punch taverns plc annual report and financial … review 06 operating review 08 ... corporate...

Punch Taverns plc Annual Report and Financial Statements 2014

Punch Taverns is a leading pub company with around 3,800 leased pubs in the UK.

Our aim is to be the UK’s best leased pub company.

Strategic reportHighlights 01Executive Chairman’s strategic review 02Financial review 06Operating review 08Corporate social responsibility 10Our approach to managing risks and uncertainties 13Our key risks and uncertainties 14

GovernanceBoard of Directors 16Directors’ report 17Corporate governance statement 20Audit and risk committee report 25Directors’ remuneration report 28Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements 39

Financial statementsConsolidated income statement 40 Consolidated statement of comprehensive income 41 Consolidated balance sheet 42Consolidated statement of changes in equity 43Consolidated cash flow statement 44Company balance sheet 45Company statement of changes in equity 46Company income statement 46Company cash flow statement 47Notes to the financial statements 48Independent auditor’s report to the members of Punch Taverns plc only 87Financial glossary 90Company information 92

Investment case

Balance sheet restructured > Net debt reduced by £576m> Largely freehold pub estate plus Matthew Clark

investment valued at £675m in excess of net debt> Long-term debt finance: •Noshort-termbankdebt •Notermrepaymentsuntil2021attheearliest

Highly cash generative business > High quality core estate of c.2,900 pubs positioned

to support sustainable long term growth: •5consecutivequartersofnetincomegrowth •1.3%netincomegrowthin2014> Further proceeds from sale of non-core estate

and selective gold-brick disposals

Path to further debt reduction > Deleveraging from free cash flow further strengthens

the balance sheet > £200m debt reduction target over three years> Opportunity to refinance junior debt from 2016 at par

Strategy – To drive sustainable growth in the core estate

Strategy Opportunity ProgressRecruit the best partners >Maintainafullyletestate(93%-95%

substantive)> Attract the best partners

>Finishedyearat95%let

Invest in the pubs >63%ofthecoreestatehasnothadameaningful investment in the last five years

> £52m capital investment in the financial year

Develop and support our partners

> Industry leading training and support > First full year for New Business Development team delivering double digit sales growth

> Record level of partner training

The business

Punch Taverns plc is a leading leased and tenanted pub company with a portfolio of 2,925 core pubs across the UK. Punch also has a non-core estate of 884 pubs which are expected to be largely disposed of over the next five years.

We are a business made up of over 3,800 small businesses. Our goal is to help our partners (the enterprising individuals who run our pubs) build better businesses through working with them on a local and national basis. In our core estate we aim to make each pub the best of its type in its marketplace. In our non-core estate we are maximising short term returns ahead of disposal.

The business model offers our partners a flexible split on their pub rental and the beer they purchase from us.

A clear path to capital accretion and value creation

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Underlying financial performance1 – in line with guidance• EBITDAof£205m(2013:£216m)

• Profitbeforetaxof£69m(including£30mofprofitsattributabletobondpurchasesinH1)(2013:£49m;noprofitsattributabletobondpurchases)

Operational highlights • Deliveringthebusinessplanwithsteady

progressinallareasofthebusiness

Core estate (2,925 pubs): • Like-for-likenetincome2up1.3%,with

growthforfiveconsecutivequarters

• Newpartnerapplicationsup20% on the prior year

• £43mofinvestmentspendinthecoreestateatanaverageofc.£100,000 perpub

• FirstfullyearoftheNewBusinessDevelopmentteam,deliveringdoubledigit sales growth

Non-core estate (884 pubs) and disposal programme: • 116pubstransferredtothecoreestate

from the start of the financial year

• Disposalprogrammeontrackwiththedisposalof285pubs(including65fromthecoreestate),realisingnetproceedsof£111m,atamultipleof19timesEBITDA

Capital restructuring • Capitalrestructuringsuccessfully

completedon8October2014deliveringa£0.6bnreduction intotalnetdebt

• Robustbalancesheetnowinplace:ProformanetdebttoEBITDAratioreducedtoc.7.7times;nobankdebt,longtermamortisingbondswith no term repayments until 2021 at the earliest

• Highlycashgenerativebusinesswith£200mofnetdeleveragingtargetedoverthenextthreeyears

Highlights

KPIs1

1 Beforenon-underlyingitems.2 Netincomerepresentsrevenuelesscostofdrinksales(grossprofit);growthratesarequotedona52weekversus52weekbasis

toexcludethebenefitofanextraweektradinginFY2014.3 Including£30mofprofitsattributabletobondpurchasesin2014(2013and2012:noprofitsattributabletobondpurchases).4 Nominalvalueofnetdebt,excludingswapmark-to-marketvalue.5 On8October2014PunchannouncedsuccessfulcompletionofrestructuringproposalsforthePunchAandPunchBsecuritisations.

SeeNote33:Postbalancesheetevent.

post restructuring5

EBITDA1 £m Profitbeforetax3 £m Netdebt4 £m

0

50

100

150

200

250

238216 205

2012 2013 20140.0000

9.0625

18.1250

27.1875

36.2500

45.3125

54.3750

63.4375

72.5000

64

49

69

2012 2013 20140

440

880

1320

1760

2200

2,1262,004 1,918

2012 2013 2014 8 Oct 2014

1,508


Executive Chairman’s strategic review

MarketoverviewandstrategyPunchisaleadingleasedandtenantedpubcompanyintheUnitedKingdom.At23August2014,Punchowned3,809pubs,96%ofwhichareheldonafreeholdorlongleaseholdbasis. Inaddition,Punchhasa50%shareholdingintheMatthewClarkbusiness,theleadingindependentdrinkswholesaleranddistributorintheUKon-trade.

Punch’saimistobetheUK’sbestleasedandtenantedpubbusinesswithafocusonmakingeachofitscorepubsthebestofitstypeinitsmarketplace.

Our marketPunchoperatesintheUKpubindustry,whichitselfispartof thewiderdrinking-outandeating-outmarketthatalsoincludesrestaurants,socialclubs,nightclubsandfastfoodoutlets.TheUKpubindustrycurrentlyconsistsofc.47,000licensedpublichouses,andgoingtopubscontinuestobeoneofthemostpopularleisureactivitiesintheUK.

TheUKpubindustryfacesanumberofchallengesduetochangesindemographics,legislation,consumerbehaviour andthewidereconomicclimate.Ourmarketremainsamajorcontributortothelocalandregionaleconomy,andwebelievethatthereareexcitingopportunitiesavailable.

Wearecommittedtoastrategicfocusonpubswiththepotentialtoanticipateandmeetlocaldemand.Weareinvestinginupgradingpubstoprovideahigherqualityexperiencewithanextended,targetedfoodandentertainmentoffer,andweofferavastrangeofsupporttoourpartnerstogivethemthebestpossibleopportunitytosucceedinthischallengingmarket.

Our business modelWeoperatealeasedpubbusinessmodelwherebythepubsthatweownareleasedouttoourpartners,independentbusinessmenandwomen,whorunourpubs.

Theleasesthatourpartnerstake,offeraflexiblesplitbetweenrentandtieddrinkmargin.Thereisaslightlyhigherriskforthepartneriftheyoptforahigherrentandhigherdrinksdiscount(asopposedtolowerrentandlowerdrinksdiscount),buttheycouldbenefitfromlowerbeerprices,furtherrewardingvolumeoutperformance.

Thebusinessmodelissimpleandadaptablewithnosingle puboranysinglepartneraccountingformorethan1%oftheGroup’soperatingprofit.Eachpartnerisabletoadaptquickly tolocalmarketconditionswithoutthebureaucracyof acentraliseddecision-makingprocess.

Thetiedleasedpubmodelhasbeeninoperationformanyyearsandoffersalowcostopportunityforprospectivepartnerstotakeonandruntheirownpub.Weandourpartnershave amutualinterestinmakingeachpubsuccessfulasourprofitsareultimatelylinked.PunchremainscommittedtoasustainablefutureforBritishpubsandtheroletheyplayincommunitiesacross the UK.

StephenBillinghamExecutive Chairman

Punch Taverns plc Annual Report and Financial Statements 2014 03

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Our strategyGiventhechangingmarketdynamics,Punch’sstrategyistofocusonitscoreestate,whichrepresentsahigherquality,well-locatedportfolioof2,925pubs(asat23August2014)whichissuitablypositionedtoadapttochangingmarketconditionsandsupportsustainablelongtermgrowthfor Punchandourpartners.

Thecoreestateaimstodrivesustainablegrowthbymakingeachpubthebestofitstypeinitsmarketplace.Thefocusisonrecruitingthebestpartners,investmenttooptimisesales,andtheprovisionoffieldsupporttoourpartners.

Thestrategyforthenon-coreestate(whichcomprised884pubsasat23August2014)istomaximiseshort-termreturnspriortodisposal.Thesepubsarepredominantlysmall,wetledandhaveamuchloweraveragenetincomeperpub.Giventhelimitedscopeforinvestment,thesepubsaremorelikelytobeimpactedbythelongtermdeclineindrinkingoutandasaresultareexpectedintimetogeneratemorevaluethroughdisposalthanretention.Approximately1,300non-corepubshavebeendisposedofsincethedivisionwascreatedinMarch2011.

Aroundhalfofthenon-coreestateisletonsubstantiveagreementsandallnon-corepubscontinuetohaveaccesstothesameoperationalsupportinfrastructureasourcorepubs, toassistindrivingoperationalperformanceuntilthedecisionis made to dispose of them.

Capital structureThecapitalrestructuringwhichwascompletedon8October2014(postthe2014yearend)reducednetdebtbysome £0.6bn(includingthemark-to-marketoninterestrateswaps),creatingwhatwebelievetobearobustandsustainablelongtermdebtstructurefortheGroup.

TheGroupisfinancedsolelybylongtermsecuritiseddebtandhasnoshort-termbankborrowings.Proformanetdebtoncompletionofthecapitalrestructuringof£1,508missecuredagainstalargelyfreeholdpubestatewhichwasindependentlyvaluedduringAugust2014at£2,133m(afteradjustingfor £32mofpubdisposalsbetweenAugust2014andcompletion oftherefinancing).

Therestructureddebthasamateriallylowercontractualamortisationrequirementwithscheduledcontractualamortisationofjust£205moverthenextfiveyearsfollowingtherefinancing,withnotermrepaymentsuntil2021.

TheproformanetdebttoEBITDAratiooncompletionoftherefinancingwasc.7.7times,basedonLTMEBITDAfortheclosingpubestate.TheGroupgeneratessignificantlevelsofcashflow(havinggenerated£216mofcashflowbeforedebtfinancinginthe2014financialyear)andthestronglevelofcashgenerationisexpectedtoleadtofurtherdeleveraginginthecomingyears,with£200mofnetdeleveragingtargetedoverthenextthreeyears.

BusinessreviewWehavedeliveredunderlyingfinancialperformancefortheyearinlinewithourpreviouslyannouncedguidance.Thecoreestatehasnowbeeningrowthforfiveconsecutivequartersandwehavedelivereda3%improvementinaverageprofitperpubacrosstheentirepubestate.Ourresultshavebeendrivenby theincreasedlevelofoperationalsupportthatweareprovidingto our partners.

Inthe53weeksended23August2014,PunchgeneratedEBITDAof£205m(excludingnon-underlyingitems):

Core Non-core Central Punch

Averagepubnumbers 2,960 993 – 3,953Revenue £380m £68m – £448mNetincome £223m £38m – £261mEBITDA £206m £29m £(31)m £205m

Core estate – continued growthThecoreestateaccountedfor88%ofPunchoutletEBITDAwithanaveragenetincomeperpubofapproximately£74,000p.a.Tradinghasbeeninlinewithourexpectationswithlike-for-likenetincomeshowinggoodgrowthat1.3%fortheyear,havingnowrecordedlike-for-likegrowthforfiveconsecutivequarters.

Ourstrategyforthecoreestateinordertodrivesustainablegrowthisbasedaroundrecruitment,investmentandpartnersupportanddevelopment:

(i)Recruitingthebestpartners:Attheheartofmakingeach pubthebestofitstypeinitsmarketplaceisrecruitingthebestpartnertorunthatpub.Wehaveadedicatedrecruitmentteamensuringthatthebestpossiblepartnersarerecruitedfromthehighlevelofapplicationsthatwereceive.Weofferinnovativepartnershipagreementstoourpartnerswithflexiblerentanddrinkdiscountlevelsthatsupportthepubbusinesssothatourpartnerscanachievetheirindividualbusinessgoals.

Thepercentageofcorepubsonsubstantiveleaseandtenancyagreementsattheendoftheyearwas95%andhasbeenwithinourtargetrangeofbetween93%and95%throughouttheyear.Theleasedpubmodeloffersanattractivelowcostmethodofentryintothepubtradeforentrepreneursandwehaveseenyetanotherincreaseinapplicantnumbers,up20%onthepreviousyear.


Executive Chairman’s strategic review continued

(ii)Pubinvestment:Wearecommittedtodevelopinganestateofwellinvested,highqualitypubsrepresentingthebestleasedpubsintheUK.Underlyingthiscommitment,weexpecttoinvestinapproximately400corepubsperyear.Wehaveanexperiencedfooddevelopmentteam,supportedbydedicatedmarketingandtrainingteams,whichalongsidethetargetedcapitalinvestmentwilldrivefurtherfoodpenetrationinthecoreestateoverthecomingyears.

Wehavespent£43minvestinginthecoreestateatanaverageofapproximately£100,000perpub,transformingthecustomerofferinginthesepubs.Ofthepubsinthecoreestate,37%havenowbenefittedfromameaningfulinvestmentofover£40,000inthelastfiveyears.Ourtargetisfor65%ofthecoreestate tohavemeaningfulinvestmentsandwehaveastrongpipelineofinvestments,takingadvantageofthisopportunity.

(iii)Partnersupportanddevelopment: We want to offer the bestlevelofpartnersupportinthesectorandhaveinvestedheavilyinthisareainthelastyeartosupportthedevelopmentofourpartnersindevelopingtheirbusinesses.

2014wasthefirstfullyearwiththeNewBusinessDevelopmentteaminplace.Thisspecialistteamwasputinplacetosupport allnewpartnerswiththeirinitialinvestment,thelaunchof theirpubandthroughouttheirfirstsixmonthsoftrading.Thissupportfocusesontheretailoffer,aimstodrivesales,improvepartnerprofitabilityandreducethelevelofnewpartnerfailures.ThefirstyearhasbeenencouragingwithaveragevolumesfortheNewBusinessDevelopmentteambeingaheadoftarget andindouble-digitgrowth.

Wearealsoincreasingthelevelsofspecialisttrainingthatweprovidetodevelopourpartnersandtheirbusinesses.Inthe lastfinancialyearweprovidedarecordleveloftraining,reaching3,600partnersandmembersoftheirstaff.

We ensure that new partners are set up for success with our FoundationWeek–acomprehensivetrainingprogrammewhichprovidesalltheskillsneededtorunasuccessfulpubbusinessincludingthesupporttheywillreceivefromPunch.Thereafterpartnershaveaccesstoavarietyofworkshopsande-learningmaterialscoveringareassuchasmarketingandmerchandising,financeandsocialmedia.Theseworkshopsarealsoavailable toexistingpartnersallofwhicharefreeofcharge.

Theproductoffers,marketingandpromotionalsupportweprovidetoourpartnersthroughthePunchBuyingClubcontinuetoproveextremelypopular,with64%ofourpartnersattendingourindustryleadingroadshowsin2014,anincreaseof19%indemandforourdesignandprintserviceandrecordparticipationinsalesactivitiessuchastheUK’slargestdartscompetition with1,136pubstakingpartandthenationalquizcompetitionwith1,166pubstakingpart,bothincreasesonthepreviousyear.PunchalsoreceivednationalrecognitionfromtheBritishBeer&PubAssociationbeingawardedthe“BeerChampion of2014”aheadofstrongbrewercompetition.

Non-core estate – disposal programme on trackThenon-coreestatecomprised884pubsattheyearendwith abookvalueof£227mandaccountedfor12%ofPunchoutletEBITDA.Thesepubshaveamuchloweraveragenetincomeperpubatapproximately£37,000p.a.,arepredominantlysmall,withlowturnoverandarewet-led.

(i)Maximisingshort-termreturns:Whilenon-corepubsremaininourportfolio,wearecommittedtodrivingoperatingperformanceandmaximisingtheprofitsfromtheseoutlets.Atthestartofthe2014financialyear,116pubswerereturnedtothecoreestate,followingimprovementinperformance.Thesepubshadanaveragenetincomeperpubofc.£59,000p.a..

Pubsremaininginthenon-coreestatearemanagedunderthethreecategoriesof(i)protect(403pubs),(ii)sell-later(270pubs)and(iii)sell-now(211pubs).Wehavesuccessfullystabilisedperformanceintheyearforthepubswithintheprotectcategory,deliveringalike-for-likenetincomegrowthof0.4%,withanaverageprofitperpubof£38,000p.a..

Asat23August2014211pubsinthesell-nowcategorywerebeingactivelymarketedfordisposal.Thesepubshaveanaverageprofitperpubof£11,000p.a.andabookvalue of£38m.

(ii)Maximisingvalueondisposal:Duringtheyearwesold 285pubs(including65pubsfromthecoreestatefor£58m),togetherwithotherassetsforproceedsof£111m,aheadofbookvalue,atadisposalmultipleof19timesEBITDA.

Expectationsforthenextfinancialyeararefordisposalproceedstobenotlessthan£60m,followingastrongstarttothe newyearwith£43mofproceedsrealisedinthefirsttenweeks,£10mofwhichwasduetothedelayedcompletionofthesaleofapackageoffivecoreLondonpubsannouncedon3June2014.Thedisposalprogrammefortheremainderofthenextfinancialyear(whichisexpectedtobeatsignificantlyreducedratesofdisposal)willbefocusedonthedisposaloftailendpubsinthenon-coreestate.

Matthew Clark joint ventureThisbusiness(our50%jointventurewithAccolade)hassignificantscaleinitsmarketplaceastheleadingindependentdrinkswholesaleranddistributortotheUKon-trade,with grossannualrevenueof£810mandapproximately20,000customers.MatthewClarkhasastrongandexperiencedmanagement team with plans for continued growth from whichtheGroupexpectstobenefit.

Thebusinessperformedstronglyintheyeardelivering£19mofEBITDA,witha£6.2mpost-taxcontributiontoPunch,upfrom£4.8mintheprioryear.Punchreceivedadividendof£5.0m intheperiodfromMatthewClarkwhichrepresentedthefirstdividendsinceApril2011.

PunchequityaccountsfortheMatthewClarkjointventure, andtheinvestmentisheldontheGroupbalancesheetasat theyearendat£50.5m.


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RegulatoryPunchremainscommittedtoasustainablefutureforBritishpubsandtheroletheyplayincommunitiesacrosstheUK.Ultimately,wewillonlybesuccessfulifourpubsandourpartnerssucceed.Weareproudthatwehaveledthewayinimprovingthesupportforpubtenantsacrossthesectorandbelievethatthelevelofsupporttheyreceiveextendssignificantlybeyondthatenjoyedbyothercommercialtenants.

Giventhesignificantprogressthathasbeenmadeinpublandlord/tenantrelationsinrecentyears,wedonotbelieve thattheintroductionofaGovernmentbackedStatutoryCodeofPracticeandAdjudicatorisnecessary.However,weremaincommittedtoworkingwiththeDepartmentofBusinessInnovationandSkillstodeliveraworkableStatutoryCode.

ManagementFollowingthesuccessfulcompletionofthecapitalrestructuring,wehavecommencedthesearchforanewChiefExecutiveOfficer(CEO)andhopetobeinapositiontoannouncetheappointmentinearly2015.IwillremainasExecutiveChairmanuntiltheCEOtakesoffice,atwhichpointIwillreturntotheroleofNon-ExecutiveChairman.


Financial review

SteveDandoFinance Director

Resultsforthe53weeksended 23August2014:

Underlying results2014

£m2013

£m

Revenue 448.1 457.6Operating costs (249.5) (246.8)Shareofpost-taxprofitfromjointventure 6.2 4.8EBITDA 204.8 215.6Depreciationandamortisation (11.0) (12.3)Netfinancecosts (125.2) (154.7)Profit before taxation 68.6 48.6Tax (8.2) (10.8)Net earnings 60.4 37.8BasicEPS 181.5p 113.7p

Thefinancialyearcomprisedthe53weeksto23August2014withresultspositivelyimpactedbyanextraweek’stradingrelativetolastyear.Underlyingprofitperformanceisinlinewithmanagementexpectations.Resultshavebenefitedfromtheongoinginvestmentprogrammebuthavealsobeenimpactedbytheongoingdisposalofnon-corepubsandselecteddisposalsofcorepubs.

August2013resultshavebeenrestatedtoreflectamendmentsto accounting policies for pensions following the amendment toIAS19‘EmployeeBenefits’.Fulldetailsoftheimpactofthis(whichhadtheeffectofreducing2013profitaftertaxby£0.3m)canbeseenintheaccountingnote1tothefinancialstatements.

Underlying results 2014 2013 change

Averagepubnumbers 3,953 4,361 (9)%Yearendpubnumbers 3,809 4,096 (7)%

Revenue £m £m

Drink 326.2 329.4Rent 110.9 117.4Machineincome&other 11.0 10.8Total revenue 448.1 457.6 (2)%Gross marginDrink 140.0 137.7Rent 110.3 116.9Machineincome&other 10.8 10.8Total gross margin 261.1 265.4 (2)%Pubandcentralcosts andjointventureincome (56.3) (49.8)EBITDA 204.8 215.6 (5)%

Revenuedeclinedby2%to£448m,witha5%declineinunderlyingEBITDAwhichreflectstheincreasedinvestmentinpubrepairspendandincreasedcostsintheprovisionofpartnertrainingandfieldresource.Thiscomparestoareductionintheaverageestatesizeof9%.Thepositiveimpactoftheadditionalweek’strading,whichadded£4mtothefullyearEBITDA,reflectsaslightlybetterdeclineinEBITDAcomparedtothedeclineofestatesize.


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Netunderlyingfinancingcostsdecreasedby19%to£125mprimarilyduetoprofitsonloannoteredemptionsof£30m. TheweightedaverageinterestratefortheGroup’sborrowings,includingtheimpactofinterestrateswaps,atthebalancesheetdatewas7.2%.Underlyingprofitbeforetaxwas£69m,anincreaseof41%onlastyear.

TaxationThetaxchargebeforenon-underlyingitemsof£8mequatestoaneffectivetaxrate(excludingjointventure)of13%,reflectingtheloannoteredemptionprofitswhichwerenon-taxable.Wereceived£3mofcorporationtaxrepaymentsintheperiodfromconsortiumreliefclaims.Theavailabilityofsizeablecapitalallowancepoolsamountingtoc.£230m(generatedfromourinvestmentprogrammeincommunitypubs)attheperiodend isexpectedtoresultinnocorporationtaxpaymentsbeingdueforthe2014/15year.

Non-underlying itemsAnumberofnon-underlyingitems,thevastmajorityofwhicharenon-cash,wererecognisedduringtheperiod,resultingin anetnon-underlyinglossaftertaxof£236m.Theprincipalitemsaresetoutbelow:• £27mchargeforcapitalrestructuringcosts;• £51mchargeforassetwrite-downs,followingareviewin

theyearofthenetrealisablevalueofthenon-currentassetsclassifiedasheldforsale,andtheremainingassetsinthewidernon-coreestate;

• £4mgoodwillchargeondisposalofcorepubs;• £26mchargeforthemark-to-marketmovementinvalue

ofinterestrateswaps;• £214mchargerelatingtotherecyclingofthehedgereserve

relatingtothePunchAinterestrateswapsfollowingitsreclassificationasineffectiveduringtheperiod,dueto theannouncementofthecapitalrestructuringproposals;

• £11mprofitondisposalofproperties;and• £3mcreditonthereleaseofprovisionforshareschemes.

Thetaxeffectofalloftheseitems,togetherwiththeresolutionofprioryeartaxmatters,gaverisetoataxcreditof£73m.

DividendsTheBoardisnotproposingtorecommendafinaldividendforthe year.

Capital structure and cash flowOnthe8October2014(postthe2014yearend)theGroupannounced the successful completion of the capital restructuring which was launched on 18 August 2014.

Thenominalvalueofnetdebtfollowingtherestructuringdecreasedby£576msincetheyearend(includingthemark-to-marketoninterestrateswapsonexchangednotes) to£1,508m.Grosssecuritiseddebtof£1,604mfollowingtherestructuringhasaninitialeffectiveinterestrateof7.7%.

Netborrowingscomprise:8October

2014£m

23August 2014

£m

Cash1 (96.3) (315.6)Securitiseddebtdue<1year 45.1 74.9Securitiseddebtdue>1year 1,559.2 2,158.8SwapMtMonexchangednotes – 165.6Nominal value of net debt 1,508.0 2,083.7

1 Afterallowanceforpaymentofallrestructuringcostsat8October2014.

TheGrouphasbeencashgenerativeacrosstheyearattheoperationallevel.Thisstrongcashgenerationof£158mhasenabledtheGrouptocontinuetoinvestinthePunchestatewith£52mofcapitalinvestment.Cashflowhasbeenfurtherenhancedby£111mofcashgeneratedfromdisposals,resultinginacashinflowbeforedebtfinancingof£216m.

Share capitalAsat23August2014Punch’sissuedsharecapitalamounted to665.8mshares.Subsequenttotheyearend,Punchissued3,771.2mnewordinaryshareson8October2014inconsiderationforthedebtreductiondeliveredunderthetermsofthecapitalrestructuring,increasingtheissuedsharecapitalonthatdateto4,437.0mordinaryshares.

On13October2014Puncheffectedashareconsolidationonthebasisof1consolidatedordinaryshareforevery20existingordinary shares. Following the share consolidation the issued sharecapitalonthatdateamountedto221.9mordinaryshares.

Forthepurposeofcalculatingtheearningspersharemeasure,theordinarysharesoutstandingduringtheyear(andtheprioryear)hasbeenadjustedforthe1for20shareconsolidation. Thebasicweightedaveragenumberofsharesappliedtotheearningspersharecalculationistherefore33.3mforcurrent year(prioryear:33.3m).

Current trading and guidance for 2014/15Inthefirst10weeksofthenewfinancialyearto1November2014coreestatelike-for-likenetincomewasup0.8%.Ourdisposalprogrammehasstartedstronglywith£43mofproceedsfromthedisposalof102pubs,atamultipleof23timesEBITDAand£14mabovebookvalue.

Lookingaheadtotherestoftheyear,whileweexpecttheUKconsumerenvironmenttoremainchallenginginthenear-term,wehaveaclearoperationalplanandareinastrongposition todeliverunderlyingEBITDAforthefullyearofbetween £193mand£200m.


Operating reviewOur process

Before

After

TheHonorOakSouth London

Recruiting the best partnersPartnerJustinWallaceofJustPubsandDiningLimitedhadspent 17yearsworkingforothersinthehospitalityindustrybeforedecidinghewantedabusinessofhisown: “IhadmixedexperiencesofthevarioustenantedandleasedestatecompaniesbutworkingwithPunchtodevelopourpartnershipfor a‘historyofBritishfood’basedgastropubhasbeenveryeasy. Iwasnewtothissideofthe industrybutPunch’sNewBusinessDevelopmentteamhavebeen onhandeverystepoftheway.”

Pub investment JustPubsandDiningLimitedandPunchjointlyinvested£600,000 inthetransformationalrefurbishmentofcommunitypremiumsite, TheHonorOak.Theoldground floorfunctionroomhasbeenconvertedintoagallerykitchenandrestaurantwiththefirstfloorofficespaceopenedupintoaprivate diningroom.Alarge‘WhiskyRoom’hasbeencreatedaswellasanenclosed front terrace and rear deckedgardenspacewithasmallchildren’splayarea.

Partner support and development“Punch’sCateringDevelopmentteamassistedwithmykitchendesignandhelpedmemakesignificantcostsavingswhiletheNewBusinessDevelopmentteamhelpedusdevelopthecraft,caskandworldbeerrangewhichIbelieverivalsanycomparablebusinessinoursector”,saysJustin.

“Therangeoftrainingcourseswasalso first class and the assistance fromthetrainingteaminvaluable”,explainsJustin.“Punchwaseven abletoprovideaprofessionaltrainertodelivermymessagetoour newstaffpre-opening.”Headds“MyexperienceofasubstantialinvestmentandnewopeningwithPunchhasbeeneasy.Ihavefeltreallysupported and pleased to say our businessistradingwellaboveallofourexpectations.Atruetestament toPunch’sindividualstyleandrealcommitmenttome,andmynewbusiness.”

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Recruiting the best partners

Pub investment

Partner support and development


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Champs Sports BarandGrillWashington

Working with the best partners PartnerLindseyArmstronghasbeena consistently strong operator since shetookonanagreementin2006andhasalwayshadagoodworkingrelationshipwithPunch.ThePunchteamworkedcloselywithherfromthe outset to transform the formerly knownChevysBar–anightclubexperiencingwetvolumedecline andinneedofinvestment–intotheChampsSportsBarandGrillconcept.

Pub investmentPunchhadsuccessfullyrolledout twoChampsschemespreviously sohadatemplateforsuccess.The£500,000transformationofthiscommunitymainstreamsiteinvolved

moderninteriorandexteriorredecoration throughout including sportsmemorabiliaandtheinstallationof35screensshowing a range of sports. A new American themed menu was also introduced andanewdrinksofferincluding caskalesandcocktails.

Theteampartneredwithalocal radiostationforacreativelaunchtoattract new customers and promote the new all day food offering.

Partner support and developmentPunch’strainingteamsupportedpartnerLindseywithatwodayrecruitmenteventtobringonboard a new team and then put in place a full staff induction and training programme to ensure consistently highlevelsofcustomerserviceacrossall elements of the operation.

TheFusilierLeamington Spa

Recruiting the best partnersDonnaCharmaineRosewaspreviouslythepubmanagerattheFusilierinLeamingtonSpabutherhigh standards in a challenging locationandexceptionallywarmandwelcomingapproachleadthePunchteam to encourage and support her intakingonaleaseagreementinJune2014.

Pub investmentTheFusilierisacommunitylocal andPunchhasintroduceditsMightyLocalconcept,aretailformatwherepartnersareguidedonkeyretaildisciplines and standards such as havingsomeformofentertainmentorsportingeventoneveryday oftheweek.Punchinvestedover£250,000tocompletelyrefurbish thepubwithfreshcontemporarydécorandintroducedbrandnewfacilities,includingeightscreensshowinglivesports.

PartnerDonnasaid“Theinvestmenthasgivenusthenewfacilitiestocaterforfamilies,introduceanewfoodofferandbringthepubbacktothecommunity as the home of sport.”

PositivefeedbackwasalsoreceivedfromthelocalMPwhowasinvitedalongtothepub’slaunchevent.

Partner support and developmentHavingnotrunabusinessbefore,DonnabenefittedfromtheclosesupportprovidedbythePunchFoundationTenancyAgreement, a fully supported way for entrepreneurswithlimitedpubexperiencetoenterthetrade. Donnareceivedcomprehensivetraining and access to a range of experts,includinganaccountantfrom day one.

Before

After

Before

After


Corporate social responsibility

PunchTavernsiscommittedtoensuringthatthesocialimpactofourbusiness isapositiveone.Thekeyprinciples we adhere to are promoting responsibleretailingofalcoholby ourpartners,supportinggoodcauses and supporting local communities.

Social impactResponsible retailingWehaveadedicatedRiskManagementteaminplacetoensurethatourpubsoperateresponsiblyandtothehigheststandards.Westrivetoensureourpubsarenotoperatingirresponsibledrinkspromotions,orservingunderagedrinkersorthoseundertheinfluenceofalcohol.ThePunchBuyingClubhasasectiononriskmanagementprovidingpartnerswithawiderange ofdownloadableeducationaltools,adviceandpubfriendlymaterials.

WearePortmanGroupsignatoriesandactivesupporters ofDrinkaware,anindependentcharitywhoworktoreducealcohol misuse and harm in the UK. We promote the messages oftheDrinkawarecampaigninanumberofways:• theyhadapresenceatourpartnerroadshows;• wesupporttheirlocalcampaigns;• carrythelogoonallmaterialsproducedbyourcreative

team(suchasmenus);• linktotheirsitefromourBuyingClubwebsite;and• rananalcoholawarenesscampaigninternallyforour

employees. Responsibleretailingformsakeypartofourpartnertrainingandinthelastfinancialyearnearly500partnersand theirteammemberscompletedourresponsibleretailingtraining.Weprovideourpartnerswithaclearguideon currentlegislationandbestpractice.

Good causesThePunchCommunityPromiseisaninitiativebasedondonatingtimeandmoneytolocalcauses.Wehavemadedonations to a wide range of causes from local scout and footballclubstofundingforSightSupportDerbyshire,whichenabledvisuallyimpairedyoungsterstobenefitfromoneto one swimming lessons.

Wealsomakeanannualdonationof£20,000toLicensedTradeSupportandCare,partoftheLicensedTradeCharity,whichprovidessupporttopeopleincrisiswhoareworkingin,orretiredfrom,thelicenseddrinkstrade.Ourdonationenables the charity to run a national Volunteer Visitor programme.

Local communitiesAs well as our commitment to local charities we also encourage allourpartnerstoconsidertheroletheirpubbusinesscanplayinthelocalcommunity.Manypubs,especiallythoseinruralareas,havediversifiedtoprovideawidercommunityservicethroughservicessuchashostingthepostofficeorlocalshop,providingwebaccessandmeetingspacestolocalclubsandsocieties.Localpubsarealsoperfectlypositionedtocoordinatefundraisingeventsforlocalsportsteamsandcommunitygroups.

Wewelcome‘PubistheHub’,initiatedbyHRHthePrinceofWalesin2001,whichencouragesruralpubowners,licenseesandlocalcommunitiestoworktogethertosupport,retainandlocateserviceswithinthepub.Wesupport‘PubistheHub’throughannualdonationsof£25,000andseniormembers ofourteamactivelyparticipateinitsRegionalAdvisoryHubs.

Industry engagementPunchcontinuestoplayafullroleinthepubsectorthroughmembershipoftheBritishBeerPubAssociation(BBPA)andsupportfortheBritishInstituteofInnkeeping(BII),theAssociationofLicensedMultipleRetailers(ALMR)andtheFederationofLicensedVictuallersAssociations(FLVA).

Pubsplayavitalroleintheeconomyprovidinglocalemploymentparticularlyforyoungpeople.Wehaveenabled our partners and their staff to reap the rewards of Government-fundedApprenticeshipschemes.Todate, 180partnershavebenefitedwith42partnerstakingonnewapprentices,eachqualifyingfor£1,500offunding.

WealsocontinuetoengagewithGovernmentontheneed forinvestmentinthesectorasakeypartofthewidergrowthagenda for the UK economy.


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ValuesOur‘PROUD’valuesareembeddedinourcultureandapproach:

Partner first

Weputthepartnerfirstinallwedo,offeringthemthebestpossiblesupportandhighestlevelofservicetohelpthem runsuccessfulpubbusinesses.

Restless dissatisfaction

Weconstantlystrivetodothebestjobwecanand challengepositivelywherewethinkitcouldbedonebetter.Wecontinuallyseekopportunitiesforimprovements.

One team

WeallworktogetherasoneteamwithasharedaimtobetheUK’sbestleasedpubcompany.

Understand the part you play

WeareallclearonthekeyprioritiesofthebusinessandunderstandhowweasindividualscanhelpPunchandourpartnerstobethebestthattheycanbe.

Do it once, do it right

Wealwaysstrivetodothingsrightthefirsttimeandinthebestpossibleway.Wedeliveronourpromisesanddowhatwe say we are going to do.

CommunicationWearecommittedtoregular,twowaycommunicationsbetweentheBoardandemployees,withstrongstructuresandchannelsinplaceforconsultationandfeedback.OurleadershipteamdeliverregularBusinessBriefstoemployeesontheGroup’sperformance.WealsohaveaquarterlyInformationConsultationGroup(ICG),madeupofrepresentativesfromallourteams. TheICGisatwowayfeedbackprocessfortheGroupandouremployees.

Anti-bribery and corruptionTherisksofbribery,corruption,fraudortheftexistineverycompany.PunchTavernsiscommittedtoconductingits businesswiththehighestdegreeofintegrity.Thiscommitmentincludesazerotoleranceapproachtowardsallformsofbribery,corruption,fraudandtheftandprocedureswithintheGrouphavebeendesignedtominimisetheserisks.

