punch taverns plc 
annual report and financial statements 2012 punch taverns is a leading pub 
company in the uk with around  
4500 pubs nationwide
our aim is to become the uk’s  
highest quality most trusted and  
best value leased pub company
business review
highlights 01
chairman’s statement 02
chief executive officer’s review 03
our approach to managing risks  
and uncertainties 07
our key risks and uncertainties 08
financial review 10
our pubs 12
our partners 13
punch support 14
our people and csr 15
governance
board of directors 16
directors’ report 18
corporate governance statement 21
report on directors’ remuneration 27
statement of directors’ responsibilities  
in respect of the annual report and  
the financial statements 36
financial statements
consolidated income statement 37
consolidated statement  
of comprehensive income 38
consolidated balance sheet 39
consolidated statement of changes in equity 40
consolidated cash flow statement 41
company balance sheet 42
company statement of changes in equity 43
company income statement 43
company cash flow statement 44
notes to the financial statements 45
independent auditor’s report  
to the members of punch taverns plc 86
financial glossary 87 annual report and financial statements 2012 punch taverns plc
01
business review
kpis

highlights
underlying financial performance – in line with expectations
n  ebitda of £238m 2011 £258m
n  profit before tax of £64m 2011 £76m
n  basic earnings per share of 72p 2011 86p
n  strong cash position £264m of cash reserves of which  
£90m held outside of the securitisations
n  net debt decreased by £137m
operational kpis
n  average net income per pub broadly flat across the year 
n  substantive agreements at 94 
n  core substantive likeforlike net income 1  
partners on secure agreements for greater than 1 year
n  total core estate likeforlike net income 37 
n  475 pubs disposed together with other assets for £130m  
£1m ahead of book value and at a multiple of 18 times ebitda
operational headlines
n  continued progress on delivering our key strategic initiatives
core estate
1  invest to improve customer environment and increase food sales 
record £38m invested in 400 core pubs food mix up  
3 percentage points to 24
2   attract high quality partners 25 increase in applicant numbers 
growing number of multiple operators 
3   drive sales additional 1100 partners in the punch buying club  
a 65 increase 45 of drinks orders now online up from 21 
last year
4   improve punch support successful launch of the punch franchise 
tenancy agreement free wifi to be rolled out across our estate  
in 2013
noncore estate
5  disposal of noncore sites disposal programme on track to 
deliver a core estate of 3000 pubs within the next 5 years 
 before nonunderlying items and discontinued operations
 net income represents revenue less cost of drink sales gross profit
ebitda £m
2010 2011 2012
2908
2577
2380
profit before tax £m
2010 2011 2012
898
763
640
basic earnings per share p
2010 2011 2012
99
86
72
net debt £m
2011 2012
22636
21264
2010 not reported as net debt included the spirit 
business prior to demerger punch taverns plc annual report and financial statements 2012
02
chairman’s statement
i am pleased with the progress  
we have made on delivering  
on our key strategic initiatives 
stephen billingham chairman
corporate governance
the board sets itself high standards of corporate governance  
in order to facilitate effective and prudent management that 
can deliver the long term success of the company the details  
of our compliance with the uk corporate governance code  
is set out in our corporate governance statement
people
we are making good progress towards our long term objective 
to become the uk’s highest quality most trusted and best value 
leased pub company delivering on this objective is only possible 
with the skills and commitment of the punch team the 
improvements in the level of service and support to our partners 
that i have seen across the business in the last year is testament 
to their calibre and commitment
i am pleased with the progress we have made on delivering on 
our key strategic initiatives the level of activity in investment 
partner recruitment and food development has been particularly 
strong in the second half of the year and this high level of 
activity is continuing in the new financial year
having completed a detailed and thorough review of the capital 
structure options we can now move forward to the next stage 
of the process discussions have already commenced with 
certain of the group’s key stakeholders to seek their input and 
following this we will look to engage with all our stakeholders
board
in march angus porter joined our board as senior independent 
director and chairman of the remuneration committee  
angus has a wealth of experience having been a nonexecutive 
director of mytravel group alliance and leicester and  
thomas cook and has held executive positions at mars  
british telecom abbey national and wpp
angus replaced mark pain who stepped down from the board 
having completed his service on the board for the transitional 
period following the demerger of the spirit business in 2011
we have announced the appointment of john allkins  
to our board as chairman of the audit and risk committee 
john brings valuable experience having held senior executive 
positions at mytravel group equant nv and british telecom
john will replace ian fraser who will not be seeking reelection 
at the agm in december and will retire from the board after 
eight years service annual report and financial statements 2012 punch taverns plc
03
business review
chief executive officer’s review
our strategy is to focus on our  
high quality well located core  
estate of approximately 3000 pubs 
roger whiteside chief executive officer
business review
we underwent a significant reorganisation of our field teams  
in 2011 with 73 of pubs having a change of partnership 
development manager pdm following the transfer of  
c550 leasehold pubs to spirit at the time of the demerger and 
the transfer of pubs to the turnaround division this disruption  
had an impact on our rate of letting and investment activity  
in the first half of the year as our field teams improved their 
understanding of their new areas and established strong 
relationships with their new partners i am pleased to report 
that this slowdown in activity has been more than compensated 
for by record levels of letting and investment activity in  
the second half of the year 
while our pubs had made strong plans to maximise the 
opportunities offered by the jubilee and sporting events over 
the summer these were outweighed by the impact of the wet 
weather on market demand notwithstanding these shortterm 
challenges we continued to make good progress towards  
our longterm goal of growth in the core estate this includes 
record levels of investment in over 400 core pubs and an 
additional 1100 partners joining the punch buying club  
we also benefited from a positive mix shift towards food  
during the year which was up 3 percentage points to 24  
of partner revenue
we are committed to improving on the level of support we 
provide to our partners and see this as being fundamental  
to returning the core estate to growth we have successfully 
launched our new punch franchise tenancy agreement in  
a limited number of pubs and will roll this out nationally this 
year we have strong plans in place to build on the progress we 
have made including increasing the size of specialist field teams 
in the areas of investment marketing and food development 
the rollout of free wifi across our pub estate and the provision 
of nontied goods and services through the punch buying club 
we intend to deliver these improvements without increasing  
the cost base of the business and will continue to focus on cost 
reduction as we downsize the noncore estate and improve 
back office efficiency
market and strategic overview
the combination of a longterm decline in drinkingout of 
approximately 35 per annum changing customer behaviour 
relative price positioning and the impact of regulation means 
that the number of pubs in the uk is expected to continue to 
decline whilst we believe the longterm growth in eatingout 
will continue to support the pub industry we believe the  
benefit will favour the larger food led destination pubs and  
so a disproportionate number of the closures will be from 
smaller predominantly drinks led pubs
 
