Preliminary results

GREENE KING plc

Preliminary results for the 53 weeks to 04 May 2014

RECORD RESULTS, STRONG RETURNS & STRATEGIC PROGRESS

PERFORMANCE HIGHLIGHTS

· Retail like-for-like sales up 4.1%; food like-for-like sales up 5.0%.

· Average EBITDA per pub up 5.2% in Pub Partners; core like-for-like net income up 2.2%.

· Brewing & Brands core own-brewed volume up 4.6%; profit up 1.3%.

· Strong cash flow, lower leverage, earnings & dividend growth.

· Return on capital employed up 30 basis points to 9.2%.

· Continued progress across all businesses in first eight weeks of new financial year.

STRATEGIC PROGRESS

· Portfolio reshaping better positions Greene King for growth and higher returns.

o Added 45 sites to Retail, taking estate to 1,032; Hungry Horse now 226 sites.

o 148 disposals or transfers from Pub Partners; sold 275 site package post year-end.

· Volume share of UK ale market up 70 basis points to 11.3%.

· Evolving strategy to accelerate Retail exposure and move beyond conventional pub offers.

*before exceptional items **F13 restated for impact of IAS 19 (revised 2011), see note 11 of preliminary financial statements

Rooney Anand, Greene King chief executive officer, comments:

"We have delivered four years of record results since the credit crunch and maintained this momentum over the last 12 months by giving our customers what they want, in the right way and at the right price. Profit growth of 12% in our largest business, Retail, was driven by strong like-for-like sales growth and by newly-acquired sites. Pub Partners and Brewing & Brands also performed well. As a result, we achieved strong earnings, ROCE and dividend growth for the year.

"There are now clear signs that both the UK economic outlook and consumer confidence are improving, although consumers continue to spend cautiously. While continuing to provide customers with great value for money, excellent service and industry-leading quality, we see the pace of change in how people eat and drink out of home quickening and so we are shaping the business for the future to benefit from the opportunities these changes will bring."

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

For further information:

NOTES FOR EDITORS

· Greene King was founded in 1799 and is headquartered in Bury St. Edmunds, Suffolk. It currently employs 23,000 people across its main trading businesses; Retail, Pub Partners and Brewing & Brands.

· It operates 1,914 pubs, restaurants and hotels across England, Wales and Scotland, of which 1,032 are retail pubs, restaurants and hotels, and 882 are tenanted, leased and franchised pubs. Its leading retail brands are Hungry Horse, Old English Inns, Eating Inn and Loch Fyne Seafood & Grill. 94% of the estate is either freehold or long leasehold.

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

CHAIRMAN'S STATEMENT

RESULTS

We have delivered a strong financial result for the year, achieving record sales and profit. In a 53 week year, our revenue was up 8.9% to £1,301.6m and our operating profit before exceptional items was up 7.0% to £265.6m. Profit before tax and exceptional items was up 9.4% to £173.1m, while adjusted earnings per share was up 10.4% to 61.4p.

DIVIDEND

As a result of another year of strong growth, the board has recommended a final dividend of 20.8p per share, up 6.9% on last year. This takes the total dividend for the year to 28.4p per share, up 6.8%. The final dividend is expected to be paid on 15 September 2014 to those shareholders on the register at the close of business on 15 August 2014.

ACQUISITIONS

We continued to expand, and improve the overall quality of, our Retail business. We added 48 sites to our Retail estate through a combination of acquisitions and transfers from Pub Partners. The total cost of acquiring sites during the year was £24.3m. At the year-end, we had a Retail estate of 1,032 sites, up from 888 sites when we started our Retail expansion strategy in 2009.

DISPOSALS

We made further, significant progress on our non-core disposal plan in the year, selling, or transferring to Retail, 148 sites, taking the Pub Partners estate down to 1,165 sites, below what had been our strategic target of 1,200 sites. The total proceeds raised from disposals in the year were £38.4m, in line with book value. Since the year-end, we have sold 275 non-core Pub Partners' pubs to Hawthorn Leisure, backed by May Capital, for £75.6m.

BOARD

In March, Matthew Fearn, our group finance director, began a period of extended absence due to serious illness. He has been undergoing treatment and we are hopeful that he can make a full recovery. While Matthew is away, we have appointed David Brown, our corporate finance director, to fulfil the role of interim group finance director. In this role, David is attending all our board meetings, but is not a main board director.

At the end of July, we will be saying goodbye from our board to John Brady. He will have served for nine years, during which time he has been a member of all three of the board committees. I would like to thank John for the contribution he has made through his independent views and valuable insight and we wish him well in the future.

PEOPLE

We now have 23,000 people working for Greene King and every one of them has contributed to our success this year. The dedication that they show on a daily basis, particularly when interacting directly with our customers, is a key driver of our long-term record of growth.