TheGrouphasimplementedbusinessconductguidelinesdescribingthestandardsofbehaviourexpectedfromthoseworkingfortheGroup,viaanEthicsandCodeofConductPolicy.Itsaimistopromotehonestandethicalconductthroughoutourbusiness,anditappliestoallemployees.

TheEthicsandCodeofConductPolicyrequires:• compliancewithallapplicablerulesandregulationsthatapply

totheGroupanditsofficersincludingtheBriberyAct2010;• theethicalhandlingofactualorapparentconflictsofinterest

betweeninternalandexternal,personalandprofessionalrelationships;and

• thatanyhospitalityfromsuppliersmustbeapproved,with a presumption against its acceptance.

TheGrouptakesazerotoleranceapproachtobriberyand hasdevelopedanextensiveAnti-BriberyPolicy.TheEthicsand CodeofConductPolicyrequiresemployeestocomplywiththeAnti-BriberyPolicy.Engaginginfraud,briberyorcorruptionisunlawfulandanyemployee,directororofficerfoundtohavebreachedtheCodeofEthicswillbeliabletodisciplinaryactionwhichmayresultindismissalorotherserioussanctions.Therehavebeennorecordedinstancesofbriberyorcorruptionduringtheperiodunderreview.

PartnersWhileourpartnersarenotdirectlyemployedbyPunchTaverns,werecognisethatourexpertiseasanemployerisinvaluable insupportingtheirbusinesses.Wethereforehelpthemtosetthehigheststandardswithintheirpubs,throughourpartnertrainingprogrammesandsupportservices.Thisincludeshelpingthemandtheirstafftoobtainqualificationsinfoodhygiene,healthandsafetyandotherskills.Withinthefirstfewdays oftakingontheirpubs,ourpartnersreceiveacomprehensive‘Safe,LegalandCompliant’packwhichhasbeenproducedtoensuretheyareclearonthevariouslegalrequirementsaffectingtheirbusiness,rangingfromgeneraladviceandguidancetotoptipsandtemplates,suchasfireassessmentsorhealthandsafetypoliciesthatcanbetailoredfortheirbusinesses.

WorkplacePunchTavernsiscommittedtobeingagreatplacetowork.Inordertoattractandretainthehighestcalibreteam,weoffercompetitiverewardsandhighqualitytraininganddevelopmentopportunities,aswellasstrongvaluesandpoliciesoninclusion,equalityandhealthandsafety.


Corporate social responsibility continued

EnvironmentalimpactsWithaportfolioof3,809pubsaswellasourBurtonhead officewerecognisethatthecarbonfootprintofourbusinessrepresentsamajorenvironmentalimpact.Wearetackling ourenvironmentalimpactsthroughcarbonmanagement, wastereductionandsustainableprocurement.

Carbon managementWeareabsolutelycommittedtoreducingourcarbonfootprint.AtourBurtonheadofficewerecycleawiderangeofitems and carefully monitor our energy usage to minimise wastage.

Weprovidepriorityparkingspacesformembersofourofficecarsharescheme,incentivisingthosethatcan,totravelto worktogether.

Wealsohavearegularprogrammeofinternalcommunicationdesignedtoencourageteammemberstothinkabouttheirenergyusageandremindingthemofourkeyaimtoreduce ourcarbonfootprint.

Effectivecarbonmanagementandtheimportanceofcorporatesocialresponsibility(CSR)alsoformpartoftheprofessionaltrainingourPartnershipDevelopmentManagersundertake.Theyinturnrelaythesemessagestoournetworkofpartners.Wealsoprovidedownloadablematerialsforpartnersoneffectivecarbonmanagementandwastereduction.

Waste reductionWehavemadechangestothewaywemanageourgeneralwaste and dramatically increased the amount we recycle at our Burtonheadoffice.Ultimatelyweareaimingtoreachapositionofvirtuallyzerogeneralwastewhereeverythingisrecycledandnothing goes to land fill.

We are also committed to helping our partners reduce theirwastewherepossible.WeworkcloselywithSITAUK– a recycling and resource management company who in turn workwithanumberofourpartners.SITAdeliversolutions to help their clients reduce the impact of their waste on the environmentthroughanetworkofrecycling,composting,energy-from-wasteandlandfillfacilities.

OurPunchBuyingClub,whichhasover3,000users,enablespartners to place their orders online which allows ordering ‘justintime’and‘justenough’thusavoidingunnecessary waste.OurBuyingClubpartnersalsobenefitfrom‘green’ online accounting.

Sustainable procurementWehaveanationwideteamofCateringDevelopmentManagerswhoworkcloselywithourpartnerstohelpthemintroduce andenhancetheirfoodoffers.Wearepassionateaboutlocalprovidenceand,whereappropriate,theteamwillencouragepartners to source their produce from local sources and reduce their food miles.

Greenhouse gas emissions statementAssessment parametersBaselineyear 2013-2014

Consolidation approach

Operationalcontrolboundary

Boundarysummary All facilities under operational control were included

Consistency with the financial statements

ThepubsincludedinProperty,PlantandEquipmentintheConsolidatedBalanceSheet are not under our operational control and are therefore not included in ouremissionstable.Thereare173leasedvehicleswhichareunderouroperationalcontrolandhavebeenincludedintheemissionstablebutdonotappearintheConsolidatedBalanceSheet

Emissionfactor data source

DEFRA

Assessment methodology

TheGreenhouseGasProtocoland ISO14064-1

Intensityratio Emissionsperfulltimeemployeeequivalent(FTE)

Greenhouse gas emission source (tCO2e) (tCO2e/FTE)

Scope 1 – direct emissionsFuelcombustion(fleetvehicles) 1,077 2.75

Scope 2 – indirect energyPurchasedelectricity 330 0.84

Statutory total 1,407 3.59 Group metrics 2014

FTE 392


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Our approach to managing risks and uncertainties

Punchhasaformalriskmanagementprocessinplacewhich isdesignedtoidentify,evaluateandmanagetherisksanduncertaintiestowhichitisexposed.

ManagementteamsfromacrosstheGroupcarryoutregularriskworkshopsandupdateourriskregister.Risksarehighlightedandthenassessedbasedontheprobabilityofthemoccurringandtheimpacttheymayhaveonthebusiness.AconsistentapproachforreportingrisksonariskmatrixensuresthatPunchisabletoprioritiseitsrisks.Mitigationplansareimplementedwherenecessarytoensurethatrisksaremanagedappropriately.TheBoardhasultimateresponsibilityfortheriskmanagementframeworkandformallyreviewsthematerialriskstotheGroupregularlyaswellasdiscussingchangingoremergingriskson anongoingbasis.TheBoardisresponsibleforensuringthatbusinessrisksareappropriatelymanagedbythemanagementteamandmonitorskeyriskperformancemeasuresona periodicbasis.

TheInternalAuditfunctionprovidesassurancetotheBoard onkeycontrolsandthemanagementofriskswithinPunch. TheAuditandRiskCommitteeannuallyreviewstheoveralleffectivenessoftheriskmanagementframework.External AuditprovidesfurtherassurancetotheBoardonkeycontrols viaacontrols-basedaudit.

Monitor andtrackprogress andkeyriskKPls

plcBoard ManagementDepartments RiskOwners

•Riskworkshops•Assessrisktolerance

andriskappetite•Updatetoriskregisters

Identifyand evaluaterisks

Implementmitigating

action plans

Test controls

Identifycontrols or mitigation

already in place

Risk management framework

Punchisexposedtoavarietyoffinancial,operational,economicandregulatoryrisksanduncertainties.Ourmainrisksandhowwemanagethemareshowninthefollowingpages;however,thisisnotanexhaustivelistofalloftheriskswhichPunchisexposedto.SomeoftherisksPunchfacesareexternalandthereforebeyondourcontrol.Somerisksmaynotbeknown atpresentormaybeconsideredtobecurrentlyimmaterial, butcoulddevelopintomaterialrisksinthefuture.Theriskmanagement processes are therefore designed to manage the riskswhichmayhaveamaterialimpactonourabilitytomeetourstrategicobjectives,ratherthanfullymitigateallrisks.

TheBoardisawarethattheserisksanduncertaintiesmayeithersingularlyorcollectivelyaffectPunch’srevenue,ourcosts,thevalueofourassets,ourreputationorourabilitytomeetourstrategicobjectivesanditisthereforecommittedtocontinuallyreviewingandimprovingtheriskmanagementframework.


Our key risks and uncertainties

Risksandtheirimpact Mitigating actions and controls

Mar

ket

and

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ks

Economic climate Punch’sbusinessoperationsaresensitivetoeconomicconditionsandtheeconomic downturn has affected consumer confidence and discretionary spendingacrossboththeretailandleisureindustries.Delaysintherecoveryofconsumers’disposableincomeorfurtherchallengessuchasfurtherdutyincreasescouldaffectconsumerexpenditure,ourpartners’businessesandPunch’srevenue.

Consumerperceptionandpublicattitudestowardstheconsumptionofalcoholmaycontinuetochange,andtheGroupmaybeunabletorespond tochangingconsumerhabitsandtastes.

• Wecarryoutregularreviewsoftheimpactofeconomicconditionson ourbudgetandstrategicplans.

• Weprovidedc.£0.5mperperiodtosupportourpartnersduringthedifficultconditionslastyearresultingin95%ofourcoreestatepubs nowbeingonasubstantiveagreement.

• WecontinuetomonitorthefinancialhealthofourpartnersviaaPartnerSupportTool,togetherwithanalysistohighlightpotentialfailures,andourPartnershipDevelopmentManagerscontinuetohelpgrowanddiversifyourpartners’businesses.

• Wearecommittedtodevelopinganestateofwellinvested,highqualitypubs.Wehaveanexperiencedfooddevelopmentteam,supportedbydedicatedmarketingandtrainingteams,whichalongsidethetargetedcapitalinvestmentwilldrivefurtherfoodpenetrationinthecoreestate overthecomingyears.

Property valuationsFluctuationsintheUKpropertymarketaswellasthecurrentuncertainmarketconditionscouldimpactthevalueofPunch’spropertyportfolio andourabilitytodisposeofpubsatanappropriatevalue.

• Wehaveconductedfullestatereviewsandregularlyupdatetheseto allowustoassessthefuturestrategyforpubswithintheestate.

• Thishasallowedustoinvestwhereappropriate;considerpossiblealternativeuse;ordisposeofthosepubswhichnolongerfitourfuturestrategy.

• Weinvested£52mondevelopingandimprovingthequalityofour estate during the year.

• Wecarryoutanannualreviewforanyindicatorsofimpairment.

Increasing costsIncreasesinanyofourkeysupplycostsduetoavailabilityofproducts, theeconomicclimateorinflationarypriceincreasesisanongoingrisk toourbusiness.

• We continue to negotiate supplier contracts to protect us against significantincreasesindrinkcosts.

• Carefulcostcontrolprocessesensurethatcostsarebudgeted,closelymonitoredandsubjecttoappropriateauthorisation.

Fin

anci

al

Liquidity and covenant riskPunch’scapitalstructureismadeupofdebt,issuedsharecapitalandreserves.

Punchisfinancedthroughtwowholebusinesssecuritisations,thePunchASecuritisationandthePunchBSecuritisation,aswellascashresourcesheldacross the Group.

Thekeyshort-termliquidityriskistherequirementtomeetscheduleddebtservicecostsastheyfalldue.

BothofPunch’ssecuritisationstructureshavefinancialcovenants.

• Cashflowforecastsareregularlyproducedtoassistmanagementinidentifyingliquidityrequirementsandarestress-testedforpossiblescenarios.

• Cashbalancesareinvestedinshort-termdepositssuchthattheyare readilyavailabletosettleshort-termliabilitiesorfundcapitaladditions.

• Covenantsarecloselymonitoredandstress-testedtoensureweareable togeneratesufficientreturnstoserviceourdebtandmeetourcovenantrequirements.

Interest rate riskPunchisexposedtointerestrateriskfromloannotesandborrowsatbothfixedandfloatingratesofinterest.

Theuseoffixedrateborrowingsandderivativefinancialinstruments exposesPunchtofairvalueinterestraterisksuchthatPunchwouldnotbenefitfromfallsininterestratesandwouldbeexposedtounplanned costs,suchasbreakagecosts,shoulddebtorderivativefinancialinstrumentsberestructuredorrepaidearly.

FurtherinformationonPunch’sfinancialinstrumentscanbefoundinnote22to the financial statements.

• Punchemploysderivativefinancialinstrumentssuchasinterestrateswapsto generate the desired interest rate profile.

• Punchhastakenoutderivativefinancialinstrumentssuchthat100% ofallexternaldebt(August2013:100%)waseitheratfixedratesorwasconvertedtofixedratesasaresultofswaparrangements,reducingourexposuretochangesininterestrates.

• Futuredebtrequirementsarecloselymonitoredtoassistmanagementinidentifying the appropriate strategy for interest rate hedge arrangements.

PensionsPunchhasalegacydefinedbenefitpensionschemewhichmustbefunded tomeetrequiredbenefitpayments.Thevalueandfundingofthescheme issubjecttoriskofchangesinlifeexpectancy,actualandexpectedpriceinflation,changesinbondyieldsandfuturesalaryincreases.Thedifference invaluebetweenschemeassetsandschemeliabilitiesmayvaryresulting inanincreaseddeficitbeingrecognisedonourbalancesheet.

• Thedefinedbenefitpensionschemeisclosedtonewmembers;andinsteadweoperatedefinedcontributionschemesforouremployees.

• We maintain a close relationship with the trustees of the pension scheme.

Internal financial control Punchiscommittedtomaintainingarobustinternalcontrolenvironment. Alackofcontrolcouldresultinfinancialfraudormaterialerrorinour financial statements.

• Robustinternalcontrolsoperateoverallkeyprocessesincludinggeneralcontrols such as segregation of duties and authorisation of contracts andexpenditure.

• TheInternalAuditfunctionreviewsandreportsonstrengthsandweaknessesintheinternalcontrolenvironment.

• ExternalAuditprovidesassuranceonkeycontrolsviaacontrols-basedaudit.


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Risksandtheirimpact Mitigating actions and controls

Op

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Change managementPunchisreliantonthesuccessfulimplementationofchangeprogrammes todeliverbothday-to-dayoperationalimprovementsandourstrategicplan.

• Formalprojectmanagementprocessesareusedacrossthebusiness toprepareprojectobjectivesandplanstoensureprogressistracked and results measured.

• Majorprojectsarewellcommunicatedacrossthebusinesssothat ajoinedupapproachismaintained.

Information systems, technology and securityPunchisreliantuponinformationsystemsandtechnologyformany aspectsofitsbusiness,whichcouldcausedamageiftheyweretofail for any length of time.

• Anincidentmanagementandbusinesscontinuityplanisinplacefor criticalbusinessprocessestoensurethebusinessisabletocontinueoperatingintheeventofamajorincident.

• Wehaveaccesstoanoff-sitedisasterrecoveryfacilityifaccesstooursupportcentre,oritssystems,isaffected.

Product qualityPunchisexposedtoproductqualityriskinrelationtodrinkwhichis supplied to us and sold on to our partners.

• Safety measures are in place to ensure that product integrity is maintained andthatdrinkproductsarefullytraceable.

• Ourincidentmanagementplanisdesignedsothatproductscanbe recalledquicklyifrequired.

Supply chain managementPunchplacesrelianceonourkeysuppliersanddistributorstoensurecontinuoussupplyofdrinkandotherproductsintoourpubs.Punchisexposedtotheriskofinterruptionorfailureofsuppliersordistributors,resultinginourproductsnotbeingdeliveredontimeortoourrequiredstandards.

• Punchhasreviewedthedisasterrecoveryandbusinesscontinuityplans ofourkeydistributors.

• Wemonitorproductqualitycloselyandconsideractionwhichmayberequiredtoprovidesubstituteproductsorsuppliersifrequired.

People risksFailuretorecruit,trainandretainsuccessfulpartners,andhighcalibreemployeesforoursupportteamsmayimpacttheabilitytodeliver ourstrategicplanandoperationalobjectives.

• Weprovideindustryleadinginductiontrainingandcoachingprogrammesfor our new partners.

• Weundertakesuccessionplanningatalllevelstoensureweattract andretainhighcalibrepeople.

• WecarryoutanannualEmployeeEngagementSurveyandregular listeninggroupstoobtaindirectfeedbackfromouremployees.

• Wehavearemunerationstrategytoensureourteamsarepaidfairly andcompetitively.

Reg

ula

tory

Health and safetyAhealthandsafetyaccidentorincidentcouldleadtoseriousillness, injuryorevenlossoflifetooneofourpartners,employeesorvisitors, orsignificantlyimpactPunch’sreputation.

• A health and safety management committee meets to consider all aspects ofhealthandsafetyacrossPunchandtoreporttotheBoardofDirectorson the status of health and safety.

• Wehaveformallydocumentedandbriefedhealthandsafetypolicies foroursupportcentreandfield-basedteamsandcarryoutannualriskassessmentsinkeyareas.

Changes in legislationPunchissubjecttomanydifferentareasofregulation,manyduetothehighlevelofcontroloverthesaleofalcohol.Increasingfocusinareassuchas therelationshipbetweenpubcompaniesandtheirtenants,bingedrinking,underagedrinking,andhealthimpactsoverrecentyearsalsomeansthat theGovernmentmayintroducefurtherregulationwhichmaysignificantlyaffectourbusiness.

• Punchworkscloselywithourpartnersandtherestoftheindustrytoaddressthekeyissuesfacingthepubsector.

• Weensurethatourtrainingcoversallaspectsoflicensingrequirements andhaveduediligenceinplacetoconfirmthatourpubsmeetrelevantlicensing legislation.

• PunchworkscloselywithlocalLicensingAuthorities,toensureindividualpublicensingrequirementsaremetandanyissuesarehighlightedassoonaspossible.

• Punch’sCodeofPracticeexceedstherequirementsofthePubIndustryFrameworkCode,withthe5theditionbeingaccreditedbytheBIIinJune2013.AnyamendmentstotheCodeofPracticewillbeinlinewiththe PubIndustryFrameworkCodeandwillnotfallbelowthosestandards. ThePunchCodeofPracticeclearlysetsoutthepromiseswemakeandexactlyhowweintendtohonourthemandwewillcontinuetowork withtheDepartmentofBusiness,InnovationandSkillstoimplementtheproposalsforthestatutorycodeandadjudicatorinordertoprovidewhat isbestforUKpubs.

Strategic report approvalTheStrategicreport,outlinedonpages1to15,incorporatestheExecutiveChairman’sstrategicreview,theFinancialreview, theCorporatesocialresponsibilityreportandOurkeyrisksanduncertainties.

ByorderoftheBoard

Ed BashforthCompany Secretary11November2014


StephenBillinghambecameExecutiveChairmanoftheCompanyinFebruary2013.StephenjoinedtheCompanyasNon-ExecutiveChairmaninSeptember2011.HewasFinanceDirectorofBritishEnergyGroupplcfrom2004to2009,whereheworkedondeliveringtheturnaroundandstrongperformanceofthebusiness,itsrelistingin2005,itsmoveuptotheFTSE100anditssaletoEDFin2009for£12.5bn.Priortothis,StephenwasGroupFinanceDirectorofWSAtkinsplcduringitsfinancialrecovery,aswellasGroupTreasurerofBICCplc(nowBalfourBeattyplc)andSevernTrentplc.StepheniscurrentlyaGovernmentappointedNon-ExecutiveDirectorandChairman oftheAuditCommitteeofUrencoLimited.

StephenBillinghamExecutive Chairman

JohnAllkinsjoinedtheBoardasanIndependentNon-ExecutiveDirectorinOctober2012.JohnisalsoaNon-ExecutiveDirectorofRenoldplc,FairpointGroupplcandVolexplc.Hehasbeen aNon-ExecutiveDirectorofanumberofpublicandprivatecompaniessince2007.JohnwaspreviouslyGroupFinanceDirectorofMyTravelGroupplcandCFOofEquantNV,prior towhichheheldthreedivisionalFinanceDirectorroleswithinBritishTelecom.JohnisaCharteredManagementAccountantwho did his graduate training at the Ford Motor Company and hasadegreeinBusinessStudies.

JohnAllkinsIndependent Non-Executive Director

SteveDandojoinedtheCompanyin2003asChiefAccountantandwaspromotedtoGroupFinancialControllerin2009andFinanceDirectorinJuly2011.DuringhistimewithPunch,StevehasplayedamajorroleinthedevelopmentoftheGroup,mostrecentlyactinginakeyroleindeliveringthecapitalrestructuring.StevepreviouslyheldanumberofseniorfinanceroleswithCourtauldsplc.SteveisamemberoftheInstituteofCharteredAccountantsofEngland&WalesandstartedhiscareeratPricewaterhouseCoopers.

SteveDandoFinance Director

IanDysonjoinedtheCompanyasCEOinSeptember2010.FollowingthedemergerofSpiritPubCompanyplcinAugust2011,IanwasappointedCEOofSpiritPubCompanyplcandbecameaNon-ExecutiveDirectoroftheCompany.IanwaspreviouslywithMarksandSpencerplcwherehewasGroupFinanceandOperationsDirectorandpriortothatGroupFinanceDirector.HehasheldrolesasFinanceDirectorofTheRankGroup plc and Financial Controller of Hilton Group plc. IanisalsoaNon-ExecutiveDirectorofBetfairplc,ASOSplc,IntercontinentalHotelsGroupplcandSSPGroupplc.

IanDysonNon-Executive Director

AngusPorteristheSeniorIndependentNon-ExecutiveDirectorof the Company and also Chairman of the Remuneration Committee,andwasappointedtothoserolesinApril2012. HeiscurrentlyCEOoftheProfessionalCricketers’Association,andaNon-ExecutiveDirectorofDirectWinesLimitedandTDC.Inhiscareertodate,AngushasbeenaNon-ExecutiveDirectorofMyTravelGroupplc,AllianceandLeicester,andThomasCook,andhasheldseniorExecutivepositionsatMars,BritishTelecom,AbbeyNationalandWPP.

AngusPorterSenior Independent Non-Executive Director

Board of Directors


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Directors’ report

TheDirectorspresenttheirAnnualReporttoshareholders on the affairs of the Group and the Company together with theauditedfinancialstatementsforthe53weeksended 23August2014.

CertaininformationrequiredfordisclosureinthisreportisprovidedinotherappropriatesectionsofthefullAnnualReportandFinancialStatements2014.TheseincludetheStrategicreport,theCorporategovernancestatement,theReportonDirectors’remunerationandtheGroupfinancialstatements andtheseareaccordinglyincorporatedintothisDirectors’ reportbyreference.

Results and dividendsTheresultsoftheGroupfortheperiodaresetoutintheConsolidated income statement on page 40. As announced on12November2014theDirectorswillnotbeproposingthepaymentofafinaldividend.

Principal activity and review of the businessTheGroup’smaintradingactivityistheoperationofpublichousesundertheleasedmodel.Thisinvolvesthegrantingofleasestotenantswhooperatethepubastheirownbusiness,payingrenttotheGroup,purchasingbeerandotherdrinks fromtheGroupandenteringintoprofit-sharingarrangementsfor income from leisure machines.

Areviewoftheperiod’sactivitiesandfuturedevelopments, andinformationontherisksanduncertaintiesfacedbytheGroup,areincludedintheStrategicreport.Themanagement ofbusinessriskissetoutintheCorporategovernancestatementandOurrisksanduncertaintiesonpages20and14ofthisreportandkeyperformanceindicators(KPIs)areshownon page1ofthisreport.TheGroup’sriskmanagementpoliciesin relation to the use of financial instruments are set out in note 22 to the Group financial statements.

Directors and their interestsThecurrentDirectorsoftheCompanyarelistedonpage16.

Noboardchangestookplaceduringtheperiod.

DetailsofDirectors’servicecontractsarecontainedwithin theReportonDirectors’remunerationonpages28to38.

Theprocedurefortheappointment,replacementandre-electionofDirectorsandtheroleoftheNomination andGovernanceCommitteeisdisclosedintheCorporategovernancestatementonpages20to24.

AttheCompany’sforthcomingAnnualGeneralMeeting(AGM),tobeheldon26January2015,allDirectorswillstandforre-election.ThebiographicaldetailsofeachDirectorcanbefoundonpage16ofthisreport.

ThebeneficialinterestsofDirectorsandtheirconnectedpersons,whoheldofficeat23August2014,inthesharecapitaloftheCompanyareshownbelow(notethaton13October2014theCompanyundertookaconsolidationofitssharecapitalona1for20basis).

At11November

2014Consolidated

Ordinaryshares

At23August

2014Ordinary

shares

At17 August

2013Ordinary

shares

StephenBillingham – – –SteveDando 41,836 836,724 699,035IanDyson 15,208 304,168 304,168AngusPorter – – –JohnAllkins – – –

AstatementoftheDirectors’remunerationandtheirinterests inthevariousshareincentiveschemesoftheCompanyissetoutintheReportonDirectors’remunerationonpages28to38.

NonotificationhasbeenreceivedofanychangeintheinterestsoftheDirectorsandtheirconnectedpersonsduringtheperiod23August2014to11November2014.

NoDirectorhadamaterialinterestinanysignificantcontractwiththeCompanyoranyofitssubsidiariesduringtheperiod.

Powers of the DirectorsSubjecttotheArticlesofAssociation,theCompaniesAct2006andanydirectionsgivenbytheCompanybyspecialresolution,thebusinessoftheCompanyismanagedbytheDirectorswhomayexerciseallthepowersoftheCompany.

Directors’ conflicts of interestsDuringtheperiod,theBoardhascontinuedtoreviewtheinterestsoftheDirectorsandtheirconnectedpersonsand hasauthorisedanyinterestswhichconflictedorpotentiallyconflictedwiththeinterestsoftheCompany.TheNominationandGovernanceCommitteewillcontinuetoconductperiodicreviewsofconflictauthorisationstodeterminewhethertheauthorisationgivenshouldcontinue,beaddedtoorberevokedbytheBoard.

Directors’ indemnityAsgovernedbytheCompaniesAct2006,theGroupmaintainsliabilityinsuranceforitsDirectorsandofficers.On26February2006asubsidiarycompanywithintheGroup,PunchTaverns(PGE)Limited,grantedindemnitycoverforthebenefitoftheGroup’sDirectorsandofficers.Theindemnityisuncappedinamount,inrelationtocertainlossesandliabilitieswhichtheymayincurtothirdpartiesinthecourseofactingasaDirector orofficeroftheGroup,andwasineffectduringthefinancialyearandcontinuestodate.NeithertheindemnitynorinsurancecoverprovidescoverintheeventthataDirectororofficerisprovedtohaveactedfraudulentlyordishonestly.


Substantial shareholdingsAsat11November2014,beingthelastpracticabledaypriortothedateofthisreport,theCompanyhasbeennotifiedofthefollowingsubstantialinterests(representing3%ormore)intheordinary shares of the Company.

ShareholderTotal

holdingOrdinary

shares

GlenviewCapitalManagement 22.17% 22.17%LuxorCapitalGroup 14.65% 14.65%AvenueCapitalManagement 12.04% 12.04%WarwickCapitalPartners 8.93% 8.93%Moore Capital Management 8.36% 8.36%OaktreeCapitalManagement 3.65% 3.65%Serengeti Asset Management 3.47% 3.47%

Political and charitable contributionsDuringtheperiodtheGroupmadecharitablecontributionsof£22,000(2013:£23,425)whichincluded£20,000oftradevolunteersponsorship.Nopoliticalcontributionsweremadeduringtheperiod(2013:nil).

TheCompanydoesnotmakepoliticaldonationsandhasnointentionofmakingdonationsnorincurringsuchexpenditure.Astherelevantlegislationisverybroadlydrafted,theCompanyasaprecautionarymeasure,includesaresolutionattheAGM topermittheCompanytomakepoliticaldonationsandincurpoliticalexpenditure.

Employees Thetotalnumberofemployeesattheendoftheperiodwas416.TheGrouprecognisesthevalueofitsemployeesandseekstocreateanenergetic,dynamicandresponsiveenvironment inwhichtowork.Itplacesconsiderableimportanceoncommunicationswithemployeeswhichtakeplaceatmanylevelsthroughtheorganisationonbothaformalandinformallevel.Weholdregularstaffbriefingsandevents,andevaluatestaffmotivationandmoralethroughanannualengagementsurvey.

EmployeesareencouragedtoownsharesintheCompanyandtheGroupoperatesanHMRCApprovedShareIncentivePlan(SIP)whichisopentoallemployeesoftheGroupincludingtheExecutiveDirectors.Currently,93eligibleemployeesparticipateintheSIPwhichprovidesemployeeswiththeopportunityofpurchasing£1,500ofsharesperannumoutofpre-taxsalary onamonthlybasis(partnershipshares)andtheCompany awardingadditionalsharesona1:1ratio(matchingshares).

Thepartnershipsharesareheldintrust,usinganEmployeeBenefitTrust(EBT),foraperiodofthreeyearsattheendofwhichthematchingshareswillnormallybereleasedprovidedthatthepartnershipshareshavebeenretainedandthattheemployeeisstillemployedbytheGroupatthistime.Duringthistimethesharesarebeneficiallyownedbyemployees,attractvotingrightsandareeligiblefordividends.Thevotingrightsinrespectofthesesharesareexercisedbythetrusteesonbehalf oftheemployees.IfafterthreeyearstheemployeeelectstokeepthematchingsharesintheEBTforafurthertwoyears (i.e.afteratotalperiodoffiveyears)thematchingsharesarereleasedtotheemployeefreeoftaxandNationalInsurance.

TheGroupiscommittedtopromotingdiversityacrosstheGroup.Tothisend,theGroupiscommittedtoprovidingequalopportunitiesinrecruitment,promotion,careerdevelopment,trainingandrewardtoallemployeeswithoutdiscrimination.TheGroupgivesfullconsiderationtoapplicationsforemploymentfromdisabledpersonswheretherequirementsofthejobcan beadequatelyfulfilledbysuchpersons.TheGroupcontinues tobesupportiveoftheemploymentofdisabledpersonsinaccordancewiththeirabilitiesandaptitudes,providedthattheycanbeemployedinasafeworkingenvironment.Whereexistingemployeesbecomedisabled,itistheGroup’spolicywhereverpracticabletoprovidecontinuingemploymentundernormalterms and conditions.

Corporate governanceTheBoardreviewsitsworkoncorporategovernanceintheCorporategovernancestatementonpages20to24.

The environmentTheGroupregardscompliancewithrelevantenvironmental lawsandtheadoptionofresponsiblestandardsasintegral toitsbusinessoperation.

Creditor payment policy and practiceItistheGroup’spolicythatpaymentstosuppliersaremadeinaccordancewiththosetermsandconditionsagreedbetweentheCompanyanditssuppliers,providedthatalltradingtermsandconditionshavebeencompliedwith.At23August2014 theCompanyhadnil(2013:nil)days’purchasesoutstanding in trade creditors.

Significant agreementsTheCompanyispartytocertainnon-materialagreements(includingtrustdeedsrelatingtotheCompany’semployee shareincentiveplans)thatcontainchangeofcontrolprovisionsintheeventofthetakeoveroftheCompanybuttheseare notconsideredtobesignificantonanindividualbasis.

Directors’ report continued


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Additional information for shareholdersAt23August2014,theCompany’sissuedsharecapitalcomprisedasingleclassofsharesknownasordinaryshares. On13October2014,aftertheyearend,theCompanyundertook aconsolidationofitssharecapitalona1for20basis.TheSharecapitalnoteonpage76ofthisreportcontainsfulldetailsofsharesallottedandprovidesanexplanationofthemovements insharecapital,duringtheperiod.582,423partnershipshares,inrespectoftheCompany’sSIP,totalling£278.75nominalvalue,werepurchasedbytheCompanyduringtheperiod.

TherearenorestrictionsontransferofsharesintheCompanyotherthan:(i)thosewhichmayfromtimetotimebeapplicableunderexistinglawsandregulations(forexampleundertheMarketAbuseDirective);(ii)pursuanttotheCompany’sdealingcodewherebypersonsdischargingmanagerialresponsibilities(andtheirconnectedpersons)oftheCompanyrequireapprovalfromtheCompanytodealintheCompany’ssecuritiesandareprohibitedfromdealingduringa‘closeperiod’and(iii)thosecontainedinanyrestrictionnotice(asdefinedintheArticles ofAssociation)issuedbytheCompany.

TherearenorestrictionsonthevotingrightsofthesharesintheCompany other than those contained in any restriction notice issuedbytheCompanyofwhichnoneiscurrentlyinissue.

TheCompanyisnotawareofanyagreementsbetweenshareholders that may result in restrictions on the transfer of securitiesoronvotingrights.Inaddition,therearenopeopleholding securities that carry special rights with regard to control of the Company.

TherearenoprovisionscontainedinanyoftheDirectors’oremployees’servicecontractswhichprovideforcompensationforlossofofficeoremploymentthatoccursbecauseofatakeoverbid.

General meetingsAtageneralmeetingoftheCompany’sshareholders,theCompany’sArticlesofAssociationmaybeamendedbyspecialresolution.AlsoatageneralmeetingoftheCompany’sshareholdersonashowofhandseverymemberwhoispresentinpersonandbyproxyentitledtovoteshallhaveonevote. Onapolleverymemberwhoispresentinpersonandbyproxyshallhaveonevoteforeveryshareofwhichheistheholder. Ashareholdermayappointmorethanoneproxyinrelationtotheirholdingsprovidedthateachproxydoesnotvoteinrelationtothesameshares.TheNoticeofMeetingsenttoshareholdersgivesfulldetailsofdeadlinesforexercisingvotingrightsandappointingaproxyorproxiestovoteinrelationtoresolutions tobeconsideredattheAGM.

Post balance sheet eventOn8October2014PunchTavernsplcannouncedthesuccessfulcompletionofrestructuringproposalsforthePunchAandPunchBsecuritisations.Furtherdetailsoftherestructuringcanbefoundinnote33thefinancialstatements.

Forward looking statementsThefinancialinformationintheStrategicreportshouldbe readinconjunctionwiththeauditedfinancialstatements.Readersarecautionedthatforward-lookingstatementsare notguaranteesoffutureperformanceandinvolverisksanduncertainties.Thediscussionofestimatedamountsgeneratedfromthesensitivityanalysisisforwardlookingandalsoinvolvesrisksanduncertainties.Cautionshouldbeexercisedinrelying on this analysis. Actual results may differ materially from those inforwardlookingstatements.

Directors’ statement as to disclosure of information to the auditorTheDirectorsconfirmthat,sofarastheyareaware,thereis norelevantauditinformationofwhichtheauditorisunawareandthateachDirectorhastakenallreasonablestepstomakethemselvesawareofanyrelevantauditinformationandtoestablishthattheauditorisawareofthatinformation.

AuditorAresolutiontoreappointKPMGLLPastheCompany’sauditorswillbeputtotheforthcomingAGM.

ByorderoftheBoardofDirectors

Ed BashforthCompany Secretary


Corporate governance statement

TheUKCorporateGovernanceCode(theCode)setsoutguidanceintheformofmainprinciplesandspecificprovisionsonhowcompaniesshouldbedirectedandcontrolledtofollowgoodgovernancepractice.TherulesoftheFinancialConductAuthority(theFCA)requirelistedcompaniesincorporatedintheUKtodisclose,inrelationtotheCode,howtheyhaveappliedthoseprinciplesandwhethertheyhavecompliedwiththeprovisionsthroughoutthefinancialyear.

Thisreport,togetherwiththeAuditandriskcommitteereport,theDirectors’reportandtheDirectors’remunerationreport,providesanoverviewofhowtheGrouphasappliedtheprinciplesoftheCodethroughouttheperiod.Itdetailsthe workandactivitiesundertakenbytheCompany’srelevantCommitteesandsetsoutthekeyfeaturesoftheCompany’sgovernancestructure.

TheBoardrecognisestheimportanceofgoodcorporategovernanceincreatingasustainable,successfulandprofitablebusinessanddetailsaresetoutinthisstatementoftheCompany’scorporategovernanceproceduresandapplication oftheprinciplesoftheCode.TheCompanyiscommittedtohighstandardsofcorporategovernanceanddemonstrates thisbybeingcompliantwithallthemainprovisionsofthe 2010and2012UKCorporateGovernanceCode,exceptwhereexplainedbelow.

