3rd Jul 2007 07:02
Greene King PLC03 July 2007 3 July 2007 GREENE KING plc Preliminary results for the 52 weeks ended 29 April 2007 RECORD RESULTS GROWTH ACROSS ALL DIVISIONS £130M SHARE BUY-BACK PROGRAMME Financial Highlights • Revenue £917.5m, +12% • Operating profit* £218.1m, +14% • Operating profit margin* 23.8%, +0.5 %pts • Profit before tax* £139.8 m, +17% • Adjusted earnings per share* 64.8p, +16% • Dividends per share 22.9p, +14% • Increased capital structure efficiency Business Highlights • Pub Company like-for-like sales up 3.4% • Pub Partners operating profit per pub up 6%; like-for-like sales up 1.7% • Brewing Company operating profit up 12%; own-brewed volume up 2.1% • Belhaven operating profit up 4%**; managed house food sales up over 25% • Hardys & Hansons integration complete and synergy capture on track • Estate average quality further improved through disposals • Well-positioned for smoking ban * before exceptional items ** prior year on pro-forma basis Rooney Anand, Greene King chief executive, comments: "These record results are another step in over four decades ofuninterrupted profit growth. I am particularly pleased that they were achievedby strong performances in all our divisions combined with the benefits fromeffectively integrated acquisitions. Our unique experience across the whole of the Scottish pub and beer industry hasstood us in good stead for the English smoking ban. We are well prepared and ina good position to grasp the opportunities afforded by the ban by broadening theappeal of our pubs. We are today also announcing plans to release significant additional funds fromfurther increasing the efficiency of our balance sheet; and to unlocksubstantial extra value from our quality property estate. These steps, alongwith the intrinsic quality of our assets, brands and people, and the benefit ofrecent acquisitions, combined with a good start to the current year, underpinour confidence in the future." A copy of the results presentation is available on our website:www.greeneking.co.uk. For further information: Greene King plc Rooney Anand, chief executive Tel: 01284 763222 Ian Bull, group finance director Financial Dynamics Ben Foster / Charles Watenphul Tel: 020 7831 3113 GREENE KING plc Preliminary results for the 52 weeks ended 29 April 2007 Chairman's Statement Results It is my welcome task to report a very good set of figures for the 52 weeks to29 April 2007. The results this year include a first time contribution of 34weeks from Hardys & Hansons, which we acquired in September 2006, and a fullyear from Belhaven, which includes 22 weeks of non-comparable trading. Allprofit figures in this statement are shown before exceptional items. Our revenue for the year increased by 12% to £917.5m and operating profit by 14%to £218.1m. We therefore raised our profit margin once again and it now standsat 23.8%. I am particularly pleased that all four of our trading divisionsproduced profit figures which were ahead of last year's, as this underlines thestrength we draw from our business model. Profit before tax and exceptional items increased by 17% to £139.8m and ourearnings per share by 16% to 64.8p. This is the thirteenth successive year inwhich we have delivered compound annual growth in earnings per share of 10 percent or more. Dividend The board has taken the decision to increase the total dividend for the year by14% which will help to raise the yield for shareholders. We recommend a finaldividend payment of 16.45p which will produce a total dividend of 22.9p for theyear. If approved, the final dividend will be paid on 10 September to thoseshareholders on the register at the close of business on 3 August. Acquisition We acquired Hardys & Hansons plc on 5 September last year. They had a longhistory as an integrated brewer and pub company, based at Kimberley inNottinghamshire, and their assets included 268 pubs, of which 83 were run undermanagement and 185 as tenancies or leaseholds. Many Hardys & Hansons people havejoined our business, and have been welcomed to contribute towards our futuresuccess, and the properties have now been fully integrated into our estate. Disposal As part of the continual process of wanting to improve the quality of ourtrading assets, we have sold 191 pubs during the year. This included oneparticular package of 155 properties, which were widely spread across ourtrading area and raised £56.5m. The board We have two new members of the board this year. Ian Durant joined us as anon-executive director in March and has become a member of our audit committee.He formerly served as finance director for two different listed companies in theJardine Matheson group and was more recently chief financial officer of