Preliminary Results

3rd Jul 2008 07:00



PRESS RELEASE 

3 July 2008

GREENE KING plc 

Preliminary results for the 53 weeks ended 4 May 2008

Outperformance in challenging conditions:  growth in profit, margin and EPS; strong cash generation

Financial Highlights 

Revenue £960.5m, +5%

Operating profit* £236.2m, +8%; +4.5% excluding acquisitions

Operating profit margin* 24.6%, +0.8 percentage points

Profit before tax* £142.0m, +2%

Adjusted earnings per share* 74.0p, +14%

Dividend per share 26.0p, +14%

Free cash flow £31.1m after capital expenditure and dividend

Successful £350m securitisation tap (post year end); no further refinancing needed until 2012

Business Highlights

Retail  Operating profit* +5% Strong growth in food: now 34% of sales Loch Fyne successfully integrated and trading well

Pub Partners  Operating profit* per pub +8% Operating profit margin* +3.1 percentage points

Belhaven  Operating profit* +18% Food sales +31% 

Brewing Company  Own-brewed volume +6% Market share gains in on- and off-trade

Rooney Anand, Greene King chief executive, comments:

"The year saw an unprecedented set of challenges for the industry but I am pleased to report exceptional performance across the business. Our results in Scotland, with operating profit up 18% in the second year of the smoking ban, give me some encouragement for future prospects in England. The economy is not likely to improve in the short term, and we are not immune to the difficulties this presents for our market, but we are better placed than many others, thanks to the resilience and flexibility of our business and our team." 

* As throughout this document, the profit figures are shown before exceptional items. The results are positively impacted by an additional week's trading relative to last year.

A copy of the results presentation is available on our website: www.greeneking.co.uk.

For further information:

Greene King plc	Rooney Anand, chief executive Ian Bull, group finance director	Tel: 01284 763222
Financial Dynamics	Ben Foster	Tel: 020 7831 3113

  GREENE KING plc 

Preliminary results for the 53 weeks ended 4 May 2008

Chairman's statement 

Results

I am delighted that we have managed to extend an unbroken run in earnings growth that stretches back over 40 years. A strong increase in operating profit, up by 8% over 2006/07 to £236.2m, combined with effective balance sheet management, has driven our profit before tax and exceptional items up by 2% to £142.0m and our earnings per share up by 14% to 74.0p.

Dividend

The results have led the board to recommend a final dividend payment of 18.7p which will produce a total dividend of 26.0p for the year, an increase of 14% on last year. If approved, the final dividend will be paid on 8 September to those shareholders on the register at the close of business on 8 August. 

Acquisitions and disposals

The company has been transformed in the last two decades into a significant national player in the British eating and drinking out market. We have added acquisitions to organic growth to extend our product offer and our geographical spread, and have made asset disposals to improve the average quality of our estate.

 

This year we acquired Loch Fyne Restaurants in August 2007 for £64.2m. They had 36 outlets at the time, and now have 41, and the acquisition marks an important further step forward in the development of our food retailing. We also acquired New Century Inns for £32.8m in November 2007. They had 49 tenanted and leased pubs mostly located in the north east, and have brought us much better representation in that part of the country. 

Board

Howard Phillips will be retiring at our AGM in September. He has served as a non-executive director for ten years and I would like to thank him for the experience and good sense he has brought to the board over that time. 

People

These results are particularly encouraging in view of the tough trading environment in which we find ourselves. They have been achieved through the dedication, passion and enthusiasm of our employees and our partners in the licensed trade. I would like to express my thanks to all of you for the part you have played in producing such a strong set of figures. 

I also welcome those who have joined us through our acquisitions, who bring fresh ideas and valuable experience to our business. For all of us, the crucial attributes of hard work and skill will be all the more important in the difficult times ahead and I am confident that we have a great team to handle that challenge.

Tim Bridge Chairman

2 July 2008

  Chief Executive's Review 

I am pleased to report another strong set of results for Greene King. For financial year 2007/8, revenue was up 5% at £960.5m, operating profit up 8% at £236.2m and profit before tax up 2% at £142.0m*. This has led to adjusted earnings per share up 14% to 74.0p, and has allowed the board to recommend a full-year dividend up 14% to 26.0p.

Pub and restaurant retailing delivered encouraging growth in sales and profit. Pub Partners grew both revenue and margins. Our key beer brands achieved significant growth again, despite the declining ale market.

Common to all our businesses have been the themes of:

Delivering quality and value for money

Mitigating cost increases and reducing the fixed cost base

Growing sales in strategic categories

Investing for future growth

Trading conditions have become more difficult. We are a year into the English smoking ban and consumer confidence is at its lowest for 18 years. We have faced major cost increases across a wide range of categories. Looking forward, pubs will have to fight even harder to protect and grow their share of discretionary spending, and on-trade beer sales will be under considerable pressure. But there are a number of our sales categories that continue to grow, including eating out, premium drinks and accommodation; and newer consumer groups continue to be attracted to our outlets.