Explanation for non-compliance with parts of the CodeB.2.1 Appointments to the BoardThroughouttheyeartheNominationandGovernanceCommittee was not constituted in accordance with the Code asthemajorityofmembersonthecommitteewerenotindependent.TheNominationandGovernanceCommittee ismadeupoftheChairmanoftheBoardandallthreeNon-ExecutiveDirectorswhichencouragesabroaderrangeofinputandtheBoarddoesnotconsiderthistobeanimpedimenttogoodgovernance.TheCompanyintendstoseektoappointanadditionalIndependentNon-ExecutiveDirectortotheboardinearly2015andtheappointedIndependentNon-ExecutiveDirectorwillbeinvitedtojointheNominationandGovernanceCommittee.

A.LeadershipThe Role of the Board

✓ The Company is headed by an effective Board which is collectively responsible for the long term success of the Company.

TheworkoftheBoardisstructuredaroundscheduledBoardmeetingswhicharelinkedtokeyeventsintheCompany’scorporatecalendar,withadditionalmeetingsandconferencecallsconvenedtoconsidermatterswhicharetime-criticalorwhichrequirefurtherdiscussion.

TogethertheBoardiscollectivelyresponsibletotheCompany’sshareholdersfortheGroup’sperformanceandsetsthestrategicaimsandobjectivesoftheGrouptofulfilthisresponsibility.

TheBoarddeterminestheCompany’skeypolicies,agreesonperformance criteria and delegates to senior management their planningandimplementation.Overall,theBoardensuresthat all necessary resources are in place in order for the Company tomeetitsobjectivesandthatalldecisionsaretakenobjectivelyand in the interest of the Company and its shareholders.

WhilsttheBoardhasdelegatedthenormaloperationalmanagementoftheCompanytotheExecutiveDirectorsandotherseniormanagement,itretainsascheduleofmatterswhicharedealtwithbytheBoard.Theseincludematterspertaining tostrategyandmanagement,structureandcapital,financialreportingandcontrols,significantcontracts,materialacquisitionsanddisposals,investmentsandcapitalprojects.

DuringtheperiodtheBoardheld18Boardmeetings,theattendanceofwhichwasasfollows:

DirectorBoard

meetings

Nominationand

Governance Committee

meetings

Audit andRisk

Committee meetings

Remuneration Committee

meetings

SteveDando 18/18 N/A N/A N/AStephen Billingham1 18/18 2/2 N/A 4/4AngusPorter2 17/18 2/2 6/6 4/4IanDyson3 18/18 2/2 5/6 4/4JohnAllkins4 18/18 2/2 6/6 4/4

1 StephenBillinghamisChairmanoftheNominationandGovernanceCommitteeandisamemberoftheRemunerationCommittee.

2AngusPorterisChairmanoftheRemunerationCommittee,andamember oftheAuditandRiskCommitteeandtheNominationandGovernanceCommittee.

3IanDysonisamemberoftheAuditandRiskCommittee,theNomination andGovernanceCommitteeandtheRemunerationCommittee.

4JohnAllkinsisChairmanoftheAuditandRiskCommitteeandisamember oftheRemunerationCommitteeandtheNominationandGovernanceCommittee.

Division of responsibilities

✓ There is a clear division of responsibilities at the head of the Company between the running of the Board and the executive responsibility for the running of the Company’s business. No one individual has unfettered powers of decision.

AsChairmanoftheBoard,StephenBillinghamisresponsiblefor:• theleadershipoftheBoard,ensuringitseffectivenessand

settingitsagenda;• ensuringthatadequatetimeisavailablefordiscussionofall

agendaitems,inparticularstrategicissues;• arrangingtheregularevaluationoftheperformanceofthe

Board,itsCommitteesandindividualDirectors;• promotingacultureofopennessanddebatebyfacilitating

theeffectivecontributionofNon-ExecutiveDirectorsandensuringconstructiverelationsbetweenExecutiveandNon-ExecutiveDirectors;

• ensuringthat,throughtheCompanySecretary,themembersoftheBoardreceiveclear,accurateandtimelyinformation;and

• ensuringeffectivecommunicationwithshareholders.


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TheExecutiveDirectorsandtheChiefOperatingOfficer, (whoisnotaBoardmember)areresponsiblefor:• developingstrategicoperatingplans;• preparingannualbudgetsandmediumtermprojections

for the Group and closely monitoring performance against plansandbudgets;and

• overseeingtheday-to-daymanagementoftheGroup.

TheCompanyiscurrentlyengagedinaprocesstoidentifyandthenappointanewCEO,whereuponStephenBillinghamwillreverttohisroleasNon-ExecutiveChairman.Announcement ofanappointmentisexpectedinearly2015.

Non-Executive Directors

✓ As part of their role as members of a unitary Board, Non-Executive Directors constructively challenge and help develop proposals on strategy.

InadditiontotheirattendanceatBoardandCommitteemeetings,theChairmanandtheNon-ExecutiveDirectorsmetwithouttheExecutiveDirectorstodiscusstheoperationalperformanceoftheGroupasawhole.Duringtheperiod,theNon-ExecutiveDirectorshavealsotakentheopportunitytomeetwithouttheChairmantoreviewhisperformanceinlinewiththeCompany’sobjectives.

TheCompanyactivelyencouragesitsNon-ExecutiveDirectorsto:• challengeconstructivelythestrategyproposedbythe

ExecutiveDirectors;• scrutinisetheperformanceofmanagementinmeetingagreed

goalsandobjectives;• monitorthereportingofperformance;• satisfythemselvesontheintegrityoffinancialinformation

andthatfinancialcontrolsandsystemsofriskmanagementarerobustanddefensible;and

• ensurethatappropriateremunerationandsuccessionplanningarrangementsareinplaceinrelationtotheExecutiveDirectorsandotherseniormembersofthemanagementteam.

Ifnotsatisfiedwiththeoutcome,theNon-ExecutiveDirectorscanrecordtheirconcernsintheCompany’sBoardminutes untilactionistakentoremedytheirconcern.

AsSeniorIndependentNon-ExecutiveDirector,AngusPorterisresponsiblefor:• supportingtheChairman;• leadingtheotherNon-ExecutiveDirectorsinthereview

oftheChairman;• monitoringthedivisionofresponsibilitiesbetweenthe

BoardandtheExecutiveDirectors;and• beingavailabletoshareholderstoexpressanyconcerns

whichtheExecutiveDirectorshavefailedtoresolvein a satisfactorily manner.

B.EffectivenessComposition of the Board

✓ The Board and its committees have the appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their respective duties and responsibilities effectively.

TheBoardincludesanappropriatecombinationofExecutive andNon-ExecutiveDirectorssothatnoindividualorsmall groupofindividualscandominatetheBoard’sdecision-making.Attheyearend,theBoardhadtwoExecutiveandthreeNon-ExecutiveDirectors.

ItisconsideredthattheBoardisofsufficientsizethatthebalanceofskillsandexperienceisappropriatetothesizeofthebusiness;howevertheCompanyintendstoseektoappointanadditionalIndependentNon-ExecutiveDirectortotheBoardfollowing completion of the financial restructuring.

WhendecidingchairmanshipandmembershipofcommitteestheBoardtakesintoaccountthatunduerelianceisnotplacedonparticularindividuals.

Nooneotherthanthecommitteechairmanandmembers isentitledtobepresentatameetingoftheNominationandGovernance,AuditandRiskorRemunerationCommittees, butothersmayattendattheinvitationofthecommittee.

TheBoardhasassessedtheindependenceofitsNon-ExecutiveDirectorsagainsttheprovisionsoftheCodeandhasconcludedthat,underthedefinitionsused,AngusPorterandJohnAllkinsareindependentincharacterandjudgementandhavenorelationshipsthatarelikelytoaffect,orcouldappeartoaffect,theirjudgementasDirectorsoftheCompany.IanDyson,duetohispreviousappointmentasChiefExecutiveOfficeroftheCompany until his resignation from the role at demerger of the SpiritBusinessfromthePunchGroup(‘demerger’)on1August2011,isnotconsideredtobeindependent.

Appointments to the Board

Work of the Nomination and Governance Committee

✓ There is a formal, rigorous and transparent procedure for the appointment of new Directors to the Board.

DuringtheperiodtheNominationandGovernanceCommitteeheldtwoscheduledmeetings,theattendanceofwhichisshown inthetableonpage20.

TheCommittee’stermsofreferencecanbefoundontheCompany’swebsitewww.punchtavernsplc.com.

Seniormanagement,includingtheCompanySecretary, maybeinvitedtoattendforpartorallofeachmeeting.


Corporate governance statement continued

ThemainpurposeoftheNominationandGovernanceCommitteeistoreviewthestructure,sizeandcomposition(includingtheskills,knowledgeandexperience)ofthe Board,leadtheprocessforBoardappointmentsandmakerecommendationstotheBoardwithregardtoanyadjustmentsthataredeemednecessary.Otherareasofresponsibilitiesinclude:• considerationoftheCompany’ssuccessionplanswhicharein

placeforBoardmembersandtheseniormanagementteam;• theidentification,evaluationandnominationofcandidates

tofillBoardvacancies;• reviewingDirectors’conflictsofinterestsandmaking

recommendationstotheBoardtoauthorisesuchconflictswhereapplicable;

• regularlyreviewingthemembershipoftheCompany’scommittees to ensure that undue reliance is not placed upon certainindividuals;and

• makingrecommendationsinrespectofBoardre-election byshareholders.

AllNon-ExecutiveDirectorsareappointedforspecifiedtermssubjecttore-electionandtostatutoryprovisionsrelatingto theremovalofaDirector.AnytermbeyondsixyearsforaNon-ExecutiveDirectorissubjecttoparticularlyrigorousreviewandshouldtakeintoaccounttheneedforprogressiverefreshingoftheBoard.

When considering new appointments the Company has a formal,rigorousandtransparentprocedurewhichisbasedonmeritandassessedobjectivecriteria.TheNominationandGovernanceCommitteeevaluatesthebalanceofskills,knowledgeandexperiencerequiredforthepositionandpreparesadescriptionoftheroleandcapabilitiesrequired.BeforeanyappointmentismadetheCommitteeobtainsdetailsofanyintereststhecandidatemayhavewhichconflictormayconflictwiththeinterestsoftheCompanyandconsiderswhether,despiteanysuchconflict,thereareneverthelessgrounds for recommending the candidate for appointment.

TheCompanyhasdecidedtovoluntarilyprovidedataontheproportionofwomenintheworkforce,inseniormanagementandontheBoard.Asatthedateofthisreportthepercentageofwomenemployedinthewholeorganisationwas42%, 10%oftheExecutiveCommitteemembersarefemaleand 24%ofseniormanagementpositionsareheldbywomen.

WhilsttherearecurrentlynowomenontheBoard,theNominationandGovernanceCommitteeensuresthatthere isanappropriatebalanceofmenandwomenonanyshortlistforBoardpositions.

Wepursuediversitythroughourcommitmenttoattractandretaintalentwithinourbusinesstoenableustoeffectivelysupport out partners.

Asanequalopportunitiesemployer,wewelcomeindividualsfromallbackgrounds.Allemployeesandapplicantswillbetreatedequally,regardlessoftheirage,disability,race,religionorbelief,gender,sexualorientation,maritalorcivilpartnershipstatus.Allappointmentdecisionsaremadepurelyonjobrelatedcriteriaandtheneedsofthebusiness.

WefullysupportthekeyprinciplesoftheDaviesReviewonWomenonBoardsandwillcontinuetofocusonrecruitingtalentedindividualstosupportthehighperformingculture thatwestrivetoachieveacrossourbusiness.

Commitment

✓ Directors allocate sufficient time to the Company to discharge their responsibilities effectively.

ThetermsandconditionsofappointmentofNon-ExecutiveDirectorsareavailableforinspectionattheCompany’sregisteredofficeduringnormalbusinesshoursandfrom15minutespriortoandduringtheCompany’sAnnual GeneralMeeting(AGM).Onappointment,theCompany’sNon-ExecutiveDirectorsareinformedoftheexpectedtimecommitmentthatwillberequiredandisrecommendedthatthey set aside enough time to demonstrate satisfactory time commitmenttotheirnewrole.DetailsofothercommitmentsandpotentialconflictsofinterestaredisclosedtotheNominationandGovernanceCommitteeandapprovedbeforeappointment,andanysubsequentchangesarenotifiedtotheBoard.

TheCompanywouldnotagreetotheExecutiveDirectors takingmorethanonenon-executivedirectorshipin,orthechairmanshipof,aFTSE100company.

Development

✓ All Directors should receive induction on joining the Board and should regularly update and refresh their skills and knowledge.

Onappointment,theChairmantogetherwiththeCompanySecretaryensuresthateachDirectorreceivesatailoredinductionprogrammethatincludes:• individualtimewiththeChairmanandothermembersof

theBoard;• meetingswiththeCompany’sexternaladvisors,substantial

shareholders,brokersandlawyers;• aninternalinductioncoursewhichintroducestheGroup,

itsdivisionsanditsemployees;• visitstotheGroup’spubsandthoseofcompetitors;and• externaltrainingcourses,ifrequired.

TheChairmanregularlyreviewsandagreeswitheachDirectortheirtraininganddevelopmentneeds.

Information and support

✓ The Board is provided with timely information in a form and of quality appropriate to enable it to discharge its duties.

TheChairman,togetherwiththeCompanySecretary,ensuresthattheBoardreceivesaccurate,timelyandclearinformation. InpreparationforeveryBoardmeeting,eachDirectorreceivesdocumentation including a detailed report on current trading andfullpapersonmatterswheretheBoardwillberequiredtomakeadecisionorgiveitsapproval.ThesemattersarediscussedduringtheBoardmeeting,withtheChiefOperatingOfficer andFinanceDirectorgivinganoverviewofhowtheGroupisperformingagainstexpectations.Inaddition,theBoardreceivespresentationsfromothermembersofseniormanagementandexternaladvisorstoaidtheirunderstandingwhenapplicable.


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AllDirectors,especiallyNon-ExecutiveDirectors,haveaccess toindependentprofessionaladviceattheCompany’sexpensewhereitisjudgednecessarytodischargetheirresponsibilities asDirectors.

AlltheDirectorshaveaccesstotheadviceandservicesoftheCompanySecretary.TheCompanySecretaryisresponsiblefor:• ensuringthatgoodinformationflowswithintheBoard,its

CommitteesandbetweentheNon-ExecutiveDirectorsandseniormanagement;

• facilitatinginductionandassistingwithprofessionaldevelopmentasrequired;

• advisingtheBoard,throughtheChairman,onallgovernancematters;

• providingassistanceandinformationoncorporateadministrationandlegalmatters;and

• ensuringthatBoardproceduresarefollowedandthatallapplicablelegislationandregulationsarecompliedwith.

TheappointmentandremovaloftheCompanySecretaryis amatterfortheBoard.

Evaluation

✓ The Board undertakes formal and rigorous annual evaluation of its own performance and that of its Committees and individual Directors.

TheBoardagreedthatitwouldbemoreeffectiveduringtheperiodtoundertakeaformalevaluationofitsownperformanceandthatofitsCommitteesandindividualDirectors.TheBoardconsideredthatthebestmeansofeffectivelyundertakingthisprocesswasacombinationofself-andpeer-assessment. ThisprocesswasledbytheChairmanexceptinrelationtohisownperformanceasChairman,whichwasledbytheSeniorIndependentNon-ExecutiveDirector.Theresultsofsuch reviewsarediscussedbytheBoardandanyappropriateactionplan agreed.

Re-election

✓ All Directors are submitted for annual re-election subject to continued satisfactory performance.

StephenBillingham,AngusPorter,IanDyson,JohnAllkinsandSteveDando,willstandforre-electionattheforthcomingAGM.ThebiographicaldetailsofeachDirectorcanbefoundon page16ofthisreport.

C.AccountabilityRisk management and internal control

✓ The Board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The Board maintains sound risk management and internal control systems.

TheAuditandRiskCommitteeregularlyreviewstheeffectivenessoftheCompany’ssystemofinternalcontrolstoensuretheeffectivenessofthosecontrolsinordertosafeguardshareholders’interestsandtheCompany’sassetsandguaranteethatrobustfinancialreportingprocessesareinplace,andreportstotheBoardthatithasdoneso.Suchsystems,

includingcontrolsforfinancial,operational,complianceandriskmanagementmatters,aredesignedtomanageratherthaneliminatetheriskoffailuretoachievetheCompany’sstrategicobjectives.However,itshouldberecognisedthatthesesystemscanonlyprovidereasonableandnotabsoluteassuranceagainstmaterial misstatement or loss.

ToenabletheCompanytoidentify,evaluateandmanagesignificantrisks,theCompanyhasanongoingprocess,intheformofariskmanagementframework(theCompany’sRiskRegister),whichisregularlyreviewedandupdatedbytheBoard.Theprocesseshavebeeninplaceforthewholeoftheperiodand up to the date of this report.

TheBoardhasestablished,withaviewtoprovidingeffectiveinternalcontrol,thefollowingkeyprocedures:• regularBoardmeetingstoconsiderthescheduleofmatters

reservedfortheBoard;• aformalannualreviewofcorporatestrategy,includingregular

reviewsofrisksfacingthebusiness;• aRiskRegisterwhichidentifiesthekeyrisksfacingthe

businessandhowtheserisksaremonitoredandmanagedonanongoingbasis;

• anestablishedorganisationalstructurewithclearlydefinedlinesofresponsibilityanddelegationofauthority;

• documentedandenforcedpoliciesandprocedures;• appointmentofstaffofthenecessarycalibretofulfiltheir

allottedresponsibilities;• comprehensivebudgetsandforecasts,approvedbythe

Board,reviewedandrevisedonaregularbasis,withperformancemonitoredagainstthemandexplanationsobtainedformaterialvariances;

• adetailedinvestmentapprovalprocess;• anInternalAuditfunctionwhichperformscontinuous

assessmentsofthequalityandeffectivenessofriskmanagementandtheinternalcontrolenvironment;

• anAuditandRiskCommitteeoftheBoard,comprisingNon-ExecutiveDirectors,whichconsiderssignificantfinancialcontrolmattersasappropriate;

• regularreportingbytheAuditandRiskCommitteetotheBoardofDirectorsregardinginternalaudit,controlupdatesand any changes to accounting policies and any accounting andlegaldevelopments;

• documentedfraud,anti-briberyandwhistleblowingpoliciesandprocedures,regularreviewofcurrentwhistleblowingregulations,andreportingofanywhistleblowingincidents totheAuditandRiskCommittee;

• aregularreviewoftreasurypoliciesandactivitiesbythe AuditandRiskCommittee;

• anestablishedprogrammeofmanagementandstaffdevelopmentandsuccessionplanning;and

• formalfinancialreportingprocessesforpreparationoftheconsolidated accounts.

Usingthismonitoringprocess,theAuditandRiskCommittee,onbehalfoftheBoard,hasconductedareviewoftheeffectivenessofthesystemofinternalcontrolduringtheperiodandhasconsideredanymaterialdevelopmentswhichhavetakenplacesincetheyearend.TheBoardissatisfiedthatthereviewdemonstratedthattheCompany’sinternalcontrolsystemiseffective.


Corporate governance statement continued

Financial and Business Reporting

✓ The Board presents a fair, balanced and understandable assessment of the Company’s position and prospects.

TheBoardshouldpresentafair,balancedandunderstandableassessmentoftheCompany’spositionandprospects;maintainsoundriskmanagementandinternalcontrolsystemsandmanageanappropriaterelationshipwiththeCompany’sauditor.

FurtherinformationabouthowtheseprincipleshavebeenappliedisdetailedintheAuditandriskcommitteereport onpages25to27.

D.Remuneration✓

The remuneration procedure is formal and transparent and levels of remuneration are appropriate.

TwoCommitteememberswereindependentNon-ExecutiveDirectors.ThetermsofreferenceoftheCommitteecanbefoundontheCompany’swebsitewww.punchtavernsplc.com.

DuringtheperiodtheRemunerationCommitteeheldfourscheduledcommitteemeetings,theattendanceofwhichisdetailedinthetableonpage20.

Seniormanagement,includingtheChairmanandCompanySecretarymaybeinvitedtoattendforpartorallofeachmeeting.

ThemainpurposeoftheRemunerationCommitteeisto:• recommendtotheBoardtheCompany’spolicyforthe

remunerationoftheChairman,ExecutiveDirectorsandothermembersofseniormanagement;

• takeintoaccountfactorswhichitdeemsnecessarywiththeobjectiveofensuringthatappropriateincentivesareprovidedto encourage enhanced performance and are rewarded in a fairandresponsiblemannerfortheirindividualcontributionstothesuccessoftheCompany;

• reviewthedesignofallshareincentiveplansforapprovalbytheBoardandshareholdersanddetermineeachyearwhetherawardswillbemadeandwhen;

• determinetheoverallamountofshareawardsandtheindividualawardlevelstoExecutiveDirectorsandseniormanagement;

• determinetargetsforanyperformance-relatedpayments;and• determinethepolicyforandscopeofthepension

arrangements,serviceagreements,terminationpayments andcompensationcommitmentsinrelationtoExecutiveDirectorsandseniormanagement.

ThelevelsofremunerationarereviewedforallExecutiveandNon-ExecutiveDirectorsbytheRemunerationCommitteeatleastannuallytoensurethattheyaresufficienttoattract, retainandmotivatetheDirectorsandarelinkedtoboththeCompany’sandtheirindividualperformance.Furtherdetails oftheworkoftheRemunerationCommitteeandthelevelsofremunerationpaidtotheBoardduringtheperiod,includingdetailsofhowremunerationlevelsaresetandexternalbenchmarkingprocedures,canbefoundintheReportonDirectors’remunerationwhichcanbefoundonpages28 to38.

E.Relationswithshareholders✓

There is a satisfactory dialogue with shareholders based on mutual understanding of objectives.

CommunicationswithshareholdersaregivenhighprioritytoensurethatabalancedandunderstandableassessmentoftheGroup’spositionandprospectsisgiven.TheCompanyaimstoprovideasmuchinformationasiscommerciallysensibletobothexistingandpotentialinvestors,recognisingthattransparency isthebestwaytodevelopunderstandingoftheCompany’sstrategy,performanceandgrowthpotential.

TheCompanyencouragestwo-waycommunicationwithbothitsinstitutionalandprivateshareholdersandaimstoprovide atimelyresponsetoallenquiries.DuringtheCompany’scapitalrestructuringprocesstherehasbeenextensivedialoguewithshareholdersandotherstakeholders.

✓ The AGM is used to communicate with shareholders and encourage participation.

TheBoardusestheAGMtocommunicatewithinstitutional andprivateshareholdersandwelcomestheirparticipation. TheChairmanaimstoensurethattheChairmanoftheAuditandRisk,RemunerationandNominationandGovernanceCommitteesandtheSeniorIndependentNon-ExecutiveDirectorattendtheAGMtoansweranyrelevantquestions.

Duringtheyear,ourExecutiveChairmanandFinancialDirectormetwithanumberofourleadingshareholderstodiscuss issues relating to the financial restructuring of the Company. TheSeniorIndependentDirectorandtheotherNon-ExecutiveDirectorsareavailabletoshareholderstodiscussanymatter they wish to raise.

TheNoticeoftheAGMandrelatedpapersaresenttoshareholdersatleast20workingdaysbeforethemeeting.Separateresolutionsoneachsubstantiallyseparateissueareproposed,andallvalidproxyappointmentsreceivedareproperlycounted and recorded.


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Audit and risk committee report

TosupporttheBoard’sdutyofstewardshiptheAudit andRiskCommitteeaimstoensurethatappropriatecorporategovernanceisappliedtotheGroup’ssystemsofinternal control,riskmanagement,andothercomplianceareas.TheCommittee monitors the integrity of financial information publishedexternally.WeensurethattheintegrityoftheFinancialStatementsissupportedbyaneffectiveexternalandinternalauditorganisation.TheCommitteemetsixtimes during the year.

Membership of the Audit and Risk CommitteeAs at the date of the 2014 Annual Report the Audit and RiskCommitteecomprisesofthreeNon-ExecutiveDirectors,JohnAllkins,AngusPorterandIanDyson,atleastoneofwhomhasrecentandrelevantfinancialexperience.IanDyson,due tohispreviousappointmentasChiefExecutiveOfficeroftheCompany until his resignation from the role at demerger of the SpiritPubCompanyon1August2011,isnotconsideredtobeindependent.JohnAllkinsandAngusPorterareindependent.ThesethreeNon-ExecutiveDirectorsformtheCommitteeas thisencouragesabroaderrangeofinputandtheBoarddoesnotconsiderthistobeanimpedimenttogoodgovernance.

Anymemberofseniormanagement,theinternalauditorandtheexternalauditormaybeinvitedtoattendforpartor allofeachmeeting.Theinternalandexternalauditorshaveunrestricted access to the Committee and its Chairman.

Roles and responsibilities of the Audit and Risk CommitteeTheCommitteeisresponsibleforensuringthattheinterests of shareholders are protected in relation to financial reporting andinternalcontrol;monitoringtheintegrityoftheCompany’sfinancialstatements;monitoringanyformalannouncementsrelatingtotheCompany’sfinancialperformance;andreviewingandchallengingasnecessarythejudgmentsandactionsofmanagement in relation to the financial statements.

TheBoardhasdelegatedtotheCommitteeresponsibilityforadvisingontheadequacyoftheprocessesrequiredtoconfirmthattheAnnualReport,whentakenasawhole,isfair,balancedandunderstandable,andincludestheinformationnecessary toallowshareholderstoassesstheGroup’sperformance,businessmodelandstrategy.

TheCommitteehasoversightoftherelationshipwiththeexternalauditorincludingtheappointmentand,whereappropriate,re-appointmentoftheexternalauditor;itsreportstotheCommittee;itsindependence,remuneration,termsofengagementandobjectivity,includingitsappropriatenesstoundertakenon-auditwork;andreviewsthenature,scope andeffectivenessoftheexternalaudit.Theauditplanandmateriality are discussed in detail.

TheCommitteealsohasoversightoftheinternalauditfunction,reviewstheinternalauditplan,ensuringthatmanagement hasfolloweduponissuesraisedandreviewstheeffectivenessofinternalaudit.TheCommitteereviewsandmonitorstheCompany’sriskmanagementandinternalcontrolsystems.

TheCommitteeisalsoresponsibleforreviewingarrangementsbywhichemployeesmay,inconfidence,raiseconcernsaboutpossibleimproprietiesinmattersoffinancialreportingor other matters.

TheCommitteeassiststheBoardinfulfillingtheCompany’sobligationsundertheCodeinparticularinrelationtolegalrequirements,accountingstandardsandtheListingRules.

TheCommitteereportstotheBoardonhowwehavedischargedourresponsibilities.Thefulltermsofreference oftheCommitteecanbefoundontheCompany’swebsitewww.punchtavernsplc.com.

Key activities of the Audit and Risk CommitteeAuditmattersarereviewedduringCommitteemeetingsthroughout the year at which detailed reports are presented forreview.DuringtheperiodtheCommitteeheldsixscheduledmeetingsinwhichwediscussed:• thesuitabilityoftheGroup’saccountingpoliciesandpractices;• halfyearandfullyearfinancialresults;• thescopeandcostoftheexternalaudit;• theexternalauditor’shalfyearandfullyearreports,which

werenoted,containednounadjustedauditdifferences;• variousfinancialstatementsissuedaspartoftheGroup’s

capitalrestructuring;• reappointmentandevaluationoftheperformanceofthe

externalauditor,includingrecommendationstotheBoard forapprovalbyshareholdersontheappointmentoftheCompany’sexternalauditorandapprovaloffeesandterms ofengagement;

• non-auditworkcarriedoutbytheexternalauditorandtrendsinthenon-auditfeesinaccordancewiththeCommittee’spolicy;

• thesafeguardingofauditindependence;• theco-ordinationoftheinternalandexternalauditfunctions;• reportsproducedbyinternalauditduringtheperiod;• theauditplanforFY2014regardingthelevelofachievement

andthescopeoftheinternalauditplanforFY2015;• theCompany’sRiskManagementframeworkforthe

identificationandcontrolofmajorrisksandtheannualassessmentofcontroleffectiveness;and

• reportsonallegationsmadeviatheGroup’swhistleblowingproceduresandtheeffectivenessofthoseprocedures.


Audit and risk committee report continued

Significant issues considered in relation to the financial statementsDuringtheperiodtheCommitteeconsideredthefollowingsignificantrisksandissuesinrelationtothefinancialstatements.

• Going concern:Refertopage48(Accountingpolicies)

TheGroupoperatesinamarketwithongoingcompetitivepressures.OperatingandcashflowforecastsareusedtodeterminethattheGrouphasadequatefundstobeabletooperatewithinitsagreedfacilitiesandcovenantsfortheforeseeablefuture.On8October2014theGroupannouncedthe successful completion of its capital restructuring which itisconsideredcreatesarobustandsustainablelongtermdebtstructurefortheGroup,withthefirsttermloanrepaymentsnotdueuntil2021attheearliest.HavingreviewedtheassumptionsusedaroundprospectivetradinglevelsincludedwithintheGroupforecastfollowingtherestructuring,theCommitteewasabletoconcludeupon theGroup’sabilitytocontinueasagoingconcern.

• Goodwill valuation:Refertopage49(Accountingpolicies)andpage64(note14:Impairmentlosses)

Goodwillrepresentsthesynergisticbenefitsofoperating alargepubestateandisallocatedsolelytothecoreestate.ThepubsthatmakeupthePunchTavernsestateoperatein achallengingmarketwithperceivedover-capacity,anactiveregulatorandchangingcustomerdemands.Acombination ofthesefactorsmayleadtoariskthatthebusinessdoes notmeetthegrowthprojectionsnecessarytosupportthecarryingvalueofgoodwill.TheCommitteereviewedtheGroup’simpairmentreviewofgoodwillwhichincludedtheunderlying assumptions and estimates used in determining thecashflowsusedincalculatingvalueinuseandthediscountrateapplied.TheCommitteeconcludedthereis no impairment of goodwill in the current period.

• Property valuation:Refertopage50(Accountingpolicies)andpage64(note14:Impairmentlosses)

ThepubsinthePunchTavernsestateoperateinachallengingmarketwithperceivedover-capacity,activeregulatory scrutinyandchangingcustomerdemandstowardsfood-ledperformanceratherthanbeingdrinks-focused.Additionally,giventheGroup’sstrategicplantosellthemajorityofthenon-coreestate,therecoverableamountoftheseassetsaresubjecttomovementsinlandandpropertyvalues.TheCommitteehasreviewedtheimpairmentworkcarriedout bytheGroupwithparticularattentionpaidtotheassetsheldforsaleelement.Thisreviewincludedunderstandingtheunderlying assumptions and estimates used in determining thevalueassociatedwithnon-currentassetsheldforsale,whetherthisbeagreedsalepriceorperceivedmarketvalue ofthesite.Property,plantandequipmentiscarriedatdepreciatedcost(ordeemedcost)lessimpairment.

Role of internal auditTheInternalAuditfunctionisindependentofbusinessoperationsandhasabusiness-widemandate.TheCommitteereviewstheeffectivenessoftheinternalauditfunctionanditsrelationshipwiththeexternalauditor,includinginternalauditresources,plansandperformance.

TheCommitteereviewedandapprovedtheInternalAuditTermsofReferencewhichsetsouttherole,objectives,reportinglinesandaccountability,authority,independenceandobjectivity of the internal audit function.

MembersoftheCommitteereceiveallissuedinternalauditreports,enablingthemtochallengethereports’contentandrelatedrecommendations.TheCommitteeapprovestheinternalaudit plan at the start of each financial year along with the effectivenessandworkloadoftheinternalauditfunctionandtheadequacyandeffectivenessofresourcesused,includingoutsourcedsubjectmatterexperts.

Effectiveness of external audit and non-audit feesTheCommitteereviewedtheexternalauditor’sperformanceand ongoing independence in a structured discussion facilitatedbytheCompanySecretary,takingintoaccountinputfrommanagementbothpresentatthemeetingandfrom aquestionnaire,considerationofresponsestoquestionsposedbytheCommitteetotheauditorandtheauditfindingsreportedtotheCommittee,theprogressachievedagainsttheagreedauditplan,andthecompetencewithwhichtheauditorhandledthekeyaccountingandauditjudgments.FollowingthisreviewtheCommitteeconcludedthattheauditor,KPMGLLP,remainedindependentandprovidedaservicethatwasrobustandfit for purpose.

Tomaintaintheindependenceoftheexternalauditor,the Boardhasdeterminedapolicy,consistentwiththeEthicalStandardsforAuditors,detailingwhatnon-auditservicescan beprovidedbytheCompany’sexternalauditor.Underthispolicy,workofaconsultancynatureisnotofferedtotheexternalauditorunlessthereareclearefficienciesandvalue-addedbenefitstotheCompany.ApprovalfromtheCommitteeisrequiredbeforenon-auditworkisundertaken bytheauditor.TheCommitteemonitorsthelevelofnon-auditfeespaidtotheexternalauditoranddetailsofthesefeescan befoundinnote3tothefinancialstatementsonpage58.

External auditor appointmentKPMGwereappointedasexternalauditorin2010following aformaltenderprocess.Therearenocontractualobligationswhichrestrictthechoiceofanexternalauditor.

Sincethistime,KPMGLLPhascompliedwiththepartnerrotationrequirementssetoutintheEthicalStandardsforAuditors.ArotationisnowdueandKPMGisintheprocessofsuggestinganewpartnerwhoisexpectedtotakeuptheresponsibilityofSeniorStatutoryAuditorforthenewfinancialyear.TheprospectivenewpartnerwillmeetwiththeCommitteeandmanagement.TheCommitteehasconsideredthenewguidance in relation to auditor rotation including the proposed transitionruleswhichwillbeconsideredwhenrecommendingtheappointmentoftheexternalauditorinfutureyears.


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KPMG’sappointmentwasreviewedduringtheyearandtheCommittee considers that the relationship with the auditor isappropriateandissatisfiedwiththeireffectivenessand has not considered it necessary at this moment in time to run atenderprocessfortheexternalauditwork.

WhistleblowingTheCompany’swhistleblowingpolicyenablesemployeestoreport,inconfidence,anyconcernsaboutpossibleimproprietiesinfinancialandothermatterswithoutfearofreprisal.Details ofthepolicyaresetoutintheCompany’sEthicsandCode ofConductPolicy.TheCommitteereceivesquarterlyreports onwhistleblowingincidentsandremainssatisfiedthattheproceduresinplacearesatisfactorytoenableindependentinvestigationandfollowupactionofallmattersreported. NomajorissueshavebeenreportedinFY2014.

AccountabilityTheAuditCommitteehasadvisedtheBoardthattheprocessestoensurethattheAnnualReporttakenasawholeisfair,balancedandunderstandableareadequate.Thepreparation ofthisdocumentiscoordinatedbytheFinanceandCompanySecretariatteamswithGroup-widesupportandinputfromotherareasofthebusiness.Comprehensivereviewsareundertakenatregularintervalsthroughouttheprocessbyseniormanagementandothercontributingandnon-contributingpersonnelwithintheGroup.ThetimetableforthepreparationoftheAnnualReportissuchthattheDirectorscanreadandquestionthecontentoftheAnnualReport.

SummaryTheCommitteeissatisfiedthatappropriatecorporategovernancecontinuestobeappliedtotheGroup’ssystemsofinternalcontrol,riskmanagementandothercomplianceareas.WewelcomefeedbackonthisreportandIwillbeavailable attheAGMtoanswerquestions.

John AllkinsChairman of the Audit Committee


Directors’ remuneration report

Dear ShareholderIampleasedtopresentthePunchTavernsplcRemunerationReportfortheyearended23August2014.

ThisisthefirstyearinwhichPunchTaverns’DirectorsRemunerationReportissplitintothreesections,namely:• ThisAnnual statement:summarisingandexplainingthe

majordecisionson,andanysubstantialchangesto,Directors’remunerationintheyear;

• Directors’ remuneration policy:whichsetsoutthebasis ofremunerationfortheGroup’sDirectorsfromthe2014AGMonwards;and

• Annual report on remuneration:whichsetsouttheremunerationearnedbytheGroup’sDirectorsintheyearended23August2014,togetherwithhowthepolicywill beimplemented.

TheDirectors’remunerationpolicywillbesubjecttoabindingshareholdervoteandtheAnnualreportonremunerationwill besubjecttoanadvisoryshareholdervoteattheforthcomingAGMon26January2015.Infuture,theDirectors’remunerationpolicywillbesubjecttoabindingvoteeverythreeyears(soonerifchangesaremadetothepolicy)andtheAnnualreport onremunerationwillbesubjecttoanannualadvisoryvote.

