4th Dec 2007 07:02
Greene King PLC04 December 2007 PRESS RELEASE 4 December 2007 GREENE KING plc Interim results for the 24 weeks ended 14 October 2007 ORGANIC GROWTH AND SUCCESSFUL ACQUISITIONS DRIVE RECORD FIRST HALF RESULTS • Revenue £445.0m, +6% • Operating profit* £111.8m, +11% • Operating profit margin* 25.1%, +1.1 %pts • Profit before tax* £71.6m, +7% • Adjusted earnings per share* 35.6p, +14% • Interim dividend per share 7.3p, +13% • £126.4m of share buy-backs, over 8% of equity • Continued positive cash flows; robust balance sheet • Revenue and operating profit up in all businesses • Retail like-for-like sales up despite English smoking ban • Operating profit up 16% at Belhaven, one year on from Scottish smoking ban • Pub Partners operating profit per pub up 8% • Brewing Company: volume and share growth • Loch Fyne Restaurants: in line with expectations, integration on track • New Century Inns acquired**: 49 quality pubs, extends presence in the north * before exceptional items. ** after period end Rooney Anand, Greene King chief executive, comments: "These record results have been underpinned by sales and profit growth acrossall our businesses. This, combined with £126.4m of share buy-backs, hasgenerated substantial earnings growth in the first half. "We have had a very successful first half but we expect the remainder of theyear to be more challenging. We will, however, benefit from the underlyingstrength of our business, recent acquisitions and our strong financialmanagement. Overall, we are confident of an earnings performance in line withexpectations. "There are well-documented concerns facing the entire industry: the first winterof the English smoking ban, cost pressures and general consumer confidence.Nevertheless, we continue to seize opportunities to strengthen our business andbroaden the appeal of our pubs. "We have confidence in the resilience of our business model, the quality of ourassets, our robust balance sheet and our long-proven strategy. These, coupledwith our strong cash generation and profit conversion, will enable us to createshareholder value in the current year and into the future." A copy of the results presentation is available on our website:www.greeneking.co.uk. For further information: Greene King plc Rooney Anand, chief executive Tel: 01284 763222 Ian Bull, group finance director Financial Dynamics Ben Foster Tel: 020 7831 3113 GREENE KING plc Interim management report for the 24 weeks ended 14 October 2007 Chairman's Statement Results I am very pleased to be able to report another set of record results for thefirst 24 weeks of the financial year 2007/8. These results are underpinned byorganic growth, and benefit from the positive contribution of recentacquisitions, including 10 weeks' contribution from Loch Fyne Restaurants. Revenue for the period was up 6% at £445.0m; operating profit was up 11% at£111.8m; and profit before tax and exceptional items was up 7% at £71.6m. Thisstrong operating performance, coupled with our programme of share buy-backs,results in earnings per share rising 14% to 35.6p. Dividend The board has declared an interim dividend per share of 7.3p, which is 13%higher than for the equivalent period last year. This dividend, we believe,strikes the right balance between retaining cash in the business to fundvalue-creative growth, and realising an attractive yield for shareholders in thecurrent year. The interim dividend will be paid on 29 January 2008 to those shareholders onthe register at the close of business on 21 December 2007. Acquisitions We acquired Loch Fyne Restaurants for a final consideration, including debt, of£64.2m in August. The acquisition reflects the ever-increasing importance offood and high-quality service in our pubs. Whereas the earlier Hardys & Hansonsacquisition brought us expertise in mid-market dining, Loch Fyne does the samein the premium casual dining sector. Since the period end, we have acquired New Century Inns, which had 49 goodquality tenanted and leased pubs in the north of England. The properties fitinto our existing footprint very well and will raise the average standard of ourestate. People I would like to express my heartfelt thanks to all those who make Greene Kingthe strong, successful business it is: our employees and our partners in thelicensed trade. Their dedication, commitment and creativity are second to none.I would also like to extend a warm welcome to our new colleagues at Loch FyneRestaurants, and the tenants and lessees of New Century Inns. We have alwaysbeen diligent in