We are well placed to face the challenges. We remain focused on what is most important in our business: high-quality, good-value food and drink in the unique setting of the British pub. We have never chased sales for their own sake, but rather sustainable profit growth over the long term - reflected in our strong margins. We maintain a balance sheet with comfortable headroom, asset-backed by a well-invested and overwhelmingly freehold pub estate. We continue to generate healthy free cash flow, and have a long-term record of doing what is required to deliver industry-leading results.

Over the past two years, we have been implementing an accelerated programme of change, to optimise our position relative to expected market developments. A significant part of the estate has been churned and we have continued to add quality sustainable outlets and brought in further expertise via Hardys & Hansons and Loch Fyne. Food sales now stand at 34% of our Retail revenues: adding in food-related drink sales, our dining revenue now accounts for half of the total. In ales we focus on a small number of brands that can lead their categories. We have rationalised the cost base in all businesses: retail, tenancy and brewing & distribution.

Although all our divisions have performed well in difficult circumstances, I am particularly encouraged by Belhaven's result. Scotland's smoking ban came over a year before England's. In the second year of the ban, the Belhaven team have developed the business significantly towards food and families, and delivered operating profit growth of 18%.

* As throughout this document, the profit figures are shown before exceptional items. The results are positively impacted by an additional week's trading relative to last year.

Greene King Retail 

	06/07	07/08	Change	Change
	52 weeks	53 weeks		52 week basis
Average number of pubs trading	781	801	+3%	+3%
Revenue	£546.0m	£578.7m	+6%	+4%
EBITDA	£138.0m	£147.9m	+7%	+5%
Operating profit	£110.7m	£116.5m	+5%	+3%
Operating profit margin	20.3%	20.1%	- 0.1 %pts	- 0.1 %pts
Revenue per pub	£699.1k	£722.5k	+3%	+1%
Operating profit per pub	£141.7k	£145.4k	+3%	+1%

In Greene King Retail, made up of our Local Pubs, Destination Pubs and Loch Fyne Restaurants businesses, sales were up 6% at £578.7m and operating profit up 5% at £116.5m. Before the impact of the mainly leasehold Loch Fyne restaurants, Retail margins were up 0.5 percentage points. Total like-for-like sales were down 1%, while like-for-like food sales were up by over 2%.

All businesses made meal deals more prominent, many houses delayed passing on the Chancellor's budget increases in beer duty, and, facing a strong Euro, we introduced more dollar-traded wines. We made major savings from rationalising both menu items and ingredients, energy savings have mitigated increases in power costs, and we have removed Sky from a number of pubs where it made economic sense to do so.

Food and food-related sales now account for half of our Retail sales and food remains our top priority for sales growth. We have learned much from Loch Fyne on development planning, kitchen design, customer profiling and direct marketing. The Locals team have driven particularly high food growth this year - focusing on top quality pub food, and investing in kitchen upgrades to deliver this at its very best. We have seen significant growth again in wine sales, and have agreed a wider roll-out of Fairtrade coffee. The accommodation business in Destination Pubs has been upgraded with the replacement of all the beds in Old English Inns, as well as improvements to bathroom amenities and the breakfast offer. Hungry Horse benefits from a new livery, a rationalised menu with additional value, and an accelerated capital investment programme.

In the course of the year, we invested £21.4m in 97 major property improvements. Additionally, £27.0m went on maintenance capex, with a further £7.5m on repairs from the revenue account. Key strategic capital projects included the upgrade of a further tranche of pubs to the Premium Local format, and beginning the conversion of a number of pub sites to Loch Fyne restaurants, as well as the major upgrades at Hungry Horse.

We began the financial year with 788 Retail sites. 36 sites were added from the Loch Fyne acquisition, two new Loch Fyne sites were acquired, 11 pubs were divested, 17 transferred to, and one from, Pub Partners, and seven transferred to Belhaven. The closing balance was therefore 792 sites, segmented as follows:

	Outlets at year end	Outlets trading on average during year
Local Pubs	492	500
Destination Pubs	261	273
Loch Fyne Restaurants	39	28
Total	792	801

Pub Partners

	06/07	07/08	Change	Change
	52 weeks	53 weeks		52 week basis
Average number of pubs trading	1,431	1,443	+1%	+1%
Revenue	£164.0m	£167.2m	+2%	+0%
EBITDA	£80.6m	£88.2m	+9%	+7%
Operating profit	£74.7m	£81.4m	+9%	+7%
Operating profit margin	45.5%	48.7%	+ 3.1 %pts	+ 3.1 %pts
EBITDA per pub	£56.3k	£61.1k	+9%	+6%
Operating profit per pub	£52.2k	£56.4k	+8%	+6%

Revenue at Pub Partners, our tenancy/lease division in England and Wales, was up 2% at £167.2m, while operating profit rose 9% to £81.4m. Hence the operating profit margin rose significantly, by 3.1 percentage points, to 48.7%. Like-for-like profit was unchanged year-on-year.

An average of 1,443 sites traded over the year. At the start of the financial year, 1,417 pubs were trading. 53 sites were added from acquisitions, mainly New Century Inns, while 12 were sold and 17 transferred in from the Retail division, with one going the other way. The closing balance was therefore 1,474 pubs.