punch’s stated strategy is therefore to focus on its high quality 
well located core estate of approximately 3000 pubs these 
pubs are well positioned to outperform the broader market 
drinks volume declines and grow food revenues while net 
income in the core estate remained in decline this year and  
we anticipate a comparable decline in the shortterm as we 
continue to rebalance rents in the coming year we expect a 
return to growth the following financial year in the medium 
term we have a clear operational plan to return the core estate 
to growth of c2 per annum in both partner earnings and 
punch net income 
the strategy for the noncore estate also remains consistent 
with a focus on maximising cash returns whilst the pubs are let 
and then to deliver in excess of book value on the disposal of 
the pubs the disposal programme remains on track and the 
group expects to deliver c£630m from the disposal of the 
2278 pub noncore estate over the next five years of which 
£172m has already been delivered from 683 pub disposals  
over the last 18 months against a book value of £169m  
whilst these pubs continue to have access to the same 
operational tools and infrastructure as the core estate they  
are expected to continue to suffer volume declines materially 
greater than the broader market as a result we expect these 
pubs to continue to experience profit declines albeit with an 
improving trend as we dispose of the worst performing  
pubs first punch taverns plc annual report and financial statements 2012
04
chief executive officer’s review continued
core turnaround central punch
aug 2012 pub 
numbers 2934 1595 – 4529
revenue £377m £115m – £492m
net income £222m £66m – £287m
ebitda £209m £57m £28m £238m
core estate
the core division comprising 2934 pubs accounts for 79 of 
punch outlet ebitda these pubs have a much higher average 
net income per pub than the turnaround estate at c£75000 
and have experienced a decline in net income of 37 in  
the year 
trading performance has been impacted this year by disruption 
following the demerger of spirit combined with the wettest 
april to june period since records began in line with the 
performance of the core division market statistics confirm  
a sharp decline in beer sales during this period
underlying performance in the business continues to be robust 
with likeforlike net income in pubs that have been on full 
substantive agreements for more than one year being down just 
1 within this trading in the south of england continues to 
outperform the rest of the uk
despite the difficult market conditions the level of pub failures 
remains in line with last year the majority of these pubs will 
receive investment to reposition their offering in their local 
marketplace and are currently in the process of being relet on 
full substantive agreements as at the year end date 94 of  
the pubs in the core estate were let on substantive agreements 
leaving 183 core pubs 6 available for letting of which 73 
have new partners in place awaiting legal completion
throughout the year management actions have been focused 
on delivering our four key objectives
i  investing to improve the customer environment and 
increase food sales we invested in over 400 core pubs 
during the year and increased our average spend per pub to 
£90000 with the rate of investment having accelerated in 
the second half of the year our focus has been on new lets 
where there is an opportunity to invest to improve food 
participation and the consumer environment 
  alongside increased investment in the core estate we are 
increasing the level of pub support providing more influence 
over the customer offer we are in the process of introducing 
dedicated pub launch teams to help design and implement 
the full customer offer including product ranging events 
planning service delivery and promotional activity
  food sales represent a significant opportunity for our 
partners and we have a 5 year target to increase the food 
sales mix to 35 of partner revenue our catering experts 
have performed 1900 partner visits in the year to develop 
the food offer increasing the estimated food sales mix in 
our pubs by 3 to 24 of partner revenue our strategy  
is to improve the food offering across our estate using 
managed house principles and supporting our partners  
with food specifications and menu costing 
 
