RNS Number : 5744C
Greene King PLC
29 June 2016

29 June 2016

A TRANSFORMATIONAL YEAR,

INTEGRATION AHEAD, STRONG RETURNS

& FURTHER DIVIDEND GROWTH

Preliminary results for the 52 weeks to 01 May 2016

Group revenue

Adjusted1,2

profit before tax

Statutory

profit before tax

Adjusted1,2

earnings per share

Dividend

per share

Return on1 capital employed

£2,073.0m

+57.6%

£256.5m

+52.2%

£189.8m

+60.6%

69.9p

+14.6%

32.05p

+7.7%

9.4%

+10bps

Highlights

Market outperformance

· Pub Company3 like-for-like (LFL) sales +1.5%; ahead of the market +1.3%4

· Pub Partners LFL net income +2.7%

· Brewing & Brands own-brewed volume (OBV) +2.9%; ale market share up 40 basis points to 10.5%

Financial strength

· Operating cash flow +24.1%; net debt/EBITDA improved to 3.9x5

· Group return on capital employed (ROCE) +10 basis points to 9.4%

· Dividend per share up 7.7%, continuing our progressive dividend track record

Strategic & operational progress

· Five strategic priorities outlined to drive future underlying growth

· Record customer satisfaction scores in Greene King Pub Company; net promoter score (NPS) +7.9%pts

· Greene King named Best Managed Pub Operator at the 2016 Publican Awards

Acquired Spirit Pub Company; integration & synergies ahead of plan

· £16.7m of cost synergies delivered versus year one target of £12m

· Tenanted and leased integrated ahead of schedule; integration of the managed business well under way

· Five retail growth brands identified & optimisation programme commenced to deliver long-term growth

Strong start to the current year; Pub Company LFL sales +2.8%

Rooney Anand, chief executive officer:

"It has been a transformational year for Greene King. We completed the acquisition of Spirit Pub Company and reached the milestone of £2bn revenue. We have delivered growth across each of the three divisions, outperforming the market in a challenging environment, while making significant progress in combining the best of both businesses to build Britain's best pub company.

"I am pleased to report a strong start to the new financial year, although it is likely that consumer confidence will be affected by Brexit in the near-term. However, Greene King has a strong track record of performing well in challenging conditions, we are a resilient business with a talented team and a strong balance sheet, and we will benefit from the opportunities created by the Spirit acquisition. We are well placed to continue delivering value to our shareholders."

Headline group results

52 weeks

2014/2015

2015/2016

YOY change

Total revenue

£1,315.3m

£2,073.0m

+57.6%

- Pub Company

£1,000.7m

£1,688.2m

+68.7%

- Pub Partners

£121.9m

£187.9m

+54.1%

- Brewing & Brands

£192.7m

£196.9m

+2.2%

Group operating profit before exceptional items

£256.2m

£392.2m

+53.1%

- Pub Company

£190.8m

£299.2m

+56.8%

- Pub Partners

£54.0m

£85.3m

+58.0%

- Brewing & Brands

£29.8m

£32.7m

+9.7%

Group operating profit

£212.3m

£366.3m

+72.5%

Group profit before tax & exceptional items

£168.5m

£256.5m

+52.2%

Group profit before tax

£118.2m

£189.8m

+60.6%

Adjusted basic EPS before exceptional items

61.0p

69.9p

+14.6%

Basic EPS

40.9p

64.4p

+57.5%

Dividend per share

29.75p

32.05p

+7.7%

Core6capital expenditure

£84.6m

£137.5m

+62.5%

Net debt

£1,368.7m

£2,048.4m

+49.7%

Net cash flow from operations

£197.3m

£244.8m

+24.1%

Free cash flow

£55.7m

£50.2m

-9.9%

Notes:

  1. Adjusted for exceptional items as detailed in note three of the financial statements
  2. Includes synergies and, where applicable, Spirit acquisition fair value adjustments
  3. Previously Retail
  4. Coffer Peach Business tracker
  5. Pro-forma, calculated by inclusion of Spirit management accounts data for the seven week pre-acquisition period. EBITDA is adjusted for exceptional items as detailed in note three of the financial statements
  6. Cash flow in respect of capital expenditure on pubs already owned

For further information:

Greene King plc

Rooney Anand, chief executive officer

Kirk Davis, chief financial officer

Tel: 01284 763222

Finsbury

James Leviton

Tel: 0207 251 3801

Philip Walters

Information on Greene King plc is available atwww.greeneking.co.uk;follow us on Twitter: @greeneking

There will be a presentation today for analysts and investors at 9.30am at Deutsche Bank, 1 Great Winchester St. London, EC2N 2DB. A live webcast of the presentation will be available athttp://www.greeneking.co.uk/index.asp?pageid=43

The conference will also be accessible by phone: 0800 953 1287 UK Toll Free; +44 (0) 1452 560297 - Standard International Access. Conference ID:38576466

Definitions

For definitions please refer to glossary of terms at the end of this document

Financial calendar

The group will publish its AGM trading statement on 9 September 2016

Notes for editors

· Greene King was founded in 1799 and is headquartered in Bury St. Edmunds, Suffolk. It currently employs around 44,000 people across its main trading businesses; Pub Company, Pub Partners and Brewing & Brands

· At the year end, it operated 3,035 pubs, restaurants and hotels across England, Wales and Scotland, of which 1,823 were retail pubs, restaurants and hotels, and 1,212 were tenanted, leased and franchised pubs. Its leading retail brands and formats include Hungry Horse, Farmhouse Inns, Chef & Brewer, Flaming Grill and the Greene King Local Pubs estate. 83% 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

I became chairman of Greene King on 2 May 2016 and so this is my first report to you on the company, its performance and prospects. Greene King is a strong business with an excellent track record and, following the acquisition of Spirit Pub Company during the year, we are at an exciting time in our development. I look forward to working with the board and senior executive team to build upon the success of my predecessor in creating further value for all our stakeholders.

OVERVIEW

2016 was a year of strong growth for Greene King, reflecting a continued good performance from the underlying business, enhanced by a substantial contribution from Spirit. Including a 45 week contribution from Spirit, group revenue grew 57.6% and exceeded £2bn. Including synergies, operating profit before exceptional items increased by 53.1% and profit before tax and exceptional items grew 52.2% to £256.5m, resulting in a 14.6% increase in adjusted earnings per share to 69.9p. Cash generation remained strong and net debt to EBITDA improved to 3.9x. Excellent progress has been made integrating the Spirit business and we realised synergies ahead of target in the first year.

DIVIDEND

As a result of this strong growth and reflecting confidence in future prospects, the board has recommended a final dividend of 23.6p, giving a total dividend for the year of 32.05p. This represents growth of 7.7% compared to last year and continues the long-term track record of progressive dividends. The board continues to target minimum cover of around two times earnings.

OUR PEOPLE

Greene King is a people business and the strength of the business performance during the Spirit integration demonstrates the dedication, hard work and passion of our teams. I would like to thank everyone who has worked so hard within the enlarged group during the last year to deliver such strong results while successfully integrating Spirit.

BOARD CHANGES

On 2 February 2016, it was announced that Tim Bridge would be retiring at the end of the financial year after more than 45 years with the company including ten years as chief executive followed by over ten years as chairman. Under Tim's leadership, Greene King has been transformed and it is a testament to his astute assessment of people and business opportunities that the group is in such a good state both operationally and financially. It is a privilege to succeed Tim Bridge as chairman and on behalf of the board I would like to thank him for his enormous contribution to Greene King over the years.

At the beginning of the financial year, Rob Rowley took over the role of senior independent director and will be taking the chairmanship of the audit committee at this year's annual general meeting (AGM). Ian Durant will be retiring at the AGM after completing nine years as a director, latterly as chair of audit, and I wish to record our sincere thanks for his valuable input and advice over this period.

LOOKING AHEAD

The choice available to the UK consumer who wants to enjoy a drink or a meal with family or friends has never been wider and capital continues to be attracted to leisure dining. Greene King has great teams, great brands and great assets and is well placed within this dynamic environment.The recent decision by the UK to leave the EU will need time to be implemented and the uncertainty this brings is likely to weigh on the economy in the near-term. We will not be immune from its effects, but our business has shown resilience in the past, our teams are motivated and, particularly following the Spirit acquisition, we have many opportunities. I look forward to reporting on our continued progress.

Philip Yea

28 June 2016

CHIEF EXECUTIVE'S REVIEW

It has been a transformational year for Greene King, with the acquisition of Spirit in June 2015 followed by significant progress integrating the 'best of both' businesses and realising cost synergies, helping to deliver further improvement in earnings and dividends, and strong returns.

TRADING ENVIRONMENT

In the first half, improvements in the economic environment, including increased consumer confidence and sustained real income growth, were slow to positively impact the UK eating and drinking out market. As the UK referendum approached in the second half, the environment softened and consumers appeared more reluctant to spend discretionary income due to the uncertainty.

Following the UK's vote to leave the European Union, the increasingly uncertain trading environment is likely to weigh on consumer sentiment in the near term. However, Greene King has a strong track record of performing well in challenging trading environments and we have levers to pull within our business, particularly following the Spirit acquisition, to refocus our investment and help limit the indirect impact from lower consumer confidence. In addition, we have limited exposure to European sales, although we have some exposure to foreign exchange rate movements through overseas sourcing. We will look to mitigate the impact of this as far as possible.

Outside of the consequences of the vote, UK eating and drinking out remains a dynamic market with intense competition for every pound in the consumer pocket. This environment of increasing consumer choice extends beyond the traditional pub and restaurant sector and includes the supermarkets and the takeaway aggregators who have made eating at home more attractive. Understanding this, and ensuring our offer is compelling enough to compete successfully with this broader competitive set, is increasingly important for delivering long-term growth.