Pub Partners is focused on our partners' business health. We have cut the price of soft drinks and bottled lager on many newer agreements, to allow more attractive pricing to the end customer. 'Share & Save', our third-party purchasing programme, can add 10% to a typical participating pub's bottom line. We optimise rather than maximise rents, balancing short-term rental yield against tenant morale, viability and long-term security of income. We offer both tenancies and leases and we try to ensure we always have the right licensee on the right agreement in the right pub. However, in general we do favour tenancies, which account for 79% of Pub Partners sites. With a tenancy, the licensee's fixed cost base is somewhat reduced compared to a straight lease, and we retain more control.

We are not immune to the difficulties in the market, but we believe we are better placed than many others. In the year, rent concessions remained below 1% of rent roll and were actually lower than the prior year, bad debts accounted for just 0.3% of sales and 17 pubs were closed. Applications remained healthy, at 93% of the previous year's level, and we have appointed three new regional recruitment and training managers, managing the whole process from recruitment to the end of a new licensee's first year.

During the period, a total of £8.7m was invested across the Pub Partners estate, including 30 major investments. An additional £10.0m went on maintenance capex, and £3.8m on repairs from the revenue account. These figures exclude additional monies spent by licensees.

Belhaven

	06/07	07/08	Change	Change
	52 weeks	53 weeks		52 week basis
Revenue	£116.4m	£126.1m	+8%	+6%
Operating profit	£23.3m	£27.5m	+18%	+16%
Operating profit margin	20.0%	21.8%	+ 1.8 %pts	+ 1.8 %pts

Belhaven, our Scottish division, operates in managed pubs, tenanted/leased pubs and brewing & drinks distribution. In the second year of trading following Scotland's smoking ban, the team delivered an outstanding result, with revenue up 8% at £126.1m, operating profit up 18% at £27.5m and the operating profit margin up 1.8 percentage points at 21.8%. All of Belhaven's businesses grew both sales and profits.

The number of pubs trading grew during the year from 299 to 321, including 7 pubs transferred from the English Retail business just before the financial year end. 95 of the 321 are managed and the balance tenanted/leased. On average during the year, 306 pubs were trading.

In tenancy/lease, like-for-like rents and beer supply income were both positive. Debt was tightly controlled and support was given to our tenants through various initiatives including equitable beer pricing policies, financial and accounting guidance and catering planning assistance; and we are taking the lead role in ensuring that our tenanted and leased pubs comply fully with the new Scottish licensing regime.

Belhaven's managed pubs enjoyed an excellent year, with strong profit growth being achieved despite a reduction in the number of units operated. Growth came from the successful repositioning of a number of specialist pubs to appeal to a broader consumer base, increased focus on food and value for money, and an impressive improvement in the rate of conversion of sales to operating profit. Food business development has been a key theme throughout the estate; overall, Belhaven's food revenue has increased by more than 50% over the last two years.

Belhaven's drinks business grew beer volume and profit in an on-trade market down 6%. Net new business in free trade drove the growth, and margins held up despite the intensity of competition for market share. Belhaven Best volume was up 4.6%, representing another substantial increase in market share.

As planned, Stuart Ross is due to retire this autumn, having led Belhaven for nearly 20 years. Since he joined the Greene King top team at the time of the acquisition, the whole business has benefited extensively from his experience and exceptional talent. On a personal level, I would like to extend my sincere thanks to Stuart for his commitment and support, and for his professional execution of the integration and ongoing development of the Belhaven business. The results achieved in Scotland this year make a fitting valediction. Stuart's commitment and work-rate have been as strong in this, his retirement year, as in any other year.

The process to find a replacement to lead Belhaven through its next stage of development is well underway, and I am delighted that Stuart has accepted my invitation to stay on with Belhaven in an advisory capacity. Stuart has always placed great emphasis on putting in place a strong team around him; the Belhaven team will, I am sure, maintain the momentum of the last couple of years into the future.

Brewing Company

	06/07	07/08	Change	Change
	52 weeks	53 weeks		52 week basis
Revenue	£91.1m	£88.5m	- 3%	- 5%
Operating profit	£23.0m	£21.6m	- 6%	- 8%
Operating profit margin	25.2%	24.4%	- 0.8 %pts	- 0.8 %pts

Brewing Company enjoyed a strong first half but had a more difficult second half. Our own brands performed strongly, and especially so in the take-home market. However, sales of third-party lager and other drinks sales declined year on year in an increasingly challenging on-trade market, which in turn led to under-recovery of our fixed costs. Nevertheless, the operating profit margin, at 24.4%, remains sector-leading.

Own-brewed volume was up 6% on the prior year, with Greene King IPA, Old Speckled Hen and Abbot Ale growing 4%, 9% and 12% respectively. Despite the UK beer market declining by 5%, we grew both our share and our absolute volume. In the on-trade, Greene King IPA remains Britain's number one cask ale brand, and Greene King is the largest brewer in both standard and premium cask ale categories. We are also market leader in premium ale in supermarkets, where in the year, Old Speckled Hen grew its volume by 28% and its share of the category by two full percentage points to 11.9%, according to AC Nielsen data. Benefiting from a single brewery, we run a lean brewing and distribution operation, which enables us to achieve our strong margins and return on capital employed.