ii   attracting high quality partners the core estate remains 
stable with pub failures remaining in line with previous years 
and an average tenure of over 5 years new applicant 
enquiries continue to be very strong at approximately  
400 enquiries per month representing a 25 increase 
compared to the prior year and we are experiencing a trend 
moving back towards long leases we now have over 200  
of our punch buying club leases in place which reward our 
partners for outperformance and our new agreements are 
attracting an increased interest from small multiple pub 
operators and micro brewers alike our recruitment website 
has been completely overhauled and will be relaunched in 
october with greatly enhanced crm capabilities
iii   driving sales growth the use of the punch buying club 
has doubled in the year with 45 of our drinks orders now 
being taken online up from 21 as at august 2011 the 
punch buying club now has 2800 partners and gives access 
to exclusive deals and through the punch buying club blog 
partners can provide feedback on issues seek advice share 
best practice and access exclusive marketing and point of 
sale materials 
  the product offers marketing and promotional support  
we offer our partners have proved extremely popular  
with 48 of our partners attending our industry leading 
roadshows a doubling in our design and print service and 
record participation in sales activities such as the uk’s 
largest darts competition up 12 quiz nights up 72 
and siba cask ale sales up 40
iv   effective punch support partnership development 
managers pdms are key to driving the performance of  
our pubs we have invested in industry leading training  
in partnership with the bii piloting the first level 4 
qualification in multiple retail management which we 
expect all of our pdms to complete by the end of this year 
  the new punch franchise tenancy agreement has been 
successfully launched aimed at community local pubs and 
new entrants to the sector this fully supported open book 
agreement provides more support to our partners and 
increases our influence over the customer offer initial results 
in the limited number of pubs with the new agreement have 
been encouraging and we aim to roll it out nationally  
this year
  in a drive to support our partners to improve retail standards 
in our pubs we introduced a mystery visit programme this 
year providing independent feedback on the consumer 
experience and beer quality the programme which has 
been well received and clearly demonstrates the link 
between high retail standards and pub performance  
will be rolled out across the core estate this year
  annual report and financial statements 2012 punch taverns plc
05
business review
 building on the success of the punch buying club we are now 
extending the services and range of products we offer to 
include the rollout of free wifi across our pub estate and the 
provision of further nontied goods and services through the 
buying club we are committed to simplifying the administrative 
burden for our existing and prospective partners and to drive 
down the cost to our partners of running a pub
turnaround estate
the turnaround division comprising 1595 pubs with a book 
value of £469m accounts for 21 of punch outlet ebitda 
these pubs are predominately small wet led and have a much 
lower average net income per pub at c£36000 and which 
have declined by 9 in the last financial year given the limited 
scope for investment these pubs are more likely to be impacted 
by the longterm decline in drinking out and as a result are 
expected in time to generate more value through disposal  
than retention 
since we created the turnaround division we have further 
refined our operating strategy segmenting the division into two 
groups ‘sell now  sell later’ and ‘protect and grow’ the ‘sell 
now  sell later’ pubs 1029 pubs will be sold over the next 13 
years while the ‘protect and grow’ pubs 566 pubs will be held 
and operated over the nearterm and sold over the next 35 
years this additional segmentation supports our objectives of 
maximising our profits for as long as we own the pub including 
limited targeted investment in ‘protect and grow’ pubs and in 
optimising our disposal proceeds by selling at the right time
maximising shortterm returns while these noncore pubs 
remain in our portfolio we remain committed to driving 
operating performance and maximising the profits from  
these outlets net income in noncore pubs on substantive 
agreements is broadly stable with all the decline coming  
from nonsubstantive pubs in the process of disposal
maximising value on disposal during the year we sold  
475 pubs together with other assets for proceeds of £130m 
£1m ahead of book value the disposed pubs generated  
just £74m of ebitda over the last 12 months equating to  
a disposal multiple of 18x demonstrating the accretive nature 
of these disposals
we are on track with our disposal programme in extracting 
maximum value from our noncore assets in line with book 
value and reducing our estate down to c3000 core pubs within 
the next 5 years we aim to sell c400 noncore pubs in the 
20122013 financial year
matthew clark joint venture
matthew clark the 50 joint venture with accolade owned 
by champ private equity continues to perform satisfactorily  
in a very competitive market providing a posttax contribution 
to punch of £34m for the year matthew clark has significant 
scale in its marketplace as the largest independent drinks 
wholesaler and distributor to the uk leisure and hospitality 
industry with gross annual turnover of c£700m and c20000 
customers turnover increased by 9 in the joint venture’s  
last financial year and the business has clear plans for continued 
growth in market share from which punch will benefit
regulatory
punch is committed to developing a responsible approach in 
working with our partners and in the marketplace in which we 
operate our biibas accredited code of practice is now firmly 
embedded in the business and lays out clearly what our partners 
should expect from us when committing to a lease agreement 
our code of practice goes further than the requirements of the 
industry framework code which has been made legally binding 
in the year
further progress has been made towards self regulation with 
two complaint review bodies now available to licensees pirrs 
exists to provide low cost resolution for rent disputes and our 
partners are now able to take complaints relating to any other 
part of our code of practice to picas
punch continues to play a full role in the pub sector through 
membership of the bbpa and support for the bii almr and 
flva pubs play a vital role in the economy providing local 
employment particularly for young people and we continue  
to engage with government on the need for investment in the 
sector as a key part of the wider growth agenda for the uk 
economy we believe the economic case for reduction in vat  
in the hospitality sector is compelling with the potential to 
create thousands of new jobs and have given our full support  
to the vat club campaign led by jacques borel 
social responsibility
pubs play a vital role at the heart of the community and punch 
continues to support key initiatives such as pub is the hub and 
work with the licensed trade charity our pubs are significant 
contributors to local fund raising with many of them recording 
their achievements through pubaid our teams in our support 
centre in burton are also involved in the local community 
providing help to local causes through the punch community 
promise scheme 
we believe that pubs provide a safe supervised environment  
for the consumption of alcohol and punch is committed to the 
alcohol responsibility agenda providing support to drinkaware 
and the portman group punch taverns plc annual report and financial statements 2012
06
chief executive officer’s review continued
capital structure review 
objectives
during the year the board appointed goldman sachs and 
blackstone as advisors to assist in undertaking a detailed review 
of the options to optimise the group’s capital structure this 
review examined i punch’s current business strategy in light  
of current and expected operating conditions and ii punch’s 
current capital structure position
the key objective of the review was to identify all options that 
could deliver shareholder and wider stakeholder value and to 
assess them against the following criteria
• creation of a sustainable capital structure and
• feasibility of successful execution
current capital structure 
the group is financed through two whole business 
securitisations the punch a securitisation £1477m of gross 
debt and the punch b securitisation £914m of gross debt  
as well as certain cash resources held across the group  
as at the year end the group held £264m of cash resources  
of which £90m was held outside the securitisation structures 
compared to loan amortisation due within 1 year of £57m  
in addition to cash resources held outside the securitisations 
punch also holds a 50 interest in the matthew clark  
joint venture 
the majority of the trading assets of the group are held in the 
two securitisation structures and whilst the securitisations 
generated underlying profits and positive net cash flow before 
debt repayments and disposals in the year they required 
financial support through the use of cash resources held outside 
of the securitisations to maintain compliance with their dscr 
debt service cover ratio covenants without this support 
both the punch a and punch b securitisations would have 
breached their respective dscr covenant levels in the year 
august 2012
punch a
 securitisation
punch b 
securitisation
reported 2qtr dscr  
including support 136x 151x
underlying 2qtr dscr  
excluding support 108x 105x
dscr covenant level 125x 125x
net support from cash resources held outside of the 
securitisations amounted to £21m for the year being £79m  
of gross support less £58m of cash payments from the 
securitisations to the wider group during the year given 
expectations for the level of performance of the group and the 
anticipated debt service requirements it is expected that the 
level of support required will increase in the next financial year
while this financial support provides valuable time to identify 
appropriate legal and capital restructuring options it is not 
sustainable over the medium to longterm a restructuring  
of both securitisations is therefore required in order to avoid  
a covenant default and deliver value to stakeholders 
since the year end the group has continued to provide financial 
support to the securitisations to allow restructuring options  
to be developed the continuation of that support into each 
securitisation will continue to be reviewed on a regular basis  
in light of all relevant circumstances 
status of the review
the scope of the review undertaken by the board has been 
extensive with a number of alternatives considered while  
no decision has been taken as to the preferred solution to 
restructure the group’s capital structure the following 
conclusions have been drawn from the review
•  both securitisations are over levered and unsustainable in 
their current form
•  significant amendments to each of the punch a and punch b 
securitisation structures are necessary including one or more 
of a material reduction in debt an increase in the maturities 
of the debt and changes to the financial covenants 
•  although both the punch a and punch b securitisations need 
to be restructured given the differences in their stakeholder 
profiles their legal and financial structures and the 
contractual linkages between them and the wider group the 
optimal restructuring solution and implementation timetable 
may differ for each securitisation
•  proposed changes to the capital structure should be 
developed for both the punch a and punch b securitisation 
structures to protect the material financial and operational 
benefits that both enjoy as being part of the wider group
•  operational covenant amendments are also required to allow 
the securitised businesses to continue to maximise returns 
through further investment in the core estate and the 
ongoing disposal of noncore assets
•  the board believes that it is likely that a covenant default 
would have a material adverse impact on the value of the 
underlying businesses and
•  while the group continues to maintain significant cash 
balances providing time and optionality it is preferable  
to work towards identifying a preferred solution as soon as 
practicable so that any uncertainty around potential changes 
to the legal and capital structure of the securitisations does 
not impact on the underlying performance of what is a very 
profitable and high quality pub business
given the adverse impact that a covenant default could have on 
all stakeholders the board believes that it is in the best interests 
of the stakeholders to pursue a consensual restructuring 
solution on the basis of the dialogue with stakeholders to date 
the board remains confident that a restructuring can be 
successfully implemented
next steps and discussions with stakeholders
the board is mindful that uncertainty around the group’s 
capital structure could have a negative impact on the group’s 
underlying business and that as a result it is likely to be in the 
best interest of all stakeholders to identify and implement a 
preferred solution to restructure the group’s capital structure  
as soon as practicable
as part of the review process the board initiated discussions 
with certain of its major shareholders and other significant 
stakeholders to seek their input on the range of options under 
consideration while these discussions have assisted the board 
in reaching the conclusions set out today they remain ongoing 
at the appropriate time the board will be initiating a process  
to identify debt holders in both the punch a and punch b 
securitisations and extending these discussions to the 
bondholders in both securitisations annual report and financial statements 2012 punch taverns plc
07
business review
our approach to managing risks 
and uncertainties
punch has a formal risk management process in place which  
is designed to identify evaluate and manage the risks and 
uncertainties to which it is exposed 
management teams from across the group carry out regular 
risk workshops and update our risk register risks are 
highlighted and then assessed based on the probability of  
them occurring and the impact they may have on the business 
a consistent approach for reporting risks on a risk matrix 
ensures that punch is able to prioritise its risks mitigation plans 
are implemented where necessary to ensure that risks are 
managed appropriately the board has ultimate responsibility 
for the risk management framework and formally reviews the 
material risks to the group regularly as well as discussing 
changing or emerging risks on an ongoing basis the board is 
responsible for ensuring that business risks are appropriately 
managed by the executive management team and monitors 
recently introduced key risk performance measures on a 
periodic basis to track the movement of these key risks 
the internal audit function provides assurance to the board  
on key controls and the management of risks within punch  
the audit and risk committee annually reviews the overall 
effectiveness of the risk management framework 
punch is exposed to a variety of financial operational economic 
and regulatory risks and uncertainties our main risks and how 
we manage them are shown in the following pages however 
this is not an exhaustive list of all of the risks which punch is 
exposed to some of the risks punch faces are external and 
therefore beyond our control some risks may not be known  
at present or may be considered to be currently immaterial  
but could develop into material risks in the future the risk 
management processes are therefore designed to manage the 
risks which may have a material impact on our ability to meet 
our strategic objectives rather than fully mitigate all risks 
the board is aware that these risks and uncertainties may either 
singularly or collectively affect punch’s revenue our costs the 
value of our assets our reputation or our ability to meet our 
strategic objectives and it is therefore committed to continually 
reviewing and improving the risk management framework 
 
