Greene King Retailing Parent Limited

Transcription

1 Greene King Retailing Parent Limited Annual Report and Financial Statements 28 April 2013 Registered number:

2 Directors report The directors present their report and accounts for the 52 week period ended 28 April Results and dividends The loss after tax and interest was 13.5m (2012 : 20.4m) and the directors do not recommend the payment of an ordinary dividend (2012: Nil). Principal activities and review of the business The company s principal activities are the management of public houses, and the wholesaling and retailing of beers, wines, spirits and soft drinks. The group s properties and future income streams are subject to a secured charge held by the bondholders of Greene King Finance Plc. Together with the activities of the non-securitised estate and the brewing and distribution business, both held within separate fellow subsidiaries, the overall Greene King business is contained within the Greene King plc group accounts. The group s performance in the year has met directors expectations. The directors do not expect any significant changes to the operations of the business going forward. A comprehensive review of the Greene King plc group business can be found in the Greene King plc financial statements for the period ended 28 April As a 100% owned subsidiary of the Greene King plc group, the principal risks faced by the company are consistent with those disclosed within the Greene King plc financial statements. Directors and their interests The directors during the period were as follows: R Anand M Fearn P Groves (resigned 13 July 2012) C Houlton (appointed 8 January 2013) S Jebson (appointed 5 September 2012) R Lewis S Longbottom J Webster None of the directors held any interest in the share capital of the company during the period. The interests of the directors in the shares of the ultimate parent company, Greene King plc, are shown in the accounts of that company, where they are directors of Greene King plc. Indemnity provision / directors liabilities The company has indemnified the directors of the company in respect of proceedings brought by third parties. Such qualifying third party indemnity provision remains in place at the date of this report. Statement as to disclosure of information to auditors The directors who were members of the board at the time of approving this report are listed above. Having made enquiries of fellow directors and of the company s auditors, each of these directors confirm that: to the best of their knowledge and belief, there is no information relevant to the preparation of this report of which the company s auditors are unaware; and they have taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the company s auditors are aware of that information. 1

3 Equal opportunities We recruit, develop, reward and promote our staff on the basis of their skills and suitability for the role. We are committed to ensuring that all employees receive equal treatment regardless of their colour, nationality, race, religion/belief, ethnic origin, sex, marital status, disability, part-time or fixed term status, parental responsibilities, sexual orientation or age. Our flexible benefits enable employees to tailor their benefits to what is important them, including childcare and healthcare, as well as offering flexible working hours and working from home options where practicable. Payments to suppliers The company understands the benefits to be derived from maintaining good relationships with its suppliers and where possible enters into agreements over payment terms. Where such terms have not been agreed it is the company policy to settle invoices close to the end of the month following invoicing. This policy is dependent on suppliers providing accurate, timely and sufficiently detailed invoices. Payment in respect of 80 days average purchases from trade creditors was outstanding at the end of the period (2012: 61 days). Financial instruments The group s policy on the use of financial instruments is set out in note 17. Going concern The group s business activities, together with the factors likely to affect its future development, performance and position are set out in the business review. The directors are of the opinion that the group s forecast and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within its current borrowing facilities and comply with its financing covenants. At the balance sheet date the group had net liabilities of 83.2 million. Within this amount is a million subordinated loan from other group companies. This loan cannot be repaid until all the securitised debt has been repaid. After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. Re-appointment of auditors In accordance with s.485 of the Companies Act 2006, a resolution is to be proposed at the Annual General Meeting for reappointment of Ernst & Young LLP as auditor of the company. Mrs L A Keswick Company Secretary Date: 26 June

4 Statement of directors responsibilities The directors are responsible for preparing the Directors Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the accounts on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 3

5 Independent auditor s report to the members of Greene King Retailing Parent Limited We have audited the financial statements of Greene King Retailing Parent Limited for the 52 week period ended 28 April 2013 which comprise the group profit and loss account, the group and parent company balance sheets and the related notes 1 to 24. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' 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 and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors Responsibilities Statement on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s (APB s) Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s and parent company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non financial information in the Annual Report and Financial Statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the group s and of the parent company's affairs as at 28 April 2013 and of the group s loss for the period then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Bob Forsyth (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Cambridge Date: 26 June