I would like to express my thanks to all of them for the work they have done during the year in helping us to deliver these strong results. Going forward, they will remain crucial to further success as we remain focused on delivering sustainable value creation for our shareholders.

Tim BridgeChairman

02 July 2014

CHIEF EXECUTIVE'S REVIEW

PERFORMANCE SUMMARY

It has been another successful year for Greene King with record sales and profits. In a 53 week year, we achieved profit growth of 11.9% in our key Retail business, further profit per pub growth in Pub Partners and a return to growth, on the back of market outperformance, at Brewing & Brands. We also made good strategic progress across the business, culminating in the announcement, at the end of the year, of the disposal of 275 non-core sites from Pub Partners.

Strong group revenue growth of 6.9%* was driven by a combination of Retail like-for-like (LFL) sales growth of 4.1%, supplemented by the positive impact of acquisitions and transfers during the year, and a contribution from the strong volume growth in Brewing & Brands. Staying close to our customers and meeting their needs through industry-leading value, service and quality are key to our continued LFL sales growth and in the year this approach drove LFL sales growth across all three of our markets - eating out, drinking out and staying out. Most months of the year also delivered strong LFL sales growth, although customers spent less in September after their summer spending, while February was held back by record rainfall.

Our revenue growth converted into operating profit growth of 5.0% at a slightly lower margin due to the impact of the changing channel mix as Retail grows its share of revenue, now at 74%, up from 72% last year, while Pub Partners becomes a smaller part of the business. Encouragingly, despite the continued pressure on margins from input costs, we managed to expand the Retail margin by ten basis points (bps).

Our strong operational performance led to profit before tax and exceptionals (PBTE) growth of 7.4%, adjusted earnings per share growth of 8.3%, free cashflow generation, after capital expenditure and dividends, of £67.9m and a 30bps increase in our return on capital employed (ROCE) to 9.2%, comfortably above our cost of capital.

These strong financial metrics gave the board the confidence to announce a dividend per share increase of 6.8%, maintaining our long-term track record of dividend growth.

Looking forward, while the impact of selling a significant number of non-core pubs will slow growth in the new financial year, a combination of an improving external environment, maintained sales momentum in Retail and the continuation of our successful Retail expansion programme should deliver strong and sustainable earnings and dividend growth for our shareholders.

*Unless otherwise stated, all numbers in this review are based on a 52 week year

STRATEGIC PROGRESS

We have now completed four years of our current five-year strategic plan to improve growth and returns to our shareholders. During the year we made further significant progress: -

1. Expanding Retail to 1,100 sites and improving estate quality. We acquired or transferred in 48 sites to take the estate to 1,032 pubs, restaurants and hotels. The average weekly take (AWT) of the acquired or transferred sites was £30k, 68% above the existing estate average. Of these additional sites, 21 were Hungry Horse sites, six were Old English Inns (OEI) and five were Metropolitan sites. We remain on track to reach 1,100 sites by the end of the five-year plan.

2. Reducing the Pub Partners estate, improving estate quality and maintaining our offer influence. Against an initial target of 1,200 sites, we reached an estate of 1,165 by the year-end following the disposal of 133 non-core sites and the transfer of 15 sites to Retail. This helped to drive average EBITDA* per pub up 5.3%. Just after the year-end, we completed the sale of a further 275 non-core sites.

3. Maintaining industry-leading brand investment to strengthen our leadership position. We again invested in our core ale brands to drive own-brewed volume (OBV) growth and UK ale market outperformance in Brewing & Brands. We increased our volume share of the UK ale market by 70bps to 11.3%**. We also invested £750k in the St. Edmund Brewhouse to supplement our core brands with a range of innovative ale brands to further meet the growing consumer demand for choice, provenance and quality.

*Earnings before interest, tax, depreciation, amortisation and exceptional items

**  CGA Brand Index MAT to 19/04/14, Nielsen Scantrack MAT to 24/05/14

As we near the end of our current five-year plan and given the pace of change in consumer behaviour, we are evolving a new five-year plan to take us to 2020, building on the progress we have made so far.

We have taken steps already to get even closer to our customers and to understand their behaviour. For example, we increased investment in our digital platform and we launched the Greene King Leisure Spend Tracker during the year, reporting monthly GB household spending on eating out, drinking out and other leisure activities.

Customer behaviour is increasingly dynamic, presenting constant challenges to the industry. Consumers are going out less but when they do they are demanding more choice and more control over what they eat and drink. Increasingly, they also like to treat themselves to more premium products. We responded to these trends by broadening our offering in key drinks categories such as premium lager, craft ale, wine and cider, and by offering increased customisation on our menus.