Consumers remain highly value conscious with a heightened awareness of price, a demand for excellent and personalised service, and a desire for higher quality on the plate and in the glass. These trends will be exacerbated by the uncertainty surrounding Brexit and we are well positioned to take advantage of any weakening in spending power utilising our successful value brands and formats.

They are also seeking experiences they can share with both friends and family and with a much wider audience on social media. Our aim is to create experiences that our customers will value and remember, and that they want to share with others. While digital and technology will increasingly contribute to the overall customer experience, it is the physical interaction with our people and our pubs that will enhance these experiences. We believe that our high quality estate, together with our approach to digital, can set us apart from our broad competitive set.

Our people are core to our business and we constantly strive to pay them appropriately for their hard work while also ensuring we maintain a high level of investment in their development and training. We remain confident of being able to mitigate most of the impact from the ongoing increases in the National Living Wage. We continue to expect the benefits of mitigating actions to be fully achieved in 2018/19 and there are no changes to our estimate that the incremental impact, over and above general wage inflation, will be £2m in the current financial year and will reach an annualised run rate of £6m per annum in 2018/19.

Now that the revised statutory pubs code has been announced, and assuming there are no further changes, we are planning for the introduction of the code at the end of July 2016. We believe the overall financial impact on the group will be immaterial.

PERFORMANCE SUMMARY

Total revenue grew 57.6% to £2,073.0m while operating profit* was 53.1% higher than last year at £392.2m, including £16.7m of synergies achieved during the year.

The operating margin was 18.9%, 0.6%pts lower than last year. This comprised a positive contribution from cost synergies, diluted by a higher contribution from managed pubs, higher lease costs following the Spirit acquisition and incremental investment in our people and in customer service.

In Pub Company, this investment in our people helped to drive LFL sales growth of 1.5%, ahead of the market**, and included LFL sales growth in the original Greene King managed estate of 1.9%. Total sales growth in Pub Company was 68.7% while operating profit grew by 56.8% to £299.2m. 13 new pubs were opened during the year.

Having achieved a record customer satisfaction score in Greene King Pub Company in the first half, further progress was achieved in the second half resulting in a 7.9%pts increase in the full year. We also saw an improved trend in team member retention and in our food safety ratings. The improvements in these metrics indicate the success of our teams in continuing with business as usual during the integration process.

The tenanted and leased businesses were successfully integrated at the end of the first half and the combined Pub Partners business grew LFL net income by 2.7% in the year. Average EBITDA per pub increased by 14.3% reflecting further improvements in estate quality as a result of the Spirit acquisition, the disposal of 48 pubs from the combined estate and synergy contribution.

Brewing & Brands achieved record revenue of £196.9m, including 2.9% OBV growth, and we extended our share of the UK ale market by 40bps to 10.5%. Operating profit grew 9.7% to £32.7m.

The integration of Spirit progressed ahead of plan, with synergy realisation of £16.7m in the year exceeding our expectations. Overall, the positive group performance delivered a 24.1% increase in net cash flow generated from operations and we again covered our debt service obligation, core capital expenditure and dividend from internally generated cash. Net debt to EBITDA improved to 3.9x.

Adjusted earnings per share grew 14.6% to 69.9p and, as a result of this growth and our confidence in the future, we have declared a 7.7% increase in the dividend per share, maintaining our long-term progressive dividend policy.

The business achieved another year of robust returns, generating a ten basis point increase in ROCE to 9.4%, which remains comfortably ahead of our weighted average cost of capital (WACC).

*Throughout this review, operating profit, operating profit margin and EBITDA are stated on a pre-exceptional basis

**Coffer Peach Business Tracker

SPIRIT INTEGRATION

On 23 June 2015, we completed the acquisition of Spirit Pub Company, adding 791 managed pubs and 416 tenanted and leased pubs to the estate. Following a thorough review of Spirit, we commenced the exciting task of integrating these two leading pub businesses using a 'best of both' companies approach. At the end of the first half of the year, our two tenanted and leased businesses were integrated ahead of schedule. We also drove strong acceptance of the Greene King beer brands within Spirit's managed pubs and we announced a decision to retain both the Spirit and Greene King head offices. During the second half, the Greene King beer portfolio gained further traction within Spirit pubs, we commenced the roll out of the 'best of both' pub IT system and the majority of the people transition was completed.

The scale of change in the combined business since the acquisition is significant. While maintaining trading momentum, we have driven fundamental improvements to how the business is structured and run. Keeping Spirit's Burton office as the headquarters for our managed pub business and putting together a senior management team with the requisite retailing experience and skills has given us a platform to create an exceptional retailing business that can generate sustainable competitive advantage.

Following a strong start, momentum with the realisation of cost synergies continued in the second half with good progress on procurement, where we saw a number of supplier negotiations concluded sooner than anticipated. As a result, £16.7m of cost synergies were achieved in the year compared with our original expectation of around £12m. We continue to anticipate annual cost synergies in the region of £35m by the end of 2017/18, of which 80% will be realised by the end of this financial year. Non-recurring costs of achieving these synergies are still expected to total £25m. Our intention remains to invest cost synergies in excess of our stated target to strengthen key areas within Pub Company such as our people, our systems and our brands.

BRAND OPTIMISATION

We acquired a strong portfolio of brands and formats with Spirit - one that would have been very difficult to replicate organically - and we continue to anticipate material benefits from optimising the combined brand portfolio, which will provide an exciting growth opportunity over the next few years.

The combined business has 20 brands and formats and our plan is to reduce this to around ten. We are evolving the future brand portfolio and plan to focus on five growth retail brands and formats: Hungry Horse, Flaming Grill, Farmhouse Inns, Chef & Brewer and Greene King.We will also continue to develop our hotels and Metropolitan, our premium London pub format.

In order to select the growth brands and formats to invest in, we looked at the consumer relevance and financial performance of each brand, the long-term opportunities to grow and expand and the proximity to other pubs within the combined group.

There is potential profit upside from investment in over 300 of our existing pubs to reposition them into the growth brands over the next three years. Our priority in 2016/17 is to convert around 100 Fayre & Square pubs into the growth brands, of which the majority will be rebranded as Hungry Horse.

We also plan to simplify our Local Pubs estate. We will reduce the number of formats and we will replace any existing retail branding with Greene King branding, considerably increasing the size of the Greene King branded estate and creating a significant pub retail brand in the UK eating and drinking out market.

In the current year, we expect to spend around £40-50m on these conversions and anticipate generating EBITDA returns significantly above our cost of capital. We expect a £1m dilutive profit impact in the first year, including the impact of additional opening costs.

STRATEGIC PRIORITIES

Our vision is to be the best pub company in Britain; the best for our customers, our teams, our communities and our shareholders. By being the best, we believe we will generate superior underlying growth and returns for our stakeholders. Pubs have to contend with a wider set of competitors, including coffee shops, takeaway aggregators and grab and go stores and a faster pace of consumer change than ever before. This means we will look to redefine what our pubs offer their customers, ensuring they have a broader and more lasting appeal. In order to deliver our vision, we have identified five strategic priorities for the medium-term: -

1. Build attractive and strong brands

We must ensure our brands stand out and remain relevant to today's increasingly demanding consumer in order to drive long-term growth. We are optimising our brands and formats and using the scale this brings to increase investment in our brand propositions to drive greater brand awareness and loyalty. We will look to broaden the appeal of our pubs, both in terms of the customers that use them and their reasons for visiting. For our Local Pubs estate, Pub Partners and Brewing & Brands, the Greene King brand is key to superior performance and we will extend our brand marketing leadership by investing more in communicating the brand's benefits. A strong digital presence is vital in building successful brands and we will create the digital industry leader through combining the best of Greene King and Spirit's digital expertise to drive customer engagement, engender higher levels of customer brand loyalty and improve the return on our marketing investment.

2. Industry leading value, service and quality

We remain committed to exceeding customer expectations and we will achieve this by constantly improving the value offer to our customers, the service delivery of our teams and the quality of our food and drink offer. We will use our scale to deliver leading value propositions through the successful execution of known value item (KVI) and every-day low pricing (EDLP) strategies to drive a sustainable mix of volume and spend per head growth. We will increase investment in our people to ensure we lead the industry on service and successfully compete with the wider competitive set. Lastly, we will evolve and improve the quality of the food, drink and accommodation we offer our customers, regularly benchmarking against the best in class.

3. Work with the best people

Being the first choice for people who want to work in the hospitality sector is important to us and we want to offer every existing team member the opportunity to grow and develop. Our refreshed career pathway 'Craft your career' provides individuals with structured development opportunities while further initiatives include our focus on apprenticeships across the business, which has led to a commitment to employ a further 10,000 apprentices over the next three years.

We also want to recruit, retain and develop the best operators in our Pub Partners business and this means extending our focus on training and development to both existing and future licensees.

Overall, investing more in the recruitment, retention and development of our people will lead to a better trained and more motivated team across our business, which will be reflected in ongoing improvements in team retention and customer service.

4. Own the best invested pub estate

We want to own and run the best pubs in Britain, which we will achieve through proactive management of our pub portfolio and continued industry leading investment in our estate. We will further grow the share of our profits from managed pubs, where we can determine the customer experience, while valuing the role that Pub Partners plays in generating cash, adding scale and promoting the Greene King brand. The best pubs have the best beers and we will continue to brew our own industry leading beer brands. We believe the strong relationship between our pubs and our breweries is a clear competitive advantage.

