TIDMPUB
RNS Number : 0489E
Punch Taverns PLC
04 May 2017
PUNCH TAVERNS PLC
("Punch" or "the Group")
Interim Results for the 28 weeks to 4 March 2017
Corporate Developments:
Shareholders approved the sale of the Group to Vine Acquisitions
Limited on 10 February 2017 for 180 pence per share. Completion of
the sale is expected (subject to competition conditions) before the
end of August 2017.
Financial highlights:
-- Like-for-like net-income(1) decline of 1.2% in the leased and
tenanted estate, including the Mercury division (H1 2016: 0.7%
growth), but flat after adjusting for the impact of the previously
flagged temporary slow-down in letting activity;
-- Underlying adjusted EBITDA(1) of GBP88 million (H1 2016:
GBP94 million); reflecting the impact of GBP53 million of disposals
completed over the last 12 months;
-- Progress in reducing interest costs with the GBP65 million
early repayment of junior notes in November 2016;
-- Strong liquidity, with GBP131 million of cash on the balance
sheet, no short-term bank debt and low scheduled amortisation at
c.GBP36 million per year until 2021;
-- Increased pub investment with GBP41 million of total capital
expenditure (H1 2016: GBP25 million), supporting the roll-out of
the Retail division;
-- Continued good progress in realising value from our extensive
property portfolio with GBP18 million of net disposal proceeds (H1
2016: GBP100 million), GBP5 million above book value (H1 2016:
GBP13 million);
-- Statutory loss before tax of GBP174 million (H1 2016: GBP55
million profit), includes GBP198 million of non-underlying charges,
principally due to the write-down in goodwill and assets following
shareholder approval on 10 February 2017 for the sale of the
Group.
Operational progress:
-- Doubled the size of the Retail pub division since the August
2016 year end, with 171 pubs open and trading as at April 2017
(August 2016: 85 pubs);
-- Launch of a new innovative operating agreement, designed to
be a simpler version of the Falcon Retail contract, targeted
towards smaller drinks led pubs. We opened our first pub under this
new agreement in April 2017;
-- Recent market uncertainty resulting from the sale of the
Group has impacted letting activity, together with the previously
reported impact of the new Pubs Code Regulations. Consequently, we
now expect it to take up to 12 months to return to our long-term
target of having a core estate of 93%-95% let on substantive
agreements;
-- Continued progress with the Mercury pub division (management
of lower profitability sites under a reduced cost operating model),
on-track to deliver like-for-like net income growth in this
division from the end of 2017;
-- Growing commercial free-of-tie lease division with 57 pubs in
operation with an average rent of GBP71,000;
-- Tight control over central costs with short-term cost savings
offsetting the previously announced cost increases from additional
resource to support the execution of our strategy.
Duncan Garrood, Chief Executive Officer of Punch Taverns plc,
commented:
"During the period, we have doubled the size of our Retail
estate and continue to innovate our operating agreements. This has
been achieved whilst managing through a period of significant
change, ahead of the sale of the Group which is now expected to
complete before the end of August 2017."
4 May 2017
(1) In the reporting of financial information throughout the
Interim Report, the Directors have adopted various Alternative
Performance Measures (APMs). APMs are presented in order to
supplement reported results by providing further clarity on the
Group's underlying performance and to present additional
information that reflects how the Directors monitor and measure the
progress of the Group. Definitions of each of the APMs included in
the Interim Report and how they reconcile to reported measures can
be found on note 14.
Enquiries:
Results: Punch Taverns plc Tel: 01283 501
948
Duncan Garrood, Chief Executive Officer
Steve Dando, Chief Financial Officer
Media: Brunswick Tel: 020 7404
5959
Jonathan Glass, Joe Shipley
The interim results presentation and audio cast is available on
our website, www.punchtavernsplc.com.
Forward-looking statements
This report contains certain statements about the future outlook
for Punch. Although we believe our expectations are based on
reasonable assumptions, any statements about future outlook may be
influenced by factors that could cause actual outcomes and results
to be materially different.
CHIEF EXECUTIVE'S REVIEW
APPROVAL OF RECOMMED CASH OFFER FOR PUNCH BY VINE ACQUISITIONS
LIMITED
On 15 December 2016, Vine Acquisitions Limited and Punch
announced that they had reached agreement on the terms of a
recommended cash offer for the entire issued and to be issued share
capital of Punch by Vine Acquisitions Limited (the "Offer") and the
associated disposal of the Punch A Group to Heineken UK Limited.
Under the Offer, each Punch shareholder shall be entitled to
receive for each Punch share held 180 pence in cash. The Offer
values the entire issued and to be issued ordinary share capital of
Punch at approximately GBP402.7 million.
At the Court and General Meetings held on 10 February 2017,
shareholders voted to approve the Offer.
Subject to the satisfaction or (if capable of waiver) waiver of
the remaining conditions set out in the Scheme Document, including
the Court sanctioning the Scheme at the Court Hearing, the Offer is
expected to become effective before the end of August 2017.
MARKET POSITIONING
Punch is a leading operator of pubs in the United Kingdom, with
the second largest pub estate by number of pubs. As at 4 March
2017, the Punch estate comprised 3,227 pubs located across the UK,
96% of which are held on a freehold or long leasehold basis.
Punch operates its pubs predominantly under the tied leased and
tenanted model, with a small but growing number of pubs operated
under both a Retail operating model and as free of tie commercial
leases.
Our model makes a pub business accessible to many more publicans
than the purchase of a freehold, while also providing an extensive
package of support to our publicans to help them build a successful
pub business. The business model is simple and adaptable with no
single pub or any single publican accounting for more than 1% of
the Group's operating profit.
Under the tied leased and tenanted model, publicans lease pubs
from the Group on agreements which provide a flexible split between
rent and tied drink margin. There is a higher risk for the publican
if they opt for an agreement with a higher rent and lower drinks
price, as opposed to an agreement with a lower rent and higher
drinks price which provides the publican with protection during
periods of lower trading.
Under the Falcon Retail contract, Punch retains 100% of the
revenue and cost of sales (like a traditional managed house
operation) and pub costs (excluding staff costs), and pays the
retailer (the publican) a percentage of the retail sales, out of
which the retailer pays their staff costs. The retailer is free to
focus on delivering an excellent consumer experience whilst Punch
supports the back-of-house processes.
PERFORMANCE SUMMARY
In the 28 weeks ended 4 March 2017, Punch generated underlying
adjusted EBITDA of GBP88.4 million (H1 2016: GBP94.0 million),
which reflects the impact of GBP53 million of disposals completed
over the last 12 months.
Operating Segment Core Mercury Central Punch
---------------------------- ----------- ----------- ----------- -----------
Period end pub numbers 2,575 652 - 3,227
---------------------------- ----------- ----------- ----------- -----------
Revenue GBP193.4m GBP23.6m - GBP217.0m
Cost of sales GBP(80.9)m GBP(11.1)m - GBP(92.0)m
Net income GBP112.5m GBP12.5m - GBP125.0m
Other underlying operating GBP(15.3)m GBP(2.7)m GBP(18.6)m GBP(36.6)m
costs
Underlying adjusted EBITDA GBP97.2m GBP9.8m GBP(18.6)m GBP88.4m
---------------------------- ----------- ----------- ----------- -----------
The leased and tenanted pub estate (including Core and Mercury
divisions) saw like-for-like net income decline by 1.2%, which
reflects the impact on letting activity following the introduction
of the Pubs Code Regulations, coupled with the recent market
uncertainty resulting from the announced sale of the Group.
The percentage of pubs available to let in the Core estate has
increased to 10% (up 3.7pts on March 2016). After adjusting for
this impact on letting activity, adjusted leased and tenanted
like-for-like net income was broadly stable. While we are confident
in our plans to improve this position, we now expect it to take up
to 12 months to return to our long-term target of having a core
estate of 93%-95% let on substantive agreements.
We have doubled the size of the Retail pub division since the
August 2016 year end, with 171 pubs open and trading as at April
2017. Building on our learnings of the Retail model, we have now
created a new 'Front of House' agreement, which is targeted towards
smaller drinks led pubs.
While the impact on letting activity, has impacted near-term
trading, our expectations for the longer-term growth prospects of
the business remain unchanged.
STRATEGIC AND OPERATIONAL REVIEW
Following my appointment as Chief Executive Officer in June
2015, I led a full review of our strategic priorities, which we
communicated to the market in November 2015. Approximately 18
months on, I am pleased with the progress the business has made
towards the delivery of this strategy which is recognised in the
recommended cash offer for Punch by Vine Acquisitions Limited.
We will continue to develop innovative new Retail agreements and
support a phased lower risk approach to capital investment. Our
plans enable us to meet both publican and consumer needs in an
evolving pub market by taking greater control of the property and
retail offer, but without the added overhead that comes with
directly employing pub staff. Our strategy enables us to maximise
the value in our properties through a phased, lower risk approach
to pub management, coupled with unlocking significant additional
value from our property portfolio.
