the settlement of guaranteed loannotes of the same amount, the repayment of which is included in loans repaid.Cash deposits of 31.6m (March 2004: £73.7m; August 2004: £73.0m) have beenreclassified as within Financing, previously they were classified as cash. Theamounts for the 28 weeks ended 6 March 2004 have been restated to include a cashinflow relating to cash deposits of £0.5m. Cash flows for the 28 weeks ended 5 March 2005 Net cash inflow from operating activities includes outflows of £2.9m in respectof licensing reform cost and redundancy, costs to integrate acquisition ofsubsidiary and other related one-off costs treated as exceptional during theperiod. Interest paid includes outflows of £4.7m and interest received includes£0.3m of items treated as exceptional. Costs of terminating financingarrangements includes £8.4m treated as exceptional within interest payable (note4). Receipts from disposal of assets held for resale relate to the disposal of596 of the 1,064 estate acquired through the InnSpired Group Ltd acquisitionthat were either identified as non-core to the Group's long-term strategy orsold to comply with competition guidelines. The discounted proceeds are used indetermining the fair value of assets held for resale (note 9) with the discounteffect of £4.7m being included as exceptional within interest receivable (note4). Cash flows in respect of the 28 weeks ended 6 March 2004 Net cash inflow from operating activities includes outflows of £2.4m in respectof redundancy, costs to integrate acquisition of subsidiary and other relatedone-off costs treated as exceptional during the period. Interest paid includesoutflows of £2.4m and interest received includes inflows of £1.8m relating toitems treated as exceptional items in the period. Costs of terminating financingarrangements includes £2.5m of items treated as exceptional within interestpayable (note 4) in the period together with £5.2m deferred fee paid onredemption of loans and £2.7m paid to terminate interest rate swap arrangementson loans redeemed. Both the deferred fee and swap termination costs relate toloan arrangements within Pubmistress Ltd, the acquired subsidiary, and arereflected in the fair value of assets acquired. Receipts from sales oftangible fixed assets include £52.4m of net proceeds relating to disposalstreated as exceptional in the period (note 4). Cash flows in respect of the 52 weeks ended 21 August 2004 Net cash inflow from operating activities includes outflows of £8.2m in respectof redundancy, costs to integrate acquisition of subsidiary and other relatedone-off costs treated as exceptional during the period. Interest paid includesoutflows of £2.4m and interest received includes inflows of £1.8m relating toitems treated as exceptional items in the period. Costs of terminating financingarrangements includes £2.5m of items treated as exceptional within interestpayable (note 4) in the period together with a £5.2m deferred fee paid onredemption of loans and £2.7m paid to terminate interest rate swap arrangementson loans redeemed. Both the deferred fee and swap termination costs relate toloan arrangements within Pubmistress Ltd, the acquired subsidiary, and arereflected in the fair value of assets acquired. Receipts from sales oftangible fixed assets include £53.9m of net proceeds relating to disposalstreated as exceptional in the period (note 4). NOTES TO THE ACCOUNTSfor the 28 weeks ended 5 March 2005 1. ACCOUNTING POLICIES Basis of preparation The interim financial information is unaudited but has been reviewed by theauditors. The interim financial information has been prepared in accordance with theGroup's accounting policies as set out in the financial statements for the 52weeks ended 21 August 2004. The valuation of fixed assets has been broughtforward from those included in the statutory accounts for the period ended 21August 2004 without amendment. The interim report, which was approved by the Board of Directors on 27 April2005, does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. The figures for the period ended 21 August 2004 are extracted from the auditedaccounts for that period which have been delivered to the Registrar of Companiesand on which the auditors gave an unqualified opinion and did not make anystatement under sections 237 (2) or (3) of the Companies Act 1985. 