SeaContainers Ltd. We look forward to benefiting greatly from his broad property,retail and financial experience. In April we appointed Jonathan Lawson as managing director of our local pubsdivision. This followed our decision to split Pub Company into two specialistdivisions, to provide more focus to the business and to allow the potentialfurther expansion of our managed estate without prejudicing our flat linemanagement structure. Jonathan was retail operations director of Sainsbury'sconvenience stores and will, we believe, bring a valuable fresh perspective torunning our local pubs. These two arrivals followed two departures. I thanked Alan Bowkett for hisservice as a non-executive director in last year's report and he left after theAGM. I would now like to do the same for Mark Angela, who was managing directorof Pub Company until leaving us in April this year. Mark was with us for justover three years, during which time our managed estate expanded greatly,particularly through the acquisition of the Laurel pubs in 2004. I would liketo thank him for his contribution to the continued success of our Pub Companyduring his time with us. People Our business is all about people and we have a huge number of very good people.Some have worked for the company for many years and some have joined in the lastyear, but everyone's efforts towards the well-being and success of Greene Kingare fully appreciated and crucial to our future. I would like to thank all ofour people for being part of a proud and determined team. Tim BridgeChairman 2 July 2007 Chief Executive's Review Once again, Greene King's results for the financial year 2006/7 show stronggrowth right across our businesses. Revenue was up 12%, operating profit up 14%and profit before tax up 17%. As throughout this document, the profit figuresare shown before exceptional items. This result has delivered adjusted earningsper share up 16% to 64.8p, and has allowed the board to recommend a full-yeardividend up 14% to 22.9p. We have thus continued our run of uninterrupted earnings growth, which hasspanned over four decades. We aim to achieve sustainable, consistent growth in organic sales, and in thevalue of our assets, augmented by appropriate acquisitions at the right price.We focus on the efficiency of our operations, and our success in this areaallows us both to reinvest in the business and to continue to grow margins. We strive continually to evolve our offer to meet customers' ever-growingdemands. Our focus is always on our customers, and our approach is built ondeveloping and leveraging our key assets to meet their expectations: a high-quality estate, first-rate people, and strong brands and trading formats. With our largely freehold estate, we focus primarily on suburban and communitysites rather than the more volatile high street. We will continue to evaluateappropriate acquisition opportunities and attractive individual sites. Activelymanaging our property portfolio is central to our business. As well asexpanding the estate, we churn regularly to uphold and improve the averagestandard. Having both managed and tenanted/leased divisions means we can alsotransfer sites both ways between these business models, to optimise theirindividual potential. We place great value on recruiting the best pub managers and area managers, andon developing long-term partnerships with tenants and lessees. It was aparticular pleasure this year that in the Association of Licensed MultipleRetailers' area management awards, Greene King managers were the winners in boththe managed and tenanted/leased classes. The team, from the board down,features a blend of talents and diverse career backgrounds, which combine tomake a formidable force in the market. The Greene King brand is a powerful asset, both with consumers and in the trade- representing all that is good not only in real ale, but also in the greatBritish pub. This year, we demonstrated our commitment to it by taking ourbrand onto prime time television, with our "Sign of a Great Pub" sponsorship ofITV1's Ant & Dec's Saturday Night Takeaway. We have long believed that there isa vital role both for branded outlets, such as our Hungry Horse family valuepubs; and a diverse set of individual locals. At the end of the financial yearwe formalised this distinction, and better positioned both strands for furthergrowth, by creating two new divisions from our managed estate: Destination Pubsand Local Pubs. We are heavy investors in advertising and other brand marketing. This,alongside our rigorous quality standards, enables us to ensure that our alebrands continue to trade at a premium to the market. Pub Company 52 weeks 05/06 06/07 ChangeAverage number of pubs trading 784 781 --Revenue £516.5m £546.0m +6%EBITDA £128.2m £138.0m +8%Operating profit £102.1m £110.7m +8%Operating profit margin 19.8% 20.3% + 0.5 %pts Revenue per pub £658.8k £699.1k +6%Operating profit per pub £130.2k £141.7k +9% During 2006/7, we had an average of 781 managed pubs trading in England andWales in our Pub Company division. A combination of strong organic growth,targeted investment, the Hardys & Hansons acquisition, estate churn and carefulcost control has delivered strong profit growth. Operating profit rose 8% to £110.7m on revenue up 6% at £546.0m. Total like-for-like sales were 3.4% ahead, continuing our record over a numberof years of steady, sustainable sales growth. We do not chase sales growth forits own sake, but seek to build customer loyalty and margin. The operating profit margin was 20.3%, an improvement of 0.5 percentage pointson 2005/6, continuing our long run of margin growth, despite major costpressures during the year, especially in energy and Sky TV. In the run-up to the smoking ban, we have pursued further development programmesfor our mealtime, late-evening food, soft drinks and wine ranges, and addedbranded coffee offers in many outlets, and improved the quality of our outsidetrading areas. Within Pub Company, we invested £20.8m in some 70 major property improvements.Additionally, £12.6m went on maintenance capex, with a further £8.5m spent onrepairs from the revenue account. These figures exclude the investments we havemade in facilities relating specifically to the smoking ban. Pub Company began the financial year with 761 pubs. 83 pubs were added from theHardys & Hansons estate, 32 pubs were divested and 21 transferred to PubPartners, as part of our ongoing programme of estate re-balancing. 5 weretransferred to Belhaven and 2 were acquired. The closing balance was therefore788 sites, segmented as follows: Number of Pubs April 2006 April 2007Hungry Horse 126 107Real Pubs 341 371Town Locals 152 140Inns 142 170Total 761 788 In March we won The Publican's "Pub Company of the Year" award. This is thethird time our managed division has won the accolade. It is a great testamentto the quality of our business, and the efforts of all our employees. The number of managed pubs in Greene King has risen by over 50% since 2000. Atthe end of the financial year, we re-shaped our managed houses business,creating two new divisions. This move creates headroom for potential furthergrowth, while retaining a flat management structure and keeping the wholeorganisation as close as possible to the customer. It has been achieved withoutany increase in cost. The new divisions are: • Destination Pubs (278 sites): focused on branded or strongly-formatted pubs, most of which are food-intensive. This division is led by Jonathan Webster, formerly chief executive of Hardys & Hansons. • Local Pubs (510 sites): focused on community, town-local and town- traditional pubs, where more decision-making on the "feel" and activities of the outlet will be devolved to local level, to reflect their individual markets. To lead this division, Jonathan Lawson joins us from Sainsbury's Local, where he was instrumental in delivering top-line growth through entrepreneurialism among local store managers. Pub Partners 52 weeks 05/06 06/07 ChangeAverage number of pubs trading 1,324 1,431 +8%Revenue £149.6m £164.0m +10%EBITDA £70.0m £80.6m +15%Operating profit £64.9m £74.7m +15%Operating profit margin 43.4% 45.5% + 2.2 %pts EBITDA per pub £52.9k £56.3k +7%Operating profit per pub £49.0k £52.2k +6% Pub Partners is our tenanted and leased pubs division in England and Wales.Underlying sales growth, margin management and churning of the estate havecombined to deliver a 6% improvement in operating profits per pub. This,together with the effect of an additional 107 pubs trading on average in thedivision, has delivered operating profit growth of 15% year on year. The operating profit of £74.7m was on revenue up 10% to £164.0m. The operatingprofit margin was 45.5%, up 2.2 percentage points on the previous year.Like-for-like sales rose 1.7%. A total of £10.8m was invested across the Pub Partners estate, including 55major investments started in the year. An additional £5.7m went on maintenancecapex, and £4.6m on repairs from the revenue account. These figures excludeadditional monies spent by licensees. At the start of the financial year, 1,353 pubs were trading. The Hardys &Hansons acquisition brought 185 more sites, and 21 pubs transferred in from PubCompany. We also sold the 142 pubs which we felt were most exposed to thesmoking ban, well ahead of the ban. The closing balance was therefore 1,417pubs. An average of 1,431 sites traded over the year, 94% of them bearing Greene Kingbranding. Almost 