We now operate 1,823 pubs, restaurants and hotels in our managed estate. We will selectively build and acquire new pubs and transfer exceptional tenanted and leased pubs to Pub Company when the opportunity arises. We will also selectively reduce the size of our current managed estate by selling pubs that dilute returns or have an unattractive long-term outlook. In Pub Partners, we now operate 1,212 pubs and we will reduce the size of the estate through disposals from the tail and through transfers to Pub Company. Our medium term target for our Pub Partners estate is around 1,000 pubs.

Our preference remains to own the freehold title of our assets and, where it makes financial sense, we will selectively acquire pub freeholds where we currently operate the pub on a lease.

5. Maintain a strong balance sheet and flexible capital structure

Underpinning our company strategy is a financial strategy to maximise the strength and flexibility of our balance sheet. Through a relentless focus on cash generated from operations, we will continue to cover our debt service obligation, our core capital expenditure and our dividend through internally generated cash flow. After the year-end, we successfully completed the issuance of an additional £300m of bonds in the Greene King secured financing vehicle, realising net proceeds of £180m after settling certain interest rate swap liabilities.This additional financing provides longer-term funding for general business operations including increasing our optionality to invest in the business.

BEST FOR OUR COMMUNITIES

Our pubs are at the heart of the community and have a unique opportunity to play an active role in the communities they serve. We understand the importance of operating a sustainable and responsible business and, as an industry leader, it is our duty to set an example by delivering a winning social responsibility programme.

During the year, we were proud to deliver the following initiatives: -

· In March we announced that our teams and customers raised £2 million for our charity partner, Macmillan Cancer Support, doubling our initial target. To mark the milestone, we were pleased to renew our partnership with Macmillan Cancer Support for a further three years

· A partnership with The Prince's Trust to launch ten programmes across the country giving unemployed young people an opportunity to step into work

· For the third year running, we donated to the Pub is the Hub Community Services Fund inorder to help to support rural pubs that want to diversify their services for the benefit of their communities

· Further reduction in water consumption with Spirit named as the Water Efficient Project of the Year at the 2015 Energy awards

OUTLOOK

Trading in the first eight weeks of the year has strengthened, helped by the European Football Championships (Euros) and better weather in May, with Pub Company LFL sales up 2.8%. We are pleased with the initial performance of the brand optimisation programme and the exciting opportunity this presents to deliver long-term growth, and today we have outlined five strategic priorities to deliver our vision of being the best pub company in Britain.

The increasing uncertainty surrounding the UK's future withdrawal from the European Union is likely to have a negative impact on the economy and on consumer confidence in the near-term. However, with our track record of success in previous challenging conditions, our strong balance sheet and the limited direct impact on our business from Brexit, we remain confident that our strategy will drive further growth in earnings, returns and dividends and we look forward to delivering further financial and strategic progress in the current financial year.

PUB COMPANY

52 weeks

Greene King

F15

Greene King

F161

Greene King

YOY

Combined F162

Combined YOY

Average no. of pubs trading

1,042

1,062

+1.9%

1,740

+67.0%

Revenue

£1,000.7m

£1,051.6m

+5.1%

£1,688.2m

+68.7%

Adjusted EBITDA

£239.8m

£249.9m

+4.2%

£386.0m

+61.0%

Adjusted Operating profit

£190.8m

£197.2m

+3.4%

£299.2m

+56.8%

Operating profit margin

19.1%

18.8%

-0.3%pts

17.7%

-1.4%pts

Average EBITDA per pub

£230.1k

£235.3k

+2.3%

£221.8k

-3.6%

1Excludes synergies in the existing Greene King business 2Includes Spirit acquisition fair value accounting adjustments, synergies and a 45 week contribution from Spirit

Our Pub Company strategy is to attract customers with exciting brands that deliver unrivalled value, service and quality. The acquisition of Spirit Pub Company has helped us accelerate this strategy through the addition of successful brands and the opportunity to learn from each other and enhance the customer offer. It also allows us to generate greater scale to drive cost efficiencies that can be reinvested in the business.

In the former Greene King estate, total sales grew by 5.1%, while total sales increased 68.7% to £1,688.2m when including Spirit.

Full year LFL sales growth in the Greene King and Spirit managed estates was 1.9% and 1.0% respectively. On a combined basis, LFL sales grew by 1.5%, ahead of the market, which grew by 1.3%* over a broadly comparable period. We achieved LFL sales growth in food, drink and accommodation and, by brand, we saw notable strength in Chef & Brewer.

*Coffer Peach Business Tracker

On a combined basis, operating profit increased 56.8% to £299.2m. The combined operating margin declined 1.4%pts reflecting higher lease costs following the Spirit acquisition and a 0.3%pt reduction in the margin in the Greene King managed estate due to ongoing investment in our people and our service proposition.

1. Build attractive and strong brands

We constantly improve our brands and the offer within them to ensure they remain fresh and appealing to today's demanding consumer. For example, to extend the appeal of Hungry Horse while retaining the brand's family focus, we are trialling improved zoning, allowing more families to dine in a comfortable environment, while other customers enjoy the option to watch sport.

On digital, we have combined the 'best of both' from the Greene King and Spirit businesses and our ambition is to create seamless hospitality across the whole customer experience. Aiming to facilitate the customer journey, we developed our online booking capabilities, which contributed to a 41% increase in online bookings. Feedback from our customers on how we are doing is important to us and during the year we relaunched our 'Hungry For Feedback' initiative in Hungry Horse while, recognising the increasingly important role of social media, we further rolled out the 'Always On Service' initiative encouraging pub teams to engage with customers on Facebook at a pub level. We continued to personalise the content of our email communications with customers and saw an 18% increase in visits to our pub websites.

Our food festivals turn classic pub food and drink into interesting events, giving customers more reasons to visit and offering them the opportunity to trade up, which can drive spend per head. Further initiatives to expand the appeal of the traditional pub included the relaunch of our value-orientated breakfast offer in Farmhouse Inns, extended breakfast service hours in Hungry Horse and the introduction of a 'Grab 'n' Go' price point for a coffee and a pastry in Local Pubs. Including the Spirit estate, the proportion of sales generated before 5pm increased by 7.6%, including by 8.6% in the five retail growth brands.

2. Industry leading value, service and quality

During the year, we expanded the number of KVIs across the Greene King estate, driving repeat visits among core customers and positively impacting volumes and gross margins. We introduced an 'EDLP' approach into the Spirit estate and, aiming to enhance the customer experience, particularly ahead of the Euros, upgraded our sports viewing facilities in Flaming Grill and in Local Pubs. Elsewhere, we were proud to see Hungry Horse win best value pub restaurant menu at the Menu Innovation and Development Awards. On service, initiatives focusing on great service at all customer touch points led to further increases in NPS since the half year and a 7.9%pts increase in the full year in the original Greene King estate to a new company record since measurement began in 2011. Quality improvements included a refreshed 'Steak Education' programme in Flaming Grill, and in the Greene King estate, further improvements in core dishes contributed to a 2.3%pts increase in quality scores compared to last year.

3. Work with the best people

Our teams are vital to our success and we are pleased with the trend in team member retention since the acquisition of Spirit, demonstrating the resilience and commitment of our pub teams throughout the integration progress to date. During the year, we began developing updated employee value propositions by brand, which outline recruitment, retention and development opportunities in each as well as the overall employee experience. This initiative has delivered positive results to date including the highest team member retention in Hungry Horse since measurement began.

On apprenticeships, we had over 3,000 apprentices in learning during the year and we were delighted to be recognised for our commitment to apprenticeships through the award of Macro Employer of the Year by Apprenticeships 4 England. We were also named as one of the top 50 apprenticeship employers in the UK by the Daily Telegraph.

4. Own the best invested pub estate

We continued to invest in our estate to ensure that our pubs remain enticing places for our customers to spend their time. During the year, we spent £139.0m on maintaining and developing the combined estate, including £51.8m on the Spirit managed estate and, reflecting a rigorous approach to investment allocation, we achieved annualised EBITDA returns in excess of 27%. Taking advantage of opportunities to selectively and strategically expand our Pub Company estate, we opened 13 new pubs in the year. We disposed of 26 pubs from the combined managed business including ten disposals that were required by the Competition and Markets Authority (CMA).

Overall, we were pleased to be recognised with the award of Best Managed Operator at the prestigious Publican Awards.

PUB PARTNERS

52 weeks

Greene King

F15

Greene King

F161

Greene King

YOY

Combined F162

Combined YOY

Average no. of pubs trading

881

829

-5.9%

1,193

+35.4%

Revenue

£121.9m

£119.4m

-2.1%

£187.9m

+54.1%

Adjusted EBITDA

£61.6m

£62.0m

+0.6%

£95.3m

+54.7%

Adjusted Operating profit

£54.0m

£54.4m

+0.7%

£85.3m

+58.0%

Operating profit margin

44.3%

45.6%

+1.3%pts

45.4%

+1.1%pts

Average EBITDA per pub

£69.9k

£74.8k

+7.0%

£79.9k

+14.3%

1Excludes synergies in the existing Greene King business 2Includes Spirit acquisition fair value accounting adjustments, synergies and 45 week contribution from Spirit

In Pub Partners, our strategy is to be the preferred partner for the best operators in the industry. We will achieve this through the offer of the best retail partnerships, in flexible formats and in the best pubs. During the year, we made further significant progress with this, accelerated by the acquisition of Spirit including its high-quality tenanted and leased estate and talented operations team.

The integration of Pub Partners and Spirit Leased was successfully achieved ahead of schedule at the end of the first half.

Pub Partners traded well throughout the year and the combined estate delivered LFL net income growth of 2.7%. Average EBITDA per pub increased by 14.3% reflecting the contribution of the Spirit pubs, ongoing improvements in the quality of the estate and synergy contribution.

