Preliminary Results announcement

PUNCH TAVERNS PLC

("Punch" or "the Group")

Preliminary results for the 52 weeks to 22 August 2015

Underlying financial performance1 - reflects reduced non-core estate and is in line with expectations:

§ Underlying1 EBITDA of £196 million (2014: £205 million);

§ Statutory loss before tax of £105 million includes £166 million of non-underlying charges, principally due to the capital restructuring and transition to accounting for properties at market value.

Higher quality pub estate:

§ Core estate now expected to deliver c.95% of pub profits in the 2016 financial year (up from 88% in 2014);

§ Positive like-for-like trends in net income2; core estate net income up 0.3%;

§ Average profit per pub up 4%, benefiting from the disposal of non-core pubs.

Stronger balance sheet:

§ Property estate externally valued at £2,097 million; £692 million in excess of nominal net debt3;

§ Nominal net debt3 down £513 million in the year to £1,406 million;

§ Consolidated nominal net debt : LTM EBITDA at 7.2 times (2014: 9.5 times)

§ Post year end disposal of non-core assets (including the disposal of our 50% investment in Matthew Clark for gross proceeds of £100.7 million; and pub disposals of £53.5 million) further enhance our ability to pursue our strategic objectives.

Review of Strategic Priorities - The Way Forward

§ Delivering a clear, consistent consumer offer, adapting to changing consumer behaviour;

§ Comprising a broad range of flexible operating models that are in line with today's evolving pub market;

§ Underpinned by a reorganisation of management to drive operational excellence;

§ Built on an attractive offer, delivering real value to our publicans through the Punch Buying Club; and

§ Supported by releasing additional value from our under-utilised property portfolio and land bank.

Duncan Garrood, Chief Executive Officer of Punch Taverns plc, commented:

"Since joining in June, I have undertaken a detailed review of the business and today I set out a clear plan for the future. In recent years, Punch has been at the forefront of change within the leased and tenanted pub sector. The conclusions announced today represent an evolution of our existing plan. It is also designed to address the many structural and regulatory changes impacting our market.

Our strategy enables us to maximise the value in our properties through a phased, lower risk approach to addressing an evolving pub market, taking greater control of the property and retail offer, but without the added overhead that comes with directly employing pub staff.

We have already made significant steps towards evolving our operating model and financial position, and while we have a lot to do, we are well placed to deliver on our plan."

1 before non-underlying items

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

3 nominal net debt represents the par value of loans less cash balances (note 7)

 12 November 2015

Enquiries:

A presentation for equity and debt analysts on the full year results will be held today at 9.00am (UK time) at the Andaz, 40 Liverpool Street, EC2M 7QN.

A live web cast and slide presentation of this event will be available on our website, www.punchtavernsplc.com and subsequently available on demand. We recommend you register at 8.45am.

Forward-looking statements

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

CHAIRMAN'S STATEMENT

I am pleased with the progress we have made in the year in delivering on our key initiatives. Continued like-for-like growth in the core estate and the completion of the capital restructuring in October 2014 provides a better platform to undertake a thorough review of the future direction of the business.

We secured the appointment of new Chief Executive, Duncan Garrood, who joined the business in June 2015. Duncan, together with the Board, has been undertaking a review of our operations and strategic direction bringing to bear his external perspectives from other businesses. From this review, we have developed a clear direction to move forward in order to maximise long-term value for all our stakeholders.

Through our ongoing selective disposal programme, we benefit from having a higher quality pub estate in which approximately 95% of pub profits are expected to come from the core estate in the 2016 financial year (up from 88% in 2014). Following the year end, we completed the sale of a package of 158 non-core pubs for gross proceeds of £53.5 million and the disposal of our 50% joint venture investment in Matthew Clark for gross proceeds of £100.7 million.

The capital restructuring placed the Group in a stronger financial position with nominal net debt down by £513 million in the year. All of the Group's debt is in the form of long-term securitised debt, secured against a property portfolio which was independently revalued at £2,097 million; £692 million in excess of nominal net debt.

Following the restructuring, the securitisation structures contain a number of restrictive covenants in relation to the use of disposal proceeds, consequently, the Board is giving appropriate consideration to how best to improve flexibility and support the strategic development of the business going forward. The Matthew Clark proceeds provide the Group with financial flexibility, with this cash being held outside of the securitisation structures. We have not committed to any particular use of the sale proceeds at this stage, but the Board is mindful of the need to maintain sufficient flexibility in our finances, in light of the uncertainty created by the MRO, which could include retention of cash on the balance sheet or the purchase of or refinancing of bonds.

Legislative changes

The tied long-lease pub model, which today represents 56% of Punch's core estate, but fewer than 20% of the wider UK pub market, has successfully provided entrepreneurs with a low cost, lower risk entry into running pubs with the ability to build successful businesses and sell-on through the assignment market.

The Small Business, Enterprise and Employment Act 2015 (the 'Act') which includes the provision of a Statutory Code, independent adjudicator and a Market Rent Only option ("MRO") for all companies with over 500 pubs operating under tied leased and tenancy agreements in England and Wales, received Royal Assent on 26 March 2015.

There is currently a period of consultation in order for the Government to prepare Secondary Legislation setting out the detail of how the Act will be implemented, and it is anticipated that it will come in to operation from June 2016.

