10th Nov 2005 07:01
Punch Taverns PLC10 November 2005 PUNCH TAVERNS PLC("Punch" or "the Group") Preliminary Results for the 52 Weeks ended 20 August 2005 Growth momentum continues across the estate Punch Taverns plc, the operator of over 8,200 leased and tenanted pubsthroughout the UK, today announces preliminary results for the 52 weeks ended 20August 2005. Highlights • Group turnover up 21% to £770 million (2004: £638 million) - like for like turnover up 2.5% • EBITDA (pre exceptional items)increased by 21% to £412 million (2004:£339 million) - like for like pub profit up 2.5% • Profit before tax (pre exceptional items and amortisation) up 28% to £207 million (2004: £161 million) • Adjusted earnings per share (pre exceptional items) up 28% to 62.3p (2004: 48.8p) • Good results driven by: - continued organic growth - existing Punch estate average EBITDA per pub up 4% - acquisition and completed integration of InnSpired and Avebury plus 106 individual pubs • Proposed final dividend of 7.6p, bringing the total dividend for the year to 11.3p, representing an increase of 26% (2004: 9.0p) • Continued investment in estate: £63 million including 936 developments • Trading in the current year is in line with expectations Giles Thorley, Chief Executive of Punch Taverns plc, commented: "We have had another year of good progress driven by organic growth andvalue-enhancing acquisitions. With the constant application of our provenstrategy our enlarged estate will continue to deliver sustained growth. "Current trading is satisfactory and in line with the Board's expectations. Weare continuing to focus on supporting our retailers to build their businessesand remain well placed to acquire further quality pubs through piecemeal andinnovative corporate acquisitions." 10 November 2005 Enquiries: Punch Taverns plc Today: 020 7457 2020Giles Thorley, Chief Executive Thereafter: 020 7868 8903Robert McDonald, Finance Director College Hill Tel: 020 7457 2020Justine WarrenMatthew Smallwood Preliminary results for the 52 weeks to 20th August 2005 The financial year to the 20th August 2005 has seen our strategy continue todeliver long term growth for shareholders through organic operationalimprovement and value enhancing acquisitions. Punch's strategy is straightforward and has remained consistent since formation.It is to focus on the sustained organic growth of our pub estate by constantlyimproving the quality of pubs and their consumer offer. This is achievedthrough the recruitment of high quality pub operators; training and support;capital investment and the continued development of preferential supplyarrangements with our suppliers. At the same time, the Group seeks to acquirepubs that meet the Board's criteria for earnings enhancement and to efficientlyfinance the business using long term debt that complements our income streamsand the strength of our balance sheet. Punch's results for the year demonstrategood progress in all of these areas. Results A summary of key achievements is set out below. Figures exclude exceptionalitems: • Turnover of £770m, up 21%• EBITDA of £412m, up 21%• Profit before tax and amortisation of £207m, up 28%• Adjusted earnings per share of 62.3p, up 28%• Continued organic growth with like for like turnover and pub profit contribution both up 2.5%. Average EBITDA per pub in the original estate up 4%• Acquisition and completed integration of InnSpired and Avebury adding a further 880 leased and tenanted outlets In recognition of these excellent results the Board is recommending a finaldividend of 7.6p per ordinary share, taking the full year dividend to 11.3p, anincrease of 26% on last year. The final dividend will be payable on 26thJanuary 2006 to shareholders on the register on 30th December 2005. Corporate Activity and Refinancing In September 2004, we completed the acquisition of InnSpired with an intentionfrom the outset to refinance that business and sell on those pubs in the estatethat did not meet our growth criteria. That process was duly completed inJanuary 2005, at which point we integrated the retained 471 pubs into the Punchinfrastructure. The net cost of £213m represented excellent value for theretained estate and we have already seen growth of 4.5% in the operationalperformance of those pubs, which contributed for 49 weeks in the trading year. In August 2005, we completed the acquisition of Avebury Holdings, with 409additional pubs, for a price of £219m including debt. This simple acquisitionwas fully integrated into the Punch estate by mid October 2005. Results for theyear include two weeks' trading from Avebury. Both InnSpired and Avebury offer great potential for growth, particularlythrough our investment programme and the introduction of progressive RetailerAgreements over the next few years. The performance of the former Pubmasterestate, acquired in December 2003, provides a real illustration of the potentialwhich saw EBITDA per pub grow by 7.6% this year. In addition to these two large acquisitions we continue to secure individualpubs and improve the quality of our estate through disposal of any pubs that donot offer sustainable income. During the year we completed the purchase of 106individual sites and sold 93 pubs, mostly for alternative use. At the financialyear end the estate comprised 8,227 pubs, prior to the sale of 45 pubs toAdmiral Taverns on 8th September. Key to our ability to expand through acquisition is our efficient capitalstructure. This provides the stability of long term fixed rate finance but alsoallows us to raise further debt finance as profitability permits. In August2005, we restructured the securitised debt acquired with the Pubmaster businessin 2003. This restructure enabled us to replace all short term facilities, toextend this securitisation to £1.25bn at fixed rates averaging 6.2% and torenegotiate covenants to ensure operational flexibility. This refinancingraised some £150m of new cash, paving the way for the acquisition of Avebury.The Group's financial structure and resources mean that we remain well placed tocapitalise on further acquisition opportunities. Organic Growth Our business model continues to deliver growth in revenue and profit. Webelieve that only by encouraging the success of our retailers can we besuccessful. Our objective is therefore to maximise the overall profit of everypub. To give greater focus to this objective we have increased the face-to-facecontact with our retailers. In those pubs within our estate that we have owned for at least two full years,organic turnover growth of 2.5% and steady margins led to an increase in pubprofit contribution of 2.5%. We continue to seek the best calibre of entrepreneurial retailers. Over the past12 months, we have tightened our recruitment process combining local knowledgeand advertising on a pub by pub basis with a national recruitment campaign tiedinto our website. The combination of a structured interview process andassistance given to potential retailers in the preparation of business plans hasfurther improved the quality of applicants. At present we have 1,529 registeredapplicants seeking pubs with Punch. Over the year some 3,000 retailers and staff have participated in our awardwinning training programmes which amount to nearly 14,000 training days. Ourtraining focus continues to be on those issues that make the biggest financialimpact. Consumers in Punch pubs are offered an ever-widening choice of drink productswith over 250 draught ales and lagers and 500 plus non-beer product linesavailable to our retailers. We sold 164 different cask ales during the year andour launch of the Connect to Cask awareness campaign highlighted theopportunities to be gained from the proper promotion and sale of cask ale. Wealso sourced ales from 74 different brewers. Trends in the marketplace have seenthe growth of cold variants of lager which has seen the lager category as awhole grow within our estate. As a result of this beer margin in the estaterose by 3% in the year. Non beer sales continue to grow with comparable margin up 6% in the year.Whilst sales of ready-to-drink flavoured alcoholic beverages are now in marketdecline, cider and wine continue to show strong growth. We seek to lead thesemarket trends by offering both marketing support and an excellent product rangeto ensure our retailers are fully able to exploit the opportunities open tothem. This year has also seen the launch of a food offer designed for pubs andretailers with little experience in food - "Food Solutions" - is now availableto all our retailers and is already producing positive results in a number ofoutlets. Rent in the original Punch estate rose by 6% in the year, with the two keydrivers being our new Retailer Agreements and investment. By August, 957retailers had lease agreements based on the long term version of our RetailerAgreement, which is an evolution of the Punch Growth Lease permitting moreflexibility to reflect a retailer's particular business needs. Our investment programme continues to drive business growth for ourselves andour retailers. During the year we invested over £63m in 936 developmentschemes, including 423 in the former Pubmaster estate. We continue to seeexcellent opportunities to use investment to enhance our estate and achieve highreturns. We continue to maximise machine income through machine share agreements with ourretailers such that overall income has been steady in an increasinglycompetitive market. Industry Issues Punch Taverns is committed to developing a responsible approach to its corporatesocial responsibility. Our pubs are an integral part of the local communitiesin which they are sited and we believe that building strong relationships withthe community is a fundamental part of that responsibility. This can be seen in the proactive approach we have taken to the new licensingregime which comes into force on 24 November and the opportunity it offers bothour retailers and their local communities in terms of more flexible and extendedtrading hours. The support package we offered our retailers, which includedmaking applications on their behalf for both premises and personal licenses, wastaken up by 6,537 of our retailers representing 89% of the estate where newarrangements apply. To date 5,448 premises and 5,199 personal licenses havebeen granted. We have also been successful in extending licensing hours - 99%of our pubs applied for variations and to date 96% of those have been granted.This has been accomplished by working closely with both our retailers and thelocal communities in which they operate. We remain confident that thoselicenses outstanding will be granted by the 24 November deadline. There has been much discussion about prospective legislation imposingrestrictions on smoking in public places. Together with many in the industry,we have introduced a smoking charter which has seen 4,291 of our pubs implementa smoking policy in their business. Legislation in Scotland is due to beimplemented in March 2006 and we have already developed detailed plans for eachof our pubs to create outside smoking areas and to look at other aspects of thepub trade to develop such as food. Prospective legislation for England andWales has just been announced and again we will address the final legislation ona pub by pub basis to take advantage of the opportunities it may offer for ourretailers. Finance Structure and Accounting Results for the year are presented in accordance with UK GAAP. IFRS will applyin the current trading year and results on this basis will be presented with ourinterim results in April 2006. We expect IFRS to cause only minor impact toreported earnings, and there will be no impact on cash flows or debt covenants.Further information will be given in early 2006, including a restatement of 2005results to an IFRS basis. The acquisition of InnSpired in September 2004, removal of the associated debtstructure and subsequent disposal of part of the estate gave rise to goodwill of£12m. The acquisition of Avebury in August 2005 gave rise to goodwill of £20m.Under UK GAAP these goodwill provisions are amortised over 20 years and a chargeof £0.6m was incurred in the year accordingly. The restructure of our securitised debt in August 2005 and the acquisition ofthe Avebury securitisation removed short term debt and increased our securitiseddebt to £3.25bn, which is entirely at fixed rates of interest averaging 6.8% andrepayable from routine cash flows over 30 years. Whilst our debt has increasedto fund acquisitions, profit growth means our interest cover continues to riseand exceeded 2.1x in the year. Exceptional and non recurring costs of £16.3m arose in the year, due mainly tothe two major acquisitions, debt refinancing and licensing. These costs were inline with our expectation, the previously announced forecast of £15m being priorto the debt restructure and acquisition of Avebury. The cost includes a £3.5mcharge for the expected full cost of licensing. Our taxation charge continues to benefit from brought forward losses,particularly arising from companies acquired into the Group. Accordingly ourtax charge for the year was slightly lower than anticipated, 22% beforeexceptional items, and 20% post exceptional items. Cash tax paid in the yearwas £13m. Adjusted earnings per share of 62.3p are calculated before exceptional items andrepresents growth of 28% over prior year. On a fully taxed basis, adjustedearnings per share would have been 55.8p, a growth of 27%. Current Trading and Outlook The outlook for our business continues to be positive and current trading issatisfactory and in line with the Board's expectations. Both of our recentacquisitions are performing well and we continue to see good opportunities forfurther acquisitions and property based transactions to enhance value. The community pub holds a unique and strong position in the social fabric of theUK and we believe that by working closely with our retailers and focusing oninvestment and training it will continue to do so. GROUP PROFIT & LOSS ACCOUNTfor the 52 weeks ended 20 August 2005 52 weeks ended 20 August 2005 52 weeks ended 21 August 2004 Notes Total Non-recurring Before Non-recurring Before exceptional exceptional exceptional exceptional £m items items Total items items (note 3) £m £m (note 3) £m £m £mTurnoverOngoing 726.9 - 726.9 637.6 - 637.6 Acquisitions1 43.2 - 43.2 - - -Group turnover 770.1 - 770.1 637.6 - 637.6Cost of sales (289.4) - (289.4) (240.9) - (240.9)Gross profit 480.7 - 480.7 396.7 - 396.7Administrative expenses (95.4) (7.5) (87.9) (81.7) (8.2) (73.5)Operating profit 2Ongoing 364.4 (5.3) 369.7 315.0 (8.2) 323.2 Acquisitions1 20.9 (2.2) 23.1 - - -Group operating profit 385.3 (7.5) 392.8 315.0 (8.2) 323.2Loss on sale of tangible fixed - - - (12.0) (12.0) -assetsProfit before interest and 385.3 (7.5) 392.8 303.0 (20.2) 323.2taxationInterest receivable 15.8 5.0 10.8 9.9 1.8 8.1Interest payable (216.9) (13.8) (203.1) (179.6) (4.7) (174.9)Profit on ordinary activities 184.2 (16.3) 200.5 133.3 (23.1) 156.4before taxationTax on profit on ordinary 4 (37.6) 6.2 (43.8) (30.8) 4.1 (34.9)activitiesProfit for the period 146.6 (10.1) 156.7 102.5 (19.0) 121.5Ordinary dividend 5 (28.7) - (28.7) (22.5) - (22.5)Retained profit for the period 117.9 (10.1) 128.0 80.0 (19.0) 99.0Earnings per shareBasic (pence) 6(a) 58.3 41.2Diluted (pence) 6(b) 57.0 40.3Adjusted (pence) 6(c) 62.3 48.8 1 Acquisitions relate to the acquisitions of InnSpired Group Ltd, ultimateparent of the InnSpired trading companies, and Avebury Holdings Ltd, ultimateparent of the Avebury trading companies. The profit and loss account in thecurrent period includes 49 weeks of results relating to the acquired InnSpiredcompanies and 2 weeks of results relating to the acquired Avebury companies. The profit and loss account for the periods ended 20 August 2005 and 21 August2004 is in respect of continuing operations. GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the 52 weeks ended 20 August 2005 52 weeks 52 weeks ended ended 20 August 21 August 2005 2004 £m £mProfit for the period 146.6 102.5Unrealised surplus on revaluation of tangible fixed assets 128.2 84.7Total recognised gains and losses for the period 274.8 187.2 NOTE OF GROUP HISTORICAL COST PROFIT AND LOSSESfor the 52 weeks ended 20 August 2005 52 weeks 52 weeks ended ended 20 August 21 August 2005 2004 £m £mReported profit before taxation 184.2 133.3Difference between historical cost depreciation charge and the actual 0.7 0.8depreciation charge for the year calculated on the revalued amountRealisation of property revaluation gains of previous periods 1.7 0.8Historical cost profit on ordinary activities before taxation 186.6 134.9Historical cost profit retained after taxation and dividends 120.3 81.6 GROUP BALANCE SHEETat 20 August 2005 August August 2005 2004 £m £mFixed assetsGoodwill 157.0 132.8Negative goodwill (26.5) (28.2) 130.5 104.6Tangible fixed assets 4,231.4 3,569.0 4,361.9 3,673.6Current assetsDebtors due within one year 78.5 74.4Debtors due after more than one year 11.7 10.8Cash at bank and in hand1 448.5 238.3 538.7 323.5Creditors: amounts falling due within one year (511.3) (335.0) Net current assets / (liabilities) 27.4 (11.5)Total assets less current liabilities 4,389.3 3,662.1 Creditors: amounts falling due after more than one year (3,214.6) (2,759.2)Provisions for liabilities and charges (121.7) (103.3) Net assets 1,053.0 799.6 Capital and reservesCalled up share capital 0.1 0.1Share premium 373.0 366.7Revaluation reserve 311.8 186.0Profit and loss account 368.1 246.8Equity shareholders' funds 1,053.0 799.6 1Cash at bank and in hand includes £30.7m (August 2004: £73.0m) of deposits usedas security for guaranteed loan notes and £172.1m (August 2004: £nil) of moniesraised from the refinancing of Punch Taverns Finance B Ltd debt deposited onescrow to fund the redemption of floating rate debt due on 30 September 2005. GROUP CASH FLOW STATEMENTfor the 52 weeks ended 20 August 2005 52 weeks 52 weeks ended ended 20 August 21 August 2005 2004 £m £m NotesNet cash inflow from operating activities 7 396.2 327.5Returns on investment and servicing of financeInterest paid (211.5) (181.5)Interest received 9.0 8.5Cost of terminating financing arrangements (25.5) (10.4)Deferred issue costs paid (11.0) (14.9)Dividends paid to preference shareholders of acquired subsidiary - (6.6) (239.0) (204.9)Taxation paid (13.5) (4.4)Capital expenditure and financial investmentPayments to acquire tangible fixed assets1 (139.9) (99.4)Receipts from sales of tangible fixed assets 29.0 75.6 (110.9) (23.8)AcquisitionsPayments to acquire subsidiary undertakings (141.4) (223.0)Net cash acquired on acquisition of subsidiary undertakings 72.2 39.9Cash receipts in respect of assets held for disposal 175.4 - 106.2 (183.1) Equity dividends paid (24.7) (18.1) Net cash inflow / (outflow) before financing 114.3 (106.8) FinancingIssue of Ordinary share capital 6.3 3.2Loans raised2 1,063.9 1,017.3Loans repaid (974.3) (854.1)(Increase) / decrease in cash deposits (129.8) 1.2 (33.9) 167.6 Increase in cash 80.4 60.8 1 Payments to acquire tangible fixed assets includes payments of £65.1m on theacquisition of new pubs (August 2004: £48.7m). 2 Loans raised includes £625.0m of new floating rate debt issued as part of therefinancing of Punch Taverns Finance B Ltd's debt on 1 August 2005 of which£172.1m was deposited on escrow, included in the increase in cash deposits inthe period, to fund the redemption of the old floating rate debt not subject toa tender offer, due on 30 September 2005, together with interest accruing fromrefinancing to redemption. Cash flows in respect of the 52 weeks ended 20 August 2005 Net cash inflow from operating activities includes outflows of £7.5m relating tolicense reform costs, redundancy, costs to integrate acquisition of subsidiariesand other related one-off costs treated as exceptional during the period.Interest paid includes outflows of £4.7m and interest received includes £0.3m ofitems treated as exceptional. Costs of terminating financing arrangementsincludes £8.8m treated as exceptional within interest payable (note 3) with theremaining £16.7m being reflected in the fair value of assets acquired at thedate of acquisition of InnSpired Group Ltd (see note 8). Receipts from disposalof assets held for resale relate to the disposal of 596 of the 1,064 estateacquired through the InnSpired Group Ltd acquisition that were either identifiedas non-core to the Group's long-term strategy or sold to comply with competitionguidelines. The discounted proceeds are used in determining the fair value ofassets held for resale (note 8) with the discount effect of £4.7m being includedas exceptional within interest receivable (note 3). Cash flows in respect of the 52 weeks ended 21 August 2004 Net cash inflow from operating activities includes outflows of £8.2m relating tolicense reform costs, redundancy, costs to integrate acquisition of subsidiaryand other related one-off costs treated as exceptional during the period.Interest paid includes outflows of £2.4m and interest received includes inflowsof £1.8m relating to items treated as exceptional items in the period. Costs ofterminating financing arrangements includes £2.5m of items treated asexceptional within interest payable (note 3) in the period together with a £5.2mdeferred fee paid on redemption of loans and £2.7m paid to terminate interestrate swap arrangements on loans redeemed. Both the deferred fee and swaptermination costs relate to loan arrangements within Pubmistress Ltd, theacquired subsidiary, and are reflected in the fair value of assets acquired.Receipts from sales of tangible fixed assets include £53.9m of net proceedsrelating to disposals treated as exceptional in the period (note 3). 1. BASIS OF PREPARATION The figures for the 52 weeks ended 20 August 2005 are unaudited and are not theCompany's statutory accounts which have not yet been filed with the Registrar ofCompanies and on which the auditors have not yet reported. The comparative figures for the 52 weeks to 21 August 2004 have been extractedfrom the Annual Report and Accounts, which has been filed with the Registrar ofCompanies and on which the auditors gave an unqualified report. This preliminary announcement has been prepared using accounting policiesconsistent with those adopted in the previous year's annual report and accounts. Copies of the Annual Report and Accounts will be mailed to members in December2005 and will be available from the company's registered office, Jubilee HouseSecond Avenue, Burton on Trent, Staffordshire DE14 2WF. 2. OPERATING PROFIT The profit and loss account down to operating profit is split between ongoingand acquired operations as follows: 52 weeks ended 20 August 2005 52 weeks ended 21 August 2004 Ongoing Acquisitions1 Total Total £m £m £m £mTurnover 726.9 43.2 770.1 637.6Cost of sales (272.1) (17.3) (289.4) (240.9)Gross profit 454.8 25.9 480.7 396.7Administrative expenses: Amortisation of goodwill (7.6) (0.6) (8.2) (6.4) Amortisation of negative goodwill 1.7 - 1.7 1.6 Depreciation (12.2) (0.6) (12.8) (11.4) Exceptional items (note 4) (5.3) (2.2) (7.5) (8.2) Other (67.0) (1.6) (68.6) (57.3)Total administrative expenses (90.4) (5.0) (95.4) (81.7)Operating profit 364.4 20.9 385.3 315.0 1 Acquisitions relate to the acquisitions of InnSpired Group Ltd, ultimateparent of the InnSpired trading companies, and Avebury Holdings Ltd, ultimateparent of the Avebury trading companies. The profit and loss account in thecurrent period includes 49 weeks of results relating to the acquired InnSpiredcompanies and 2 weeks of results relating to the acquired Avebury companies. 3. EXCEPTIONAL ITEMS Included in continuing operations are the following exceptional items: 52 weeks 52 weeks ended 20 ended 21 August 2005 August 2004 £m £mExceptional administrative expensesLicense reform costs, redundancy, costs to integrate acquisition of (7.5) (8.2)subsidiaries and other related one-off costs Loss on disposal of tangible fixed assets1 - (12.0) Interest receivableInterest receivable on deposits to fund repayment of old floating rate notes2 - 1.8Effect of discounting assets3 4.7 -Other4 0.3 - 5.0 1.8Interest payable and similar chargesSecured loan interest5 (1.3) (2.3)Bank loan interest6 (3.2) -Cost of terminating financing arrangements7 (9.3) (2.4) (13.8) (4.7) Total exceptional items (16.3) (23.1) Tax impact of exceptional items 6.2 4.1 Exceptional items included in retained profit (10.1) (19.0) 1 The profit and loss account for the period ended 21 August 2004 includes£12.0m losses made on the sale of a package of 256 pubs from the existing pubestate following the acquisition of Pubmistress Ltd in order to comply withcompetition guidelines. In the current period a package of 37 pubs from theexisting estate were disposed of following the acquisition of InnSpired GroupLtd in order to comply with competition guidelines. No profit or loss was madeon these disposals. 2 During the comparative period £277m was paid into an escrow account to coverredemption of and associated interest payable on floating rate notes relating tothe old financing structure that were not subject to an acceptance of tenderoffer before the refinancing. The exceptional interest receivable represents theinterest earned on these funds from date of refinancing (3 November 2003) to thefinal redemption of the loans (on the following interest payment date) thatwould not otherwise have been earned had the loans been settled at the date ofthe debt restructure. 3 Discounting has been applied to the proceeds received from sale of 51 pubs on24 September 2004 and 545 pubs on 28 January 2005 out of the total 1,064InnSpired pubs acquired on 10 September 2004 to reflect the fair value of assetsacquired (note 8). 4 Funds were held in an escrow account to fund the cost of acquisition ofInnSpired Group Limited. The exceptional interest receivable in the currentperiod relates to the proportion of funding relating to the 545 pubs of thetotal 1,064 pubs acquired on 10 September 2004 that were subsequently disposedof on 28 January 2005. 5 In the current period interest was incurred on the secured loan notes acquiredthrough the InnSpired Group acquisition from the date of acquisition to theirsubsequent redemption on 21 October 2004. The exceptional secured loan noteinterest charge represents the portion of the loan relating to the 545 of thetotal 1,064 pubs acquired that were subsequently disposed of on 28 January 2005.In the comparative period the exceptional secured loan note interestrepresents interest payable on the floating rate notes not subject to acceptanceof a tender offer from the date of debt restructure to final redemption thatwould not otherwise been paid had the loans been repaid at the date of debtrestructure. 6 A bank facility was drawn down to fund the acquisition of InnSpired GroupLimited. 545 of the 1,064 pubs acquired were subsequently sold on 28 January2005 with the receipts used to repay a portion of the facility drawn down. Theexceptional bank loan interest represents the interest and fees incurred on theportion of the loan relating to the 545 pubs from acquisition to 28 January 2005when that portion was repaid. 7 In the current period the cost of terminating financing arrangementsrepresents premiums paid to redeem secured loan notes acquired through theacquisition of InnSpired Group Ltd, break costs incurred to cancel swaparrangements associated with these loans and premiums incurred to redeem securedfloating rate notes as part of the debt restructure. In comparative periods thecost of terminating financing arrangements represents premiums paid togetherwith write-off of deferred issue costs, fair value premiums and other balancesrelating to the floating rate notes redeemed as a part of the debt restructureon 3 November 2003. 4. TAXATION The tax charge is made up as follows: 52 weeks ended 52 weeks 20 August ended 2005 21 August 2004 £m £mCurrent taxUK corporation tax 28.6 6.0Tax over provided in previous periods (6.3) - 22.3 6.0Deferred taxCurrent period charge 15.3 24.8 15.3 24.8 37.6 30.8 Factors affecting current and future tax charges The current tax charge for the period reflects the utilisation of broughtforward losses not previously recognised as deferred tax assets. The deferred tax charge arises in respect of the origination and reversal oftiming differences. The Group's current period deferred tax charge reflects thatin the period capital allowances exceeded depreciation. This position isexpected to continue given the Group's accounting policy not to chargedepreciation on freehold and long leasehold buildings on the basis that thiswould not be material. The tax charge will be lower than the standard corporation tax rate of 30% overthe next two to three years if the Group is successful in using brought forwardlosses. As a result of the acquisition of InnSpired Group Ltd, the Group owns furthercompanies having tax losses carried forward. These tax losses are onlyrecognised as a deferred tax asset where it is reasonably foreseeable that theywill be utilised in the next accounting period against taxable profits of thecompanies in which they originated. 5. DIVIDENDS 52 weeks ended 52 weeks 20 August ended 2005 21 August £m 2004 £mEquity dividends on ordinary shares:Interim paid 3.7 pence (2004: 2.9 pence) 9.4 7.2Final proposed 7.6 pence (2004: 6.1 pence) 19.3 15.3 28.7 22.5 6. EARNINGS PER ORDINARY SHARE (a) Basic earnings per share The calculation of basic earnings per share of 58.3 pence (August 2004: 41.2pence) is based on a total profit of £146.6m (August 2004: £102.5m), andweighted average number of equity shares in issue during the period of251,642,029 (August 2004: 249,082,407). (b) Diluted earnings per share Diluted earnings is the basic earnings per share after allowing for the dilutiveeffect of the conversion into ordinary shares of the weighted average number ofoptions outstanding during the period. Diluted earnings per share of 57.0 pence(August 2004: 40.3 pence) has been calculated using basic earnings of £146.6m(August 2004: £102.5m) and after including the effect of all dilutive potentialordinary shares. The weighted average number of shares can be reconciled asfollows: 52 weeks ended 52 weeks 20 August ended 2005 21 August 2004 £m £mBasic weighted average number of ordinary shares 251,642,029 249,082,407Dilutive effect from share options 5,382,428 5,206,056Diluted weighted average number of ordinary shares 257,024,457 254,288,463 (c) Adjusted earnings per share Adjusted earnings per share is based on basic profits adjusted to excludenon-recurring exceptional items and is presented to show the underlyingperformance of the Group. It is calculated as follows: 52 weeks ended 52 weeks 20 August ended 2005 21 August 2004 £m £mProfit for the period 146.6 102.5Non-recurring exceptional items (note 4) 10.1 19.0Adjusted earnings 156.7 121.5Basic weighted average number of ordinary shares 251,642,029 249,082,407Adjusted earnings per share 62.3 48.8 7. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 52 weeks 52 weeks ended ended 20 August 21 August 2005 2004 £m £mOperating profit 385.3 315.0Depreciation 12.8 11.4Amortisation of goodwill / negative goodwill 6.5 4.8Decrease in debtors 0.6 0.8Decrease in creditors and provisions (9.0) (4.5)Net cash inflow from operating activities 396.2 327.5 8. ACQUISITIONS DURING THE PERIOD Acquisition of subsidiaries During the period the Group acquired the entire share capital of InnSpired GroupLtd (10 September 2004) and Avebury Holdings Ltd (8 August 2005). At the dateof acquisition the InnSpired and Avebury estates consisted of 1,064 and 409leased and tenanted pubs respectively. The acquisitions are summarised as follows: InnSpired Group Avebury Holdings Ltd Ltd Total £m £m £m Tangible fixed assets 202.9 233.8 436.7Assets held for resale 170.7 - 170.7Debtors 5.8 1.3 7.1Cash 28.4 43.8 72.2Creditors and provisions (44.7) (28.6) (73.3)Loans (337.1) (147.4) (484.5)Net assets acquired 26.0 102.9 128.9Provisional goodwill arising on acquisition 12.4 20.0 32.4Total consideration 38.4 122.9 161.3Consideration is analysed as follows:Loan notes issued in consideration - 15.7 15.7Cash 38.4 107.2 145.6 38.4 122.9 161.3 InnSpired Group Ltd Book value Fair value adjustments Fair value Revaluation Assets held Other for resale £m £m £m £m £mIntangible fixed assets 30.0 (30.0) - - -Tangible fixed assets 330.4 41.8 (169.3) - 202.9Assets held for resale - - 170.7 - 170.7Debtors 8.0 - (2.2) - 5.8Cash 28.4 - - - 28.4Creditors and provisions (32.9) (8.5) 0.8 (4.1) (44.7)Loans (311.6) (25.5) - - (337.1)Net assets acquired 52.3 (22.2) - (4.1) 26.0 The principal fair value adjustments were in respect of: Revaluations • revaluation of fixed assets and reversal of consolidated goodwill;• revaluation of loans and other financial instruments (included within creditors and provisions) to their fair value. Assets held for resale • reclassification of fixed assets, trade debt and security deposits to assets held for resale relating to 545 pubs identified at the time of acquisition as non-core to the Group's long-term strategy and sold on 28 January 2005;• reclassification of 51 pubs sold on 24 September 2004 in order to comply with competition guidelines;• assets held for resale valued at discounted sales proceeds. Other • provision for property lease obligations;• provision for deficit on the defined benefit scheme;• deferred tax asset associated with the onerous property lease provision and deficit on the defined benefit scheme. 8. ACQUISITIONS DURING THE PERIOD (continued) Avebury Holdings Ltd Book Value Fair value adjustments Fair value Revaluation Other £m £m £m £mIntangible fixed assets (37.5) 37.5 - -Tangible fixed assets 168.6 65.2 - 233.8Debtors 3.2 - (1.9) 1.3Cash 43.8 - - 43.8Creditors and provisions (26.4) (1.0) (1.2) (28.6)Loans (122.0) (25.4) - (147.4)Net assets acquired 29.7 76.3 (3.1) 102.9 The principal fair value adjustments were in respect of: Revaluations • revaluation of fixed assets and reversal of consolidated goodwill;• revaluation of loans and other financial instruments (included within creditors and provisions) to their fair value; Other • provision for doubtful debts;• provision for property lease obligations;• deferred tax asset associated with the onerous property lease provision. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Punch Taverns PLC