Performance and reward in 2013/142013/14wasanunusualyearfortheCompany,inthatweoperatedwithoutaChiefExecutivethroughout.StephenBillinghamservedasExecutiveChairman,arolehewillrelinquishonceanewChiefExecutiveisappointed.StephenBillinghamreceivedafixedfeeforhisservicesintheyear.

TheFinanceDirectorwaseligibletoreceiveawardsofvariableremunerationbasedonperformanceperiodswhichcompletedattheendofthe2013/14financialyear.ReflectingboththeCompany’sperformanceinrespectofthefinancialyearand thechallengingperformancetargetsset,theFinanceDirectorwasawardedanannualbonusof38%ofthemaximumpotentialand,reflectingtheCompany’slongertermshare priceperformance,theLongTermIncentivePlan(LTIP)awardsgrantedin2011didnotvestin2014.

The year aheadAs stated in the prospectus for the restructuring and firm placing,theCompanyintendstoengageinaprocesstoidentifyandthenappointaCEO,whereuponthecurrentExecutiveChairman,StephenBillingham,willreverttohisroleasNon-ExecutiveChairman.TheCompanybelievesthatinorder tofacilitatetherecruitmentofanindividualwithappropriateexperienceandexpertisetotheroleofCEO,itmaybenecessarytoofferaremunerationpackagethatincludesaone-offincentiveshareawardonjoininginexcessofthenormal200%ofbasesalarylimitundertheCompany’scurrentLTIP,togetherwith,insubsequentyears,annualawardsofuptothe200% ofbasesalarylimitundertheCompany’scurrentLTIP. Anysuchone-offawardwouldbemadewithintheapprovedremunerationpolicysetoutoverleafwithaviewtoaligningtheinterestsoftheindividualwiththoseofshareholdersthroughtheuseofperformanceconditionsbasedontotalshareholderreturnandthesamevestingperiodasusedforstandardawards.

Otherkeydecisionstakenfortheyearaheadinclude:• Theannualbonusmaximumwillbereducedfrom125%

ofsalaryto100%ofsalary;• TheFinanceDirector’ssalarywillbereviewedatthesame

timeasanyincreaseforthegeneralworkforce;• TheFinanceDirector’sLTIPshareawardwillbe100%ofsalary

inlinewiththepolicy;and• Followingthesuccessfulrefinancingandasdisclosedlastyear,

theFinanceDirectorwillalsoreceiveanadditionaloneoff LTIPawardoversharesworth100%ofsalaryin2014/15.

TheCommitteeunanimouslyrecommendsthatshareholdersvotetoapprovetheDirectors’remunerationpolicyandtheAnnual report on remuneration.

OnbehalfoftheBoard

Angus PorterChairman of the Remuneration Committee


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Directors’remunerationpolicy

Introduction and overviewTheCommittee’srewardpolicyisdesignedtohelpdrivebusinessperformanceandmaximiseshareholdervalue.Itcontinuestobebasedonthefollowingprinciples:• Remunerationshouldbeviewedholistically(‘TotalReward’),

takingaccountofallrewardelements;• TotalRewardshouldbesetatamarket-competitivelevelto

retainandrecruitpeopleoftherequiredtalentandexperience;• PackagesshouldbestructuredsothatmostofTotalReward

isdependentonperformance;• TotalRewardcostsshouldbemonitoredandcontrolled;and• TotalRewardshouldsupportthecreationofshareholdervalue.

TotalRewardlevelsarecomparedagainstbothlistedUKpub,restaurant and hospitality sector companies and those UK companiesofasimilarsizeandcomplexitytotheGroupinotherrelevantsectorsalthoughexternalmarketcomparisonsareusedwith appropriate caution.

Consideration of shareholder viewsTheCompanyencouragescontinuouscommunicationwith bothitsinstitutionalandprivateshareholders.Forexample,significant detail on our planned recruitment and remuneration arrangementsforanynewCEOwasdisclosedinourprospectus

atthetimeofourrecentrefinancingbeforethepublicationofthisremunerationpolicyreport.TheCommitteealsoconsidersshareholderfeedbackreceivedinrelationtotheAGMeachyearatameetingimmediatelyfollowingtheAGM.Thisfeedback,plusanyadditionalfeedbackreceivedduringanymeetingsfromtimetotime,isthenconsideredaspartoftheGroup’sannualreviewofremunerationpolicy.

TheRemunerationCommitteewillseektoengagedirectlywithmajorshareholdersandtheirrepresentativebodiesshouldanymaterialchangesbemadetotheremunerationpolicy.Details ofvotescastforandagainsttheresolutiontoapprovelast year’sremunerationreportandanymattersdiscussedwithshareholders during the year are set out in the Annual report on remuneration.

Consideration of employment conditions elsewhere in the GroupTheCommitteeconsidersthegeneralbasesalaryincreaseforthebroaderUKemployeepopulationwhendeterminingtheannualsalaryincreasesfortheExecutiveDirectors.EmployeeshavenotbeenconsultedinrespectofthedesignoftheGroup’sseniorexecutiveremunerationpolicy,althoughtheCommitteewillkeepthisunderreview.

Summary of remuneration policy

ElementHow component supports corporate strategy Operation Limits

Performancetargetsandrecoveryprovisions

Base salary Torecognisethemarketvalueoftheemployeeandthe role.

Normallyreviewedannually.

SalariesarebenchmarkedperiodicallyagainstbothlistedUKpub,restaurantandhospitalitysector companies and those UK companiesofasimilarsizeandcomplexitytotheGroupinotherrelevantsectors.

Thereisnoprescribedmaximumbasesalaryorannualsalaryincrease.

TheCommitteeisguidedbythegeneralincreaseforthebroaderemployeepopulationbutmay decide to award a lower increase forExecutiveDirectorsorindeed exceedthistorecognise,forexample,anincreaseinthescale,scopeorresponsibilityoftheroleand/ortotakeintoaccountrelevantmarketmovements.

Currentsalarylevelsaresetoutinthe Annual report on remuneration.

Notapplicable.

Pension Toprovideamarketcompetitivelevelofcontributiontopension.

Companycontributionnormally paidmonthlyintotheCompany’spensionscheme,apersonalpensionarrangement and/or as a cash supplement.

Upto25%ofsalary. Notapplicable.

Benefits Toprovideamarketcompetitivelevelofbenefits.

Includes:companycarorcarallowance,privatemedicalinsurance,lump-sumlifeinsurancefordeath inserviceandincomeprotectioninsuranceforlongtermdisability.Otherbenefitsmaybeprovidedwhererelevant.

Providedatcost. Notapplicable.

Annual bonus Todriveandrewardannualperformanceofindividuals,teams and the Group.

Basedonperformanceduring therelevantfinancialyear.

50%ofanybonusabove50%ofbasesalaryisdeferredintoshares for two years.

Upto100%ofbasesalary. Performanceperiod:Normally one year.

Performancetargetsbasedatleast50%onslidingscalefinancialtargetswiththeremainderbased on personal/strategic targets.

Clawbackprovisionoperates.


Directors’ remuneration report continuedDirectors’remunerationpolicy

ElementHow component supports corporate strategy Operation Limits

Performancetargetsandrecoveryprovisions

Long-term incentives

Todriveandrewardsustained performance of the Group and to align the interests with those of shareholders.

Long-termincentiveshavethefollowingfeatures:• performance shares.• vestingisdependentonthe

satisfaction of performance targetsandcontinuedservice.

• performanceandvestingperiodsare normally three years.

Upto200%ofsalary.

(400%ofsalaryexceptionallimit).

Participantsmaybenefitfromthevalueofdividendspaidoverthevestingperiodtotheextentthatawardsvest.Thisbenefitisdeliveredin the form of cash or additional sharesatthetimethatawardsvest.

Performanceperiod:Normallythree years.

Upto25%ofanawardvestsatthresholdperformance(0%vestsbelowthis),increasingto100%pro-rataformaximumperformance.

PerformancewillbemeasuredagainstTSRand/orrelevantfinancialmeasures.

Clawbackprovisionoperates.

TheCommitteealsoconsiders,interalia,theGroup’slike-for-likesalesperformance,underlyingprofitperformanceanddebtlevelswhendeterminingwhethertheGroup’sfinancial performance is consistent withthelevelofvestingsuggestedbytheperformancetargets.

All-employee Share Incentive Plan

Encouragedshareownershipamongst all employees.

Planopentoallemployees. As per HMRC limits. None.

Share ownership

Furtheralignsexecutiveswithinvestors,whileencouragingemployee share ownership.

TheCommitteerequiresthatExecutiveDirectorswhoparticipateintheCompany’sLTIPsatisfyaminimumshareholdingrequirementwithinfiveyearsoftheSpiritdemergeror,iflater,fiveyearsofappointmenttotheBoard.TargetsaresettoencourageDirectorstoretainsharesreceivedfromshareincentiveschemes.

Minimumof100%ofsalary. None.

Non-Executive Directors

Toprovidefeesreflectingtime commitments and responsibilitiesofeachrole,inlinewiththoseprovided bysimilarlysizedcompanies.

Cashfeepaidonamonthlybasis.

Feesarereviewedannuallyand takeintoaccount:• themedianleveloffeesforsimilar

positionsinthemarket;• the time commitment each

Non-ExecutiveDirectormakes totheGroup;and

• Taxablebenefitsmaybeprovidedwhere appropriate.

Feesaresetwithinthelimitssetbythe Articles of Association.

None.

Notes(1)AdescriptionofhowtheCompanyintendstoimplementthepolicysetoutinthistablefromthe2014AGMissetoutintheAnnualreportonremuneration.(2)BelowBoard,alowerornoannualbonusopportunitymayapplyandparticipationintheLTIPisnormallylimitedtotheExecutiveDirectorsandcertainselected

seniormanagers.Ingeneral,thesedifferencesarisefromthedevelopmentofremunerationarrangementsthataremarketcompetitiveforthevariouscategoriesofindividuals,togetherwiththefactthatremunerationoftheExecutiveDirectorsandseniorexecutivestypicallyhasagreateremphasisonperformance-relatedpay.

(3)ThechoiceoftheperformancemetricsapplicabletotheannualbonusschemereflecttheCommittee’sbeliefthatanyincentivecompensationshouldbeappropriatelychallengingandtiedtoboththedeliveryoffinancialtargetsandspecificindividualobjectives.Furtherdetailofthechoiceofperformancemeasuresand performance targets is set out in the Annual report on remuneration.

(4)TheperformanceconditionsapplicabletotheLTIP(seeAnnualreportonremuneration)areselectedbytheRemunerationCommitteeonthebasisthattheyrewardthedeliveryoflongtermreturnstoshareholdersandareconsistentwiththeCompany’sobjectiveofdeliveringsuperiorlevelsoflongtermvaluetoshareholdersfollowing the successful refinancing.

(5)TheCommitteeoperatestheLTIPinaccordancewiththeplanrulesandtheListingRulesandtheCommittee,consistentwithmarketpractice,retainsdiscretionoveranumberofareasrelatingtotheoperationandadministrationoftheplan.

(6)WhileLTIPawardscurrentlyvestafterthreeyearssubjecttocontinuedserviceandperformancetargets,theCommitteewillconsiderdevelopmentsinbestpracticewhensettingfuturelongtermincentivegrantpoliciesand,inparticular,whethertheintroductionofapostvestingholdingperiod,inadditiontotheexistingshareholdingguidelines,isappropriatefortheCompany.

(7)Theall-employeeShareIncentivePlandoesnothaveperformanceconditions.(8)Whileincludedinthepolicy,remunerationfortheExecutiveChairmanisnotincludedinthetableabovegiventhetemporarynatureoftherole.Detailsonthe

policy for his role are shown at the end of the policy report.

Summary of remuneration policy continued


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Reward scenariosThechartsbelowshowhowthecompositionoftheFinanceDirector’sremunerationvariesatdifferentlevelsofperformanceunderthepolicysetoutpreviously,asapercentageoftotalremunerationopportunityandasatotalvalue.TheExecutiveChairmanhasnotbeenshownduetothetemporarynature oftheroleandbecausehisremunerationcontainsnovariableelements.

200,000

400,000

600,000

800,000

1,000,000

0 Target MaxMinimum

100%357,250

568,65612.5%

62.5%

25%

40%

30%

30%921,000

■ Fixed ■ Annual bonus ■ LTIPFinance Director

Notes(1)Theminimumperformancescenariocomprisesthefixedelementsof

remunerationonly,including: •Salary,asforFY2014/15assetoutintheAnnualreportonremuneration; •Pension,asperthepolicytable;and •Benefits,aspertheFY2014/15singlefigure.(2)TheOn-Targetlevelofbonusistakentobe50%ofthemaximumbonus

opportunity(100%ofsalary),andtheOn-TargetlevelofLTIPvestingisassumedtomeetthresholdandbe25%ofthefacevalueoftheLTIPaward(100%ofsalary).Thesevaluesareincludedinadditiontothecomponents/valuesofminimumremuneration.

(3)Maximumassumesfullbonuspayout(100%ofsalaryonly)andthefullfacevalueoftheLTIP(i.e.100%ofsalary),inadditiontofixedcomponentsofminimumremuneration.Theadditional100%ofsalaryLTIPawardfortheFinanceDirectorin2014/15hasbeenexcludedfromthechartgivenitsone-offnature.

(4)Nosharepricegrowthhasbeenfactoredintothecalculations.

Approach to recruitment and promotionsTheremunerationpackageforanewExecutiveDirectorwouldbesetinaccordancewiththetermsoftheCompany’sprevailingapprovedremunerationpolicyatthetimeofappointment andtakeintoaccounttheskillsandexperienceoftheindividual,themarketrateforacandidateofthatexperienceandtheimportanceofsecuringtherelevantindividual.

Salarywouldbeprovidedatsuchalevelasrequiredtoattractthemostappropriatecandidateandmaybesetinitiallyat abelowmid-marketlevelonthebasisthatitmayprogresstowardsthemid-marketlevelonceexpertiseandperformancehasbeenprovenandsustained.Theannualbonuspotentialwouldbelimitedto100%ofsalaryandgrantsunderthe LTIPwouldbelimitednormallyto200%ofsalary,although inexceptionalcircumstances,longtermincentiveawardsofupto400%ofsalarymaybegranted.

Inaddition,theCommitteemayofferadditionalcashand/orshare-basedelementstoreplacedeferredorincentivepayforfeitedbyanexecutiveleavingapreviousemployerifrequiredinordertofacilitate,inexceptionalcircumstances,therecruitmentoftherelevantindividual.Itwouldseektoensure,wherepossible,thattheseawardswouldbeconsistentwithawardsforfeitedintermsofvestingperiods,expectedvalue and performance conditions.

ForaninternalExecutiveDirectorappointment,anyvariable payelementawardedinrespectofthepriorrolemaybeallowedtopayoutaccordingtoitsterms.Inaddition,anyotherongoingremunerationobligationsexistingpriortoappointmentmay continue.

Forexternalandinternalappointments,theCommitteemayagree that the Company will meet certain relocation and/or incidentalexpensesasappropriate.

Service contracts for Executive DirectorsThepolicyonterminationisthattheGroupdoesnotmakepaymentsbeyonditscontractualobligations.Inaddition,ExecutiveDirectorswillbeexpectedtomitigatetheirloss. TheCommitteeensuresthattherehavebeennounjustifiedpayments for failure.

NoneoftheExecutiveDirectors’contractsprovidesforliquidateddamages.Therearenospecialprovisionscontained inanyoftheExecutiveDirectors’contractswhichprovideforlonger periods of notice on a change of control of the Company. Further,therearenospecialprovisionsprovidingforadditionalcompensationonanExecutiveDirector’scessationofemployment with the Group.

TheCommittee’spolicyistoofferservicecontractsforExecutiveDirectorswithnoticeperiodsofnomorethan12months.

AttheBoard’sdiscretionearlyterminationofanExecutiveDirector‘sservicecontractcanbeundertakenbywayofpaymentofsalaryandbenefitsinlieuoftherequirednoticeperiod. A summary of the main contractual terms surrounding terminationaresetoutbelow:

Provision Policy

Noticeperiod Nomorethan12monthsTerminationpayment

Paymentinlieuofnoticebasedonsalary andspecifiedbenefits,andinsomecases, theprovisionofoutplacementservicesandthepaymentofanyrelevantlegalfees

Remuneration entitlements

Abonusmaybepayable(pro-ratedwhererelevant)andoutstandingshareawards mayvest

Change of control

NoExecutiveDirector’scontractcontainsadditionalprovisionsinrespectofchange of control


Directors’ remuneration report continuedDirectors’remunerationpolicy

Anyshare-basedentitlementsgrantedtoanExecutiveDirectorundertheCompany’sshareplanswillbedeterminedbasedontherelevantplanrules.Incertainprescribedcircumstances, suchasdeath,injury,ill-health,disability,retirementorothercircumstancesatthediscretionoftheCommittee,“goodleaver”statusmaybeapplied.Forgoodleavers,awardswillnormallyvestatthenormalvestingdate,subjecttothesatisfactionof therelevantperformanceconditionsatthattimeandreducedpro-ratatoreflecttheproportionoftheperformanceperiodactuallyserved.However,theRemunerationCommitteehasdiscretiontodeterminethatawardsvestatanearlierdate,butnoearlierthanthedateoftermination.

TheBoardallowsExecutiveDirectorstoacceptappropriateoutsidecommercialNon-ExecutiveDirectorappointmentsprovidedthattheaggregatecommitmentiscompatiblewiththeirdutiesasExecutiveDirectors.TheExecutiveDirectorsconcernedmayretainfeespaidfortheseservices,whichwillbesubjecttoapprovalbytheBoard.OnlytheExecutiveChairmanheldothernon-executivedirectorshipsduringtheyear.

Non-Executive DirectorsTheCompany’spolicyistoappointNon-ExecutiveDirectorstotheBoardwithabreadthofskillsandexperiencethatisrelevanttotheCompany’sbusiness.AppointmentsaremadebytheBoardupontherecommendationsandadvicefromtheNominationCommittee.

TheNon-ExecutiveDirectorsdonothaveservicecontractsbuttheirappointmentsaresubjecttorevieweverythreeyearsundertherotationprovisionsoftheCompany’sArticlesofAssociation.Theyallhavenoticeperiodsofonemonth.

Executive ChairmanTheroleofExecutiveChairmanistemporaryasaresult oftheunusualcircumstancesthatprevailedduringthecapitalrestructuring. Following completion of the capital restructuring theCompanyisrevertingtoaconventionalgovernancestructureofaNon-ExecutiveChairmanandChiefExecutiveOfficer.RemunerationfortheExecutiveChairmancomprisessolely ofasalaryof£300,000p.a.BenefitsandpensionarenotprovidedandtheExecutiveChairmandoesnotparticipate inanyincentivearrangements.


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Annual report on remuneration

Implementation of the Remuneration Policy for the year ending 22 August 2015Base salaryBasesalarylevelsfortheExecutiveDirectorswerereviewedinMarch2014andanincreaseof2.5%wasawardedtotheFinanceDirector.Thisincreasewasinlinewiththeincreaseforthegeneralworkforce.ThetablebelowshowsthebasesalariesforbothExecutiveDirectors:

2013/14Basesalary

2014/15Basesalary

StephenBillingham ExecutiveChairman £300,000 £300,000SteveDando FinanceDirector £275,000 £281,875

PensionTheGroupwillcontribute20%ofbasesalaryforthepensionarrangementsoftheFinanceDirector.

BenefitsBenefitsprovidedwillcontinuetoincludecompanycarorcarallowance,privatemedicalinsurance,lump-sumlifeinsurancefordeathinserviceandincomeprotectioninsuranceforlongtermdisability.ThesebenefitsarenotprovidedtotheExecutiveChairman.

Annual bonusFor2014/15,theoperationoftheannualbonusarrangementfortheFinanceDirector(theExecutiveChairmanwillcontinuenottoparticipateinthearrangement)willbesimilartothatoperatedin2013/14albeitthatthemaximumbonuspotentialwillbereducefrom125%ofsalaryto100%ofsalaryfortheFinanceDirectorfor2014/15onwards.Targetswillcontinuetobebasedaroundslidingscaleprofithurdlesunderpinnedbystrategic/personaltargets.Annualbonustargetsfor2014/15arecurrentlycommerciallysensitiveandwillbedisclosedretrospectivelyinthe2014/15Annualreportonremuneration.

Long-term incentivesLong-termincentiveawardswillbemadeinlinewiththepolicyduring2014/15and,asstatedintheprospectusfortherestructuring,inordertofacilitatetherecruitmentofanindividualwithappropriateexperienceandexpertisetotheroleofCEO, itmaybenecessarytoofferaremunerationpackagethatincludesaone-offlongtermincentiveawardonjoininginexcessofthe200%ofbasesalarynormallimit,uptothe400%ofsalaryexceptionallimit,undertheCompany’scurrentLTIP.Asaresultofthesuccessfulcapitalrestructuringandasdisclosedlastyear,theFinanceDirectorwillreceiveanadditionaloneoffLTIPawardoversharesworth100%ofsalaryin2014/15.

Non-Executive DirectorsNon-ExecutiveDirectorfeeswillnextbereviewedin2014/15.Asummaryofcurrentfeesisasfollows:

FY2014/15 FY2013/14 % increase

Basicfee £42,000 £42,000 0%SeniorIndependentDirector £45,000 £45,000 0%Additionalfees:ChairmanshipofAuditandRiskorRemunerationCommittee £10,000 £10,000 0%ChairmanshipofNominationandGovernanceCommittee1 £5,000 £5,000 0%

1 ThefeeforchairingtheNominationandGovernanceCommitteehasbeenwaivedbytheExecutiveChairman.

TheExecutiveChairman’ssalarywillremainatitsexistinglevelonceherevertstoNon-ExecutiveChairman,areflectionof StephenBillingham’svaluetothebusiness.Hisnoticeperiodwillalsobeincreasedtothreemonths.


Directors’ remuneration report continuedAnnual report on remuneration

Directors’ remunerationThedetailssetoutonpages34to38ofthisreporthavebeenauditedbyKPMGLLP.

ThetotalofDirectors’emolumentsinthe53weekperiodwas£944,000(2013:£1,242,000),includingpensioncontributions of£59,000(2013:£101,000).TheremunerationoftheDirectorsduringtheperiodwasasfollows:

Annual remuneration

Basicsalary/ fees1 Benefits2 Bonus

Gain on release of shares Pension

Other payments made to former Directors Total

2014£000

2013£000

2014£000

2013£000

2014£000

2013£000

2014£000

2013£000

2014£000

2013£000

2014£000

2013£000

2014£000

2013£000

Executive DirectorsStephenBillingham3 306 152 – – – – – – – – – – 306 152SteveDando 283 275 19 19 135 210 – – 59 57 – – 496 561Non-Executive DirectorsStephenBillingham3 – 115 – – – – – – – – – – – 115AngusPorter 56 55 – – – – – – – – – – 56 55JohnAllkins 53 42 – – – – – – – – – – 53 42IanDyson 43 42 – – – – – – – – – – 43 42Former Directors – 216 – 15 – – – – – 44 – – – 275Total 731 897 19 34 135 210 – – 59 101 – – 944 1,242

1 Salariesforthe2013financialyearwerepaidinrelationtoserviceoverthe2013financialyearwhichcomprised52weeks.Salariesfor2014werepaidin relationtoserviceoverthe2014financialyearwhichcomprised53weeks.

2 Benefitscomprisethefollowingelements;healthcover,car,fuel,deathinserviceandincomeprotection.3AppointedExecutiveChairmanon4February2013,thereforeremunerationhasbeendisclosedseparatelyforhisExecutiveandNon-Executiverolesintheprioryear.

Theperformancerelatedannualbonusfor2013/14wasbasedaroundslidingscaleprofithurdlesunderpinnedbystrategic/personaltargetssurroundinglettingbeervolumesandthedisposalprogramme(i.e.failuretomeetthestrategic/personaltargetsinfullwouldreducetheprofit-relatedbonus).TheExecutiveChairmandidnotparticipate.Maximumbonuspotentialwassetat125% ofsalaryfortheFinanceDirectorwith50%ofanybonusawardover50%ofsalarydeferredintoPunchTavernsplcsharesfor aperiodoftwoyears.Aclawbackprovisionwillcontinuetooperate.AsaresultoftheCompanyachievingcertaintargetsrelatingtoletting,beervolumesanddisposals,theFinanceDirector’sbonusfor2013/14wassetat47%ofsalary,whichis38%ofthemaximumamount.

TheperformanceconditionforLTIPawardsvestinginNovember2014isbasedonPunchTavernsTotalShareholderReturn(TSR)overthreefinancialyearsrelativetotwopeergroups:50%ofanawardismeasuredagainstapeergroupofUKlistedpubcompanies(EnterpriseInns,Fuller,Smith&Turner,GreeneKing,JDWetherspoon,Marston’s,Mitchells&ButlersandSpiritPubCompany)withtheother50%ofanawardmeasuredagainsttheFTSE250Index(excludinginvestmenttrusts).AsPunch’sTSRovertheperiod21August2011to23August2014wasbelowtheTSRofthemediancompanyinbothcomparatorgroups,noneoftheawardswillvest.

SteveDandoreceivedaGroupcontributionpaidintotheCompany’spensionschemerepresenting20%ofhispensionablesalary.

Scheme interests awarded during the year ShareBonusPlanawards1 LTIPshareawards2

NumberFacevalue

£000 NumberFacevalue

£000

SteveDando 135,605 19 1,896,551 275

1 Theseawardsrelatetotheportionofthe2012/13netannualbonuswhichwasdeferredinshares.In2012/13theCommitteedeterminedthattheFinanceDirectorwaseligibleforanannualbonuspaymentof72.5%ofsalaryand,inaccordancewithourpolicy,halfofanybonusabove50%ofsalaryisdeferredinsharesundertheShareBonusPlan.Thenumberofshareswasdeterminedusingtheclosingsharepriceon23October2013of14.25p.

2 ThefacevalueoftheLTIPawardsisbasedonapriceof14.5pbeingtheaveragepriceintheweekleadinguptothedateofaward.

Board changes/payments for loss of officeTherewerenoBoardchangesorpaymentsforlossofofficeduring2013/14.

Payments to past DirectorsNopaymentstopastDirectorsweremadeduring2013/14.


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Statement of Directors’ shareholding and share interests

Long Term Incentive Plan (LTIP)ThefollowingtablesetsouttheawardsmadeundertheLTIP.FulldetailsoftheoperationoftheLTIParesetoutinthefirstpart of this report.

Value of shares conditionally awarded Value of shares released

DirectorsDateofaward

Dateof release

Share price at date ofaward(£)

Numberas at

17 August2013 £000

Percentage of salary at

date of award

Awarded during the

period

Forfeited during the

period

Lapsed during the

period

Marketprice

at date of release /lapse(£)

Gain on release

£000

Numberas at

23August 2014

SteveDando19.11.10 19.11.13 0.58 301,204 175 100 – – 301,204 – – –30.11.11 30.11.14 0.12 1,138,245 137 50 – – – – – 1,138,24530.11.12 30.11.15 0.07 2,086,494 137 50 – – – – – 2,086,49424.10.13 24.10.16 0.14 – 275 100 1,896,551 – – – – 1,896,551

Total 3,525,943 1,896,551 301,204 5,121,290IanDyson 19.11.10 19.11.13 0.58 831,061 1,348 200 – – 831,061 – – –Total 831,061 – 831,061 –

AwardsgrantedinNovember2011,November2012andOctober2013,inadditiontotherelevantunderpinbeingdeemedto havebeenmet,willonlybereleasediftheGroup’sTSRisequaltoorgreaterthanthemedian/indexlevelofperformanceoftherespectivecomparatorgroupsoverthethreeyearperiodfromgrantatwhichpoint25%oftheawardwillbereleased.Fullreleaseoftheawardwilloccurforupper-quartile/index+5%p.a.performancewithstraight-linereleasebetweenthethresholdandmaximumperformancelevels.Fulldetailsoftheperformanceconditionsattachedtotheseawardsaredetailedonpage30inthefirst part of this report.

Inland Revenue approved Share Incentive Plan (SIP)TheSIPisthecurrentallemployeeshareplanoperatedbytheGroup.ThefollowingtablesetsoutthesharespurchasedandawardedundertheSIPinrespectoftheExecutiveDirectors.FulldetailsoftheoperationoftheSIParesetoutintheDirectors’reportonpage18andinnote27totheaccountswhichcanbefoundonpage76.

DirectorsDateofaward

Dateofrelease

Share price at date of

purchase of partnership shares and

award of matchingshares(£)

Numberas at

17 August2013

Partnershipshares

purchased during the

period

Matching shares

conditionally awarded

during the period

Partnershipordividend

shares released

during the period

Matching shares

released during the

period

Matching shares

forfeited during the

period

Gain on release of matching

shares£000

Numberas at

23August 2014

SteveDando 28.06.11 28.06.14 0.72 4,168 – – 2,084 2,084 – – –Total 4,168 –

Discretionary Share Plan (DSP)TheDSPisalegacyoptionscheme.TheCompanydoesnotcurrentlyintendtomakeanyfuturegrantsundertheDSP.ThelastawardundertheDSPwasmadeinJanuary2006andalloutstandingoptionswerewaivedduringtheperiod.FulldetailsoftheoperationoftheDSParesetoutinnote27totheaccountswhichcanbefoundonpage76.

Exerciseperiod

DirectorsDateof

grant From ToExerciseprice(£)

Numberof options at17 August

2013

Optionswaived

during the period

Numberof options at23August

2014

Numberof optionsalreadyvested

SteveDando 17.11.04 17.11.07 17.11.14 5.51 2,203 2,203 – –16.11.05 16.11.08 16.11.15 7.67 1,656 1,656 – –

Total 3,859 3,859 – –

Nooptionsweregranted,lapsedorexercisedduringtheperiod.



Share Bonus Plan (SBP)ThefollowingtablesetsouttheawardsundertheSBPinrelationtothe2010/11,2011/12and2012/13annualbonusconsistentwiththerequirementforExecutiveDirectorstodeferaportionoftheirannualbonusaward.FulldetailsoftheoperationoftheSBParedetailedinthefirstpartofthisreportandnote27totheaccountswhichcanbefoundonpage76.

DirectorsDateof

grantDeferral

period

SharePriceat date of award(£)

Numberof shares at

17 August 2013

Awarded during the

period

Released during the

period

Numberofshares at

23August2014

SteveDando 27.10.11 2 years 0.1025 429,268 – 429,268 –30.11.12 2 years 0.066 243,309 – – 243,30924.10.13 2 years 0.145 – 135,605 – 135,605

Total 672,577 378,914

Thesharepriceatthecloseofbusinesson22August2014was£0.092,duringtheperiodthehighestsharepricewas£0.165andthelowestwas£0.085.

Directors’ shareholdings ThetablebelowsetsoutDirectorsshareholdingswhicharebeneficiallyownedorsubjecttoaperformanceorservicecondition.

Interestsinordinary shares

Shareawardssubjectto performance conditions

Shareawardssubject toservicecondition

Shareoptionssubject to performance conditions

Shareoptionssubjecttoserviceconditions Total

Director23Sep2013

11Nov 2014

23Sep2013

11Nov2014

23Sep2013

11Nov 2014

23Sep2013

11Nov 2014

23Sep2013

11Nov 2014

23Sep2013

11Nov2014

Stephen Billingham – – – – – – – – – – – –SteveDando 699,035 836,724 3,525,943 5,121,290 672,577 378,914 3,859 – 4,168 – 4,905,582 6,336,928Angus Porter – – – – – – – – – – – –IanDyson 304,168 304,168 831,061 – – – – – – – 1,135,229 304,168JohnAllkins – – – – – – – – – – – –

Directors’ service contractsDetailoftheservicecontractsofcurrentDirectorsissetoutbelow:

ExecutiveDirectors Company notice period Contract dateUnexpiredterm

ofcontract(months)1Potential

termination payment

Potentialpaymenton change of

control/liquidation

Current DirectorsStephenBillingham 1 month 15September2011 9 1month’ssalary NilSteveDando 12 months 2June2003 Rolling contract 12months’salary Nil

ContractwillcontinueuntilterminatedbynoticeeitherbytheCompanyortheDirector.TheExecutiveChairman’snoticeperiod willbeincreasedtothreemonthswhenherevertstotheroleofNon-ExecutiveChairman.

Non-ExecutiveDirectors Company notice period Contract dateUnexpiredterm

ofcontract(months)

Current DirectorsIanDyson 1 month 1 August 2011 9AngusPorter 1 month 26March2012 4JohnAllkins 1 month 25October2012 11


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TSR performance graph ThegraphshowstheCompany’sperformance,measuredbytotalshareholderreturn(TSR),comparedwiththeFTSE350TravelandLeisureIndexandtheFTSESmallCapIndex(excludinginvestmenttrusts).TheCommitteeconsidersthesetoberelevantindicesforTSRcomparisonastheCompanywasaconstituentoftheFTSE350TravelandLeisureIndexforthemajorityofthefive-yearperiodpresentedandispositionedintheFTSESmallCapIndex.

0

50

100

150

200

250

Aug

200

9

Aug

201

0

Aug

201

1

Aug

201

2

Aug

201

3

Aug

201

4

Tota

l sha

reho

lder

ret

urn

(Reb

ased

)

Punch TavernsFTSE SmallCap Index (excluding investment trusts)FTSE 350 Travel & Leisure Index

Source: Datastream (Thompson Reuters)

Total shareholder return

Thegraphaboveshowsthevalue,at23August2014,of£100investedinPunchTavernsplcon22August2009comparedwiththevalueof£100investedintheFTSESmallCapandFTSE350TravelandLeisureindicesoverthesameperiod.Theotherpointsplottedarethevaluesattheinterveningyearends.

Single figure five year history

Year Incumbent RoleSingle figure of

total remuneration

Annualbonuspay-outagainst

maximum

PSPVestingagainstmaximum

opportunity

2013/14 StephenBillingham1 ExecutiveChairman £300,000 N/A N/A2012/13 StephenBillingham1 ExecutiveChairman £267,000 N/A N/A2012/13 Roger Whiteside2 CEO £257,000 0% 0%2011/12 Roger Whiteside2 CEO £706,000 15% 0%2010/11 Roger Whiteside2 CEO £931,000 67% 0%2010/11 IanDyson3 CEO £833,000 0% 0%2010/11 GilesThorley4 CEO £23,000 0% 0%2009/10 GilesThorley4 CEO £640,000 0% 0%

1 AppointedExecutiveChairmanfrom4February2013.2 AppointedCEOon1August2011,steppeddownasCEOon1February2013.3 AppointedCEOon6September2010andceasedtobeCEOuponthedemergerofSpiritPubCompanyinAugust2011.4 SteppeddownasCEOinSeptember2010.

Percentage change in remuneration of CEO and employeesThetablebelowshowsthepercentagechangeinremunerationoftheExecutiveChairman(astheCompanydidnothaveaCEOduringtheyear)andtheCompany’semployeesasawholebetweentheyear2013/14and2012/13:

Percentageincrease/(decrease) inremunerationin2013/14compared withremunerationin2012/13

ExecutiveChairmanAveragepaybased

on all employees

Salary 0% 3%Benefits N/A 4%Annualbonus N/A (7)%

ComparisonrelatestoremunerationforStephenBillinghamwhodoesnotreceivebenefitsorannualbonus.



Relative importance of spend on pay ThefollowingtableshowstheGroup’sactualspendonpay(forallemployees)relativetodividends:

2012/13 2013/14 %change

Staffcosts(£m) 21.1 21.2 0%Dividends(£m) – – 0%

Details of the Remuneration Committee, advisers to the Committee and their feesTheCommitteereceivedindependentremunerationadvicefromNewBridgeStreet(NBS).ThisindependentadviserwasappointedbytheCommitteeandisaccountabletoitandprovidesnootherservicestotheCompany.ThetermsofengagementbetweentheCommitteeandNBSareavailablefromtheCompanySecretaryonrequest.Inaddition,ComputershareprovidesadministrationservicesconnectedtotheExecutiveandall-employeeshareplans.TheCommitteealsoconsultswiththeExecutiveChairman,theCompanySecretaryandtheHRDirector.However,noexecutiveispermittedtoparticipateindiscussionsordecisionsabouttheirpersonalremuneration.DuringtheyearfeespayabletoNBSamountedto£27,590.