Customers are also demanding higher quality, more healthy options and better consistency in what they eat and drink. We carried out two benchmarking exercises on key menu items to ensure we stay ahead of our competitors. As a result, we redesigned our burger offer, upgraded the quality of our steaks and added a number of healthier dishes to our menus. Importantly, we continue to win awards for the quality of our fish & chips, still our customers' favourite dish.

People are still looking for value and we saw an increase in the share of our sales from promotional activity, especially in food. In Loch Fyne Seafood & Grill, we increased communication of our offers through electronic direct mailing to our extensive customer database, while across Retail we broadened the number of sites with known value item pricing on lager.

In addition to addressing current trends, we have been working closely with the Trajectory Partnership, a leading consumer insight and futures consultancy, to analyse and identify forthcoming consumer trends in order to get a clearer understanding of how eating out and drinking out might change between now and 2025.

The main trends we have identified include: -

1. 'Vertical families' - indicates the rising importance of inter-generational leisure occasions.

2. 'Digitalisation of leisure' - the increase in use of and access to technology in leisure.

3. 'Value hunters' - demonstrates that cost of living is likely to remain a central consumer issue.

4. 'Deregulation of life' - where different activities are less associated with specific times of day.

The implications of these trends for our business are significant and include the need to: -

· Develop sites and offers that cater for different generations at the same occasions.

· Continue investing in our digital platform and our colleague training programmes to meet the challenges of a more demanding consumer, providing instant feedback to other customers.

· Maintain focus on delivering great value for our customers, even as the economy improves.

· Make our sites more convenient for our customers by increasing the occasions they use our pubs by expanding our daytime offer and becoming less reliant on 'traditional' pub eating and drinking occasions.

Using the analysis of current and future consumer trends, we will evolve the current strategy to accelerate our Retail expansion and to move beyond conventional pub offers. Specifically, our future strategy will focus on six key elements: -

1. Open a minimum of 30 new Retail sites per annum.

2. Reposition and simplify the existing Retail estate to optimise growth and returns.

3. Further improve value, service and quality to our customers.

4. Investigate options to diversify the Retail offer including potential acquisitions.

5. Reduce Pub Partners to 750 sites.

6. Maintain investment in Brewing & Brands to drive market outperformance.

 GREENE KING RETAIL

Greene King Retail again performed well, delivering strong growth and further strategic progress. LFL sales growth of 4.1% compared to 2.4%* sector growth, meaning we achieved another year of strong outperformance. LFL sales growth was well balanced through volume growth of 1.9% and price, mix, and spend per head improvements of 2.2%. Growth was achieved across all the main sales categories, with food LFL sales up 5.0%, drink LFL sales up 3.2% and room LFL sales growth up 6.8%. Food generated over 41% of total Retail sales.

* Coffer Peach Business Tracker

Total revenue was £963.0m, up 9.4%, driven by a particularly strong performance in Local Pubs, a 3.7% increase in the average number of sites trading and more favourable weather in the second half compared to last year. The AWT was up 5.5% to £18.0k as the overall quality of our estate continues to improve. Retail delivered operating profit of £187.7m, up 9.8%, with the 10bps improvement in the operating margin in the first half sustained through the year, reflecting positive drink and food price/mix effects, supported by tight cost control, but tempered by ongoing inflationary pressures including in rent and rates.

There are a number of key factors driving the continued success of Greene King Retail. Fundamental to our operational approach is putting customers at the heart of our business, building and sustaining their confidence in our brands and rewarding their loyalty. We constantly evolve our offer to ensure we stay relevant in an environment of increasing customer choice and expectation.

1. Exceeding customer value, service & quality expectations

· Value. We strive to offer value across all brands and segments. We rolled out a 'Golden Years' offer in OEI and a 'Two courses for £3.99' offer for over 60's in Meet & Eat. New weekly offers were introduced in Hungry Horse, such as 'Little Hooves Tuesday', where kids can eat for a pound with every adult meal purchased, and 'Thank Horse it's Thursday', where customers can choose a free starter or dessert with any 'Big Plate Special'.

· Service. We aim to provide industry-leading service standards. Hungry Horse won a national award at the Annual Customer Experience Awards and continued to implement initiatives, such as the trial of an ordering application and the extension of a self-serve kiosk trial, to further enhance the customer experience. Overall, our net promoter score, as measured by guest satisfaction, has increased 1.8% to 58.9%. In our food supply chain, we increased first time product availability by 13bps to 99.7%, further improving the reliability of product supply to our sites, given greater and more consistent choice for our customers.

· Quality. As part of our strategy to continuously improve quality, we introduced a 28 day aged Black Angus steak in Flame Grill and 30 wines served in Retail won prestigious Sommelier Wine Awards. Of the 30, 23 were specifically selected for Greene King by our own Master of Wine.