About half of Brewing Company's sales are 'factored' product, meaning lager, wine, spirits and soft drinks produced by other companies that we sell to the on-trade, to offer our customers a full range. We were affected this year by the overall decline in the on-trade lager market, and we also withdrew from a number of unsustainable wholesaler relationships. In common with others we also had to absorb major cost increases for energy and raw materials. We believe that some of these changes, especially the decline in lager volume, are structural rather than temporary. Accordingly, we have been rationalising our fixed cost base throughout the year and have announced further changes since the year end. In August we will close one of our distribution depots, outsource deliveries to outlying areas to a third party, bring certain other deliveries back in house and improve working practices. Together, these actions will result in savings of around £0.5m in 2008/9 and around £1m per annum thereafter. 

Greene King remains committed to long-term investment in its brands. A major new advertising campaign has just been launched for Old Speckled Hen and in the year under review, we ran a highly successful £2m multi-media campaign for Greene King IPA including TV, press and outdoor advertising. Greene King IPA is the official beer of England Rugby and, to underline our relationship with rugby, we have signed Lawrence Dallaglio as an 'ambassador' for the brand in a new two-year deal.

Financial review

Our strong growth in earnings per share was achieved by increased profits (both organic and from acquisitions), strengthened margins, tight cost control and rigorous cash management, augmented by share buy-backs. We have maintained our level of capital investment in the business and, after funding interest and dividends, we remain strongly cash positive, despite the challenges faced during the year.

Our revenue of £960.5m, up 5% on last year, was driven by a combination of organic growth, contributions from the Loch Fyne and New Century Inns acquisitions and a full year contribution from Hardys & Hansons. Despite an environment of fragile sales and hostile costs, our profit conversion was good. We improved margins through a combination of purchasing initiatives and contract re-negotiations, yield management focus, labour productivity gains and other economies. Together these initiatives more than offset increases of £8.1m in our key cost categories.

Operating profit grew 8% to £236.2m at a margin of 24.6%. Interest costs of £94.2m were £15.9m higher than the prior year, as the two acquisitions, increased investment in the estate, and share buy-backs were only partially offset by the strong free cash flows of the core business. 

Profit before tax grew to £142.0m, up 2%, delivering adjusted earnings per share of 74.0p, an increase of 14%. The strength of the trading performance underpins the proposed final dividend per share of 18.7p to give a full year dividend per share of 26.0p, an increase of 14%, with dividend cover of 2.8x.

This year we invested £107.9m in our existing business, an increase of £16.4m on the prior year. Continuous investment is important, especially in more challenging times, for sustained performance and the maintenance of a quality estate. In the year, £34.4m was spent on pub developments with good returns ahead of our cost of capital, £17.5m on single site acquisitions and £45.7m on maintaining the excellent condition of our estate. 

We continue to focus on delivering strong cash flows. At £283.3m, EBITDA was almost 9% or £22.5m higher than last year. Combined with effective working capital management this converted to £31.1m of positive free cash flow, after interest, tax, dividends and investment in the estate. Adding in the proceeds from disposals, positive cash flow was £72.5m.

During the year, we returned £149m to shareholders through the repurchase for cancellation of 15.4m shares at an average price of 969p per share, representing 10.2% of the issued share capital. At the end of the year, our net debt of £1,605.5m was £170.0m higher than at the end of the previous year. This was after investing £247.6m in New Century Inns, Loch Fyne and our share buy-back programme.

With a debt service cover ratio of 1.8x in our securitised vehicle, unchanged on last year, we are comfortably within our covenant of 1.1x. We remain well placed for the future with fixed charge cover at the year end of 2.3x. At the year end we had net debt of £1,605.5m at a composite rate of 6%, with 97% of it fixed. We have sufficient headroom to continue financing our business strategy and growth. Our prudent and efficient approach to balance sheet management gives us options for continued investment and growth in our core estate, further acquisitions and further share buy-backs.

Acquisitions and disposals

On 7 August we acquired Loch Fyne Restaurants for a final consideration, including net debt, of £64.2m, financed from existing debt facilities. Loch Fyne brings an important new dimension to Greene King: its strong position in premium casual dining complements our pre-existing expertise in mid-market food-led pubs. We have begun conversion of a number of Greene King sites to the Loch Fyne format. Trading at Loch Fyne for the year was encouraging and like-for-like sales were up. I am delighted that Mark Derry and his senior team at Loch Fyne have agreed to continue to manage the business's growth. They and all their employees are most welcome new members of the Greene King team.

On 13 November, we acquired New Century Inns for a total consideration, including net debt, of £32.8m, also financed from existing debt facilities. These 49 high-quality tenanted and leased pubs (all but one freehold), complement our existing estate and strengthen our position in the north and northeast. A programme of improvements is underway, capture of synergies is on track and trading in the estate has been in line with our expectations.

We continually review our portfolio to identify sites for disposal, namely those of lower quality, limited potential or high alternative-use value. In 2007/8, we disposed of 26 sites, realising an exceptional profit of £9.8m and releasing cash of £41.4m to invest in higher-potential sites and/or to acquire new sites for the portfolio. 