Statement of voting at general meetingAttheAGMheldon27November2013theDirectors’remunerationreportreceivedthefollowingvotesfromshareholders:

Totalnumberofvotes

%ofvotescast

For 308,421,800 95.13Against 9,053,062 2.79Totalvotescast(forandagainst) 317,474,862 97.93Votes withheld 6,720,766 2.07Totalvotescast(includingwithheldvotes) 324,195,638 100.00

ThisreporthasbeenpreparedbytheRemunerationCommitteeandhasbeenapprovedbytheBoard.ItcomplieswiththeCompaniesAct2006andrelatedregulations.ThisreportwillbeputtoshareholdersforapprovalattheforthcomingAnnualGeneral Meeting.


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Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements

TheDirectorsareresponsibleforpreparingtheAnnualReportand the group and parent company financial statements in accordancewithapplicablelawandregulations.

CompanylawrequirestheDirectorstopreparegroupandparent company financial statements for each financial year. UnderthatlawtheyarerequiredtopreparethegroupfinancialstatementsinaccordancewithIFRSsasadoptedbytheEUandapplicablelawandhaveelectedtopreparetheparentcompanyfinancialstatementsonthesamebasis.

UndercompanylawtheDirectorsmustnotapprovethefinancialstatementsunlesstheyaresatisfiedthattheygiveatrueand fairviewofthestateofaffairsofthegroupandparentcompanyandoftheirprofitorlossforthatperiod.Inpreparingeachofthegroupandparentcompanyfinancialstatements,theDirectorsarerequiredto:• selectsuitableaccountingpoliciesandthenapplythem

consistently;•makejudgementsandestimatesthatarereasonableand

prudent;•statewhethertheyhavebeenpreparedinaccordancewith

IFRSsasadoptedbytheEU;and•preparethefinancialstatementsonthegoingconcernbasis

unless it is inappropriate to presume that the group and the parentcompanywillcontinueinbusiness.

TheDirectorsareresponsibleforkeepingadequateaccountingrecordsthataresufficienttoshowandexplaintheparentcompany’stransactionsanddisclosewithreasonableaccuracy at any time the financial position of the parent company and enablethemtoensurethatitsfinancialstatementscomplywiththeCompaniesAct2006.Theyhavegeneralresponsibilityfortakingsuchstepsasarereasonablyopentothemtosafeguardtheassetsofthegroupandtopreventanddetectfraudandother irregularities.

Underapplicablelawandregulations,thedirectorsarealsoresponsibleforpreparingaDirectors’Report,Directors’remunerationreportandCorporategovernancestatementthat complies with that law and those regulations.

TheDirectorsareresponsibleforthemaintenanceandintegrityof the corporate and financial information included on the Company’swebsite.LegislationintheUKgoverningthepreparation and dissemination of financial statements may differfromlegislationinotherjurisdictions.

Director’s responsibility statementTheDirectorsconfirmtothebestoftheirknowledge:

a)thegroupandparentcompanyfinancialstatements,preparedinaccordancewithIFRS,asadoptedbytheEuropeanUnion,giveatrueandfairviewoftheassets,liabilities,financialposition and profit or loss of the Company and the Group asawhole;and

b)theDirectorshaveconcludedthattheAnnualReport andAccountstakenasawhole,isfair,balancedandunderstandableandprovidestheinformationnecessary forshareholderstoassesstheCompany’sperformance,businessmodelandstrategy;and

c)themanagementreportincludesafairreviewofthedevelopmentandperformanceofthebusinessandthepositionoftheCompanyandGroup,togetherwith adescriptionoftheprincipalrisksanduncertaintiesfaced.

OnbehalfoftheBoard

Stephen Billingham Steve DandoExecutiveChairman FinanceDirector11November2014 11November2014


Consolidated income statementforthe53weeksended23August2014

53 weeks to 23 August 2014 52weeksto17August2013(Restated)

Notes

Underlying items

£m

Non-underlying

items(note 6)

£mTotal

£m

Underlying items

£m

Non-underlying

items(note6)

£mTotal

£m

Revenue 2 448.1 – 448.1 457.6 – 457.6Operatingcostsbeforedepreciation and amortisation (249.5) (27.3) (276.8) (246.8) (8.3) (255.1)Shareofpost-taxprofitfromjointventure 6.2 – 6.2 4.8 – 4.8EBITDA1 204.8 (27.3) 177.5 215.6 (8.3) 207.3Depreciationandamortisation (11.0) – (11.0) (12.3) – (12.3)Profitonsaleofproperty,plantandequipment andnon-currentassetsclassifiedasheldforsale – 10.7 10.7 – 10.5 10.5Impairment 14 – (50.8) (50.8) – (10.2) (10.2)Goodwill charge – (3.6) (3.6) – (3.8) (3.8)Operating profit / (loss) 3 193.8 (71.0) 122.8 203.3 (11.8) 191.5Finance income 4 36.4 3.3 39.7 7.0 3.3 10.3Finance costs 5 (161.6) (214.7) (376.3) (161.7) (39.9) (201.6)Movementinfairvalueofinterestrateswaps – (26.4) (26.4) – 16.4 16.4Profit / (loss) before taxation 68.6 (308.8) (240.2) 48.6 (32.0) 16.6UKincometax(charge)/credit 8 (8.2) 73.3 65.1 (10.8) 14.9 4.1Profit / (loss) for the financial period attributable to owners of the parent company 60.4 (235.5) (175.1) 37.8 (17.1) 20.7

Earnings per share 9–basic(pence) 181.5 (526.1) 113.7 62.2–diluted(pence) 181.5 (526.1) 113.7 62.2

1 EBITDArepresentsearningsbeforedepreciationandamortisation,profitonsaleofproperty,plantandequipmentandnon-currentassetsclassifiedasheldforsale,impairment,goodwillcharge,financeincome,financecosts,movementinfairvalueofinterestrateswapsandtaxoftheGroup.


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Consolidated statement of comprehensive incomeforthe53weeksended23August2014

Notes

53 weeks to 23 August

2014 £m

52weeksto 17 August

2013(Restated)

£m

(Loss) / profit for the period attributable to owners of the parent company (175.1) 20.7Items that are or may be recycled subsequently to the income statement(Losses)/gainsoncashflowhedges (6.3) 58.5Transferstotheincomestatementoncashflowhedges 214.4 39.1Taxrelatingtocomponentsofothercomprehensiveincome thatcanbereclassifiedintoprofitorloss (53.2) (28.1)Items that cannot be recycled subsequently to the income statementRemeasurementsofdefinedbenefitpensionschemes 29 (1.3) (4.0)Otheritemsthatcannotberecycledsubsequentlytotheincomestatement (0.9) –Taxrelatingtocomponentsofothercomprehensiveincome thatcannotbereclassifiedintoprofitorloss 0.3 0.9Other comprehensive profits for the period 153.0 66.4Total comprehensive (loss) / income for the period attributable to owners of the parent company (22.1) 87.1


Consolidated balance sheetat23August2014

Notes

23 August 2014

£m

17 August2013

£m

AssetsNon-current assetsProperty,plantandequipment 11 2,297.4 2,397.2Operating leases 12 4.0 5.8Otherintangibleassets 12 0.7 0.4Goodwill 12 172.6 176.2Investmentinjointventure 32 50.5 49.3Otherinvestments 13 – 5.5

2,525.2 2,634.4Current assetsTradeandotherreceivables 16 34.0 35.5Currentincometaxassets 1.3 2.1Non-currentassetsclassifiedasheldforsale 19 69.8 76.5Cashandcashequivalents 18 315.6 328.6Restricted cash 18 315.0 315.0

735.7 757.7

Total assets 3,260.9 3,392.1

LiabilitiesCurrent liabilitiesTradeandotherpayables 20 (99.9) (116.0)Short-termborrowings 21 (79.9) (68.1)Cash-backedborrowings 23 (315.0) (315.0)Derivativefinancialinstruments 22 (38.2) (40.3)Provisions 24 (0.8) (3.6)

(533.8) (543.0)Non-current liabilitiesBorrowings 21 (2,189.9) (2,304.7)Derivativefinancialinstruments 22 (240.3) (214.0)Deferredtaxliabilities 17 (12.1) (22.0)Retirementbenefitobligations 29 (4.3) (4.8)Provisions 24 (6.8) (8.0)

(2,453.4) (2,553.5)

Total liabilities (2,987.2) (3,096.5)

Net assets 273.7 295.6

EquityCalled up share capital 26 0.3 0.3Share premium 455.0 455.0Hedgereserve – (154.9)Sharebasedpaymentreserve 6.4 7.2Retained earnings (188.0) (12.0)Total equity attributable to owners of the parent company 273.7 295.6

OnbehalfoftheBoard

Stephen Billingham Steve Dando11November2014 11November2014

Companynumber:3752645


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Consolidated statement of changes in equityforthe53weeksended23August2014

Share capital

£m

Share premium

£m

Hedge reserve

£m

Share based

payment reserve

£m

Retained earnings

(Restated)£m

Total equity

£m

Totalequityat18August2012 0.3 455.0 (226.1) 9.7 (30.7) 208.2Profitfortheperiod – – – – 20.7 20.7Othercomprehensivegains/(losses)fortheperiod – – 71.2 – (4.8) 66.4Totalcomprehensiveincomefortheperiod attributabletoownersoftheparentcompany – – 71.2 – 15.9 87.1Sharebasedpayments – – – (2.5) 2.8 0.3Totalequityat17August2013 0.3 455.0 (154.9) 7.2 (12.0) 295.6Lossfortheperiod – – – – (175.1) (175.1)Othercomprehensivegains/(losses)fortheperiod – – 154.9 – (1.9) 153.0Totalcomprehensiveincome/(loss)fortheperiod attributabletoownersoftheparentcompany – – 154.9 – (177.0) (22.1)Sharebasedpayments – – – (0.8) 1.0 0.2Total equity at 23 August 2014 0.3 455.0 – 6.4 (188.0) 273.7


Consolidated cash flow statementforthe53weeksended23August2014


2014 £m

52weeksto 17 August

2013£m

Cash flows from operating activitiesOperating profit 122.8 191.5Depreciationandamortisation 11.0 12.3Impairment 50.8 10.2Goodwill charge 3.6 3.8Profitonsaleofproperty,plantandequipmentandnon-currentassetsclassifiedasheldforsale (10.7) (10.5)Sharebasedpaymentexpenserecognisedinprofit 0.2 0.3Decrease/(increase)intradeandotherreceivables 0.1 (6.3)Decreaseintradeandotherpayables (18.5) (5.5)Differencebetweenpensioncontributionspaidandamountsrecognisedintheincomestatement (2.0) (1.9)Decreaseinprovisionsandotherliabilities (1.4) (0.9)Shareofpost-taxprofitfromjointventure (6.2) (4.8)Cash generated from operations 149.7 188.2Dividendreceivedfromjointventure 5.0 –Incometaxreceived/(paid) 3.0 (0.4)Net cash from operating activities 157.7 187.8

Cash flows from investing activitiesPurchaseofproperty,plantandequipment (51.3) (57.1)Proceedsfromsaleofproperty,plantandequipment 60.0 77.7Proceedsfromsaleofoperatingleases 0.2 –Proceedsfromsaleofnon-currentassetsclassifiedasheldforsale 50.4 70.9Purchaseofotherintangibleassets (1.1) (0.4)Interestreceived 7.6 7.4Net cash generated from investing activities 65.8 98.5

Cash flows from financing activitiesRepaymentofborrowings (69.1) (57.4)Repaymentofderivativefinancialinstruments (6.7) –Interestpaid (165.5) (167.4)Repaymentsofobligationsunderfinanceleases (0.2) (0.8)Interestelementoffinanceleaserentalpayments (0.2) (0.2)Proceedsfromsaleofsharesheldintrust 5.2 4.2Net cash used in financing activities (236.5) (221.6)

Net (decrease) / increase in cash and cash equivalents (13.0) 64.7

Cashandcashequivalentsatbeginningofperiod 328.6 263.9

Cash and cash equivalents at end of period 315.6 328.6


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Company balance sheetat23August2014

Notes

23 August 2014

£m

17 August2013

£m

AssetsNon-current assetsInvestmentsinsubsidiaryundertakings 15 1,342.4 1,342.2Receivables 16 1,445.8 1,253.7Deferredtaxassets 17 4.6 5.5

2,792.8 2,601.4Current assetsReceivables 16 – 0.6Cashandcashequivalents 18 2.8 3.5

2.8 4.1

Total assets 2,795.6 2,605.5

LiabilitiesCurrent liabilitiesTradeandotherpayables 20 (0.3) (0.2)

(0.3) (0.2)Non-current liabilitiesOthernon-currentpayables 25 (1,612.1) (1,609.6)

(1,612.1) (1,609.6)

Total liabilities (1,612.4) (1,609.8)

Net assets 1,183.2 995.7

EquityCalled up share capital 26 0.3 0.3Share premium 455.0 455.0Sharebasedpaymentreserve 6.4 7.2Retained earnings 721.5 533.2Total equity 1,183.2 995.7

OnbehalfoftheBoard

Stephen Billingham Steve Dando11November2014 11November2014

Companynumber:3752645


Company statement of changes in equityforthe53weeksended23August2014

Company income statementforthe53weeksended23August2014

Share capital

£m

Share premium

£m

Share based payment

reserve£m

Retained earnings

£m

Total equity

£m

Totalequityat18August2012 0.3 455.0 9.7 371.2 836.2Profitfortheperiod – – – 159.2 159.2Totalcomprehensiveincomefortheperiod – – – 159.2 159.2Sharebasedpayments – – (2.5) 2.8 0.3Totalequityat17August2013 0.3 455.0 7.2 533.2 995.7Profitfortheperiod – – – 187.3 187.3Totalcomprehensiveincomefortheperiod – – – 187.3 187.3Sharebasedpayments – – (0.8) 1.0 0.2Total equity at 23 August 2014 0.3 455.0 6.4 721.5 1,183.2

Aspermittedbysection408oftheCompaniesAct2006,theCompany’sincomestatementhasnotbeenincludedinthesefinancialstatements.TheCompany’sprofitforthe53weeksended23August2014was£187.3m(52weeksended17August2013:£159.2m).


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Company cash flow statementforthe53weeksended23August2014


2014 £m

52weeksto17 August

2013£m

Cash flows from operating activitiesOperating loss (4.1) (2.6)Sharebasedpaymentexpenserecognisedinprofit 0.1 –Increaseinreceivables – (0.1)Increaseinpayables 0.1 –Incometaxreceived 0.7 –Net cash flow from operating activities (3.2) (2.7)

Cash flows from financing activitiesProceedsfromnewintercompanydebt 2.5 1.9Net cash used in financing activities 2.5 1.9

Net decrease in cash and cash equivalents (0.7) (0.8)

Cashandcashequivalentsatbeginningofperiod 3.5 4.3

Cash and cash equivalents at end of period 2.8 3.5


Notes to the financial statementsforthe53weeksended23August2014

1. Accounting policies

Basis of preparationTheconsolidatedfinancialstatementspresentedinthisdocumenthavebeenpreparedinaccordancewithIFRSasadoptedbytheEuropeanUnion.TheCompany’sfinancialstatementshavebeenpreparedinaccordancewithIFRSasadoptedbytheEuropeanUnionandasappliedinaccordancewiththeprovisionsoftheCompaniesAct2006.TheCompanyhastakenadvantageoftheexemptionprovidedunders408oftheCompaniesAct2006nottopublishitsindividualincomestatementandrelatednotes.

Thefinancialstatementsarepreparedunderthehistoricalcostconvention,asmodifiedbytherevaluationofderivativefinancialinstrumentstofairvalue,andinaccordancewiththosepartsoftheCompaniesAct2006applicabletocompaniesreportingunderIFRSasadoptedbytheEuropeanUnion.NewstandardsandinterpretationsissuedbytheInternationalAccountingStandardsBoard(IASB)andtheInternationalFinancialReportingInterpretationsCommittee(IFRIC),becomingeffectiveduringtheyear,havenothadamaterialimpactontheGroup’sfinancialstatements.

Going concernThefinancialstatementshavebeenpreparedonagoingconcernbasis.TheDirectorshaveprepareddetailedoperatingandcashflowforecasts,whichcoveraperiodofmorethan12monthsfromthedateofapprovalofthesefinancialstatements.TheseshowthattheGrouphasadequatefundsfortheforeseeablefuturetomeetitsliabilitiesastheyfalldue.

TheGroupisfinancedthroughtwowholebusinesssecuritisations,thePunchASecuritisation(£1,400mofgrossdebtsecuredagainst2,194pubs)andthePunchBSecuritisation(£834mofgrossdebtsecuredagainst1,551pubs),aswellascertaincashresourcesheldacrosstheGroup.At23August2014,theGroup’sliquiditypositionwasstrongwith£316mofcashresources(ofwhich£65mwasheldoutsideofthesecuritisationstructures,excludingsupplycompanyandEmployeeBenefitTrustcash).

Asatthe23August2014theGroupbenefittedfromcovenantwaiverswhichwereapprovedbynoteholderson18July2014 and,assuch,wasnotinbreachofanyofthefinancialcovenantsinitssecuritisationarrangements.

Onthe8October2014theGroupannouncedthesuccessfulcompletionoftherestructuringofitssecuritisationarrangementsincludingtheresettingofitsfinancialcovenants.TheDirectorsofPunchTavernsplcbelievethatthecompletionoftherestructuringcreatesarobustandsustainablelongtermdebtstructurefortheGroup,witha£0.6bnreductionintotalnetdebt(includingmark-to-marketinterestrateswaps).

FurtherdetailsofthedebtstructureofthePunchAandPunchBsecuritisationsfollowingcompletionoftherestructuringcanbeseeninnote33:Postbalancesheetevent.

FurtherinformationinrelationtotheGroup’sbusinessactivities,togetherwiththefactorslikelytoaffectitsfuturedevelopment,performanceandpositionissetoutintheOperatingreviewonpages8and9andOurrisksanduncertaintiesonpages14and15.

ThefinancialpositionoftheGroup,itscashflows,liquiditypositionandborrowingsaredescribedintheFinancialreviewon pages6and7andinnotes18,21and22,togetherwithinformationontheGroup’sstrategiessurroundingmanaginginterest raterisk,liquidityrisk,capitalriskandcreditrisk.

TheGroupandCompanyfinancialstatementsarepresentedinsterlingandallvaluesareroundedtothenearesthundredthousandpounds,exceptwhereindicated.

New standards, interpretations and amendments to existing standardsTheIASBandIFRIChaveissuedthefollowingstandards,interpretationsandamendmentswhichhavebeenendorsedbytheEU:

EffectivefortheGroupandtheCompanyinthesefinancialstatements:• AmendmenttoIAS19‘Definedbenefitplans’–effectivefrom1January2013• IFRS13‘Fairvaluemeasurement’–effectivefrom1January2013.

TheaboveamendmentstopublishedstandardshavehadnomaterialimpactontheresultsorthefinancialpositionoftheGroup ortheCompanyforthe53weeksended23August2014.

EffectivefortheGroupandtheCompanyforthenextfinancialyear:• IFRS10‘Consolidatedfinancialstatements’–effectivefrom1January2014• IFRS11‘Jointarrangements’–effectivefrom1January2014• IFRS12‘Disclosureofinterestsinotherentities’–effectivefrom1January2014


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1. Accounting policies continued

IAS 19R restatementTheGroupiscomplyingwiththeamendmenttoIAS19‘EmployeeBenefits’.UnderpreviousIAS19theinterestcostandtheexpectedreturnonassetswereshownwithinfinancecostsandfinanceincomerespectively.AsaresultoftheamendmenttheGroupnowrecognisesasinglenetinterestcostorincomewhichiscalculatedonthenetdefinedbenefitliabilitybyapplyingthediscountratetothenetdefinedbenefitliability.Thedifferencebetweentheactualreturnonplanassetsandinterestincome,togetherwithactuarialgainsandlosses,areincludedwithinremeasurementsofdefinedbenefitliabilitywhicharerecognised inthestatementofcomprehensiveincome.

Therestatementsintheyearended17August2013comprisethereversalofpensionfinanceincomeof£2.9mandthepensionfinancecostof£2.5m,tobereplacedbyanetpensioninterestcostof£nil.Theassociatedincometaxhasbeenrestatedaccordingly.Actuariallossesrecognisedintheconsolidatedstatementofcomprehensiveincomeof£4.4mhavebeenrestated intoaremeasurementlossof£4.0mwiththeassociatedincometaxalsorestated.Asaresultofthisrestatement,basicanddilutedearningspersharehasreducedby0.9pto62.2p.

TherevisedstandardhashadtheeffectofreducingtheGroup’sprofitaftertaxby£0.3mandincreasesothercomprehensiveprofitsbythesameamount.

Therevisedstandardstipulatesthatremeasurementgainsandlossesarerecognisedimmediatelyintheperiodswhichtheyoccur.TheGroupalreadyadoptedthispolicyandthereforetherearenochangestotheconsolidatedbalancesheetorconsolidated cashflowstatement.

Inthecurrentyear,therevisedstandardhashadtheeffectofreducingtheGroup’sprofitaftertaxby£0.6mandincreasingtheremeasurementlossbythesameamount.

Basis of consolidationConsolidatedfinancialstatementscomprisethefinancialstatementsoftheparentcompany(PunchTavernsplc)andallofitssubsidiaries.

TheGroup’sinterestsinitsjointventuresareincorporatedinthefinancialstatementsusingtheequitymethodofaccounting.

SubsidiariesareconsolidatedfromthedateonwhichcontrolistransferredtotheGroupandceasetobeconsolidatedfromthedateonwhichcontrolistransferredoutoftheGroup.Investmentsinsubsidiariesarecarriedatcostlessanyimpairmentinvalue inthefinancialstatementsoftheCompany.Investmentsinjointventuresarecarriedatcostpluspost-acquisitionchangesintheGroup’sshareofaccumulatedcomprehensiveincome,lessdistributionsreceivedandlessanyimpairmentinvalue.

OtherinvestmentsinwhichtheGrouphasaninterestarerevieweddependentonhowmuchcontroltheGrouphas.IftheGroupmaintainsday-to-daycontrolovertheinvestment,theinvestmentistreatedasasubsidiaryandtheresultsandpositionareconsolidated into the Group financial statements.

Allintra-groupbalancesandtransactions,includingunrealisedprofitsarisingfromintra-grouptransactions,areeliminatedinfull.Unrealisedlossesareeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.

GoodwillGoodwillonacquisitionisinitiallymeasuredatcost,beingtheexcessofthefairvalueoftheconsiderationofthebusinesscombinationoverthefairvalueoftheGroup’sshareoftheidentifiableassets,liabilitiesandcontingentliabilities.Followinginitialrecognition,goodwillismeasuredatcostlessanyaccumulatedimpairmentlosses.Whereasignificantlevelofassetsaretransferredbetweensegmentsordisposed,thegoodwillattributabletotheseassetsisalsotransferredorchargedtotheincomestatement,respectively.

Goodwillcarriedinthebalancesheetisnotamortised.Goodwillisreviewedforimpairmentannuallyormorefrequentlyifevents orchangesincircumstancesindicatethatthecarryingvaluemaybeimpaired.

Ifthecostofacquisitionislessthanthefairvalueofthenetidentifiableassets,liabilitiesandcontingentliabilitiesofthesubsidiaryacquired,thegainisrecognisedimmediatelyintheincomestatement.


Notes to the financial statements continuedforthe53weeksended23August2014


Operating leases and other intangible assetsThefairvaluesattachedtooperatingheadleaseholdinterestsonacquisitionsaredeemedtorepresentleasepremiums,andarecarriedasintangibleassets.Theseoperatingleasestogetherwithotherintangibleassetsarecapitalisedatcost.Amortisationischargedtotheincomestatementonastraight-linebasisovertheestimatedusefullivesofintangibleassets.Theestimatedusefullivesareasfollows:

Operating leasesOverthetermofthelease

Software 3to10years

Paymentsmadeonenteringintooracquiringoperatingleasesareaccountedforasintangibleassetsandamortisedovertheleasetermonastraight-linebasis.

Property, plant and equipmentPropertiesheldat22August2004,thedateoftransitiontoIFRS,wererevaluedatthatdateandthisrevaluationisthedeemed costunderIFRS.

Landlord’sfixturesandfittingsincluderemovableitems,whicharegenerallyregardedaswithinlandlordownership.Thesearedepreciatedinaccordancewiththepolicydetailedbelow.

Property,plantandequipmentassetsarecarriedatcostordeemedcostlessaccumulateddepreciationandanyrecognisedimpairmentinvalue.Depreciationisprovidedtowriteoffthecostofproperty,plantandequipment,lessestimatedresidualvalues,byequalannualinstalmentsasfollows:

Licensed properties, unlicensed properties and owner-occupied properties50yearsorthelifeoftheleaseifshorter

Landlord’s fixtures and fittings, office furniture and fittings and motor vehicles5years

Information technology equipment3to5years

Freehold land is not depreciated.

Anannualassessmentofresidualvaluesisperformedandthereisnodepreciableamountifresidualvaluesarethesameas,ormorethan,bookvalue.Residualvaluesarebasedontheestimatedamountthatwouldbecurrentlyobtainablefromdisposal oftheassetnetofdisposalcostsiftheassetwerealreadyoftheageandconditionexpectedattheendofitsusefullife.

Impairment Assetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyforimpairmentifeventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Assetsthataresubjecttodepreciationoramortisationarereviewedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable.Areviewforindicatorsofimpairmentisperformedannually.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.Anyimpairmentchargeisrecognisedintheincomestatementintheyearinwhichitoccurs.When animpairmentloss,otherthananimpairmentlossongoodwill,subsequentlyreversesduetoachangeintheoriginalestimate,thecarryingamountoftheassetisincreasedtotherevisedestimateofitsrecoverableamount,uptothecarryingamountthatwouldhaveresulted,netofdepreciation,hadnoimpairmentlossbeenrecognisedfortheassetinprioryears.


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ProvisionsProvisionsarerecognisedwhentheGrouphasapresentlegalorconstructiveobligationtotransfereconomicresourcesasaresultofpastevents.

Provisionsaremeasuredatmanagement’sbestestimateoftheexpenditurerequiredtosettlethepresentobligationatthebalancesheetdate.Provisionsarediscountediftheeffectofthetimevalueofmoneyismaterial.Thediscountrateusedtodeterminethepresentvaluereflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheliability.

BorrowingsAllloansandborrowingsareinitiallyrecognisedatthefairvalueoftheconsiderationreceivednetofissuecostsassociatedwith theborrowings.

Afterinitialrecognition,interestbearingloansandborrowingsaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestratemethod.Amortisedcostiscalculatedtakingaccountofanyissuecosts,andanydiscountsorpremiumsonsettlement.

Gainsandlossesarerecognisedintheincomestatementwhentheliabilitiesarederecognised,aswellasthroughtheamortisationprocess.

Whendebtispurchasedfromthemarket,aprofitorlossisrecognisedatthepointofpurchase.Thedebtisthenheldatamortisedissuevalueuntilitiscancelled.

Equity instrumentsEquityinstrumentsissuedbytheCompanyarerecordedatthefairvalueoftheproceeds,netofdirectissuecosts.

TaxationIncometaxexpensecomprisesboththeincometaxpayable,basedontaxableprofitsfortheyear,anddeferredtax.

Deferredtaxisprovidedonalltemporarydifferencesatthebalancesheetdatebetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsexceptwherethedeferredtaxliabilityarisesfromtheinitialrecognitionofgoodwillorwherethedeferredtaxassetorliabilityarisesonanassetorliabilityinatransactionwhichisnotabusinesscombinationthatatthetimeofthetransactionaffectsneitheraccountingnortaxableprofitorloss.Deferredtaxassetsarerecognisedforalldeductibletemporarydifferences,carry-forwardofunusedtaxassetsandunusedtaxlosses,totheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferences,carry-forwardofunusedtaxassetsandunusedtaxlossescanbeutilised.

Deferredtaxiscalculatedusingtaxratesthatareexpectedtoapplyintheperiodwhentheliabilityissettledortheassetisrealised,basedontaxrates(andtaxlaws)thathavebeenenactedorsubstantivelyenactedatthebalancesheetdate.Movementsindeferredtaxarechargedorcreditedintheincomestatement,exceptwheretheyrelatetoitemschargedorcrediteddirectlytoequity,inwhichcasethedeferredtaxisalsodealtwithinequity.

Deferredtaxbalancesarenotdiscounted.

Leasing Leasesofproperty,plantandequipment,wheretheGrouphassubstantiallyalltherisksandrewardsofownership,areclassified asfinanceleases.Financeleasesarecapitalisedattheinceptionoftheleaseatthefairvalueoftheleasedassetor,iflower,thepresentvalueoftheminimumleasepayments.Acorrespondingliabilityisincludedinthebalancesheetasafinanceleaseobligation.Leasepaymentsareapportionedbetweenthefinancechargesandreductionoftheleaseliabilitytoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Financechargesarechargeddirectlyagainstincome.

Capitalisedleasedassetsaredepreciatedovertheshorteroftheestimatedusefullifeoftheassetortheleaseterm.

Leaseswherethelessorretainssubstantiallyalltherisksandbenefitsofownershipoftheassetareclassifiedasoperatingleases.Operatingleasepaymentsarerecognisedasanexpenseintheincomestatementonastraight-linebasisovertheleaseterm.

Paymentsmadeonenteringintooracquiringoperatingleasesareaccountedforasintangibleassetsandamortisedovertheleasetermonastraight-linebasis.




PensionsTheGroupoperatesonedefinedbenefitschemewhichrequirescontributionstobemadetoseparatelyadministeredfunds.TheassetorliabilityrecognisedinthebalancesheetinrespectoftheGroup’sdefinedbenefitarrangementsisthedifferencebetweenthefairvalueofschemeassetsandthepresentvalueofschemeliabilities.Anydefinedbenefitassetsarelimitedtothepresentvalueofeconomicbenefitsintheformofanyfuturerefundsfromtheschemeorreductionsinfuturecontributionstothescheme.Thecostofprovidingbenefitsundertheschemeisdeterminedusingtheprojectedunitcreditactuarialmethod.Thecurrentservicecostischargedtooperatingprofit.Asinglenetinterestcostorincome,whichiscalculatedonthenetdefinedbenefitliabilitybyapplyingthediscountratetothenetdefinedbenefitliability,isshowninfinancecostsandfinanceincomeasappropriate.ThecumulativenetdeficitsonthisdefinedbenefitpensionschemehavebeenrecognisedinfullinequityatthedateoftransitiontoIFRSandthedifferencebetweentheactualreturnonplanassetsandinterestincome,togetherwithactuarialgainsandlosses, areincludedwithinremeasurementsofdefinedbenefitliabilitywhicharerecognisedinthestatementofcomprehensiveincome.

TheGroupalsocontributestomoneypurchasepensionplansforemployees.Contributionsarechargedtotheincomestatement astheybecomepayable.

Accounting for derivative financial instruments and hedging activities TheGroupusesderivativefinancialinstrumentssuchasinterestrateswapstohedgeitsriskassociatedwithinterestratefluctuations.Suchderivativefinancialinstrumentsareinitiallyaccountedforandsubsequentlyre-measuredtofairvalue.Thefairvalueoftheinterestrateswapcontractsisdeterminedbyreferencetomarketvaluesforsimilarinstruments.

Themethodofrecognisingtheresultinggainorlossdependsonwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.Forthepurposesofhedgeaccounting,hedgesareclassifiedaseitherfairvaluehedgeswhentheyhedgetheexposuretochangesinthefairvalueofarecognisedassetorliability,orcashflowhedgeswheretheyhedgeexposuretovariabilityinforecasttransactions.

TheGroupdocumentsattheinceptionofthetransactiontherelationshipbetweenthehedginginstrumentsandthehedgeditems,aswellasitsriskmanagementobjectiveandstrategyforundertakingvarioushedgetransactions.TheGroupalsodocumentsitsassessment,bothathedgeinceptionandonanongoingbasis,ofwhetherthederivativesthatareusedinhedgingtransactions arehighlyeffectiveinoffsettingchangesinfairvaluesorcashflowsofhedgeditems.

Cash flow hedgesTheeffectiveportionofchangesinthefairvalueofderivativesthataredesignatedasandqualifyascashflowhedgesarerecognisedinequity.Thegainorlossrelatingtotheineffectiveportionisrecognisedimmediatelyintheincomestatement.

Amountsaccumulatedinequityarerecycledintheincomestatementintheperiodswhenthehedgeditemwillaffectprofitorloss.

Hedgeaccountingisdiscontinuedwhenthehedginginstrumentexpiresorissold,terminatedorexercisedornolongerqualifies forhedgeaccounting.Atthatpointintime,anycumulativegainorlossonthehedginginstrumentrecognisedinequityiskeptinequityuntiltheforecastedtransactionoccurs.Ifahedgedtransactionisnolongerexpectedtooccur,thenetcumulativegainorlossrecognisedinequityistransferredtotheincomestatementimmediately.Thereplacementorrolloverofahedginginstrumentintoanotherhedginginstrumentisnotanexpiry,saleorterminationwheresuchreplacementorrolloverispartofthedocumentedhedging strategy.

Derivatives that do not qualify for hedge accountingChangesinfairvalueofanyderivativefinancialinstrumentsthatdonotqualifyforhedgeaccountingarerecognisedimmediately in the income statement.


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Share based payment transactionsAnumberofemployeesoftheGroup(includingDirectors)receiveanelementofremunerationintheformofsharebasedpaymenttransactions,wherebyemployeesrenderservicesinexchangeforsharesorrightsovershares(‘equity-settledtransactions’).

Equity-settledtransactionsaremeasuredatfairvalueatthedateofgrant.Thefairvalueoftransactionsinvolvingthegrantingofsharesisdeterminedbythesharepriceatthedateofgrant.Thefairvalueoftransactionsinvolvingthegrantingofshareoptions iscalculatedbyanexternalvaluerbasedonabinomialmodel,abetamodelortheBlack-Scholesmodeldependentuponthemostappropriatevaluationmodelfortheindividualscheme.Invaluingequity-settledtransactions,noaccountistakenofanyperformanceconditions,otherthanconditionslinkedtothepriceofthesharesofPunchTavernsplc(‘marketconditions’).

Thecostofequity-settledtransactionsisrecognised,togetherwithacorrespondingincreaseinequity,onastraight-linebasisoverthevestingperiodbasedontheGroup’sestimateofhowmanyoftheawardswilleventuallyvest.Noexpenseisrecognisedforawardsthatdonotultimatelyvest,exceptforawardswherevestingisconditionaluponamarketcondition,whicharetreatedasvestingirrespectiveofwhetherornotthemarketconditionissatisfied,providedthatallotherperformanceconditionsaresatisfied.

Wherethetermsofanequity-settledawardaremodified,asaminimum,anexpenseisrecognisedasifthetermshadnotbeenmodified.Inaddition,anexpenseisrecognisedforanyincreaseinthevalueofthetransactionasaresultofthemodification, as measured at the date of the modification.

Whereanequity-settledawardiscancelled,itistreatedasifithadvestedonthedateofcancellationandanyexpensenotyetrecognisedfortheawardisrecognisedimmediately.However,ifanewawardissubstitutedforthecancelledaward,anddesignatedasareplacementawardonthedatethatitisgranted,thecancelledandnewawardsaretreatedasiftheywere amodificationtotheoriginalaward,asdescribedinthepreviousparagraph.Thedilutiveeffectofoutstandingoptionsisreflected as additional share dilution in the computation of earnings per share.

RevenueRevenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableandrepresentsamountsreceivableforgoodsandservicesprovidedinthenormalcourseofbusiness,netofdiscountsandVAT.AlloperationstakeplacesolelyintheUnitedKingdom.

Drink sales Revenueinrespectofdrinksalesisrecognisedatthepointatwhichthegoodsareprovided,netofanydiscountsorvolumerebatesallowed.

Rents receivable Rentsreceivablearerecognisedonastraightlinebasisovertheleaseterm.

Machine incomeTheGroup’sshareofnetmachineincomeisrecognisedintheperiodtowhichitrelates.

Trade and other receivablesTradereceivablesarerecognisedandcarriedatoriginalinvoiceamountlessanallowanceforanyuncollectibleamount.Anestimatefordoubtfuldebtsismadewhencollectionofthefullamountisnolongerprobable.Receivablesarewrittenoffagainstthedoubtfuldebtprovisionwhenmanagementdeemsthedebttobenolongerrecoverable.

Cash and cash equivalentsCashandcashequivalentsinthebalancesheetcomprisecashatbankandinhandandshorttermdepositswithanoriginalmaturity of three months or less.

Non-current assets classified as held for saleNon-currentassetsclassifiedasheldforsalearemeasuredatthelowerofcarryingamountandfairvaluelesscoststoselland are not depreciated.