2. Broadening customer appeal through growth categories

Part of our strategy is to increase our share of the £48bn* UK eating out market by increasing our provision of all-day food and drink, encompassing the broadening of our customer appeal through categories such as food, wine and coffee.

*Allegra UK Restaurant Market 2014

Menu innovation during the year included the widening of our range of sharing platters, the launch of a new mid-week sizzler menu in OEI and, in Hungry Horse, the addition of new dishes such as the 'Jumpin' Jack Jalapeno Burger'.

Looking to maximise the hot drinks opportunity, we have introduced unlimited Big Bean coffee with breakfast in Hungry Horse and Joe's Tea into our premium Local Pubs while, just after the year-end, we launched own label coffee in Farmhouse Inns.

As a result of our initiatives, LFL food sales grew 5.0%, with total food sales, on a 53 week basis, up 15%, total wine sales up 9% and total coffee sales up 7%.

3. Understanding key customer trends such as convenience, customisation and health

We previously identified three key consumer trends in eating out. Innovating to meet these trends is a significant driver of our food growth:-

· Customisation. The new Flame Grill menu has eleven different meat and fish grilling options. The carvery offer at Farmhouse Inns, which accounts for over 30% of the brand's food sales, is now available in three different plate sizes and with additional vegetable, potato and gravy choices.

· Convenience. Our Cakeaway offer, launched in 2013 in Hungry Horse, continued to grow strongly with sales up 47% to £1.1m. We also launched a weekend breakfast offer in Hungry Horse aiming to appeal to a broader range of eating out occasions.

· Health. We introduced a new 'Skinnylicious', under 600 calorie, section of the menu in Meet & Eat, while a menu redesign in Flame Grill increased the number of healthier options available. A five-a-day salad now features on all Mainstream High Street menus.

4. Continued investment in our core estate

In total, we spent £76.7m on repairing, maintaining and improving the quality of our existing Retail estate, of which £29.4m was expansionary capital. In addition to a number of smaller schemes, development spend comprised a number of projects in excess of £70k in 126 sites, or 12%, of the estate. These developments achieved an annualised EBITDA return of 30%.

5. Further aligning our estate to our customers through targeted acquisitions

In the year, we increased our trading estate by a net 45 sites, having acquired or transferred in 48 sites and disposed of three non-core sites. This took our estate to 1,032 pubs at the year end. Of those new sites, 14 were single site acquisitions, 19 were new-build openings and 15 were transfers from Pub Partners. The new-build openings included our first new-build site in Scotland and the 200th Hungry Horse site.

6. Employing the best trained and motivated people in the sector

3,900 colleagues have been on an apprenticeship programme since February 2011 with 2,200 qualifying and an ongoing retention rate of 75%. Our progress was recognised, becoming a Top 100 Apprenticeship Employer and coming runner-up in the national competition at the National Apprenticeship awards. We also saw year on year improvement of 2%pts in our employee engagement score to 77% and launched a new internal HR system, called 'GKi,' which gives every colleague online access to Greene King and allows us to speak directly to all 23,000 colleagues across the business.

7. Increasing investment in our expanding digital platform

We again invested more resource in digital to better understand our customers and to communicate more effectively with them. Traffic on our websites grew 59%, helped by website redesigns in Hungry Horse and Loch Fyne, while visits via mobile devices were up 97% to 4.4m, representing 39% of total visits. Our online hotel sales and table reservations were up 40% and 61% respectively, while our Facebook followers rose more than three-fold to 793,000. We sold over £1m of Greene King gift cards and we saw a 32% increase in loyalty card holders.

 PUB PARTNERS

It was another successful year for Pub Partners with good trading and further strategic progress. This culminated in an agreement to dispose of 275 non-core sites to Hawthorn Leisure for a total consideration of £75.6m. Excluding this agreement, net disposal proceeds in the year totalled £31.8m, representing an average historic EBITDA multiple of 10.3x and against a total book value of £33.6m.

On 8.5% fewer pubs, Pub Partners achieved revenue of £149.6m, down 4.5%. Average revenue per pub was up 4.4%, driven by per pub increases in beer volume and rental income. EBITDA was £74.9m, down 3.7%, although average EBITDA per pub was up 5.2% and LFL net income in the core estate was up 2.2%. Operating profit was £65.3m, down 5.9%, with the operating margin down 70bps to 43.6%. The difference in performance between EBITDA and operating profit was due to a higher proportion of capital repairs as opposed to revenue repairs, compared to the previous year.

While challenges in the tenanted and leased industry remain, Pub Partners plays an important role in Greene King through generating significant cash for the group, adding material purchasing scale and providing attractive yields on smaller pubs. As it stands, the proposed statutory code for pub companies is not expected to have a material impact on Pub Partners' profitability.