We urge the Government to ensure that the Secondary Legislation for the MRO, when drafted, allows an appropriate period of time for implementation and protects the ongoing investment that pubs need to compete. We believe that appropriately drafted legislation can avoid the adverse unintended consequences of the Act and allow the tied model to continue to thrive into the future, allowing future publicans the same low cost, lower risk access into a thriving pub market.

Board of directors

As referred to above, we announced in March 2015 the appointment of Duncan Garrood as Chief Executive Officer with effect from June 2015. Duncan has extensive experience in the retail and franchise sectors which is of particular relevance to Punch, given the dynamic and evolving pubs market.

Following Duncan's appointment, I have reverted to my original role of Non-executive Chairman having held the position of Executive Chairman since February 2013, following the resignation of the previous Chief Executive.

Employees and publicans

We have an extremely committed and engaged workforce and the Board was pleased to see the results of our recent employee engagement survey in which 92% of our employees took part. It is a testament to the commitment and calibre of our employees that we were recognised as the 'Operations Team of the Year' and 'Responsible Retailer of the Year' at the 2015 Publican Awards.

Our publicans include a number of award winners with a record eleven regional finalists and three overall category winners in this years 'Great British Pub Awards'. Over 250 of our publicans (and their pubs) were represented in the '2016 Good Beer Guide' and over 1,000 pubs are 'Cask Marque' accredited.

Outlook

While our actions to date have put us in a much stronger position to address the structural changes impacting our market, we do not underestimate the challenges the industry faces in light of impending legislative changes.

While the year ahead represents another period of transition for the business, we are confident in our plans and in our ability to implement our strategy, which is aimed at maximising the long-term value of our business.

CHIEF EXECUTIVE OFFICER'S REVIEW

INTRODUCTION

Having joined Punch in June 2015, my first priority was to get around the business and spend time listening to our publicans, employees and other key stakeholders. My arrival as CEO has provided the Board and me with an opportunity to review and stress test our strategic priorities. Given the changing market dynamics, this is of particular importance and I set out below the key elements of how the strategy will be deployed to move the business forward.

What I have set out today is very much aligned with the strategy the business is already pursuing, but with some refinements and developments to unlock opportunities within the business and manage an evolving operational and changing regulatory market.

STRATEGIC REVIEW

A summary of the review findings are below:

§ Pubs remain an attractive market with great potential. Going to pubs continues to be one of the most popular leisure activities in the UK. In 2014, the UK pub industry had estimated annual sales of approximately £22 billion and directly employed an estimated 750,000 staff. Despite the challenges faced by the industry, there are some clear growth opportunities and I have seen many examples where we have been able to materially grow a pub's sales when we implement the right consumer offer that meets today's consumer trends.

§ Punch needs to modify its proposition in light of legislative changes and to maximise the opportunity from changing consumer trends. While Punch has in recent years been at the forefront of change within the leased and tenanted pub sector, the market is changing rapidly and Punch will need to adapt further to meet the needs of this evolving marketplace.

§ We can achieve significant benefits in this new environment by deploying more than one operating model. Running a pub continues to be seen as an attractive proposition for many entrepreneurs and we typically receive 25 enquiries to every one publican being placed in a pub. A broader range of operating models is required to appropriately meet the level of skills, support and financial position of the wide range of prospective publicans applying to run one of our pubs. Providing a broader range of operating models will allow us to maximise the value in each and every one of our pubs.

§ A significant proportion of the estate could deliver higher returns through investment. Alongside setting the right consumer offer, providing an appropriate level of investment is key to maximising the returns in our pubs. A significant proportion of our estate could benefit from investment, with investment being prioritised to those pubs where we have control over the consumer offer, and to new investments with a payback of less than five years in England and Wales.

§ There is still significant unrecognised value in Punch's freehold property estate. The Group has a sizeable property portfolio comprising in excess of 9 million sq. ft. of ground floor area, significant additional upper floor area and encompassing c.1,400 acres of total site area. There is a significant portfolio of under-utilised upper floor areas and under-utilised land bank.

§ Punch has the right foundations in its business to deliver value for the longer term, but it will take time. We have already taken significant steps towards evolving our operating model. While we have a lot to do, and the year ahead represents the start of a period of transition for the business, we are confident in our plans going forward, and in our ability to implement our strategy, which will maximise the long-term value of our business.

From our review we have a clear set of plans to move the business forward:

1. Deliver a clear, consistent consumer offer, adapting to changing consumer behaviour;

2. Comprising a broad range of operating models that are in line with today's evolving pub market;

3. Underpinned by a refocussing of management resources to drive operational excellence;

4. Building on an attractive offer, delivering real value to our publicans through the Punch Buying Club; and

5. Releasing additional value from our under-utilised property portfolio and land bank.

We believe that delivering these levers will help drive sales and profit by realising previously untapped growth opportunities in an evolving pub market and unlock significant additional value from our under-utilised property portfolio.

Development of the Punch model

1. Consistent consumer offer:

Over the last few years, Punch's business has been evolving towards a model in which we have greater insight into the consumer offer and are best placed to implement a clear and consistent strategy going forward. In 2013 we launched a dedicated New Business Development team working with our publicans from before the launch of their pub and throughout the first six months of trading, supporting them in executing the consumer offer in the pub. In 2014 we introduced Retail Operating Plans, setting out the agreed consumer offer, operating plan and rhythm of the week in our pubs.