6 Group profit and loss account for the 52 weeks ended 28 April 2013 Notes 28 April April 2012 Turnover Trading expenses 3 (470.6) (450.1) Impairment of fixed assets 10 (18.2) (17.7) Insurance proceeds Operating profit Disposal of properties (0.9) (0.7) Net interest payable 6 (126.5) (126.5) Loss on ordinary activities before taxation (13.7) (17.1) Taxation (3.3) Loss after taxation 20 (13.5) (20.4) There are no other recognised gains and losses for the period. All results are from continuing operations. 5

7 Group balance sheet as at 28 April April April 2012 Notes Fixed assets Intangible fixed assets Tangible assets 10 1, , , ,766.2 Current assets Stocks Debtors Cash at bank Current liabilities Creditors: amounts falling due within one year 14 (150.4) (128.0) Short term borrowings 16 (29.2) (25.9) Net current liabilities (147.9) (117.1) Total assets less current liabilities 1, ,649.1 Creditors: due after more than one year Other creditors 15 (393.7) (393.7) Medium and long term borrowings 16 (1,266.9) (1,296.2) Provisions for liabilities and charges Deferred taxation 18 (21.2) (28.9) Net liabilities (83.2) (69.7) Capital and reserves Called up share capital Profit and loss account 20 (83.2) (69.7) Shareholder s funds 20 (83.2) (69.7) Approved and issued by the Board of Directors on 26 June 2013 and signed on its behalf by: M Fearn Director 6

8 Company balance sheet as at 28 April April April 2012 Notes Fixed assets Investments 1 1 Current assets Cash at bank 947, ,841 Net current assets 947, ,841 Net assets 947, ,842 Capital and reserves Called up share capital Profit and loss account , ,841 Shareholder s funds , ,842 Approved and issued by the Board of Directors on 26 June 2013 and signed on its behalf by: M Fearn Director 7

9 1. Accounting policies Basis of preparation These accounts have been prepared under the historical cost convention and in accordance with the Companies Act 2006 and applicable accounting standards. Going concern At the balance sheet date the group had net liabilities of 83.2 million. Within this amount is a million subordinated loan from other group companies. This loan cannot be repaid until all the securitised debt has been repaid. After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. Basis of consolidation The consolidated financial statements incorporate the financial statements of Greene King Retailing Parent Limited and its subsidiaries. The financial statements of subsidiaries are prepared for the same reporting year as the parent company. The results of subsidiaries are consolidated, from the date of acquisition, being the date on which the group obtains control, and continue to be consolidated until the date that such control ceases. Intercompany transactions, balances, income and expenses are eliminated on consolidation. Cash Flow Statement The company has taken advantage of the exemption permitted by FRS1, whereby a wholly owned subsidiary need not prepare a cash flow statement provided the consolidated financial statements in which the subsidiary undertaking is included are publicly available. Goodwill policy Goodwill arising from the premium paid on businesses acquired is amortised over its estimated useful life of twenty years. Depreciation Freehold land is not depreciated, freehold buildings are depreciated to their estimated residual values over periods up to fifty years, long leasehold properties are depreciated to their estimated residual values over periods up to fifty years, short leasehold properties are depreciated to their estimated residual values over the remaining term of the lease and furniture and equipment assets are depreciated over their estimated useful lives which range from three to twenty years. Where the carrying value of properties may not be recoverable an impairment in the value of fixed assets is charged to the profit and loss account. Stocks Stocks are valued at the lower of cost and net realisable value and where applicable include an element of production overheads. Investments Investments held as fixed assets are stated at cost less provision for any impairment in value. Derivatives and financial instruments Term loans issued by Greene King Retailing Limited are initially stated at the amount of funds advanced, net of facility fees. Finance income is allocated to periods over the term of the loan at a constant rate on the carrying amount. The group uses interest rate swaps to hedge its exposure to interest rate fluctuations on its variable rate loans, notes and bonds. Amounts payable or receivable in respect of interest rate swaps are recognised as adjustments to the interest expense over the period of the swap contracts. Interest rate swaps are not revalued to fair value or shown on the group s balance sheet at the year end. 8