The addition of 416 tenanted and leased pubs from Spirit led to growth in revenue and operating profit in the year of 54.1% and 58.0% respectively. Excluding Spirit, revenue declined 2.1% due to disposals, although the operating margin improved by 1.3%pts reflecting good cost control and higher estate quality. The combined Pub Partners operating margin increased by 1.1%pts and was positively impacted by the performance in the original Greene King estate, offset by the increased proportion of leaseholds following the Spirit acquisition. Average revenue per pub grew 13.8% in the combined estate.

Central to the successful execution of our strategy is the ability to offer licensees the best pubs in their location. During the year, we spent £21.1m on maintaining and developing our Pub Partners estate. We also continued to optimise the combined estate through the disposal of a further 48 pubs. These disposals included six that were required by the CMA.

Aiming to attract and retain the best licensees, we increased our focus on food to further support licensees to build sustainable, quality business and expanded our range of partner suppliers to include premium brands such as Italian cuisine focused Barrel & Stone. We also continued to develop our range of attractive and innovative agreements. During the year, Local Hero, our franchise-style agreement built around local provenance, saw the opening of its 50th site while, together with Spirit, we refreshed our suite of turnover agreements.

Digital is a means through which we can further engage with current and prospective licensees and in the year we launched a new and improved online application process and expanded our use of social media. Overall, our number of Twitter followers increased by 75% and traffic to the Pub Partners website increased twelve-fold.

Our teams are important in ensuring we are preferred partners and can attract the best operators. Training initiatives included a 'Bury St Edmunds heritage experience' for our Spirit teams and a continued focus on apprenticeships where we now have 154 qualified apprentices compared with 85 this time last year.

These initiatives have contributed to a consistently low proportion of bad debts in the estate and a stable average licensee tenure at around five years.

BREWING & BRANDS

52 weeks

F15

F16

Change

Revenue

£192.7m

£196.9m

+2.2%

EBITDA

£34.9m

£37.8m

+8.3%

Operating profit

£29.8m

£32.7m

+9.7%

Operating profit margin

15.5%

16.6%

+1.1%pts

In Brewing & Brands, our strategy is to drive growth and cash generation through building consumer loyalty to our core ale brands and our innovative range of seasonal and 'craft' ales. This strategy has led us to being the UK's leading cask ale brewer.

Significant progress was achieved in the year and, including additional volumes to Spirit pubs, OBV grew by 2.9%, increasing our share of the UK ale market by 40bps to 10.5%*.

Revenue grew 2.2% to a record £196.9m, while operating profit grew by 9.7% to £32.7m leading to a 1.1%pts increase in the margin. The margin increase was predominantly driven by new sales to Spirit managed pubs, which are included in the Pub Company revenues along with those to the rest of the Greene King estate, but there was also a benefit from a positive channel mix and additional cost efficiencies realised in the second half of the previous financial year.

During the year, initiatives to further build consumer loyalty and engagement included the Greene King IPA 'To The Pub' campaign, which reached an audience of over 20 million and resulted in 60% of ale drinkers surveyed saying that the adverts encouraged them to buy Greene King IPA on their next visit to the pub. Other initiatives were a £1.2m investment in a multi-channel media campaign in the Hen brand family and increased use of social media to promote the Abbot Ale brand, with industry-leading engagement levels to date**.

Our three core ale brand families - Greene King IPA, Old Speckled Hen and Belhaven - saw further volume growth in the year and our ale portfolio benefited from a number of exciting new partnerships including Greene King IPA's sponsorship of the England and Wales Cricket Board. Greene King IPA was positively impacted by a brand refresh in the on-trade and growing popularity in the export market led by China. Overall, volumes of Greene King IPA grew by 8.0%, increasing its share of the UK cask ale market by 0.4%pts. The 'Hen' brand family had another successful year, particularly in take-home where penetration increased by 3%*** on last year and, overall, Old Speckled Hen remains the number one premium ale brand in Great Britain.****

New product development remains a core part of our strategy and helps us to remain relevant to core consumer drinking occasions. Volumes of East Coast IPA continued to grow throughout the year, we launched 'Old Spirited Hen' and we also released limited edition ales such as Purple Reign, launched in celebration of Her Majesty's 90th birthday.

Elsewhere, we were proud to see Belhaven awarded 'Distributor of the Year' in Scotland at the prestigious DRAM awards and a number of our ales, including Greene King IPA, Abbot Ale and Belhaven Best, won gold at this year's Monde Awards. The launch of our new beer café at our Bury St Edmunds brewery has added to the brewery tour experience, which itself received a Certificate of Excellence on TripAdvisor for the fourth consecutive year.

Following the acquisition of Spirit, we have been encouraged by the response of the Spirit pub managers and their desire to sell Greene King beers and are delighted that Greene King IPA is on sale in over 90% of Spirit managed pubs.

*BBPA May 2015-May 2016

**Google analytics

***Kantar Worldpanel 52 w/e 24th April 2016

****CGA Brand Index On Trade Survey 52 weeks to 03/16/Nielsen Scantrack volume data 52 weeks to 04/16

FINANCIAL REVIEW

INCOME STATEMENT

Revenue was £2,073.0m, an increase of 57.6% compared to the prior year. Excluding a £705.1m contribution from Spirit, revenue increased 4.0% to £1,367.9m. Pub Company was the biggest driver of this increase, with revenue up 68.7% and average revenue per pub rising 1.0%. The combined Pub Company business now accounts for over 81% of group revenue. Total revenue in Pub Partners was £187.9m. This included the Greene King tenanted & leased estate where revenue of £119.4m was down 2.1%, due to the impact of pub disposals. Average tenanted and leased revenue per pub increased 13.8% and average EBITDA per pub grew 14.3% demonstrating improvements in the quality of the estate and also benefitting from the inclusion of synergies and fair value accounting. Brewing & Brands grew revenue 2.2% to £196.9m.

Operating profit before exceptionals was £392.2m, which was an increase of 53.1% on the prior year. Group operating profit margin before exceptional items was down 60bps to 18.9%, reflecting a higher contribution from the managed estate and within this a reduction in Pub Company margin from 19.1% to 17.7%. The reduction of the Pub Company margin was in line with expectations and reflected ongoing investment in labour and training along with the impact of the higher proportion of leasehold pubs in the Spirit estate compared to the Greene King estate.

Net interest costs before exceptional items were £135.7m and included £49.0m of interest relating to Spirit.

Profit before tax and exceptionals was £256.5m, an increase of 52.2% on last year. The tax charge before exceptional items equated to an effective tax rate of 19.3%.

Earnings per share before exceptional items of 69.9p was up 14.6%. Statutory profit before tax was £189.8m, up 60.6% on last year.

CASHFLOW AND CAPITAL STRUCTURE

Operating cash flows remained strong. We generated free cash flow (FCF) of £50.2m, ahead of our scheduled debt repayments of £43.3m and after our core capital expenditure and dividend payments. Overall, EBITDA before exceptional items was £496.9m.

Group net debt at the year-end was £2,048.4m, an increase of £679.7m from the previous year-end due to acquiring net debt of £674.5m with the Spirit business.

In line with our strategic priorities, our objective is to maximise the strength and flexibility of our balance sheet, and the group has a capital structure aimed at meeting the short, medium and longer-term funding requirements of the business. The principal elements of the group's capital structure are a shorter dated £460m revolving credit facility to June 2018 that was £315m drawn at the year-end and two long-term asset-backed financing vehicles. The Greene King securitisation has secured bonds with a carrying value of £1,140.9m and an average life of 11 years, while the Spirit debenture has secured bonds with a carrying value of £788.7m and an average life of 12 years.

Our credit metrics remain strong with 96.1% of our interest costs at a fixed rate and an average cost of debt of 6.6%. As a consequence of the Spirit acquisition, fixed charge cover reduced to 2.3x from 2.9x last year, while interest cover increased to 3.3x from 3.0x last year. On a pro-forma basis, annualised net debt to EBITDA improved to 3.9x. Our Greene King secured vehicle had a free cash flow debt service cover ratio of 1.5x at the year-end, giving 26% headroom. The Spirit debenture vehicle had a free cash flow debt service cover ratio of 1.9x giving headroom of 33%.

After the year-end, the group issued a £300m A6 bond at a coupon of 4.06%, realising net proceeds of £180m after settling certain interest rate swap liabilities. Capitalising on our high proportion of freehold assets, this transaction increased the proportion of longer-term debt in our capital structure and took the outstanding nominal value of bonds issued by Greene King Finance plc at that point to £1,447.7m. The Greene King bond portfolio is secured against 1,543 pubs with a market value of £2.2bn and a carrying value of £1.6bn.

CAPITAL EXPENDITURE & DISPOSALS

During the year, we invested in both maintaining and developing our existing estate. Total expenditure during the year was £168.4m, made up of £110.3m in Greene King and £58.1m in Spirit.

In addition to the acquisition of Spirit, we added 13 new pubs, investing £46.7m in our retail expansion. Total cash capital expenditure was £194.1m, including £137.5m of core capital expenditure. Core capital expenditure included £45.9m on the Spirit estate.

We disposed of 48 pubs from the combined Pub Partners estate, including six required by the CMA. We also disposed of 26 Pub Company pubs, including ten required by the CMA. Total cash proceeds were £82.6m and a net profit on disposal of £23.3m has been recognised.

RETURN ON CAPITAL EMPLOYED

The group is focused on delivering the best possible returns on our assets and on the investments we make. We are focused on capital discipline, coupling targeted investment in new build pubs, single site acquisitions and in developing our existing estate to drive organic growth with disposals of non-core pubs. This has contributed to a ten basis point improvement in group ROCE to 9.4%. These returns were achieved despite a ten basis point dilutive impact from Spirit. ROCE remains comfortably ahead of the group's cost of capital.

