Preliminary results

GREENE KING plc

Preliminary results for the 52 weeks to 28 April 2013

RECORD RESULTS, STRONG RETURNS AND STRATEGIC PROGRESS

PERFORMANCE HIGHLIGHTS

·; Retail like-for-like sales up 2.3%; total Retail sales up 7.4%.

·; Retail operating profit up 12.1%; margin increased 80 basis points to 19.4%.

·; Average EBITDA per pub up 4.2% in Pub Partners; core like-for-like EBITDA up 0.1%.

·; Brewing & Brands core own-brewed volume up 1.0%; revenue up 2.1%.

·; Strong cash flow; earnings & dividend growth.

·; Further improvement in ROCE, up 40 basis points to 8.9%.

·; Current trading strong; Retail like-for-like sales up 3.3%.

STRATEGIC PROGRESS

·; Estate plan on track; 38 high quality retail sites added, 108 non-core disposals.

·; Balance sheet strengthened; net debt to EBITDA 4.7x, fixed charge cover 2.7x.

·; Lower pension funding post triennial review; refinanced & bought back bonds before step-up.

* before exceptional items 

Rooney Anand, Greene King chief executive officer, comments:

"This has been another successful year with record results and further, significant progress, led by our retail business, which has delivered 12% profit growth. Our strategy is on track and we have continued to provide exceptional value, service and quality to our customers. We achieved growth in both earnings and dividends, and further improvement in ROCE for our shareholders.

We have made a strong start to the year, but the overall outlook remains subdued and we are not assuming a pick-up in the economy. However, our strategy is designed, and proven to be appropriate, for these conditions as we shift our business towards higher growth areas of our markets and constantly improve our customer offer. We are confident of maintaining this momentum and delivering further value to our shareholders."

A copy of the results presentation will be available on our website: www.greeneking.co.uk. We can also be followed on twitter via @greeneking.

For further information:

NOTES FOR EDITORS

·; Greene King was founded in 1799 and is headquartered in Bury St. Edmunds, Suffolk. It currently employs over 22,000 people across its main trading businesses; Retail, Pub Partners and Brewing & Brands.

·; It operates 2,256 pubs, restaurants and hotels across England, Wales and Scotland, of which 987 are retail pubs, restaurants and hotels, and 1,269 are tenanted, leased and franchised pubs. Its leading retail brands are Hungry Horse, Old English Inns, Eating Inn and Loch Fyne Restaurants. 95% of the estate is either freehold or long leasehold.

·; Greene King also brews quality ale brands from its Bury St. Edmunds and Dunbar breweries, and is the UK's leading cask ale brewer and premium ale brewer. Its industry-leading portfolio includes Greene King IPA, Old Speckled Hen, Abbot Ale and Belhaven Best.

CHAIRMAN'S STATEMENT

RESULTS

We have achieved another set of record results, despite the difficult weather conditions in the second half of the year. Revenue was £1,194.7m, up 4.8%, and operating profit before exceptionals was £248.2m, up 5.1%. Profit before tax and exceptional items was £162.0m, up 6.6%, while adjusted earnings per share was 57.0p, up 7.5%.

DIVIDEND

On the back of these record results and strong growth, the board has recommended a final dividend of 19.45p per share, up 7.5% on last year. This takes the total dividend for the year to 26.6p per share, up 7.3%. The final dividend is expected to be paid on 9 September 2013 to those shareholders on the register at the close of business on 9 August 2013.

ACQUISITIONS

In the year, we have made further progress with the expansion of our Retail business. We spent £35.3m on 24 new pubs and have exchanged or completed on a further 30 sites for development.

DISPOSALS

We also remain focused on disposing of sites that we consider no longer have a long-term sustainable future within our estate. These mainly come from Pub Partners, from which we disposed of 103 sites in the year. In total, the disposed properties raised proceeds of £28.0m.

BOARD

At the end of December, we bade farewell to Norman Murray, who served on our board as a non-executive director for nine years, and acted as chairman of both the audit and the remuneration committees during that time. I would like to express my sincere thanks to him for the substantial contribution he made to the board and wish him well for the future.

In October, we welcomed Lynne Weedall to our board as a non-executive director and member of the remuneration committee. She has subsequently become chairman of that committee. She is the HR and strategy director at Carphone Warehouse and we expect her business background to be a great asset to us.

GOVERNANCE

The board continues to set itself high standards of corporate governance, supported by its nomination, remuneration and audit committees. The corporate governance section in this report shows details of our compliance with the UK Corporate Governance Code and our directors' remuneration report incorporates a number of additional disclosures consistent with the government's proposed new regulations on remuneration reporting. These regulations will apply to the company next year.

PEOPLE

Our consistent growth and success could not have been achieved without the hard work and efforts of our 22,000 employees across the business. They combine to make Greene King the company that it is and deliver the greatest source of competitive advantage for our shareholders, particularly in such a demanding trading environment.

I would like to extend my heartfelt thanks to every one of our team for their personal and collective contribution. Looking ahead, we do not expect short-term conditions to improve but I am confident that the team at Greene King will continue to drive the business forward and deliver further success.

Tim BridgeChairman

26 June 2013

CHIEF EXECUTIVE'S REVIEW

PERFORMANCE SUMMARY

It has been another strong year for Greene King, delivering record results for our shareholders. This was led by a successful trading performance from our largest and fastest growing business, Greene King Retail, achieving 12.1% operating profit growth: -

·; Group revenue was £1,194.7m, up 4.8%.