Development of the Punch model
1. Deliver a clear and consistent bespoke consumer offer, relevant to each pub
Over the last two years we have created an exciting portfolio of
new concepts, which are being rolled out across the business in a
measured way. To date we have 61 pubs operating under a retail
concept, with five existing concepts ('Mighty Local' community
drinks led pubs, 'Champs' sports bars, 'Village Pub & Kitchen'
and 'Our Local' community food and drink led pubs, 'Punch Inns'
accommodation led pubs and the soon to be launched 'Urban Oasis'
high street pubs).
2. Broad range of operating models in line with an evolving market
While approximately 51% of the core Punch estate is leased to
publicans on long-term leases, the majority of agreements will be
coming to the end of their lease at their next rent review or have
five or less years remaining on their lease at their next rent
review. Only around 6% of the core Punch estate will have ten or
more years remaining on their lease at their next rent review.
We continue to see a market shift away from long-term fully
repairing leases towards shorter-term tenancy agreements where the
external building repair obligations remain the responsibility of
the pub company. There has also been a marked shift away from fixed
rent agreements towards variable turnover linked agreements.
In addressing these changing market dynamics, we have introduced
a number of new operating formats including:
-- Retail:
- Managed 'houses of excellence';
- 'Falcon' Retail contract;
- 'Front of House' Retail contract;
-- Flexible short-term tenancies;
-- Turnover leases; and
-- Commercial free-of-tie leases.
Retail:
The Falcon Retail contract has proved to be extremely popular
with prospective and new publicans, enabling us to double the size
of this division since the August 2016 year end.
The projected underlying pub EBITDA for the 171 pubs operating
under the Falcon retail contract is between GBP90,000 and
GBP105,000. The Falcon contract has proved to be extremely
successful in the right pubs, with our highest earning pub
projected to make c.GBP300,000 in underlying pub EBITDA this year,
and we now have a much clearer picture of which pubs work best
under this Retail model.
Building on these learnings, we have recently launched our new
'Front of House' agreement, which represents a much-simplified
version of the Falcon Retail contract, and is targeted towards
smaller drinks led community pubs, which represent the largest
segment of our estate.
The 'Front of House' agreement operates along a similar
financial model to that of the Falcon Retail contract, in that the
retailer (the publican) is paid a percentage of the retail sales,
out of which the retailer pays their staff costs. This agreement
has been simplified in the areas of cash management, overhead and
operational support requirements, management of pub consumables and
flexibility on food (the publican retains the food business in pubs
with limited food opportunity). These simplifications will allow
this type of Retail model to become financially attractive for
smaller turnover pubs, and allow a faster roll-out, without the
need for separate specialist field team resource.
Flexible short-term tenancies:
Given the market preference for more flexible shorter-term
tenancy agreements over that of long-term fully repairing leases,
we expect the majority of new lettings to be on either short-term
tenancies or Retail contracts ('Falcon' or 'Front of House').
Short-term tenancies can provide publicans with the benefit of
having a six month notice term should they wish to reduce the term
of their agreement, the added benefit of external building repair
obligations residing with the pub company and the availability of
greater operational support through our fully supported open book
tenancy agreements.
Commercial free-of-tie leases:
We have continued to build a small but growing commercial
free-of-tie operation with a number of fixed rent and variable
turnover-linked leases in operation. As at April 2017 we had 57
such commercial pub leases in operation with an average gross rent
of GBP71,000 (November 2016: 46 free-of tie leases at GBP73,000
average rent).
Our focus for this division is to work with expert operators,
mainly in the premium and destination food led segments of our
estate, with stronger covenants, in order that we can maximise both
the level of rental income and the pub asset value.
3. Refocussing of management resources to drive improved
support, innovation and operational delivery
We previously flagged, at the time of our full year results,
that central costs were expected to increase in 2017, due to
additional resource recruited to support the execution of our
strategy, with efficiency savings expected to be made from 2018
onwards.
Having reviewed our operating structures, we are confident that
the planned efficiencies can be realised from 2018, with a focus on
minimising field employee drive-times and maximising time
in-pub.
In addition to realising support cost efficiencies, we plan to
change the profile of pub capital expenditure, which will in part,
be supported by the roll-out of the new 'Front of House' Retail
agreement. Turnover based agreements such as 'Front of House'
provide the opportunity to implement a staged investment approach
(as opposed to one single investment event at the point of
letting), allowing for lower absolute spend levels, reduced risk,
and ensuring building maintenance is regularly addressed.
4. Delivering value to our publicans through an enhanced Punch Buying Club
Punch leads the sector with the Punch Buying Club, which
provides a real point of differentiation to our publicans.
Approximately 75% of Punch's drinks orders are placed through the
on-line buying club which compares to around 30% for the rest of
the leased and tenanted sector.
In January of this year we launched a new and improved version
of the Buying Club which enhances the publican journey through
order to pay and enhances Punch's ability to provide cross-channel
personalised offerings throughout the estate no matter which
trading style, concept or agreement the outlet trades.
Through the Punch Buying Club, we leverage our Group buying
power to provide a range of free services including commercial
WiFi, publican and pub staff training, marketing materials and
legal helplines, as well as access to cheaper goods and
services.
5. Releasing significant additional value from our
under-utilised property portfolio and land bank
Having completed our strategic disposal programme, we are now
focussed on realising additional value from the non-trading parts
of our extensive freehold property and land estate, which is not
currently recognised in the external property valuation.
Progress has already been made in unlocking value with GBP6
million of additional value having been realised in the half year
(in addition to the GBP11 million of value realised in FY16),
having identified upwards of GBP100 million of potential additional
value (post planning and net of development expenditure), of which
a further GBP9 million is subject to due diligence and exchange of
contracts.
REGULATORY CHANGES
The Pubs Code Regulations, which form part of the Small
Business, Enterprise and Employment Act 2015, came into effect on
21 July 2016. The legislation has three key aspects, a statutory
code, the appointment of an independent adjudicator and a Market
Rent Only (MRO) option.
The MRO option enables some occupational lessees to elect to
opt-out of the drinks supply tie at certain points during the term
of their lease agreement and therefore occupy the premises on a
standard commercial property lease, paying rent only. In the event
that a lessee elected to invoke the MRO option, whilst our income
derived from the supply of tied drinks products would be partially
offset by increases in rent, our total income to be adversely
affected.
Publicans lease pubs from the Group under a wide variety of
agreements ranging from short-term tenancies (less than 5 years),
tied leases (10 to 30 years) and free-of-tie commercial leases.
Approximately 70% of Punch's Core estate pubs do not have a rent
review MRO trigger event before the end of their agreement. Tied
leases with five years remaining on their lease at the next rent
review represent c.23% (c.590 pubs) of the Core estate, while tied
leases with ten or more years remaining on their lease represent a
further c.6% (c.140 pubs) of the Core estate.
Since the new regulations came into effect on 21 July 2016, 90
publicans have requested MRO comparison figures, of which 3 MRO
leases have been concluded, 29 are currently under review with the
publicans, with the remainder having been either concluded under a
tied rent review or renewal, or lapsed.
Our expectations, and early indications are, that the majority
of publicans will continue to operate under, and enjoy the benefits
of the tied drinks model, noting however that it remains relatively
early days with the new legislation still less than 12 months
old.
FINANCIAL REVIEW - Results for the 28 weeks to 4 March 2017:
Underlying results 2017 2016 Movement
-------------------------------- ------- ------- ---------
Average Core pub numbers 2,578 2,604 (1.0)%
Average Mercury pub
numbers 671 791 (15.2)%
-------------------------------- ------- ------- ---------
Average Total pub numbers 3,249 3,395 (4.3)%
-------------------------------- ------- ------- ---------
Underlying results GBPm GBPm GBPm
-------------------------------- ------- ------- ---------
Core division 97.2 100.9 (3.7)
Mercury division 9.8 11.3 (1.5)
Matthew Clark joint
venture - 0.4 (0.4)
Central costs (18.6) (18.6) -
-------------------------------- ------- ------- ---------
Underlying adjusted
EBITDA 88.4 94.0 (5.6)
-------------------------------- ------- ------- ---------
Depreciation and amortisation (5.9) (4.6) (1.3)
Net finance costs (58.5) (62.1) 3.6
Underlying profit before
taxation 24.0 27.3 (3.3)
-------------------------------- ------- ------- ---------
Tax (4.7) (5.2) 0.5
-------------------------------- ------- ------- ---------
Underlying net earnings 19.3 22.1 (2.8)
-------------------------------- ------- ------- ---------
Average outlet profit per pub across the entire estate of 3,227
pubs declined by 0.3% (note 14). The combined underlying results of
the Core and Mercury divisions (before central costs) were down
4.6% on last year at GBP107.0 million, reflecting the impact of a
4.3% reduction in the size of the estate, having realised net
proceeds of GBP53 million over the last 12 months.
Like-for-like net income (which reflects rental income and net
income from the sale of drinks and other products to our publicans)
in the Core leased and tenanted division, after adjusting for the
impact of disposals, was 1.2% down on last year.