10 Deferred taxation Deferred tax is recognised in respect of all timing differences that have originated but not reversed by the balance sheet date and is calculated using the tax rates extant at the balance sheet date. Deferred tax is not recognised when an asset is sold if it is more likely than not that the taxable gain will be rolled over. Provisions for deferred tax are not discounted. Interest Interest receivable or payable under the company s various investments and financial instruments is accrued so as to impute a constant periodic rate of return in the profit and loss account. Inter-company balances Amounts owed by or to group undertakings are classified as short term assets or liabilities unless there is a loan arrangement in place that specifies repayment over a period longer than one year from the balance sheet date. Leasing commitments Rentals paid under operating leases are charged to the profit and loss account on a straight-line basis over the lease term. 2. Turnover Turnover, which is stated net of value added tax, is derived from the provision of goods and services in the United Kingdom which fall within the company s continuing ordinary activities. The principal business activity is the management of public houses. 3. Trading expenses Raw materials, consumables and excise duty Employment costs Other operating charges Operating profit Operating profit is stated after charging: Depreciation of owned fixed assets (note 10) Amortisation of goodwill (note 9) Impairment of fixed assets Operating lease rentals - property The auditors were remunerated by the ultimate parent company. 9

11 5. Employment costs During the period the company paid million (2012: million) to Greene King Brewing and Retailing Limited, a fellow subsidiary company. This payment was to procure the secondment of employees from two other companies, Greene King Services Limited and Greene King Retail Services Limited, both of whom are fellow subsidiaries of Greene King plc. The average number of employees seconded during the period was as follows: No. No. Retailing 12,302 11,777 The figure above includes 5,385 (2012: 5,876) part-time employees. Pension contributions in respect of the employees working for the company are borne by the subsidiary companies mentioned above. The directors who held office during the year were also directors of fellow group companies. Total emoluments, including any company pension contributions, received by these directors totals 3.6 million (2012: 3.9 million) paid by the ultimate parent company or other subsidiaries. The directors do not believe that it is practicable to apportion this amount between services as directors to the company and of fellow subsidiary companies. 6. Net interest payable Interest payable and similar charges Borrowings Subordinated loans from group undertakings Interest receivable (0.3) (0.3)

12 7. Taxation Current taxation Corporation tax Deferred taxation Original and reversal of timing differences (note 18) (7.7) (4.3) Total tax (credit) / charge for the period (0.2) 3.3 Factors affecting current taxation charge for year The effective rate of taxation is lower than the full rate of corporation tax. The differences are explained below: Loss on ordinary activities before tax (13.7) (17.1) Loss on ordinary activities multiplied by standard rate corporation tax 23.9% (2012: 25.8%) (3.3) (4.4) Tax relief on disposal of properties Expenses not deductible for tax purposes - goodwill other Impairment not deductible for tax purposes Capital allowances Group relief (1.3) The Finance Act 2012 reduced the rate of corporation tax from 24% to 23% from 1 April The effect of the reduced rate is a deferred tax credit of 1.2m in the period. Factors that may affect future tax charges Based on current capital investment plans, it is anticipated that capital allowance claims will be in excess of depreciation in future years. No provision has been made for deferred tax on gains on revaluing property to its market value or on the sale of properties where potentially taxable gains have been rolled over into replacement assets. Such tax would become payable only if the properties were sold without it being possible to claim rollover relief. The total amount unprovided for is 77.4m (2012: 80.2m). In addition to the reduction in corporation tax during the period it is proposed to reduce the rate to 21% from 1 April 2014 and 20% from 1 April These further reductions had not been substantively enacted at the balance sheet date and consequently not included in these accounts. The effect of these proposals would be to reduce the deferred tax liability by a further 3.1m. 8. Company profit for the year No profit or loss account is presented for the company as permitted by s408 of the Companies Act The profit after tax for the period is nil (2012: nil). 11

13 9. Intangible assets Intangible assets comprise goodwill arising on acquisitions. Group m Cost At 29 April Acquisitions - At 28 April Amortisation At 29 April Charged during the period 23.5 At 28 April Net book value At 28 April At 29 April Goodwill is being amortised evenly over the directors estimate of its useful economic life of 20 years. 10. Tangible fixed assets Group Land & buildings Fixtures, fittings & equipment Total m Cost At 29 April , ,683.3 Additions Acquisitions Disposals (18.2) (11.7) (29.9) At 28 April , ,731.9 Depreciation At 29 April Charge for period Impairment Disposals (0.9) (4.6) (5.5) At 28 April Net book value At 28 April , ,437.7 At 29 April , ,