making sure that the businesses we have acquired have beensuccessfully integrated, mixing their strengths with our own, and we lookforward to carrying out this process with these two teams. Everyone associated with the company makes a contribution to our success andthey should all be proud of these results and our continuing achievements. Tim BridgeChairman 3 December 2007 Chief Executive's Review I am pleased to report another strong set of results. In the first 24 weeks of2007/8, revenue and profit before tax rose by 6% and 7% respectively. Asthroughout this document, the profit figures are shown before exceptional items. These results were achieved through a combination of underlying growth and apositive contribution from recent acquisitions. Revenue and operating profitwere up again in every one of our divisions. It is another strong performance,which has allowed us to declare an interim dividend of 7.3p per share, 13%higher than last year. Although we have a sound track record of making value-creative acquisitions, wedo not pursue scale for its own sake. Instead we strive to be the best in oursector, in the eyes of our customers, our employees and our shareholders. Our record of total shareholder return is a strong one. With a robust balancesheet, we retain potential to release significant further value to shareholders.Additionally, we expect to continue to have a number of value-creativeinvestment options open to us, both organically and through acquisition. The markets in which we operate have become more challenging in the last 12months. Pressures and uncertainties include input cost increases, which wecontinue to manage; intense price competition in the off-trade; the short-termeffect of the smoking ban; and some concern about consumer confidence in thewake of the credit crunch. Nevertheless, we remain confident in the quality ofour pubs, beer brands and people; and consequently in our ability to createpositive value for the long-term. The smoking ban in England The smoking ban in England came into force on 1 July, part-way through thereporting period. As was the case in Scotland, at least one full year's tradingis needed before any definitive conclusion can be reached on the effect of theban. However, in the light of our experiences in Scotland, our extensiveresearch with licensees and customers, and results to date, we are able to makea few early observations. As witnessed by Belhaven last year in Scotland, growth in food sales has helpedoffset softer wet sales and machine income. The ban presents an opportunity to bring new customers into the market,especially from among non-smokers, women, families and retired couples. We haveinvested substantially to improve our business, enhancing our food, wine andsoft drinks offers, and installing premium coffee offers in 397 managed sites. For many smokers, of course, the ban is an unwelcome development, and our firstpriority was to make provision for this group to continue to use the pub,without reducing frequency or shortening visit time. We have installed smokingfacilities in the overwhelming majority of our sites; and focused ourbiggest-spend capital projects on sites where we could attract smokersdissatisfied with the smoking facilities at their previous regular pub. We do not see the smoking ban project as finished. We continue to refine andimprove our approach to make our pubs as welcoming as they can be to smokers andnon-smokers alike. We now face the more testing cold winter months, but we are cautiouslyencouraged by our experience thus far. Greene King Retail 24 weeks 06/07 07/08 ChangeAverage number of outlets trading 761 798 +5%Revenue £248.0m £268.2m +8%EBITDA £65.3m £70.0m +7%Operating profit £53.2m £56.5m +6%Operating profit margin 21.5% 21.1% - 0.4 %pts Revenue per outlet annualised £706.1k £728.2k +3%Operating profit per outlet annualised £151.5k £153.4k +1% In our managed houses in England and Wales, revenue was up 8% to £268.2m, andoperating profit up 6% to £56.5m. The operating margin was down 0.4 percentagepoints to 21.1%, due largely to the addition of the leasehold Loch Fynerestaurants. Excluding the effect of adding the Loch Fyne outlets, margins werebroadly flat year-on-year. Total like-for-like sales in the 24 weeks were up slightly on the prior year,despite the smoking ban, the comparison versus the FIFA World Cup, and theeffect of flooding, which interrupted business at 39 sites. Excluding pubsclosed by flooding and FIFA World Cup days, underlying like-for-like sales wereup 1.5%. Our development of key sales lines continues apace. In the period, sales offood were up by 16%, wine by 17%, and coffee by 45%. Annualised revenue per outlet was up 3% to £728.2k. On a pro-forma basis,reflecting a full-period contribution from Loch Fyne, the equivalent figurewould be £742.6k, up 5% on the prior year. At the start of the period, a total of 788 outlets were open, 36 were added as aresult of the Loch Fyne acquisition, 1 transferred from, and 16 transferred to,Pub Partners, and there were 5 disposals and 1 new opening. The closing balancewas therefore 805. 