DIVIDEND

The board has recommended a final dividend of 23.6 pence per share, up 8.3%. This will be paid on 12 September 2016 to shareholders on the register at the close of business on 12 August 2016.

The proposed final dividend brings the total dividend for the year to 32.05 pence per share, up 7.7%. This maintains our long-term track record of annual dividend growth and is in line with the board's policy of maintaining a minimum dividend cover of around two times underlying earnings, while continuing to invest for future growth.

TAX

The effective rate of corporation tax (before exceptional items) was 19.3% compared to 21.0% in the previous year, resulting in a charge to operating profits (before exceptional items) of £49.4m. This is slightly below the standard UK corporation tax rate due to adjustments in respect of prior periods. The exceptional tax credit of £50.5m is discussed under exceptional items.

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 £570m (2015: £405m). The group's tax policy, which has been approved by the board, aligns with this strategy and ensures that the group fulfils its obligations as a responsible UK taxpayer.

Since the year-end, a formal agreement was reached with HMRC on a number of historical tax positions. We expect to draw the remaining issue to a close and this will be heard by the Court of Appeal in July. The provision for uncertain tax positions and related interest accrued at the balance sheet date were £10.5m (2015: £31.6m) and £5.9m (2015: £13.9m) respectively.

PENSIONS

Following the Spirit acquisition, the group now maintains three defined contribution schemes, which are open to all new employees and three defined benefit schemes, which are closed to new entrants and to future accrual.

At 1 May 2016, there was an IAS 19 pension deficit of £52.3m representing a reduction of £6.9m since the previous year-end. The £52.3m comprised £48.6m in respect of Greene King schemes and £3.7m in respect of the Spirit scheme.

The deficit reduction resulting from the effect of contributions paid to the schemes and the reduction in scheme liabilities following changes to demographic assumptions are partially offset by the impact of changes to the market-derived actuarial assumptions and a reduction in the market value of the schemes assets since the previous year-end.

Total cash contributions in the year were £12.5m for past service.

The triennial funding valuation and recovery plans have now been agreed for the three defined benefit pension schemes and future deficit recovery contributions are expected to be £3.3m per annum, a reduction of £8.6m per annum.

EXCEPTIONAL ITEMS

We recorded a net exceptional charge of £16.2m, consisting of a £25.9m charge to operating profit before tax, a £40.8m charge to finance costs and a net exceptional tax credit of £50.5m. The following items were recognised in the year: -

1. A £17.5m charge for legal, professional, integration and reorganisation costs following the Spirit acquisition

2. A net impairment charge of £32.2m (2015: £27.4m) was made against the carrying value of our pubs and other assets. This comprises an impairment charge of £79.8m offset by reversals of previously recognised impairment losses of £47.6m

3. A net surplus on disposal of property plant and equipment, which includes a number of high alternative use value disposals, of £23.3m

4. £39.1m of exceptional finance costs in respect of the mark-to-market movements in the fair value of interest rate swaps not qualifying for hedge accounting within the Spirit debenture

5. The exceptional tax credit of £50.5m consists of a £11.4m tax credit on exceptional items, a deferred tax credit of £33.6m in respect of the licensed estate, a £0.7m tax credit in respect of prior periods and a £4.8m tax credit in respect of rate changes. The deferred tax credit in respect of the licensed estate includes a credit of £26.8m in relation to revaluation and rolled over gains on the licensed estate following clarification from HMRC on the treatment of certain judgemental terms

SPIRIT ACQUISITION

The group completed the acquisition of Spirit Pub Company plc on 23 June 2015 for consideration of £763.1m.

A fair value exercise was undertaken upon completion and the final assessment in respect of the assets and liabilities acquired has been concluded. The goodwill on acquisition following the fair value exercise is £434.0m.

Key fair values include the following: -

• Property, plant and equipment values, for which valuations have been performed by external surveyors, of £1,413.4m

• A £168.3m intangible operating lease asset

• The brands acquired with the Spirit business have been valued at £16.1m

• A £312.7m liability recognised in respect of lease arrangements that are not considered to have market rate terms

• Derivative liabilities in respect of interest rate swaps of £165.2m

• Deferred tax asset of £68.7m recognised relating to losses, derivatives and other temporary differences

• Net debt acquired, which totalled £674.5m and included cash of £147.5m

The impact of fair value adjustments and other accounting alignments on the annual results has been to increase operating profit by £7.1m, largely as a result of the treatment of the off-market lease liability. The benefit to profit before tax and exceptionals has been £7.4m. There has been no impact on cash.

GUIDANCE FOR FINANCIAL YEAR 2016/17

The 2016/17 pre-exceptional tax rate is expected to be c.20%.

In Pub Company, we anticipate opening 10-15 pubs in the current year and disposing of 65-75 pubs from the estate.

In Pub Partners, we expect to reduce the estate by 50-65 pubs in the financial year. These disposals, as well as potential transfers to Pub Company, will improve the quality of the estate while generating cash for other uses across the business.

We anticipate spending £130-140m in the current financial year, excluding brand optimisation capex, on maintaining and developing our pubs, in order to ensure that they remain attractive places for customers to spend their time.

Spend on the brand optimisation programme is expected to total £40m-50m in the current financial year - out of a total spend over three years of £120-150m - and we are targeting EBITDA returns significantly ahead of our cost of capital.

Our blended cost of debt is expected to be c.6.3%

INCOME STATEMENT ANALYSIS

Greene KIng

Spirit1

TOTAL

GROUP

F16

Synergies

Total

F16

Synergies

Accounting adjustments2

Total

£m

£m

£m

£m

£m

£m

£m

£m

Revenue

1,367.9

-

1,367.9

705.1

-

-

705.1

2,073.0

EBITDA3

326.5

5.6

332.1

143.4

11.1

10.3

164.8

496.9

Operating profit3

258.3

5.6

263.9

110.1

11.1

7.1

128.3

392.2

Net finance cost3

(86.7)

-

(86.7)

(49.3)

-

0.3

(49.0)

(135.7)

Profit before tax3

171.6

5.6

177.2

60.8

11.1

7.4

79.3

256.5

1Post acquisition since 23 June 2015

2Accounting alignments and income statement impact of fair value adjustments

3Before exceptional items

OPERATING PROFIT ANALYSIS3

Greene KIng

Spirit1

TOTAL

GROUP

F16

Synergies

Total

F16

Synergies

Accounting adjustments2

Total

£m

£m

£m

£m

£m

£m

£m

£m

Pub Company

197.2

3.5

200.7

82.9

10.0

5.6

98.5

299.2

Pub Partners

54.4

1.1

55.5

27.2

1.1

1.5

29.8

85.3

Brewing & Brands

31.7

1.0

32.7

-

-

-

-

32.7

Corporate

(25.0)

-

(25.0)

-

-

-

-

(25.0)

Total

258.3

5.6

263.9

110.1

11.1

7.1

128.3

392.2

1Post acquisition since 23 June 2015

2Accounting alignments and income statement impact of fair value adjustments

3Before exceptional items

Group income statement

for the fifty-two weeks ended 1 May 2016

2016

2015

Before

Before

exceptional

Exceptional

exceptional

Exceptional

items

items

Total

items

items

Total

Note

£m

£m

£m

£m

£m

£m

(Note 3)

(Note 3)

Revenue

2

2,073.0

-

2,073.0

1,315.3

-

1,315.3

Operating costs

(1,680.8)

(25.9)

(1,706.7)

(1,059.1)

(43.9)

(1,103.0)

Operating profit

392.2

(25.9)

366.3

256.2

(43.9)

212.3

Finance income

1.5

-

1.5

0.3

-

0.3

Finance costs

(137.2)

(40.8)

(178.0)

(88.0)

(6.4)

(94.4)

Profit before tax

256.5

(66.7)

189.8

168.5

(50.3)

118.2

Tax

4

(49.4)

50.5

1.1

(35.3)

6.4

(28.9)

Profit attributable to equity holders of parent

207.1

(16.2)

190.9

133.2

(43.9)

89.3

Earnings per share

- basic

5

64.4 p

40.9 p

- adjusted basic *

5

69.9 p

61.0 p

- diluted

5

64.1 p

40.6 p

- adjusted diluted *

5

69.5 p

60.6 p

Dividend per share paid and proposed in respect of the period


6

32.05 p

29.75 p

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

Group statement of comprehensive income

for the fifty-two weeks ended 1 May 2016

2016

2015

£m

£m

Profit for the period

190.9

89.3

Other comprehensive loss to be reclassified to the income statement in subsequent periods:

Cash flow hedges:

- Losses taken to equity

(40.1)

(93.4)

- Transfers to income statement on cash flow hedges

27.6

29.7

Tax on cash flow hedges

(2.5)

12.7

(15.0)

(51.0)

Items not to be reclassified to the income statement in subsequent periods:

Actuarial losses on defined benefit pension schemes

(4.5)

(11.9)

Tax on actuarial losses

(1.5)

2.4

(6.0)

(9.5)

Other comprehensive expense for the period, net of tax

(21.0)

(60.5)

Total comprehensive income for the period, net of tax

169.9

28.8

Group balance sheet

as at 1May 2016

2016

2015

2014

Note

£m

£m

£m

(Restated

see note 4)

(Restated

see note 4)