2. SEGMENTAL INFORMATION Turnover, operating profit and assets and liabilities relate to the primaryactivity of leasing public houses to independent publicans and the wholesalesupply of beer products to lessees. A small number of pubs are directly managed by GRS Inns Ltd, a wholly ownedsubsidiary, but do not have a material impact on the turnover, operating profitor assets of the group. 3. OPERATING PROFIT The profit and loss account down to operating profit is split between ongoingand acquired operations as follows: 28 weeks ended 5 March 2005 28 weeks 52 weeks ended 6 ended 21 March 2004 August 2004 Ongoing Acquisitions1 Total Total Total £m £m £m £m £mTurnover 382.8 20.8 403.6 303.2 637.6Cost of sales (144.6) (8.5) (153.1) (114.1) (240.9)Gross profit 238.2 12.3 250.5 189.1 396.7Administrative expenses: Amortisation of goodwill (3.2) (0.3) (3.5) (1.9) (4.8) Depreciation (6.7) (0.3) (7.0) (4.9) (11.4) Exceptional items (note 4) (2.2) (0.7) (2.9) (2.4) (8.2) Other (35.9) (1.5) (37.4) (28.8) (57.3)Total administrative expenses (48.0) (2.8) (50.8) (38.0) (81.7)Operating profit 190.2 9.5 199.7 151.1 315.0 1 Relates to the acquisition of InnSpired Group Limited, ultimate parent of theInnSpired trading companies. The profit and loss account in the current periodincludes 25 weeks of results relating to the acquired InnSpired companies. Comparative periods relate to ongoing activities 4. EXCEPTIONAL ITEMS Included in continuing operations are the following exceptional items: 28 weeks 28 weeks 52 weeks ended ended ended 5 March 2005 6 March 21 August 2004 2004 £m £m £mExceptional administrative expensesRedundancy, costs to integrate acquisition of subsidiary and other related (2.9) (2.4) (8.2)one-off costs (2.9) (2.4) (8.2) Loss on disposal of tangible fixed assets1 - (11.5) (12.0)Interest receivableInterest receivable on deposits to fund repayment of old floating rate - 1.8 1.8notes2Effect of discounting assets3 4.7 - -Other4 0.3 - - 5.0 1.8 1.8Interest payable and similar chargesSecured Loan interest5 (1.3) (2.3) (2.3)Bank loan interest6 (3.2) - -Cost of terminating financing arrangements7 (8.4) (2.4) (2.4) (12.9) (4.7) (4.7) Total Exceptional Items (10.8) (16.8) (23.1) Tax impact of exceptional items 4.4 2.4 4.1 Exceptional items included in retained profit (6.4) (14.4) (19.0) In the current period the Group profit and loss account includes a non-operatingexceptional item of £0.2m relating to profit on disposal of tangible fixedassets. These disposals are a recurring feature of the Group's business andresults and are therefore excluded from the above table. In the 28 weeks ended6 March 2004, profit of £0.6m included in the £10.9m net loss on disposal oftangible fixed assets related to such disposals. In the 52 weeks ended 21August 2004 no net profit or loss was made on such disposals. 1 The profit and loss account for the periods ended 21 August 2004 and 6 March2004 includes £12.0m and £11.5m losses made on the sale of a package of 256 pubsfrom the existing pub estate following the acquisition of Pubmistress Ltd inorder to comply with competition guidelines. In the current period a package of37 pubs from the existing estate were disposed of following the acquisition ofInnSpired Group in order to comply with competition guidelines. No profit orloss was made on these disposals. 2 During the comparative periods £277m was paid into an escrow account to coverredemption of and associated interest payable on floating rate notes relating tothe old financing structure that were not subject of an acceptance of tenderoffer before the refinancing. The exceptional interest receivable in thecomparative periods represents the interest earned on these funds from date ofrefinancing (3 November 2003) to the final redemption of the loans (on thefollowing interest payment date) that would not otherwise have been earned hadthe loans been settled at the date of the debt restructure. 