In recent years, we have also developed and trialled a small number of retail concepts, 'Champs' sports bar, 'Mighty Local' community drinks led pub concept, and most recently 'Brewed & Baked', our new high street coffee shop and chameleon bar concept. While the first Brewed & Baked outlet will open later this month, we have seen excellent results from our Champs and Mighty Local concepts which now number 6 and 13 outlets respectively with further rollouts planned for 2016.

The majority of Punch's core estate (c.84%: c2,400 pubs) is in the drinks led, mainstream and value pub segments. Having seen positive results from the early concepts where Punch has developed a clear and consistent consumer offer, we are now in a position to accelerate our programme of developing and rolling-out new concepts.

We have a high level of confidence in the upside opportunity in rolling-out retail concepts across a meaningful proportion of the estate, but have purposely not put a target on how many pubs will operate under a defined concept as the scale of any roll-out will be determined by their financial performance, which is still in the trial phase. There is also the potential to franchise these retail concepts at a future date.

While we are taking a much more active role in defining and overseeing the consumer offer in our drinks led mainstream and value pub segments, we will take a different approach in the premium and destination food led segments which accounts for c.16% of the core estate, (c.450 pubs). These sectors require specialist skills to maximise the opportunity in these sites and we will continue to work with specialist operators, such as Harry Ramsden's, the iconic British brand, world famous for its fish and chips, and have formed a trading partnership within which we will jointly invest in selected sites across the Punch estate.

We have seen significant uplifts in pub sales and profit where we have invested, alongside setting the right consumer offer. It will take time to implement our strategy however which will be phased over a five year period. Investment will be directed to those pubs where we have input into the retail offer and have control over the terms of the agreement. Subject to the above, we plan to invest in up to 500 pubs per year, investing between £250 million and £300 million over the next five years.

2. Broad range of operating models:

The Group already offers a wide variety of flexible commercial agreements to our publicans, with over 60 different lease and tenancy agreements currently in place. In recent years we have seen a significant market shift away from long-term fully repairing leases towards shorter-term tenancy agreements, where the external building repair obligations remain the responsibility of the pub company. There has also been a marked shift away from fixed rent agreements towards variable turnover linked agreements.

We have been quick to address these changing market dynamics and have already introduced three new operating formats, including the Retail contract, our first managed pub, and commercial free-of-tie arrangements (covering both fixed-rent and variable turnover-linked agreements).

Under the Retail contract, Punch retains 100% of the sales and cost of sales (akin to a traditional managed house operation) and pub costs (excluding staff costs), and pays the retailer (the publican) a percentage of the retail sales, out of which the retailer pays their staff costs. The retailer is free to focus on delivering an excellent consumer experience while Punch supports the back-of-house processes.

As at October 2015, we had 31 pubs operating under the Retail contract and have seen significant (15% to 20%) volume growth in these pubs compared to historic performance under a traditional leased and tenanted model. We are pleased with the results from these initial trials and already have in place the infrastructure and a separate Retail operations team capable of rolling out the model nationally across the UK. We anticipate having approximately 100 pubs operating under the Retail contract by August 2016.

Our first fully managed pub opened in October 2015, and while we do not currently anticipate building a significant managed pub presence, we will take learnings from a small managed pub trial to support the development of new consumer offers.

We already have a small but growing commercial free-of-tie operation with a number of fixed rent commercial free-of-tie leases and variable turnover-linked agreements in operation. We expect this division to grow over time as we introduce new innovative agreements, particularly in the premium and destination food led segments of our estate.

3. Refocussing management resources to drive operational delivery:

To ensure effective delivery of these changes and of the separate operating models, we have recently made a number of changes to the operating structure of the business with distinct divisions:

· Tied tenanted & leased division;

· Retail pub division (including the managed pub trial); and

· Commercial leases (free-of-tie); which will move into a separate division managed under the property team.

Three new roles have also been created to ensure that we drive our future success, develop our employer brand and really maximise the opportunity from existing and new retail formats. These roles are Chief Strategy Officer, Marketing Director and Development Director.

4. Delivering value to our publicans through the Punch Buying Club:

Launched in 2009, the Punch Buying Club has been a great success with the vast majority of publicans using the club to purchase their drinks products. Punch is one of the largest buyers of drinks in the UK on-trade market, delivering significant economies of scale not available to individual publicans buying drinks on their own. We offer a wide range of drinks products through the Punch Buying Club to our publicans and during the last year have supplied over 3,000 drinks brands from 660 drinks suppliers, including in the region of 2,500 cask ale brands.

Through the Punch Buying Club we leverage our group buying power to provide services such as free WiFi and provide access to cheaper electricity and gas supply through our brokerage service providers. The Punch Buying Club is also full of useful information to help our publicans to professionally operate their pubs giving access to free training, legislative information, marketing materials and a legal helpline. In addition, our innovative machines performance data, an industry leading service introduced earlier this year, is made available for publicans to monitor and maximise their machine income performance.

We have continued to build on the success of the Buying Club over the last five years and have plans to further develop it over the coming years.

5. Releasing additional value from our property portfolio:

The Group has a sizeable property portfolio with over 3,500 properties comprising in excess of 9 million sq. ft. of ground floor gross area, significant additional upper floor area and encompassing c.1,400 acres of total site area.