80% are tenanted, with the balance on a lease agreement. Inboth business models we are aiming to build partnerships, and lead the industryin terms of support and ways of working. This was acknowledged in the MorningAdvertiser annual survey (September 2006), where our area managers scored thehighest in terms of receiving an 'excellent' rating, and we were seen as makingthe most effort to 'become a better partner' by licensees. To capture more sales in wines, spirits and minerals we have introduced a newtenancy agreement which gives even more attractive prices on these products. Weare making more sites available for lease, to attract a greater number ofentrepreneurial licensees. To retain control over the quality of the asset andthe trading style adopted by the licensee, we have launched a new leaseagreement, assignable only after four years. We have provided extensive support to tenants to help them prepare for thesmoking ban, with an assisted purchase scheme for smoking shelters, andprovision of assistance with marketing and planning applications. Brewing Company 52 weeks 05/06 06/07 ChangeRevenue £87.7m £91.1m +4%Operating profit £20.6m £23.0m +12%Operating profit margin 23.5% 25.2% + 1.8 %pts Brewing Company is our brand management, brewing and distribution business inEngland and Wales. Following a very strong second half performance, revenue wasup 4% on the previous year, to £91.1m, while operating profit was up 12% to£23.0m. The operating profit margin was therefore 25.2%, an improvement of 1.8percentage points from 2005/6. Our brand strategy leads on Greene King IPA in the on-trade and Old Speckled Henin the off-trade - each supported by the other; by our other main brandsAbbot Ale and Ruddles; and by an extensive portfolio of specialist and seasonalales. Both Greene King IPA and Old Speckled Hen further grew their marketshares, and total own-brewed volume was up 2.1% against a beer market down by-1.7%* and an ale market down by -7%*. Greene King IPA, Britain's No. 1 cask ale, became the Official Beer of EnglandRugby in October. We are delighted to have Greene King IPA associated withrugby in the year of the rugby World Cup. The launch of Greene King IPA Chilledprovides access to the growing category of extra cold beer. Old Speckled Hen, the best-selling premium ale in supermarkets, was re-launchedin a new livery and bottle. In the on-trade, the gravity was lowered to 4.5%ABV, to build distribution and rate of sale. The results have been encouraging,with the brand growing 7% last year in the on-trade. *Source: BBPA Monthly MAT April 2007 Belhaven 52 weeks 05/06* 06/07 ChangeRevenue £115.1m £116.4m +1%Operating profit £22.4m £23.3m +4%Operating profit margin 19.5% 20.0% + 0.6 %pts * 2005/6 numbers on pro-forma basis Belhaven's results were comfortably ahead of our expectations in 2005 whenGreene King acquired the Scottish business, and we are particularly encouragedby Belhaven's strong finish to the financial year. Belhaven's revenue, trading profit and trading profit margin all grew year onyear, a significant achievement in the first year of the Scottish smoking ban. Each part of Belhaven contributed to the success. Belhaven's brewing businesssignificantly outperformed competitors with on-trade beer volumes up 2.2% on thepreceding year in a market which was down by 7.2%. Belhaven brand salesvolumes were up 2.4% with Belhaven Best, Scotland's on-trade market leadingdraught ale, improving volume by 5.6%. Belhaven's managed pubs grew both sales and margin. A combination of newopenings and over 25% growth in food sales compensated for a slight decline inbeer sales and machine income. The tenanted/leased business also performedwell, and benefited further from estate churn and improved wholesale beermargins. 26 pubs were added during the financial year mainly through single siteacquisitions and there were 17 disposals of smaller, lower-quality units,leaving the estate at the close of the year at 299 houses (200 tenanted / leasedand 99 managed). Hardys & Hansons On 5 September we completed the acquisition of Hardys & Hansons plc. Theacquisition brought us 268 sites: 83 managed and 185 tenanted. 