Profits in the Core division have declined by GBP3.7 million, of
which GBP0.5 million is due to the disposal programme, GBP1.3
million due to the decline in like-for-like net income in the
leased and tenanted estate (reflecting the increased number of pubs
on temporary agreements), GBP1.0 million due largely to periods of
closure ahead of conversion of pubs to the Falcon Retail division,
and GBP0.9 million increase in leased and tenanted pub operating
costs.
Profits in the Mercury division have declined by GBP1.5 million,
the majority of which, GBP0.8 million, is due to the disposal
programme. Excluding the impact of disposals, the underlying profit
decline of GBP0.7 million largely relates to reduced profits in the
non-core pubs either currently on the market for disposal, or
planned for disposal in FY18.
We have continued to maintain a tight control on costs, with
central costs broadly in line with that of the prior period as
short-term cost savings have offset the previously flagged increase
in additional resource recruited to support the roll-out of the
Retail division.
Underlying net finance costs reduced by GBP3.6 million to
GBP58.5 million, reflecting the benefit of the prepayment of
GBP65.0 million junior notes in November 2016, combined with the
ongoing amortisation of securitisation debt.
Underlying taxation:
The underlying taxation charge is based on an estimated full
year effective tax rate of 19.6% (H1 2016: 19.3% before post-tax
earnings from joint ventures). This compares with the UK
corporation taxation rate of 19.6% for the financial year ending
August 2017.
The availability of sizeable capital allowance pools amounting
to c.GBP300 million (generated from our investment programme in
community pubs) at the half year, together with other tax assets is
expected to result in limited corporation tax payments being due in
the current year.
Non-underlying items:
A number of non-underlying items were recognised during the
period amounting to a net charge of GBP202.3 million, resulting in
a net loss after tax of GBP183.0 million. This was principally due
to the accounting impact of recognising impairments of goodwill and
assets crystalized by the sale of the Group.
The principal items are set out below:
-- GBP224.3 million impairment of goodwill and assets relating to the Group disposal (note 4);
-- GBP3.0 million operating charge, of which GBP1.4 million is
advisor fees incurred relating to the sale of the Group, and GBP1.6
million on the conversion of pubs to the Retail division (one-off
lessee compensation and launch costs);
-- GBP5.0 million profit on disposal of properties;
-- GBP0.3 million goodwill charge on the disposal of Core pubs;
-- GBP24.6 million credit on the mark-to-market movement in value of interest rate swaps; and
-- GBP0.5 million charge for refinancing costs.
The tax effect of all of these items, together with the
resolution of prior year tax matters, gave rise to a tax charge of
GBP3.8 million.
Cash flow:
Cash flow before the benefit of the strategic activities
amounted to an outflow of GBP7.5 million for the half year,
reflecting the seasonal working capital movement and the
acceleration in capital expenditure. For the last 12 months, there
was an equivalent cash inflow of GBP20.3 million.
28 weeks to March Last 12 months
Cash flow 2017 to March 2017
GBPm (LTM)
GBPm
---------------------------------------- ------------------ ---------------
Underlying adjusted EBITDA 88.4 172.3
Working capital and other cash
movements (17.2) (7.5)
Net cash interest expense (51.9) (103.5)
Non-core disposal proceeds (individual
sales) 13.8 35.2
Capital expenditure (40.6) (76.2)
---------------------------------------- ------------------ ---------------
Cash flow before strategic disposals (7.5) 20.3
---------------------------------------- ------------------ ---------------
Non-underlying operating and
finance costs (3.5) (3.7)
Acquisition of pub freeholds - (2.2)
Strategic disposals - Core (gold
brick sites) 4.1 18.0
Net cash flow available for debt
reduction (6.9) 32.4
---------------------------------------- ------------------ ---------------
Net repayment of borrowings,
derivatives and finance leases (95.9) (135.6)
---------------------------------------- ------------------ ---------------
Net decrease in cash and cash
equivalents (102.8) (103.2)
---------------------------------------- ------------------ ---------------
Non-cash: payment-in-kind (PIK)
interest (5.6) (12.5)
---------------------------------------- ------------------ ---------------
Note: Underlying adjusted EBITDA, non-underlying operating and
finance costs, working capital and other cash movements form net
cash from operating activities and other financing costs as set out
in the Group's cash flow.
Net cash flow available for debt reduction, after including the
benefit of the strategic activities amounted to GBP32.4 million for
the last 12 months, and includes a working capital outflow of
GBP7.5 million largely relating to disposed pubs and a reduction in
employee compensation accruals.
Capital expenditure has increased with GBP41 million of spend
(LTM: GBP76 million) in the half year, as we have accelerated the
roll-out of the Retail division. The rate of capital expenditure is
expected to slow into the second half of the year, with an expected
full year spend of c.GBP60 million.
Total cash balances reduced by GBP103 million in the period from
GBP234 million at the August 2016 year end to GBP131 million at
March 2017. The reduction in cash balances in the period is largely
due to GBP65 million early repayment of junior debt, seasonal
working capital outflow in the first half of the year, and the
increase in capital expenditure to support the accelerated roll-out
of conversion of pubs to the Retail division.
A small proportion of the annual interest charge is in the form
of payment-in-kind (PIK) interest, which accrues and is then
capitalised at each quarter end. The PIK interest amounted to
GBP5.6 million for the half year and GBP12.5 million for the last
12 months.
Financing and capital structure
We have an extensive largely freehold property and land
portfolio, benefit from GBP131 million of cash on the balance
sheet, have no short-term bank debt, and have long-term securitised
debt with low scheduled amortisation at c.GBP36 million per year
until 2021.
Punch A Punch B External Group
GBPm GBPm GBPm GBPm
---------------------- -------- -------- --------- --------
Securitisation cash 40.7 32.4 - 73.1
External cash - - 50.0 50.0
Supply company cash - - 8.3 8.3
---------------------- -------- -------- --------- --------
Total cash 40.7 32.4 58.3 131.4
---------------------- -------- -------- --------- --------
Securitisation notes 773.6 552.7 - 1,326.3
Nominal Net Debt 732.9 520.3 (58.3) 1,194.9
---------------------- -------- -------- --------- --------
The nominal value of net debt (excluding the mark-to-market of
interest rate swaps) increased by GBP13 million in the period to
GBP1,195 million, reflecting the cash outflow in the period and the
capitalisation of payment-in-kind interest.
CONSOLIDATED CONDENSED INCOME STATEMENT
for the 28 weeks ended 4 March 2017
28 weeks to 4 March 2017 28 weeks to 5 March 2016
Non- underlying Non- underlying
items items
Underlying (note Underlying (note
items 3) Total items 3) Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- ---------------- -------- ----------- ---------------- --------
Revenue 217.0 - 217.0 212.9 - 212.9
Operating costs before
depreciation,
amortisation
and impairment (128.6) (3.0) (131.6) (119.3) (0.3) (119.6)
Share of post-tax profit
from joint venture - - - 0.4 - 0.4
Adjusted EBITDA(1) 88.4 (3.0) 85.4 94.0 (0.3) 93.7
Depreciation and
amortisation (5.9) - (5.9) (4.6) - (4.6)
Profit on sale of
property,
plant and equipment
and non-current assets
classified as held
for sale - 5.0 5.0 - 12.8 12.8
Profit on disposal
of joint venture - - - - 46.1 46.1
Impairment (note 4) - (224.3) (224.3) - (2.2) (2.2)
Movement in valuation - - - - - -
of properties
Goodwill charge - (0.3) (0.3) - (13.4) (13.4)
Operating profit /
(loss) 82.5 (222.6) (140.1) 89.4 43.0 132.4
Finance income (note
5) 0.6 - 0.6 1.0 - 1.0
Finance costs (note
5) (59.1) (0.5) (59.6) (63.1) - (63.1)
Movement in fair value
of interest rate swaps - 24.6 24.6 - (15.6) (15.6)
Profit / (loss) before
taxation 24.0 (198.5) (174.5) 27.3 27.4 54.7
UK income tax (charge)
/ credit (note 6) (4.7) (3.8) (8.5) (5.2) 8.9 3.7
-------------------------- ----------- ---------------- -------- ----------- ---------------- --------
Profit / (loss) for
the financial period
attributable to owners
of the parent company 19.3 (202.3) (183.0) 22.1 36.3 58.4
-------------------------- ----------- ---------------- -------- ----------- ---------------- --------
Earnings / (loss) per
share
(note 7)
Basic (pence) 8.7 (82.4) 10.0 26.3
Diluted (pence) 8.6 (82.0) 9.9 26.2
-------------------------- ----------- ---------------- -------- ----------- ---------------- --------
(1) Adjusted EBITDA represents earnings before depreciation and
amortisation, profit on sale of property, plant and equipment and
non-current assets classified as held for sale, profit on disposal
of joint venture, impairment, movement in valuation of properties,
goodwill charge, finance income, finance costs, movement in fair
value of interest rate swaps and tax of the Group.