Historically the Group has looked to operate its properties purely as tenanted and leased pubs. While the principal use of our properties moving forward will continue to be that of public houses, there is a significant portfolio of under-utilised upper floor areas and excess under-utilised land bank.

Through more active property management we expect to be able to release additional value, which is not currently recognised in the external property valuation, in our freehold property and land estate over the next five years.

In summary, our strategic plan enables us to maximise the value in our properties through a phased, lower risk approach to addressing an evolving pub market, taking greater control of the property and retail offer, without the risk of added overhead that comes with directly employing pub staff.

BUSINESS REVIEW

Punch is a leading operator of leased and tenanted pubs in the UK, with the second largest pub estate by number of pubs. As at 22 August 2015, the Punch estate comprised 3,588 pubs located across the UK, 96% of which were held on a freehold or long leasehold bases.

Our market

The Group operates in the UK pub industry, which itself is part of the wider drinking-out and eating-out market. The UK pub market, which consists of some 47,000 licenced public houses, has had to manage the impact of significant changes over the last decade including the smoking ban, changing consumer preferences and an increasingly competitive landscape. Recent changes in legislation, including the lowering of the drink-driving limit in Scotland in December 2014 and the implementation of the Market Rent Only option (MRO) in England and Wales, which is expected to come into force progressively from June 2016, will result in further structural changes to the pub market.

Success for the UK pub sector is being determined by the ability to respond, with pace, to the changing market conditions and provide offers which deliver great customer experiences and value. Aware of the challenges, we have refocused our plans and strategy to ensure that we are in the strongest position to address the changing needs of the marketplace.

Our business model

We operate a predominantly tenanted and leased pub model where our pubs are let to independent publicans. Our model makes a pub business accessible to many more publicans than the purchase of a freehold, while also providing an extensive package of support to our publicans to help them build a successful pub business. The business model is simple and adaptable with no single pub or any single publican accounting for more than 1% of the Group's operating profit.

Publicans lease their pub(s) from the Group on the basis of agreements which provide a flexible split between rent and tied drink margin. There is a higher risk for the publican if they opt for an agreement with a higher rent and lower drinks price, as opposed to an agreement with a lower rent and higher drinks price which provides the publican with protection in periods of lower trading.

Both we and our publicans have a mutual interest in making each pub successful as our profits are ultimately linked. When we work in partnership with our publicans to drive sales in the pub, both Punch and the publican benefit from increased sales and potential profit.

Regulatory environment

The Small Business, Enterprise and Employment Act 2015 (the 'Act') which is expected to come into force from June 2016 includes a lessee's right, under certain circumstances, to change the freely-negotiated commercial terms of their agreement. This MRO option enables some occupational lessees to elect to opt-out of the drinks supply tie at certain points during the term of their lease agreement and therefore occupy the premises on a standard commercial property lease, paying rent only.

We remain concerned about the unintended consequences of the Act, which will only become clear over time. Punch's initial view (which remains subject to seeing the finalised terms of the Secondary Legislation) is that the proposed legislation is contrary to existing legal contracts and property rights and runs contrary to the Office of Fair Trading's findings when it considered a super-complaint from the Campaign for Real Ale in 2010. We are in dialogue with Government as to how the Act will work in practice. Within phase one of Secondary Consultation there remain a number of areas in which we are seeking clarity from Government. We await the publication of phase two of the consultation with interest and will continue to engage constructively with the process.

We are also fully engaged in the forthcoming pub sector review being undertaken by the Scottish Government and look forward to constructive dialogue with them to help develop plans for a healthy Scottish pub sector.

Tied pub leases provide access to financial, business and training support and a wider range of products and services that cannot normally be accessed in a free-trade pub. We urge the Government to recognise the benefits that this model provides and continue to work with the industry to allow this model to continue to thrive into the future, allowing future business men and women the same low cost, lower risk access into a thriving pub market.

With limited impact in our current financial year, in our 2017 financial year we expect up to 400 potential MRO event triggers in the core estate and up to 300 event triggers per year in the following four years. In the event that a lessee elected to invoke the MRO option, whilst our income derived from the supply of tied drinks products would be partially offset by increases in rent, we are aware of the potential for our total income to be adversely affected.

For the 2015 financial year Punch generated £248 million of net income of which £134 million was from the sale of drinks, £102m from rental income and £12 million of machine and other income. Of the £134 million of drinks income, approximately £72 million was from core pubs with a potential at some time in the future for an MRO event trigger to occur.

While the take-up of the MRO option will only become clear over time through the cycle of five yearly rent reviews and renewals, our current expectations are that the majority of the estate will continue to operate under, and enjoy the benefits of the tied-drinks model.

Trading review

Given changing market dynamics, Punch's strategy is to focus on its core estate, which represents a higher quality, geographically well-located portfolio of pubs, suitably positioned to adapt to changing market conditions and support sustainable long-term profits for Punch and our publicans.

The aim for the core estate which comprised 2,872 pubs at 22 August 2015, is to make each pub the best of its type in its marketplace. The focus is on attracting the right publicans through flexible agreements, to attractive well-located pubs that have had the appropriate level of investment. We then support those publicans with extensive training and dedicated field support, backed up by further specialist support teams and access to the Punch Buying Club.