20 pubs benefited from major re-development programmes (aside from purelysmoking ban related projects), representing £5.2m of capital spend. Total cashcapital investment in managed houses was £17.7m, with a further £4.5m spent onrepairs from the revenue account. Local Pubs493 outlets at period end; average of 507 trading across the period. Local Pubs comprises a set of local market-facing bespoke pubs, where theemphasis is on individuality rather than a set format. Local Pubs outletsoperate at both the mid-market core and the premium end of the market. Wecontinue to roll out Premium Local pubs, replacing previously under-performingunits in up-and-coming areas, with encouraging results. Local Pubs have aspecial expertise in sports and events management. Inevitably, the Rugby WorldCup was less of a boost for business than was the FIFA World Cup last year, butthe team made the best of the opportunity, peaking in 38% like-for-like salesgrowth on the day England played in the final. Destination Pubs275 outlets at period end; average of 277 trading across the period. In Destination Pubs, the focus is on attractive brands or formats that peoplewill seek out specifically. The only overtly branded units are the Hungry Horsepubs, while the Old English Inns name provides a sales and marketing umbrellafor our accommodation business. Wayside is an example of a set format without aconsumer-facing brand attached to it - marrying the advantages of an operationaltemplate with the feel of an individual pub. At Hungry Horse, we are currently investing in a new livery, updated menus andenhanced operational standards. Across Destination Pubs, the team are puttingin place new menus, with a greater range and choice of healthy options,alongside popular treats. Loch Fyne Restaurants37 outlets at period end; due to the timing of the acquisition, the averagenumber trading under Greene King ownership over the period was 14. On 7 August we acquired Loch Fyne Restaurants for a final consideration,including debt, of £64.2m. Loch Fyne's expertise in premium casual diningcomplements the expertise in mid-market food brought by the earlier acquisitionof Hardys & Hansons. Since then, trading at Loch Fyne has been in line with ourexpectations. The opening programme has remained on track, and a number ofcurrent Greene King pubs have also been earmarked for conversion to the brand.There were a total of 37 restaurants trading at the period end, since when wehave opened one more unit, at Milton Keynes; by the end of the financial year,we expect a total of 45 restaurants to be open or under development. There isalso much that other parts of Greene King can learn from Loch Fyne's provenconcept - from kitchen and restaurant layout ergonomics to wine merchandisingand direct marketing. Pub Partners 24 weeks 06/07 07/08 ChangeAverage number of pubs trading 1,412 1,416 +0%Revenue £74.3m £76.6m +3%EBITDA £36.7m £39.5m +8%Operating profit £34.0m £36.7m +8%Operating profit margin 45.8% 47.9% + 2.2 %pts EBITDA per pub annualised £56.3k £60.4k +7%Operating profit per pub annualised £52.2k £56.2k +8% Revenue at Pub Partners, our tenanted and leased pubs division in England andWales, rose 3% to £76.6m, and operating profit rose 8% to £36.7m. The operatingprofit margin was therefore 47.9%, up 2.2 percentage points on the previousyear. Despite more challenging trading conditions, I am pleased to be able to reportthat like-for-like sales and like-for-like profit were both up, and theannualised average operating profit per pub was up 8% to £56.2k. The average number of pubs rose by four. At the start of the period there were1,417 sites in Pub Partners, and the closing balance was 1,427. The divisionwas impacted positively by 16 pubs transferring from the managed business; 1 wastransferred the other way; and 5 were sold. 40 pubs benefited from capital developments (aside from purely smoking banrelated projects), representing £3.4m of capital spend. Total cash capitalinvestment in the division was £6.5m, with a further £2.1m spent on repairs fromthe revenue account. The guiding principle of Pub Partners is 'True Partnership'. When our tenantsand lessees do well, we do well, and vice versa. We run a series of programmesto help partner profitability, from training and development to a broad-rangingpurchasing scheme, 'Share & Save'. In the first half, we significantly upgradedour merchandising and sales support for wine, launched a successful machineincome defence approach, and introduced an energy brokerage programme. We constantly monitor key indicators of our tenancy and lease business'svitality. Although the market is without doubt tougher, Pub Partners 'vitalsigns' have held up well. The speed with which we fill pub vacancies and thelevel of churn remain at levels with which we are comfortable. The number ofshort-term 'tenancies-at-will' (TAWs) remains stable at under 100 (in line withlast year), and rent concessions are running at less than 1/4% of the rent roll. New Century Inns On 13 November, after the end of the reporting period, we completed theacquisition of New Century Inns (NCI) for a total consideration, including debt,of £32.6m. The acquisition was financed from existing debt facilities and isexpected to be earnings enhancing in the first full year of ownership. In the12 months to October 2007, NCI generated a run-rate EBITDA of £3m. The NCIestate, 49 high-quality tenanted and leased pubs (all but one freehold),complement Greene King's existing estate. They will strengthen our position inthe north and northeast, forming a 'bridge' between the core part of the formerHardys & Hansons estate and the Belhaven pubs in Scotland. We have met with allNCI licensees, and we are very impressed with their positive attitude to theacquisition, and to becoming Greene King partners. Brewing Company 24 weeks 06/07 07/08 ChangeRevenue £41.1m £41.4m +1%Operating profit £10.0m £10.4m +4%Operating profit margin 24.3% 25.1% + 0.8 %pts Brewing Company grew revenue by 1% and profit by 4% in the period. As a resultthe operating margin improved 0.8 percentage points to 25.1%. In a difficult ale market, own-brewed volume grew 8%, helped by the Hardys &Hansons acquisition and very successful off-trade promotions around the RugbyWorld Cup. Britain's number one cask ale, Greene King IPA, enjoyed volume growth of 4.3%,and increased its share of the cask ale market by 1.4 percentage points, to17.7%(1). Key to this performance was the sponsorship of England Rugby and ourmarketing campaign, 'The Beer With Nothing to Prove'. Given the heightenedinterest in rugby following England's extended run in the World Cup, we aredelighted that we signed a four year deal last year to be the Official Beer ofEngland Rugby. Old Speckled Hen remains the nation's top-selling premium ale in supermarkets;overall brand volume in the period was up 6.8%. The strong volume growth also helped to drive further cost efficiencies throughour brewing and distribution operations. The brewery is currently running at90% capacity and we have scope to further increase capacity as and when thatbecomes necessary. Belhaven 24 weeks 06/07 07/08 ChangeRevenue £55.8m £58.8m +5%Operating profit £11.5m £13.3m +16%Operating profit margin 20.6% 22.6% + 2.0 %pts The Belhaven results are very pleasing, with the business forging ahead in thesecond year of the Scottish smoking ban, having achieved 4% profit growth in thefirst year of the ban. Operating profit was up 16% at £13.3m, on revenue up 5%, at £58.8m. Theoperating profit margin was therefore 22.6%, up two full percentage points onthe prior year. The brewing division achieved an increase in on-trade beer volumes of 4%,despite a market decline of some 7%. Belhaven Best, Scotland's most populardraught ale, increased volume by over 7% helped by the introduction of newcountermounts, high profile sponsorships in sports, music and the arts, and amarketing campaign launched in the autumn which includes TV and cinemaadvertising based on the theme "Scotland's Best". Tenancy / lease profits were up on the back of expansion of the estate and asolid increase in rental streams. Belhaven's retail business, which operates "locals" rather than "destination"pubs, had a sparkling period. Food sales rose by 25%, and now stand fully 50%higher than at the time of the acquisition. Trading results in community pubswere particularly strong. The division benefited from the policy of switchingsmaller units to tenancy and the focus on higher food potential when pursuingopportunities to add single site acquisitions. In