CONSOLIDATED CONDENSED INCOME STATEMENT continued
for the 28 weeks ended 4 March 2017
52 weeks to 20 August 2016
Non-underlying
items
Underlying (note
items 3) Total
GBPm GBPm GBPm
-------------------------------- ------------- --------------- --------
Revenue 406.8 - 406.8
Operating costs before
depreciation, amortisation
and impairment (229.3) (0.5) (229.8)
Share of post-tax profit
from joint venture 0.4 - 0.4
-------------------------------- ------------- --------------- --------
Adjusted EBITDA(1) 177.9 (0.5) 177.4
Depreciation and amortisation (9.8) - (9.8)
Profit on sale of property,
plant and equipment and
non-current assets classified
as held for sale - 28.8 28.8
Profit on disposal of joint
venture - 46.1 46.1
Impairment (note 4) - (4.6) (4.6)
Movement in valuation of
properties - (10.5) (10.5)
Goodwill charge - (13.9) (13.9)
Operating profit / (loss) 168.1 45.4 213.5
Finance income (note 5) 2.1 - 2.1
Finance costs (note 5) (117.3) - (117.3)
Movement in fair value
of interest rate swaps - (38.2) (38.2)
Profit / (loss) before
taxation 52.9 7.2 60.1
UK income tax (charge)
/ credit (note 6) (11.1) 16.3 5.2
-------------------------------- ------------- --------------- --------
Profit / (loss) for the
financial period attributable
to owners of the parent
company 41.8 23.5 65.3
Earnings / (loss) per share
(note 7)
Basic (pence) 18.8 29.4
Diluted (pence) 18.8 29.3
-------------------------------- ------------- --------------- --------
(1) Adjusted EBITDA represents earnings before depreciation and
amortisation, profit on sale of property, plant and equipment and
non-current assets classified as held for sale, profit on disposal
of joint venture, impairment, movement in valuation of properties,
goodwill charge, finance income, finance costs, movement in fair
value of interest rate swaps and tax of the Group.
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the 28 weeks ended 4 March 2017
28 weeks 28 weeks 52 weeks
to to to
4 March 5 March 20 August
2017 2016 2016
GBPm GBPm GBPm
--------------------------------------------- --------- --------- -----------
(Loss) / profit for the period attributable
to owners of the parent company (183.0) 58.4 65.3
--------------------------------------------- --------- --------- -----------
Items that cannot be recycled subsequently
to the income statement
Remeasurements of defined benefit pension
schemes 5.2 1.5 (6.4)
Other items that cannot be recycled
subsequently to the income statement - (0.2) (0.2)
Unrealised surplus on revaluation of
properties - - 1.4
Tax relating to components of other
comprehensive income that cannot be
reclassified into profit or loss (1.0) (0.2) 1.4
Other comprehensive profits / (losses)
for the period 4.2 1.1 (3.8)
--------------------------------------------- --------- --------- -----------
Total comprehensive (loss) / income
for the period attributable to owners
of the parent company (178.8) 59.5 61.5
--------------------------------------------- --------- --------- -----------
CONSOLIDATED CONDENSED BALANCE SHEET
at 4 March 2017
4 March 5 March 20 August
2017 2016 2016
GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ----------
Assets
Non-current assets
Property, plant and equipment (note
8) 797.8 2,030.4 2,044.2
Other intangible assets 0.2 0.9 0.8
Goodwill - 150.1 149.6
Deferred tax asset 1.6 11.8 11.8
799.6 2,193.2 2,206.4
Current assets
Inventories 0.5 0.3 0.7
Trade and other receivables 13.2 27.3 31.3
Current income tax assets 2.0 0.8 3.7
Assets classified as held for sale
(note 10) 1,269.2 31.5 18.3
Cash and cash equivalents 90.7 234.6 234.2
1,375.6 294.5 288.2
Total assets 2,175.2 2,487.7 2,494.6
-------------------------------------- ---------- ---------- ----------
Liabilities
Current liabilities
Trade and other payables (37.4) (86.1) (94.7)
Short term borrowings (24.0) (43.0) (42.9)
Derivative financial instruments - (16.0) (16.7)
Provisions (0.6) (0.7) (0.8)
Liabilities directly associated with (959.8) - -
assets held for sale (note 10)
-------------------------------------- ---------- ---------- ----------
(1,021.8) (145.8) (155.1)
Non-current liabilities
Borrowings (536.2) (1,418.6) (1,385.0)
Derivative financial instruments - (131.4) (153.0)
Retirement benefit obligations (6.2) (4.2) (11.7)
Provisions (5.0) (5.5) (5.3)
(547.4) (1,559.7) (1,555.0)
Total liabilities (1,569.2) (1,705.5) (1,710.1)
-------------------------------------- ---------- ---------- ----------
Net assets 606.0 782.2 784.5
-------------------------------------- ---------- ---------- ----------
Equity
Called up share capital 2.1 2.1 2.1
Share premium 700.0 700.0 700.0
Revaluation reserve 283.0 286.5 283.4
Share based payment reserve 7.0 6.6 6.9
Retained earnings (386.1) (213.0) (207.9)
-------------------------------------- ---------- ---------- ----------
Total equity attributable to owners
of the parent company 606.0 782.2 784.5
-------------------------------------- ---------- ---------- ----------
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
for the 28 weeks ended 4 March 2017
Share
based
Share Share Revaluation payment Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- --------- -------------- --------- ---------- --------
At 20 August 2016 2.1 700.0 283.4 6.9 (207.9) 784.5
------------------------- --------- --------- -------------- --------- ---------- --------
Loss for the period - - - - (183.0) (183.0)
Other comprehensive
profits for the period - - - - 4.2 4.2
------------------------- --------- --------- -------------- --------- ---------- --------
Total comprehensive
loss for the period
attributable to owners
of the parent company - - - - (178.8) (178.8)
Transfers on disposal
of property, plant
and equipment and
non-current assets
classified as held
for sale - - (0.4) - 0.4 -
Share based payments - - - 0.1 0.2 0.3
Total equity at 4
March 2017 2.1 700.0 283.0 7.0 (386.1) 606.0
------------------------- --------- --------- -------------- --------- ---------- --------
At 22 August 2015 2.1 700.0 291.0 6.5 (277.1) 722.5
------------------------- ---- ------ ------ ---- -------- ------
Profit for the period - - - - 58.4 58.4
Other comprehensive
profits for the period - - - - 1.1 1.1
------------------------- ---- ------ ------ ---- -------- ------
Total comprehensive
income for the period
attributable to owners
of the parent company - - - - 59.5 59.5
Transfers on disposal
of property, plant
and equipment and
non-current assets
classified as held
for sale - - (4.5) - 4.5 -
Share based payments - - - 0.1 0.1 0.2
------------------------- ---- ------ ------ ---- -------- ------
Total equity at 5
March 2016 2.1 700.0 286.5 6.6 (213.0) 782.2
------------------------- ---- ------ ------ ---- -------- ------
At 22 August 2015 2.1 700.0 291.0 6.5 (277.1) 722.5
------------------------- ---- ------ ------ ---- -------- ------
Profit for the period - - - - 65.3 65.3
Other comprehensive
profits / (losses)
for the period - - 1.4 - (5.2) (3.8)
------------------------- ---- ------ ------ ---- -------- ------
Total comprehensive
income for the period
attributable to owners
of the parent company - - 1.4 - 60.1 61.5
Transfers on disposal
of property, plant
and equipment and
non-current assets
classified as held
for sale - - (9.0) - 9.0 -
Share based payments - - - 0.4 0.1 0.5
Total equity at 20
August 2016 2.1 700.0 283.4 6.9 (207.9) 784.5
------------------------- ---- ------ ------ ---- -------- ------
CONSOLIDATED CONDENSED CASH FLOW STATEMENT
for the 28 weeks ended 4 March 2017
28 weeks 28 weeks 52 weeks
to to to
4 March 5 March 20 August
2017 2016 2016
GBPm GBPm GBPm
----------------------------------------------- ----------- ----------- -----------------
Cash flows from operating activities
Operating (loss) / profit (140.1) 132.4 213.5
Share of post-tax profit from joint
venture - (0.4) (0.4)
Depreciation and amortisation 5.9 4.6 9.8
Profit on sale of property, plant and
equipment and non-current assets classified
as held for sale (5.0) (12.8) (28.8)
Profit on sale of joint venture - (46.1) (46.1)
Impairment 224.3 2.2 4.6
Movement in valuation of properties - - 10.5
Goodwill charge 0.3 13.4 13.9
Share based payment expense recognised
in profit 0.3 0.2 0.5
Increase in inventories (0.6) (0.2) (0.6)
Decrease / (increase) in trade and
other receivables 5.4 2.7 (0.1)
Decrease in trade and other payables (22.7) (18.0) (4.5)
Difference between pension contributions
paid
and amounts recognised in the income
statement (0.5) (0.5) (1.0)
Decrease in provisions and other liabilities (0.8) (1.4) (1.8)
Cash generated from operations 66.5 76.1 169.5
Income tax received 1.7 - -
----------------------------------------------- ----------- ----------- -----------------
Net cash from operating activities 68.2 76.1 169.5
------------------------------------------------ ----------- ----------- -----------------
Cash flows from investing activities
Purchase of property, plant and equipment
* Acquisitions - - (2.2)
* investments (40.4) (24.1) (59.6)
Proceeds from sale of property, plant
and equipment 3.4 13.6 21.7
Proceeds from sale of other non-current
assets held for sale 14.5 86.6 113.8
Proceeds from sale of joint venture - 98.8 98.8
Purchase of other intangible assets (0.2) (0.5) (0.6)
Interest received 2.1 1.1 2.1
Net cash (used in) / generated from investing
activities (20.6) 175.5 174.0
------------------------------------------------ ----------- ----------- -----------------
Cash flows from financing activities
Repayment of borrowings (95.8) (103.1) (142.7)
Interest paid (53.9) (53.8) (106.4)
Repayments of obligations under finance
leases (0.1) (0.1) (0.2)
Interest element of finance lease rental
payments (0.1) (0.1) (0.1)
Other financing costs (0.5) - -
Net cash used in financing activities (150.4) (157.1) (249.4)
------------------------------------------------ ----------- ----------- -----------------
Net (decrease) / increase in cash and
cash equivalents (102.8) 94.5 94.1
Cash and cash equivalents at beginning
of period 234.2 140.1 140.1
------------------------------------------------ ----------- ----------- -----------------
Cash and cash equivalents at end of
period 131.4 234.6 234.2
------------------------------------------------ ----------- ----------- -----------------
NOTES TO THE FINANCIAL STATEMENTS
for the 28 weeks ended 4 March 2017
1. ACCOUNTING POLICIES
Basis of preparation
This condensed set of interim financial statements has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the EU. The Group's Annual Report and Financial
Statements are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU. As required by
the Disclosure and Transparency rules of the Financial Conduct
Authority, this condensed set of financial statements has been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Group's Annual Report and
Financial Statements 2016, and which are expected to apply at 19
August 2017.