Non-currentassetsanddisposalgroupsareclassifiedasheldforsaleiftheircarryingamountwillberecoveredthroughasaletransactionratherthanthroughcontinuinguse.Thisconditionisregardedasmetonlywhenthesaleishighlyprobableandtheassetisavailableforimmediatesaleinitspresentcondition.Managementmustbecommittedtothesaleandcompletionshould beexpectedwithinoneyearfromthedateofclassification.




Other investmentsOtherinvestments,suchasholdingsinsharesinothercompanies,areheldatfairvalue,andanymovementsinthefairvalue aretakentotheincomestatementintheperiodtheyoccur.

Dividend distributionFinaldividendsarerecognisedasaliabilityintheGroup’sandtheCompany’sfinancialstatementsintheperiodinwhichthedividendsareapprovedbytheCompany’sshareholders.Interimdividendsarerecognisedwhentheyarepaid.

Non-underlying itemsInordertoprovideatrendmeasureofunderlyingperformance,profitispresentedexcludingitemswhichmanagementconsiderwilldistortcomparability,eitherduetotheirsignificantnon-recurringnatureorasaresultofspecificaccountingtreatments.Furtherdetailonthenatureofnon-underlyingitemsisincludedinnote6.

Significant accounting estimates and judgementsThepreparationoffinancialstatementsrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilities,disclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.

Onanongoingbasis,managementevaluatesitsestimatesandjudgementsincludingthoserelatingtoincometaxes,deferredtax,financialinstruments,property,plantandequipment,goodwill,intangibleassets,valuations,provisionsandpost-employmentbenefits.

Managementbasesitsestimatesandjudgementsonhistoricalexperienceandonvariousotherfactorsthatarebelievedtobereasonableunderthecircumstances,theresultsofwhichformthebasisformakingjudgementsaboutthecarryingvalueofassetsandliabilitiesthatarenotreadilyavailablefromothersources.Actualresultsmaydifferfromtheseestimatesunderdifferentassumptions and conditions.

Theestimatesandjudgementsthathaveasignificanteffectontheamountsrecognisedinthefinancialstatementsaredetailedbelow.

Goodwill impairmentTheGroupassesseswhethergoodwillisimpairedonatleastanannualbasis.Therecoverableamountsofthecashgenerating units(CGUs)towhichgoodwillhasbeenallocatedisdeterminedbasedonvalue-in-usecalculations.Thesecalculationsrequireassumptionstobemaderegardingfuturecashflowsandthechoiceofasuitablediscountrateinordertocalculatethepresentvalueofthosecashflows.Theseassumptionsaredisclosedinnote14.Actualoutcomescouldvaryfromtheseestimates.

Impairment of property, plant and equipment and operating leasesProperty,plantandequipmentandoperatingleasesarereviewedforimpairmentifcircumstancessuggestthatthecarryingamountmaynotberecoverable.Recoverableamountsaredeterminedbasedonvalue-in-usecalculationsandestimatedsaleproceeds.Thesecalculationsrequireassumptionstobemaderegardingfuturecashflowsandthechoiceofasuitablediscountrateinordertocalculatethepresentvalueofthosecashflows.Theseassumptionsaredisclosedinnote14.Actualoutcomesmayvaryfromthese estimates.

Post-employment benefitsThepresentvalueofdefinedbenefitpensionschemeliabilitiesisdeterminedonanactuarialbasisanddependsonanumber ofactuarialassumptionswhicharedisclosedinnote29.Anychangeintheseassumptionscouldimpactthecarryingamountsofpensionliabilities.

Onerous lease provisions TheGroupprovidesforitsonerousobligationsunderoperatingleaseswherethepropertyisclosedorvacantandforpropertieswhererentalexpenseisinexcessofincome.Theestimatedtimingsandamountsofcashflowsaredeterminedusingtheexperienceofinternalpropertyexperts;however,anychangestotheestimatedmethodofexitingfromthepropertycouldleadtochanges totheleveloftheprovisionrecorded.


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Effectiveness of cash flow hedgesTheGroupperformsanassessmentoftheprobabilityoffuturecashflowsonthefloatingratenotesandrelatedinterestrateswaps.Wherefutureexpectedhedgedcashflowsareexpectedtostillbehighlyprobable,theGroupcontinuestoaccountfortheseaseffectivecashflowhedges,withtheeffectiveportionbeingrecognisedinequity.Wherefutureexpectedcashflows aredeemednottobehighlyprobablebutarestillexpectedtooccur,theGroupdiscontinueshedgeaccountingfromthedateoftheassessment.Fromthisdate,allmovementsinthefairvalueofthecashflowhedgesarerecognisedintheincomestatement.Wherefutureexpectedcashflowsaredeemedtonolongerbeexpectedtooccur,theGroupdiscontinueshedgeaccountingfromthisdateandrecyclestheexistingaccumulatedamountsinequityintheincomestatement.Fromthisdateallfuturemovementsinthefairvalueofthecashflowhedgesarerecognisedintheincomestatement.

Theimplicationsofadebtrestructuringofthesecuritisationarrangementshavebeenconsideredwithregardstothecontinuedeffectivenessofhedgeaccountingfortheinterestrateswapsandalsoinrelationtowhetherthehedgereserveshouldberecycledthroughtheincomestatement.AsaresultofthecapitalrestructuringproposalstheinterestrateswaprelatingtothePunchB C1loannoteandthePunchAB3,D1andM2(N)loannoteswerereclassifiedasanineffectivecashflowhedge,anditshedgereservebalancewasrecycledthroughtheconsolidatedincomestatementaccordingly.

Authorisation of financial statementsTheGroup’sandCompany’sfinancialstatementsofPunchTavernsplcfortheperiodended23August2014wereauthorisedforissuebytheBoardofDirectorson11November2014andthebalancesheetsweresignedontheBoard’sbehalfbyStephenBillinghamandSteveDando.

Corporate informationPunchTavernsplcisapubliclimitedcompanyincorporatedanddomiciledinEngland.TheCompany’ssharesarelistedontheLondonStockExchange.

2. Segmental analysis

ThePunchbusinessconsistsofacoreestateandanon-coreestate,eachhavingitsownclearstrategy.Eachofthesestrategicbusinessunitsconsistsofanumberofcashgeneratingunits(CGUs),whichareindividualpubs.TheseCGUsgeneratetheirownrevenues,whichareconsolidatedtogivetheGrouprevenueandasaresult,Grouprevenueisnotreliantononesignificantcustomer.

TheChiefOperatingDecisionMaker,representedbytheBoard,reviewstheperformanceofthecoreandnon-coredivisionsseparately,atanunderlyingEBITDAlevel,asincludedintheinternalmanagementreports.

TheGroupoperatessolelyintheUnitedKingdom. 53 weeks to 23 August 2014

Core£m

Non-core£m

Unallocated£m

Total£m

Drinkrevenue 275.4 50.8 – 326.2Rental income 96.4 14.5 – 110.9Otherrevenue 8.2 2.8 – 11.0Underlyingrevenue 380.0 68.1 – 448.1Underlying operating costs1 (173.8) (38.7) (37.0) (249.5)Shareofpost-taxprofitfromjointventure – – 6.2 6.2EBITDA before non-underlying items 206.2 29.4 (30.8) 204.8Underlying depreciation and amortisation (11.0)Operatingnon-underlyingitems (71.0)Netfinancecosts (336.6)Movementinfairvalueofinterestrateswaps (26.4)UKincometaxcredit 65.1Loss for the financial period attributable to owners of the parent company (175.1)

1 Unallocatedunderlyingoperatingcostsrepresentcorporateoverheadsthatarenotallocateddowntothedivisionalperformance.



2. Segmental analysis continued 52weeksto17August2013

Core£m

Non-core£m

Unallocated£m

Total(Restated)

£m

Drinkrevenue 262.1 67.3 – 329.4Rental income 96.4 21.0 – 117.4Otherrevenue 7.4 3.4 – 10.8Underlyingrevenue 365.9 91.7 – 457.6Underlying operating costs1 (164.5) (48.6) (33.7) (246.8)Shareofpost-taxprofitfromjointventure – – 4.8 4.8EBITDA before non-underlying items 201.4 43.1 (28.9) 215.6Underlying depreciation and amortisation (12.3)Operatingnon-underlyingitems (11.8)Netfinancecosts (191.3)Movementinfairvalueofinterestrateswaps 16.4UKincometaxcredit 4.1Profit for the financial period attributable to owners of the parent company 20.7

1 Unallocatedunderlyingoperatingcostsrepresentcorporateoverheadsthatarenotallocateddowntothedivisionalperformance.

Assets and liabilities 23 August 2014

Core£m

Non-core£m

Unallocated£m

Total£m

Segment assets 2,293.6 241.4 8.8 2,543.8Unallocated assets – – 717.1 717.1Totalassets 2,293.6 241.4 725.9 3,260.9Segmentliabilities – – – –Unallocatedliabilities – – (2,987.2) (2,987.2)Totalliabilities – – (2,987.2) (2,987.2)Net assets / (liabilities) 2,293.6 241.4 (2,261.3) 273.7

17August2013Core

£mNon-core

£mUnallocated

£mTotal

£m

Segment assets 2,275.2 366.7 13.8 2,655.7Unallocated assets – – 736.4 736.4Totalassets 2,275.2 366.7 750.2 3,392.1Segmentliabilities – – – –Unallocatedliabilities – – (3,096.5) (3,096.5)Totalliabilities – – (3,096.5) (3,096.5)Net assets / (liabilities) 2,275.2 366.7 (2,346.3) 295.6


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2. Segmental analysis continued

Capital expenditure 23 August 2014

Core£m

Non-core£m

Unallocated£m

Total£m

Acquisitionspend – – – –Investmentspend 42.6 4.6 5.2 52.4Total capital expenditure 42.6 4.6 5.2 52.4

17August2013Core

£mNon-core

£mUnallocated

£mTotal

£m

Acquisitionspend – – – –Investmentspend 49.2 5.3 3.0 57.5Total capital expenditure 49.2 5.3 3.0 57.5

Therearenosalesbetweenthesegments.Segmentassetsincludeproperty,plantandequipment,operatingleases,non-currentassetsclassifiedasheldforsaleandgoodwillandexcludeotherintangibleassets,receivables,cash,restrictedcash,taxation,investmentsinjointventuresandotherinvestments,whilstallliabilitiesareunallocated.

Atthestartofthefinancialperiod116pubswithabookvalueof£43.9mweretransferredfromthenon-coreestatetothe core estate.

3. Analysis of expenses

Thefollowingitemshavebeenincludedinarrivingatoperatingprofit/(loss): 53 weeks to

23 August 2014

£m

52weeksto 17 August

2013£m

Drinkcosts 186.1 191.5Leaseholdrentals 8.7 8.6Shareofpost-taxprofitfromjointventure (6.2) (4.8)Depreciation 8.2 11.2Amortisation 2.8 1.1Impairmentlosses 50.8 10.2Goodwill charge 3.6 3.8Profitonsaleofproperty,plantandequipmentandnon-currentassetsclassifiedasheldforsale (10.7) (10.5)Other costs 82.0 55.0Total costs deducted from revenue to determine operating profit1 325.3 266.1

1 Non-underlyingcostsof£27.3mareincludedwithinothercostsabove(August2013:£8.3m).



3. Analysis of expenses continued

Auditorremunerationisasfollows: 53 weeks to

23 August 2014

£m

52weeksto 17 August

2013£m

Audit services Statutory audit of Group financial statements 0.2 0.2Statutoryauditofsubsidiarycompaniespursuanttolegislation – –

Audit related services1 0.5 0.1

Non-audit related servicesOtherservices – –

1 Relatestorestructuringfees£0.5m(August2013:£0.1m).

Theaccountsoftheparentcompanydonotincludedetailsofremunerationreceivablebytheauditoranditsassociatesfornon-auditservices,astheGroupaccountsarerequiredtoincludethisinformationasrequiredbyRegulation5(1)(b)ofTheCompanies(DisclosureofAuditorRemunerationandLiabilityLimitationAgreements)Regulations2008onaconsolidatedbasis.

4. Finance income


2014 £m

52weeksto 17 August

2013(Restated)

£m

Bankinterestreceivable 6.5 7.0Loannoteredemptions 29.9 –Non-underlyingfinanceincome(note6) 3.3 3.3Total finance income 39.7 10.3

5. Finance costs


2014 £m

52weeksto 17 August

2013(Restated)

£m

Interestpayableonloannotes1 158.8 159.1Interestpayableonfinanceleases 0.2 0.1Netpensioninterestcosts 0.4 0.3Amortisation of deferred issue costs 1.6 1.6Effectofunwindingdiscountedprovisions 0.6 0.6Non-underlyingfinancecosts(note6) 214.7 39.9Total finance costs 376.3 201.6

1 Interestpayableonloannotesisnetof£5.4mcredit(August2013:£5.5mcredit)fortheamortisationoffairvalueadjustmentsand£2.6mnetcredit (August2013:£2.3mnetcredit)forinterestrateswaps,allofwhichrelatestofinancialliabilitiesnotatfairvaluethroughprofitorloss.


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6. Non-underlying items

Inordertoprovideatrendmeasureofunderlyingperformance,profitispresentedexcludingitemswhichmanagementconsiderwilldistortcomparability,eitherduetotheirsignificantnon-recurringnatureorasaresultofspecificaccountingtreatments.Includedintheincomestatementarethefollowingnon-underlyingitems:


2014 £m

52weeksto17 August

2013£m

Operating non-underlying itemsCapitalrestructuring,redundancyandotherrelatedone-offcosts (27.3) (8.3)Profitonsaleofproperty,plantandequipmentandnon-currentassetsclassifiedasheldforsale 10.7 10.5Impairmentlosses(note14) (50.8) (10.2)Goodwill charge1 (3.6) (3.8)

(71.0) (11.8)Finance incomeMovementinfairvalueofprovisionforshareschemesettlement2(note24) 3.3 1.6MovementinfairvalueofSpiritsharesheld3(note13) – 1.7

3.3 3.3Finance costsLossonsaleofsharesheldintrust (0.3) (0.8)Recyclingofhedgereserve4 (214.4) (39.1)

(214.7) (39.9)

Movement in fair value of interest rate swaps5 (26.4) 16.4

Total non-underlying items before tax (308.8) (32.0)TaxTaximpactofnon-underlyingitems 72.4 16.2Adjustmentstotaxinrespectofpriorperiods 0.9 (1.3)

73.3 14.9Total non-underlying items after tax (235.5) (17.1)

1 Representsthegoodwillrelatingtothosecorepubsdisposedofintheperiod.2Representsmovementinfairvalueofsharesheldtosettlefutureshareschemesandreleaseofprovisionforshareschemes.3Representsmovementinfairvalueofsharesheldasaninvestment.4RepresentstherecyclingofthehedgereserverelatingtothePunchAB3,D1&M2(N)interestrateswapsfollowingitsreclassificationasineffectiveduring

thefinancialperiod(August2013:PunchBC1interestrateswap),duetotheannouncementofthecapitalrestructuringproposals.5Representsthemovementinthefairvalueofinterestrateswapswhichdonotqualifyforhedgeaccounting.

7. Employees and Directors

Thestaffcostsaresetoutbelow: 53 weeks to

23 August 2014

£m

52weeksto 17 August

2013£m

Wages and salaries 17.5 17.6Social security costs 2.0 2.0Sharebasedpayments 0.3 0.3Other pension costs 1.3 1.3

21.1 21.2

TheaveragenumberofemployeesemployedbytheGroupduringtheperiodwasasfollows: 53 weeks to

23 August 2014

52weeksto 17 August

2013

Management and administration1 425 451

1 Employeenumbersrelatetoactualemployeesratherthanfulltimeemployeeequivalents.

TheDirectorsareremuneratedbytheCompany.

Directors’emolumentsaredisclosedintheReportonDirectors’remunerationonpages28to38.



8. Taxation

(a) Tax on profit on ordinary activities

Tax charged / (credited) in the income statement 53 weeks to 23 August 2014 52weeksto17August2013(Restated)

Underlying£m

Non-underlying

£mTotal

£mUnderlying

£m

Non-underlying

£mTotal

£m

Current tax UKcorporationtax–currentperiod 7.4 (7.4) – 2.0 (2.0) –UKcorporationtax–adjustmentsinrespectofpriorperiods – (2.3) (2.3) – (0.9) (0.9)

7.4 (9.7) (2.3) 2.0 (2.9) (0.9)Deferred tax (note 17)Originationandreversaloftemporarydifferences – current period 0.8 (65.0) (64.2) 8.8 (14.2) (5.4)Originationandreversaloftemporarydifferences –adjustmentsinrespectofpriorperiods – 1.4 1.4 – 2.2 2.2

0.8 (63.6) (62.8) 8.8 (12.0) (3.2)Total tax charge / (credit) 8.2 (73.3) (65.1) 10.8 (14.9) (4.1)

Tax on items credited to equityInadditiontotheamountcreditedtotheincomestatement,taxmovementsrecogniseddirectlyinequitythroughtheconsolidatedstatementofcomprehensiveincomewereasfollows:


2014 £m

52weeksto 17 August

2013£m

Deferred taxDeferredtaxcreditonlossonactuarialvaluationofpensionschemes (0.3) (0.9)Deferredtaxchargeoneffectiveelementofcashflowhedges 53.2 28.1Deferred tax charge recognised directly in equity 52.9 27.2

(b) Reconciliation of the total tax chargeTheeffectiverateoftaxisdifferenttothefullrateofcorporationtax.Thedifferencesareexplainedbelow:


2014 £m

52weeksto 17 August

2013(Restated)

£m

(Loss)/profitonordinaryactivitiesbeforetax (240.2) 16.6TaxatcurrentUKtaxrateof22.22%(August2013:23.61%) (53.4) 3.9

Effects of:Neteffectofexpensesnotdeductiblefortaxpurposesandnon-taxableincome(underlyingitems) (6.9) (0.6)Adjustmentstotaxinrespectofpriorperiods(non-underlyingitems) (0.9) 1.3Currentperiodnon-underlyingcredits:–Changeinstandardrateoftax 1.2 (8.9)–(Incomenotchargeablefortaxpurposes)/expensesnotdeductiblefortaxpurposes (5.1) 0.2Total tax credit reported in the income statement (65.1) (4.1)

Detailsofthenon-underlyingtaxcreditsandchargesareincludedinnote6.


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9. Earnings per share

Basicearningspershareiscalculatedbydividingtheearningsattributabletoordinaryshareholdersbytheweightedaveragenumberofordinarysharesoutstandingduringtheyear,excludingthoseheldintheemployeesharetrust,whicharetreated as cancelled.

Dilutedearningspershareiscalculatedbydividingtheearningsattributabletoordinaryshareholdersbytheweightedaveragenumberofordinarysharesoutstandingduringtheyear(adjustedfortheeffectsofdilutiveoptions).

Theordinarysharesoutstandingduringtheyearhasbeenadjustedfortheimpactoftheconsolidationofordinarysharesasannouncedon13October2014followingsuccessfulcompletionofrestructuringproposals.Theexistingordinarysharesin PunchTavernsplchavebeenconsolidatedintoconsolidatedordinarysharesonthebasisofoneconsolidatedordinaryshareforevery20existingordinaryshares.AspartoftherestructuringproposalstheGrouphasissued3,771,151,200newordinaryshareson8October2014,priortotheshareconsolidation,whichhasnotbeenadjustedforasperIAS33:Earningpershare.Theadjustmenttoordinarysharesoutstandingimpactsthecurrentandpriorperiod.

Seealsonote33:Postbalancesheetevent.

Reconciliationsoftheearningsandweightedaveragenumberofsharesaresetoutbelow: 53 weeks to 23 August 2014

52weeksto 17August2013(Restated)

Earnings£m

Per share amount

penceEarnings

£m

Pershare amount

pence

Results attributable to ordinary shareholders:Basicearningspershare (175.1) (526.1) 20.7 62.2Dilutedearningspershare (175.1) (526.1) 20.7 62.2Supplementary earnings per share figures:Basicearningspersharebeforenon-underlyingitems 60.4 181.5 37.8 113.7Dilutedearningspersharebeforenon-underlyingitems 60.4 181.5 37.8 113.7

Theimpactofdilutiveordinarysharesistoincreaseweightedaveragesharesbynil(August2013:nil)foremployeeshareoptions.


2014 No. (m)

52weeksto 17 August

2013No.(m)

Basicweightedaveragenumberofshares 33.3 33.3Diluted weighted average number of shares 33.3 33.3

10. Dividends

Nodividendshavebeendeclaredandpaidduringthecurrentorprioryear.

TheDirectorswillnotbeproposingthepaymentofafinaldividend.



11. Property, plant and equipment

Land and buildings

£m

Public house fixtures

and fittings£m

Other assets

£mTotal

£m

Cost or deemed costAt 18 August 2012 2,695.9 72.0 16.0 2,783.9Additions 52.3 6.2 0.2 58.7Transferstonon-currentassetsclassifiedasheldforsale (108.0) (4.2) – (112.2)Disposals (79.2) (3.0) – (82.2)At17August2013 2,561.0 71.0 16.2 2,648.2Additions 46.7 5.2 0.2 52.1Transferstonon-currentassetsclassifiedasheldforsale (85.1) (2.3) – (87.4)Disposals (65.8) (1.5) – (67.3)At 23 August 2014 2,456.8 72.4 16.4 2,545.6

Accumulated depreciationAt 18 August 2012 252.4 52.9 14.7 320.0Charge for the year 4.4 6.2 0.6 11.2Impairmentlosses(note14) 10.2 – – 10.2Transferstonon-currentassetsclassifiedasheldforsale (62.6) (4.1) – (66.7)Disposals (21.5) (2.2) – (23.7)At17August2013 182.9 52.8 15.3 251.0Charge for the year 2.8 4.9 0.5 8.2Impairmentlosses(note14) 50.8 – – 50.8Transferstonon-currentassetsclassifiedasheldforsale (44.8) (2.3) – (47.1)Disposals (13.9) (0.8) – (14.7)At 23 August 2014 177.8 54.6 15.8 248.2

Net book value at 23 August 2014 2,279.0 17.8 0.6 2,297.4Netbookvalueat17August2013 2,378.1 18.2 0.9 2,397.2

Thecostofworkinprogresswithinproperty,plantandequipmentat23August2014was£16.6m(August2013:£13.2m). Workinprogressisnotdepreciated.

TheGroupleasesvariouslicensedproperties,officesandothercommercialpropertiesandotherassetsunderfinanceleases. Theleaseshavevariousterms,escalationclausesandrenewalrights.

Includedinproperty,plantandequipmentabovearemotorvehiclesheldunderfinanceleaseswithanetbookvalueof£nil (August2013:£0.1m)andpropertiesheldunderfinanceleaseswithanetbookvalueof£1.7m(August2013:£1.8m).

Includedinlandandbuildingsarepropertieswithanetbookvalueof£2,274.4m(August2013:£2,369.2m)overwhichtheGroup’sborrowingsaresecuredbywayoffixedandfloatingcharges.


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12. Goodwill, operating leases and other intangible assets

Operating leases

£m

Other intangible

assets£m

Goodwill£m

CostAt 18 August 2012 39.4 16.2 251.9Additions – 0.4 –Disposals (0.1) – (5.3)At17August2013 39.3 16.6 246.6Additions – 1.5 –Disposals (0.5) – (5.0)At 23 August 2014 38.8 18.1 241.6

AmortisationAt 18 August 2012 33.4 15.3 71.9Charge for the year 0.2 0.9 –Disposals (0.1) – (1.5)At17August2013 33.5 16.2 70.4Charge for the year 1.6 1.2 –Disposals (0.3) – (1.4)At 23 August 2014 34.8 17.4 69.0

Net book value at 23 August 2014 4.0 0.7 172.6Netbookvalueat17August2013 5.8 0.4 176.2

Includedwithinoperatingleasesarepropertieswithanetbookvalueof£3.7m(August2013:£4.1m)overwhichtheGroup’sborrowingsaresecuredbywayoffixedandfloatingcharges.

Otherintangibleassetsrelatetocomputersoftware.

13. Other investments£m

Spirit shares heldAt 18 August 2012 8.8Disposals (5.0)Movementinfairvalueofsharesheld(note6) 1.7At17August2013 5.5Disposals (5.5)At 23 August 2014 –



14. Impairment losses

Property, plant and equipment and operating leasesWhenanyindicatorsofimpairmentareidentified,includingthedifferencebetweenmarketcapitalisationandnetassetsofthebusiness,property,plantandequipmentandoperatingleasesarereviewedforimpairmentbasedoneachcash-generatingunit(CGU).TheCGUsareindividualpubs.ThecarryingvaluesoftheseindividualpubsarecomparedtotherecoverableamountoftheCGUs,whichisthehigherofvalueinuse(VIU)andfairvaluelesscoststosell(FVLCS).CashflowsusedintheVIUcalculationwerebasedonearningsbeforeinterestandtaxation,andusedtheforecastedcashflowsincludedwithintheGroupbusinessplanfor thefirstfiveyears,andthenthecashflowswereextrapolatedforafurther45years,applyingamultipleoftenastheterminalvalue(whichisbroadlyinlinewiththemostrecentpropertyvaluationoftheestate).Thepre-taxriskadjusteddiscountrateappliedtocashflowprojectionswas8%,beingtheGroup’sadjustedweightedaveragecostofcapital.Thegrowthrateappliedtocashflowsoverthe45yearperiodwas2%basedonanextrapolationofthefinaltwoyearsofthebusinessplan.

Followingafullvaluationofthenon-coreestateintheyear,theFVLCSoftheassetstransferringintothenon-currentassetsclassifiedasheldforsalecategory,andtheremainingassetsinthewidernon-coreestate,havebeenreviewed,andanimpairmentof£50.8m(17August2013:£10.2m)hasbeenidentified.TheFVLCSwasassessedonbothexternalandinternalvaluations.

Theimpairmentsrecognisedinthecurrentandpriorperiodsareasfollows:53 weeks to

23 August2014

£m

52weeksto17 August

2013£m

Property,plantandequipment 50.8 10.2 GoodwillGoodwillrepresentsthesynergisticbenefitsofoperatingalargepubestateandisallocatedtogroupsofCGUs.Theleasedestate isorganisedintotwogroupsofCGUs;coreandnon-core.Nogoodwillisallocatedtothenon-coreestategiventhelowvalueofthepropertiesintheestateandthelowlevelofsynergisticbenefits.

Duringthepriorfinancialperiod,areviewforimpairmentwascarriedoutontheremaininggoodwillallocatedtopubsinthe coreestate.Thisreviewcomparedthecarryingamountofthegoodwilltothenetrealisablevalue.CashflowsusedintheVIUcalculationwerebasedonearningsbeforeinterestandtaxation,andusedtheforecastedcashflowsincludedwithintheGroupbusinessplanforthefirstthreeyears,andthenthecashflowswereextrapolatedforafurther47years,applyingamultipleof tenastheterminalvalue(whichisbroadlyinlinewiththemostrecentpropertyvaluationoftheestate).Thepre-taxriskadjusteddiscountrateappliedtocashflowprojectionswas8%,beingtheGroup’sadjustedweightedaveragecostofcapital.Thegrowthrateappliedtocashflowsoverthe47yearperiodwas2%basedonanextrapolationofthefinaltwoyearsofthebusinessplan.Basedonthisreview,noimpairmentofgoodwillonthecoreestatewasidentified.

Duringthecurrentfinancialperiod,asimilarreviewforimpairmentwascarriedoutontheremaininggoodwillallocatedtopubsinthecoreestate.Thisreviewcomparedthecarryingamountofthegoodwilltothenetrealisablevalue.CashflowsusedintheVIUcalculationwerebasedonearningsbeforeinterestandtaxation,andusedtheforecastedcashflowsincludedwithintheGroupbusinessplanforthefirstfiveyears,andthenthecashflowswereextrapolatedforafurther45years,applyingamultipleoften astheterminalvalue(whichisbroadlyinlinewiththemostrecentpropertyvaluationoftheestate).Thepre-taxriskadjusteddiscountrateappliedtocashflowprojectionswas8%,beingtheGroup’sadjustedweightedaveragecostofcapital.Thegrowthrateappliedtocashflowsoverthe45yearperiodwas2%basedonanextrapolationofthefinaltwoyearsofthebusinessplan.Basedonthisreview,noimpairmentofgoodwillonthecoreestatewasidentified.

Whentestedindependently,neithera2%decreaseinthegrowthrateassumption,nora1%increaseinthediscountrateassumptionwouldhaveledtoimpairmentineitherthecurrentorpriorperiod.


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15. Investments in subsidiary undertakings and joint ventures

CompanyTotal

£m

At 18 August 2012 1,341.9Additions 0.3At17August2013 1,342.2Additions 0.2At 23 August 2014 1,342.4

Duringtheperiod,theCompanymadeacapitalcontributionof£0.2m(August2013:£0.3m)toitsimmediatesubsidiaryundertaking,PunchTaverns(PGE)Limited.

Detailsoftheprincipalsubsidiaryundertakingsandjointventuresat23August2014areasfollows:

Name of company Nature of business

Subsidiary undertakings owned directly:PunchTaverns(PGE)Limited Holding company

All of which are directly or indirectly wholly owned subsidiaries of Punch Taverns (PGE) Limited:PunchPartnerships(PGRP)Limited PuboperatingcompanyPunchPartnerships(PTL)Limited PuboperatingcompanyPunchPartnerships(PML)Limited PuboperatingcompanyPunchTaverns(Services)Limited IntermediatesupplycompanyPunchTavernsFinanceplc Financing companyPunchTavernsFinanceBLimited Financing companyPunchTaverns(Finco)Limited Financing companyPunchTaverns(PRAF)Limited Financing companyPunchTaverns(Offices)Limited Propertycompany

Joint ventures:MatthewClark(Holdings)Limited IntermediateholdingcompanyofMatthewClark

TheCompanyowns100%oftheordinarysharecapitaldirectlyorindirectlyandcontrols100%ofthevotingrightsofthecompanieslistedabove,withtheexceptionofMatthewClark(Holdings)Limited,ofwhichtheCompanyindirectlyowns50% oftheordinarysharecapitalandexercisesjointcontrol.

AllthecompanieslistedaboveareincorporatedinEnglandandWalesotherthanPunchTavernsFinanceBLimited,whichisincorporatedintheCaymanIslands.

Inadditiontothoseinvestmentslistedabove,theGroupalsomaintainsday-to-daycontroloverPunchTavernsplcGeneralEmployeeBenefitTrust,aTrustsetuppurelyforholdingsharesrelatedtosharebasedpaymentschemes.Althoughnocompany intheGroupownsanyshareseitherdirectlyorindirectlyinPunchTavernsplcGeneralEmployeeBenefitTrust,thefinancialstatementsarealsoconsolidatedintotheGroupfinancialstatementsinaccordancewithSIC12.

Exemptionhasbeentakentoexcludesubsidiaryundertakingswhoseresultsorfinancialpositiondonotprincipallyaffectthefinancialstatementsfromtheabovedisclosure.

16. Trade and other receivables

Group Company23 August

2014£m

17 August2013

£m

23 August 2014

£m

17 August2013

£m

Amounts falling due within one yearTradereceivables 23.5 25.0 – –Prepayments 9.6 9.6 – –Currentincometaxassets – – – 0.6Otherreceivables 0.9 0.9 – –

34.0 35.5 – 0.6Amounts falling due after more than one yearAmountsduefromgroupundertakings – – 1,445.8 1,253.7



17. Deferred tax

Themovementonthedeferredtaxaccountisasfollows:

Deferred tax Group Company

23 August 2014

£m

17 August2013

£m

23 August 2014

£m

17 August2013

£m

(Liabilities)/assetsatbeginningofperiod (22.0) 2.0 5.5 8.2Credited/(charged)toincomestatement(note8) 62.8 3.2 (3.3) (2.7)Chargedtoothercomprehensiveincome (52.9) (27.2) – –Deferred tax (liabilities) / assets at end of period (12.1) (22.0) 2.2 5.5

Themovementsindeferredtaxassetsandliabilitiesduringtheperiodareshownbelow:

Deferred tax assetsGroup

Tax losses£m

Retirement benefit

liabilities£m

Financial instruments

£mOther

£mTotal

£m

At 18 August 2012 9.4 0.6 81.3 3.6 94.9(Charged)/creditedtoincomestatement (3.0) (0.7) 1.3 (0.7) (3.1)Credited/(charged)toequity – 1.0 (28.1) – (27.1)At17August2013 6.4 0.9 54.5 2.9 64.7(Charged)/creditedtoincomestatement (0.9) (0.4) 57.4 (0.2) 55.9Credited/(charged)toequity – 0.3 (53.2) – (52.9)At 23 August 2014 5.5 0.8 58.7 2.7 67.7

Company Tax losses

£m

At 18 August 2012 8.2Charged to income statement (2.7)At17August2013 5.5Charged to income statement (0.9)At 23 August 2014 4.6

Deferred tax liabilitiesGroup

Accelerated capital

allowances£m

At 18 August 2012 92.9Credited to income statement (6.2)At17August2013 86.7Credited to income statement (6.9)At 23 August 2014 79.8

Atthebalancesheetdate,theGrouphasunusedtaxlossesof£30.2m(August2013:£34.5m)andunusedcapitallossesof£1,779.7m(August2013:£1,713.6m)availableforoffsetagainstfutureprofits.Adeferredtaxassethasbeenrecognisedinrespectof£27.9m(August2013:£32.1m)ofsuchlosses,whichareexpectedtobeutilisedagainstfutureprofitstreamswithintheGroup.Nodeferredtaxassethasbeenrecognisedinrespectoftheremaining£1,782.0m(August2013:£1,716.0m)oflossesdueto theunpredictabilityoffutureprofitstreams.Currentlegislationdeemsthattheselossesmaybecarriedforwardforanunlimitednumberofyears.Theavailabilityofsizeablecapitalallowancepoolsamountingtoc.£230mattheperiodendisexpected toresultinnocorporationtaxpaymentsbeingdueforthenextfinancialyear.

ReductionsintheUKcorporationtaxratefrom23%to21%(effectivefrom1April2014)andto20%(effective1April2015) weresubstantivelyenactedon2July2013.ThiswillreducetheCompany’sfuturecurrenttaxchargeaccordingly.Thedeferredtaxassetat23August2014and17August2013hasbeencalculatedbasedontherateof20%;theratesubstantivelyenactedatthebalancesheetdates.


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18. Cash Group Company

23 August 2014

£m

17 August2013

£m

23 August 2014

£m

17 August2013

£m

Cashandcashequivalents 315.6 328.6 2.8 3.5Restricted cash1 315.0 315.0 – –

1 Representsringfencedfundsdrawndownfollowingaratingdowngradeofoneoftheliquidityfacilityproviders,TheRoyalBankofScotlandGroupplcinJune2012andbeingtheavailablecommitmentamountof£147.0mforthePunchASecuritisationand£168.0mforthePunchBSecuritisation.Thefundsdrawndownwereringfencedfromanoperationalperspectiveandcannotbeutilisedforanyactivitiesotherthantheiroriginalpurpose.Acorrespondingliability(note23)hasbeenrecognisedinthesefinancialstatements.Oncompletionoftherestructuring(seenote33:Postbalancesheetevent)theratingstriggerswereamendedandtherestrictedcashwasrepaidtotheliquidityfacilityprovider.

19. Non-current assets classified as held for sale23 August

2014£m

17 August 2013

£m

Non-currentassetsclassifiedasheldforsale 69.8 76.5

Non-currentassetsclassifiedasheldforsalerepresentspubsthatareindividuallybeingactivelymarketedforsalewithvaryingexpectedcompletiondateswithinoneyear.Thevalueofnon-currentassetsclassifiedasheldforsalerepresentsthelowerof, costordeemedcostlessaccumulateddepreciationandanyrecognisedimpairmentinvalue,andexpectednetdisposal proceeds.Asat23August2014£36.3mofthenon-currentassetsclassifiedasheldforsaleweresituatedinthenon-coreestate(August2013:£76.5m).