97% of the jobsat Hardys & Hansons were retained. Most of the pubs are in the East Midlands,which is adjacent to our heartland; and the acquisition has extended our coreterritory in a very efficient way from a sales and distribution perspective. Idescribed it at the time as a "hand-in-glove fit" and so indeed it has proved. At the time of the deal, we estimated £5m annual synergies, £3m of them in thefirst full year. Capture of these synergies is on track. Additionally, we arenow gaining operational know-how about the running of larger-format food pubs. I am delighted that Jonathan Webster accepted my invitation to stay with GreeneKing and lead our new Destination Pubs division. Disposal of 155 pubs On 1 December, we completed the sale of 155 pubs to Admiral Taverns, for the sumof £56.5m. These pubs generated historic pre-overhead EBITDA of £5.3m. Alongwith the deal, we secured an attractive beer supply agreement with Admiral fortheir entire estate in England. We will continue to dispose of, as well as toacquire, sites in a timely manner and at the right price, in order to optimisethe quality of our estate. Capital efficiency We are committed to maximising value to shareholders through a combination ofacquisitions, organic investment and return of surplus funds. Key to this isfinding the appropriate balance between retaining financial flexibility on theone hand, and driving balance sheet efficiency on the other. Due to the strongcash generation of our business, and the changes we have made to our debtstructure, our fixed charge cover currently stands at 2.8x, which we believe isnow sub-optimal. We therefore intend to move towards fixed charge cover of 2.3x over the nexttwelve to eighteen months. This ratio we will continue to keep under closereview. Of the funds thus generated, we intend to return at least £100m to shareholdersin financial year 2007/8, in the form of share buy-backs, additional to the £28mof buy-backs already executed this financial year. The balance will beavailable to fund a combination of further acquisitions, on which we have astrong track record of value-creative deals; organic investment; and the returnof additional funds to shareholders in the form of further share buy-backs. Unlocking property value Greene King has in place a securitisation arrangement covering 1,632, or 65%, ofour pubs, representing EBITDA of £165.4m. There remain, therefore, 872 or 35%of our pubs outside the securitisation arrangement. The board has reviewed in detail a wide range of options to maximise the valuerelease from these unsecuritised assets, including a separate Real EstateInvestment Trust (REIT), an extension of the existing securitisation, and thecreation of an 'OpCo/PropCo' structure with a joint-venture partner. The board believes that an OpCo/PropCo structure with a joint-venture partnerfor all or a proportion of the unsecuritised part of the estate may deliver thebest balance between realising value and retaining some operational control.With the right joint-venture partner, and on the right terms, we believe that wecould benefit from additional skills and disciplines which will further help usto unlock property value from our estate. Assuming the right conditions, wewould anticipate a transaction during the course of this financial year.Throughout this process, we remain committed to achieving and maintainingbalance sheet efficiency. The smoking ban in England The smoking ban in enclosed public spaces in England has now come into effect.Although it is too early to measure actual results, we believe we are verywell-placed both to meet the challenges and to capitalise on the opportunitiespresented by the ban, for the following reasons: • We have high-quality sites, over 95% of which have usable exterior areas • Our preparations for the ban have stretched over a number of years, gradually introducing non-smoking areas and building 'smoking solutions' into developments • We have also over a number of years been broadening both our customer base among women and families, and our sales mix to elevate the importance of food • Our exposure to all major trade channels in Scotland means we have been able to 'learn in advance' and adapt plans from Belhaven's experiences • Specific actions preparatory to the ban, including the installation of smoking shelters and marketing and communications programmes, have been delivered on schedule. In total we will have spent £10m on smoking ban projects Current trading and outlook Trading in the first eight weeks of the current financial year has been in linewith our expectations. Total like-for-like sales in our managed houses inEngland and Wales were up 1%; underlying total like-for-like sales, excludingthe World Cup effect, were up by 3%. Like-for-like sales at Pub Partners wereup 1%, while Brewing Company's own-brewed volume sales were up 6%. BelhavenBest sales were up 6%. We are well prepared for the smoking ban, which has just come into force inEngland. The actions we have taken, combined with the quality and positioningof our estate, will enable us to meet the challenge and to grasp theopportunity, as we widen our customer base. We are confident that we will continue to deliver a strong performancethroughout the course of the year. The intrinsic quality