risk management
framework
identify and
evaluate risks
identify controls
or mitigation
already in place
monitor and track
progress and
key risk kpis
plc board
management
departments
risk owners
• risk workshops
• assess risk tolerance 
 and risk appetite
• update to risk registers
• risk matrix reporting
implement
mitigating
action plans
test controls punch taverns plc annual report and financial statements 2012
08
our key risks and uncertainties
risks and their impact mitigating actions and controls
market and economic risks
economic climate 
the recent recession and continued uncertain outlook for the uk 
economy has affected consumer confidence and discretionary spending 
across both the retail and leisure industries delays in economic recovery 
or further challenges such as further duty increases could affect 
consumer expenditure our partners’ businesses and punch’s revenue 
•  we carry out regular reviews of the impact of economic conditions on 
our budget and strategic plans 
•  we provided c£12m per period to support our partners during the 
difficult conditions last year resulting in 94 of our core estate pubs 
now being on a substantive agreement 
•  we continue to monitor the financial health of our partners via a 
partner support tool together with analysis to highlight potential 
failures and the new partnership development manager roles launched 
last year have helped grow and diversify our partners’ businesses 
property valuations
fluctuations in the uk property market as well as the current uncertain 
market conditions could impact the value of punch’s property portfolio 
and our ability to dispose of pubs at an appropriate value
 