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

· Right pubs. During the year, we disposed of 133 non-core sites, transferred 15 to Retail, and announced an agreement to sell a further 275 non-core tenanted sites to Hawthorn Leisure. We invested £20.9m in our core estate, up from £16.2m last year. Successful developments in the year included the Station in Bury St Edmunds, the Weathercock in Woburn Sands and the White Lion in Baldock.

· Right people. We launched quarterly open days for prospective licensees, including a National Open Day in Bury St Edmunds. These proved popular, increasing our future licensee talent pool and helping to let difficult sites. We introduced social media training courses for licensees and courses for Business Development Managers (BDM) and head office teams to promote marketing and communication. One of our BDMs was named BDM of the year at the 2013 Association of Licensed Multiple Retailers awards.

· Right agreements. We now have 259 Touchstone or Touchstone Plus tenancies and 46 franchise or franchise-style agreements including 26 Local Hero sites. We plan to add another 20 franchise or franchise-style sites in the new financial year. 70% of our trading estate, or 818 sites, operated under a form of free-of-tie agreement, highlighting the flexibility of our agreements and our increasingly competitive range and pricing.

· Right offer. We continue to help our licensees improve their offer where appropriate. We used our scale to drive new Sky subscribers to the estate and generated £750k of licensee discounts, while we funded the rollout of Cask Marque across our Head Brewer's Cask Club. We successfully introduced cider and beer festivals to the estate with over 500 sites taking part in our Easter beer festival.

As a result of these initiatives, average licensee tenure reached five years at the year-end with first year licensee retention in the core estate improving 2%pts to 85%. We also achieved our lowest ever number of temporary agreements, at 16, and lowest ever levels of licensee overdue debt.

BREWING & BRANDS

Brewing & Brands' strategy is to drive OBV through a focus on core brands, supplemented by the growing range of small-batch, innovative brands from the St. Edmund Brewhouse, while operating an efficient cost base. This facilitates sector-leading investment in sales and marketing and generates significant cash for the group.

Following a better second half, core OBV was up 4.6%, outperforming a UK ale market down 1.6%*. As a result, we increased our ale market share by 70bps to 11.3%**.

Revenue was £189.0m, up 4.5%, while operating profit reached £30.4m, down 0.7%.

This performance was driven by Old Speckled Hen, the UK's no.1 premium ale brand. Led by strong growth in Take Home, the brand family grew 12.9% by volume against a premium ale market up 5.7%*. Greene King IPA volume was slightly down on last year due to lower tenanted and leased volumes, although we gained further market share against a UK standard ale market down 4.9%*.

We continued to reposition the business towards the Take Home and Export markets. Core OBV growth in Take Home was 18.2% and we are now the UK's no.1 ale brewer in the off-trade by value**. Our core Export volume grew 5.4%, led by growth in emerging markets.

We again invested in our industry-leading ale portfolio, including the continuation of our Greene King IPA 'crafted for the moment' campaign and sponsorship of the Greene King IPA rugby union Championship in England.

New beers, including Belhaven Black and Old Golden Hen, performed well, with sales of Old Golden Hen almost doubling versus last year. Overall, new product development volume was up 61% and accounted for 10% of total volume.

Innovation is key to our continued outperformance and in November we opened the St. Edmund Brewhouse to brew and pack a range of innovative craft beers off shorter runs with a broader range of raw materials. Four brands from the new brewhouse, St Edmunds, Strong Suffolk, Double Hop Monster and Yardbird won Gold Awards at the 2014 Monde Selection awards, along with four of our existing ale portfolio.

* BBPA

** CGA Brand Index MAT to 19/04/14, Nielsen Scantrack MAT to 24/05/14

FINANCIAL REVIEW

The benefits of our consistent and clear strategy to deliver earnings and dividend growth continue to be seen in the performance of the group.

RESULTS

Revenue grew to £1,301.6m, an increase of 6.9%. The biggest driver of this growth continues to be our Retail estate, where revenue grew 9.4% and average revenue per site rose 5.5%. Our Retail estate now accounts for 74% of group revenue and will continue to grow its share as we make further progress with our Retail expansion strategy. Total revenue in Pub Partners was down 4.5% from 8.5% fewer pubs, although average revenue per pub increased 4.4%. Brewing & Brands grew revenue by 4.5%.

Operating profit before exceptionals was £265.6m, up 5.0%. Group operating margins fell by 40bps to 20.4%, reflecting the on-going changes to business mix, continuing inflationary cost pressures, particularly in our Brewing & Brands business, and reducing Pub Partners rental income. Despite these inflationary pressures, our control over costs and cash remains strong with the Retail operating margin growing 10bps to 19.5%.

Net interest costs before exceptional items of £92.5m were only 0.8% higher than last year, due to strong cash flow management and a small reduction in the IFRS pension interest charge.