14 The net book value of land and buildings comprises: Freehold properties 1, ,261.4 Long leasehold properties , ,300.4 Impairment During the year 18.2m of impairment losses (2012: 17.7m) were recognised in the profit and loss account. The company considers that each of its individual pubs is a cash generating unit (CGU). Each CGU is reviewed annually for indicators of impairment. When indicators of impairment are identified the carrying value of the CGU is compared to its recoverable amount. The recoverable amount is the higher of the CGU s net realisable value and its value in use. The company estimates value in use using a discounted cash flow model. The key assumptions used are the discount rate applied to cash flow projections of 9% and the projected cash flows extrapolated using an average growth rate taking into account current economic conditions and the growth rate of 2%. Other commercial assumptions relating to individual CGUs have been made based on historic trends adjusted for management s estimates of medium term trading prospects. The impairment recognised in the estate is primarily as a result of the reduced trading performance of a relatively small number of restaurants due to a combination of site specific trading circumstances and the general weakening of the UK consumer environment seen in the year. 1.6m of the impairment recognised in the year is in respect of two licensed properties damaged by fire. In the period 0.8m of insurance compensation has been received to meet costs incurred to date to restore the property; further compensation is expected to be received as the restoration project progresses. 11. Investments Company Shares in subsidiaries at cost 1 1 Details of the investments in principal subsidiaries are given as follows: Name of company Principle Activity Holding Shares held Directly held Greene King Retailing Limited Pub retailing Ordinary shares 100% Indirectly held Sapphire Food North East No.1 Limited Property Leasing Ordinary shares 100% Sapphire Food South West No.2 Limited Property Leasing Ordinary shares 100% Sapphire Food North West No.3 Limited Property Leasing Ordinary shares 100% Sapphire Food South East No.4 Limited Property Leasing Ordinary shares 100% Sapphire Rural Destination No.5 Limited Property Leasing Ordinary shares 100% 13

15 12. Stocks Group Finished goods for resale Debtors: amounts falling due within one year Group Trade debtors Other debtors Corporation tax - - Prepayments and accrued income Creditors: amounts falling due within one year Group Other taxes and social security costs Accruals and deferred income Corporation tax Amounts owed to fellow group undertakings Trade creditors Accrued interest on subordinated loan (see note 15) Creditors: amounts falling due after one year Group Amounts owed to fellow group undertakings Subordinated loans The subordinated loans are not repayable until all other borrowings have been repaid. This is currently scheduled to be December Interest accrues at 12.5% per annum and can only be paid if the group meets its financial covenants. 14

16 16. Borrowings 2013 Within one After one Total year year m Securitised debt Term Advances A Term Advances A Term Advances A Term Advances A Term Advances A Term Advances AB Term Advances B Term Advances B , ,301.2 Deferred issue costs (0.5) (8.0) (8.5) Swap provision , , Within one After one Total year year m Securitised debt Term Advances A Term Advances A Term Advances A Term Advances A Term Advances A Term Advances AB Term Advances B Term Advances B ,328.9 Deferred issue costs (2.0) (8.3) (10.3) Swap provision , ,322.1 Maturity of financial liabilities and expiry of facilities Within one year or on demand Between one and two years Between two and five years After five years 1, , , ,