Refinancing after year end

We were pleased to announce on 26 June that we had successfully finalised terms for a second tap of our whole business securitisation, issuing an additional £350m of investment grade bonds. This maintains the company's flexibility to continue to invest and enhance shareholder income whilst taking advantage of longer term, more leveraged bond finance. This will take the total outstanding securitised debt to £1,451m, backed by approximately 80% of our pubs. The transaction was completed on 30 June, when the funds raised were used to partially re-pay existing bank facilities.

We also worked closely with our banking partners to simplify our bank borrowings to a 4-year, £400m syndicated facility. We appreciate the strength of our relationship with the banks and their confidence in us. All of our debt is now fixed and our blended interest rate remains at 6%. 

Following the securitisation tap, only around half of our £400m bank facility will be drawn. This means that - with no refinancing risk, no major repayments until 2012 and strong and positive operational cash flows after ongoing capital expenditure - we have both the efficiency and the flexibility to take on the challenges that the industry now faces. 

As part of the securitisation tap process, the directors commissioned Gerald Eve to undertake a valuation of the securitisation estate as at 1 May 2008. The subsequent portfolio valuation of the 2,035 pubs was £2.1bn, based on current market values, a rise on average of 5% per pub since the March 2006 tap valuation. 

Real Estate Investment Trust

We stated our commitment to releasing property value in our preliminary results statement for 2006/7. Since then, we have consulted with HM Revenue & Customs as to the feasibility of a Real Estate Investment Trust (REIT) for Greene King. They have indicated that Greene King could in principle convert to a REIT without de-merging the company. This removes one key obstacle, but we still need to be convinced that a REIT structure for Greene King will deliver real long-term economic value. We are also reviewing the operational implications for the business. We will provide an update at our interim results in December. 

Current trading and outlook

Despite the difficult economic conditions our businesses are trading in line with our expectations. In the first eight weeks of the new financial year, Retail like-for-like sales were 2.8% below last year, though we are still seeing food and accommodation growth. Like-for-like profits in Pub Partners are level with last year's. Brewing Company's own-brewed volume is down by 2%, which we believe to be ahead of the market. Belhaven has maintained its strong performance into the new financial year, with retail like-for-like sales up strongly again. Cost pressures continue but we believe our margin and cash focus will allow us to minimise the impact of these pressures in the new financial year. We are better placed than many others due to the resilience and flexibility of our business, and as a result we remain confident of meeting our expectations for the year. 

Rooney Anand

Chief executive

2 July 2008

Group Income Statement

for the fifty-three weeks ended 4 May 2008

		2008				2007
	Note	Before exceptional  items	Exceptional items	Total	Before exceptional items		Exceptional items	Total
		£m	£m	£m	£m		£m	£m
Revenue	2	960.5	-	960.5	917.5		-	917.5
Operating costs		(724.3)	(4.9)	(729.2)	(699.4)		(4.9)	(704.3)
Profit on disposal of property, plant and equipment		-	9.8	9.8	-		21.1	21.1
Operating profit	2	236.2	4.9	241.1	218.1		16.2	234.3
Finance income		16.4	1.0	17.4	4.4		-	4.4
Finance costs		(112.0)	-	(112.0)	(83.0)		(10.1)	(93.1)
Net finance income from pensions		1.4	-	1.4	0.3		-	0.3
Profit before tax		142.0	5.9	147.9	139.8		6.1	145.9
Tax	4	(39.7)	16.1	(23.6)	(42.0)		4.7	(37.3)
Profit attributable to equity holders of parent		102.3	22.0	124.3	97.8		10.8	108.6
Earnings per share
- basic	5			89.9p				71.9p
- adjusted basic	5	74.0p			64.8p
- diluted	5			89.7p				70.8p
- adjusted diluted	5	73.8p			63.8p
Dividends per share (paid and proposed in respect of the period)		26.0p			22.9p

Adjusted earnings per share, operating profit and tax exclude the effect of exceptional items.

  Group Balance Sheet

as at 4 May 2008

 

				As at	As at
				4 May	29 April
				2008	2007
	Note			£m	£m
Non current assets
Property, plant and equipment				2,057.9	1,985.8
Goodwill				673.8	607.7
Financial assets				34.8	33.7
Derivative financial instruments				2.7	8.4
Deferred tax assets				28.6	26.3
Prepayments				5.2	6.2
Trade and other receivables				0.2	0.2
				2,803.2	2,668.3
Current assets
Inventories				17.9	18.2
Trade and other receivables				51.7	48.9
Prepayments				13.0	6.4
Derivative financial instruments				0.7	2.0
Cash and cash equivalents	7			91.6	92.1
				174.9	167.6
Total assets				2,978.1	2,835.9
Current liabilities
Borrowings	7			(60.6)	(136.4)
Derivative financial instruments				(1.0)	(0.2)
Trade and other payables				(198.7)	(168.2)
Income tax payable				(39.5)	(31.6)
				(299.8)	(336.4)
Non current liabilities
Borrowings	7			(1,636.5)	(1,391.2)
Derivative financial instruments				(7.9)	(4.4)
Deferred tax				(211.4)	(224.2)
Post-employment liabilities				(73.8)	(45.5)
				(1,929.6)	(1,665.3)
Total liabilities				(2,229.4)	(2,001.7)
Total net assets				748.7	834.2
Issued capital and reserves
Share capital				17.0	18.8
Share premium				247.2	243.7
Capital redemption reserve				3.3	1.4
Hedging reserve				(3.6)	4.3
Own shares				(17.2)	(18.9)
Retained earnings				502.0	584.9
Total equity	9			748.7	834.2
Net debt	7			1,605.5	1,435.5