of our assets, combined with the talents of our team, andthe benefit of recent acquisitions, provide exciting opportunities to deliverfurther underlying growth in the future. Furthermore, our plans to releasecapital from our balance sheet and to unlock value from our property estate willgenerate substantial additional value for our shareholders. Rooney AnandChief Executive 2 July 2007 Group Income Statement for the fifty-two weeks ended 29 April 2007 2007 2006 Note Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total £m £m £m £m £m £m Revenue 2 917.5 - 917.5 818.6 - 818.6Operating costs (699.4) (4.9) (704.3) (627.7) (4.2) (631.9)Disposal of property, plant and - 21.1 21.1 - 5.5 5.5equipmentOperating profit 2 218.1 16.2 234.3 190.9 1.3 192.2Finance income 4.4 - 4.4 1.0 - 1.0Finance costs (83.0) (10.1) (93.1) (71.7) - (71.7)Net finance income/(cost) from 0.3 - 0.3 (0.6) - (0.6)pensionsProfit before tax 139.8 6.1 145.9 119.6 1.3 120.9Tax 4 (42.0) 4.7 (37.3) (36.5) 5.5 (31.0)Profit attributable to equity 97.8 10.8 108.6 83.1 6.8 89.9holders of parent Earnings per share - basic 5 71.9p 60.6p- adjusted basic 5 64.8p 56.0p- diluted 5 70.8p 59.7p- adjusted diluted 5 63.8p 55.2p Dividends per share (paid and 22.90p 20.15pproposed in respect of theperiod) Adjusted earnings per share, operating profit and tax exclude the effect ofexceptional items. Group Balance Sheet as at 29 April 2007 As at As at 29 April 30 April 2007 2006 Note £m £m Non current assets Property, plant and equipment 1,985.8 1,771.8Goodwill 607.7 505.1Financial assets 33.7 34.0Derivative financial instruments 8.4 1.9Deferred tax assets 26.3 24.6Prepayments 6.2 7.3Trade and other receivables 0.2 0.5 2,668.3 2,345.2 Current assets Inventories 18.2 20.1Trade and other receivables 48.9 38.0Prepayments 6.4 8.6Derivative financial instruments 2.0 1.0Cash and cash equivalents 7 92.1 30.6 167.6 98.3 Current liabilities Borrowings 7 (136.4) (279.2)Derivative financial instruments (0.2) (3.2)Trade and other payables (168.2) (132.4)Income tax payable (31.6) (17.1) (336.4) (431.9) Non current liabilities Borrowings 7 (1,391.2) (998.1)Derivative financial instruments (4.4) (17.0)Deferred tax (224.2) (179.6)Post-employment liabilities (45.5) (55.4) (1,665.3) (1,250.1) Total net assets 834.2 761.5 Issued capital and reserves Share capital 18.8 19.1Share premium 243.7 240.6Capital redemption reserve 1.4 1.0Hedging reserve 4.3 (11.9)Own shares (18.9) (11.1)Retained earnings 584.9 523.8Total equity 9 834.2 761.5 Net debt 7 1,435.5 1,246.7 Group Cash Flow Statement for the fifty-two weeks ended 29 April 2007 2007 2006 Note £m £m Operating activities Operating profit 234.3 192.2Operating exceptional items (16.2) (1.3)Depreciation and amortisation 42.7 38.3EBITDA* 2 260.8 229.2Working capital and non-cash movements 10 14.5 (11.6)Interest received 4.4 1.0Interest paid (91.5) (69.2)Tax paid (16.0) (28.9)Net cashflow from operating activities 172.2 120.5 Investing activities Purchase of property, plant and equipment (90.9) (77.9)Movements in financial assets 0.9 4.1Sales of property, plant and equipment 70.3 17.9Acquisition of subsidiaries, net of cash acquired 8 (172.5) (232.7)Net cashflow from investing activities (192.2) (288.6) Financing activities Equity dividends paid 6 (31.5) (27.7)Issue of shares 9 5.4 51.6Purchase of own shares 9 (44.2) (4.8)Financing costs (4.3) (0.1)Repayment of borrowings (802.9) (99.0)Advance of borrowings 965.0 239.7Net cashflow from financing activities 87.5 159.7 Net increase/(decrease) in cash and cash equivalents 67.5 (8.4) Opening cash and cash equivalents 15.2 23.6Closing cash and cash equivalents 82.7 15.2 *EBITDA represents earnings before interest, tax, depreciation, amortisation andexceptional items. Group Statement of Recognised Income and Expense for the fifty-two weeks ended 29 April 2007 2007 2006 £m £m Cashflow hedges: gains taken to equity 18.1 4.1Cashflow hedges: losses recycled to income 5.0 -Actuarial gains on defined benefit pension schemes 10.2 10.7Tax on items recognised directly in equity (10.0) (4.4)Tax on benefit relating to share based payments 6.3 1.7Net income recognised directly in equity 29.6 12.1 Profit for the period 108.6 89.9 Total recognised income and expense for the period 138.2 102.0attributable to equity holders of parent The effects of changes in accounting policy on implementation of IAS 32 and IAS39 at the start of the comparative period have been applied. Notes to the accounts for the fifty-two weeks ended 29 April 2007 1 Basis of preparation The financial information for the fifty-two weeks ended 29 April 2007 has beenaudited and has been prepared in accordance with International FinancialReporting Standards (IFRS) as required by European Union Law. The accountingpolicies are as described in the full 2006 financial statements of Greene Kingplc, except for the following: • International Accounting Standards (IAS) 39 Financial guarantee amendment - Financial instruments: Recognition and measurement • International Financial Reporting Interpretations Committee (IFRIC) 4 - Determining whether an arrangement contains a lease • IFRIC 8 - Scope of IFRS 2 There is no impact in the current period and no changes to comparatives aredeemed required from the adoption of these standards. 