The strategy for the non-core estate, which comprised 716 pubs at 22 August 2015, focuses on maximising short-term returns prior to disposal. These pubs are predominantly small, wet led and have a much lower average net income per pub. Given the limited scope for investment, these pubs are expected in time to generate more value through disposal than retention.

Overall profit performance for the year was in line with management expectations and previous guidance. In the 52 weeks ended 22 August 2015, Punch generated EBITDA of £196 million (excluding non-underlying items):

Core estate:

The core estate accounted for 90% of outlet EBITDA in the year with an average net income per pub of approximately £76,000 p.a. Trading has been in line with our expectations with like-for-like net income growth of 0.3% for the year. Like-for-like growth has now been delivered for nine consecutive quarters. The core estate is expected to generate c.95% of outlet EBITDA in the 2016 financial year.

We continue to offer high levels of support in developing our publicans' businesses, having invested heavily in this area in recent years. The New Business Development team, which supports all new publicans with their initial investment, pub launch and throughout their first six months, has made further improvements against volume uplift expectations.

We ensure that new publicans are set up for success with our Foundation Week, a comprehensive training programme which provides all the skills needed to run a successful pub business. Thereafter publicans have access to a variety of workshops and e-learning materials covering areas such as marketing and merchandising, finance and social media. Overall, during the year we trained over 500 of our publicans.

Non-core estate:

The non-core estate accounted for 10% of outlet EBITDA in the year and represented 21% of the estate by number of pubs.

We are committed to driving operating performance of the non-core estate and maximising the profits from these outlets. For some of our estate, changing market dynamics and operational performance will lead to some reclassifications of sites between core and non-core. Consequently, during the first half of the year, 71 pubs transferred to the core estate following improved performance and outlook and 65 pubs transferred from the core to non-core estate to focus on maximising short-term returns. Immediately following the year end, a further 39 pubs transferred to the core estate and another 39 pubs transferred from the core to non-core estate.

Pubs remaining in the non-core estate are managed under separate categories; protect and sell. We have reviewed the remaining estate to ensure that our focus is directed towards the opportunities we have to drive performance.

Property review

Following a review of our property portfolio, the Board considers that the most appropriate accounting policy to carry our pub estate, going forward, is at open market valuation, which gives greater transparency on the underlying value of our property assets than historic cost. We commissioned external valuers to assist with this valuation during the second half of the year, having undertaken a full impairment review of the estate at the interim accounting date.

Our property estate has been externally valued at £2,097 million which represents a net uplift in the valuation (after accounting for pub disposals) of £9 million. It should be noted that whilst the valuation represents an-uplift on the prior year valuation, the change in accounting policy does necessitate a significant accounting charge against historic book value which is further explained in the Financial Review.

Consistent with our strategy to focus on the core estate, we disposed of 162 non-core pubs (including unlicensed) in the year, together with other assets for proceeds of £39 million. Following the year end (on 11 September 2015), we completed on the sale of a package of 158 non-core pubs for gross proceeds of £53.5 million. This disposal at an average of c.£340,000 per pub, was above book value and significantly ahead of the average proceeds achieved for previous non-core disposals.

We also disposed of a small number of core pubs in the year, realising £51 million in proceeds, £18 million above book value and at a multiple of 23 times LTM EBITDA.

We have continued to invest in our properties with a £46 million spend across the Group. This was 11% below last year's level reflecting the uncertainty created by the MRO provisions of the Small Business, Enterprise and Employment Act. While we have a strong pipeline of potential investments, new investments with a payback in excess of five years remain on hold pending finalisation of the Secondary Legislation expected in 2016.

Punch has a rigorous approach to capital allocation and authorisation, including an annual plan, a project by project capital approval process and regular post-investment reviews.

Disposal of our investment in Matthew Clark:

On 7 October 2015 we announced the completion of the disposal of our 50% shareholding in Matthew Clark (our 50% joint venture investment with Accolade Wines) for £99 million in cash (after £2 million of transaction costs) and at a £46 million premium to book value. The sale of our investment in Matthew Clark, a non-core asset, enhances the Group's financial flexibility to pursue its strategic objectives.

On completion, the Group entered into a 10 year non-exclusive drinks supply contract with Matthew Clark Wholesale Limited. Under this supply agreement, Matthew Clark will supply selected wines and spirits drinks products to the Group at agreed pricing levels.

Financial review

Income statement:

Results for the 52 weeks ended 22 August 2015:

As previously presented, underlying results were in line with expectations, having delivered underlying EBITDA of £196.4 million. Comparative results for the 2014 year were positively impacted by an extra week's trading (53rd week).

Like-for-like net income (which reflects rental income and net income from the sale of drinks and other products to our publicans) in the core estate, after adjusting for the impact of disposals, has been relatively stable, with a growth of 0.3% for the full year. The decline in core estate profit is predominantly due to the additional week of trading in the previous year (£3.9 million) and the impact of pub disposals (£3.3 million).

The decline in profit from the non-core estate was principally due to the impact of the ongoing disposal programme (£3.1 million), lower like-for-like profits as these smaller uninvested pubs were impacted by market conditions, together with the impact of the additional week of trading in the previous year (£0.6 million).

The non-core disposal programme has had the benefit of improving the average quality of the Group's pub estate, with average profits per pub across the wider estate up 4% on the year. The core estate now makes up 90% of the Group's pub profits, up from 88% in the previous year, with this proportion expected to increase to c.95% in 2016.