•  we have conducted full estate reviews and regularly update these  
to allow us to assess the future strategy for pubs within the estate 
•  this has allowed us to invest where appropriate consider possible 
alternative use or dispose of those which no longer fit our  
future strategy
•  we invested £42m on developing and improving the quality of our 
estate during the year 
•  we carry out an annual review for any indicators of impairment
increasing costs
increases in any of our key supply costs due to availability of products 
the economic climate or inflationary price increases is an ongoing risk  
to our business 
•  we continue to negotiate supplier contracts to protect us against 
significant increases in drink costs 
•  careful cost control processes ensure that costs are budgeted  
closely monitored and subject to appropriate authorisation
liquidity risk
punch’s capital structure is made up of debt issued share capital  
and reserves 
punch is financed through two whole business securitisations the  
punch a securitisation £1477m of gross debt and the punch b 
securitisation £914m of gross debt as well as certain cash resources 
held across the group as at the year end the group held £264m of cash 
resources of which £90m was held outside the securitisation structures
the key shortterm liquidity risk is the requirement to meet scheduled 
debt service costs as they fall due the secured loan notes which make up 
the majority of our financing have an average weighted life of 15 years 
with approximately 83 august 2011 85 of the capital balance on 
these loan notes being repayable after more than five years 
•  cash flow forecasts are regularly produced to assist management  
in identifying liquidity requirements and are stresstested for  
possible scenarios 
•  cash balances are invested in shortterm deposits such that they are 
readily available to settle shortterm liabilities or fund capital additions
•  there are a number of options available to the group to help meet  
debt service costs including the acceleration of the disposal of 
noncore pubs with disposal proceeds being used to repay debt  
and a reduction in capital expenditure on the securitised estate with 
surplus cash being used to repay debt
financial
financial covenant and refinancing risk
both of punch’s securitisation structures have a debt service cover ratio 
dscr and net worth financial covenant
while there was significant headroom in the two net worth financial 
covenants as at the year end both securitisations required financial 
support through the use of cash resources held outside of the 
securitisations to maintain compliance with their dscr covenants 
without this support both securitisations would have breached their 
respective dscr covenant levels in the year
net support from cash resources held outside of the securitisations 
amounted to £21m for the year being £79m of gross support less  
£58m of cash payments from the securitisations to the wider group 
during the year
the ability of the securitisations to continue to make cash payments  
to the wider group and to comply with their dscr covenants in the 
nearterm is dependent on either continuing to receive financial support 
from the group or agreeing with the relevant securitisation stakeholders 
to amend the terms of the dscr covenants
if a dscr covenant breach were to occur this could lead to circumstances 
in which the securitisations’ lenders may be able to request early 
repayment of all outstanding borrowings were this to occur the 
securitisations may have insufficient cash resources to repay all  
of their borrowings
•  covenants are closely monitored and stresstested to ensure we are 
able to generate sufficient returns to service our debt and meet our 
covenant requirements 
•  a group support mechanism has been in place throughout the year 
whereby cash resources held outside of the securitisations have been 
used to lower the cost of drinks purchased by the two securitisations  
to maintain compliance with their dscr covenants
•  additional options available to the group to improve the securitisations’ 
dscr covenant performance include the prepayment of debt using 
proceeds from the disposal of the noncore estate and the reduction  
of capital expenditure on the securitised estate with surplus cash being 
used to repay debt
•  the board has recently completed a review of the group’s capital 
structure and has commenced discussions with certain major 
shareholders and other significant stakeholders on a range of possible 
options available to restructure the securitisations in a consensual way 
so as to enable the securitisations to continue to comply with their 
financial covenants including the dscr covenant without the need  
for ongoing group support
•  the board are of the opinion that it is in the best interests of 
stakeholders to agree to a consensual restructuring of the 
securitisations and the directors are of the view that a consensual 
restructuring can be achieved
interest rate risk
punch is exposed to interest rate risk from loan notes and borrows  
at both fixed and floating rates of interest 
the use of fixed rate borrowings and derivative financial instruments 
exposes punch to fair value interest rate risk such that punch would not 
benefit from falls in interest rates and would be exposed to unplanned 
costs such as breakage costs should debt or derivative financial 
instruments be restructured or repaid early as at the year end  
the fair value liability of interest swap agreements was £331m
further information on punch’s financial instruments can be found in  
note 23 to the financial statements
•  punch employs derivative financial instruments such as interest rate 
swaps to generate the desired interest rate profile 
•  punch has taken out derivative financial instruments such that 100  
of all external debt august 2011 100 was either at fixed rates or 
was converted to fixed rates as a result of swap arrangements  
reducing our exposure to changes in interest rates
•  future debt requirements are closely monitored to assist  
management in identifying the appropriate strategy for interest  
rate hedge arrangements annual report and financial statements 2012 punch taverns plc
09
business review
risks and their impact mitigating actions and controls
financial
pensions
punch has a defined benefit pension scheme which must be funded to 
meet required benefit payments the value and funding of the scheme  
is subject to risk of changes in life expectancy actual and expected  
price inflation changes in bond yields and future salary increases  
the difference in value between scheme assets and scheme liabilities  
may vary resulting in an increased deficit being recognised on our 
balance sheet 
•  the defined benefit pension scheme is closed to new members and 
instead we operate defined contribution schemes for our employees
•  we maintain a close relationship with the trustees of the  
pension scheme 
internal financial control 
punch is committed to maintaining a robust internal control environment 
a lack of control could result in financial fraud or material error in our 
financial statements 
 