the period, Belhaven's pub estate increased from 299 to 306 units (94 managedand 212 tenancies compared to 99 and 200 respectively at the start of thefinancial year). Across the period, the average number of pubs trading was 302. Finances and balance sheet We remain committed to striking a balance between financial prudence andefficiency of capital structure. We continue to believe that it would be in theinterests of our shareholders to reduce our fixed charge cover over time to2.3x. Our fixed charge cover is currently 2.6x, which includes the part-yearimpact of £126.4m of share buy-backs in the first half, the £64.2m acquisitionof Loch Fyne Restaurants, and continued investment of £38.7m capital expenditureacross our businesses. The full year effect of the share buy-backs, Loch Fyneand New Century Inns (acquired after the period end) will be to reduce fixedcharge cover to below 2.6x. At our preliminary results announcement in July, we laid out three main optionsfor realising value from our property estate: the creation of a real estateinvestment trust; an extension of our existing securitisation; and the creationof an 'OpCo/PropCo' structure with a joint venture partner. Changes since thenin the property and debt markets now make 'OpCo/PropCo' relatively lessattractive; we are keeping it under review, along with alternative options. Our balance sheet remains strong and flexible, 95% of our debt is at fixedrates, and we have an overall blended rate of 5.9%. We remain comfortable withour available headroom and confident of access to further funds for acquisitionsif required. Current trading and outlook In the 30 weeks to 25 November, like-for-like sales in managed pubs were in linewith last year, or up 1% on an underlying basis, i.e. excluding the effect ofthe FIFA World Cup. Pub Partners achieved like-for-like sales in line with lastyear. Brewing Company delivered growth in its own-brewed volume of 7% andBelhaven Best volume is up 8%. We have had a very successful first half but we expect the remainder of the yearto be more challenging. We will, however, benefit from the underlying strengthof our business, recent acquisitions and our strong financial management.Overall, we are confident of an earnings performance in line with ourexpectations. Rooney AnandChief Executive 3 December 2007 Unaudited Group Income Statement for the twenty-four weeks ended 14 October 2007 24 weeks to 14.10.07 24 weeks to 15.10.06 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total Note £m £m £m £m £m £m Revenue 445.0 - 445.0 419.2 - 419.2Operating costs (333.2) - (333.2) (318.3) (3.1) (321.4)Disposal of property, plantand equipment. - 8.8 8.8 - 3.6 3.6Operating profit 111.8 8.8 120.6 100.9 0.5 101.4 Finance income 2.9 1.0 3.9 1.2 - 1.2Finance costs (43.9) - (43.9) (35.3) (10.1) (45.4)Net finance income/(costs)from pensions 0.8 - 0.8 0.3 - 0.3Profit before tax 71.6 9.8 81.4 67.1 (9.6) 57.5Tax 4 (20.8) 11.7 (9.1) (20.1) 4.4 (15.7)Profit attributable to equityholders of parent 50.8 21.5 72.3 47.0 (5.2) 41.8 Earnings per share- basic 5 50.6 p 27.7 p- adjusted basic 5 35.6 p 31.1 p- diluted 5 49.8 p 27.2 p- adjusted diluted 5 35.0 p 30.6 p Dividend proposed per share inrespect of the period 7.3 p 6.45 p Adjusted earnings per share excludes the effect of exceptional items. Unaudited Group Balance Sheetas at 14 October 2007 As at As at 14.10.07 29.04.07 Note £m £m Non current assets Property, plant and equipment 2,000.3 1,985.8Goodwill 665.3 607.7Investments 0.9 -Financial assets 32.9 33.7Derivative financial instruments 10.9 8.4Deferred tax assets 22.7 26.3Prepayments 6.7 6.2Trade and other receivables 0.2 0.2 2,739.9 2,668.3 Current assetsInventories 18.6 18.2Trade and other receivables 48.7 48.9Prepayments 10.9 6.4Derivative financial instruments 1.7 2.0Cash and cash equivalents 98.5 92.1 178.4 167.6 Total assets 2,918.3 2,835.9 Current liabilities Borrowings (80.4) (136.4)Derivative financial instruments (0.1) (0.2)Trade and other payables (168.4) (168.2)Income tax payable (39.2) (31.6) (288.1) (336.4) Non current liabilitiesBorrowings (1,607.7) (1,391.2)Derivative financial instruments (2.3) (4.4)Deferred tax (212.5) (224.2)Post-employment liabilities (44.9) (45.5) (1,867.4) (1,665.3) Total liabilities (2,155.5) (2,001.7) Total net assets 762.8 834.2 Issued capital and reservesShare capital 8 17.2 18.8Share premium 8 246.2 243.7Capital redemption reserve 8 3.0 1.4Hedging reserve 8 7.4 4.3Own shares 8 (17.8) (18.9)Retained earnings 8 506.8 584.9Total equity 762.8 834.2 Net debt 8 1,589.6 1,435.5 