Matthew Clark provided a post-tax contribution to Punch of £7.8 million (2014: £6.2 million) and we received £6.0 million in dividends in the year.

We continued to maintain a tight control on costs, with central costs down by 6% in the year to £34.2 million, after adjusting for the additional week in 2014, which was in line with the reduction in the estate size, being down 6% on the previous year end.

Underlying net finance costs (before the impact of bond buyback profits in 2014) reduced by £31.8 million to £123.3 million, reflecting the benefit of the capital restructuring that completed on 8 October 2014. Following the capital restructuring, the weighted average interest rate for the Group's gross borrowings, including the impact of interest rate swaps and PIK interest, at the balance sheet date was 7.8% (2014: 7.2%). Underlying finance costs in the previous year included a net credit of £29.9 million in relation to loan note redemption profits, with a credit of only £0.3 million in the current year. The one-off charges and credits relating to the capital restructuring in the year are shown within non-underlying items, referred to below.

Taxation:

The underlying taxation charge equates to an effective tax rate of 21.5% before post-tax earnings from joint ventures. This compares with the UK corporation taxation rate of 20.6% for the year.

The availability of sizeable capital allowance pools amounting to £210 million (generated from our investment programme in community pubs) at August 2015, together with other tax assets is expected to result in no corporation tax payments being due in the 2016 financial year.

Non-underlying items:

A number of non-underlying items were recognised during the period amounting to a net charge of £132.1 million, resulting in a net non-underlying loss after tax of £82.6 million. The principal items are set out below:

· £(483.8) million charge on transition to accounting for properties at market valuation (note 3);

· £(16.4) million impairment losses;

· £374.6 million profit on capital restructuring;

· £(35.0) million charge for the mark-to-market movement in value of interest rate swaps;

· £21.9 million profit on disposal of properties;

· £(18.3) million charge for capital restructuring costs; and

· £(9.1) million goodwill disposed on the transfer and disposal of core pubs.

The tax effect of all of these items, together with the resolution of prior year tax matters, gave rise to a tax credit of £34.0 million.

Completion of the Capital Restructuring (October 2014):

On 8 October 2014 the Group announced the successful completion of restructuring proposals for the Punch A and Punch B securitisations. The impact of the restructuring reduced total net debt (including mark-to-market on interest rate swaps) by £0.6 billion. The Group also issued a total of 3,771 million new ordinary shares in connection with the restructuring proposals, of which 1,273 million was a firm placing at 3.93 pence per share.

A non-underlying profit of £374.6 million was recorded on completion of the capital restructuring, reflecting:

· £794.0 million reduction in gross nominal debt and swap mark-to-market on exchanged notes;

· £7.0 million on issue of class B3 notes;

· £(271.1) million cash payments on debt settlement;

· £(196.5) million equity issued;

· £22.6 million on write off of deferred issue costs; and

· £18.6 million other capital restructuring items.

Share capital and earnings per share:

Punch's issued share capital at the start of the year, 24 August 2014, amounted to 665.8 million shares. Punch issued 3,771.2 million new ordinary shares on 8 October 2014 under the terms of the capital restructuring. On 13 October 2014 Punch effected a share consolidation on the basis of 1 consolidated ordinary share for every 20 existing ordinary shares. Following the share consolidation and as at the balance sheet date, the issued share capital amounted to 221.9 million ordinary shares.

For the purpose of calculating the earnings per share measure, the ordinary shares outstanding during the year (and the prior year) have been adjusted for the share consolidation. The basic weighted average number of shares applied to the earnings per share calculation is 198.0 million for the current year (prior year: 33.3 million).

Adjusted basic earnings per share (EPS), which excludes the effect of non-underlying items was 25.0 pence. Basic EPS was a loss of 41.7 pence, primarily due to the capital restructuring and impact on the transition to accounting for properties at market value.

Property valuation:

The result of the change in accounting policy for our properties to open market valuation has resulted in a net reduction in our property, plant and equipment values of £190.6 million. The net impact has been recognised as a £483.8 million charge to the income statement for pubs for which book values were higher than market value, offset by a £293.2 million credit to equity reflecting the reversal of previous impairment charges for a number of properties on which book values were below current market value.

The net downward valuation reflects the fact that the current open market valuations are lower than the valuation at acquisition (or the August 2004 valuation, being the date of transition to IFRS) plus capital investment and less accumulated depreciation and impairment charges, largely reflecting the decline in like-for-like profits experienced from 2008 to 2013. Under historic cost accounting a property's book value could be greater than the open market value of the property, providing that the value-in-use of the property (calculated by reference to the discounted future expected cash flows generated by the property) was no less than the book value of the property.

Pensions:

Punch maintains a defined contribution scheme which is open to all employees. The Group has one defined benefit scheme (the Pubmaster pension scheme) which is closed to new entrants. Under IAS 19 the net pension liability was £6.1 million at August 2015 (2014: £4.3 million).

Cash flow:

Cash flow from operating activities at £181.8 million compared to an EBITDA of £178.1 million (net of £18.3 million of non-underlying costs).