This condensed set of interim financial statements has been
prepared on a going concern basis. The Directors have prepared
detailed operating and cash flow forecasts, which cover a period of
more than 12 months from the date of approval of these financial
statements. These show that the Group has adequate funds to be able
to operate within its agreed facilities and covenants for the
foreseeable future.
The Group is financed through two whole business
securitisations, the Punch A Securitisation (GBP774m of gross debt
secured against 1,868 pubs) and the Punch B Securitisation (GBP553m
of gross debt secured against 1,309 pubs), as well as certain cash
resources held across the Group. Further details of the debt
structure of the Punch A and Punch B Securitisations can be found
on the Punch website (www.punchtavernsplc.com).
The Directors cannot anticipate the actions of Vine Acquisitions
Limited and Heineken UK Limited subsequent to the acquisition as
set out in note 4. Consequently, the Directors' going concern
assessment cannot take into account the actions of those acquirers.
As such, the going concern assessment has been made on an "as is"
basis.
The comparative figures for the 52 weeks to 20 August 2016
presented in these interim financial statements are not the Group's
statutory accounts for that financial period. Those accounts have
been reported on by the Company's auditor and delivered to the
Registrar of Companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain statements under
section 498(2) or (3) Companies Act 2006.
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.
On an ongoing basis, management evaluates its estimates and
judgements including those relating to income taxes, deferred tax,
financial instruments, property, plant and equipment, goodwill,
intangible assets, valuations, provisions and post-employment
benefits.
Management bases its estimates and judgements on historical
experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis for making judgements about the carrying value of assets and
liabilities that are not readily available from other sources.
Actual results may differ from these estimates under different
assumptions and conditions.
At present, there are no new standards, amendments to standards
or interpretations mandatory for the first time for the year ending
19 August 2017.
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
2. SEGMENTAL ANALYSIS
Core Mercury Unallocated Total
GBPm GBPm GBPm GBPm
------------------------------------------ -------- -------- ------------ --------
28 weeks to 4 March 2017:
Drink revenue 142.4 18.4 - 160.8
Rental income 43.7 4.0 - 47.7
Other revenue 7.3 1.2 - 8.5
------------------------------------------ -------- -------- ------------ --------
Underlying revenue 193.4 23.6 - 217.0
Underlying operating costs(1) (96.2) (13.8) (18.6) (128.6)
Adjusted EBITDA before non-underlying
items 97.2 9.8 (18.6) 88.4
------------------------------------------ -------- -------- ------------ --------
Underlying depreciation and amortisation (5.9)
Operating non-underlying items (218.0) (3.1) (1.5) (222.6)
Net finance costs (59.0)
Movement in fair value of interest
rate swaps 24.6
UK income tax charge (8.5)
------------------------------------------ -------- -------- ------------ --------
Loss for the financial period
attributable to owners of the
parent company (183.0)
------------------------------------------ -------- -------- ------------ --------
28 weeks to 5 March 2016:
Drink revenue 136.4 19.8 - 156.2
Rental income 45.6 5.0 - 50.6
Other revenue 4.8 1.3 - 6.1
------------------------------------------ -------- -------- ------------ --------
Underlying revenue 186.8 26.1 - 212.9
Underlying operating costs(1) (85.9) (14.8) (18.6) (119.3)
Share of post-tax profit from
joint venture - - 0.4 0.4
------------------------------------------ -------- -------- ------------ --------
Adjusted EBITDA before non-underlying
items 100.9 11.3 (18.2) 94.0
------------------------------------------ -------- -------- ------------ --------
Underlying depreciation and amortisation (4.6)
Operating non-underlying items 6.4 (9.2) 45.8 43.0
Net finance costs (62.1)
Movement in fair value of interest
rate swaps (15.6)
UK income tax credit 3.7
------------------------------------------ -------- -------- ------------ --------
Profit for the financial period
attributable to owners of the
parent company 58.4
------------------------------------------ -------- -------- ------------ --------
52 weeks to 20 August 2016:
Drink revenue 265.3 36.8 - 302.1
Rental income 83.7 9.0 - 92.7
Other revenue 9.8 2.2 - 12.0
------------------------------------------ -------- -------- ------------ --------
Underlying revenue 358.8 48.0 - 406.8
Underlying operating costs(1) (167.3) (27.9) (34.1) (229.3)
Share of post-tax profit from
joint venture - - 0.4 0.4
------------------------------------------ -------- -------- ------------ --------
Adjusted EBITDA before non-underlying
items 191.5 20.1 (33.7) 177.9
------------------------------------------ -------- -------- ------------ --------
Underlying depreciation and amortisation (9.8)
Operating non-underlying items 21.8 (22.1) 45.7 45.4
Net finance costs (115.2)
Movement in fair value of interest
rate swaps (38.2)
UK income tax credit 5.2
------------------------------------------ -------- -------- ------------ --------
Profit for the financial period
attributable to owners of the
parent company 65.3
------------------------------------------ -------- -------- ------------ --------
(1) Unallocated underlying operating costs represent corporate
overheads that are not allocated down to the divisional
performance.
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
Core Mercury Unallocated Total
GBPm GBPm GBPm GBPm
------------------------- -------- -------- ------------ ----------
4 March 2017
Assets and liabilities
Segment assets 1,817.2 187.6 5.0 2,009.8
Unallocated assets - - 165.4 165.4
------------------------- -------- -------- ------------ ----------
Total assets 1,817.2 187.6 170.4 2,175.2
------------------------- -------- -------- ------------ ----------
Segment liabilities - - - -
Unallocated liabilities - - (1,569.2) (1,569.2)
------------------------- -------- -------- ------------ ----------
Total liabilities - - (1,569.2) (1,569.2)
------------------------- -------- -------- ------------ ----------
Net assets 1,817.2 187.6 (1,398.8) 606.0
------------------------- -------- -------- ------------ ----------
5 March 2016
Assets and liabilities
Segment assets 1,988.9 218.1 5.0 2,212.0
Unallocated assets - - 275.7 275.7
------------------------- -------- ------ ---------- ----------
Total assets 1,988.9 218.1 280.7 2,487.7
------------------------- -------- ------ ---------- ----------
Segment liabilities - - - -
Unallocated liabilities - - (1,705.5) (1,705.5)
------------------------- -------- ------ ---------- ----------
Total liabilities - - (1,705.5) (1,705.5)
------------------------- -------- ------ ---------- ----------
Net assets 1,988.9 218.1 (1,424.8) 782.2
------------------------- -------- ------ ---------- ----------
20 August 2016
Assets and liabilities
Segment assets 2,008.5 199.5 4.1 2,212.1
Unallocated assets - - 282.5 282.5
------------------------- -------- ------ ---------- ----------
Total assets 2,008.5 199.5 286.6 2,494.6
------------------------- -------- ------ ---------- ----------
Segment liabilities - - - -
Unallocated liabilities - - (1,710.1) (1,710.1)
------------------------- -------- ------ ---------- ----------
Total liabilities - - (1,710.1) (1,710.1)
------------------------- -------- ------ ---------- ----------
Net assets 2,008.5 199.5 (1,423.5) 784.5
------------------------- -------- ------ ---------- ----------
There are no sales between the segments. Segment assets include
property, plant and equipment and non-current assets held for sale
and exclude other intangible assets, inventories, receivables, cash
and taxation whilst all liabilities are unallocated.