·; Operating profit before exceptional items was up 5.1% at £248.2m.

·; The operating margin was up ten basis points to 20.8%, despite the business mix change.

·; Profit before tax and exceptional items was £162.0m, up 6.6%.

·; Adjusted earnings per share grew 7.5% to 57.0p.

·; The board has recommended a final dividend of 19.45p per share, up 7.5%.

·; ROCE improved a further 40 basis points to 8.9%.

Even though we experienced a long, cold and wet winter, the robustness of our business and our proven strategy ensured we delivered further strong growth in revenue, up 4.8%, with Retail leading the way with growth of 7.4%.

We continue to focus on providing our customers with the best value, service and quality across our three main markets of eating out, drinking out and staying out. This helped us deliver like-for-like (LFL) sales growth of 2.3% in Retail, split 4.3% growth in the first half and 0.6% growth in the second half (reflecting the more difficult trading conditions experienced after the New Year). This underlying growth was supported by another positive contribution from new sites. Retail now generates over 72% of group revenue.

Further productivity improvements in labour, tight cost control and acquisition synergy benefits drove strong margin growth in Retail, which more than offset the negative impact of our changing business mix on the group operating margin. Operating profit before exceptional items grew 5.1%.

Our strong performance delivered adjusted earnings per share growth of 7.5% and dividend growth of 7.3% for our shareholders in the third year of our retail expansion plan. The impact of estate changes, growing the size and quality of our retail estate and reducing the size, while improving the quality, of our tenanted and leased estate, has driven further improvements in our ROCE. In the year, ROCE rose 40 basis points (bps) to 8.9%, ahead of our cost of capital.

We made substantial financial progress in the year helping to further strengthen our balance sheet and financial resilience. After the year-end, we refinanced our revolving credit facility, using an additional £60m to buy back our AB1 bonds ahead of their step-up, and we completed the latest triennial pension review, leading to a lower annual cash funding requirement.

This was the first year of our three year partnership with Macmillan Cancer Support to raise £1m. It has been successful so far, raising £300,000 in the first year, including raising £100,000 for the 'World's Biggest Coffee Morning'.

OVERVIEW

Our strong performance and record results were delivered in another year of tough economic conditions, a generally difficult regulatory environment, highly competitive markets and constantly shifting consumer trends. We also had to deal with a year of unprecedented weather, particularly in some of our most important trading months. Both June and July were abnormally wet, while October and March were abnormally cold. While we hope for better weather in the new financial year, we do not expect to see material change in the economic or political environment.

Economic conditions through the year remained subdued. After five years, we have still not returned to the real GDP levels of 2007, before the economic slump began. Numerous key measures, such as house prices, consumer confidence and household earnings are sluggish, although there is a degree of resilience to the employment market.

From a regulatory perspective, there are three key issues facing the industry: -

1. Beer Duty. The scrapping of the beer duty escalator was a welcome move and we are hopeful of additional duty reform going forward.

2. Statutory Code. We believe the proposal for a statutory code to govern the relationship between pub companies and licensees is unnecessary. We have fully participated in the consultation process and have argued for more time to be given to the current, legally-binding, self-regulatory code to prove its worth, particularly for brewery-tied tenanted operators like Greene King.

3. Minimum Unit Pricing. We remain supporters of a minimum unit price (MUP) for alcohol. We believe it would help to reduce the costs to society of irresponsible retailing and consumption of alcohol, although we do not expect legislation on MUP in this parliament.

We primarily operate in three UK markets: informal eating out, worth £54bn*, drinking out, worth £22bn** and staying out, worth £27bn***. These are large, profitable and fragmented markets with long-term growth potential and opportunities for us to grow market share. Our focus on delivering industry leading value, service and quality, providing 'affordable treats' to customers, combined with accelerating offer innovation, gives us a significant competitive advantage. It ensures we optimise the opportunities within each market, particularly in accessible growth segments and occasions such as breakfasts and takeaways in eating out, the trend towards premiumisation in drinking out and pub accommodation within staying out.

We can also deliver competitive advantage through improved understanding of consumers and their evolving preferences. We anticipate trends such as health, convenience and customisation to grow in importance over the next few years and we are positioning our offers accordingly. Improving customer information and insight is therefore crucial to delivering sustainable sector-leading growth and margins. As a result, we made further investment in our digital platform and customer insight, covering areas such as targeted voucher offers, maintaining a regular dialogue with customers through social media and facilitating online table reservations.

* Allegra Eating Out Report 2013

** CGA Brand Index

*** Eurostat, PWC, Allegra, Company

STRATEGIC PROGRESS

We are three years into our five-year strategy to improve growth and returns to shareholders through increasing our exposure to more attractive categories in our markets. We made further progress in all areas as we continue to invest in a successful future for Greene King: -

1. Expanding Retail to 1,100 sites and improving estate quality. We acquired or transferred in 38 sites to take the estate to 987 pubs, restaurants and hotels. Of the 38 sites, 15 were new Hungry Horse openings and 11 were Meet & Eat transfers. We opened our 200th Hungry Horse just after the year-end. Since we began our strategy, the acquired sites have delivered an average site EBITDA ROI of 15.0%.