Unaudited Group Cashflow Statement for the twenty-four weeks ended 14 October 2007 24 weeks to 24 weeks to 14.10.07 15.10.06 Note £m £m Operating activities Operating profit 120.6 101.4Operating exceptional items (8.8) (0.5)Depreciation and amortisation 21.2 19.0EBITDA* 133.0 119.9 Working capital and non-cash movements 9 (10.4) 10.6Interest received 3.9 1.2Interest paid (47.2) (49.6)Tax paid (12.4) (4.0)Net cashflow from operating activities 66.9 78.1 Investing activities Purchase of property, plant and equipment (38.7) (36.8)Movement in trade loans 0.7 0.7Sales of property, plant and equipment 28.1 8.8Acquisition of subsidiary, net of cash acquired 7 (49.8) (172.5)Net cashflow from investing activities (59.7) (199.8) Financing activities Equity dividends paid 6 (23.7) (21.7)Issue of shares 8 3.6 2.1Purchase of own shares 8 (126.4) (4.4)Financing costs (0.1) (4.3)Repayment of borrowings (76.5) (534.7)Advance of borrowings 225.0 730.0Net cashflow from financing activities 1.9 167.0 Net increase / (decrease) in cash and cashequivalents 9.1 45.3 Opening cash and cash equivalents 82.7 15.2Closing cash and cash equivalents 10 91.8 60.5 *EBITDA represents earnings before interest, tax, depreciation, amortisation andexceptional items Unaudited Group Statement of Recognised Income and Expense for the twenty-four weeks ended 14 October 2007 As at As at 14.10.07 15.10.06 £m £m Cashflow hedges: Gains taken to equity 7.3 -Cashflow hedges: (Gains)/losses recycled to income (2.9) -Actuarial losses on defined benefit pension schemes (0.4) -Tax on items recognised directly in equity (1.2) -Tax on benefit relating to share based payments (1.5) 1.5Net income recognised directly in equity 1.3 1.5 Profit for the period 72.3 41.8 Total recognised income and expense for the period 73.6 43.3attributable to equity holders of the parent Notes to the accounts for the twenty-four weeks ended 14 October 2007 1 Basis of preparation The interim financial information has been prepared on the basis of theaccounting policies set out in the group's statutory accounts for the year ended29 April 2007. This interim report has been prepared in accordance with IAS 34 'InterimFinancial Reporting'. IFRS 7 'Financial Instruments: Disclosures' will be applied for the first timein the accounts to April 2008. The financial information contained in this interim statement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The figures for the year ended 29 April 2007 have been derived from thestatutory accounts, which have been filed with the Registrar of Companies and onwhich the auditors gave an unqualified report. 2 Segment information 2007/08 (24 weeks) Retail Pub Brewing Belhaven Corporate Total Partners Company Operations £m £m £m £m £m £m External revenue 268.2 76.6 41.4 58.8 - 445.0Segment operating profit 56.5 36.7 10.4 13.3 (5.1) 111.8(pre-exceptionals)% growth on prior year (pre-exceptionals) +6% +8% +4% +16% +11%Exceptional items 4.7 1.7 - - 2.4 8.8Segment operating profit 61.2 38.4 10.4 13.3 (2.7) 120.6(post-exceptionals)Net assets 1,262.0 829.1 212.8 307.4 (1,848.5) 762.8EBIDTA* 70.0 39.5 12.3 15.3 (4.1) 133.0 2006/07 (24 weeks) Retail Pub Brewing Belhaven Corporate Total Partners Company Operations £m £m £m £m £m £m External revenue 248.0 74.3 41.1 55.8 - 419.2Segment operating profit 53.2 34.0 10.0 11.5 (7.8) 100.9(pre-exceptionals)Exceptional items 1.2 (1.4) - - 0.7 0.5Segment operating profit 54.4 32.6 10.0 11.5 (7.1) 101.4(post-exceptionals)Net assets 1,215.9 854.3 204.6 291.0 (1,784.0) 781.8EBIDTA* 65.3 36.7 11.8 13.3 (7.2) 119.9 The group's business operations are divided into four core trading segmentswhich are managed separately. Retail covers the results of managed houses and restaurants, Pub Partners coversthe results of tenanted houses, Brewing Company covers brewing beer, marketingand selling, all predominately in England. Belhaven covers the results of ourScottish operation which includes managed and tenanted houses, and brewing andselling beer. Corporate includes the group debt and any central costs and assets/liabilities. To aid comparability, the 2006/07 segmental figures have beenadjusted to include the Hardys & Hansons business into segments in which it wasintegrated. Retails includes 10 weeks trading from the acquired Loch Fyne Restaurantsbusiness which contributed £1.0 million profit. *EBITDA represents earnings before interest, tax, depreciation, amortisation andexceptionals. Notes to the accounts for the twenty-four weeks ended 14 October 2007 3 Exceptional items 24 weeks to 24 weeks to 14.10.07 15.10.06 £m £mOperating Integration of Hardys & Hansons business - 3.1Disposal of property, plant and equipment (8.8) (3.6) (8.8) (0.5)FinancingTermination of interest rate swaps and loan facilities (1.0) 10.1 (9.8) 9.6 Exceptional integration costs are items of one-off expenditure incurred tocombine the acquired business with the rest of the group, and include stafftermination costs and incentives. 