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
3. NON-UNDERLYING ITEMS
In order to provide a trend measure of underlying performance,
profit is presented excluding items which management consider will
distort comparability, either due to their significant
non-recurring nature or as a result of specific accounting
treatments. Included in the income statement are the following
non-underlying items:
28 weeks 28 weeks 52 weeks
to to to
4 March 5 March 20 August
2017 2016 2016
GBPm GBPm GBPm
------------------------------------------------- --------- --------- -----------
Operating non-underlying items
Restructuring and one-off costs on conversion
of pubs to the Retail division(1) (3.0) (0.3) (0.5)
Profit on sale of property, plant and equipment
and non-current assets classified as held
for sale 5.0 12.8 28.8
Profit on sale of joint venture - 46.1 46.1
Impairment losses (note 4) (224.3) (2.2) (4.6)
Movement in valuation of properties(2) - - (10.5)
Goodwill charge(3) (0.3) (13.4) (13.9)
(222.6) 43.0 45.4
------------------------------------------------- --------- --------- -----------
Finance costs
Refinancing costs(4) (0.5) - -
------------------------------------------------- --------- --------- -----------
(0.5) - -
------------------------------------------------- --------- --------- -----------
Movement in fair value of interest rate
swaps(5) 24.6 (15.6) (38.2)
Total non-underlying items before tax (198.5) 27.4 7.2
------------------------------------------------- --------- --------- -----------
Tax
Tax impact of non-underlying items (3.5) 8.9 13.3
Change in standard rate of tax (0.3) - -
Adjustments to tax in respect of prior periods - - 3.0
(3.8) 8.9 16.3
------------------------------------------------- --------- --------- -----------
Total non-underlying items after tax (202.3) 36.3 23.5
------------------------------------------------- --------- --------- -----------
(1) GBP1.4m in advisor fees incurred relating to the sale of the
Group (H1 2016: GBPnil; FY 2016: GBPnil), GBP1.6m on the conversion
of pubs to the Retail division (one-off lessee compensation and
launch costs) (H1 2016: GBPnil; FY 2016: GBP0.1m) and GBPnil of
redundancy costs (H1 2016: GBP0.3m; FY 2016: GBP0.4m).
(2) The movement in valuation of properties of GBP10.5m
comprises a downward valuation of GBP58.9m where the fair value of
an asset is less than the net book value, offset by a credit of
GBP48.4m where the fair value of an asset is greater than the net
book value and the credit reverses a previous charge to the income
statement for impairment.
(3) Represents the goodwill relating to those Core pubs disposed
of in the period and also the goodwill relating to pubs transferred
to Mercury in the prior period.
(4) Relates to refinancing costs from the redemption of the
prepayment of junior notes in November 2016 and the 2014 capital
restructuring.
(5) Represents the movement in the fair value of interest rate
swaps which do not qualify for hedge accounting.
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
4. IMPAIRMENT
The impairments recognised in the current and prior periods are
as follows:
28 weeks 28 weeks 52 weeks
to to 5 March to 20 August
4 March 2016 2016
2017
GBPm GBPm GBPm
------------------------------------ --------- ------------ --------------
Property, plant and equipment 0.6 1.7 3.1
Non-current assets classified as
held for sale 0.1 0.5 1.5
Goodwill relating to the Punch 93.9 - -
A Group
Goodwill relating to ongoing Group 55.4 - -
(excluding Punch A)
Punch A disposal Group property, 74.3 - -
plant and equipment
224.3 2.2 4.6
------------------------------------ --------- ------------ --------------
Property, plant and equipment
When any indicators of impairment are identified, property,
plant and equipment and operating leases are reviewed for
impairment based on each cash generating unit (CGU). The cash
generating units are individual pubs. The carrying values of these
individual pubs are compared to the recoverable amount of the CGUs,
which is the higher of value-in-use (VIU) and fair value less costs
to sell (FVLCS).
In the 28 week period to 4 March 2017 the FVLCS of the assets
transferring into the assets classified as held for sale category
have been reviewed and an impairment of GBP0.6m has been
identified. In addition, the FVLCS of assets already classified as
held for sale were reviewed and an impairment of GBP0.1m was
identified. During the 52 week period to 20 August 2016, the FVLCS
of the non-current assets classified as held for sale were
reviewed, and an impairment of GBP4.6m was identified, of which
GBP2.2m had been recognised during the 28 week period to 5 March
2016.
Sale of the Group
On 10 February 2017, there was a court meeting and general
meeting held for shareholders to consider and approve a recommended
cash offer by Vine Acquisitions Limited to acquire the entire
issued and to be issued share capital of Punch Taverns plc.
Following implementation of the scheme of arrangement which will
effect the acquisition, Vine Acquisitions Limited will sell the
Punch A securitisation to Heineken UK Limited. Punch shareholders
voted to pass the Special Resolution to implement the scheme of
arrangement at the general meeting and scheme shareholders voted to
approve the scheme of arrangement at the court meeting.
Following shareholder approval of the transaction at the general
meeting and court meeting held on 10 February 2017, the sale of the
Punch A Group to Heineken UK Limited has been deemed to be highly
probable and as such, the Punch A Group has been classified as held
for sale from that date.
Prior to 10 February 2017 there was significant uncertainty
surrounding any sale of the Punch A Group. In particular, on 14
December 2016, Emerald Investment Partners Limited ("Emerald") made
a proposal to Punch regarding a possible cash offer for the entire
issued and to be issued share capital of Punch. Emerald
subsequently confirmed on 1 February 2017 that it did not intend to
proceed to make a binding offer for the Punch Group.
Given the uncertainties surrounding the final value of any
competing offer for the Punch Group, the disposal or retention of
the Punch A Group, and whether the cash offer by Vine Acquisitions
Limited would be approved at the general meeting and court meeting,
no assets were reclassified as held for sale and no impairments
were booked prior to the 10 February 2017 trigger event date.
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
Goodwill
Goodwill created on the formation of the Group through historic
mergers and acquisitions represents the synergistic benefits of
operating a large pub estate and is allocated to groups of CGUs. As
a result of the approved sale of the Group to Vine Acquisitions
Limited, and the subsequent sale of the Punch A Group to Heineken
UK Limited and classifying the Punch A Group as a disposal group
held for sale, explained in further detail in note 10, a review of
the carrying value of the disposal group compared to the FVLCS
identified an impairment of the disposal group of GBP168.2m. The
impairment is first to be applied to any goodwill associated with
the disposal group, being GBP93.9m.
The Directors have performed an impairment review of the
goodwill association to the ongoing Punch Group and concluded that
the level of goodwill is no longer supported by synergistic
benefits. As such, all goodwill associated to the ongoing Punch
Group of GBP55.4m has been impaired.
Punch A disposal Group property, plant and equipment
In line with IFRS 5, the impairment of the Punch A disposal
Group of GBP168.2m, once applied to the goodwill associated with
the disposal Group, is then to be applied to the carrying amount of
the non-current assets in the disposal Group. This has resulted in
an impairment of GBP74.3m to the property, plant and equipment of
the Punch A disposal Group.
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
5. FINANCE INCOME AND COSTS
28 weeks 28 weeks 52 weeks
to to to
4 March 5 March 20 August
2017 2016 2016
GBPm GBPm GBPm
------------------------------------------- --------- --------- -----------
Finance income
Bank and other interest receivable 0.6 1.0 2.1
Total finance income 0.6 1.0 2.1
------------------------------------------- --------- --------- -----------
Finance costs
Interest payable on loan notes 58.4 62.4 115.9
Interest payable on finance leases - 0.1 0.1
Net pension interest costs 0.3 0.2 0.5
Amortisation of deferred issue costs 0.1 0.1 0.2
Effect of unwinding discounted provisions 0.3 0.3 0.6
Non-underlying finance costs (note 3) 0.5 - -
Total finance costs 59.6 63.1 117.3
------------------------------------------- --------- --------- -----------
6. TAXATION
The effective taxation charge before non-underlying items and
share of post-tax profit from the joint venture is 19.6% (H1 2016:
19.3%; FY 2016: 21.1%)
The total tax charge of GBP8.5m (March 2016: credit of GBP3.7m;
August 2016: credit of GBP5.2m) includes a non-underlying tax
charge of GBP3.8m (March 2016: credit of GBP8.9m; August 2016:
credit of GBP16.3m).
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year, excluding
those held in the employee share trust, which are treated as
cancelled.
Diluted earnings per share is calculated by dividing the
earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year
adjusted for the effects of dilutive options.
Reconciliations of the earnings used in the calculations are set
out below:
28 weeks to 4 28 weeks to 5 52 weeks to 20
March 2017 March 2016 August 2016
Per share Per share Per share
Earnings amount Earnings amount Earnings amount
GBPm pence GBPm Pence GBPm Pence
------------------------------ ----------- ---------- ----------- ---------- ----------- ----------
Basic (loss) / earnings
per share (183.0) (82.4) 58.4 26.3 65.3 29.4
Diluted (loss) /
earnings per share (183.0) (82.0) 58.4 26.2 65.3 29.3
Supplementary earnings
per share figures:
Basic earnings per
share before non-underlying
items 19.3 8.7 22.1 10.0 41.8 18.8
Diluted earnings
per share before
non-underlying items 19.3 8.6 22.1 9.9 41.8 18.8
------------------------------ ----------- ---------- ----------- ---------- ----------- ----------
The impact of dilutive ordinary shares is to increase weighted
average shares by 1,221,160 (March 2016: 609,261; August 2016:
836,807) for employee share options.