Net cash flows from investing activities generated £45.4 million in the year (2014: £65.8 million), as the level of disposal proceeds at £89.4 million exceeded the level of capital reinvestment in the estate of £46.4 million. Interest received at £2.4 million (2014: 7.6 million) was significantly lower than the previous year as the high levels of cash balances in 2014 were used in the capital restructuring.

Financing cash flows primarily reflect interest paid of £120.6 million (2014: £165.7 million), net repayment in borrowings of £339.8 million (2014: £69.3 million), which in 2015 were largely as part of the capital restructuring, and £50.0 million of proceeds on the issue of shares in connection with the restructuring.

Cash flows have benefited in both the current and prior year from the ongoing pub disposal programme, proceeds from which have been used towards repayment of debt. The non-core pub estate was valued at £179 million at the balance sheet date and we expect to continue to dispose out of this estate over time, with in the region of £60 million of disposal proceeds from individual pub sales (including a small number of core pubs) expected in the next financial year. Proceeds from the disposal of non-core pubs are available to be used towards scheduled debt repayment, with excess proceeds used to prepay senior debt.

Capital Structure:

The nominal value of net debt (excluding the mark-to-market of interest rate swaps) was down by £513 million in the year and down by £102 million since the October 2014 refinancing to £1,406 million.

The Group is financed solely by two long-term securitised debt structures (Punch A and Punch B securitisations) and has no bank borrowings. The restructured debt has a lower contractual amortisation requirement with scheduled contractual amortisation of £200.8 million over the next five years, with no term repayments until 2021.

The capital restructuring has positively impacted the consolidated net debt to LTM EBITDA leverage ratio of the Punch Group, with leverage having reduced to 7.2 times (2014: 9.5 times).

Outside of the securitisations ('External'), the Group holds a number of loss making short leasehold pubs. External EBITDA of £7.6 million represents Punch's share of the post-tax earnings from Matthew Clark (£7.8 million) together with the operating loss from the short leasehold pubs (£1.3 million) and the release of certain central accruals (£1.1 million).

Net debt at August 2015 of £1,405.8 million is secured against a largely freehold pub estate which was independently valued during August 2015 at £2,097 million. Total Group Net Asset Value (defined as property valuation and investments less nominal net debt), including the value of Matthew Clark (shown at the net disposal value) amounted to £790 million (£3.56 per share).

The Group benefits from having a long-term securitisation financing structure. While this provides certainty of financing with no term debt repayments until 2021, the covenant structure attached to the securitisations is restrictive, in particular in relation to the use of pub disposal proceeds, which is not permitted to be used to fund additional capital reinvestment into the estate, even where investment opportunities are at attractive levels of return. Consequently, the Board is giving appropriate consideration to how best to improve financial flexibility and support the strategic development of the business going forward.

All of the Group's securitised debt, with the exception of the senior hedge notes, is at fixed rates of interest, or fixed through the use of interest rate swaps. Consequently, the Group does not benefit from the current low UK interest rate. The mark-to-market value on the Group's interest rate swap which matches the Class M notes amounted to £132.3 million at the balance sheet date.

The junior classes of securitised notes (Class M and Class B notes) are callable (at the Group's option) at par from October 2016 onwards, following the end of their no-call period. The Class A notes carry make-whole provisions (modified Spens) whereby a predetermined price is set should the notes be redeemed early (at the Group's option).

For further information on the capital restructuring, please refer to our website: www.punchtavernsplc.com

CONSOLIDATED INCOME STATEMENT

for the 52 weeks ended 22 August 2015

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the 52 weeks ended 22 August 2015

BALANCE SHEET

at 22 August 2015

STATEMENT OF CHANGES IN EQUITY

for the 52 weeks ended 22 August 2015

CASH FLOW STATEMENT

for the 52 weeks ended 22 August 2015

1. ACCOUNTING POLICIES

Basis of preparation

The consolidated financial statements presented in this document have been prepared in accordance with IFRS as adopted by the European Union. The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under s408 of the Companies Act 2006 not to publish its individual income statement and related notes.

The consolidated financial statements of Punch Taverns plc and its subsidiary undertakings (together "the Group") are prepared under the historical cost convention, except where adopted IFRSs require an alternative treatment. The principal variations relate to financial instruments (IAS 39 "Financial instruments: recognition and measurement") and Property (IAS 16 "Property, Plant and Equipment")

New standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), becoming effective during the year, have not had a material impact on the Group's financial statements. The preliminary statement of results was approved by the Board on 11 November 2015. The preliminary statement is derived from but does not represent the full Group statutory financial statements of Punch Taverns plc and its subsidiaries which will be delivered to the Registrar of Companies in due course. The financial information for the 53 weeks ended 23 August 2014 has been extracted from the Annual Report and Financial Statements 2014, as filed with the Registrar of Companies. The audit reports for both periods presented were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain statements under section 498(2) or (3) Companies Act 2006 or equivalent preceding legislation.

Going Concern

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

The Group is financed through two whole business securitisations, the Punch A Securitisation

(£938 million of gross debt secured against 2,076 pubs) and the Punch B Securitisation (£608 million of gross debt secured against 1,453 pubs), as well as certain cash resources held across the Group.

On the 8 October 2014 the Group announced the successful completion of the restructuring of its securitisation arrangements, including the resetting of its financial covenants, with a £0.6 billion reduction in total net debt (including mark-to-market interest rate swaps).