2. Reducing the Pub Partners estate, improving estate quality and increasing our offer influence. In Pub Partners, we disposed of 103 non-core sites and transferred 14 sites to Retail. Average EBITDA per pub grew 4.2% and there were 38 franchise and franchise-style sites at the year-end. There are 331 sites, or 26% of the Pub Partners estate, under central offer influence.

3. Maintain industry-leading brand investment to strengthen leadership position. We again invested in our core ale brands to drive core own-brand volume (OBV) growth and UK ale market outperformance in Brewing & Brands. We relaunched TV advertising for Greene King IPA, Old Speckled Hen and Belhaven Best and our investment took a 45%* share of all ale media spend in the year.

* Nielsen MAT to 31/3/13

GREENE KING RETAIL

Greene King Retail delivered another successful year, combining strong growth with further strategic progress. LFL sales growth was 2.3%, outperforming the sector average growth of 0.5%*, as the industry was hit by challenging weather in the second half of our financial year. Over the last five years, Retail has delivered average annual LFL sales growth of 3.3%. Of the 2.3% LFL sales growth in the year, 0.4% was driven by volume improvements and 1.9% by price, mix and spend per head improvements. All major sales categories achieved growth with food LFL sales up 2.9%, drink LFL sales up 1.8% and room LFL sales up 3.1%. London performed well with Realpubs achieving 9.1% LFL sales growth.

Total revenue was £863.6m, up 7.4% on 3.5% more sites. As a result, the average weekly take grew 3.8% to £17.1k. Retail also achieved strong profit growth, with operating profit of £167.7m, up 12.1%. The operating margin was 19.4%, an improvement of 80bps, driven by strong operational gearing, improved labour productivity, the delivery of acquisition synergies, and despite the weaker second half sales environment.

* Coffer Peach Tracker

There are a number of key factors driving the continued success in Retail: -

1. EXCEEDING CUSTOMER VALUE, SERVICE & QUALITY EXPECTATIONS

·; Value. The flight to value by UK consumers, as they seek out 'everyday treats', continued in the year. We maintained a healthy balance between offering further value to our customers and continuing to improve our retail margins. In Hungry Horse, we increased the share of all covers sold through offers, while we simplified and improved our centrepiece two for £8.49 offer to all day, every day. In Loch Fyne Restaurants (LFR), we introduced 'Loch Fyne Favourites' via a meal and drink offer at £9.95, while in Old English Inns (OEI), we launched a lunch deal highlighting a sandwich, crisps and a drink for £4.95. In our Scottish sites, we lowered the average coffee price and increased the average serve size, while in Local Pubs we introduced additional known value item pricing on lager and for early week occasions.

·; Service. We continued to roll out our tailored service enhancement programmes across the retail estate. Our 'Hungry for Feedback' guest satisfaction programme in Hungry Horse had over 70,000 customer responses in the year delivering a net promoter score (NPS) of 59.6% and 40,000 positive individual employee comments. Our LFR 'Keeping it Reel' programme delivered a record NPS, halved customer complaints and doubled customer compliments, while guest satisfaction programmes were launched in Farmhouse Inns and Eating Inn.  

·; Quality. In Local Pubs, we launched our Flame Grill family dining concept in the mainstream community segment, where we improved the quality of our unique grill offer through increased kitchen investment and more fresh meat items. In Eating Inn and Belhaven, we increased the number of fresh, homemade dishes, while we introduced improved menu specifications and additional carvery training into Farmhouse Inns. Across the whole of the Destination Pubs estate, our guest satisfaction score for food quality improved 16%pts through the year.

No issues were found in our supply chain during the horsemeat scandal that affected the food industry in February and March. We have a robust supply chain with thorough quality control procedures, although we took this opportunity to further strengthen procedures to ensure we provide the highest quality ingredients and we remain clear of any future industry mislabelling issues.

2. BROADENING CUSTOMER APPEAL THROUGH GROWTH CATEGORIES SUCH AS FOOD, WINE & COFFEE

We continue to pursue our strategy of increasing our share of the £54bn eating out market and increasing our share of sales driven by food and food occasions. On an organic basis, we primarily achieve this by broadening the appeal of our food offers to drive cover growth, alongside selected price and mix improvements to help offset annual cost inflation.

Against a market with value growth of 1.6%*, Retail food sales were up 9.7% to £336.9m. This took food's share of our total sales to 40%, up 80bps on the previous year. Food LFL sales were up 2.9% with cover growth of 0.4%.

Much of our food growth comes from innovating to meet eating out consumer trends. We have identified three key trends: -

·; 'Customisation'. We developed 'fish your way' in LFR, 'burger your way' in Eating Inn, and 'build your own burger' in Flame Grill and Meet & Eat. In Eating Inn, there are 560 different combinations of burger for a customer to choose from.

·; 'Convenience'. Our Cakeaway offer in Hungry Horse generated sales of £750k in the first full year and in our Local high street sites, we improved the breakfast offer, launched a lunchtime deli deal, and introduced a wider range of sharing platters for 'after work' customers.

·; 'Health'. We introduced a 'live well' section on our Eating Inn menu for dishes under 700 calories and we stepped up the number of gluten free dishes in our menus.

Wine and coffee are also important long-term growth categories for Retail.

Wine sales grew 15.8% and are now up 62% in the last five years. On a per site basis, wine sales grew 11.8%. Our wines won 25 International Wine Challenge awards this year, including 19 sourced directly by our expert wine team. In Metropolitan, our premium Local Pubs estate, we introduced a dedicated wine specialist and developed our own premium, directly sourced, own-label brand, Piazzi.