28 weeks 28 weeks 52 weeks
to to 5 March to 20 August
4 March 2016 2016
2017
No. (m) No. (m) No. (m)
----------------------------------------- --------- ------------ --------------
Basic weighted average number of shares 222.0 221.9 221.9
Long Term Incentive Plan 0.9 0.6 0.8
SAYE scheme 0.3 - 0.1
Diluted weighted average number of
shares 223.2 222.5 222.8
----------------------------------------- --------- ------------ --------------
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
8. PROPERTY, PLANT AND EQUIPMENT
GBPm
----------------------------------- ----------
Net book amount at 20 August 2016 2,044.2
Additions 40.4
Disposals (2.4)
Depreciation (5.7)
Impairment (0.6)
Transfer to held for sale (1,278.1)
--------------------------------------- ----------
Net book amount at 4 March 2017 797.8
--------------------------------------- ----------
Net book amount at 22 August 2015 2,038.2
Additions 24.1
Disposals (13.0)
Depreciation (4.5)
Impairment (1.7)
Transfer to held for sale (12.7)
--------------------------------------- ----------
Net book amount at 5 March 2016 2,030.4
--------------------------------------- ----------
Net book amount at 22 August 2015 2,038.2
Additions 62.0
Disposals (13.2)
Depreciation (9.5)
Impairment (3.1)
Revaluation (9.1)
Transfer to held for sale (21.1)
--------------------------------------- ----------
Net book amount at 20 August 2016 2,044.2
--------------------------------------- ----------
9. GOODWILL
GBPm
------------------------------------------------- -------
Net book amount at 20 August 2016 149.6
Charge (0.3)
Impairment relating to the Punch A Group
(note 4) (93.9)
Impairment relating to ongoing Group (excluding
Punch A) (note 4) (55.4)
Net book amount at 4 March 2017 -
------------------------------------------------- -------
Net book amount at 22 August 2015 163.5
Charge (13.4)
Net book amount at 5 March 2016 150.1
---------------------------------------------------- -------
Net book amount at 22 August 2015 163.5
Charge (13.9)
Net book amount at 20 August 2016 149.6
---------------------------------------------------- -------
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
10. ASSETS HELD FOR SALE
On 10 February 2017, there was a court meeting and general
meeting held for shareholders to consider and approve a recommended
cash offer by Vine Acquisitions Limited to acquire the entire
issued and to be issued share capital of Punch Taverns plc.
Following implementation of the scheme of arrangement which will
effect the acquisition, Vine Acquisitions Limited will sell the
Punch A securitisation to Heineken UK Limited. Punch shareholders
voted to pass the Special Resolution to implement the scheme of
arrangement at the general meeting and scheme shareholders voted to
approve the scheme of arrangement at the court meeting.
As at 4 March 2017, the disposal of the Punch A Group was deemed
to be highly probable and as such, the assets and liabilities of
the Punch A Group have been presented as held for sale. The assets
and liabilities of the Punch A Group are held at the lower of
carrying amount and fair value less costs to sell. The impairment
recognised in this regard is presented in note 4, being GBP93.9m to
goodwill and GBP74.3 to property, plant and equipment.
Further information on the scheme of arrangement can be found on
the company's website www.punchtavernsplc.com
The major classes of assets and liabilities of the Punch A
disposal group as at 4 March 2017 are as follows:
GBPm
-------------------------------------- --------
Assets classified as held for sale
Property, plant and equipment 1,207.6
Other intangible assets 0.7
Deferred tax asset 1.0
Inventories 0.8
Trade and other receivables 14.0
Cash and cash equivalents 40.7
Total assets of the Punch A disposal
Group 1,264.8
------------------------------------------ --------
GBPm
-------------------------------------------------------- --------
Liabilities directly associated with assets classified
as held for sale
Borrowings (776.3)
Derivative financial instruments (144.6)
Trade and other payables (38.9)
--------------------------------------------------------- --------
Total liabilities of the Punch A disposal Group (959.8)
--------------------------------------------------------- --------
GBPm
-------------------------------------------------------- --------
Total net assets of the Punch A disposal Group 305.0
--------------------------------------------------------- --------
Total net debt of the Punch A disposal Group (880.2)
--------------------------------------------------------- --------
In addition to the Punch A disposal Group above, there is also
GBP4.4m of non-current assets classified as held for sale relating
to the ongoing Punch Group.
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
11. NET DEBT
(a) Analysis of net debt
4 March 5 March 20 August
2017 2016 2016
GBPm GBPm GBPm
--------------------------------------- -------- ---------- ----------
Secured loan notes (552.7) (1,449.2) (1,416.6)
Cash and cash equivalents 90.7 234.6 234.2
Nominal value of net debt (462.0) (1,214.6) (1,182.4)
Capitalised debt issue costs 1.1 1.2 1.2
Fair value adjustments on acquisition
of secured loan notes (8.0) (11.5) (10.5)
Fair value of interest rate swaps - (147.4) (169.7)
Finance lease obligations (0.6) (2.1) (2.0)
--------------------------------------- -------- ---------- ----------
Net debt(1) (469.5) (1,374.4) (1,363.4)
--------------------------------------- -------- ---------- ----------
Balance sheet:
Borrowings (560.2) (1,461.6) (1,427.9)
Derivative financial instruments - (147.4) (169.7)
Cash and cash equivalents 90.7 234.6 234.2
Net debt(1) (469.5) (1,374.4) (1,363.4)
--------------------------------------- -------- ---------- ----------
(1) Net debt excluding assets and liabilities classified as held
for sale.
(b) Analysis of net debt, including cash and debt classified
within assets and liabilities held for sale
Net Debt at 4 March 2017 Balance Assets Total net
Sheet and liabilities debt
held for
sale
GBPm GBPm GBPm
--------------------------------------- -------- ----------------- ----------
Secured loan notes (552.7) (773.6) (1,326.3)
Cash and cash equivalents 90.7 40.7 131.4
Nominal value of net debt (462.0) (732.9) (1,194.9)
Capitalised debt issue costs 1.1 - 1.1
Fair value adjustments on acquisition
of secured loan notes (8.0) (1.4) (9.4)
Fair value of interest rate swaps - (144.6) (144.6)
Finance lease obligations (0.6) (1.3) (1.9)
--------------------------------------- -------- ----------------- ----------
Net debt (469.5) (880.2) (1,349.7)
--------------------------------------- -------- ----------------- ----------
Balance sheet:
Borrowings (560.2) (776.3) (1,336.5)
Derivative financial instruments - (144.6) (144.6)
Cash and cash equivalents 90.7 40.7 131.4
Net debt (469.5) (880.2) (1,349.7)
--------------------------------------- -------- ----------------- ----------
Fair value measurement
Derivative financial instruments carried at fair value have been
measured by a level 2 valuation method as required under IFRS 13.
Level 2 valuation measurements are by reference to inputs other
than quoted prices in active markets for identical assets or
liabilities, that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from
prices).
12. CAPITAL COMMITMENTS
Capital commitments contracted, but not provided for by the
Group, amounted to GBP15.7m (March 2016: GBP15.1m; August 2016:
GBP18.3m).
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
13. SEASONALITY OF INTERIM OPERATIONS
The Group's financial results and cash flows are impacted by the
financial year being split into two unequal periods, with the first
half being 28 weeks and the second half being 24 weeks in the
current and prior financial.
In addition, the Group's financial results and cash flows have,
historically, been subject to seasonal trends between the first and
the second half of the financial year.
14. ALTERNATIVE PERFORMANCE MEASURES (APMs)
In the reporting of financial information, the Directors have
adopted various Alternative Performance Measures (APMs). These
measures are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, including those in the
Group's industry. APMs should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS
measurements.
The Directors believe that these APMs assist in providing
additional useful information on the underlying trends, performance
and position of the Group. Consequently, APMs are used by the
Directors and management for performance analysis, planning,
reporting and incentive setting purposes.