  Group Cash Flow Statement

for the fifty-three weeks ended 4 May 2008

			2008	2007
	Note		£m	£m
Operating activities
Operating profit			241.1	234.3
Operating exceptional items			(4.9)	(16.2)
Depreciation and amortisation			47.1	42.7
EBITDA*	2		283.3	260.8
Working capital and non-cash movements	10		(7.3)	14.5
Interest received			16.4	4.4
Interest paid			(102.8)	(91.5)
Tax paid			(25.8)	(16.0)
Net cashflow from operating activities			163.8	172.2
Investing activities
Purchase of property, plant and equipment			(98.3)	(90.9)
Purchase of other investments			(0.2)	-
Movements in financial assets			(0.4)	0.9
Sales of property, plant and equipment			41.4	70.3
Acquisition of subsidiaries, net of cash acquired	8		(82.6)	(172.5)
Net cashflow from investing activities			(140.1)	(192.2)
Financing activities
Equity dividends paid	6		(33.5)	(31.5)
Issue of shares	9		5.3	5.4
Purchase of own shares	9		(150.6)	(44.2)
Financing costs			(0.1)	(4.3)
Repayment of borrowings			(101.8)	(802.9)
Advance of borrowings			265.0	965.0
Net cashflow from financing activities			(15.7)	87.5
Net increase/(decrease) in cash and cash equivalents			8.0	67.5
Opening cash and cash equivalents			82.7	15.2
Closing cash and cash equivalents			90.7	82.7

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

  Group Statement of Recognised Income and Expense

for the fifty-three weeks ended 4 May 2008

			2008	2007
			£m	£m
Cashflow hedges: (losses)/gains taken to equity			(3.2)	18.1
Cashflow hedges: (gains)/losses recycled to income			(8.1)	5.0
Actuarial (losses)/gains on defined benefit pension schemes			(31.3)	10.2
Tax on items recognised directly in equity			12.2	(10.0)
Tax on benefit relating to share based payments			(4.0)	6.3
Net (loss)/income recognised directly in equity			(34.4)	29.6
Profit for the period			124.3	108.6
Total recognised income and expense for the period attributable to equity holders of parent			89.9	138.2

  Notes to the accounts 

for the fifty-three weeks ended 4 May 2008

1 Basis of preparation

The financial information for the fifty-three weeks ended 4 May 2008 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 2007 financial statements of Greene King plc, except for the following:

IFRS 7 - Financial instruments: Disclosure

IAS1 - Amendment - Presentation of Financial Statements: Capital Disclosures

IFRIC 8 - Scope of IFRS 2

IFRIC 9 - Reassessment of Embedded Derivatives

IFRIC 10 - Interim Financial Reporting and Impairment

IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions

IFRIC 12 - Service Concession Agreements

There is no impact on the current or prior period financial position or results from the adoption of these standards and interpretations.

 

2 Segment information

Retail covers the results of managed houses and restaurants, Pub Partners covers the results of tenanted houses, Brewing Company covers brewing beer, marketing and selling, all predominantly in England. Belhaven covers the results of our Scottish operation which includes managed and tenanted houses, and brewing and selling beer. Corporate includes central costs and central assets/liabilities.

Retail includes 39 weeks trading from the acquired Loch Fyne Restaurants business which contributed £3.4 million profit.

2008	Retail	Pub Partners	Brewing Company	Belhaven	Corporate	Unallocated	Total Operations
	£m	£m	£m	£m	£m	£m	£m
External revenue	578.7	167.2	88.5	126.1	-	-	960.5
Segment operating profit (pre-exceptionals)	116.5	81.4	21.6	27.5	(10.8)	-	236.2
Exceptional items	(1.3)	2.7	0.2	0.1	3.2	-	4.9
Segment operating profit (post-exceptionals)	115.2	84.1	21.8	27.6	(7.6)	-	241.1
Net assets	1,246.8	873.1	205.7	331.7	(1.5)	(1907.1)	748.7
EBITDA*	147.9	88.2	25.6	31.7	(10.1)	-	283.3

2007	Retail	Pub Partners	Brewing Company	Belhaven	Corporate	Unallocated	Total Operations
	£m	£m	£m	£m	£m	£m	£m
External revenue	546.0	164.0	91.1	116.4	-	-	917.5
Segment operating profit (pre-exceptionals)	110.7	74.7	23.0	23.3	(13.6)	-	218.1
Exceptional items	2.1	17.2	(2.2)	-	(0.9)	-	16.2
Segment operating profit (post-exceptionals)	112.8	91.9	20.8	23.3	(14.5)	-	234.3
Net assets	1,212.9	816.3	212.0	306.9	(9.2)	(1,704.7)	834.2
EBITDA*	138.0	80.6	27.1	27.3	(12.2)	-	260.8

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

Unallocated assets / liabilities includes cash, borrowings, pension, net deferred tax, net current tax, and derivatives.