Hot beverage sales, of which coffee is 75%, grew 6.2% and we expect further growth as we grow our breakfast trade. We launched our own coffee brand, Big Bean, which has been successfully rolled out across the Hungry Horse estate. Across the rest of the estate, 86% of our sites use illy as their coffee offer.

* Allegra Eating Out Report 2013

3. FURTHER ALIGNING OUR ESTATE TO OUR CUSTOMERS THROUGH TARGETED ACQUISITIONS

We have targeted 1,100 sites by 2015 and we remain on track to achieve this. In the year, we increased our trading estate by a net 33 sites, having acquired or transferred in 38 sites and disposed of five non-core sites. This took the estate to 987 pubs, restaurants and hotels. Of those new sites, 12 were single-site acquisitions, 12 were new build openings, including our first Hungry Horse leasehold site, and 14 were transfers from Pub Partners, including 11 Meet & Eat sites. These transfers are supporting the expansion of the Meet & Eat brand within Retail. In addition, our pipeline for further expansion is healthy and we exchanged or completed on a further 30 sites.

4. EMPLOYING THE BEST TRAINED & MOTIVATED PEOPLE IN THE SECTOR

We have over 22,000 employees across the business. 94% work within Retail, taking part in 440m customer interactions each year. We therefore constantly look to improve the calibre of our teams to deliver the best value, service and quality in the sector. There are a number of ways this is achieved, including improving the working environment and building employee loyalty to Greene King as an employer brand through initiatives such as enhanced employee benefits, more effective communication and improved recruitment and training processes.

At the heart of our approach is our Discovery Apprentice scheme, which we began in January 2011. The introduction of apprenticeships has improved the culture within Retail, as team members can more easily see a career path in hospitality ahead of them. We continue to grow the scheme and deliver excellent results: at the year-end, we had almost 2,500 apprentices in Retail, of which 1,300 were 'in learning' and 1,200 were fully trained. This equates to 12.3% of our Retail team, compared to 8.2% 12 months ago. Most importantly, 71% of our apprentices have successfully completed the programme, ahead of the national average of 62%.

This focus on, and success of, our apprenticeship scheme has positively influenced team turnover, down 8%pts, employee engagement, up 4%pts, and labour productivity, which was 2.3% better than last year.

Finally, we believe that our positive reputation as an employer is attracting more and more people to work for Greene King. For example, we average 12 applications for every job vacancy in our new build sites, equivalent to almost 800 applications per site.

5. CONTINUED INVESTMENT IN OUR BRANDED & SEGMENTED ESTATE

In our retail estate, we operate branded sites or sites segmented by customer occasion and demographics. We re-segmented our Local Pubs estate into five segments: Metropolitan, Mainstream High Street, Flame Grill, Meet & Eat and Value Sport. The new segmentation further simplifies the operating structure in Local Pubs and brings our Flame Grill and Meet & Eat concepts to the fore. Excluding these concepts, our fully branded pubs, restaurants and hotels represent 40% of our retail estate, with our leading brand, Hungry Horse, at 199 trading sites at the year-end. Just after the year-end, we opened our 200th Hungry Horse, the Royal Horse in Leamington Spa, and we anticipate opening a further 25 in the new financial year. Also at the year-end, there were 108 Old English Inns, 42 Loch Fyne Restaurants, 28 Eating Inns and 16 Farmhouse Inns, the former Cloverleaf estate.

We converted seven sites to the Realpubs or Capital Pub Company formats. On average, all the converted sites are delivering an EBITDA ROI of 33%, although we expect investment returns to moderate going forward.

In total, we spent £70.1m on repairing, maintaining and improving the quality of our existing retail estate, of which £31.7m was expansionary capital. This was invested in 140 sites, or 14.2% of the estate, and achieved an EBITDA ROI of 26%.

6. INCREASING INVESTMENT IN OUR EXPANDING DIGITAL PLATFORM

Investment in our digital platform has continued as we improve our customer understanding, directly target our tailored offers to the right demographics and occasions, and use direct feedback to improve the retail offer. Traffic on our websites grew 50% to 7.2m over the year with mobile traffic trebling to 31% of the total, up from 17% last year. We averaged 138,000 'hits' per week in total. Online table reservations grew 26% and generated £3.2m in sales. At the year-end, we had 224,000 Facebook followers, up from 23,000 last year. Our combined databases grew by 76%, we sent out over 20m marketing emails, our loyalty card holders increased ten-fold and our guest satisfaction feedback forms totalled 167,000.

PUB PARTNERS

The tenanted and leased model has become challenged over the last five years and our response has been to reduce the size of our estate and to enhance our influence over the customer offer to improve licensee and pub sustainability. Pub Partners plays an important role in Greene King, through generating significant cash for the group, adding material purchasing scale and providing attractive yields on smaller pub sites.

On 8.8% fewer pubs, Pub Partners achieved revenue of £153.7m, down 5.5%. Revenue per pub was up 3.6%, with beer volume per pub in line and rent per pub ahead. EBITDA was £76.3m, down 4.9%, although average EBITDA per pub was up 4.2%. LFL EBITDA in the core estate was up 0.1% and total LFL EBITDA was level with the previous year, highlighting the profit and cash stability of Pub Partners. Operating profit was £68.1m, down 5.7%, with the operating margin holding up at 44.3%, down just 10bps.