2 Segment information Pub Company covers the results of managed houses, Pub Partners covers theresults of tenanted houses, Brewing Company covers brewing beer, marketing andselling, all predominantly in England. Belhaven covers the results of ourScottish operation, which includes managed and tenanted houses and brewing andselling beer. Corporate includes central costs and central assets/liabilities.To aid comparability, the 2005/06 segmental figures have been adjusted to re-analyse the Ridley's business from Brewing Company to Pub Partners and Corporatein accordance with the 2006/07 treatment. Results for the 34 weeks of the acquired Hardys & Hansons business have beenintegrated into the Pub Company, Pub Partners and Brewing Company segments. In2006, the Belhaven results reflect 30 weeks of trading since acquisition. 2007 Pub Pub Brewing Belhaven Corporate Unallocated Total Company Partners Company £m £m £m £m £m £m £m Net assets 1,212.9 816.3 212.0 306.9 (9.2) (1,704.7) 834.2Revenue 546.0 164.0 91.1 116.4 - - 917.5EBITDA* 138.0 80.6 27.1 27.3 (12.2) - 260.8Operating profit** 110.7 74.7 23.0 23.3 (13.6) - 218.1Operating profit** 8.4% 15.1% 11.7% 86.4% - -change 2006 Pub Pub Brewing Belhaven Corporate Unallocated Total Company Partners Company £m £m £m £m £m £m £m Net assets 1,064.5 703.5 199.4 278.4 7.2 (1,491.5) 761.5Revenue 516.5 149.6 87.7 64.8 - - 818.6EBITDA* 128.2 70.0 24.1 14.9 (8.0) - 229.2Operating profit** 102.1 64.9 20.6 12.5 (9.2) - 190.9 * EBITDA represents earnings before interest, tax, depreciation, amortisationand exceptional items ** before the effect of exceptional items (note 3) Unallocated assets / liabilities includes pension, net deferred tax, net currenttax, and derivatives. 3 Exceptional items 2007 2006 £m £m Included in operating profitIntegration of Laurel Neighbourhood business - 1.3Integration of Ridley's business - 2.4Integration of Belhaven business - 0.5Integration of Hardys & Hansons business 4.9 -Disposal of property, plant and equipment (21.1) (5.5) (16.2) (1.3)Included in financing costsTermination of interest rate swaps and loan facilities 10.1 - Total exceptional items before tax (6.1) (1.3) 4 Taxation 2007 2007 2007 2006 2006 2006 Before Before exceptional Exceptional Exceptional Exceptional items items Total Items items Total £m £m £m £m £m £mIncome tax Corporation tax before 39.2 - 39.2 32.7 - 32.7exceptional itemsExceptional tax credit - (3.0) (3.0) - - -Recoverable on exceptional - (4.4) (4.4) - (0.8) (0.8)itemsCurrent income tax 39.2 (7.4) 31.8 32.7 (0.8) 31.9Adjustment in respect of prior - - - - (3.3) (3.3)periods 39.2 (7.4) 31.8 32.7 (4.1) 28.6 Deferred taxOrigination and reversal of 2.8 2.7 5.5 3.8 (1.4) 2.4temporary differences Tax charge in the income 42.0 (4.7) 37.3 36.5 (5.5) 31.0statement The tax effect of non-trading exceptionals was £3.0m (2006 - £nil) 5 Earnings per share Basic earnings per share has been calculated by dividing the profit attributableto equity holders of £108.6m (2006 - £89.9m) by the weighted average number ofshares in issue during the year (excluding own shares held) of 151.0m (2006- 148.4m). Diluted earnings per share has been calculated on a similar basis taking accountof 2.3m (2006 - 2.3m) dilutive potential shares under option, giving aweighted average number of ordinary shares adjusted for the effect of dilutionof 153.3m (2006 - 150.7m). Adjusted earnings per share excludes the effect of exceptional items and ispresented to show the underlying performance of the group on both a basic anddilutive basis. Adjusted earnings per share Earnings Basic earnings Diluted earnings per share per share 2007 2006 2007 2006 2007 2006 £m £m p P p p Profit attributable to equity holders 108.6 89.9 71.9 60.6 70.8 59.7Exceptional items (note 3) (10.8) (6.8) (7.1) (4.6) (7.0) (4.5)Profit attributable to equity holders 97.8 83.1 64.8 56.0 63.8 55.2before exceptional items 6 Dividends paid and proposed 2007 2006 £m £mDeclared and paid in the periodInterim dividend for 2007 - 6.45p (2006 - 5.8p) 9.8 8.9Final dividend for 2006 - 14.35p (2005 - 12.925p) 21.7 18.8 31.5 27.7 Proposed for approval at the AGMFinal dividend for 2007 - 16.45p (2006 - 14.35p) 24.4 21.7Total proposed dividend for 2007 - 22.90p (2006 - 20.15p) 34.2 30.6 Dividends on own shares have been waived. 