PBTE was £173.1m, an increase of 7.4%. Adjusted earnings per share of 61.4p was up 8.3%, benefiting from the reduction in the effective tax rate. Statutory profit before tax was £105.2m, down 5.2% on a 53 week basis, as a result of the impact of exceptional items, summarised below.

TAX

The effective rate of corporation tax (before exceptional items) was 23% compared to 24% in the previous year, resulting in a charge to operating profits (before exceptional items) of £39.8m. This is in line with the standard UK corporation tax rate and is expected to remain in line.

The group's business strategy generates revenue, profits and employment, all of which deliver substantial tax revenues for the UK government in the form of duties, VAT, income and corporation tax. In the year, total tax revenues paid and collected by the group were £400m (2013: £375m). The group's tax policy, which has been approved by the board, aligns with this strategy and ensures that the group fulfils its UK tax responsibilities, while also structuring its operations in a tax efficient manner. There are a number of uncertain tax positions in relation to transactions over the last ten years and an estimate of the expected total payment relating to these transactions is included within the tax creditor of £46.5m (2013: £41.1m).

EXCEPTIONAL ITEMS

We recorded a net exceptional charge of £37.2m, consisting of a £66.2m charge to operating profit before tax, a £1.7m charge to finance costs and an exceptional tax credit of £30.7m. Full details are set out in note three and the principal items are as follows: -

1. On 1 May 2014, we announced the disposal of 275 non-core pubs from Pub Partners, leading to an impairment charge of £34.2m, £19.6m in respect of the carrying value of the assets and £14.6m relating to goodwill allocated to these sites. This disposal completed on 2 June 2014. The disposal proceeds from other non-core pubs and properties sold in the year were in line with net book value, and a charge of £6.4m relating to allocated goodwill has been recognised.

2. An impairment charge of £22.0m was made against the carrying value of a small number of our pubs where specific market conditions impacted trading.

3. In a prior period, the group received a refund of £7.0m from HMRC in respect of VAT on gaming machines, the application of which was deemed to have contravened the EU's principle of fiscal neutrality. HMRC appealed the decision and on 30 October 2013, following hearings involving the Rank Group plc, the Court of Appeal found in favour of HMRC. While Rank has applied for leave to appeal this latest decision, HMRC has enforced the protective assessments issued at the time and repayment of the £7.0m refund and associated interest of £1.7m are shown in exceptional items.

4. In addition to a tax credit of £10.5m in respect of the above items, the exceptional tax credit of £30.7m includes a deferred tax credit of £18.8m, arising from the reduction in the rate of corporation tax to 20%, effective from 1 April 2015, a deferred tax credit of £6.5m, in respect of the licensed estate, and a £5.1m charge in respect of prior periods.

CASHFLOW

Operating cash flows continue to be strong. We generated free cashflow (FCF) of £67.9m, up from £63.1m, and comfortably ahead of our scheduled debt repayments of £29.4m. EBITDA was £329.7m, up 5.5%, from 3.4% fewer pubs.

We disposed of 136 sites as part of our strategy to improve the quality of our estate with the cash proceeds totalling £38.4m. We also made good progress with our strategic Retail expansion plan, adding 48 new pubs to our Retail estate, investing £82.9m.

CAPITAL EXPENDITURE

We also invested in maintaining and developing our core estate, in addition to growing the size of our Retail estate. Total expenditure during the period was £169.6m.

Capital expenditure on the core estate, including maintenance capital, was £82.3m, an increase of £2.9m. A further £24.3m was invested in acquiring single sites and £58.6m was invested on these, previously acquired sites and transfers from Pub Partners. In addition, £4.3m was spent on reinstating fully insured fire-damaged sites.

NET DEBT AND TREASURY

Net debt at the year-end was £1,435.6m, a reduction of £14.8m from the previous year-end, with the key movements being positive FCF of £67.9m, disposal proceeds of £38.4m and the continued investment in growing our Retail estate, through new sites, of £82.9m.

Our high quality pub estate supports £1,211.7m of securitised bonds with amortisation of £29.4m and a weighted average maturity of 13 years.

At the start of the year, we announced the purchase, at par, of the entire £60m tranche of the AB1 bond. This was financed from bank loan facilities, which were increased to £460m and extended until June 2018. These facilities were £280m drawn at the year-end.

Our credit metrics remain strong with interest rate hedges in place for 95% of the variable rate net debt and a blended average cost of debt of 6.0%. Fixed charge cover has improved slightly to 2.8x, while interest cover has improved to 3.0x. Group net debt to EBITDA reduced to 4.4x and will continue to improve as we maximise the annual EBITDA returns from our investments. Our securitised vehicle had a free cash flow debt service cover ratio of 1.5x at the year-end, giving 29% headroom.