Pub Partners is focused on operating the right pubs, with the right people, on the right agreement with the right offer: -

·; Right pubs. We progressed our plan to reduce the size of the estate. We sold 103 non-core sites and transferred 14 to Retail. This left 1,269 trading sites and 44 sites closed for disposal at the year-end. We expect to dispose of around 125 sites during the new financial year.

·; Right people. The recruitment of high quality licensees to run our pubs remains the most important element of the Pub Partners model. We made a number of improvements to our recruitment process, including the regionalisation of our recruitment teams and the introduction of licensee profiling. As a result, the number of new licensees in their pub, after one year, reached 83%. We also stepped up our licensee training, including a new service programme. Licensees that attended the course saw an average 12.5%pts increase in their mystery guest service scores. Having the best Business Development Managers (BDMs) is an important differentiator. During the year, 12 BDMs completed their diplomas in Multi-Unit Leadership at Birmingham City University and three have gone onto the Masters programme. We also began supporting our licensees to recruit apprentices into their businesses, saving them £1,500 per employee in labour costs. At the year-end, there were 82 apprentices in the Pub Partners estate.

·; Right agreements. Our new suite of agreements, including Touchstone and Touchstone Plus tenancies, started to gain traction, with 108 new agreements in place at the year-end. We also had 38 franchise or franchise-style agreements, with our innovative concept, Local Hero, growing strongly. There were 17 Local Hero sites at the year-end delivering an average £3k sales uplift and an EBITDA ROI of 31%. We anticipate the Local Hero estate rising to around 30 sites over the new financial year.

·; Right offer. We do all we can to help our licensees deliver the right customer offer to maximise profits and align their interests with ours. At the year-end, we had 830 sites, or 65% of the trading estate, on some form of free-of-tie (FOT) agreement, including 21 sites completely FOT. We had 331 sites, or 26% of the estate, under an element of central offer influence and we provided 800 sites with free advertising boards to improve their external offer communication. We launched a digital support tool called Footfall 123, which led to 85 sites initiating a loyalty card scheme, and our Sports Club and Head Brewers Cask Club each had over 300 members by the year-end.

As a result of these initiatives, two additional key metrics improved during the year. Average licensee tenure increased by one month to four years and eight months, while our licensee NPS increased 11%pts to 34.3%, better than a number of Pub Partners' retail competitors.

BREWING & BRANDS

Brewing & Brands is a strong business with market-leading ales, supported by industry-leading brand investment and a highly efficient brewing model, combining to deliver the highest ROCE within Greene King. While there are significant opportunities for long-term growth in parts of our business, there are structural headwinds negatively impacting elsewhere. These include supplier cost increases adversely affecting our free trade wholesaling business, particularly in Scotland, declining volume in the tenanted industry and a reduction of in the number of Pub Partners' sites.

The year was split into two. The first half saw core own-brewed volumes (OBV) down 0.9% and operating profit down 13.5%, while the second half recovery, led by our continued sector-leading brand investment and innovation, delivered 2.7% core OBV growth and operating profit down 4.8%.

Core OBV in Brewing & Brands was up 1.0%, outperforming a UK ale market down 3.9%*. Within this strong performance, Old Speckled Hen, the UK's no.1 premium ale brand, achieved volume growth of 6.9%, against a premium ale market up just 0.2%*. In addition, Greene King IPA achieved volume growth of 3.3%, against a standard ale market down 5.6%*. Our volume share of the UK ale market rose to 10.5%**.

Brewing & Brands further repositioned towards the long term growth channels of take home and export. After a year of strong growth, the share of OBV through these channels was up 3.5%pts to 38.3%, driven by the success of our golden ales in take home, including Greene King IPA Gold and Old Golden Hen, and the introduction of our new smoothflow can for Greene King IPA.

Revenue was £177.4m, up 2.1%, helped by strong growth in bottled ale, as, since the year-end, we became the UK's leading bottled ale brewer with a 16.7%*** value share. EBITDA fell 7.8% to £35.4m and operating profit fell 9.1% to £30.0m.

Our outperformance is driven by industry-leading investment and innovation in our core ale brand portfolio. During the year, Old Speckled Hen, Greene King IPA and Belhaven Best returned to television advertising as part of a combined £4.5m campaign, as we invested 45% of the total ale market media investment in the year. Our innovative brand extensions, such as Old Golden Hen and Belhaven Black, grew to around 7% 0f total OBV.

Our focus on delivering an attractive value proposition to our customers has again led to new account wins in free trade, including Saracens, Worcestershire Cricket Club, Sheffield United and Imperial College, and across leading national pub retailers.

We maintained our consistently high service and quality levels. Our internal service measure, covering the whole of our supply chain, rose to 97.6%, comfortably ahead of target. On quality, Greene King IPA Reserve and Greene King IPA Gold won Grand Gold and Gold awards respectively at the 2013 Monde Awards. We put 1,300 delegates through the BII cellar management course, we retained our Red Tractor status and achieved ISO9001 for the 20th year in succession. Finally, our visitor centre achieved a 2013 Certificate of Excellence from Trip Advisor, putting it in the top 10% of global visitor attractions for quality.