Non current assets

Property, plant and equipment

3,671.3

2,235.4

2,169.7

Intangibles

174.6

-

-

Goodwill

1,121.9

700.9

703.8

Financial assets

16.8

21.3

24.2

Deferred tax assets

78.7

28.3

13.3

Prepayments

0.3

0.4

0.3

Trade and other receivables

0.1

0.1

0.1

5,063.7

2,986.4

2,911.4

Current assets

Inventories

41.3

32.1

30.5

Financial assets

9.8

9.1

8.6

Trade and other receivables

82.7

58.9

60.2

Prepayments

27.7

18.0

13.3

Cash and cash equivalents

8

381.7

210.3

216.2

543.2

328.4

328.8

Property, plant and equipment held for sale

2.3

0.4

81.7

545.5

328.8

410.5

Current liabilities

Borrowings

9

(210.3)

(189.9)

(202.0)

Derivative financial instruments

(41.2)

(28.1)

(9.4)

Trade and other payables

(424.0)

(294.1)

(256.5)

Off market contract liabilities

10

(22.4)

-

-

Income tax payable

(30.3)

(50.8)

(46.5)

Provisions

(24.7)

(0.5)

(0.5)

(752.9)

(563.4)

(514.9)

Non current liabilities

Borrowings

9

(2,219.8)

(1,389.1)

(1,449.8)

Trade and other payables

(1.5)

(1.0)

-

Off market contract liabilities

10

(277.5)

-

-

Derivative financial instruments

(399.7)

(208.8)

(163.0)

Deferred tax liabilities

(17.9)

(57.4)

(72.0)

Post-employment liabilities

(53.6)

(60.5)

(53.5)

Provisions

(12.7)

(6.1)

(6.0)

(2,982.7)

(1,722.9)

(1,744.3)

Total net assets

1,873.6

1,028.9

1,062.7

Issued capital and reserves

Share capital

38.6

27.5

27.4

Share premium

261.0

259.3

256.6

Merger reserve

752.0

-

-

Capital redemption reserve

3.3

3.3

3.3

Hedging reserve

(182.0)

(167.0)

(116.0)

Own shares

(0.2)

(4.9)

(6.3)

Retained earnings

1,000.9

910.7

897.7

Total equity

1,873.6

1,028.9

1,062.7

Net debt

12

2,048.4

1,368.7

1,435.6

Group cashflow statement

for the fifty-two weeks ended 1 May 2016

2016

2015

Note

£m

£m

Operating activities

Operating profit

366.3

212.3

Operating exceptional items

25.9

43.9

Depreciation

94.9

62.8

Amortisation

9.8

-

EBITDA1

496.9

319.0

Working capital and other movements

11

(75.1)

4.6

Interest received

1.5

0.3

Interest paid

(132.8)

(86.0)

Tax paid

(45.7)

(40.6)

Net cash flow from operating activities

244.8

197.3

Investing activities

Purchase of property, plant and equipment

(194.1)

(160.5)

Advance of trade loans

(4.1)

(5.5)

Repayment of trade loans

4.8

7.9

Sales of property, plant and equipment

82.6

94.0

Acquisition of subsidiary. net of cash acquired

104.3

-

Net cash flow from investing activities

(6.5)

(64.1)

Financing activities

Equity dividends paid

6

(93.3)

(62.8)

Issue of shares

1.7

2.8

Transaction cost for share issue

(2.1)

-

Purchase of own shares

-

(4.2)

Repayment of borrowings

(44.0)

(61.1)

Advance of borrowings

65.0

-

Net cash flow from financing activities

(72.7)

(125.3)

Net increase in cash and cash equivalents

165.6

7.9

Opening cash and cash equivalents

210.3

202.4

Closing cash and cash equivalents

375.9

210.3

1EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptional items

GROUPStatement of change in equity

for the fifty-two weeks ended 1 May 2016

Share

Share

Merger

Capital

Hedging

Own

Retained

Total

capital

premium

reserve

redemption

reserve

shares

earnings

£m

£m

£m

£m

£m

£m

£m

£m

At 4 May 2014

27.4

256.6

-

3.3

(116.0)

(6.3)

897.7

1,062.7

Profit for the period

-

-

-

-

-

-

89.3

89.3

Other comprehensive income:

Actuarial losses on defined benefit pension schemes (net of tax)

-

-

-

-

-

-

(9.5)

(9.5)

Net loss on cash flow hedges
(net of tax)

-

-

-

-

(51.0)

-

-

(51.0)

Total comprehensive income

-

-

-

-

(51.0)

-

79.8

28.8

Issue of ordinary share capital

0.1

2.7

-

-

-

-

-

2.8

Release of shares

-

-

-

-

-

5.6

(5.6)

-

Repurchase of shares

-

-

-

-

-

(4.2)

-

(4.2)

Share based payments

-

-

-

-

-

-

3.1

3.1

Tax on share based payments

-

-

-

-

-

-

(1.5)

(1.5)

Equity dividends paid

-

-

-

-

-

-

(62.8)

(62.8)

At 3 May 2015

27.5

259.3

-

3.3

(167.0)

(4.9)

910.7

1,028.9

Profit for the period

-

-

-

-

-

-

190.9

190.9

Other comprehensive income:

Actuarial losses on defined benefit pension schemes (net of tax)

-

-

-

-

-

-

(6.0)

(6.0)

Net loss on cash flow hedges
(net of tax)

-

-

-

-

(15.0)

-

-

(15.0)

Total comprehensive income

-

-

-

-

(15.0)

-

184.9

169.9

Issue of ordinary share capital

11.1

1.7

752.0

-

-

-

-

764.8

Transaction costs for share issue

-

-

-

-

-

-

(2.1)

(2.1)

Release of shares

-

-

-

-

-

4.7

(4.7)

-

Share based payments

-

-

-

-

-

-

6.2

6.2

Tax on share based payments

-

-

-

-

-

-

(0.8)

(0.8)

Equity dividends paid

-

-

-

-

-

-

(93.3)

(93.3)

At 1 May 2016

38.6

261.0

752.0

3.3

(182.0)

(0.2)

1,000.9

1,873.6

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

1 Basis of preparation

The consolidated financial statements and preliminary announcement of Greene King plc for the 52 week period ended 1 May 2016 were authorised for issue by the board of directors on 28 June 2016.

The financial information included within this preliminary announcement does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 (the "Act").

The financial information for the 52 week period ended 1 May 2016 has been extracted from the statutory accounts on which an unqualified audit opinion has been issued.

The 2016 Report & Accounts will be posted to shareholders on 4 August 2016 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. The statutory accounts for the period end 1 May 2016 will be delivered to the Registrar of Companies following the company's Annual General Meeting.

The statutory accounts for the prior financial year, for the 52 week period ended 3 May 2015, have been delivered to the Registrar of Companies, and the auditors have made a report thereon under Chapter 3 of part 16 of the Act. That report was unqualified and did not contain a statement under sections 498(2) or 498(3) of the Act.

The consolidated financial statements of Greene King plc and its subsidiaries have prepared in accordance with International Financial Reporting Standards (IFRS) as required by European Union law and as applied in accordance with the Companies Act 2006.

The accounting policies adopted are consistent with those of the previous financial year. New standards and interpretations which came into force during the year did not have a significant impact on the Group's financial statements.

2 Segment information

Following the acquisition of Spirit Pub Company on 23 June 2015 the group had five reportable segments that are largely organised and managed separately according to the nature of products and services provided, distribution channels and profile of customers. The segments include the following businesses;

Pub Company:Managed pubs and restaurants (Greene King and Spirit)

Pub Partners:Tenanted and leased pubs (Greene King and Spirit)

Brewing & Brands:Brewing, marketing and selling beer

These are also considered to be the group's operating segments and are based on the information presented to the chief executive who is considered to be the chief operating decision maker. No aggregation of operating segments has been made.

Following the back-office integration of the Greene King and Spirit businesses from the start of the next financial year the group reverted to three reportable segments: Pub Company, Pub Partners and Brewing & Brands.

Segmental information presented in respect of the prior year is for the three Greene King reportable segments.

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

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

2SEGMENT INFORMATION(CONTINUED)

2016

Pub

Pub

Brewing

Corporate

Total

Company

Partners

& Brands

operations

£m

£m

£m

£m

£m

External Revenue

Greene King

1,051.6

119.4

196.9

-

1,367.9

Spirit

636.6

68.5

-

-

705.1

Total

1,688.2

187.9

196.9

-

2,073.0

Segment operating profit

Greene King

200.7

55.5

32.7

(25.0)

263.9

Spirit

98.5

29.8

-

-

128.3

Segment operating profit

299.2

85.3

32.7

(25.0)

392.2

Exceptional items

(25.9)

Net finance cost

(176.5)

Income tax expense

1.1

190.9

EBITDA 1

Greene King

253.4

63.1

37.8

(22.2)

332.1

Spirit

132.6

32.2

-

-

164.8

Total

386.0

95.3

37.8

(22.2)

496.9

Balance Sheet

Segment assets

Greene King

2,338.2

629.6

384.5

55.8

3,408.1

Spirit

1,452.6

288.1

-

-

1,740.7

Unallocated assets2

460.4

3,790.8

917.7

384.5

55.8

5,609.2

Segment liabilities

Greene King

(73.1)

(12.0)

(84.8)

(168.0)

(337.9)

Spirit

(362.1)

(33.4)

-

(6.0)

(401.5)

Unallocated liabilities2

(2,996.2)

(435.2)

(45.4)

(84.8)

(174.0)

(3,735.6)

Net Assets

3,355.6

872.3

299.7

(118.2)

1,873.6

Other segment information:

Capital Expenditure

Additions - Greene King

111.3

15.4

6.3

7.1

140.1

Additions - Spirit

45.9

5.9

-

-

51.8

157.2

21.3

6.3

7.1

191.9

Depreciation and amortisation

Greene King

(52.7)