•  robust internal controls operate over all key processes including  
general controls such as segregation of duties and authorisation  
of contracts and expenditure 
•  the internal audit function reviews and reports on strengths and 
weaknesses in the internal control environment 
change management
punch is reliant on the successful implementation of change  
programmes to deliver both daytoday operational improvements and 
our strategic plan 
 
•  formal project management processes are used across the business to 
prepare project objectives and plans and to ensure progress is tracked 
and results measured
•  major projects are well communicated across the business so that  
a joined up approach is maintained
operational and people
information systems technology and security
punch is reliant upon information systems and technology for many 
aspects of its business which could cause damage if they were to fail  
for any length of time 
 
•  an incident management and business continuity plan is in place for 
critical business processes to ensure the business is able to continue 
operating in the event of a major incident
•  we have an offsite disaster recovery facility if access to our support 
centre or its systems is affected 
product quality
punch is exposed to product quality risk in relation to drink which is 
supplied to us and sold on to our partners 
 
•  safety measures are in place to ensure that product integrity is 
maintained and that drink products are fully traceable
•  our incident management plan is designed so that products can be 
recalled quickly if required
supply chain management
punch places reliance on our key suppliers and distributors to ensure 
continuous supply of food drink and other products into our pubs 
punch is exposed to the risk of interruption or failure of suppliers or 
distributors resulting in our products not being delivered on time  
or to our required standards 
 
•  punch has reviewed the disaster recovery and business continuity plans 
of our key distributors 
•  we monitor product quality closely and consider action which may be 
required to provide substitute products or suppliers if required
people risks
failure to recruit train and successfully retain successful partners and 
high calibre employees for our support teams may impact the ability  
to deliver our strategic fiveyear plan and operational objectives 
 
 
 
•  we provide industry leading induction training and coaching 
programmes for our new partners
•  we have improved our succession planning at all levels to ensure we 
attract and retain high calibre people
•  we carry out an annual employee engagement survey and regular 
listening groups to obtain direct feedback from our employees 
•  we have a remuneration strategy to ensure our teams are paid fairly 
and competitively 
regulatory
health and safety
a health and safety accident or incident could lead to serious illness 
injury or even loss of life to one of our partners employees or visitors  
or significantly impact punch’s reputation 
 
•  a health and safety management committee meets to consider all 
aspects of health and safety across punch and to report to the board  
of directors on the status of health and safety
•  we have formally documented and briefed health and safety policies 
for our support centre and fieldbased teams and carry out annual risk 
assessments in key areas
changes in legislation
punch is subject to many different areas of regulation many due to the 
high level of control over the sale of alcohol increasing focus in areas 
such as binge drinking underage drinking and health impacts over 
recent years also means that the government may introduce further 
regulation which may significantly affect our business 
 
 
 
 
 