* BBPA

** Nielsen Scantrack MAT to 27/04/14 & CGA Brand Index MAT to 23/03/13

*** Nielsen Scantrack data 12 week value share Mult Grocers

**** TGI December 2012

FINANCIAL REVIEW

Once again, the benefits of a consistent and clear strategy to deliver earnings and dividend growth continue to be seen in the performance of the group. The highlights are: -

·; Revenue up 4.8% to £1,194.7m.

·; Profit before tax and exceptionals up 6.6%.

·; Dividend per share up 7.3%.

·; Reduction in net debt to EBITDA to 4.7x.

·; ROCE up 40bps to 8.9%.

·; New financing in place.

RESULTS

Revenue grew by 4.8% to £1,194.7m. The biggest driver of this growth came from our retail estate, where revenue grew by 7.4% and average revenue per pub rose 3.8%. Our retail estate now accounts for over 72% of group revenue and will continue to grow its share as we progress towards our target of 1,100 retail sites. Total revenue in Pub Partners was down 5.5%, while average revenue per pub increased by 3.6%. Brewing & Brands grew revenue by 2.1%.

Operating profit before exceptionals was £248.2m, up 5.1%, with the group operating margin up 10bps to 20.8%, despite the changing business mix of the group. Control over costs and cash remains strong with the retail operating margin growing 80bps to 19.4%, despite significant cost inflation.

Net interest costs before exceptional items of £86.2m were only 2.4% higher than last year, as a result of strong cash flow management and despite a reduction in the IFRS pension interest credit of £1.2m.

Profit before tax and exceptionals was £162.0m, an increase of 6.6%. Adjusted earnings per share of 57.0p was up 7.5%, benefitting from the reduction in the effective tax rate. Statutory profit before tax was £114.8m, down 8.2%.

TAX

The effective rate of corporation tax (before exceptional items) was 24% compared to 25% in the previous year, resulting in a charge to operating profits (before exceptional items) of £38.9m. This is in line with the standard UK corporation tax rate and is expected to remain in line.

However, our full year contribution to HM Treasury was much higher with a total of £375m in total taxes paid or generated (including beer duty, VAT, PAYE etc.). This is equivalent to 31% of our turnover and is seven times the dividends we paid out to our shareholders.

The group's tax policy, which has been approved by the board, is aligned with the business strategy. It seeks to protect shareholder value by structuring operations in a tax efficient manner, while complying with all relevant tax laws and legislation, and fulfilling our obligations as a responsible UK tax payer.

EXCEPTIONAL ITEMS

As set out in note three, we recorded a net exceptional charge of £24.8m, consisting of a £19.0m charge to operating profit before tax, a £28.2m charge to finance costs and an exceptional tax credit of £22.4m.

The key items in operating profit were a £8.4m credit as a consequence of closure of the defined benefit pension schemes to future accrual, offset by an impairment charge of £17.7m against the carrying value of a small number of our pubs, where specific market conditions have impacted trading, and £6.7m relating to disposals, which includes £4.5m of related goodwill.

An exceptional finance cost of £28.2m has been recognised in respect of the fair value of the interest rate swap no longer qualifying for hedge accounting, in anticipation of the post year-end repurchase of the AB1 floating rate bond.

In addition to a tax credit of £9.0m in respect of the above items, the exceptional tax credit of £22.4m includes a deferred tax credit of £6.1m, arising from the reduction in the rate of corporation tax from 24% to 23%, effective from 1 April 2013, and a deferred tax credit of £7.5m, in respect of the licensed estate.

CASH FLOW

Operating cash flows were strong. We generated record free cash flow (FCF) of £63.1m, up from £38.5m in the previous year, and comfortably ahead of our scheduled debt repayments of £27.8m.

EBITDA, before exceptional items, was £306.5m, up 5.0%, from 4% fewer pubs.

We disposed of 108 sites as part of our strategy to improve the quality of our estate with the cash proceeds totalling £28.0m.

As outlined below, we made good progress towards our target of growing our retail estate to 1,100 sites with a cash outflow on acquisitions and acquired sites totalling £46.3m, bringing the net cash inflow to £42.8m.

CAPITAL EXPENDITURE

We again kept constant our level of investment in maintaining and developing our core estate, as well as investing to grow the size of our retail estate. The result is a well invested estate with total expenditure of £39.7m in the year.

Capital expenditure on the core estate, including maintenance capital, was £79.4m, compared to £81.3m in the previous year. A further £22.6m was invested in acquiring single sites, with £23.7m invested on these and previously acquired sites.

Looking forward, we have a strong pipeline of new retail sites and we are on track to open 30 new builds and single site acquisitions each year, as well as identifying further transfer opportunities from the tenanted estate.

NET DEBT AND FINANCING

Net debt at the year-end was £1,450.4m, a reduction of £42.8m from the previous year-end, with the key movements being positive FCF of £63.1m, disposal proceeds of £28.0m and the continued investment in growing our retail estate, through new sites, of £46.3m.

Our financing strategy is designed to ensure we can access sufficiently diversified funding sources, maintain sufficient stand-by liquidity and mitigate re-financing risk, while maintaining an effective total cost of borrowing.

The principal element of our funding structure is a portfolio of securitised bonds, totalling £1,292.7m, with final maturity dates ranging from 2021 to 2036. The weighted average maturity of these bonds is 14 years. During the year, the group made scheduled debt repayments of £27.8m.

The group also maintains a revolving credit facility, which was £180m drawn at the year-end.