 3 Exceptional items

 

		2008	2007
		£m	£m
Included in operating profit
Integration of New Century Inns business		0.4	-
Integration of Hardys & Hansons business		1.3	4.9
Financial Systems Integration		1.0	-
Adjustments to carrying value of goodwill in respect of utilisation of tax losses		2.2	-
Net profit on disposal of property, plant and equipment		(9.8)	(21.1)
		(4.9)	(16.2)
Included in financing costs
Termination of interest rate swaps and loan facilities		(1.0)	10.1
		(5.9)	(6.1)

The net profit on disposal of property, plant and equipment of £9.8m (2007: £21.1m) comprises a total profit on disposal of £15.4m (2007: £21.1m) and a total loss on disposal of £5.6m (2007: £nil).

 

4 Taxation

	2008	2008	2008	2007	2007	2007
	Before  exceptional  items	Exceptional  items	Total	Before Exceptional  items	Exceptional items	Total
	£m	£m	£m	£m	£m	£m
Income tax
Corporation tax before exceptional items	38.2	-	38.2	39.2	-	39.2
Exceptional tax credit	-	-	-	-	(3.0)	(3.0)
Recoverable on exceptional items	-	(0.4)	(0.4)	-	(4.4)	(4.4)
Current income tax	38.2	(0.4)	37.8	39.2	(7.4)	31.8
Adjustment in respect of prior periods	(1.0)	-	(1.0)	-	-	-
	37.2	(0.4)	36.8	39.2	(7.4)	31.8
Deferred tax
Origination and reversal of temporary differences	2.5	(15.7)	(13.2)	2.8	2.7	5.5
Tax charge in the income statement	39.7	(16.1)	23.6	42.0	(4.7)	37.3

The tax effect of non-trading exceptionals was £nil (2007 - £3.0m).

 

5 Earnings per share

Basic earnings per share has been calculated by dividing the profit attributable to equity holders of £124.3m (2007 - £108.6m) by the weighted average number of shares in issue during the year (excluding own shares held) of 138.3m (2007 - 151.0m).

Diluted earnings per share has been calculated on a similar basis taking account of 0.2m (2007 - 2.3m) dilutive potential shares under option, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 138.5m (2007 - 153.3m).

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.

 

Adjusted earnings per share	Earnings		Basic earnings per share		Diluted earnings per share
	2008	2007	2008	2007	2008	2007
	£m	£m	p	p	p	p
Profit attributable to equity holders	124.3	108.6	89.9	71.9	89.7	70.8
Exceptional items (note 3)	(22.0)	(10.8)	(15.9)	(7.1)	(15.9)	(7.0)
Profit attributable to equity holders before exceptional items	102.3	97.8	74.0	64.8	73.8	63.8

 

6 Dividends paid and proposed

	2008	2007
	£m	£m
Declared and paid in the period
Interim dividend for 2008 - 7.30p (2007 - 6.45p)	9.9	9.8
Final dividend for 2007 - 16.45p (2006 - 14.35p)	23.6	21.7
	33.5	31.5
Proposed for approval at the AGM
Final dividend for 2008 - 18.70p (2007 - 16.45p)	25.0	24.4
Total proposed dividend for 2008 - 26.00p (2007 - 22.90p)	34.9	34.2

Dividends on own shares have been waived.

 

7 Borrowings 

	2008	2008	2008	2007	2007	2007
	Current	Non- current	Total	Current	Non- current	Total
	£m	£m	£m	£m	£m	£m
Bank overdrafts	0.9	-	0.9	9.4	-	9.4
Bank loans - floating rate	-	500.0	500.0	-	235.0	235.0
Bank loans - fixed rate	3.3	58.3	61.6	3.0	61.6	64.6
Securitised debt	17.0	1,077.6	1,094.6	16.1	1,094.6	1,110.7
Loan notes	39.4	0.6	40.0	107.9	-	107.9
Borrowings	60.6	1,636.5	1,697.1	136.4	1,391.2	1,527.6
Cash and cash equivalents			(91.6)			(92.1)
Net debt			1,605.5			1,435.5

8 Acquisitions

The group acquired 100% of Loch Fyne Restaurants Limited share capital on 7 August 2007. The group also acquired 100% of the share capital of New Century Inns Limited, a tenanted pub estate, on 14 November 2007.

Fair value of assets acquired	Loch Fyne		New Century Inns		Total
	Carrying	Fair	Carrying	Fair
	Value	Value	Value	Value	2008
	£m	£m	£m	£m	£m
Property, plant and equipment	22.7	17.0	18.2	25.9	42.9
Intangible assets	13.7	-	-	-	-
Investments	0.8	0.8	-	-	0.8
Inventories	0.5	0.5	-	-	0.5
Trade receivables	0.1	0.1	0.2	0.2	0.3
Other receivables/prepayments	0.8	0.7	0.4	0.3	1.0
Derivative financial instruments	-	0.2	-	-	0.2
Cash and cash equivalents	2.2	2.2	(0.9)	(0.9)	1.3
Trade payables	(4.2)	(4.2)	(0.5)	(0.5)	(4.7)
Other payables/accruals	(8.7)	(8.8)	(0.3)	(0.3)	(9.1)
Deferred tax	0.1	0.1	(1.2)	(3.3)	(3.2)
Fair value of net assets	28.0	8.6	15.9	21.4	30.0
Goodwill		57.8		10.5	68.3
		66.4		31.9	98.3
Satisfied by:
Cash		16.6		18.5	35.1
Fees		0.4		-	0.4
		17.0		18.5	35.5
Loan notes issued		14.4		-	14.4
Debt acquired		35.0		13.4	48.4
Total consideration		66.4		31.9	98.3

The fair value of properties acquired was established following a review of properties that was carried out by qualified surveyors employed by the company. Retained properties have been revalued at their existing use value and properties subsequently disposed have been valued at their fair value less costs to sell. The values of other current assets and liabilities have been adjusted to amounts to be realised or paid respectively.

  

9 Reconciliation of movements in total equity

	Share	Share	Capital	Hedging	Own	Retained	Total
	capital	premium	redemption	reserve	shares	earnings
	£m	£m	£m	£m	£m	£m	£m
At 29 April 2007	18.8	243.7	1.4	4.3	(18.9)	584.9	834.2
Issue of ordinary shares	0.1	3.5	-	-	-	-	3.6
Release of shares - share option proceeds	-	-	-	-	1.7	-	1.7
Repurchase of own shares	(1.9)	-	1.9	-	-	(150.6)	(150.6)
Actuarial loss	-	-	-	-	-	(31.3)	(31.3)
Tax on actuarial loss	-	-	-	-	-	8.8	8.8
Share based payments	-	-	-	-	-	3.4	3.4
Tax on share based payments	-	-	-	-	-	(4.0)	(4.0)
Cash flow hedges
- losses taken to equity	-	-	-	(3.2)	-	-	(3.2)
- gains recycled to income on swap terminations				(8.1)			(8.1)
Tax on cash flow hedges	-	-	-	3.4	-	-	3.4
Profit for the period	-	-	-	-	-	124.3	124.3
Equity dividends paid	-	-	-	-	-	(33.5)	(33.5)
At 4 May 2008	17.0	247.2	3.3	(3.6)	(17.2)	502.0	748.7

10 Working capital and non-cash movements

	2008	2007
	£m	£m
Increase in provision against other financial assets	0.3	0.3
Decrease in inventories	0.8	3.5
Increase in trade and other receivables	(3.9)	(1.8)
(Decrease)/increase in trade and other payables	(2.0)	14.8
Share based payment expense	3.4	4.7
Difference between defined benefit pension contributions paid and amounts charged	(2.7)	(1.9)
Integration costs	(3.2)	(5.1)
Working capital and non-cash movements	(7.3)	14.5

11 Movement in net debt

		2008	2007
		£m	£m
Cash at bank and in hand		24.9	20.1
Short term deposits*		66.7	72.0
Overdrafts		(0.9)	(9.4)
Current portion of borrowings		(59.7)	(127.0)
Non current portion of borrowings		(1,636.5)	(1,391.2)
Closing net debt		(1,605.5)	(1,435.5)

* included in cash on the balance sheet

	2008	2007
	£m	£m
Net increase in cash and cash equivalents	8.0	67.5
Proceeds - issue of securitised debt	-	(550.0)
Proceeds - advances of loans	(265.0)	(415.0)
Repayment of principal - securitised debt	16.5	15.3
Repayment of principal - loans and loan notes	85.3	787.6
Financing issue costs	-	4.3
Increase in net debt arising from cash flows	(155.2)	(90.3)
Debt acquired through acquisitions	-	-
Debt issued for acquisitions	(14.4)	(102.9)
Other non cash movements	(0.4)	4.4
Increase in net debt	(170.0)	(188.8)
Opening net debt	(1,435.5)	(1,246.7)
Closing net debt	(1,605.5)	(1,435.5)

12 Dividend payments

Subject to the approval of shareholders at the annual general meeting, the final dividend will be paid on 8 September 2008 to shareholders on the register at the close of business on 8 August 2008.

13 Reports and accounts

The above financial information is derived from the statutory accounts for the periods ended 4 May 2008 and 29 April 2007, on both of which the auditors have issued an unqualified opinion. The information does not constitute statutory accounts as defined in Section 240 (1) of the Companies Act 1985.

The accounts for the period ended 29 April 2007 have been filed with the Registrar of Companies and the accounts for the period ended 4 May 2008 will be filed in due course.

The 2008 Report & Accounts will be posted to shareholders on 1 August 2008 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.

- ends -

ENDFR IIFLIDIIVIIT

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Related Shares:

Greene King