4 Income tax 24 weeks to 14.10.07 24 weeks to 15.10.06 On profits On profits before before exceptional Exceptional exceptional Exceptional items items Total items items Total £m £m £m £m £m £m Income tax Corporation tax before exceptionalitems 19.8 - 19.8 18.7 - 18.7Chargeable/(recoverable) onexceptional items - 0.3 0.3 - (4.0) (4.0) 19.8 0.3 20.1 18.7 (4.0) 14.7 Deferred taxOrigination and reversal oftemporary differences 1.0 (12.0) (11.0) 1.4 (0.4) 1.0 Tax charge in the income statement 20.8 (11.7) 9.1 20.1 (4.4) 15.7 The Finance Act 2007 reduced the rate of corporation tax from 30% to 28% witheffect from 1 April 2008. The effect of the reduced rate is a deferred taxcredit of £13.9m. This is included within the tax credit of £11.7m shown underexceptional items which is also stated after an income tax charge of £0.3m onexceptional finance income, a deferred tax credit of £1.1m on indexation ofproperties and a deferred tax charge of £3.0m on disposal of properties. Notes to the accounts for the twenty-four weeks ended 14 October 2007 5 Earnings per share Basic earnings per share has been calculated by dividing the profit aftertaxation of £72.3 million (2006 - £41.8 million) by the weighted average numberof shares in issue of 142.9 million (2006 - 151.1 million). Adjusted earnings per share excludes the effect of exceptional items and ispresented to show the underlying performance of the group. Adjusted earnings per share Earnings Earnings per share 24 weeks 24 weeks 24 weeks 24 weeks to to to to 14.10.07 15.10.06 14.10.07 15.10.06 £m £m p p Basic 72.3 41.8 50.6 27.7Exceptionals (21.5) 5.2 (15.0) 3.4Adjusted 50.8 47.0 35.6 31.1 Diluted earnings per share has taken account of 2.3 million (2006 - 2.6 million)contingent shares under option. 6 Dividends paid 24 weeks to 24 weeks to 14.10.07 15.10.06 £m £m Declared and paid in the periodFinal dividend for 2006/07 - 16.45p (2005/06 - 14.35p) 23.7 21.7 Notes to the accounts for the twenty-four weeks ended 14 October 2007 7 Acquisitions The group acquired 100% of the Loch Fyne Restaurants Limited's share capital on7 August 2007, and has accounted for its results from that date. Estimated fair value of assets acquired Loch Fyne Restaurants Book Fair Value Value £m £m Property, plant and equipment 22.7 17.0Goodwill 13.7 -Investments 0.8 0.8Other financial assets - 0.2Net debt (31.1) (32.8)Net current liabilities (11.3) (11.3)Deferred tax (0.1) (0.1)Fair value of net assets (5.3) (26.2)Estimated goodwill 57.6 31.4 Satisfied by: Cash 16.6 Fees 0.4 17.0 Loan notes issued 14.4 31.4 The values attributed to the acquisition of Loch Fyne Restaurants are determinedprovisionally due to the proximity of the acquisition to the interim date. The difference between the consideration paid and the fair value of the assetsacquired has been recognised as goodwill, and has arisen due to expectedoperating synergies, and the proven ability of management to grow the business. Prior to acquisition the results of Loch Fyne Restaurants were prepared under UKGAAP, using different accounting policies and bases, and therefore a proformatrading result has not been produced. The consideration includes £14.4 million of two series of unsecured loan noteswhich are redeemable on 7 August 2009. Series A loan notes have a nominal valueof £11.9 million and interest is payable at 6 month LIBOR less 0.5%. Series Bloan notes have a nominal value of £2.5 million and interest is payable at5.86%. Notes to the accounts for the twenty-four weeks ended 14 October 2007 8 Movement in equity Share Share Capital Hedging Own Retained Total capital premium redemption reserve shares earnings £m £m £m £m £m £m £m At 30 April 2006 19.1 240.6 1.0 (11.9) (11.1) 523.8 761.5 Profit for the period - - - - - 41.8 41.8Issue of share capital - 0.1 - - - - 0.1Release of shares - share optionproceeds - - - - 2.0 - 2.0Repurchase of own shares - - - - (4.4) - (4.4)Share based payments - - - - - 1.0 1.0Tax on share based payments - - - - - 1.5 1.5Equity dividends paid - - - - - (21.7) (21.7) At 15 October 2006 19.1 240.7 1.0 (11.9) (13.5) 546.4 781.8 Profit for the period - - - - - 66.8 66.8Issue of