Since the financial year-end, the group has renegotiated its revolving credit facility, increasing its size from £400m to £460m and extending its maturity from April 2016 to June 2018. At the same time, a group entity has purchased the £60m AB1 bond issued by the securitisation vehicle. The impact of this transaction will help to mitigate the scheduled increase in interest costs on the securitised debt due to start in June 2013, as well as providing further liquidity.

Our blended cost of debt was 5.9% with interest rate hedges in place for 99% of the year-end debt at a fixed rate. Going forward from June 2013, we expect a blended cost of debt of 6.1% after all of the securitised bond steps-ups and the impact of the re-financing outlined above.

Our overall credit metrics remain strong. Fixed charge cover has improved to 2.7x from 2.6x and interest cover has also improved to 2.9x from 2.7x. Annualised net debt to EBITDA has reduced to 4.7x and will continue to improve as we maximise the annual EBITDA returns from the underlying business and our investments in new sites. Our securitised vehicle had a FCF debt service cover ratio of 1.5x at the year-end, giving 29% headroom.

RETURN ON CAPITAL EMPLOYED

At the year-end, our ROCE, on an annualised basis, was 8.9%, up from 8.5%. This growth is due to strong capital disciplines and improvements in the underlying profitability of the business, coupled with our stated strategy of investing trading cash flows and disposal proceeds into expanding our retail estate, where we are able to achieve returns significantly ahead of our cost of capital.

As we continue to invest and increase the number of new retail sites, particularly new builds opened each year, the full impact on ROCE will not be seen immediately as we invest capital ahead of the income stream. That said, the returns we are achieving on sites opened since 2009 remain very strong with a combined EBITDA ROI of 15.0%.

DIVIDEND

The board has recommended a final dividend of 19.45 pence per share, up 7.5%. This will be paid on 9 September 2013 to shareholders on the register at the close of business on 9 August 2013.

The proposed final dividend brings the total dividend for the year to 26.6 pence per share, up 7.3%.

This is in line with the board's policy of maintaining a minimum dividend cover of two times underlying earnings, while continuing to invest for future growth, and maintains our long-term track record of annual dividend growth.

PENSIONS

The group maintains a defined contribution scheme, which is open to all new employees.

The group's three defined benefit schemes are all closed to new entrants. During the year, the group completed a consultation with the remaining active members of the defined benefit schemes, resulting in the schemes being closed to future accrual and members being invited to join the defined contribution scheme instead. A net gain of £8.4m has been recognised within exceptional items, comprising a £10.1m gain, in respect of past service accrual, no longer being linked to future salary growth, less £1.7m of implementation costs.

At the year-end, there was an IAS 19 pension deficit of £63.8m, which compares to £67.3m at the previous year-end. The movement is primarily driven by the exceptional gain following the closure of the scheme to future accrual.

Total cash contributions in the period were £10.1m for both past and current service.

The triennial valuation for our main pension scheme was completed in the year and the future annual deficit funding payments will reduce to £6.9m from a previous payment level of £10.5m.

SUMMARY

The group has continued to make good progress across all of the key financial metrics during the year, with both earnings and dividend growth, underpinned by strong margins and credit metrics, reduced leverage and an improving ROCE.

CURRENT TRADING AND OUTLOOK

In the first eight weeks of the new financial year, we have delivered another strong trading performance, against tough comparatives with last year, which benefitted from the Jubilee and Euro 2012. LFL sales in Retail were up 3.3%, helped by improved weather on both Bank Holiday weekends. Both food LFL sales and room LFL sales have been particularly strong. Average EBITDA in Pub Partners was up 5.1% and core OBV in Brewing & Brands was up 1.5%, taking further market share and continuing the momentum from the second half of the previous financial year.

Although we have made a strong start, the overall outlook remains subdued and we are not assuming a pick-up in the economy this year. However, our strategy is designed, and proven to be appropriate, for these conditions as we shift our business towards higher growth areas of our markets and constantly improve our customer offer. We are confident of maintaining this momentum and delivering further value to our shareholders.

Rooney Anand

Chief executive officer

26 June 2013

Group income statement

for the fifty-two weeks ended 28 April 2013

* Adjusted earnings per share excludes the effect of exceptional items.

Group statement of comprehensive income

for the fifty-two weeks ended 28 April 2013

Group balance sheet

as at 28 April 2013

Group cashflow statement

for the fifty-two weeks ended 28 April 2013

*EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptional items

GROUP Statement of change in equity

for the fifty-two weeks ended 28 April 2013

Notes to the accounts

for the fifty-two weeks ended 28 April 2013

1 Basis of preparation

The financial information for the fifty-two weeks ended 28 April 2013 has been audited and has been prepared in accordance with International Financial Reporting Standards (IFRS) as required by European Union law.

The accounting policies are as described in the full 2012 financial statements of Greene King plc.

The following standards, interpretations and amendments are effective for this financial year but have not had a significant impact on the reported financial performance or position of the group:

IFRS 7 Financial Instruments: Disclosures (Amendment) - Disclosures of transfer of financial assets

This amendment, effective for accounting periods beginning on or after 1 July 2011, requires additional quantitative and qualitative disclosures relating to transfers of financial assets.

IAS 12 Income Taxes - Recovery of Underlying Assets

The amendment, effective for financial years beginning on or after 1 January 2012 clarified the determination of deferred tax on investment property measured at fair value.