17 Securitised debt The group has issued various tranches of bonds totalling 1,500.0 million, in connection with the securitisation of 2,035 of the group's pubs held in Greene King Retailing Limited at the date of the most recent tap. The bonds are secured over the properties and their future income streams and were issued by Greene King Finance plc. The securitisation is governed by various covenants, warranties and events of default, many of which apply to the group. These include covenants regarding the maintenance and disposal of properties and restrictions on its ability to move cash outside of the group. 17. Financial instruments and loan capital The group s objectives and policies on the use of financial instruments are detailed below. All financial assets and liabilities are denoted in sterling. Repayment date Nominal interest rate Nominal Value 2013 Carrying Value 2013 m Bond finance A1 bonds 2012 to 2031 Variable A2 bonds 2005 to % A3 bonds 2006 to 2021 Variable A4 bonds 2021 to % A5 bonds 2008 to 2033 Variable AB1 bonds 2033 to 2036 Variable B1 bonds 2031 to %* B2 bonds 2034 to 2036 Variable *Fixed at 5.702% until 2020 then payable/receivable at three month sterling LIBOR plus a margin of 0.72%. The interest on the A1, A3, A5, AB1 and B2 bonds is payable at three month sterling LIBOR plus a margin of 0.95%, 0.50%, 1.00%, 2.10% and 0.83% respectively. Repayment is made on quarterly dates within the date ranges shown above. Analysis of interest rate exposure and fair values of financial liabilities and assets: Effective Interest Rate Weighted Average Period Rate Fixed Fair Value 2013 Carrying Value 2013 (years) Financial liabilities Bond finance Fixed rate 5.465% Bond finance Swapped into fixed rate 7.149% Financial assets Cash Floating rate Effective Interest rate Weighted Average Period Rate Fixed Fair Value 2012 Carrying Value 2012 (years) Financial liabilities Bond finance Fixed rate 5.305% Bond finance Swapped into fixed rate 5.960% Financial assets Cash Floating rate

18 Market values have been used to determine the fair value of term loans. The fair value of the interest rate swap is based on quotation from the counterparty and is the expected amount that would be paid, or received on termination of the agreement. Carrying values are net of deferred finance fees. The fair values and effective interest rates of all other items have been calculated by discounting future cash flows by reference to the market yield curve at the balance sheet date The fair value of cash is not materially different from book value. The amounts shown above take into account the interest rate swaps used to manage the interest rate exposure. The fair value net liability of the interest rate swap was million (2012: m). The weighted average interest rate of the financial liabilities is 6.4% (2012: 5.6%), with weighted average fixed period of 19 years (2012: 20). The main risk arising from the group s financial instruments is interest rate risk. Interest rate risk The group borrows at both fixed and floating rates of interest and uses interest rate swaps to manage the exposure to interest fluctuations on the floating rate portion of borrowings. The group s policy is to keep 100% of its borrowings at fixed rates of interest to mitigate the interest rate risk. At the period end 100% of borrowings were fixed after taking account of interest rate swaps. Hedging The group s policy is to hedge exposure to interest rate risk. Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is recognised. The net expected loss on financial instruments used for hedging to be recognised in the profit and loss account in the following year is 30.8m (2012: loss of 28.2m). The actual loss recognised in the profit and loss account during the year was 29.8m (2012: 29.3m). 18. Deferred taxation The deferred tax included in the balance sheet is as follows: Group Accelerated capital allowances Deferred tax liability The movement in the deferred taxation provision during the period was: Provision brought forward Profit and loss account movement arising during the period (6.5) (1.8) Tax credit in respect of rate change (1.2) (2.5) Deferred tax liability Allotted and issued share capital Allotted, called up and fully paid No No Ordinary shares of 1 each On incorporation of the company 1 ordinary share of 1 was issued at par. The directors of the company have no rights to subscribe for additional shares in the company. 17

19 20. Reserves Group Share Profit and Total capital loss m At 1 May (49.3) (49.3) Loss after tax - (20.4) (20.4) At 29 April (69.7) (69.7) Loss after tax - (13.5) (13.5) At 28 April (83.2) (83.2) Company Share Profit and Total capital loss At 1 May , ,842 Profit after tax At 29 April , ,842 Profit after tax At 28 April , , Other financial commitments The annual commitments under non-cancellable operating leases are set out below: Leases expiring After more than five years Related party transactions The company has taken advantage of the exemption permitted by FRS8 from the requirement to disclose transactions with the ultimate parent company, Greene King plc, or with any fellow subsidiaries within the group. 23. Contingent liabilities In a prior year the group received 0.9m VAT refund from HMRC, the potential repayment of the amounts received represents a contingent liability to the group. 24. Ultimate parent company Greene King plc, a company incorporated in Great Britain and registered in England and Wales is the company s immediate and ultimate parent company. Consolidated financial statements of Greene King plc for the 52 week period ended 28 April 2013 are available from Westgate Brewery, Bury St Edmunds, Suffolk, IP33 1QT. 18