DIVIDEND

The board has recommended a final dividend of 20.8 pence per share, up 6.9%. This will be paid on 15 September 2014 to shareholders on the register at the close of business on 15 August 2014.

The proposed final dividend brings the total dividend for the year to 28.4 pence per share, up 6.8%. This is in line with the board's policy of maintaining a minimum dividend cover of two times underlying earnings, while continuing to invest for future growth, and maintains our long-term track record of annual dividend growth.

PENSIONS

The group maintains two defined contribution schemes, which are open to all new employees. The group's two defined benefit schemes are all closed to new entrants and to future accrual.

At the year-end, there was an IAS 19 pension deficit of £52.2m, which compares to £63.8m at the previous balance sheet date. The movement is primarily due to an increase in the market value of the schemes' assets over the period.

Total cash contributions in the period under the schemes' deficit recovery plans were £7.3m.

IAS 19 (revised 2011) has been applied retrospectively from 30 April 2012. Other finance expenses include a £2.5m pension finance charge and the comparative figures for the period to 28 April 2013 have been restated and now include a £2.7m IAS 19 finance cost. The impact of the application of the revised accounting standard is shown in note eleven.

CURRENT TRADING & OUTLOOK

After eight weeks of the new financial year, LFL sales in Retail were up 1.1%. This performance mirrors the trends seen in recent industry reports, including the latest Greene King Leisure Spend Tracker, which showed a softening in GB eating and drinking out from April to May. We have also seen regional differences in trading with LFL sales at Metropolitan, our premium London pubs, up 7.4%, and LFL sales overall in the south up, while LFL sales in the north are down.

We have seen strong starts to the year in our other businesses. LFL net income in our core Pub Partners estate was up 3.5%, with Brewing & Brands OBV, helped by strong Take Home sales due to the World Cup, up 6.2%.

Looking ahead to the rest of the year, we anticipate an improvement in LFL Retail sales and continued momentum in both Pub Partners and Brewing & Brands. We also expect to add 50-60 new Retail sites in the year. As a result, we are confident of achieving another year of strong progress.

Rooney Anand

Chief executive officer

02 July 2014

Group income statement

for the fifty-three weeks ended 4 May 2014

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

Group statement of comprehensive income

for the fifty- three weeks ended 4 May 2014

Group balance sheet

as at 4 May 2014

Group cashflow statement

for the fifty- three weeks ended 4 May 2014

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

GROUP Statement of change in equity

for the fifty- three weeks ended 4 May 2014

Notes to the accounts

for the fifty- three weeks ended 4 May 2014

1 Basis of preparation

The financial information for the fifty-three weeks ended 4 May 2014 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 2014 financial statements of Greene King plc.

The accounting policies adopted are consistent with those applied in the preparation of the group's annual report for the year ended 28 April 2013, except for the adoption of new standards and interpretations applicable as of 29 April 2013, the following of which have had an impact on the group's financial statements:

IAS 19 Employee Benefits (revised 2011)

IAS 19 (revised 2011) has been applied retrospectively from 30 April 2012 with comparatives restated for the impact of its adoption. The standard replaces interest costs and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net pension liability/asset. The impact of IAS 19 (revised 2011) on the current and comparative period is shown in note 11.

IFRS 13 Fair Value Measurement

IFRS 13 applies prospectively for financial periods that began on or after 1 January 2013 and establishes a single source of guidance under IFRS for all fair value measurement. IFRS 13 does not change when an entity is required to use fair values, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted and extends the disclosures required in respect of fair value measurement. The standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The default risk, i.e. the entity's own credit risk, must also be reflected in the fair value of a liability. The implementation of IFRS 13 resulted in a non-significant adjustment to the fair value of derivatives.

IAS 1 Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income. Items that could be reclassified (or recycled) to profit or loss at a future point in time, for example net gains on cash flow hedges taken to equity, are now presented separately from items that will never be reclassified, for example actuarial gains and losses on defined benefit pension schemes. The amendment has affected the presentation of the consolidated statement of comprehensive income but has had no impact on the group's financial position or performance.

Notes to the accounts

for the fifty- three weeks ended 4 May 2014

2 Segment information

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

Retail: Managed pubs and restaurants

Pub Partners: Tenanted and leased pubs

Brewing & Brands: Brewing, marketing and selling beer

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.

Notes to the accounts

for the fifty- three weeks ended 4 May 2014

3 Exceptional items

Exceptional Operating Costs

On 1 May 2014 the group announced the disposal of 275 non-core pubs from our Pub Partners estate; this disposal completed on 2 June 2014. An impairment charge totalling £34.2m has been recognised as a result of this disposal; £19.6m in respect of the carrying value of the assets and a charge of £14.6m relating to the impairment of goodwill allocated to these sites. The disposal group of 275 pubs has been transferred to assets held for sale.