2 Segment information

The group has determined the following three reportable segments that are largely organised and managed separately according to the nature of products and services provided, brands, distribution channels and profile of customers:

Retail: Managed pubs and restaurants

Pub Partners: Tenanted and leased pubs

Brewing & Brands: Brewing beer, marketing and selling

Transfer prices between operating segments are set on an arm's length basis.

Notes to the accounts

for the fifty-two weeks ended 28 April 2013

2 Segment information (COntinued)

Unallocated assets/liabilities include cash, borrowings, pensions, net deferred tax, net current tax, and derivatives

*EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptionals.

Notes to the accounts

for the fifty-two weeks ended 28 April 2013

3 Exceptional items

Exceptional divisional restructuring and financial systems integration costs are items of one-off expenditure incurred in connection with the restructuring of certain trading divisions within the group and the review of group-wide financial systems.

Acquisition costs are items of one-off expenditure incurred in connection with acquisition of businesses in the year. These costs include legal and professional fees incurred by the group and stamp duty which in accordance with IFRS 3 (Revised) can no longer be included within the consideration for the acquisition and amount to £nil (2012: £3.3m). In addition, acquisition costs include a charge of £2.2m (2012: £2.5m) in respect of amounts payable, two years post acquisition and subject to the future profitability of the businesses, to the former owners of Cloverleaf Restaurants and Realpubs, respectively, who remained employees of the group.

Following the closure of the group's defined benefit pension schemes to future accrual an exceptional credit of £8.4m has been recognised. This comprises a gain of £10.1m in respect of past service accruals no longer being linked to future salary growth less £1.7m of implementation costs and fees. The credit of £4.4m in the prior year is as a result of the curtailment of discretionary benefits provided to retired members of the main defined benefit pension scheme.

The net loss on disposal of property plant and equipment of £5.4m (2012: £0.2m profit) comprises a total profit on disposal of £6.9m (2012: £7.6m) and a total loss on disposal of £12.3m (2012: £7.4m). The loss on disposal includes £4.5m in respect of goodwill allocated to parts of operating segments disposed of in the year. The other loss on disposal of £1.3m relates to the loss on disposal of an investment in the year.

Notes to the accounts

for the fifty-two weeks ended 28 April 2013

3 Exceptional items (CONTINUED)

Since the year end the group has repurchased the £60.0m AB1 floating rate bond at par, and as a result the interest rate swap that was designated as a hedge against the bond has ceased to be effective. Accordingly an exceptional finance cost of £28.2m has been recognised in respect of the fair value of the interest rate swap no longer qualifying for hedge accounting.

The Finance Act 2012 reduced the rate of corporate tax from 24% to 23% from 1 April 2013. The effect of the change in tax rate is to reduce the deferred tax provision by a net £3.3m, comprising a credit to the Group Income Statement of £6.1m and a debit to the Group Statement of Comprehensive Income of £2.8m.

The adjustment in respect of prior periods income tax arises from finalising the tax returns for earlier periods including tax relief for capital expenditure and repairs.

The adjustment in respect of prior periods deferred tax arises from finalising the tax returns and also deferred tax on revaluation and rolled over gains on the licensed estate.

4 Taxation

Notes to the accounts

for the fifty-two weeks ended 28 April 2013

5 Earnings per share

Basic earnings per share has been calculated by dividing the profit attributable to equity holders of £98.3m (2012: £102.4m) by the weighted average number of shares in issue during the period (excluding own shares held) of 216.1m (2012: 215.0m).

Diluted earnings per share has been calculated on a similar basis taking account of 1.3m (2012: 0.6m) dilutive potential shares under option, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 217.4m (2012: 215.6m). Share options granted over 0.0m shares (2012: 0.5m) have not been included in the diluted earnings per share calculation because they are anti-dilutive at the year end. The performance conditions for share options granted over 2.8m (2012: 2.9m) shares have not been met in the current financial period and therefore the dilutive effect of the number of shares which would have been issued at the period end have not been included in the diluted earnings per share calculation.

Adjusted earnings per share excludes the effect of exceptional items and is presented to show the underlying performance of the group on both a basic and dilutive basis.

6 Dividends paid and proposed

Dividends on own shares have been waived.

Notes to the accounts

for the fifty-two weeks ended 28 April 2013

7 Borrowings

8 Working capital and non-cash movements

9 Analysis OF and movements in net debt

*included in cash and cash equivalents on the balance sheet

Notes to the accounts

for the fifty-two weeks ended 28 April 2013

9 Analysis OF and movements in net debt (Continued)

10 Dividend payments

Subject to the approval of shareholders at the annual general meeting, the final dividend will be paid on 9 September 2013 to shareholders on the register at the close of business on 9 August 2013.

11 Reports and accounts

The above financial information is derived from the statutory accounts for the period ended 28 April 2013 on which the auditors have issued an unqualified opinion. The information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

The accounts for the period ended 29 April 2012 have been filed with the Registrar of Companies and the auditors of the company made a report thereon under Chapter 3 of Part 16 of the Companies Act 2006. That report was an unqualified report and did not contain a statement under Section 498 (2) or Section 498(3) of the Act.

The 2013 Report & Accounts will be posted to shareholders on 31 July 2013 and copies will be available from that date from the Company Secretary at the registered office of the company, Westgate Brewery, Bury St. Edmunds, Suffolk IP33 1QT.

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