7 Borrowings 2007 2007 2007 2006 2006 2006 Current Non- Total Current Non- Total Current current £m £m £m £m £m £m Bank overdrafts 9.4 - 9.4 15.4 - 15.4Bank loans - floating rate - 235.0 235.0 - - -Bank loans - floating rate - - - 199.8 328.8 528.6(repaid)Bank loan - fixed rate 3.0 61.6 64.6 2.7 64.6 67.3Securitised debt 16.1 1,094.6 1,110.7 12.9 567.0 579.9Loan notes 107.9 - 107.9 0.4 6.9 7.311.25% Loan from associate - - - 48.0 - 48.0(repaid)7.75% Debenture (repaid) - - - - 30.8 30.8Borrowings 136.4 1,391.2 1,527.6 279.2 998.1 1,277.3Cash and cash equivalents (92.1) (30.6)Net debt 1,435.5 1,246.7 8 Acquisitions The group acquired 100% of the voting shares of Hardys & Hansons Plc, an AIMlisted group consisting of a brewery and managed and tenanted estates, on 5September 2006. Fair value of assets acquired 2007 2006 £m £m Property, plant and equipment 214.3 173.0Intangible assets - -Financial assets 0.9 23.6Inventories 1.6 3.2Trade receivables 2.9 8.9Other receivables/prepayments 2.6 3.2Cash and cash equivalents (0.5) (9.9) Trade payables (12.7) (5.9)Other payables/accruals (3.3) (15.8)Borrowings - (71.7)Derivative financial instruments - (0.2)Pensions liability (2.5) (6.4)Deferred tax (31.0) (17.4)Fair value of net assets 172.3 84.6Goodwill 102.6 145.1 274.9 229.7 Consideration (including fees) satisfied by:Cash 172.0 222.8Loan notes issued 102.9 6.9Total consideration 274.9 229.7 Enterprise value* 274.9 301.4 *Enterprise value is the total of consideration paid and borrowings acquired The fair value of properties acquired was established following a review ofproperties that was carried out by qualified surveyors employed by the company.Retained properties have been revalued at their existing use value andproperties subsequently disposed have been valued at their fair value less coststo sell. The values of other current assets and liabilities have been adjustedto amounts to be realised or paid respectively. 9 Reconciliation of movements in total equity 2007 2006 £m £m At 30 April 2006 761.5 637.1Issue of share capital 3.2 49.4Share option proceeds 2.2 2.2Repurchase of own shares (44.2) (4.8)Actuarial gain 10.2 10.7Tax on actuarial gain (3.1) (3.2)Share based payments 4.8 3.3Tax on share based payments 6.3 1.7Cash flow hedge: gains taken to equity 18.1 4.1Cash flow hedge: losses recycled to income 5.0 -Tax on cash flow hedges (6.9) (1.2)Profit for the period 108.6 89.9Equity dividends (31.5) (27.7)At 29 April 2007 834.2 761.5 10 Working capital and non-cash movements 2007 2006 £m £m Increase in provision against other financial assets 0.3 0.7(Increase)/decrease in inventories 3.5 (2.7)Increase in trade and other receivables (1.8) (2.1)Increase/(decrease) in trade and other payables 14.8 (4.8)Other non-cash movement - 1.4Increase in share based payments 4.7 3.1Difference between defined benefit pension contributions paid and amounts (1.9) (2.3)chargedIntegration costs (5.1) (4.9)Working capital and non-cash movements 14.5 11.6 11 Movement in net debt 2007 2006 £m £m Net increase/(decrease) in cash and cash equivalents 67.5 (8.4)Proceeds - issue of securitised debt (550.0) -Proceeds - advances of loans (415.0) (239.7)Repayment of principal - securitised debt 15.3 12.9Repayment of principal - loans and loan notes 787.6 86.1Financing issue costs 4.3 0.1Increase in net debt arising from cash flows (90.3) (149.0) Debt acquired through acquisitions - (71.7)Debt issued for acquisitions (102.9) (6.9)Other non cash movements 4.4 1.1Increase in net debt (188.8) (226.5) Opening net debt (1,246.7) (1,020.2)Closing net debt (1,435.5) (1,246.7) 12 Dividend payments Subject to the approval of shareholders at the annual general meeting, the finaldividend will be paid on 10 September 2007 to shareholders on the register atthe close of business on 3 August 2007. 13 Reports and accounts The above financial information is derived from the statutory accounts for theperiods ended 29 April 2007 and 30 April 2006, on both of which the auditorshave issued an unqualified opinion. The information does not constitutestatutory accounts as defined in Section 240 (1) of the Companies Act 1985. The accounts for the period ended 30 April 2006 have been filed with theRegistrar of Companies and the accounts for the period ended 29 April 2007 willbe filed in due course. The 2007 Report & Accounts will be posted to shareholders on 6 August 2007 andcopies will be available from that date from the Company Secretary at theregistered office of the company, Westgate Brewery, Bury St. Edmunds, SuffolkIP33 1QT. - ends - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Greene King