20. Trade and other payables Group Company

23 August 2014

£m

17 August2013

£m

23 August 2014

£m

17 August2013

£m

Tradepayables 15.5 35.5 – –Othertaxandsocialsecuritypayable 6.6 8.4 0.1 0.2Otherpayables 24.1 24.9 – –Accruals 53.7 47.2 0.2 –

99.9 116.0 0.3 0.2

21. Financial liabilities 23 August 2014 17August2013 Amounts falling due Amounts falling due

within one year

£m

after more than one

year£m

Total£m

within one year

£m

after more than one

year£m

Total£m

Secured loan notes:IssuedbyPunchTavernsFinanceplc 42.6 1,359.6 1,402.2 32.5 1,418.1 1,450.6IssuedbyPunchTavernsFinanceBLimited 36.9 828.3 865.2 35.2 884.4 919.6Totalinterestbearingloansandborrowings 79.5 2,187.9 2,267.4 67.7 2,302.5 2,370.2

Obligationsunderfinanceleases 0.4 2.0 2.4 0.4 2.2 2.6

Total financial liabilities 79.9 2,189.9 2,269.8 68.1 2,304.7 2,372.8



21. Financial liabilities continued

Secured loan notesThesecuredloannoteshavebeensecuredbywayoffixedandfloatingchargesovervariousassetsoftheGroup.

Interestispaidquarterlyinarrearsonallsecuredloannotes.Scheduledcapitalrepaymentsaremadequarterlyonthoseloannotesthatareamortising.Thedetailsforthesecuredloannotes,includingthedateofthefinalscheduledinstalmentforeachclassofnote,asindicatedinitsdescription,areasfollows: Issued by Punch Taverns Finance plc:

23 August 2014 17August2013 Amounts falling due Amounts falling due

within one year

£m

after more than one

year£m

Total£m

Within one year

£m

after more than one

year£m

Total£m

Class A1securedfixedratenotesrepayable byApril2022at7.274%perannum 9.6 260.4 270.0 – 270.0 270.0Class A2securedfixedratenotesrepayable byJuly2020at6.82%perannum 27.8 155.3 183.1 27.8 183.1 210.9Class M1securedfixedratenotesrepayable byOctober2026at5.883%perannum 4.7 93.4 98.1 5.2 98.1 103.3Class M2(N)securedfloatingratenotesrepayable byJuly2029atLIBOR1+0.20%toJuly2014 andLIBOR1+0.50%thereafter – 398.7 398.7 – 398.7 398.7Class B1securedfixedratenotesrepayable byApril2026at7.567%perannum – 79.5 79.5 – 79.5 79.5Class B2securedfixedratenotesrepayable byJuly2029at8.374%perannum – 83.7 83.7 – 83.7 83.7Class B3securedfloatingratenotesrepayable byJuly2031atLIBOR1+0.24%toJuly2014 andLIBOR1+0.60%thereafter – 134.0 134.0 – 134.0 134.0Class Csecuredfixedratenotesrepayable byApril2033at6.468%perannum – 85.1 85.1 – 85.1 85.1Class D1securedfloatingratenotesrepayable byOctober2032atLIBOR1+0.82%toJuly2014 andLIBOR1+2.05%thereafter – 67.7 67.7 – 83.7 83.7

42.1 1,357.8 1,399.9 33.0 1,415.9 1,448.9Add:premiumarisingfromfairvalueadjustment 0.7 3.6 4.3 0.6 4.2 4.8Less:deferredissuecosts (0.2) (1.8) (2.0) (1.1) (2.0) (3.1)

42.6 1,359.6 1,402.2 32.5 1,418.1 1,450.6

1 For three month deposits.

Inthecurrentperiod,theGroupredeemedClassD1noteswithanominalvalueof£16.0m.

Inthepriorperiod,theGroupdidnotredeemanyclassofnotes.


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Issued by Punch Taverns Finance B Limited: 23 August 2014 17August2013 Amounts falling due Amounts falling due

within one year

£m

after more than one

year£m

Total£m

within one year

£m

after more than one

year£m

Total£m

Class A3securedfixedratenotesrepayable byJune2022at7.369%perannum 16.3 134.7 151.0 15.8 151.0 166.8Class A6securedfixedratenotesrepayable byDecember2024at5.943%perannum – 220.0 220.0 – 220.0 220.0Class A7securedfixedratenotesrepayable byJune2033at4.767%perannum 13.6 138.6 152.2 12.8 152.2 165.0Class A8securedfloatingratenotesrepayable byJune2033atLIBOR1+0.28%untilJune2015 andLIBOR1+0.7%thereafter 2.9 40.7 43.6 2.7 43.6 46.3Class B1securedfixedratenotesrepayable byJune2025at8.44%perannum – 61.5 61.5 – 61.5 61.5Class B2securedfixedratenotesrepayable byJune2028at6.962%perannum – 99.4 99.4 – 99.4 99.4Class Csecuredfloatingratenotesrepayable byJune2035atLIBOR1+1.1%untilJune2015 andLIBOR1+2.75%thereafter – 106.1 106.1 – 125.0 125.0

32.8 801.0 833.8 31.3 852.7 884.0Add:premiumarisingfromfairvalueadjustment 4.5 28.7 33.2 4.3 33.5 37.8Less:deferredissuecosts (0.4) (1.4) (1.8) (0.4) (1.8) (2.2)

36.9 828.3 865.2 35.2 884.4 919.6

1 For three month deposits.

Inthecurrentperiod,theGroupredeemedClassCnoteswithanominalvalueof£18.9m.

Inthepriorperiod,theGroupdidnotredeemanyclassofnotes.

ThesefiguresarenetofnotesheldbytheGroupnotyetcancelled,whichasat23August2014were£11.3mClassA7,£16.0mClassB1,£25.6mClassB2and£7.4mClassCnotesheldbyPunchPartnerships(PML)Limitedand£11.5mClassCnotesheld byPunchTavernsInvestments(B)Limited(17August2013were£12.3mClassA7,£16.0mClassB1and£25.6mClassB2notes heldbyPunchPartnerships(PML)Limited).

Interest rate swapsTheGrouphastakenoutvariousinterestrateswapstoreducetheinterestrateriskassociatedwithfloatingrateloansasfollows:

Punch Taverns Finance plcInterestrateswapagreementshavebeenenteredintowhichswaptheLIBORinterestrateontheClassB3,ClassM2(N)andClassD1floatingratenotestoafixedrateof5.954%.Thecapitalamountoftheseswapsreducesovertimetomatchthecontractualrepaymentprofileofthefloatingratenotes.Asaresultofthecapitalrestructuringproposalsannouncedduringthefinancialperiod,theinterestrateswaprelatingtothePunchAB3,M2(N)andD1loannoteswasreclassifiedasanineffectivecashflowhedge,anditshedgereservebalancewasrecycledthroughtheconsolidatedincomestatementaccordingly.

Punch Taverns Finance B LimitedInterestrateswapagreementshavebeenenteredintowhichswaptheLIBORinterestrateontheClassA8andClassCnotesto afixedrateof5.1%and4.7577%respectively.Thecapitalamountoftheseswapsreducesovertimetomatchthecontractualrepaymentprofileofthefloatingratenotes.AlthoughtheClassA8swapensuresthatcashflowsareperfectlyhedgedoverthelifeofthenotes,itwasdeemedineffectiveasat21August2010duetotheintentiontopurchaseandcancelaportionofthesenotesaheadoftheirexpectedlegalmaturity.Asaresultofthecapitalrestructuringproposalsannouncedduringthepriorperiod,theinterestrateswaprelatingtothePunchBC1loannotewasreclassifiedasanineffectivecashflowhedge,anditshedgereservebalancewasrecycledthroughtheconsolidatedincomestatementaccordingly.




AftertakingaccountofthevariousinterestrateswapsenteredintobytheGroup,theinterestrateexposureoftheGroup’sfinancialliabilitiesissetoutbelow.Therearenofinancialliabilitiesotherthanshorttermpayablesandprovisionforshareschemesexcludedfromthisanalysis:

23 August 2014 17August2013Fixed

£mFloating

£mTotal

£mFixed

£mFloating

£mTotal

£m

Secured loan notes:IssuedbyPunchTavernsFinanceplc 1,402.2 – 1,402.2 1,450.6 – 1,450.6IssuedbyPunchTavernsFinanceBLimited 865.2 – 865.2 919.6 – 919.6Totalinterest-bearingloansandborrowings 2,267.4 – 2,267.4 2,370.2 – 2,370.2

Obligationsunderfinanceleases 2.4 – 2.4 2.6 – 2.6

Total financial liabilities 2,269.8 – 2,269.8 2,372.8 – 2,372.8

Interest rate analysisTheweightedaverageeffectiveinterestratesofinterest-bearingloansandborrowings,includingtheeffectofinterestrateswaps,atthebalancesheetdateareasfollows:

23 August 2014

%

17 August2013

%

Secured loan notes 7.2 6.9Finance leases 6.5 6.5

TheaverageinterestrateforGrouploansandborrowingsis7.2%(August2013:6.9%).

Obligations under finance leasesTheminimumleasepaymentsunderfinanceleasesfalldueasfollows:

23 August 2014 17August2013

Minimum lease

payments£m

Present value

of future obligations

£m

Minimum lease

payments£m

Presentvalue

of futureobligations

£m

Within one year 0.4 0.3 0.4 0.4Withinonetofiveyears 0.8 0.7 1.1 0.9Overfiveyears 6.2 1.4 6.3 1.3

7.4 2.4 7.8 2.6


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Maturity of Group debtThetablebelowsummarisesthematurityprofileoftheGroup’sdebtat23August2014and17August2013basedoncontractual,undiscountedcashflowsincludinginterest.

Period ended 23 August 2014Within

one year£m

One to two years

£m

Two to five years

£m

More than five years

£mTotal

£m

Interestbearingloansandborrowings– capital 74.9 103.9 353.8 1,701.1 2,233.7– interest 104.7 99.1 250.8 379.4 834.0– interest rate swaps 58.1 60.0 178.9 551.1 848.1

237.7 263.0 783.5 2,631.6 3,915.8

Periodended17August2013Within

one year£m

One to two years

£m

Twotofiveyears

£m

More than fiveyears

£mTotal

£m

Interestbearingloansandborrowings– capital 64.3 75.0 336.2 1,857.4 2,332.9– interest 108.3 104.7 274.2 454.5 941.7– interest rate swaps 51.2 59.8 185.0 637.5 933.5

223.8 239.5 795.4 2,949.4 4,208.1

Thecontractualmaturityoftradeandotherpayablesiswithinoneyear.


22. Financial instruments

Categories of financial instruments23 August

2014£m

17 August2013

£m

Financial assetsReceivables(amortisedcost) 23.5 25.0Cashandshort-termdeposits 315.6 328.6Liquidityfacilityagreementdrawdown 315.0 315.0Otherinvestments – 5.5

654.1 674.1

Financial liabilitiesInterestrateswaps–atfairvaluethroughprofitorloss 278.5 39.0Interestrateswaps–notatfairvaluethroughprofitorloss – 215.3Amortised cost 2,282.9 2,405.7Financeleaseobligations 2.4 2.6Liquidityfacilityagreementdrawdown 315.0 315.0Provisionforshareschemes – 3.2

2,878.8 2,980.8

TheCompanyholdsfinancialassetsandfinancialliabilitiesatamortisedcostasshowninnote32.

Allderivativefinancialinstrumentsareheldonthebalancesheetatfairvalue;theeffectiveportionofchangesinthefairvalue ofderivativefinancialinstrumentsthataredesignatedandqualifyascashflowhedges,arerecognisedinequity.Thegainorlossrelatingtotheineffectiveportionisrecognisedimmediatelyintheincomestatement.Amountsaccumulatedinequityarerecycledintheincomestatementintheperiodswhenthehedgeditemwillaffectprofitorloss.Changesinfairvalueofanyderivativefinancialinstrumentsthatdonotqualifyforhedgeaccounting,arerecognisedimmediatelyintheincomestatement.



22. Financial instruments continued

TheGroup’sprincipalfinancialinstruments,otherthanderivativefinancialinstruments,compriseborrowings,cashandliquidresources.ThemainpurposeofthesefinancialinstrumentsistoprovidefinancefortheGroup’soperations.TheGrouphasvariousotherfinancialinstrumentssuchastradereceivablesandtradepayables,whicharisedirectlyfromitsoperations.

FollowingthedemergeroftheSpiritbusiness,afinancialassethadbeenrecognisedbytheGroupforthetotalnumberofSpiritsharesthatarebeingheldbytheGroup,andaprovisionhadbeenrecognisedforthenumberofPunchandSpiritsharesthat havebeenallottedinordertosatisfyawardsthatareoutstandingtoemployeesnowemployedbytheSpiritgroup.

ThemainrisksarisingfromtheGroup’sfinancialinstrumentsareinterestraterisk,liquidityrisk,capitalrisk,creditriskandmarketrisk.Thereisnomaterialcurrencyexposureasallmaterialtransactionsandfinancialinstrumentsareinsterling.TheGrouphasnomaterialexposuretoequitysecuritiesorcommoditypriceriskanditistheGroup’spolicythatnospeculativetradinginfinancialinstrumentsshallbeundertaken.TheBoardreviewsandagreespoliciesforeachoftheserisksandtheyaresummarisedon pages13to15.

Interest rate riskAstheGrouphasnosignificantinterestbearingassets,otherthancashandcashequivalents,theGroup’sincomeandoperatingcashflowsaresubstantiallyindependentofchangesinmarketinterestrates.Incomeandcashflowsfromcashandcashequivalentsfluctuatewithinterestrates.

TheGroupfinancesitsoperationsthroughamixtureofequityshareholders’fundsandloannotes.TheGroupborrowsatbothfixedandfloatingratesofinterestandthenemploysderivativefinancialinstrumentssuchasinterestrateswapstogeneratethedesiredinterestrateprofileandtomanagetheGroup’sexposuretointerestratefluctuations.Thecashbalancesattractinterest atfloatingrates.

Whereover-hedgingarises(forexample,duetoearlyrepaymentoffloatingratenotes)theGroupwillseektoeliminatetheover-hedging,wherethisisfinanciallypracticable,byterminatingtheover-hedge.Asattheyearend,theGroupheld£nil (August2013:£nil)offloatingratenotesforwhichinterestswapsremainoutstanding.

TheGrouphastakenoutderivativefinancialinstrumentssuchthat100%ofallloansat23August2014(17August2013:100%)wereeitheratfixedrateorwereconvertedtofixedrateasaresultofswaparrangementstherebylargelyeliminatingtheGroup’sexposuretochangesininterestrates.

Cashflowsassociatedwithcashdeposits,debtandinterestrateswapsandthefairvalueoftheseinstrumentsfluctuatewithchangesininterestrates.Iftheinterestrateshadbeen1%higherorlowerduringtheperiod,theeffectontheincomestatementwouldbeasfollows:

Interest receivable

£m

Interest payable

£m

Movementin fair value

of interest rate swaps

£m

Period ended 23 August 2014Impact on income statement if interest rates increased by 1%: gain / (loss) 6.6 – 97.6Impact on income statement if interest rates decreased by 1%: gain / (loss) (4.5) – (112.2)Impact on equity if interest rates increased by 1%: gain / (loss) – – –Impact on equity if interest rates decreased by 1%: gain / (loss) – – –

Periodended17August2013Impactonincomestatementifinterestratesincreasedby1%:gain/(loss) 5.8 – 23.1Impactonincomestatementifinterestratesdecreasedby1%:gain/(loss) (5.8) – (27.4)Impactonequityifinterestratesincreasedby1%:gain/(loss) – – 76.4Impactonequityifinterestratesdecreasedby1%:gain/(loss) – – (87.5)

Whilstcashflowinterestrateriskislargelyeliminated,theuseoffixedrateborrowingsandderivativefinancialinstrumentsexposestheGrouptofairvalueinterestraterisksuchthattheGroupwouldnotbenefitfromfallsininterestratesandwouldbeexposed tounplannedcosts,suchasbreakagecosts,shoulddebtorderivativefinancialinstrumentsberestructuredorrepaidearly.


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Liquidity riskTheGroup’sfundingstrategyistoensureamixoffinancingmethodsofferingflexibilityandcost-effectivenesstomatchtherequirementsoftheGroup.TheGroupisprimarilyfinancedbysecuredloannotes.Followingthecompletionoftherestructuring(seenote33:Postbalancesheetevent)approximately87%ofthecapitalbalanceoftheloannotesisnowrepayableaftermorethanfiveyearsfromthecompletiondate,subjecttorelevantcovenantsbeingmet.TheBoardcontinuestoreviewalternativesourcesoffinance(seealsonote33:Postbalancesheetevent).TheGroup’sobjectiveistosmooththedebtmaturityprofileand toarrangefundingaheadofrequirementswhererequiredsomaturingshorttermdebtmayberefinancedorpaidasitfallsdue.Cashflowforecastsarefrequentlyproducedtoassistmanagementinidentifyingliquidityrequirementsandarestress-testedforpossiblescenarios.Cashbalancesareinvestedinshorttermdepositssuchthattheyarereadilyavailabletosettleshorttermliabilitiesortofundcapitaladditions.

Followingthecompletionoftherestructuring(seenote33:Postbalancesheetevent)theGroupheldanundrawnliquidityfacilityof£135.3mwithinthePunchASecuritisationand£89.3mwithinthePunchBSecuritisation.Theliquidityfacilitiesareavailable tomeetdebtserviceobligationsfallingdueinthesecuritisationstotheextentthatthereareinsufficientfundsavailablefromoperationstomeetsuchpayments,andfornootherpurpose.

Capital riskTheGroup’scapitalstructureismadeupofnetdebt,issuedsharecapitalandreserves.ThesearemanagedeffectivelytominimisetheGroup’scostofcapital,toaddvaluetoshareholdersandtoservicedebtobligations.TheGroup’sdebtisdividedintotwoseparatesecuritisations.Thesecuritiseddebtismonitoredbyavarietyofmeasures,whicharereportedtothedebtproviderson aquarterlybasis.TheGroupassessestheperformanceofthebusiness,thelevelofavailablefundsandtheshorttomediumtermstrategicplansconcerningcapitalspendaswellastheneedtomeetfinancialcovenantsandsuchassessmentinfluencesthelevel ofdividendspayable.FollowingtheyearendtheGroupcompletedtherestructuringofitssecuritisations.Seenote33:Postbalancesheetevent.

Credit riskWiththeexceptionofcashandshorttermdepositsinvestedwithbanksandfinancialinstitutions,therearenosignificantconcentrationsofcreditriskwithintheGroup.Themaximumcreditriskexposurerelatingtofinancialassetsisrepresentedby thecarryingvalueasatthebalancesheetdate.TheGroup’sobjectiveistominimisecreditriskbyensuringthatsurplusfundsareinvestedwithbanksandfinancialinstitutionswithhighcreditratingsandthattheGroupdealswiththirdpartiesthathavebeensubjecttocreditchecks,orthathavegoodcreditscores,whereappropriate.Tradeandotherreceivables,asshownontheconsolidatedbalancesheet,comprisealargenumberofindividuallysmallamountsfromunrelatedcustomersandareshown netofaprovisionfordoubtfuldebts.Managementestimatestheprovisionfordoubtfuldebtsbasedonareviewofallindividualreceivableaccounts,experienceandknownfactorsatthebalancesheetdate,takingintoaccountanycollateralheldintheform ofcashdeposits,whichisquantified.Thesecashdepositsareappliedagainstunpaiddebtwhenlicenseesleavethepubs,andvaryinsize.Theamountofcashdepositsheldat23August2014is£21.7m(17August2013:£22.6m).Theseareheldonthebalancesheetwithintradeandotherpayables.Receivablesarewrittenoffagainstthedoubtfuldebtprovisionwhenmanagementdeemsthedebtnolongerrecoverable.

Ananalysisoftheprovisionheldagainsttradereceivablesfordoubtfuldebtsisshownbelow:23 August

2014£m

17 August2013

£m

Provisionfordoubtfuldebtsatbeginningofperiod 2.6 2.2Charged to income statement 1.6 2.2Utilised during the period (2.0) (1.4)Released during the period (0.4) (0.4)Provision for doubtful debts at end of period 1.8 2.6

Theageingoftradereceivablesatthebalancesheetdate,netofthedoubtfuldebtprovision,isasfollows:23 August

2014£m

17 August2013

£m

Current 21.4 22.70–35dayspastdue – –Over35dayspastdue 2.1 2.3

23.5 25.0

Therearenoindicatorsat23August2014thatdebtorswillnotmeettheirpaymentobligationsinrespectofthenetamountoftradereceivablesrecognisedinthebalancesheet.




Market riskFollowingthedemergeroftheSpiritbusiness,theGroupwasexposedtomarketrisksinceitholdsaninvestmentinSpiritPubCompanyplcsharesinordertosatisfyoutstandingshareawards.Thevalueofthefinancialassetrecognised,beingallSpirit sharesheldbytheGroup,andthefinancialliabilityrecognised,beingtheobligationtodeliverPunchandSpiritsharestosatisfyoutstandingawardsforSpiritgroupemployees,willvarywiththesharepriceoftheSpiritshares,withanygainorlossbeingrecognisedintheincomestatementateachbalancesheetdate.ThereisnoriskthattheGroupwillnotbeabletosatisfytheawardsinthefuture,sincesufficientshareswereallottedtosatisfyalloutstandingawards.

Derivative financial instrumentsThecarryingvaluesofderivativefinancialinstrumentsinthebalancesheetareasfollows:

Group 23 August 2014

Current liabilities

£m

Non-current

liabilities£m

Interestrateswaps 38.2 240.3

Group 17August2013

Currentliabilities

£m

Non-current

liabilities£m

Interestrateswaps 40.3 214.0

TheinterestrateswapsreplacetheLIBORrateontheGroup’ssecuredfloatingrateloannotesandbankloanswithafixedrate. Thecapitalamountoftheswapsreducesovertimetomatchthecontractualrepaymentprofileoftheassociatednotesovertheirlife(seenote21formoredetail).Ofthetotalcarryingvalueoftheinterestrateswaps£nil(17August2013:£215.3m)qualify as,andaretreatedas,cashflowhedgesinaccordancewithIAS39andmovementsintheirfairvaluesarerecognisedinothercomprehensiveincome.Theremaining£278.5m(17August2013:£39.0m)donotqualifyforhedgeaccountingwithmovementsintheirfairvaluebeingrecognisedintheincomestatement.Followingthecompletionoftherestructuring(seenote33:Postbalancesheetevent)theonlyinterestrateswapheldbytheGroupwasagainstthenewClassM3note.

Fair value of non-derivative financial assets and liabilitiesWiththeexceptionoftheGroup’ssecuredloannotes,therearenomaterialdifferencesbetweenthecarryingvalueofnon-derivativefinancialassetsandfinancialliabilitiesandtheirfairvaluesasatthebalancesheetdate.

ThecarryingvalueoftheGroup’ssecuredloannotesat23August2014is£2,267.4m(17August2013:£2,370.2m)andthefairvalue,measuredatmarketvalue,ofthisdebtatthatdateis£1,977.6m(17August2013:£1,702.6m).

Fair value hierarchyFinancialinstrumentscarriedatfairvaluearerequiredtobemeasuredbyreferencetothefollowinglevels:

Level1–quotedpricesinactivemarketsforidenticalassetsorliabilities;Level2–inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly

(i.e.asprices)orindirectly(i.e.derivedfromprices);andLevel3–inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

ThevalueoftheSpiritsharesheldasafinancialassetandthevalueofthePunchandSpiritsharesheldasafinancialliabilityhavebeenmeasuredbyalevel1valuationmethod.

Allotherfinancialinstrumentscarriedatfairvaluehavebeenmeasuredbyalevel2valuationmethod.


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23. Cash-back borrowings Group Company

23 August 2014

£m

17 August2013

£m

23 August2014

£m

17 August2013

£m

Cash-backedborrowings1 315.0 315.0 – –

1 Representingadrawdownoffundsfollowingaratingdowngradeofoneoftheliquidityfacilityproviders(note18).

24. Provisions

Group

Property leases

£m

Share schemes

£mTotal

£m

At 18 August 2012 8.6 4.8 13.4Unwindingofdiscounteffectofprovisions 0.6 – 0.6Creditedtoincomestatement(note6) – (1.6) (1.6)Utilised during the period (0.8) – (0.8)At17August2013 8.4 3.2 11.6Unwindingofdiscounteffectofprovisions 0.6 – 0.6Creditedtotheincomestatement(note6) (0.5) (3.2) (3.7)Utilised during the period (0.9) – (0.9)At 23 August 2014 7.6 – 7.6

Provisionshavebeenanalysedbetweencurrentandnon-currentasfollows:23 August

2014£m

17 August2013

£m

Current 0.8 3.6Non-current 6.8 8.0

7.6 11.6

Property leasesTheprovisionforpropertyleaseshasbeensetuptocoveroperatingcostsofvacantorloss-makingpremises.Theprovisioncoverstheexpectedshortfallbetweenoperatingincomeandrentspayable.Paymentsareexpectedtobeongoingontheseproperties foranumberofyears.

Share schemesTheprovisionforshareschemesrepresentstheliabilitythatwouldbeduetoSpiritemployeesshouldtheshareschemesthattheyareeligibleemployeesofvest.Inthepriorperiod,theGroupheldPunchandSpiritsharesinordertosatisfytheseshareschemes,whichwereheldatcostandfairvaluerespectively,andremeasuredateachbalancesheetdate,withanymovementbeingtaken to the income statement.

TheCompanyhasnoprovisions.

25. Other non-current payables Company

23 August2014

£m

17 August2013

£m

Amountsowedtogroupundertakings 1,612.1 1,609.6

Includedwithinamountsowedtogroupundertakingsarevariousloanbalances,forwhichadditionaldetailisdisclosedinnote32.Remainingbalanceshavenorestrictivetermsorconditionsassociatedwiththem.



26. Share capital23 August

2014No. (000)

23 August 2014

£m

17 August 2013

No.(000)

17 August2013

£m

Allotted, called-up and fully paidOrdinarysharesof0.04786p 665,806 0.3 665,423 0.3

Themovementsinthecalled-upsharecapitalaresetoutbelow:Ordinary

sharesNo. (000)

Ordinary shares

£m

At 18 August 2012 664,479 0.3Issuedonexerciseofshareoptions 944 –At17August2013 665,423 0.3Issuedonexerciseofshareoptions 383 –At 23 August 2014 665,806 0.3

Rights of shareholders Allordinarysharesinissueat23August2014rankparipassuinallrespects.


27. Share based payments

TheCompanyhasfourshareincentiveschemesbywhichDirectorsandemployeesareabletoacquiresharesintheCompany. Alloftheseschemesareequity-settledschemes.

Discretionary Share PlanThefirstschemeisaDiscretionarySharePlan(DSP)wherebyoptionsaregrantedtoseniormanagementoverordinarysharesin theCompany,attheprevailingmarketpriceattimeofgrant.Theseoptionsvestafterathreeyearperformanceperiod,withperformancetargetssetbytheRemunerationCommittee,andarethenexercisableforaperiodofbetweensevenandtenyears.Nooptionshavebeengrantedunderthisschemesince31January2006,andtherightsovertheremainingoutstandingoptionswerewaivedduringtheperiod.

Long Term Incentive PlanThesecondschemeisaLongTermIncentivePlan(LTIP)wherebyseniormanagementwillreceiveconditionalrightsoverordinarysharesintheCompany.Eligibleemployeesareawardedrightstotheissueofamaximumnumberofsharesatthebeginning ofathreeyearperiod,aproportionofwhichtheywillbeentitledtoreceiveattheendofthatperioddependingontheextent towhichtheperformanceconditionssetbytheRemunerationCommitteeatthetimetheallocationismadearesatisfied.FurtherinformationontheperformanceconditionsoftheLTIPareshownintheReportonDirectors’remunerationonpages28to38. At23August2014alloutstandingLTIPawards,shouldtheyvest,willbesatisfiedbysharesalreadyheldintheEmployeeBenefitTrust.

Share Bonus PlanThethirdschemeisaShareBonusPlan(SBP)whereby,seniormanagementreceivedpartoftheirpost-taxannualbonusinshares.Duringtheperiod135,605(2013:623,745)shareswereawardedundertheSBPandarebeingheldintrust.Theseawards,astheyformedpartoftheindividuals’annualbonuses,arenotsubjecttofurtherperformancecriteriaandwillbereleasedtotheindividualsonthesecondanniversaryoftheaward.

Share Incentive PlanThefourthschemeisaShareIncentivePlan(SIP)opentoalleligibleemployees,wherebyproceedscontributedbyemployeesareusedtobuysharesintheCompanyatprevailingmarketvalues.ThesesharesarecalledPartnershipSharesandareheldinatrust onbehalfoftheemployee.ForeveryPartnershipShareboughtbytheemployeetheCompanywillgivetheemployeeonesharefreeofcharge(‘MatchingShare’).TheemployeeshavetotaketheirsharesoutoftheplanonleavingtheGroupandwillnotbeentitledtotheMatchingShareiftheyleavewithinthreeyearsofbuyingthePartnershipShares.IftheCompanyawardsdividendstoitsshareholders,theemployeewillreceiveadividendoneachofthePartnershipandMatchingSharestheyhold.TheCompanyarrangesforthedividendstobeusedtobuyextrashares(‘DividendShares’).DividendSharesmustbeheldintheplanforthreeyearsbeforetheycanberemovedunlesstheemployeeleavestheGroupinwhichcasetheymustbetakenout.TheschemewasintroducedinJune2004withsharesbeingacquiredatmarketvaluesonamonthlybasis.


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27. Share based payments continued

Fair value of share awardsThefairvalueismeasuredusingthevaluationtechniquethatisconsideredtobethemostappropriatetovalueeachclassofaward.

Discretionary Share PlanTherewerenoawardsmadeinrelationtotheDiscretionarySharePlanduringthecurrentorthepreviousperiod.

Long Term Incentive PlanThekeyassumptionsforawardsmadeinthecurrentandpreviousperiodareasfollows:

Grant date24 October

201330November

2012

Valuation model Monte Carlo Monte CarloShare price at date of grant £0.14 £0.07Shares under option 1,896,551 5,349,012Vesting period 3 years 3yearsExpectedvolatility 53.0% 48.2%Expectedlife 3 years 3yearsRiskfreerate 0.7% 0.3%Expecteddividendyield 0.0% 0.0%Expectationofmeetingperformancecriteria 100% 100%Fairvalueperoption £0.09 £0.03

ExpectedvolatilityhasbeencalculatedbasedonthehistoricvolatilityoftheCompany’ssharepricecorrespondingtotheexpectedlife of the option or share award.

Theexpectedtermoftheoptionsisbasedonthelifetothepointofexpectedexercise.Thisisdeterminedthroughanalysisofhistoricallyevidencedexercisepatternsofoptionholders.

Therisk-freerateofreturnistheyieldonzero-couponUKgovernmentbondsofatermconsistentwiththeassumedoptionlife.

Share Incentive PlanThefairvalueoftheMatchingSharesissuedundertheCompany’sSIPisrecognisedasthemarketvalueofthesharesissuedat thedateofpurchase.Thischargeisspreadoverthethree-yearvestingperiodonastraightlinebasis.

Movements in options and awards under share based payment schemesReconciliationsofmovementsfortheDSP,LTIP,SBPandSIPschemesoverthe53weeksto23August2014areshownbelow:

Discretionary Share Plan 53 weeks to

23 August 2014

No.


2014 WAEP1

52weeksto 17 August

2013No.

52weeksto 17 August

2013WAEP1

Outstandingatbeginningofperiod 23,664 615 35,092 478Expiredduringtheperiod – – (11,428) 194Waivedduringtheperiod (23,664) 615 – –Outstanding at end of period – – 23,664 615

Exercisable at end of period – – 23,664 615

1 Weightedaverageexerciseprice(pence).



27. Share based payments continued

Long Term Incentive Plan23 August

2014No.

17 August2013

No.

Outstandingatbeginningofperiod 10,337,546 17,424,658Granted during the period 1,896,551 5,349,012Expiredduringtheperiod (6,305,689) (6,533,220)Forfeited during the period – (5,902,904)Outstanding at end of period 5,928,408 10,337,546Outstanding at end of period due to Group employees 5,928,408 6,550,814Outstanding at end of period due to Spirit employees – 3,786,732

Share Bonus Plan 23 August

2014No.

17 August2013

No.

Outstandingatbeginningofperiod 2,097,696 1,473,951Granted during the period 135,605 623,745Released during the period (1,473,951) –Outstanding at end of period 759,350 2,097,696 Share Incentive Plan

23 August 2014

No.

17 August 2013

No.

Outstandingatbeginningofperiod 3,272,654 2,578,671Granted during the period 382,883 944,146Forfeited during the period (385,567) (190,495)Released during the period (270,665) (59,668)Outstanding at end of period 2,999,305 3,272,654

Thetotalchargefortheperiodrelatingtoemployeesharebasedplanswas£0.3m(52weeksended17August2013:£0.3m)allofwhichrelatedtoequitysettledsharebasedpaymenttransactions.

DuetothenatureoftheLTIP,SBPandSIPschemes,itisnotnecessarytocalculatetheweightaverageexerciseprice.


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28. Net debt

(a) Analysis of net debt23 August

2014£m

17 August2013

£m

Secured loan notes (2,233.7) (2,332.9)Cash-backedborrowings (315.0) (315.0)Cashandcashequivalents 315.6 328.6Restricted cash 315.0 315.0Nominal value of net debt (1,918.1) (2,004.3)

Capitaliseddebtissuecosts 3.8 5.3Fairvalueadjustmentsonacquisitionofsecuredloannotes (37.5) (42.6)Fairvalueofinterestrateswaps (278.5) (254.3)Financeleaseobligations (2.4) (2.6)Net debt (2,232.7) (2,298.5)

Balance sheet:Borrowings (2,269.8) (2,372.8)Cash-backedborrowings (315.0) (315.0)Derivativefinancialinstruments (278.5) (254.3)Cashandcashequivalents 315.6 328.6Restricted cash 315.0 315.0Net debt (2,232.7) (2,298.5)

(b) Analysis of changes in net debtAt

18 August 2012

£m

Cash flow£m

Non-cashmovements

£m

At 17 August

2013£m

Cashflow£m

Non-cashmovements

£m

At 23 August

2014£m

Current assetsCashatbankandinhand 263.9 64.7 – 328.6 (13.0) – 315.6Restricted cash 315.0 – – 315.0 – – 315.0

578.9 64.7 – 643.6 (13.0) – 630.6Debt Borrowings (2,434.9) 58.2 3.9 (2,372.8) 69.3 33.7 (2,269.8)Cash-backedborrowings (315.0) – – (315.0) – – (315.0)Derivativefinancialinstruments (331.5) – 77.2 (254.3) 6.7 (30.9) (278.5)

(3,081.4) 58.2 81.1 (2,942.1) 76.0 2.8 (2,863.3)Net debt per balance sheet (2,502.5) 122.9 81.1 (2,298.5) 63.0 2.8 (2,232.7)

NetdebtincorporatestheGroup’sborrowings,cash-backedborrowings,derivativefinancialinstrumentsandobligationsunderfinanceleases,lesscashandcashequivalentsandrestrictedcash.

Non-cashmovementsrelatetoamortisationofdeferredissuecostsandpremiumonloannotes,fairvaluemovementinderivativefinancialinstrumentsandprofitonthepurchaseofsecuritiseddebt.



28. Net debt continued

(c) Reconciliation of net cash flow to movement in net debt23 August

2014£m

17 August2013

£m

(Decrease)/increaseincashandcashequivalentsintheperiod (13.0) 64.7Cashoutflowfromchangeindebtfinancing 75.8 57.4Change in net debt resulting from cash flows 62.8 122.1Non-cashmovementsinnetdebt 2.8 81.1Change in net debt resulting from non-cash flows 2.8 81.1Obligationsunderfinanceleases 0.2 0.8Movement in net debt 65.8 204.0Netdebtatbeginningofperiod (2,298.5) (2,502.5)Net debt at end of period (2,232.7) (2,298.5)

29. Pensions and other post-retirement benefits

Duringthecurrentandpriorperiod,theGroupoperatedonefundeddefinedbenefitpensionscheme;thePubmasterPensionScheme.ThepensionplanhasnotinvestedinanyoftheGroup’sownfinancialinstruments,norinpropertiesorotherassetsusedbytheGroup.

Thetablesbelowillustratetheimpactofthedefinedbenefitschemeontheincomestatementandthebalancesheet.