 
•  punch works closely with our partners and the rest of the industry to 
address the key issues facing the pub sector
•  we actively participate in consultation processes and have attended 
consultation meetings discussing the government’s ‘rebalancing the 
licensing act’ initiative
•  we work closely with the bbpa and other industry bodies and have 
provided input into the institute of licensing’s response to the 
government’s ‘rebalancing the licensing act’ initiative
•  we ensure that our training covers all aspects of licensing requirements 
and have due diligence in place to confirm that our pubs meet relevant 
licensing legislation
•  punch works closely with local licensing boards to ensure individual 
pub licensing requirements are met and any issues are highlighted as 
soon as possible
•  punch’s code of practice exceeds the requirements of the pub industry 
framework code version 5 dec 2011 with the 3rd edition being 
accredited by the british institute of innkeeping in april 2012 any 
amendments to the code of practice will be in line with the pub 
industry framework code and will not fall below those standards  
the punch code of practice clearly sets out the promises we make  
and exactly how we intend to honour them punch taverns plc annual report and financial statements 2012
10
financial review
steve dando finance director
results for the 52 weeks ended 18 august 2012
underlying results
2012
£m
2011
£m
revenue 4917 5217
operating costs 2571 2680
share of posttax profit from joint venture 34 40
ebitda 2380 2577
depreciation and amortisation 135 165
net finance costs 1605 1649
profit before taxation 640 763
tax 160 213
net earnings 480 550
basic eps 72p 86p
the underlying financial results have been impacted by the 
decline in ontrade drinks volumes pub failures and negative 
rent reviews together with the ongoing strategic disposal 
programme despite the challenging uk consumer environment 
average net income per pub was broadly flat over the year 
benefiting from the disposal of underperforming assets
underlying results
2012
£m
2011
£m
average pub numbers 4791 5232
year end pub numbers 4529 5004
revenue 
drink 3514 3681
rent 1273 1393
machine income  other 130 143
total revenue 4917 5217
gross margin
drink 1479 1631
rent 1268 1394
machine income  other 125 135
total gross margin 2872 3160
revenue declined by 6 to £492m with an 8 decline in 
underlying ebitda this compares to a reduction in the average 
estate size of 8 
net underlying financing costs decreased by 3 to £161m 
primarily due to the net repayment of £70m of debt of which 
£14m was ahead of schedule the weighted average interest 
rate for the group’s borrowings including the impact of interest 
rate swaps at the balance sheet date is 69 underlying profit 
before tax was £64m a decrease of 16 on last year the tax 
charge before nonunderlying items of £16m equates to an 
effective tax rate of 25 annual report and financial statements 2012 punch taverns plc
11
business review
nonunderlying items
there is a net nonunderlying profit after tax of £3m this 
reflects a £11m charge arising from the movement in the fair 
value of certain interest rate swaps a £3m charge for asset 
writedowns a £1m goodwill charge and a £4m charge for 
restructuring costs these charges were offset by a £1m profit 
on disposal of properties a £2m credit for the buy back of debt 
at below par prices and a £4m credit relating to share schemes 
the tax effect of all of these items together with the resolution 
of prior year tax matters gave rise to a tax credit of £15m
earnings per share
underlying basic earnings per share have decreased by 16  
to 72p the basic earnings per share of 77p has been impacted 
by the nonunderlying items detailed above
dividends
the board is not proposing to recommend a final dividend 
for the year and it is unlikely that the board will be able to 
recommend any distributions to shareholders prior to the 
implementation of a restructuring in the current climate  
it remains prudent to retain cash reserves and to further 
strengthen the balance sheet
capital structure and cash flow
the nominal value of net debt decreased by £137m 6 in the 
year to £2126m net borrowings at the year end comprise
2012
£m
2011
£m
cash 2639 1965
debt
securitised loans due within 1 year 574 562
securitised loans due after 1 year 23329 24039
nominal value of gross debt 23903 24601
nominal value of net debt 21264 22636
in addition to the £264m of cash resources as at 18 august 2012 
the group also held £315m of restricted cash cash drawn 
against liquidity facility agreements following a credit rating 
downgrade in june 2012 to the liquidity facility provider the 
royal bank of scotland group plc the restricted cash is ring 
fenced from an operational perspective and cannot be utilised 
for any activities other than their original purpose and matches 
a corresponding cashbacked borrowings liability
the group has been cash generative across the year strong 
cash generation of £216m at the operational level has enabled 
the group to continue to invest in the punch estate with £42m 
of capital investment cash flow has been further enhanced  
by £130m of cash generated from disposals
going concern
in determining the appropriate basis of preparation of the 
annual report the directors are required to consider whether 
the group can continue as a going concern for the foreseeable 
future that is for at least 12 months from the date of signing  
of this report after making enquiries and considering the 
matters which are described in note 1 to the financial 
statements the directors have concluded that it is appropriate 
to prepare the financial statements on a going concern basis 
however the directors are making full disclosure as required  
by accounting standards to indicate the existence of material 
uncertainties facing parts of the business further details are  
set out in the note 1 to the financial statements
current trading and outlook
trading in the first eight weeks of the new financial year has 
been in line with management expectations while the uk 
consumer environment is likely to remain challenging in the 
shortterm we have a clear operational plan to return the core 
estate to growth in the mediumterm and extract maximum 
value from our noncore assets punch taverns plc annual report and financial statements 2012
12
our pubs
we have 3000 of the highest quality tenanted and leased 
pubs in the uk in our core division our plan remains to 
invest in our core estate to fulfil their full potential over 
the long term for both punch and our partners
investments
more than 400 pubs have been invested 
in this year to make them the very best  
of type in their area with an increased 
average spend of £90000 per pub 
investment has focused on pubs with 
new partners where we can create a 
better pub environment and to start or 
grow food sales
disposal programme
due to a well planned and executed 
disposal programme 475 non core pubs 
have been sold from our estate together 
with other assets for proceeds of £130m 
£1m ahead of book value there are 
1595 non core pubs remaining in our 
turnaround division where our teams are 
focused on maximising profits from these 
pubs as we dispose of them over the next 
few years annual report and financial statements 2012 punch taverns plc
13
business review
our partners
we have the best tenanted and leased pubs so 
we want to attract and retain the most innovative 
and talented people to run them
flexible leases
there are now more than 200 punch 
buying club leases in place which reward 
our partners for outperformance new 
partners are increasingly being attracted 
to leases over tenancies and partner 
retention is also improving with an 
average lease length of over 5 years
innovative recruitment
we have implemented a range of 
innovative and industry leading 
recruitment methods targeting multiple 
operators and microbrewers as a result 
our applicant numbers have risen by 25 
and we have a significantly increased 
talent bank of quality prospects wanting 
to run their own pub punch taverns plc annual report and financial statements 2012
14
punch support
we aim to provide the best partner support in the 
sector helping our partners to build their businesses 
at the heart of their communities
code of practice
our biibas accredited code of practice 
forms the foundation for our relationship 
with our partners laying out clearly what 
they can expect from us and what we 
expect from them the code of practice 
is now legally binding and has been  
rolled out and embedded in all areas  
of our business
summer of our lives
the summer of our lives competition 
encouraged every one of our pubs to 
make plans for the packed summer 