(7.6)

(5.1)

(2.8)

(68.2)

Spirit

(34.1)

(2.4)

-

-

(36.5)

(86.8)

(10.0)

(5.1)

(2.8)

(104.7)

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

2SEGMENT INFORMATION(CONTINUED)

2015

Pub

Pub

Brewing

Corporate

Total

Company

Partners

& Brands

operations

£m

£m

£m

£m

£m

External Revenue

1,000.7

121.9

192.7

-

1,315.3

Operating Costs

(809.9)

(67.9)

(162.9)

(18.4)

(1,059.1)

Segment operating profit

190.8

54.0

29.8

(18.4)

256.2

Exceptional items

(43.9)

Net finance cost

(94.1)

Income tax expense

(28.9)

89.3

EBITDA 1

239.8

61.6

34.9

(17.3)

319.0

Balance Sheet

Segment assets

2,058.2

608.7

358.7

51.0

3,076.6

Unallocated assets2

238.6

2,058.2

608.7

358.7

51.0

3,315.2

Segment liabilities

(110.0)

(14.1)

(73.7)

(103.9)

(301.7)

Unallocated liabilities2

(1,984.6)

(110.0)

(14.1)

(73.7)

(103.9)

(2,286.3)

Net Assets

1,948.2

594.6

285.0

(52.9)

1,028.9

Other segment information

Capital Expenditure

Additions

139.4

18.9

4.7

2.6

165.6

Depreciation

(49.0)

(7.6)

(5.1)

(1.1)

(62.8)

1EBITDA represents earnings before interest, tax, depreciation, amortisation and exceptional items and is calculated as operating profit before exceptional items adjusted for the depreciation and amortisation charge for the period.

2Unallocated assets/liabilities include cash, borrowings, pensions, net deferred tax, net current tax, and derivatives. Prior year assets and liabilities have been restated for the £33.7m deferred tax liability that has been offset against deferred tax assets as detailed in note 4.

Management reporting and controlling systems

Management monitors the operating results of its strategic business units separately for the purpose of making decisions about allocating resources and assessing performance. Segment performance is measured based on segment operating profit or loss referred to as trading profit in our management and reporting systems. Included within the corporate column in the table above are functions managed by a central division.

No information about geographical regions has been provided as the group's activities are predominantly domestic.

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

3 Exceptional items

2016

2015

£m

£m

Included in operating profit

Acquisition and integration costs

17.5

15.8

Net impairment of property, plant and equipment

32.2

27.4

Employee costs

-

1.5

Share based payment credit

-

(0.6)

Insurance proceeds

(0.5)

(0.1)

Net profit on disposal of property, plant and equipment

(23.3)

(0.1)

25.9

43.9

Included in financing costs

Interest on tax adjustment in respect of prior periods

-

4.0

Fair value losses on ineffective element of cash flow hedges

1.3

2.4

Fair value movements of derivatives held at fair value through profit and loss

39.1

-

Interest on VAT provision

0.4

-

Total exceptional items before tax

66.7

50.3

Tax impact of exceptional items

(11.4)

(7.0)

Tax credit in respect of the licensed estate

(33.6)

(2.3)

Tax credit in respect of rate change

(4.8)

-

Adjustment in respect of prior periods - income tax

(0.5)

9.5

Adjustment in respect of prior periods - deferred tax

(0.2)

(6.6)

Total exceptional tax

(50.5)

(6.4)

Total exceptional items after tax

16.2

43.9

Exceptional operating costs

Acquisition and integration costs are items of one-off expenditure, including legal and professional fees, the costs of dedicated integration project teams and redundancy costs, incurred in connection with the acquisition and integration of Spirit Pub Company.

During the period to 1 May 2016 the group has recognised a net impairment loss of £32.2m (2015: £27.4m). This is comprised of an impairment charge of £79.5m (2015: £27.4m) and reversal of previously recognised impairment losses of £47.3m (2015: £nil). The impairment charge includes £1.4m in respect of properties damaged by fire in the year. A £4.8m charge has also been recognised in respect of IT assets acquired with Spirit Pub Company that will not form part of the IT infrastructure post integration. Impairment of £73.3m has been recognised in respect of a small number of pubs and is driven by changes in the local competitive and trading environment at the respective sites, and changes to estimates of fair value less costs of disposal. In addition to this impairment, reversals have been recognised following an improvement in trading performance and an increase in amounts of estimated future cash flows for previously impaired sites as well as increases to fair value less costs of disposals.

In the period, the group received further insurance compensation to meet the costs of restoring sites fire-damaged in a previous period totalling £0.5m (2015: £0.1m).

The net profit on disposal of property plant and equipment and goodwill of £23.3m (2015: £0.1m profit) comprises a total profit on disposal of £50.1m (2015: £10.2m) and a total loss on disposal of £26.8m (2015: £10.1m).

The net profit on disposal is made up of the following segments: Greene King Pub Company £2.7m profit, Greene King Pub Partners £17.5m profit, Spirit Pub Company £0.5m loss, Spirit Pub Partners £0.9m loss and Corporate £4.5m profit.

In the prior period the group incurred £1.5m of exceptional employee costs, which included restructuring costs and costs associated with changes to key management. In addition a share based payment credit of £0.6m was recognised which resulted from the reversal of charges recognised in earlier years following a reassessment of expected scheme performance.

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

3 Exceptional items(CONTINUED)

Exceptional finance costs

The £1.3m fair value loss (2015: £2.4m loss) is the mark-to-market movement on the ineffective element of cash flow hedges resulting from changes in the LIBOR yield curve.

During the period the group acquired as part of the business combination derivatives that are subsequently accounted for at fair value through profit and loss as opposed to existing derivatives which are designated in hedge relationships. The exceptional charge relates to the mark-to-market movement on these derivatives excluding amortisation of the fair value on acquisition which reduces the pre-exceptional finance costs that include the interest paid.

Exceptional tax

The tax credit in respect of the licensed estate has arisen from movements in their tax base cost, including the impact of indexation.

The Finance (No.2) Act 2015 reduced the rate of corporation tax from 20% to 19% from 1 April 2017 and to 18% from 1 April 2020. These rate reductions were substantively enacted at the balance sheet date and are therefore included in these accounts. The net deferred tax asset has been calculated using the rates at which each temporary difference is expected to reverse. The effect of these rate reductions is to reduce the deferred tax provision by a net £2.7m comprising a credit to the income statement of £4.8m and a debit to the group statement of comprehensive income and equity of £7.5m.

The adjustment in respect of prior periods' income tax in 2015 arises from finalising the tax returns for earlier periods including the reversal of tax relief previously taken on intra-group transactions. On the 6 June 2016 a formal agreement was reached on a number of historical tax positions, in respect of which £9m remains payable, excluding Sussex which will be heard by the Court of Appeal on 4 July 2016.

The adjustment in respect of prior periods' deferred tax arises from finalising the tax returns for earlier periods and also deferred tax on revaluation and rolled over gains on the licensed estate. During the period the group recognised a deferred tax credit of £26.8m in relation to revaluation and rolled over gains on the licensed estate following correspondence with HMRC which clarified the treatment of certain judgemental items that led to a change in the group's estimation of base cost.

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

4 Taxation

2016

2015

Before

Before

exceptional

Exceptional

exceptional

Exceptional

items

items

Total

items

items

Total

£m

£m

£m

£m

£m

£m

Income tax

Corporation tax before exceptional items

32.6

-

32.6

38.5

-

38.5

Recoverable on exceptional items

-

(3.2)

(3.2)

-

(1.2)

(1.2)

Current income tax

32.6

(3.2)

29.4

38.5

(1.2)

37.3

Adjustments in respect of prior periods

(1.0)

(0.5)

(1.5)

-

9.5

9.5

31.6

(3.7)

27.9

38.5

8.3

46.8

Deferred tax

Origination and reversal of temporary differences

17.3

(41.8)

(24.5)

(3.2)

(8.1)

(11.3)

Adjustment in respect of prior periods

0.5

(0.2)

0.3

-

(6.6)

(6.6)

Tax credit in respect of rate change

-

(4.8)

(4.8)

-

-

-

17.8

(46.8)

(29.0)

(3.2)

(14.7)

(17.9)

Tax charge in the income statement

49.4

(50.5)

(1.1)

35.3

(6.4)

28.9

Income tax payable

The income tax liability of £30.3m (2015: £50.8m) includes an assessment of the expected liabilities in respect of uncertain tax positions of £10.5m (2015: £31.6m) which have yet to be agreed or are in dispute with HMRC. On the 6 June 2016 a formal agreement was reached on a number of historical tax positions, in respect of which £9m remains payable at the year end, excluding Sussex which will be heard by the Court of Appeal on 4 July 2016.

Prior year restatement

The comparatives have been restated to reflect the netting of deferred tax assets and liabilities, as in the current year, the net impact being that a £33.7m (2014: £38.0m) deferred tax liability has been offset against deferred tax assets.

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

5 Earnings per share

Basic earnings per share has been calculated by dividing the profit attributable to equity holders of £190.9m (2015: £89.3m) by the weighted average number of shares in issue during the period of 296.2m (2015: 218.3m).

Diluted earnings per share has been calculated on a similar basis taking account of 1.6m (2015: 1.6m) dilutive potential shares under option, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 297.8m (2015: 219.9m). There were no (2015: nil) anti-dilutive share options excluded from the diluted earnings per share calculations. The performance conditions for share options granted over 1.6m (2015: 1.5m) 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 has 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.