The following section provides an indication of the purpose and
definition of each of the APMs presented in these interim financial
statements, together with an appropriate cross reference to where
the financial information can be found within the IFRS financial
statements
A. Like-for-like leased and tenanted net income
Like-for-like leased and tenanted net income represents
underlying revenue less cost of sales (gross profit), for those
pubs held for the entirety of both the prior and current year. This
is a measure that provides an indication of the relative
performance in the same pub leased and tenanted estate, and is
calculated as follows:
28 weeks 28 weeks
to to
4 March 5 March
2017 2016
GBPm GBPm
------------------------------------------------------------- --------- ---------
Underlying adjusted EBITDA (income statement) 88.4 94.0
Add back: pub operating costs 12.4 10.7
central costs (note 2) 18.6 18.6
Deduct: underlying adjusted EBITDA for pubs
in the Retail division (5.4) (6.4)
share of post tax profit from joint venture
(note 2) - (0.4)
adjusted EBITDA on disposed pubs (0.1) (1.2)
Same pub, leased and tenanted net income 113.9 115.3
-------------------------------------------------------------- --------- ---------
Change
------------------------------------------------------------- --------- ---------
Change in Like-for-like leased and tenanted
net income (1.2)%
-------------------------------------------------------------- --------- ---------
B. Average outlet profit per pub
This is a measure that provides an indication of the average
quality of the Group's pub assets, providing a measure of average
earnings, and is calculated as follows:
28 weeks 28 weeks
to to
4 March 5 March
2017 2016
GBPm GBPm
---------------------------------------------------- --------- ---------
Underlying Core adjusted EBITDA (note 2) 97.2 100.9
Underlying Mercury adjusted EBITDA (note
2) 9.8 11.3
Underlying segment adjusted EBITDA pre unallocated
EBITDA 107.0 112.2
----------------------------------------------------- --------- ---------
Pubs Pubs
---------------------------------------------------- --------- ---------
Divided by: average number of pubs owned
during the period 3,249 3,395
----------------------------------------------------- --------- ---------
GBP'000 GBP'000
---------------------------------------------------- --------- ---------
Average outlet profit per pub (28 weeks) 32.9 33.0
----------------------------------------------------- --------- ---------
Change
---------------------------------------------------- --------- ---------
(0.3)%
---------------------------------------------------- --------- ---------
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
C. Underlying adjusted EBITDA
Underlying adjusted EBITDA is a measure of the Group's
underlying operating profit before depreciation and amortisation.
It excludes non-underlying items to give a year on year measure of
underlying performance, calculated as follows:
28 weeks 28 weeks
to to
4 March 5 March
2017 2016
GBPm GBPm
-------------------------------------------------------------------------- --------- ---------
Revenue (income statement) 217.0 212.9
Deduct: operating costs before depreciation, amortisation
and impairment (income
statement) (131.6) (119.6)
Add back: share of post tax profit from joint venture
(income statement) - 0.4
non-underlying operating costs (note 3) 3.0 0.3
-------------------------------------------------------------------------- --------- ---------
Underlying adjusted EBITDA 88.4 94.0
-------------------------------------------------------------------------- --------- ---------
D. Underlying earnings per share
Underlying earnings per share measures the underlying profit
attributable to each Punch Taverns plc share held. Underlying
profit attributable to shareholders is calculated as follows:
28 weeks 28 weeks
to to
4 March 5 March
2017 2016
GBPm GBPm
--------------------------------------------------------------- --------- ---------
Reported (loss) / profit attributable to equity
holders of the parent (income statement) (183.0) 58.4
Add back: non-underlying operating costs (note
3) 3.0 0.3
impairment (note 3) 224.3 2.2
goodwill charge (note 3) 0.3 13.4
non-underlying finance income and costs (note
3) (24.1) 15.6
non-underlying tax charge / (credit) (note 3) 3.8 (8.9)
Less: profit on sale of properties (note 3) (5.0) (12.8)
profit on sale of joint venture (note 3) - (46.1)
---------------------------------------------------------------- --------- ---------
Underlying profit attributable to equity holders
of the parent 19.3 22.1
---------------------------------------------------------------- --------- ---------
Underlying earnings per share is then calculated by dividing
underlying profit attributable to equity holders of the parent
shown above by the weighted average number of shares in issue as
shown below:
28 weeks 28 weeks
to to
4 March 5 March
2017 2016
-------------------------------------------------- --------- ---------
Underlying profit attributable to equity holders
of the parent (see above) (GBPm) 19.3 22.1
Weighted average number of shares in issue
(note 7) (No. m) 222.0 221.9
Basic underlying earnings per share (pence) 8.7 10.0
--------------------------------------------------- --------- ---------
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
15. PRINCIPAL RISKS AND UNCERTAINTIES
Risk is an inherent part of doing business. Full detail of the
Group's risk management process is set out in the Group's Annual
Report and Financial Statements 2016 (please refer to page 19 of
the Group's Annual Report and Financial Statements 2016), a copy of
which is available on the Group's website
www.punchtavernsplc.com.
The Board retains ultimate responsibility for the Group's risk
management framework, including the on-going monitoring and review
of its effectiveness, and formally reviews the material risks to
ensure that they are being appropriately managed by the executive
management team.
The Board has identified the following factors as the principal
potential risks to the successful operation of the business, and
these risks are considered those most likely to affect the Group in
the second half of the year. While there have been no new principal
risks identified in the period, the Operational and Regulatory
Risks and mitigating actions and controls have been updated to
reflect the increased risks associated with the recommended
disposal of the business to Vine Acquisitions Limited and the
associated disposal of the Punch A Group to Heineken UK Limited and
the impact on pub letting activity.
Market and economic risk:
The Group's business operations are sensitive to economic
conditions and any economic downturn could affect consumer
confidence and discretionary spending across both the retail and
leisure industries. The basic cost of living could rise at a faster
rate than income and further challenges such as duty increases or
the national living wage could affect our partners' businesses and
Group revenue.
On 23 June 2016, the UK voted to leave the EU ('Brexit'). The
exact nature, process and timing of the UK's exit from the EU are
unknown. Brexit could have impact on consumer spending habits, and
therefore our publican's
sales, either due to economic slowdown, increased inflation or
increases in interest rates. Similarly, the cost of running pubs
could increase as import prices in the supply chain rise, or the
cost of labour increases
Mitigating actions and controls: The Group is committed to
developing an estate of well invested, high quality pubs. We
continue to monitor the financial health of our partners and our
Partnership Development Managers continue to help to grow and
diversify our partners' businesses.
Financial risk:
The Group is financed through two whole business
securitisations, the Punch A Securitisation and the Punch B
Securitisation, as well as cash resources held across the Group.
The key short term liquidity risk is the requirement to meet
scheduled debt service costs as they fall due. Both of Punch's
securitisation structures have financial covenants.
Mitigating actions and controls: Cash flow forecasts are
regularly produced to assist management in identifying liquidity
requirements and are stress-tested for possible scenarios.
Covenants are closely monitored and stress-tested to ensure we are
able to generate sufficient returns to service our debt and meet
our covenant requirements.
Operational risk:
Operational risks have increased in the period due to the
increased market uncertainty following the recommended disposal of
the business to Vine Acquisitions Limited and the associated
disposal of the Punch A Group to Heineken UK Limited. Failure to
recruit, train and retain successful publicans and high calibre
employees may impact on our ability to deliver our strategic plan,
and failure to renew or agree new supply arrangements on
preferential terms could affect Group profitability.
Mitigating actions and controls: We maintain regular dialogue
with our employees, publicans, market participants and suppliers
with regards to the planned disposal to Vine Acquisitions Limited
and the associated disposal of the Punch A Group. We provide
industry leading induction training and coaching programmes for our
new publicans, and undertake succession planning at all levels to
ensure we attract and retain high calibre people.
Regulatory risk:
The Pubs Code Regulations, which form part of the Small
Business, Enterprise and Employment Act 2015, came into effect on
21 July 2016. Certain lessees can elect to invoke the MRO option,
whilst our income derived from the supply of tied drinks products
would be partially offset by increases in rent, there is the
potential for total income
NOTES TO THE FINANCIAL STATEMENTS continued
for the 28 weeks ended 4 March 2017
to be adversely affected. The Pubs Code Regulations have also
had an impact on the length of time taken to let pubs under
substantive tied tenancy and lease agreements to new publicans.
Mitigating actions and controls: The Group has taken a number of
operational actions to address the implications on the Group of the
implementation of the legislation, including the introduction of
new managed and Retail contract pub operating formats,
modernisation of pub tenancy agreements and development of new
commercial free-of-tie lease agreements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the European Union;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first 28 weeks of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining 24 weeks of the
year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first 28
weeks of the current financial year and that have materially
affected the financial position or performance of the Group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
On behalf of the Board
Duncan Garrood Steve Dando
Chief Executive Officer Chief Financial Officer
3 May 2017 3 May 2017
Independent review report to Punch Taverns plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the interim financial report for the 28
weeks ended 4 March 2017 which comprises Consolidated Condensed
Income Statement, Consolidated Condensed Statement of Comprehensive
Income, Consolidated Condensed Balance Sheet, Consolidated
Condensed Statement of Changes in Equity, Consolidated Condensed
Cash Flow Statement and the related explanatory notes. We have read
the other information contained in the interim financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The interim financial report is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the interim financial report in accordance with the DTR
of the UK FCA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the EU.
The condensed set of financial statements included in this interim
financial report has been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the interim financial
report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim financial report for the 28 weeks ended 4 March 2017
is not prepared, in all material respects, in accordance with IAS
34 as adopted by the EU and the DTR of the UK FCA.
Simon Haydn-Jones
for and on behalf of KPMG LLP
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham,
B4 6GH
United Kingdom
3 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BXLFBDEFFBBD
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