3 Discounting has been applied to the proceeds received from sale of 51 pubs on24 September 2004 and 545 pubs on 28 January 2005 out of the total 1,064 pubsInnSpired pubs acquired on 10 September 2004 to reflect the fair value of assetsacquired (note 9). 4 Funds were held in an escrow account to fund the cost of acquisition ofInnSpired Group Limited. The exceptional interest receivable in the currentperiod relates to the proportion of funding relating to the 545 pubs of thetotal 1,064 pubs acquired on 10 September 2005 that were subsequently disposedof on 28 January 2005. 5 In the current period interest was incurred on the secured loan notes acquiredthrough the InnSpired Group acquisition from date of acquisition to theirsubsequent redemption on 21 October 2004. The exceptional secured loan noteinterest charge represents the portion of the loan relating to the 545 of thetotal 1,064 pubs acquired that were subsequently disposed of on 28 January 2005.In the comparative periods the exceptional secured loan note interestrepresents interest payable on the floating rate notes not subject to acceptanceof tender offer from date of debt restructure to final redemption that would nototherwise have been paid had the loans been repaid at date of debt restructure. 6 A bank facility was drawn down to fund the acquisition of InnSpired GroupLimited. 545 of the 1,064 pubs acquired were subsequently sold on 28 January2005 with the receipts used to repay a portion of the facility drawn down. Theexceptional bank loan interest represents the interest and fees incurred on theportion of the loan relating to the 545 pubs from acquisition to 28 January 2005when that portion was repaid. 7 In the current period the cost of terminating financing arrangementsrepresents premiums paid to redeem secured loan notes acquired through theacquisition of InnSpired Group Ltd and break costs incurred to cancel swaparrangements associated with these loans. In comparative periods thisrepresents premiums paid together with write-off of deferred issue costs, fairvalue premiums and other balances relating to the floating rate notes redeemedas a part of the debt restructure. 5. TAXATION The effective taxation charge applied in these interim results of 23.4% reflectsthe estimated tax rate for the 52 weeks ending 20 August 2005. The effectiverate of taxation for the comparative period was 23.5%. 6. EARNINGS PER ORDINARY SHARE (a) Basic earnings per share Basic earnings per share of 27.1 pence (March 2004: 17.2 pence; August 2004:41.2 pence) has been calculated using total profit of £67.8m (March 2004:£42.6m; August 2004: £102.5m), and weighted average number of equity shares inissue during the period of 250,538,050 (March 2004: 248,349,124; August 2004:249,082,407). (b) Diluted earnings per share Diluted earnings per share is the basic earnings per share after allowing forthe dilutive effect of the conversion into Ordinary shares of the weightedaverage number of options outstanding during the period. Diluted earnings pershare of 26.4 pence (March 2004: 16.8 pence; August 2004: 40.3 pence) has beencalculated using basic earnings of £67.8m (March 2004: £42.6m; August 2004:£102.5m) and after including the effect of all dilutive potential Ordinaryshares. The weighted average number of shares can be reconciled as follows: 28 weeks ended 28 weeks ended 52 weeks ended 5 March 2005 6 March 2004 21 August 2004 No No No Basic weighed average number of Ordinary shares 250,538,050 248,349,124 249,082,407Dilutive effect from share options 5,859,790 5,034,969 5,206,056Dilutive weighted average number of Ordinary shares 256,397,840 253,384,093 254,288,463 (c) Adjusted earnings per share Adjusted earnings per share of 29.6 pence (March 2004: 23.0 pence; August 2004:48.8 pence) is based on basic profits adjusted to exclude non-recurringexceptional items and is calculated as follows: 28 weeks 28 weeks 52 weeks ended ended ended 5 March 2005 6 March 2004 21 August 2004 £m £m £m Profit for the period 67.8 42.6 102.5Non-recurring exceptional items (note 4) 6.4 14.4 19.0Adjusted earnings 74.2 57.0 121.5 The weighted average number of shares used is the same as that used tocalculate basic earning per share. 