During the period the group has recognised an impairment loss of £22.0m (2013: £17.7m) in respect of its licensed estate. The impairment has been recognised in respect of pubs where the higher of value-in-use and fair value less costs to sell has fallen below the net book value.

During the period ended 2 May 2010 the group received a refund of £7.0m from HMRC in respect of VAT on gaming machines following a ruling involving the Rank Group plc that the application of VAT contravened the EU's principal of fiscal neutrality. HMRC appealed the ruling issuing protective assessments to recover the VAT in the event their appeal was successful. On 30 October 2013 the decision was overturned and the group was therefore required to repay the VAT of £7.0m and associated interest of £1.7m. On 16 April 2014 the Supreme Court granted Rank permission to appeal which is likely to be heard in early 2015.

In the period, the group received insurance compensation to meet the costs of restoring fire-damaged sites totalling £3.4m (2013: £0.8m). Further amounts are receivable as the projects progress.

The net loss on disposal of property plant and equipment of £6.4m (2013: £5.4m loss) comprises a total profit on disposal of £8.0m (2013: £6.9m) and a total loss on disposal of £14.4m (2013: £12.3m). The loss on disposal includes £6.4m (2013: £4.5m) in respect of goodwill allocated to parts of operating segments disposed of in the year. Notes to the accounts

for the fifty- three weeks ended 4 May 2014

3 Exceptional items (CONTINUED)

Exceptional finance costs

The £1.1m fair value gain is the mark-to-market movement on the ineffective element of cashflow hedges resulting from changes in the LIBOR yield curve.

Exceptional tax

The Finance Act 2013 reduced the rate of corporate tax from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015. The lower rate of 20% has been used to determine the overall net deferred liability as the temporary differences are expected to reverse at the lower rate. The effect of the lower rate is to reduce the deferred tax provision by a net £9.1m, comprising a credit to the Group Income Statement of £18.8m and a debit to the Group Statement of Comprehensive Income of £9.7m.

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

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

4 Taxation

The income tax liability of £46.5m (2013: £41.1m) includes an assessment of the expected payments on uncertain tax positions which have not yet been agreed or are in dispute with HMRC.

Notes to the accounts

for the fifty- three weeks ended 4 May 2014

5 Earnings per share

Basic earnings per share has been calculated by dividing the profit attributable to equity holders of £96.1m (2013: £95.4m) by the weighted average number of shares in issue during the period (excluding own shares held) of 217.2m (2013: 216.1m).

Diluted earnings per share has been calculated on a similar basis taking account of 1.1m (2013: 1.3m) dilutive potential shares under option, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 218.3m (2013: 217.4m). There were no (2013: nil) anti-dilutive share options excluded from the diluted earnings per share calculations. The performance conditions for share options granted over 2.6m (2013: 2.8m) 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 diluted basis.

6 Dividends paid and proposed

Dividends on own shares have been waived.

Notes to the accounts

for the fifty- three weeks ended 4 May 2014

7 cash and cash equivalents

Liquidity facility

During the period the standby liquidity facility provider had its short-term credit rating downgraded below the minimum prescribed in the facility agreement and as such the group exercised its entitlement to draw the full amount of the facility and hold it in a designated bank account. The amount drawn at year end is £157.5m (2013: £nil). The amounts drawn down can only be used for the purpose of meeting the securitisation's debt service obligations should there ever be insufficient funds available from operations to meet such payments. As such these amounts are considered to be restricted cash.

Securitised cash

Included within cash at bank and in hand and short term deposits is £16.1m (2013: £12.2m) held within securitised bank accounts which are only available for use by the securitisation entities within the group. The securitisation entities comprise Greene King Retailing Parent and its subsidiaries.

8 Borrowings

Notes to the accounts

for the fifty- three weeks ended 4 May 2014

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

Notes to the accounts

for the fifty- three weeks ended 4 May 2014

11 retirement benefits

IAS19 (revised 2011) has been applied retrospectively from 30 April 2012. As a result, expected returns on pension schemes' assets are no longer recognised in profit or loss. Instead, net interest on the net defined benefit obligation calculated using the discount rate used to measure the pension liability is recognised in profit or loss.

The impact on the current and prior year's consolidated income statement, consolidated statement of comprehensive income and earnings per share is as follows. There is no impact on the consolidated balance sheet or consolidated cashflow statement.

12 Dividend payments

Subject to the approval of shareholders at the annual general meeting, the final dividend will be paid on 15 September 2014 to shareholders on the register at the close of business on 15 August 2014.

13 Report and accounts

The above financial information is derived from the statutory accounts for the period ended 4 May 2014 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 28 April 2013 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 2014 Report & Accounts will be posted to shareholders on 6 August 2014 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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