Adjusted earnings per share

Earnings

Earnings per share

Diluted earnings per share

2016

2015

2016

2015

2016

2015

£m

£m

p

p

p

p

Profit attributable to equity holders

190.9

89.3

64.4

40.9

64.1

40.6

Exceptional items (note 3)

16.2

43.9

5.5

20.1

5.4

20.0

Profit attributable to equity holders before exceptional items

207.1

133.2

69.9

61.0

69.5

60.6

6 Dividends paid and proposed

2016

2015

£m

£m

Declared and paid in the period

Interim dividend for 2016 - 8.45p (2015 - 7.95p)

26.2

17.4

Final dividend for 2015 - 21.8p (2014 - 20.8p)

67.1

45.4

93.3

62.8

Proposed for approval at the AGM

Final dividend for 2016 - 23.6p (2015 - 21.8p)

73.0

67.1

Total proposed dividend for 2016 - 32.05p (2015 - 29.75p)

99.2

84.5

Dividends on own shares have been waived.

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

7 BUSINESS COMBINATIONS

On 23 June 2015 the group completed the acquisition of Spirit Pub Company plc creating the UK's leading managed pub company.

The acquisition provides the group with the opportunity to accelerate its retail expansion strategy by creating the UK's leading managed pub operator with significantly enhanced estate quality and scale.

The group's tenanted business will materially benefit from the high quality of the acquired estate, and the Greene King Brewing & Brands business will benefit from additional routes to market.

The group acquired 100% of the share capital of Spirit Pub Company plc for consideration of £763.1m, made up of 89,095,959 shares of Greene King plc with a market value of £8.565 per share on completion.

2016

Fair Value of assets acquired

£m

Property, plant and equipment

1,413.4

Brand Intangible

16.1

Operating leases (Intangible assets)

168.3

Inventories

9.0

Trade receivables

7.5

Other receivables/prepayments

33.6

Property, plant and equipment held for sale

6.0

Cash and cash equivalents

147.5

Trade payables

(52.9)

Other payables/accruals

(160.7)

Off market contract liabilities

(312.7)

Retirement benefit asset

2.9

Provisions

(30.4)

Deferred tax

68.7

Derivatives

(165.2)

Finance Lease

(22.7)

Borrowings

(799.3)

Fair value of net assets acquired

329.1

Goodwill

434.0

Consideration

763.1

Goodwill has arisen primarily due to expected operating synergies, in recognition of management's proven track record, and as a result of opportunities that are expected to arise to optimise performance in the enlarged group's pub estate.

Since 24 June 2015 Spirit Pub Company has contributed revenue of £705.1m, pre-exceptional operating profit of £128.3m and PBTE of £79.3m.

If the acquisition of Spirit Pub Company had taken place at the start of the financial period, the enlarged Greene King group would have recognised revenue of £2,193.6m, pre-exceptional operating profit of £414.6m and profit before tax and exceptional items of £270.6m.

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

8 cash and cash equivalents

2016

2015

£m

£m

Cash at bank and in hand

155.2

50.0

Short term deposits

69.0

2.8

Liquidity facility reserve

157.5

157.5

Cash and cash equivalents for balance sheet

381.7

210.3

Bank overdrafts (note 9)

(5.8)

-

Cash and cash equivalents for cash flow

375.9

210.3

Included within cash at bank and in hand and short term deposits is £109.1m (2015: £34.3m) and £113.0m (2015: £nil) held within securitised bank accounts which are only available for use by the Greene King Secured financing vehicle and the Spirit Secured financing vehicle respectively.

The Greene King Secured financing vehicle comprises Greene King Retailing Parent Limited and its subsidiaries and the Spirit Secured financing vehicle comprises Spirit Pubs Debenture Holdings Limited and its subsidiaries.

Interest receivable on cash and short term deposits is linked to base rate and is received either monthly or in line with the term of the deposit.

9 Borrowings

2016

2015

Repayment Date

Current

Non-

current

Total

Current

Non-

current

Total

£m

£m

£m

£m

£m

£m

Bank overdrafts (note 8)

On demand

5.8

-

5.8

-

-

-

Liquidity facility loan

On demand

157.5

-

157.5

157.5

-

157.5

Bank loans - floating rate

2018

-

315.0

315.0

-

248.3

248.3

Secured debt:

- Issued by Greene King Finance plc

2005 to 2036

34.3

1,106.6

1,140.9

32.4

1,140.8

1,173.2

- Issued by Spirit Issuer plc

2015 to 2036

11.1

777.6

788.7

-

-

-

Obligations under finance leases

2015 to 2084

1.6

20.6

22.2

-

-

-

210.3

2,219.8

2,430.1

189.9

1,389.1

1,579.0

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

10 OFF MARKET CONTRACT LIABILITIES

Off -market contracts liabilities

£m

At 4 May 2014 and 3 May 2015

-

Acquisitions (note 7)

312.7

Unwinding of discount element of provisions

12.2

Utilised during the period

(25.0)

At 1 May 2016

299.9

Off-market contract liabilities are analysed between current and non-current as follows:

2016

2015

£m

£m

Current

22.4

-

Non-current

277.5

-

299.9

-

Off market contract liabilities are recognised where contracts are at unfavourable terms relative to current market terms on acquisition. For leases where the current rentals are below market terms, the related asset is considered to be included within the residual value of the leasehold pub. For other acquired pubs an off-market liability has been calculated as the difference between the present value of future contracted rentals and the present value of future market rate rentals. The liability unwinds against the rental expense so that the income statement charge reflects current market terms over an average period of 19 years. The remainder of the balance held relates to an unfavourable guarantee contract.

11 Working capital and non-cash movements

2016

2015

£m

£m

Increase in inventories

(0.2)

(1.6)

Decrease/(increase) in trade and other receivables

4.9

(1.4)

(Decrease)/increase in trade and other payables

(28.7)

16.8

Decrease in off market contract liabilities

(25.0)

-

Decrease in provisions

-

(0.3)

Other non-cash movement

3.1

-

Share based payments expense

6.2

3.7

Difference between defined benefit pension contributions paid and amounts charged

(10.4)

(7.0)

Exceptional items

(25.0)

(5.6)

Working capital and other movements

(75.1)

4.6

Notes to the accounts

for the fifty-two weeks ended 1 May 2016

12 Analysis OF and movements in net debt

2016

2015

£m

£m

Cash at bank and in hand and short term deposits1

224.2

52.8

Liquidity facility reserve1

157.5

157.5

Overdrafts

(5.8)

-

Current portion of borrowings

(47.0)

(32.4)

Liquidity facility loan

(157.5)

(157.5)

Non current portion of borrowings

(2,219.8)

(1,389.1)

Closing net debt

(2,048.4)

(1,368.7)

1included in cash and cash equivalents on the balance sheet

Movements in net debt

2016

2015

£m

£m

Net increase in cash and cash equivalents

165.6

7.9

Proceeds - advances of borrowings

(65.0)

-

Repayment of principal

44.0

61.1

Debt acquired through acquisitions

(822.0)

-

Decrease in net debt arising from cash flows

(677.4)

69.0

Other non-cash movements

(2.3)

(2.1)

Decrease in net debt

(679.7)

66.9

Opening net debt

(1,368.7)

(1,435.6)

Closing net debt

(2,048.4)

(1,368.7)

13 Dividend payments

Subject to the approval of shareholders at the Annual General Meeting, the final dividend will be paid on 12 September 2016 to shareholders on the register at the close of business on 12 August 2016.

14 post balance sheet events

On 26 May 2016 the group issued £300m A6 bond at a coupon of 4.0643% taking the outstanding nominal of bonds issued by Greene King Finance plc at that point to £1,447.7m. These bonds are secured against 1,543 pubs in the Greene King estate which had a market value of £2,178.0m and a carrying value of £1,637.9m. Proceeds of £116.6m were used to meet the mark to market liability in respect of interest rate swaps with a nominal value of £302.9m.

GLOSSaRY

EBITDA - Earnings before interest, tax, depreciation, amortisation and exceptional items. Calculated by taking operating profit before exceptional items and adding back depreciation.

Fixed charge cover - Calculated by dividing EBITDAR (operating profit before depreciation, rent and exceptional items) less maintenance capex by the sum of interest and rent.

Free cash flow - Movement in net debt due to operating cashflows after interest payments, tax payments, core capex and dividends, but excluding exceptional items, acquisitions, disposals and share movements.

LFL - Like for like. LFL performance is calculated against a comparable period in the prior year for pubs that were trading in both periods. Figures for the Spirit business and combined group business therefore take account of Spirit trading prior to the acquisition date. Pub Company like-for like sales include revenue from the sale of drink, food and accommodation.

NPS -Net promoter score. Calculated by asking customers how likely they are to recommend the pub on a scale of 0-10 (10 being the most favourable). The % of responses where the score is 0-6 ("brand detractors") is subtracted from the % of responses where the score is 9 or 10 ("brand promoters") to give the net promoter score %. Scores of 7 or 8 (passive responses) are ignored.

OBV - Own-brewed volume. The volume of beer brewed at our Greene King and Belhaven breweries sold in the period.

ROCE - Return on capital employed is calculated by dividing pre-exceptional operating profit by average capital employed. Capital employed is defined as total net assets excluding deferred tax balances, derivatives, post-employment liabilities and net debt.

Core capex -Cash outflow in respect of ongoing development and maintenance capital investment on pubs in the group's estate. Core capex excludes integration capex, investment in the brand optimisation programme and investments in single site acquisitions and new build developments.


This information is provided by RNS
The company news service from the London Stock Exchange
ENDFR LIFSSRVIAFIR

Greene King plc published this content on 29 June 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 29 June 2016 07:15:04 UTC.

Public permalinkhttp://www.publicnow.com/view/60793367BFC151C034E3DDEFB54FE128CE1C70D2