Further details of the debt structure of the Punch A and Punch B securitisations following completion of the restructuring can be found in note 4 and also on the Punch Taverns website www.punchtavernsplc.com.

Change of accounting policy

During the second half of the financial year ending 22 August 2015, the Group adopted a policy of revaluing its property portfolio to market value, in accordance with the revaluation provisions of IAS 16 Property, Plant and Equipment. In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, no prior year adjustment has been recognised in relation to this change in accounting policy.

The change in accounting policy reflects the adoption by the Group of the most appropriate accounting policy to carry our property portfolio at open market valuation, which gives greater transparency on the underlying value of our property assets.

Under the previous accounting policy adopted by the Group, property, plant and equipment were stated at historical cost or deemed cost less accumulated depreciation and any impairment in value. The impact on the financial statements of this change in accounting policy has been to:

· decrease the net book value of property, plant and equipment as at 22 August 2015 by £190.6 million;

· recognise a net non-underlying charge against operating profit of £483.8 million. This reflects the impact of downward revaluations of £523.8 million where the fair value of the asset is below the net book value. Offsetting this charge is a £40.0 million non-underlying credit against operating profit which reflects the impact of upward revaluations, where the fair value of the asset was greater than the net book value, and the credit to the income statement reverses a previous charge to the income statement for impairment;

· recognise a £293.2 million credit to the revaluation reserve on upward revaluations where any impairment previously taken to the income statement has already been reversed.

2. SEGMENTAL ANALYSIS

The Punch business consists of a core estate and a non-core estate, each having its own clear strategy. Each of these strategic business units consists of a number of cash generating units (CGUs), which are individual pubs. These CGUs generate their own revenues, which are consolidated to give the Group revenue and as a result, Group revenue is not reliant on one significant customer.

The Chief Operating Decision Maker, represented by the Board, reviews the performance of the core and non-core divisions separately, at an underlying EBITDA level, as included in the internal management reports. The Group operates solely in the United Kingdom.

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

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

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

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

3. NON-UNDERLYING ITEMS

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

1 The movement in the valuation of properties of £483.8m comprises a downward valuation of £523.8m where the fair value of an asset is less than the net book value, offset by a credit of £40.0m where the fair value of an asset is greater than the net book value and the credit reverses a previous charge to the income statement for impairment.

2 Represents the goodwill relating to those core pubs disposed of in the period and also the goodwill relating to pubs transferred or identified for transfer to non-core.

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

4 Represents the recycling of the hedge reserve relating to the Punch A B3, D1 & M2(N) interest rate swaps following its reclassification as ineffective during the prior financial period, due to the announcement of the capital restructuring proposals.

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

4. CAPITAL RESTRUCTURING

Completion of restructuring

On 8 October 2014 Punch Taverns plc announced the successful completion of restructuring proposals for the Punch A and Punch B securitisations. The impact of the restructuring reduced total net debt (including mark-to-market on interest rate swaps) by £0.6 billion. The Group also issued a total of 3,771,151,200 new ordinary shares in connection with the restructuring proposals, of which 1,273,005,000 was a firm placing at 3.93 pence per share.

On 13 October 2014 Punch Taverns plc announced the consolidation of its ordinary shares, as described in the combined circular and prospectus dated 18 August 2014, had become effective. As a result of the share consolidation, the existing ordinary shares in Punch Taverns plc have been consolidated into consolidated ordinary shares on the basis of one consolidated ordinary share for every 20 existing ordinary shares.

Punch A debt structure

Immediately following completion of the restructuring, the revised debt structure of the Punch A securitisation was as set out below:

1 An interest rate swap is in place to swap the Libor interest rate on the Class M3 floating rate note to a fixed rate of 5.954%

Punch B debt structure

Immediately following completion of the restructuring, the revised debt structure of the Punch B securitisation was as set out below:

Profit on capital restructuring

The £196.5m equity consideration comprised 2,498,146,197 shares issued at 7.86p. The firm placing of 1,273,005,000 shares at 3.93p generated £50.0m of cash to be used in the restructuring. Three new Ordinary shares were issued to the Company Secretary to facilitate a 1 for 20 share consolidation.

Further details of the debt structure of the Punch A and Punch B securitisations following completion of the restructuring can be found on the Punch Taverns website www.punchtavernsplc.com.

5. TAXATION

The effective rate of tax is different to the full rate of corporation tax. The differences are explained below:

6. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held in the employee share trust, which are treated as cancelled.

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

The weighted average number of ordinary shares outstanding during the prior year has been adjusted for the impact of the consolidation of ordinary shares as announced on 13 October 2014 following successful completion of restructuring proposals. The ordinary shares of 0.04786p in Punch Taverns plc have been consolidated into ordinary shares of 0.9572p in Punch Taverns plc on a one for 20 basis.

As part of the restructuring proposals the Group issued 3,771,151,200 new ordinary shares on 8 October 2014, prior to the share consolidation. The weighted average number of ordinary shares outstanding in the periods leading up to the share issue has not been retrospectively adjusted for as per IAS 33: Earnings per share. The share issue resulted in an increase in cash resources and as the share issue was not offered to all existing shareholders it was deemed that there was no bonus element associated with this issue.

The adjustment to the weighted average number of ordinary shares outstanding impacts the current and prior period.

Reconciliations of the earnings and weighted average number of shares are set out below: