Preliminary results

GREENE KING plc

Preliminary results for the 52 weeks to 29 April 2012

STRONG GROWTH, RECORD RESULTS, STRATEGIC PROGRESS

PERFORMANCE HIGHLIGHTS

·; Retail like-for-like sales growth of 4%; food sales growth of 17%.

·; Retail operating profit growth of 13%; EBITDA per pub over £200k for first time.

·; Average EBITDA per pub in Pub Partners up 4%; substantive agreements at 98%.

·; Brewing & Brands total volumes up 8%; revenue up 5%.

·; Strong growth of 10.0% in adjusted earnings per share.

·; Strong margins and cash generation support total dividend growth of 7%.

·; Current trading strong; Retail like-for-like sales up 7% in the last eight weeks.

STRATEGIC PROGRESS

·; Acquisition and integration of Capital Pub Company; Retail expansion strategy on track with a further 39 sites added to Greene King Retail; attractive pipeline of new sites.

·; Over 300 sites in Pub Partners with improved customer offer and higher levels of control and influence; disposal programme on track to deliver estate of 1,200 sites by 2014.

·; Upweighted ale brand investment in advertising and innovation; re-launch of Greene King IPA, launch of Old Golden Hen and Belhaven Black.

* before exceptional items

Rooney Anand, Greene King chief executive officer, comments:

"Our team has once again delivered record results and attractive returns to our shareholders in a difficult environment. We have achieved strong growth and made further strategic progress. All our businesses are building customer loyalty by delivering industry-leading value, service and quality as we strive to be Britain's best pubs and beer business.

We are in the middle of an exciting summer for Britain, despite the unpredictable weather, with the Diamond Jubilee, Euro 2012 and with the Olympics still to come. However, looking further ahead, our customers' spending will continue to be squeezed and concerns remain about job security. Our strategy is tailored for these difficult conditions as we focus on providing 'everyday treats' to our customers and delivering sustainable growth in earnings and dividends for our shareholders."

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

For further information:

NOTES FOR EDITORS

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

·; It operates 2,334 pubs, restaurants and hotels across England, Wales and Scotland, of which 954 are retail pubs, restaurants and hotels, and 1,380 are tenanted, leased and franchised pubs. Its leading retail brands are Hungry Horse, Old English Inns, Eating Inn and Loch Fyne Restaurants. 95% of the estate is either freehold or long leasehold.

·; Greene King also brews quality ale brands from its Bury St. Edmunds and Dunbar breweries, and is the UK's leading cask ale brewer and premium ale brewer. Its core ale brands are Greene King IPA, the no.1 cask ale in the UK, Old Speckled Hen, the no.1 premium ale in the UK, Abbot Ale, the no.1 premium cask ale in the UK and Belhaven Best, the no.1 ale brand in Scotland.

CHAIRMAN'S STATEMENT

RESULTS

This has been another very successful year for Greene King with substantial growth in sales, profits and earnings. Revenues were up 9.4% to a record £1,140.4m with operating profit before exceptionals at £236.2m, up 6.4%. Profit before tax and exceptional items was a record £152.0m, up 8.6%, and adjusted earnings per share was up 10.0% at 53.0p.

DIVIDEND

A strong second half of the financial year, supported by confidence in the company's future, has led the board to recommend a final dividend of 18.1p per share, up 7.7% on last year. This takes the total dividend for the year to 24.8p per share, up 7.4%. The final dividend is expected to be paid on 10 September 2012 to those shareholders on the register at the close of business on 10 August 2012.

ACQUISITIONS

As part of our Retail expansion strategy, we completed the acquisition of Capital Pub Company in September for £96.0m. At the time of the acquisition, Capital had 33 high quality, largely freehold sites located across London. During the year, we also acquired a further 13 pubs for £18.7m and exchanged or completed on 16 additional sites for development, which are spread up and down the country.

DISPOSALS

In line with our strategy to reduce the size of our tenanted and leased estate, we disposed of 115 non-core pubs and other properties during the period for £29.9m, marginally ahead of the book value of the assets concerned.

BOARD

In July, we were pleased to welcome Mike Coupe to our board as a non-executive director. He is the group commercial director of J Sainsbury plc and brings valuable executive multi-site retailing experience to our board.

We welcomed Matthew Fearn to the company as group finance director in September. He was previously with Brakes Group, De Vere Group plc and Whitbread plc and has a wealth of sector-related experience.

GOVERNANCE

The board sets itself high standards of corporate governance, supported by its nomination, remuneration and audit committees. The details of our compliance with the UK Corporate Governance Code, on which we are reporting for the first time, are contained in the corporate governance statement.

PEOPLE

Our consistent delivery of industry-leading value, service and quality would not be possible without the talented and industrious people who work in our pubs, our brewing operations and at our head office. I would like to express my sincere thanks to them all for their efforts and their achievements, both individually and collectively, in delivering another year of significant progress for Greene King. We face the future with great confidence in the ability of our team.

Tim BridgeChairman

27 June 2012

CHIEF EXECUTIVE'S REVIEW

PERFORMANCE SUMMARY

Greene King has again made significant progress over the last 12 months, delivering another set of record results: -

·; Revenue was £1,140.4m, a record, following 9.4% growth over last year.

·; Operating profit before exceptionals, at £236.2m, was also a record, after growth of 6.4%.

·; Despite the negative impact of cost inflation, operating margins remained strong at 20.7%, 60 basis points (bps) below last year, driven by a change in business mix.

·; Profit before tax and exceptionals was £152.0m, up 8.6% on last year - another record.

·; Adjusted earnings per share grew 10.0% to 53.0p.

·; The board is recommending a final dividend of 18.1p per share, leading to a total dividend of 24.8p per share, up 7.4% on last year.

MARKET OVERVIEW

Greene King has had another successful year in a challenging consumer environment. Although inflation is coming down, the job market has steadied and interest rates are low, consumer confidence remains weak and volatile. This is driving the UK consumer to seek out 'everyday treats', rather than 'big ticket' items. With no economic recovery on the horizon, we anticipate another tough 12 months ahead of us, although we are confident of benefitting from the exciting summer in Britain, including the Olympics in August, notwithstanding the unpredictable weather.

This predisposition to 'everyday treats' is helping the industry to deliver steady growth. In 2011, the £22bn drinking out market grew 1.7% in value terms and it is expected to grow by 2.5% per annum between 2011 and 2015*. The £42bn eating out market was up 2.4% in value terms in 2011 and is expected to grow by 3.4% per annum between 2011 and 2015**. And the £43bn staying out market was up 2.9% in 2011 and is expected to grow by 0.1% in 2012***.

There are political challenges too, with the business having to bear significant annual beer duty rises. However, we are supportive of the UK government's intention to implement a minimum unit price for alcohol. Set at the right level, we believe this can be an effective measure to combat the irresponsible retailing and consumption of alcohol. This will have positive benefits for both society as a whole and the 'great British pub'. However, we have concerns that the proposed 40 pence per unit will not have enough of a positive societal impact and therefore we recommend the UK government looks to harmonise minimum unit pricing with Scotland, at 50 pence per unit.

* CGA Brand Index December 2011

** Allegra Strategies, Project Restaurants, 2012

*** ONS Family Spending 2011, PwC UK Hotels Forecast February 2012

OUR AIM: TO BE BRITAIN'S BEST PUBS AND BEER BUSINESS

Greene King aims to be Britain's best pubs and beer business, as measured by our customers, our shareholders and our people.

In our largest business, Greene King Retail, we constantly measure our customers' satisfaction with us through our mystery guest and customer feedback programmes. By understanding their needs and responding to their issues we ensure consistent offer and service improvement. The key measure is the Net Promoter Score (NPS). This highlights the difference between customers who would recommend a pub, restaurant or hotel to others (the 'promoters' of our business) and those who would not (the 'detractors' of our business). In the year, this score reached a new high of 53%, up 13 percentage points (%pts) on the previous year. Only one retail brand in the UK achieved a higher score than both Local Pubs and Destination Pubs.

Our strategy aims to deliver sustainable growth in earnings and dividends. We are confident that this strategy is building value for our shareholders, both now and for the long-term. We have grown adjusted earnings per share by 22.1% in the last two years, following a 44 year unbroken run of earnings growth between 1964 and 2008. In addition, since 1952, we have delivered a dividend per share CAGR of 9.1%.

We are also making progress in terms of our employees and our licensees. Our annual employee engagement survey showed an overall score up four %pts to 71%, closing the gap between the UK retail average from nine %pts points to two, while licensee tenure has improved further this year to be the best for five years at 3 years and 10 months.

We have set an ambitious target and we have made excellent progress this year. Our ability to retain and attract the best talent from within our industry and more broadly from retail and consumer goods sectors gives me confidence that we can continue to build our positive momentum as we strive to be Britain's best pubs and beer business. Our people have worked extremely diligently this year, as always, and our results are once again, a testament to their effort, commitment and the talent we have across our all parts of our business. In a customer facing, people-centred business, the quality of our team and their application to our task is a key driver of our continued success.

STRATEGIC PROGRESS

Our strategy is to improve our growth and returns to shareholders through increasing our exposure to the more attractive categories in our markets, such as food, coffee, wine and rooms, and by increasing the level of influence and control we have over our offers in these categories. In order to achieve this most efficiently and successfully, we aim to: -

·; Grow Greene King Retail to around 1,100 sites and improve the overall quality of the estate through targeted acquisitions and investment in our people, our offers and our assets.

·; Improve the quality and sustainability of Pub Partners, our tenanted, leased and franchised business, by improving the customer offer, investing in core assets and reducing the estate to a maximum of 1,200 sites.

·; Continue investing in our sector-leading portfolio of core ale brands.

This was the second year of our focused growth strategy and we have again made good progress in all areas: -

·; We acquired or transferred in 51 new Retail sites and, net of disposals, there are 954 pubs, restaurants and hotels in Greene King Retail, up from 888 when we began our accelerated Retail expansion strategy. We also have a healthy pipeline of new sites. All key growth categories have performed well in the year, led by food sales, up 16.8%, and coffee sales, up 20.1%. Over the last two years, EBITDA per pub in Retail has grown 14.1% to over £200k for the first time.

·; In Pub Partners, we disposed of 103 non-core sites and transferred five sites to Greene King Retail. Average EBITDA per pub grew by 3.8%. We took greater control of the customer offer by increasing Meet & Eat franchise sites to 29, launching ten Local Hero sites and introducing specific price support for over 180 Belhaven sites. There is therefore now an element of direct offer influence in 378 sites, or 27% of the Pub Partners estate.

·; Full year investment in our core ale brands increased by 7.2%, leading to another year of strong market outperformance for Brewing & Brands. Most significantly, we re-launched Greene King IPA, the UK's no.1 cask ale brand, including our first national TV advertising for five years. We have also increased our investment in innovation with the launch of a number of new brands and brand extensions including Old Golden Hen and Belhaven Black.

Overall, across our two pub estates, EBITDA per pub grew 8.8% to £114k in the year and has grown 17.0% over the last two years, since we announced our accelerated growth strategy.

GREENE KING RETAIL

OVERVIEW

Greene King Retail is our biggest and fastest growing business, generating 71% of total revenue and 63% of group profit in the year, with three-year growth per annum of 9% and 8% respectively. At the year-end, there were 954 pubs, restaurants and hotels across the UK, split between Destination Pubs for our branded, food-led destinational sites and Local Pubs, for our unbranded, more wet-led community sites. All sites are either branded or clearly segmented by customer occasion.

Our growth and quality improvement strategy for Greene King Retail is based on: -

·; Driving industry-leading organic sales growth through our focus on consistent value, service and quality delivery, alongside the development of growth categories such as food, coffee, wine and rooms.

·; Maintaining investment levels in our leading brands, such as Hungry Horse and Old English Inns (OEI), and investing in upgrading our food provision and amenity in Local Pubs.

·; Acquiring additional sites from a number of sources, including packages, single sites, new builds and transfers from Pub Partners.

Full year revenue was £803.9m, 13.1% ahead of last year, with revenue per pub rising 7.6% to an average weekly turnover (AWT) of £16.4k. Like-for-like (LFL) sales were up 3.6%. This was generated equally between volume growth and price and sales mix improvement. Again, we achieved LFL sales growth in our three main sales categories with drink LFL sales up 2.4%, food LFL sales up 5.6% and room LFL sales up 2.9%. Food is now 39% of total sales, a 120bps improvement on last year.

Other growth categories also delivered strong growth: coffee sales, helped by the rollout of Illy coffee, were up 20.1%; wine sales were up 15.3% and soft drink sales were up 15.2%.

Operating profit was £149.6m, 13.3% ahead of last year, with the operating margin in line at 18.6%, despite significant duty and cost pressures.

VALUE, SERVICE AND QUALITY

As the UK consumer is prepared to spend money on 'everyday treats', the value of our offers is critical to our continued success, whether it be in our premium high street sites or our value locals. In Local Pubs, we continue to offer known value item (KVI) pricing on main product lines. For example, we sold 8.1m pints of Carlsberg in the year, of which over 25% was at £1.99 or under. In Hungry Horse, we have kept entry price dishes low, starting at £3.99, while in Cloverleaf, the small carvery option starts at £4.45. Our two meals for £9.95 offer in Old English Inns (OEI) and two courses for £9.95 offer in Loch Fyne Restaurants (LFR) continue to drive strong lunchtime and early evening trade.

But value is not just about price - providing excellent service and quality can deliver great value at 'premium' prices too.

So, we are investing heavily in our Retail service proposition. We believe there is a real opportunity for our pubs, restaurants and hotels to differentiate themselves from their peers through industry-leading service levels. Excellent service will be rewarded while poor, or inconsistent, service will be punished, particularly in an environment where loyalty to a brand is both harder to achieve and harder to hold onto.

In Destination Pubs, we introduced tailored service training programmes in all brands to drive customer experience improvements. Around 9,000 employees were trained on these programmes in the year. In OEI, staff turnover fell and customer satisfaction improved. Since launch, complaints are down 10%, compliments are up 120% and the NPS is up 32%pts. Hungry Horse launched its 'Can you feel the Horse?' programme leading to a 12%pts improvement in NPS, LFR is encouraging its chefs to serve meals direct to customers and Belhaven has increased the frequency of its mystery guest visits to align with the rest of the estate. Overall, NPS hit a record high of 53% for the year, up 13%pts on the previous year. And there is a strong correlation between NPS and LFL sales performance - we estimate an additional seven points of NPS equates to an additional one point of LFL sales growth.

Another area of potential differentiation is in the quality of our people, our offers and the pub amenity.

In a retail business, the quality of the people will ultimately determine the success of the business. We have approaching 21,000 employees across our Retail business now, many of whom are part-time. Improving the quality and length of service of our teams is a real focus for Greene King Retail.

In the year, we increased our investment in people to recruit and retain higher quality retail managers and team members. Our Discovery Apprentice scheme is the centrepiece of this programme and by the year-end we had 1,549 apprentices in learning and another 427 who had completed their apprenticeship and were still with us. This equates to 12% of our Retail workforce. Local Pubs' management induction programme won a NITA award and retail manager turnover fell seven %pts. We also increased the internal appointment rate to 69% across Greene King Retail.

In addition, we made a step change in the quality of our premium local food offering, using learnings from Realpubs and Capital Pub Company, while illy coffee is now in almost 800 sites. OEI won a national award for the quality of its fish and chips.

Finally, outside of acquiring new sites, we spent £65.0m on repairing, maintaining and improving the quality of our Retail estate. £27.0m of this was expansionary capital, split equally across Destination Pubs and Local Pubs. This was invested in 149 sites, or 16% of the estate, and achieved an EBITDA ROI of 27.7%.

FOOD

The eating out market is a significant long-term growth opportunity for Greene King Retail. Our food sales were over £300m in the year, still less than 1% of the fragmented, growing UK eating out market worth around £42bn*. And the pub sector is growing its share of this market - for example, the value of the branded pub food sector grew 3.6% in 2011, ahead of the overall eating out market growth rate.

Greene King Retail outperformed the pubs sector. Total food sales growth was 16.8%, improving food's share of our total sales to 39%, with LFL food sales growth of 5.6%. Both Destination Pubs and Local Pubs delivered strong growth, with food sales growing its share of total sales in Local Pubs from 20.5% to 23.5%.

Our strategy is to broaden the appeal of our food offers to drive cover growth, alongside price and mix improvements to help offset annual cost inflation.

To achieve this we have introduced lower calorie dishes, we have brought in takeaway options and we have continued to launch innovative new menu items such as 'fish your way' in LFR. This helped to drive almost 4% cover growth in the year, with below inflation price and mix improvements of 1.7%.

To offset this pricing policy and protect margins, we have increased our purchasing power through bringing Belhaven pubs and Cloverleaf into our main food distribution contract, and we have used our rising skill base in the team to further engineer our menus.

*Allegra Strategies

BRANDED AND SEGMENTED ESTATE

In Greene King Retail, we only operate either branded sites or sites clearly segmented by customer occasion and demographics. Fully branded pubs, restaurants and hotels represent 41% of our Retail estate, with our leading brand, Hungry Horse, up to 180 sites at the year-end. This brand has doubled in size in four years and we will continue to invest in the brand going forward, particularly in the current consumer environment, but also due to the significant growth opportunities for the brand across the UK. Our other main Retail brands are Old English Inns (96 sites), Loch Fyne Restaurants (42 sites) and Eating Inn (25 sites).

Our Local Pubs estate has been re-segmented following the acquisitions of Realpubs and Capital Pub Company to create the Metropolitan division within Local Pubs. We expect this division to consist of a minimum of 70-80 premium, urban sites, mainly, but not exclusively, in London. This estate will be made up of the two acquired estates and 25-35 Greene King conversions into either the Realpubs or the Capital Pub Company operating model. We have already converted two sites - the Maynard Arms in Crouch End and the Black Lion in West Hampstead - to the Realpubs model and we have seen AWT uplifts of 156% and 135% respectively.

DIGITAL

We have significantly increased our investment in improving our digital platform over the last 12 months. We are now seeing over 100k website 'hits' per week, with a 44% increase in the year, and a 270% increase via mobile devices. We have introduced online reservation bookings into LFR, which already generate 4% of covers, and we have launched facebook pages across much of our Retail estate. In Local Pubs, we have already reached around 300 'fans' per pub. We have seen a 61% increase in our email database following a number of highly targeted promotions across the estate, among the one million emails we send out each month. The 'open rate' on these emails is 30%. We are also trialling loyalty card schemes covering about 25% of our Retail estate.

EXPANSION

We remain on track to deliver our target of 1,100 sites as part of our Retail expansion strategy. In the year, we acquired or transferred in 51 sites, but disposed of 12 non-core sites, taking the year-end estate to 954 pubs, restaurants and hotels. On average the number of sites rose 5.2% to 938. Of those 51 new sites, 44 were single site or package acquisitions, including 33 in the Capital Pub Company acquisition, two were new build sites and five were transfers from Pub Partners. In addition, we exchanged or completed on 16 further sites, of which 12 were brownfield or greenfield opportunities.

PUB PARTNERS

OVERVIEW

Pub Partners is responsible for our tenanted, leased and franchised pub operations. This segment of the market has been under most pressure from trading conditions over the last five years, post the introduction of the smoking ban and through the recession. There are too many 'lifestyle' licensees operating in the sector and too many pubs with insufficient offer and amenity quality.

Our aim is to build the highest quality, most customer-focused non-managed pub estate in the UK. This will be achieved by recruiting and retaining the best licensees, delivering industry-leading agreement innovation, taking greater control of the customer offer and proactively disposing of the estate tail.

As a result of this focused strategy, we have segmented our estate as follows: -

·; A core estate of 900 sites operated under traditional tenancies and leases. These require less overhead support and are highly cash generative and capable of delivering consistent EBITDA per pub growth.

·; An innovation estate of 300 sites operated under new agreement styles and with enhanced influence over the customer offer.

·; A disposal estate, currently comprising around 200 sites. These sites will not generate sufficient and sustainable profit to be shared equitably between Pub Partners and its licensees.

Our strategy is on track and Pub Partners is delivering a resilient performance as we continue to reposition it for a sustainably profitable and cash generative future.

In the year, Pub Partners achieved revenue of £162.7m, down 2.2%, but on 6.4% fewer pubs. Beer volume per pub was marginally behind last year while rental income per pub was ahead. EBITDA was £80.2m, down 2.9%, although average EBITDA per pub was up 3.8%. LFL EBITDA in the core estate was up 0.2% and total LFL EBITDA was down 0.3%. Operating profit was £72.2m, 3.1% lower than last year on a margin 40bps lower, impacted by the rollout of our franchised model.

Pub Partners has achieved much in the year: it has successfully integrated the Belhaven tenanted and leased estate, with no impact on performance; it has delivered strong returns on its capital investment; it has seen 12 Business Development Managers achieve their Diploma in Multi-Site Leadership; and it has launched BarGains, a new buying club for licensees, utilising Greene King's scale purchasing advantages.

RECRUITMENT AND RETENTION

The most important element of the tenanted, leased and franchised business model is the recruitment and retention of the best licensees. Our recruitment process is rigorous, including Operating Director sign-off of all new licensees and the completion of seven mandatory training courses before taking a pub. Licensee tenure has improved again and is now just short of four years. The improved quality of our licensees is also reflected in further improvement in the key licensee health measures: there were just 29 temporary agreements at the year-end, or 2.1% of our trading pubs, the lowest recorded level since 2003; there were five closed pubs for reopening and the number of licensees on 'cash with order' was 20% lower than last year.

AGREEMENTS AND LICENSEE SUPPORT

We also aim to increase the level of influence over, and control of, the consumer offer in our pubs. At the more basic level, we provide price support to over 300 sites via Business Builder and Love Your Local. In Scotland, volumes were ahead of last year through specific brand price support.

All price support is agreed in conjunction with value, service and quality contracts with licensees to improve the value our licensees can provide to their customers, to raise service standards towards those we achieve in Greene King Retail, and to try to impact on the quality of the offer and amenity in the pubs. We have also provided new correx signs outside around 800 sites within the estate. Overall, despite a greater number of pubs operating with support, the value of our licensee support per pub fell 14%.

We also have two franchise-style agreements. The franchise model allows us to develop brands for Pub Partners' pubs to utilise, supported by our purchasing scale and Retail experience. 'Meet & Eat' was launched at the British Franchise Association annual exhibition in September. It is a food, drink, service and entertainment package for the value community segment of the market. We had 29 Meet & Eat sites trading at the year-end, having transferred two to Greene King Retail. AWT has risen 150% to £8k per week while annual franchisee earnings are on target at c.£40k.

We have also developed 'Local Hero'. This is a retail solution for wet-led community pubs which have lower opportunities to expand into food. The offer is centred on cask ale, selling a minimum of six at any time, split 50/50 between Greene King brands and those from local micro-breweries. The food offer is created in conjunction with our food development team and is focused on local provenance. The up-front investment from both Pub Partners and the licensee is lower than Meet & Eat, while licensee earnings are c. £25k per annum.

DISPOSAL PROGRAMME

We continue to make excellent progress on our disposal programme. In the year we disposed of 103 non-core sites. We therefore had 1,380 trading sites at the end of the year, down from almost 1,700 four years ago. We continue to target a reduced estate of around 1,200 sites in 2014. We believe this is the right strategy to pursue for the long-term benefit of the company and its shareholders although in the short-term it does hold back Pub Partners' profitability. In the year, EBITDA of c.£1m was lost due to declining trade and income at these pubs during the disposal process and we anticipate a slightly higher level in the new financial year.

BREWING & BRANDS

OVERVIEW

Our Brewing & Brands division is responsible for brewing, distributing, marketing and selling the UK's leading portfolio of ale brands. Our strategy is to utilise the most efficient operating model in the industry to fund industry-leading investment in our core ale brands to make them category leaders. This is supported by a passion for excellence in product quality and customer service to differentiate Brewing & Brands from other brewers.

As a result, Greene King is the no.1 cask ale brewer in the UK, the no.1 premium ale brewer in the UK and the no.2 ale brewer in the UK* with each of its core brands leading their categories: -

·; Greene King IPA is the UK's no.1 cask ale brand.**

·; Old Speckled Hen is the UK's no.1 premium ale brand.*

·; Abbot Ale is the UK's no.1 premium cask ale brand.**

·; Belhaven Best is Scotland's no.1 ale brand.*

* CGA Brand Index MAT to 17/03/12, Nielsen Scantrack MAT to 28/04/12

** CGA Brand Index MAT to 17/03/12

In an ale market down 5.3%*, our core ale brands were down 0.7%. Second half volume decline was driven by a more competitive environment in Scotland, price increases, particularly in Take Home, and more difficult comparatives. However, in the year we saw strong growth in Export, Take Home and Free Trade, and in our own Retail estate. Total volume, including third party drink sales, was up 8.1% leading to revenue up 5.0% to £173.8m. Operating profit was £33.0m, down 0.3%. The operating margin fell 100bps, driven by channel and product mix, together with inflationary cost pressures, particularly from third party lager suppliers.

Alongside a marketing and innovation investment increase of 7.2% in our core ale portfolio, we have launched our first apprenticeship scheme with 18 apprentices already within the business, we have invested £850k in upgrading and extending the capacity at Belhaven, we have re-launched our online shop and visitor centre and we have again won numerous awards both for our brands and our breweries.

*BBPA

CORE ALE BRANDS

·; Towards the end of the year, we re-launched Greene King IPA via a £4m investment, spread over 12 months, in our 'Crafted for the Moment' campaign. Early consumer reaction and demand has been very encouraging.

·; Old Speckled Hen had another strong year. The brand has driven our strong performance in Take Home and Export. Hen family volume growth in the year was 4.7%.

·; In a more competitive market, Belhaven brands continued to perform well, achieving volume growth of 3.9%, with Belhaven Best winning Marketing Strategy of the Year at the Scottish Business Awards.

BRAND INNOVATION

We continue to invest in innovation within Brewing & Brands: -

·; As part of the Greene IPA re-launch, we introduced Greene King IPA Gold and Reserve.

·; Old Golden Hen was the most successful bottled ale launch into the off-trade in 2011 and accounted for 18% of all bottled ale growth in the year to April 2012*.

·; London Glory, ahead of the Jubilee and the Olympics, achieved 86% volume growth.

·; In Scotland, we launched Belhaven Black, a Scottish stout, which has seen on-trade installations ahead of schedule.

*AC Nielsen MAT value to 29/4/12

FINANCIAL REVIEW

The benefits of a consistent and clear strategy to deliver earnings and dividend growth, despite the weak economic backdrop, can be seen in the performance of the business.

RESULTS

Revenue grew by 9.4% on last year to £1,140.4m. The biggest driver of this growth came from the Retail estate where revenue grew by 13.1% with average revenue per pub rising by 7.6%. The Retail estate now accounts for over 70% of group revenue. Total revenue in Pub Partners was down 2.2% while average revenue per pub increased by 4.5%. Brewing and Brands grew revenue by 5.0%, primarily driven by volume growth.

Operating profit before exceptionals was £236.2m, up 6.4% on last year with the operating margin down 57bps to 20.7%. The main driver of the reduction in group operating margin remains the changing business mix of the group, accounting for 50bps of the decline. Control over costs and cash remains strong with the operating margin of the Retail estate in line with last year at 18.6%, despite significant cost inflation, the growth in food as a percentage of sales and the impact of the duty escalator.

Net interest costs, before exceptional items, of £84.2m were only 2.7% higher than the same period last year, as a result of strong cash flow management and an IFRS pension interest credit of £2.3m. Profit before tax and exceptionals was £152.0m, an increase of 8.6% on last year. The tax charge before exceptional items of £38.0m equates to an effective tax rate of 25.0%. Earnings per share before exceptional items of 53.0p was up 10.0%, benefitting from the reduction in the effective tax rate. Total profit before tax for the year, after exceptional items, was £125.1m, up 7.1% on last year.

EXCEPTIONAL ITEMS

As set out in note three, we recorded a net exceptional charge of £11.6m during the year, consisting of a charge of £26.9m against profit before tax and an exceptional tax credit of £15.3m.

The charges against profit before tax include £5.8m in relation to the acquisitions of Cloverleaf, Realpubs and Capital Pub Company, the final costs in relation to the integration of our financial systems now completed and an impairment charge of £22.1m against the carrying value of a small number of our pubs where specific market conditions have impacted trading.

Offsetting these charges we achieved a profit over book value on disposed pubs and other properties of £0.2m and have recognised a £4.4m credit in relation to the curtailment of certain discretionary benefits provided to retired members of the main defined benefit pension scheme.

The exceptional tax credit of £15.3m is made up of four items: a credit of £12.2m arising from the reduction in the rate of corporation tax from 26% to 24% effective April 2012; a credit of £5.1m in relation to tax on exceptional items; a £6.3m adjustment in relation to prior years; and a £4.3m credit in relation to the movement in the tax base cost of our properties. A £2.0m finance cost has been charged in relation to the adjustment of prior period tax.

CASH FLOW

Operating cash flows remain strong. We delivered EBITDA of £292.0m, up 5.6% on last year, from 2.2% fewer pubs. After investing in the core estate, paying interest, tax and dividends, we generated free cash flow of £38.5m, comfortably ahead of our debt service obligation of £26.3m. This remains a consistent part of our long-term financial strategy.

During the year we disposed of 115 sites as part of our strategy to improve the quality of our estate. Cash proceeds from disposals totalled £29.9m and we expect to maintain the rate of disposal into the next financial year.

As outlined below we made good progress in our target of growing the Retail estate to 1,100 sites and the cash outflow on acquisitions and acquired sites totalled £143.6m, bringing the net cash outflow in the year to £83.0m.

CAPITAL EXPENDITURE

During the year we continued to invest in both maintaining and developing our core estate in addition to growing the size of our Retail estate. Total expenditure during the year was £224.9m compared to £209.5m in the previous year.

Capital expenditure on the core estate, including maintenance capital, was £81.3m compared to £71.9m in the previous year. In the Retail estate we continue to identify opportunities to drive better returns from our sites through selective investment such as the conversion of sites to the Hungry Horse format, which now totals 180, investing in kitchens and gardens as well as generally improving the amenity in our pubs. During the year we increased our investment in Pub Partners through the development of our franchise offers as well as increased investment in our sites to ensure they remain safe environments for our licensees. Going forward we expect the level of core capex to remain at roughly the same or a slightly lower level, focused on continuing to improve the overall quality of our estate.

On 3 September 2011 we completed the acquisition of Capital Pub Company plc for a total of £96.0m including acquired debt. This brought us 33 high quality, predominantly freehold sites in the attractive and growing premium eating and drinking out market in London. A further £18.7m was invested in acquiring single sites and £26.8m was invested on these and previously acquired sites. During the year we also converted the first two existing Greene King Retail sites to the Realpubs format driving significantly improved trading.

Looking forward we have a strong pipeline of new retail sites and expect to open a minimum of 25 sites a year from a combination of new builds, single site acquisitions and transfers.

NET DEBT AND TREASURY

Net debt at the year-end was £1,493.2m, an increase of £83.0m from the previous year-end, with the key movements being positive free cash flow of £38.5m, disposal proceeds of £29.9m and investment in growing our retail estate of £143.6m.

Our high quality and primarily freehold assets support £1,329.0m of securitised bonds with a flat debt service profile and amortisation of £26.3m in the year. Last year we announced a new five-year, £400m, revolving credit facility starting in April 2011. At the year-end this was £210.0m drawn.

Our overall credit metrics remain strong, with interest rate hedges in place for 97% of the variable rate debt and a blended average cost of debt of 5.9%. Fixed charge cover remains stable at 2.6x, and interest cover at 2.7x. Annualised net debt/EBITDA of 5.1x remains in our target area and will continue to improve as cash is invested ahead of the earnings stream generated. Our securitised vehicle had a free cash flow debt service cover ratio of 1.5x at the year-end, giving 27% headroom.

DIVIDEND

The recommended final dividend of 18.1 pence per share is expected to be paid on 10 September 2012 to shareholders on the register at the close of business on 10 August 2012.

The proposed final dividend brings the total dividend for the year to 24.8 pence per share representing an increase on last year of 7.4%. This is in line with the board's policy of targeting a minimum dividend cover of around two times underlying full year earnings.

PENSIONS

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

The group's three defined benefit schemes are all closed to new entrants. As at 29 April 2012 there was an IAS 19 pension deficit of £67.3m, which compares to £45.7m at the previous balance sheet date. The movement is primarily driven by the fall in the discount rate applied to the scheme liabilities.

Total cash contributions in the year were £13.1m for both past and current service.

As at the year end, the group was in consultation with the remaining active members of the defined benefit schemes in relation to closing the schemes to all future accrual. These discussions will be completed in the next financial year and no impact of any outcome of these discussions has been included within the accounts.

CURRENT TRADING AND OUTLOOK

Strong momentum in our underlying trading performance has continued into the new financial year, augmented by the Diamond Jubilee and Euro 2012. After the first eight weeks of the new financial year, LFL sales in Greene King Retail are +7.1%, average EBITDA per pub in Pub Partners is +4.6% and Brewing & Brands core brand volume is+2.7%.

The outlook for the rest of the year remains uncertain as our customers continue to be challenged by pressure on their disposable income and uncertainty around their job security.  However, our strategy is tailored for the prevailing conditions, focusing on providing 'everyday treats' to our customers and delivering attractive and sustainable growth in earnings and dividends. We are confident we can continue to make strong progress, not only for this year, but also for the long-term.

Rooney Anand

Chief executive officer

27 June 2012

Group income statement

for the fifty-two weeks ended 29 April 2012

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

Group statement of comprehensive income

for the fifty-two weeks ended 29 April 2012

Group balance sheet

as at 29 April 2012

Group cashflow statement

for the fifty-two weeks ended 29 April 2012

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

GROUP Statement of change in equity

for the fifty-two weeks ended 29 April 2012

Notes to the accounts

for the fifty-two weeks ended 29 April 2012

1 Basis of preparation

The financial information for the fifty-two weeks ended 29 April 2012 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 2011 financial statements of Greene King plc.

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

IAS 24 Related Party Disclosures (Revised)

The revised standard, effective for accounting periods beginning on or after 1 January 2011, clarifies the definition of a related party to simplify the identification of related party relationships, particularly in relation to significant influence and joint control.

IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)

The amendment provides guidance on assessing the recoverable amounts of a net pension asset. It permits the treatment of the prepayment of a minimum funding requirement as an asset.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value, unless this cannot be measured reliably, in which case they are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in the income statement.

Improvements to International Financial Reporting Standards (issued May 2010)

In May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in no changes to accounting policies but no impact on the financial position or performance of the Group.

·; IFRS 7 Financial Instruments - DisclosuresThe amendment emphasises the interaction between quantitative and qualitative disclosures and the nature and extent of risks associated with financial instruments.

·; IAS 1 Presentation of Financial StatementsThe amendment clarifies that an entity may present an analysis of each component of other comprehensive income maybe in the statement of changes in equity or in the notes to the financial statements. The group provides this analysis in the statement of changes in equity.

2 Segment information

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

Retail: Managed houses and restaurants

Pub Partners: Tenanted and leased houses

Brewing and Brands: Brewing beer, marketing and selling

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

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

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

3 Exceptional items

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

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

The credit of £4.4m in respect of post-employment liabilities is as a result of the curtailment of discretionary benefits provided to retired members of the main defined benefit pension scheme. The £5.5m credit in the prior year resulted following curtailment to discretionary pension payments paid to members of the defined benefit pension scheme retiring early.

The net profit on disposal of property, plant and equipment of £0.2m (2011: £3.6m) comprises a total profit on disposal of £7.6m (2011: £8.3m) and a total loss on disposal of £7.4m (2011: £4.7m).

The tax credit on indexation of properties represents the tax impact of movements in RPI during the period on the tax base cost of properties.

The Provisional Collection of Taxes Act 1968 reduced the rate of corporation tax from 26% to 24% from 1 April 2012. The effect of the new rate is to reduce the deferred tax provision by a net £8.8m, comprising a credit to the Group Income Statement of £12.2m and a debit to Group Statement of Comprehensive Income of £3.2m, and a debit of £0.2m to the group statement of changes in equity.

The adjustment in respect of prior periods is in respect of £1.6m deferred taxation on revaluation and rolled over gains on land and buildings, and £4.7m reversal of tax relief previously taken on intra group transactions. The £2.0m finance costs relate to the adjustment of prior period tax.

4 Taxation

5 Earnings per share

Basic earnings per share has been calculated by dividing the profit attributable to equity holders of £102.4m (2011: £106.8m) by the weighted average number of shares in issue during the period (excluding own shares held) of 215.0m (2011: 214.8m).

Diluted earnings per share has been calculated on a similar basis taking account of 0.6m (2011: 0.6m) dilutive potential shares under option, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 215.6m (2011: 215.4m). Share options granted over 0.5m shares (2011: 0.6m) have not been included in the diluted earnings per share calculation because they are anti-dilutive at the year end. The performance conditions for share options granted over 2.9m (2011: 1.9m) shares have not been met in the current financial period and therefore the dilutive effect of the number of shares which would have been issued at the period end have not been included in the diluted earnings per share calculation.

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

6 Dividends paid and proposed

Dividends on own shares have been waived.

7 Acquisitions

On 19 July 2011 an agreement was reached on the terms of a recommended offer for the entire issued share capital of The Capital Pub Company. The offer was declared unconditional on 22 August 2011 with the group assuming control of The Capital Pub Company from 3 September 2011. On 5 September 2011 the group announced its intention to compulsory acquire all outstanding shares in The Capital Pub Company, with all purchases completed by the 24 October 2012.

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

8 Borrowings

9 Working capital and non-cash movements

10 Analysis OF and movements in net debt

*included in cash and cash equivalents on the balance sheet

11 Dividend payments

Subject to the approval of shareholders at the annual general meeting, the final dividend will be paid on 10 September 2012 to shareholders on the register at the close of business on 10 August 2012.

12 Reports and accounts

The above financial information is derived from the statutory accounts for the period ended 29 April 2012 on which the auditors have issued an unqualified opinion. The information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

The accounts for the period ended 1 May 2011 have been filed with the Registrar of Companies and the auditors of the company made a report thereon under Chapter 3 of Part 16 of the Companies Act 2006. That report was an unqualified report and did not contain a statement under Section 498 (2) or Section 498(3) of the Act.

The 2012 Report & Accounts will be posted to shareholders on 2 August 2012 and copies will be available from that date from the Company Secretary at the registered office of the company, Westgate Brewery, Bury St. Edmunds, Suffolk IP33 1QT.

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