Theamountsrecognisedintheincomestatementareasfollows:

Analysisofamountschargedtooperatingcosts: 53 weeks to

23 August 2014

£m

52weeksto 17 August

2013£m

Currentservicecost (0.1) (0.1)

Analysisofamountsincludedwithinfinanceincomeandfinancecosts:


2014 £m

52weeksto 17 August

2013(Restated)

£m

Netinterestcost (0.2) –

RemeasurementgainsandlossesshownintheSOCIintheperiod:


2014 £m

52weeksto 17 August

2013(Restated)

£m

Actuarialreturnonassetsexcludinginterestincome 1.6 1.6Experiencelossonschemeobligations 1.6 –Changesinassumptionsunderlyingthepresentvalueofschemeobligations:Financial (4.5) (5.2)Demographic – (0.4)RemeasurementlossesrecognisedintheSOCI (1.3) (4.0)


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29. Pensions and other post-retirement benefits continued

Theamountsrecognisedinthebalancesheetareasfollows:23 August

2014£m

17 August 2013

£m

Presentvalueofschemeliabilities (64.5) (61.6)Fairvalueofschemeassets 60.2 56.8Netretirementbenefitliabilityrecognisedinthebalancesheet (4.3) (4.8)

Movementsinthepresentvalueofschemeliabilitiesareasfollows: 53 weeks to

23 August 2014

£m

52weeksto 17 August

2013£m

Presentvalueofschemeliabilitiesatbeginningofyear 61.6 55.6Currentservicecost 0.1 0.1Interestcost 2.7 2.5Actuarial loss 2.9 5.6Benefitspaid (2.8) (2.2)Presentvalueofschemeliabilitiesatendofyear 64.5 61.6

Movementsinthefairvalueofschemeassetsareasfollows:


2014 £m

52weeksto 17 August

2013(Restated)

£m

Fairvalueofschemeassetsatbeginningofyear 56.8 52.9Interestonschemeassets 2.5 2.5Remeasurement gains 1.6 1.6Contributionspaidbyemployer 2.1 2.0Benefitspaid (2.8) (2.2)Fairvalueofschemeassetsatendofyear 60.2 56.8

Schemeassetsarestatedattheirmarketvaluesatthebalancesheetdateandtheexpectedreturnonschemeassetsisderived asaweightedaverageoftheexpectedreturnoneachassetclass,recognisingtheproportionsoftheassetsinvestedineach.Theexpectedreturnoneachassetclassisdeterminedaftertakingexternalexpertadviceandbyreferencetorelevantequityandbondindices.

Themajorcategoriesofplanassetsasapercentageoftotalplanassetsareasfollows:23 August

201417 August

2013

Equities 24.1% 23.7%Bonds 29.6% 28.5%Diversifiedgrowthfunds 44.5% 44.3%Other 1.8% 3.5%

Thehistoryofexperienceadjustmentsontheschemesforthecurrentandpreviousfinancialyearsisasfollows:

23 August 2014

£m

17 August2013

(Restated)£m

18 August 2012

£m

20 August 2011

£m

21 August 2010

£m

Presentvalueofretirementbenefitliabilities (64.5) (61.6) (55.6) (54.4) (418.6)Fairvalueofplanassets 60.2 56.8 52.9 46.5 395.6Netliabilityinthescheme (4.3) (4.8) (2.7) (7.9) (23.0)Experienceadjustmentsonschemeliabilities (2.9) (5.6) (0.5) 0.8 0.6Percentageofschemeliabilities 4.5% 9.1% 0.9% 1.5% 0.1%Experienceadjustmentsonschemeassets 1.6 1.6 2.9 (1.5) 25.6Percentageofschemeassets 2.7% 2.8% 5.5% 3.2% 6.5%

Theexpectedcontributionstodefinedbenefitschemesforthenextfinancialyear,beginning24August2014,are£1.3m.




Scheme fundingPubmaster Pension SchemeThePubmasterPensionSchemeisadefinedbenefitschemeoperatedintheUK.Thevaluesofthescheme’sliabilitieshavebeendeterminedbyaqualifiedactuarybasedontheresultsofanactuarialvaluationasat6April2013,updatedto23August2014, thebalancesheetdate.

TheSchemeissubjecttotheStatutoryFundingObjectiveunderthePensionsAct2004.AvaluationoftheSchemeiscarriedout atleastonceeverythreeyearstodeterminewhethertheStatutoryFundingObjectiveismet.AspartoftheprocesstheGroupmustagreewiththeTrusteesoftheSchemethecontributionstobepaidtoaddressanyshortfallagainsttheStatutoryFundingObjectiveandcontributionstopayforthefutureaccrualofbenefits.TheStatutoryFundingObjectivedoesnotcurrentlyimpactontherecognition of the Scheme in these accounts.

TheSchemeismanagedbyaboardofTrusteesappointedinpartbytheGroup(whichincludesaprofessionalindependent trustee)andpartfromelectionsbymembersoftheScheme.TheTrusteeshaveresponsibilityforobtainingvaluationsofthefund,administeringbenefitpaymentsandinvestingtheScheme’sassets.TheTrusteesdelegatesomeofthesefunctionstotheirprofessionaladviserswhereappropriate.

TheSchemeexposestheGrouptoanumberofrisks:• Investment risk:TheSchemeholdsinvestmentsinassetclasses,suchasequities,whichhavevolatilemarketvalues.While

theseassetsareexpectedtoproviderealreturnsoverthelongterm,theshort-termvolatilitycancauseadditionalfundingtoberequiredifadeficitemerges.

• Interest rate risk:TheScheme’sliabilitiesareassessedusingmarketyieldsonhighqualitycorporatebondstodiscounttheliabilities.AstheSchemeholdsassetssuchasequities,thevalueoftheassetsandliabilitiesmaynotmoveinthesameway.

• Inflation risk:AsignificantproportionofthebenefitsundertheSchemearelinkedtoinflation.AlthoughtheScheme’sassetsareexpectedtoprovideagoodhedgeagainstinflationoverthelongterm,movementsovertheshort-termcouldleadtodeficitsemerging.

• Mortality risk:IntheeventthatmemberslivelongerthanassumedadeficitwillemergeintheScheme.• Member options:CertainbenefitoptionsmaybeexercisedbymemberswithoutrequiringtheconsentoftheTrusteesorthe

Group,forexampleexchangingpensionforcashatretirement.Inthisexample,iffewermembersthanexpectedexchangepension for cash at retirement then a funding strain will emerge.

• Insurer covenant risk:TheTrusteesholdannuitypoliciesforagroupofpensionersintheScheme.IftheinsurancecompanygoesinsolventthenthesepensionswillhavetobeprovideddirectlybytheSchemeandadeficitwillemerge.

Themortalityassumptionsattheyearendarebasedonstandardmortalitytablesthatallowforfuturemortalityimprovements. Theassumptionsarethatthelifeexpectancyofamemberwhoretiresattheageof65isasfollows:

23 August 2014

17 August2013

Malecurrentlyaged50 23.2 years 23.1yearsMalecurrentlyaged65 21.6 years 21.5yearsFemalecurrentlyaged50 25.7 years 25.6yearsFemalecurrentlyaged65 24.0 years 23.8years

Theassumptionsusedindeterminingthevaluationsareasfollows:23 August

201417 August

2013

Rate of increase of salaries 4.60% 4.80%Rate of increase in pensions 2.75% 2.85%Discountrate 3.90% 4.50%Inflationassumption(RPI) 3.35% 3.55%Inflationassumption(CPI) 2.35% 2.55%


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Theresultsareverysensitivetotheassumptionsused.ThetablebelowshowstheapproximateeffectontheScheme’sliabilities ofchangingsomeofthekeyfinancialassumptions,whilstallotherassumptionsremainthesame.Theimpactofadjustmentstoassumptionsareasfollows:

Adjustments to assumptions

Approximate effect onliabilities

£m

Reducediscountrateby0.1%perannum 1.0Increaseinflationby0.1%perannum(andallassociatedassumptions) 0.7

Theassetsintheschemeare:Value at

23 August 2014

£m

Value at 17 August

2013£m

Equities 14.5 13.5Bonds 17.8 16.2Diversifiedgrowthfunds 26.8 25.1Insuredpensions 1.1 1.3Cash – 0.7Totalmarketvalueofassets 60.2 56.8Presentvalueofschemeliabilities (64.5) (61.6)Netpensionliabilitybeforedeferredtax (4.3) (4.8)Deferredtaxasset 0.8 0.9Netpensionliability (3.5) (3.9)

Thepensioncostsforthedefinedcontributionschemesareasfollows: 53 weeks to

23 August 2014

£m

52weeksto 17 August

2013£m

Definedcontributionschemes 1.1 1.1

Pension riskTheGroupoperatesonedefinedbenefitpensionschemewhichisclosedtonewmembers.Theschemeissubjecttoriskregardingtherelativeamountofthescheme’sassets,whichareaffectedbythevalueofinvestmentsandthereturnsgeneratedbysuchinvestments,comparedtothescheme’sliabilities,whichareaffectedbychangesinthelifeexpectancy,actualandexpectedpriceinflation,changesinbondyieldsandfuturesalaryincreases.Thedifferenceinvaluebetweenschemeassetsandschemeliabilitiesmayvarysignificantlyintheshortterm,potentiallyresultinginanincreaseddeficitbeingrecognisedontheGroup’sbalancesheet.

Inthecurrentperiod,theGrouphasmadepaymentstotheschemetotalling£2.0m.TheGrouphasagreedtodeficitreductionpaymentsof£1.0mperannumtoApril2018.



30. Operating lease commitments – minimum lease payments

Group

23 August 2014

£m

17 August2013

£m

Future minimum rentals payable under non-cancellable operating leases:Within one year 9.0 9.0Betweenoneandfiveyears 31.5 31.9Afterfiveyears 139.9 147.9

180.4 188.8

Thefutureminimumrentalspayableundernon-cancellableoperatingleaseswhendiscountedtopresentvalueare£83.1m (August2013:£84.6m).

TheGroupleasesvariouslicensedproperties,officesandothercommercialpropertiesundernon-cancellableoperatingleaseagreements.Theleaseshavevariousterms,escalationclausesandrenewalrights.TheGroupalsoleasesvehiclesundernon-cancellableoperatingleaseagreements.

Thetotalfutureminimumsubleasepaymentsexpectedtobereceivedare£69.1m(August2013:£61.4m).

TheGroupisalessoroflicensedpropertiestoretailers.Theleaseshavevariousterms,escalationclausesandrenewalrights.Thetotalnon-cancellablefutureminimumleasepaymentsexpectedtobereceivedare:

Land and buildings

23 August 2014

£m

17 August2013

£m

Within one year 102.4 107.8Betweenoneandfiveyears 300.3 322.2Afterfiveyears 266.9 308.5

669.6 738.5

TheCompanyhasnooperatingleasecommitmentsat23August2014(August2013:£nil).

31. Capital and other financial commitments

GroupCapital commitments for property, plant and equipment

23 August 2014

£m

17 August2013

£m

Contractedbutnotprovided 14.6 9.4

TheCompanyhasnocapitalcommitmentsat23August2014(August2013:£nil).

32. Related party transactions

GroupTransactions with key management personnelThekeymanagementpersonneloftheGroupinthecurrentperiodcomprisemembersofthePunchTavernsplcBoardofDirectors.

Thekeymanagementpersonnelcompensationisasfollows: 53 weeks to

23 August 2014

£m

52weeksto17 August

2013£m

Shorttermemployeebenefits 0.8 1.1Post-employmentemployeebenefits – 0.1Sharebasedpayments – –

0.8 1.2

Therearenootherlongtermbenefitsorterminationbenefitspayabletokeymanagementpersonnelinthecurrentorpriorperiod.


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32. Related party transactions continued

Transactions with joint venturesPunchTaverns(Finco)Limited,awhollyownedsubsidiaryoftheCompany,holds50%oftheentireissuedsharecapitalofMatthewClark(Holdings)Limited,theholdingcompanyoftheMatthewClarkgroupofcompanies.TheGroup’sinvestmentin thisjointventureat23August2014is£50.5m(August2013:£49.3m).TheGrouphadtransactionsof£10.9mwithMatthewClarkduringthe53weeksto23August2014(52weeksto17August2013:£9.1m)andtherewas£0.4mowingtoMatthewClark at23August2014(August2013:£1.2m).

Year end balances arising from transactions with joint ventures23 August

2014£m

17 August2013

£m

Amountsowedtojointventures (0.4) (1.2)

CompanyTransactions with key management personnelThekeymanagementpersonneloftheCompanycomprisemembersofthePunchTavernsplcBoardofDirectors.TheDirectorsreceivedtheirremunerationfromtheCompany.TheCompanydidnothaveanytransactions,withtheexceptionoftransactionsrelatedtoshare-basedpayments,withtheDirectorsduringthefinancialperiod(August2013:£nil).DetailsofthesetransactionsareprovidedintheReportonDirectors’remuneration.

Asaresultofthesuccessfulcompletionoftherestructuringproposals,theCompanySecretaryhaspurchasedthreeordinaryshares inPunchTavernsplc.

Transactions with subsidiary undertakingsTheCompanyentersintoloanswithitssubsidiaryundertakingsatbothfixedandfloatingratesofinterestonacommercialbasis.TheCompanyhasreceivedinterestincomeof£192.1m(August2013:£163.9m)ontheseloansandadvances.

53 weeks to23 August

2014 £m

52weeksto17 August

2013£m

Loans and advances Increaseinloannotesowedbysubsidiaryundertakings 192.1 163.9Decreaseinloansowedtosubsidiaryundertakings – 15.1Increaseinotherloansandadvancesowedtosubsidiaryundertakings (2.5) (17.0)

TheloansarerepayableondemandbuttheCompanydoesnotintendtorequestrepaymentforatleast12monthsfromthedateofsigningthestatutoryaccountsforeachsubsidiary.

Year end balances arising from transactions with subsidiary undertakings 23 August

2014£m

17 August2013

£m

Receivables 1,445.8 1,253.7Payables (1,612.1) (1,609.6)

Theamountsowedbysubsidiaryundertakingsinclude£1,445.5m(August2013:£1,253.4m)ofloannoteswhichareinterestbearing.Inaddition,theCompanyhas£0.3m(August2013:£0.3m)ofotherbalancesowedbysubsidiaryundertakingsthatarenon-interestbearing.Theloannotesaccrueinterestatfixedratesrangingbetween12%and15%,whichiscapitalisedquarterly inarrears.InadditiontheCompanyhas£545.8m(August2013:£545.8m)ofloansand£1,066.3m(August2013:£1,063.8m)ofotherbalancesowedtosubsidiaryundertakingsthatarenon-interestbearing.

Transactions with advisorsSaveinrelationtotheRestructuringandtheFirmPlacingtheGrouphasnotenteredintoanymaterialtransactionswithrelatedparties.Intheyear,theCompanyhaspaidthefeesandexpensesofcertainadviserstoGlenviewandLuxor,whicharerelatedpartiesinrelationtotheCompany,inatotalamountof£156,000(excludingVATwhereapplicable)(August2013:£74,000).TheamountofsuchfeesandexpensesfellwithintheexemptionforsmallrelatedpartytransactionsundertheListingRules.Followingsuchpayments,theCompanyhasnofurtherobligationtopayanyfeesorexpensesofGlenview,Luxororanyotherrelatedparties.




33. Post balance sheet event

Completion of restructuringOn8October2014PunchTavernsplcannouncedsuccessfulcompletionofrestructuringproposalsforthePunchAandPunchBsecuritisations.Theimpactoftherestructuringreducestotalnetdebt(includingmark-to-marketoninterestrateswaps)by £0.6bnandtheGroupnowhasaninitialeffectiveinterestrateofc.7.7%.TheGrouphasalsoissuedatotalof3,771,151,200newordinary shares in connection with the restructuring proposals.

On13October2014PunchTavernsplcannouncedtheconsolidationofitsordinaryshares,asdescribedinthecombinedcircularandprospectusdated18August2014,hadbecomeeffective.Asaresultoftheshareconsolidation,theexistingordinaryshares inPunchTavernsplchavebeenconsolidatedintoconsolidatedordinarysharesonthebasisofoneconsolidatedordinaryshareforevery20existingordinaryshares.

Punch A debt structureImmediatelyfollowingcompletionoftherestructuring,thereviseddebtstructureofthePunchASecuritisationissetoutbelow:

Class of Notes Notional Cash coupon PIK coupon Maturity

SuperSeniorHedgeNote £123.4m Libor – 2021A1(vnote) £67.5m 7.274% – 2026A1(fnote) £202.5m 7.274% – 2026A2(vnote) £45.8m 7.320% – 2025A2(fnote) £137.4m 7.320% – 2025M3 £300.0m Libor+5.500%1 – 2027B4 £89.9m 1.500% 13.500% 2028Gross debt £966.4m

1 AninterestrateswapisinplacetoswaptheLIBORinterestrateontheClassM3floatingratenotetoafixedrateof5.954%.

Punch B debt structureImmediatelyfollowingcompletionoftherestructuring,thereviseddebtstructureofthePunchBSecuritisationissetoutbelow:

Class of Notes Notional Cash coupon PIK coupon Maturity

SuperSeniorSwapLoan £49.0m Libor+0.400% – 2019A3 £146.9m 7.369% – 2021A6 £220.0m 5.943% – 2022A7 £149.1m 5.267% – 2024B3 £72.9m 7.750% – 2025Gross debt £637.9m

GlenviewandLuxor,twoofthesevenfundsthatparticipatedintheRestructuringandFirmPlacing,eachheld,directlyorindirectly,morethan10%oftheissuedsharecapitaloftheCompanyandtheirparticipationintheRestructuringandFirmPlacingwererelatedpartytransactions,eachofwhichrequiredtheapprovaloftheothershareholdersundertheListingRules.Duetothe marketpurchasesandagreementsdescribedintheannouncementon5September2014,theinterestsofGlenviewandLuxor inthenotesissuedbythePunchAandPunchBsecuritisationsandintheissuedsharecapitalofPunchTavernsplchaveandareexpectedtochange.

FurtherdetailsofthedebtstructureofthePunchAandPunchBsecuritisationsfollowingcompletionoftherestructuringcanbefoundonthePunchTavernswebsitewww.punchtavernsplc.com.


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Independent auditor’s report tothemembersofPunchTavernsplconly

Opinions and conclusions arising from our audit

1. Our opinion on the financial statements is unmodifiedWehaveauditedthefinancialstatementsofPunchTavernsplc(“theGroup”)forthe53weekperiodended23August2014setoutonpages40to86.Inouropinion:• thefinancialstatementsgiveatrueandfairviewofthestate

oftheGroup’sandoftheParentCompany’saffairsasat 23August2014andoftheGroup’slossforthe53weekperiodthenended;

• theGroupfinancialstatementshavebeenproperlypreparedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion(IFRSsasadoptedbytheEU);

• theParentCompanyfinancialstatementshavebeenproperlypreparedinaccordancewithIFRSsasadoptedbytheEUandasappliedinaccordancewiththeprovisionsoftheCompaniesAct2006;and

• thefinancialstatementshavebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006and, asregardstheGroupfinancialstatements,Article4ofthe IASRegulation.

2. Our assessment of risks of material misstatementInarrivingatourauditopinionaboveonthefinancialstatementstherisksofmaterialmisstatementthathadthegreatest effect on our audit were as follows.

Carrying amount of Property assets and Non-current assets classified as held for sale (£2,366.6 million)Refer to pages 25 to 27 (Audit and risk committee report), page 50 (Accounting policies) and page 64 (note 14: Impairment losses).

• The risk–Propertieswithinthebusinessareclassifiedaseithercoreornon-core.ThebusinessholdsNon-currentassetsclassifiedasheldforsale,beingacombinationof coreornon-coresitesthatmanagementintendtosell. Whilstpubsinthecoreestatearebettersuitedtomarketdemands,allpubsoperateinachallengingmarketwithperceivedover-capacity,activeregulatoryscrutinyandchangingcustomerdemandstowardsafood-ledofferingratherthanbeingreliantondrinksrevenue.Additionally, giventheGroup’sstrategicplantosellthemajority,ifnot allof,thenon-coreestate,therecoverableamountoftheseassetsissubjecttomovementsinlandandpropertyvalues.

ThesefactorscreateariskthattherecoverableamountofpropertyassetsbecomeslowerthantheircarryingvaluewithintheGroupaccounts.Duetotheinherentuncertaintyinvolvedinforecastingboththecontinuingcashflows forthecoreestateandexpectedpropertydisposalvalues forthenon-coreestate,thiswasakeyjudgementalarea of our audit.

• Our response–Forcoreproperties,whicharetoberetainedintheestate,wecriticallyassessedthekeyassumptionsusedinderivingthevalueinusecalculation,whichformedthebasisfortherecoverableamount.Weusedbreakevenanalysistodeterminethekeysensitivitieswithinthevaluationmodeltobethelongtermgrowthratesof2%appliedfromYear5oftheGroupforecastcashflowsandthepre-taxriskadjusteddiscountrateof8%.Weassessedthelongtermgrowthratethroughexternalmarketinformationoncurrentandforecastperformanceofthesectoraswellaslongterminflationaryreturns,peergroupbenchmarkingandtheactualtradinghistoryoftheGroup.Ourowninternalvaluationspecialistsassistedusinassessingthediscountrate,whichincludedanadjustmentforforecastingrisk,bybenchmarkingtherateagainstexternalmarketdata,takingintoaccounttheGroup’sfinancial position.

Forthosepropertiesinthenon-coreestate,ourauditproceduresincluded,amongstothers,usingourowninternalpropertyvaluationspecialisttoassistusincriticallyassessingtheassumptionsusedinthevaluationprocessinlightofpubliclyavailableinformationfrompropertyagentsaroundchangesinpropertymarketvaluesataregionalandnationallevel,aswellasevaluationofthehistoricalaccuracyofthevaluationsapplied,particularlygiventhesignificanceofthePunchTavernsplcdisposalprogramintheoverallmarketplace.

WeconsideredtheadequacyoftheGroup’sdisclosurearoundimpairment to property assets.

Recoverability of Goodwill (£172.6 million)Refer to pages 25 to 27 (Audit and risk committee report), page 49 (Accounting policies) and page 64 (note 14: Impairment losses).

• The risk–Goodwillwithinthebusinessrelatessolelyto thecoredivision,whichcontainsallcoreassets.ThereisanindicationofimpairmentasaresultofthedifferencebetweentheGroup’smarketcapitalisationanditsreportedNetAssets.Thepubsinthisbusinessoperateinamarketwithongoingcompetitivepressuresandanactiveregulator.Thesefactorsleadtoariskthatthebusinessdoesnotmeetthegrowthprojectionsnecessarytosupportthecarryingvalueoftheintangibleasset.Duetotheinherentuncertaintyinvolved inforecastingthesecashflows,thisisoneofthekeyjudgementalareasthatourauditisconcentratedon.

• Our response–Ourauditproceduresincluded,amongstothers,usingtheworkperformedonvalueinusecalculations,inrespectofthecoreproperties(asdescribedabove)tocomparethecarryingvalueoftheCoreSegment,includingGoodwill,toitsvalueinuse.Inaddition,weassessedthereasonablenessofdifferencesbetweenmarketcapitalisationand net assets and considered this within the impairment testing.

WeconsideredtheadequacyoftheGroup’sdisclosuresaboutthesensitivityoftheoutcomeoftheimpairmentassessmenttochangesinkeyassumptions.


Independent auditor’s report continuedtothemembersofPunchTavernsplconly

Going concernRefer to pages 25 to 27 (Audit and risk committee report) and page 48 (Accounting policies).

• The risk–TheGroupoperatesinamarketwithongoingcompetitivepressures.TheGrouphaspreviouslydisclosed theexistenceofamaterialuncertaintythatcastsignificantdoubtoveritsabilitytocontinuetomeetitsliabilitiesas theyfalldue.On8October2014,theGroupsuccessfullycompleted the refinancing of its two Securitisation groups. Consequently,theDirectorshaveconcludedthatnomaterialuncertaintynowexists.GiventheinherentuncertaintyinvolvedinmakingthisassessmentandinforecastingthefuturecashflowsoftheGroup,weconsideredgoingconcernandtherelateddisclosurestobeoneofthekeyjudgementalaspects during the period of our audit.

• Our response–Ourauditproceduresincluded,amongstothers,criticalassessmentoftheassumptionsusedaroundprospectivetradinglevelsincludedwithintheGroup’scashflowforecastthroughconsiderationofpeerperformanceannouncementsandotherthirdpartypublicationsanalysingthechallengesandprospectsforthePubandLeisuresector.Inaddition,weassessedthekeyfactorsintheGroup’sforecastperformance,asdescribedabove.

We considered the terms and conditions of the refinancing andappraisedtherevisedforecastcashflowswithrespect tointerestanddebtrepaymentsagainsttheforecastworkingcapitalrequirementsofthebusinesstoidentifysufficiency offunding.Weperformedsensitivityanalysisoverkeytradingmetricssuchasbarrelsperpubandmarginperbarrelandassessedthefeasibilityofvariousremediationmechanisms thedirectorsbelieveareavailabletothemintheeventthatavailablecashislowerthanprojected.

WeconsideredtheadequacyoftheGroup’sdisclosureinrespect of the use of the going concern assumption and related uncertainties.

3. Our application of materiality and an overview of the scope of our auditThematerialityfortheGroupfinancialstatementsasawholewassetat£10.0million.ThishasbeendeterminedwithreferencetothetotalGroupassets(ofwhichitrepresents0.3%),whichweconsidertobeoneoftheprincipalconsiderationsformembersoftheCompanyinassessingthe financial performance of the Group.

WeagreedwiththeAuditandriskcommitteetoreport to it all corrected and uncorrected misstatements we identified throughourauditwithavalueinexcessof£0.4millioninadditiontootherauditmisstatementsbelowthatthreshold thatwebelievewarrantedreportingonqualitativegrounds.

TheGroupauditteamperformedtheauditoftheGroup as if it was a single aggregated set of financial information. Theauditwasperformedusingthematerialitylevelssetoutaboveandcovered100%oftotalGrouprevenue,Group profitbeforetaxation,andtotalGroupassets.

4. Our opinion on other matters prescribed by the Companies Act 2006 is unmodifiedInouropinion:• thepartoftheDirectors’remunerationreporttobe

auditedhasbeenproperlypreparedinaccordancewith theCompaniesAct2006;and

• theinformationgivenintheStrategicreportandtheDirectors’reportforthefinancialperiodforwhichthefinancial statements are prepared is consistent with the financial statements.

5. We have nothing to report in respect of the matters on which we are required to report by exception UnderISAs(UKandIreland)wearerequiredtoreporttoyou if,basedontheknowledgeweacquiredduringouraudit, wehaveidentifiedotherinformationintheannualreportthatcontainsamaterialinconsistencywitheitherthatknowledge orthefinancialstatements,amaterialmisstatementoffact, or that is otherwise misleading.

Inparticular,wearerequiredtoreporttoyouif:• wehaveidentifiedmaterialinconsistenciesbetweenthe

knowledgeweacquiredduringourauditandthedirectors’statement that they consider that the annual report and financialstatementstakenasawholeisfair,balancedandunderstandableandprovidestheinformationnecessaryforshareholderstoassesstheGroup’sperformance,businessmodelandstrategy;or

• theAuditandriskcommitteereport,assetouton pages25to27doesnotappropriatelyaddressmatterscommunicatedbyustotheAuditandRiskCommittee.

UndertheCompaniesAct2006wearerequiredtoreport toyouif,inouropinion:• adequateaccountingrecordshavenotbeenkeptbythe

ParentCompany,orreturnsadequateforouraudithave notbeenreceivedfrombranchesnotvisitedbyus;or

• theParentCompanyfinancialstatementsandthepartof theDirectors’remunerationreporttobeauditedarenot inagreementwiththeaccountingrecordsandreturns;or

• certaindisclosuresofdirectors’remunerationspecified bylawarenotmade;or

• wehavenotreceivedalltheinformationandexplanations werequireforouraudit.

UndertheListingRuleswearerequiredtoreview:• thedirectors’statement,setoutonpage39,inrelation

togoingconcern;and• thepartoftheCorporategovernancestatementonpages

20to24relatingtotheCompany’scompliancewiththe nineprovisionsofthe2010UKCorporateGovernanceCodespecifiedforourreview.

Wehavenothingtoreportinrespectoftheaboveresponsibilities.


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Scope of report and responsibilitiesAsexplainedmorefullyintheDirectors’responsibilitiesstatementsetoutonpage39,thedirectorsareresponsiblefor the preparation of the financial statements and for beingsatisfiedthattheygiveatrueandfairview. A description of the scope of an audit of financial statements isprovidedontheFinancialReportingCouncil’swebsite atwww.frc.org.uk/auditscopeukprivate.Thisreportis madesolelytotheCompany’smembersasabodyandis subjecttoimportantexplanationsanddisclaimersregarding ourresponsibilities,publishedonourwebsiteat www.kpmg.com/uk/auditscopeukco2013a,whichareincorporatedintothisreportasifsetoutinfullandshouldbereadtoprovideanunderstandingofthepurposeofthisreport,theworkwehaveundertakenandthebasisofouropinions.

Greg Watts (Senior Statutory Auditor) forandonbehalfofKPMGLLP,StatutoryAuditorChartered AccountantsOne Snowhill Snow Hill QueenswayBirminghamB46GH

11November2014


Financial glossary

Beta modelA model for pricing share options which applies the same principlesasthebinomialmodelbuttakesintoaccounttherelationship of the share price to a portfolio of a comparator groupcompanies’shares.

Binomial modelA model for pricing share options which applies the same principlesasdecision-treeanalysisbyconsideringthepossibilitiesthatpricesmayincreaseordecreasebyacertainpercentage.

Black-Scholes modelAmodelforpricingshareoptionsusingtheshareprice,thetimetoexpirationoftheoption,therisk-freeinterestrateandtheexpectedstandarddeviationofthesharereturn.

Cash flow hedgesAhedgeoftheexposuretovariabilityincashflows.

The 2010 UK Corporate Governance CodeThe2010UKCorporateGovernanceCodeisaguidetoanumberofkeycomponentsofeffectiveboardpractice.Itisbasedontheunderlyingprinciplesofallgoodgovernance:accountability,transparency,probityandfocusonthesustainablesuccessofanentityoverthelongerterm.

Corporate governanceCorporategovernancedescribesthesystembywhichanorganisation is directed and controlled.

Derivative financial instrumentsFinancialinstrumentswhosevaluechangesinresponsetochangesinaspecifiedinterestrate,financialinstrumentprice,commodityprice,foreignexchangerate,orothervariable,and are settled at a future date.

Diluted earnings per shareDilutedearningspershareisearningspershareafterallowingforthedilutiveeffectoftheconversionintoordinarysharesoftheweightedaveragenumberofoptionsoutstandingduringtheperiodandsharesfromtheassumedconversionofconvertiblebonds.

Earnings per share (EPS)Earningspershareisaperformancemeasurethatexpresses theearningsattributabletoordinaryshareholdersdividedby theweightedaveragenumberofordinarysharesinissueduringthe period.

EBITDAEBITDArepresentsearningsbeforefinanceincome,financecosts,movementinfairvalueofinterestrateswaps,UKincometax,depreciation,amortisationandprofitonsaleofnon-currentassets.

Effective interest rate methodA method of calculating the amortised cost of a financial asset orfinancialliabilityandofallocatingtheinterestincomeorexpenseovertherelevantperiod.

Experience gains / lossesChangesinthevaluationofdefinedbenefitpensionschemethatarisewheneventshavenotcoincidedwiththeactuarialassumptionsmadeforthepreviousvaluation.

Fair valueTheamountatwhichassetscanbeexchanged,orliabilitiessettled,betweenknowledgeable,willingpartiesinanarm’slength transaction.

Finance lease Amethodofpurchasinganassetbymakingrentalpaymentsthroughouttheexpectedlifetimeoftheasset.Thelesseeshowsanassetandacorrespondingliabilityinthebalancesheet.Finance lease payments are accounted for as a reduction in theliability.

GoodwillGoodwillistheexcessoftheamountpaidforacompanyoverthefairvalueofthenetassetsacquiredatthedateofacquisition.

IASInternationalAccountingStandards.

IASBInternationalAccountingStandardsBoard.

IFRICInternationalFinancialReportingInterpretationsCommittee.

IFRS InternationalFinancialReportingStandards.

Indexation allowanceIndexationallowanceistaxreliefgivenwhencalculatingcapitalgainsthattakesintoaccountinflationbasedontheRetailPricesIndex(RPI).Indexationallowancecanonlyreduceanun-indexedgain to nil and cannot create or increase a capital loss.

Interest coverAperformancemeasurethatshowsthenumberoftimesEBITDAcoversthenetfinanceincomeandfinancecost.

Interest rate swapAderivativefinancialinstrumentusedtominimiseexposuretochangesininterestratesbypaymenttoreceiveafixedinterestrateinexchangeforafloatingrateinterestrate,orpayment toreceiveafloatingrateinterestrateinexchangeforafixedinterest rate.

LIBORLondonInterBankOfferedRate.Theinterestratequotedbetweenbanks,whichisarecognisedbasisforcalculating afloatinginterestrate.

LTMLast12months.

Monte Carlo valuation methodA model for pricing share options that generates many random possiblepricepaths,calculatesassumedexercisevalues,thenaveragesanddiscountstogivethevalueoftheoption.


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Net debtLoans,convertiblebonds,derivativefinancialinstrumentsandfinanceleasesnetofotherinterest-bearingdepositsandcashandcashequivalents.

Nominal value of net debtThevalueofasecuritystatedbytheissuer;unrelatedtomarketvalue.Forbonds,itistheamountpaidtotheholderatmaturity.

Non-underlying itemsItemswhichmanagementconsiderwilldistortcomparability,eitherduetotheirsignificantnon-recurringnatureorbecauseofspecificaccountingtreatments.Theseareseparatelyidentifiedinordertoprovideatrendmeasureofunderlyingperformance.

Operating leaseAmethodofrentingassetsoveraperiodthatislessthantheexpectedlifeoftheasset.Thelesseedoesnotshowanassetorliabilityontheirbalancesheetandperiodicpaymentsareaccountedforbythelesseeasoperatingexpensesintheperiod.

Operating resultProfitafterdeductingalloperatingexpensesincludingdepreciation and amortisation.

Over-hedgeAnover-hedgeoccurswhenthenotionalprincipalamountofthe hedging instrument is greater than that of the hedged item.

PBTProfitbeforetax.

Projected unit credit methodTheaccountingmethodusedtocalculateprovisionsforpensions.Itincludesnotonlythepensionsandvestedinterestsaccruedatthedateofcalculation,butalsoanticipatedincreasesin salaries and pensions.

SecuritisationTheprocessofraisingfinancebycreatingafinancialinstrumentsecuredbypoolingotherfinancialassetstobacktheinstrument.

Segmental reportingInformationregardingthefinancialpositionandresultsofoperationsindifferentbusinessareas.

Total Shareholder Return (TSR)Thegrowthinvalueofashareholdingoveraspecificperiod,assumingthatdividendsarereinvestedtopurchaseadditionalshares.

UK GAAPUKGenerallyAcceptedAccountingPrinciples.

Working capitalShort-termdisposablecapitalusedtofinanceday-to-dayoperations.Itiscalculatedascurrentassetslesscurrentliabilities.


Company information

Registered officeJubileeHouseSecondAvenueBurtonuponTrentDE142WF+44(0)1283501600

Company number3752645

AdvisersAuditorKPMGLLPOne SnowhillSnow Hill QueenswayBirminghamB46GH+44(0)1212323000

Principal bankersBarclaysBankplcOne SnowhillSnow Hill QueenswayBirminghamB32WN+44(0)1214805562

SolicitorsSlaughter and MayOneBunhillRowLondonEC1Y8YY+44(0)2076001200

Broker & financial adviserGoldmanSachsInternationalPeterboroughCourt133FleetStreetLondonEC4A2BB+44(0)2077741000

Financial adviserTheBlackstoneGroupInternationalPartnersLLP40BerkeleySquareLondonW1J5AL+44(0)2074514000

RegistrarComputershareInvestorServicesplcPOBox82ThePavilionsBridgwaterRoadBristolBS997NH+44(0)8707020003

Financial calendarAnnual General Meeting January2015Half year end 7March2015Interimresultsannouncement April2015Yearend 22August2015Preliminaryresultsannouncement October2015

Directors of the CompanyStephenBillingham ExecutiveChairmanSteveDando FinanceDirectorAngusPorter SeniorIndependentNon-ExecutiveDirectorJohnAllkins Non-ExecutiveDirectorIanDyson Non-ExecutiveDirector

This report is printed using papers which are FSC Mixed Credit certified.

If you have finished reading this report and no longer wish to retain it, please pass it on to interested readers, return it to Punch Taverns or dispose of it in your recycled paper waste. Thank you.

Designed and produced by Instinctif Partners www.instinctif.com

Punch Taverns plcJubilee HouseSecond AvenueBurton upon TrentStaffordshireDE14 2WF

www.punchtavernsplc.comTel: +44 (0)1283 501600Fax: +44 (0)1283 501601

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