7. DIVIDENDS An interim dividend of 3.7 pence per Ordinary Share is proposed (March 2004: 2.9pence; August 2004: 6.1 pence) which will be payable on 1 July 2005 toShareholders on the register of members on 10 June 2005. 8. NOTES TO THE CASH FLOW STATEMENT (a) Reconciliation of operating profit to net cash inflow fromoperating activities 28 weeks 28 weeks 52 weeks ended 5 ended 6 ended March 2005 March 2004 21 August 2004 £m £m £mOperating profit 199.7 151.1 315.0Depreciation 7.0 4.9 11.4Amortisation of goodwill / negative goodwill 3.5 1.9 4.8Decrease / (increase) in debtors 1.5 (1.1) 0.8Decrease in creditors and provisions (29.8) (8.8) (4.5)Net cash inflow from operating activities 181.9 148.0 327.5 (b) Analysis of changes in net debt At 21 On Non cash At 5 acquisitions movements August 2004 Cash flow March 2005 £m £m £m £m £mCash 165.3 - (22.3) - 143.0Cash deposits 73.0 - (41.4) - 31.6Bank and other loans (2,873.4) (337.1) 218.7 0.2 (2,991.6) (2,635.1) (337.1) 155.0 0.2 (2,817.0) The cash deposits are used as security for guaranteed loan notes. Non-cash movements relate to amortisation of deferred issue costs and premium onloan notes. (c) Cash flows relating to acquisition The following table summarises the cash flows relating to continuing operationsand acquisitions during the current period: Continuing Acquisitions1 Total Operations £m £m £mNet cash inflow / (outflow) from operating activities 184.8 (2.9) 181.9Returns on investment and servicing of finance (100.7) (29.4) (130.1)Taxation paid (7.7) (0.1) (7.8)Capital expenditure and financial investment (45.8) (1.5) (47.3)Acquisitions and disposals (8.6) 175.5 166.9Equity dividends paid (15.3) - (15.3)Net cash inflow before financing 6.7 141.6 148.3 Of total loans repaid during the period of £635.9m, £337.1m relates torepayments of loans that were acquired through the InnSpired Group Ltdacquisition. 1 Relates to the acquisition of InnSpired Group Limited, ultimate parent of theInnSpired trading companies. Cash flows in the current period include 25 weeksof results relating to the acquired InnSpired companies. 9. ACQUISITIONS DURING THE PERIOD Acquisition of subsidiaries: InnSpired Group Ltd On 10 September 2004 the Group acquired the entire share capital of InnSpiredGroup Ltd which operates a leased/tenanted estate. At the date of acquisitionthe estate consisted of 1,064 pubs. The acquisition is summarised as follows: Fair value adjustments Book Value Revaluations Assets held Other Fair Value for resale £m £m £m £m £mIntangible fixed assets 30.0 (30.0) - - -Tangible fixed assets 330.4 41.9 (169.4) - 202.9Assets held for resale - - 170.8 - 170.8Debtors 8.0 - (2.2) - 5.8Cash 28.4 - - - 28.4Creditors and provisions (32.9) (8.5) 0.8 (4.1) (44.7)Loans (311.6) (25.5) - - (337.1)Net assets acquired 52.3 (22.1) - (4.1) 26.1Provisional goodwill 12.3arising on acquisitionTotal cash consideration 38.4 The principal fair value adjustments were in respect of: Revaluations • revaluation of fixed assets and reversal of consolidated goodwill• revaluation of loans and other financial instruments (included within creditors and provisions) to their fair value Assets held for resale • reclassification of fixed assets, trade debt and security deposits to assets held for resale relating to 545 pubs identified at the time of acquisition as non-core to the Group's long-term strategy and sold on 28 January 2005.• reclassification of 51 pubs sold on 24 September 2004 in order to comply with competition guidelines• assets held for resale are valued at discounted sales proceeds Other • provision for property lease obligations• provision for deficit on the defined benefit scheme• deferred tax asset associated with the onerous property lease provision and deficit on the defined benefit scheme This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Punch Taverns PLC