share capital 0.1 3.0 - - - - 3.1Release of shares - share optionproceeds - - - - 0.2 - 0.2Repurchase of own shares (0.4) - 0.4 - (5.6) (34.2) (39.8)Actuarial gain - - - - - 10.2 10.2Tax on actuarial gain - - - - - (3.1) (3.1)Share based payments - - - - - 3.8 3.8Tax on share based payments - - - - - 4.8 4.8Cash flow hedges- gains taken to equity - - - 18.1 - - 18.1- losses recycled to income on swap terminations - - - 5.0 - - 5.0Tax on cash flow hedges - - - (6.9) - - (6.9)Equity dividends paid - - - - - (9.8) (9.8) At 29 April 2007 18.8 243.7 1.4 4.3 (18.9) 584.9 834.2 Total profit for the period - - - - - 72.3 72.3 Issue of share capital - 2.5 - - - - 2.5Release of shares - share optionproceeds - - - - 1.1 - 1.1Repurchase of own shares (1.6) - 1.6 - - (126.4) (126.4)Actuarial loss - - - - - (0.4) (0.4)Tax on actuarial loss - - - - - 0.1 0.1Cash flow hedges- gains taken to equity - - - 7.3 - - 7.3- gains recycled to income on swap terminations - - - (2.9) - - (2.9)Tax on cash flow hedges - - - (1.3) - - (1.3)Equity dividends paid - - - - - (23.7) (23.7) At 14 October 2007 17.2 246.2 3.0 7.4 (17.8) 506.8 762.8 During the period 12.4 million (2006 - 0.5 million) shares were repurchased for£126.4 million (2006 - £4.4 million) cash and subsequently cancelled. Notes to the accounts for the twenty-four weeks ended 14 October 2007 9 Working capital and non-cash movements 24 weeks to 24 weeks to 14.10.07 15.10.06 £m £m Increase in provision against financial assets 0.1 -Decrease in inventories 0.1 1.4Increase in trade and other receivables (3.9) (1.4)(Decrease)/increase in trade and other payables (7.6) 13.8Increase in share based payments 1.5 1.0Difference between defined benefit pension contributions paid andamounts charged (0.2) (0.6)Integration costs (0.4) (3.6)Working capital and non-cash movements (10.4) 10.6 10 Analysis and movements in net debt 24 weeks to 24 weeks to 14.10.07 15.10.06 £m £m Cash at bank and in hand* 21.4 14.8Short term deposits* 77.1 48.8Overdrafts (6.7) (3.1)Cash and cash equivalents 91.8 60.5Current portion of borrowings (73.7) (126.8)Non current portion of borrowings (1,607.7) (1,423.7)Closing net debt (1,589.6) (1,490.0) *included in cash on the balance sheet Movements in net debt As at As at 14.10.07 15.10.06 £m £m Net increase in cash and cash equivalents 9.1 45.3Proceeds - issue of securitised debt - (550.0)Proceeds - advances of loans (225.0) (180.0)Repayment of principal - securitised debt 8.1 6.5Repayment of principal - loans and loan notes 68.4 528.2Financing issue costs 0.1 4.3Increase in net debt arising from cash flows (139.3) (145.7)Debt issued for acquisitions (14.4) (102.9)Other non cash movements (0.4) 5.3Increase in net debt (154.1) (243.3) Opening net debt (1,435.5) (1,246.7)Closing net debt (1,589.6) (1,490.0) Notes to the accounts for the twenty-four weeks ended 14 October 2007 11 Post balance sheet events An interim dividend of 7.3p per share (2006 - 6.45p) amounting to a dividend of£10.0m (2006 - £9.8m) was declared by the Directors at their meeting on 3December 2007. These financial statements do not reflect this dividend payable. On the 13 November 2007, the group acquired 100% of the share capital of NewCentury Inns Limited, comprising 49 tenanted and leased pubs, for a totalconsideration, including debt acquired, of £32.6m. Due to the proximity to the announcement date, a fair value exercise has notbeen completed. 12 Interim report The interim report will be posted to shareholders on 21 December 2007. Copieswill be available after that date from the Company Secretary, Greene King plc,Westgate Brewery, Bury St Edmunds, Suffolk IP33 1QT. Responsibility statement The directors confirm that to the best of their knowledge: a) the condensed set of financial statements has been prepared inaccordance with IAS34; b) the interim management report includes a fair review of the informationrequired by the Financial Statements Disclosure and Transparency Rules (DTR)4.2.7R - "indication of important events during the first six months and theirimpact on the financial statements and description of principal risks anduncertainties for the remaining six months of the year"; and c) the interim management report includes a fair review of the informationrequired by DTR 4.2.8R - "disclosure of related party transactions and changestherein". On behalf of the board Tim Bridge Rooney AnandChairman Chief Executive - ends - -------------------------- (1) Latest AC Nielsen On-Trade Survey, MAT to Sept 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Greene King