schedule of olympics euros and the 
queen’s jubilee hundreds of pubs took 
part with the winner the bell at kesgrave 
receiving a dray of beer and extensive 
press coverage as well cementing its 
place at the heart of the community 
buying club success
the punch buying club has continued  
to grow with more than 2800 partners 
now online ordering 45 of drinks 
orders through the site more than  
48 of pubs attended the buying club 
roadshows which were supported by  
a series of spring fairs and partner events 
throughout the year the uk’s biggest 
darts competition and pub quiz also took 
place under the buying club banner with 
thousands of event nights taking place in 
the run up to the national finals 
developing food
we believe that wherever possible  
food should be part of successful pub 
businesses our industry leading team  
of catering development managers have 
completed more than 1900 partner visits 
to introduce and develop the pub’s food 
offer increasing the estimated food sales 
mix in our pubs by 3 to 24
training 
our partner training programme provides 
support for partners from day one of 
their relationship with us our partners 
took part in more than 4067 days of 
training ranging from the ready for 
business programme completed by all 
new partners to bespoke site specific 
training for investments this year has 
also seen the company’s accreditation  
by the bii for the level 4 qualification in 
multiple licensed premises management 
and continuing involvement in the level 7 
masters qualification in partnership with 
leeds metropolitan university
partnership development managers
the partnership development manager 
pdm role has now been rolled out in the 
business which is focused on helping our 
core pubs grow their business to its full 
potential an ongoing programme of 
continuing professional development is in 
place and as part of the same programme 
all pdms will complete the bii level 4 in 
multiple licensed premises management  annual report and financial statements 2012 punch taverns plc
15
business review
our people and csr
we want our people to be the very best  
in the business with partner first attitudes 
and a passion for pubs
an award winning business
we are proud to have received a ‘highly 
commended’ award for best leased and 
tenanted pub company at the publican 
awards we are equally proud of those 
pubs who were finalists at the great 
british pub awards and the 263 pubs 
which appeared in the camra good 
beer guide punch employees were also 
recognised at the almr operations 
manager of the year awards where  
the company had three finalists 
pubs at the heart of the community
we recognise the role of the pub at the 
heart of the community and continue to 
support the pub is the hub initiative 
through funding and active participation 
in regional advisory boards by our senior 
management team
licensed trade charity
for the fourth year running punch has 
funded the licensed trade charity’s 
volunteer visitor programme which 
covers the training and travel expenses  
of volunteers who give support to people 
in crisis who are working in or retired 
from the trade
responsible retailing
we believe that the vast majority of  
pubs throughout the uk already provide 
a well regulated environment for the 
responsible retailing of alcohol we 
remain committed to building on this 
through our support of drinkaware  
and as signatories of the portman group 
and through our active promotion of  
the ‘why let the good times go bad’ 
campaign to tackle binge drinks
all of our partners receive extensive 
responsible retail training as part of  
our ready for business training course  
which is compulsory for all new partners
vat club
we believe the economic case for 
reduction in vat in the hospitality sector 
is compelling with the potential to create 
thousands of new jobs and have given 
our full support to the vat club 
campaign led by jacques borel 
proud awards
we continue to reward and recognise  
our teams for their hard work through 
our internal recognition scheme – the 
proud awards our proud values were 
refreshed and recommunicated at our 
conference a company wide business 
update which took place in burton 
punch community promise
through our offices in burton the punch 
community promise initiative continues 
to support dozens of local causes in 
staffordshire with more than just money 
each staff member has one day a year 
allocated to volunteer for a local charity 
lobbying for change 
punch continues to play a full role in the 
pub sector through membership of the 
bbpa and support for the bii almr and 
flva through our membership of the  
all party parliamentary beer group we 
have invited almost a dozen mps to work 
a shift in our pubs and we continue to 
engage with mps and other stakeholders 
in the community on a regular basis  punch taverns plc annual report and financial statements 2012
16
board of directors
roger whiteside chief executive officer
angus porter senior independent director
john allkins independent nonexecutive director ian dyson nonexecutive director
stephen billingham chairman
steve dando finance director
ian fraser independent nonexecutive director annual report and financial statements 2012 punch taverns plc
17
governance
stephen billingham chairman
stephen billingham 54 joined punch taverns as chairman  
in september 2011 he was finance director of british energy 
group plc playing an instrumental role in delivering the 
turnaround and strong performance of the business its relisting 
its move up to the ftse 100 and the sale to edf in 2009 for 
£125bn prior to this stephen was group finance director of 
ws atkins plc during its successful financial recovery and has 
been group treasurer of bicc plc now balfour beatty plc  
and severn trent plc stephen is currently chairman of royal 
berkshire nhs foundation trust and a government appointed 
nonexecutive director and chairman of the audit committee 
of urenco ltd
steve dando finance director 
steve dando 40 joined punch taverns in 2003 as chief 
accountant and was promoted to group financial controller  
in 2009 and finance director in july 2011 during his time with 
punch steve has played a major role in the development of  
the group and has a wealth of experience previously holding  
a number of senior finance roles with courtaulds plc steve is a 
member of the institute of chartered accountants of england  
 wales and started his career at pricewaterhousecoopers llp
john allkins independent nonexecutive director
john allkins 63 was appointed as an independent 
nonexecutive director in october 2012 john is also a 
nonexecutive director of renold plc fairpoint group plc 
linpac senior holdings limited and albemarle  bond holdings 
plc john has also been a nonexecutive director of intec 
telecom systems plc and molins plc he was previously group 
finance director of mytravel group plc and chief financial 
officer of equant nv prior to which he held a number of 
finance director roles within british telecom
ian fraser independent nonexecutive director
ian fraser 55 was appointed as an independent nonexecutive 
director in september 2004 he started his professional career 
with deloitte in glasgow and paris qualifying as an accountant 
in 1981 from this he moved to hold various financial positions 
with esmark schlumberger and adt before joining safeway 
stores in the uk in 1989 as a member of the commercial team 
following several senior positions ian was appointed as buying 
director of safeway in 1994 in 2000 he joined orange uk to 
lead the retail and distribution division and was appointed 
chief operating officer of the uk group in 2003 in february 
2005 he was appointed by cvc as ceo of kwik fit a position 
he held until the successful sale to the itochu corporation  
in june 2011 he was appointed ceo of enterprise plc in 
november 2011 ian is a graduate of the university of glasgow 
a member of the institute of chartered accountants in scotland 
and a fellow of the royal society for the encouragement  
of arts manufactures and commerce he was also invited  
to become a keeper of the quaich in 1997
roger whiteside chief executive officer
roger whiteside 54 was appointed chief executive officer  
of punch in august 2011 following the demerger of spirit  
prior to that he was managing director of punch partnerships 
the leased division of the predemerger group prior to joining 
punch roger was ceo of the thresher group and has also held 
roles as joint managing director of ocado and head of food 
for marks and spencer in addition roger is a nonexecutive 
director of greggs plc
angus porter senior independent director
angus porter is the senior independent director and also 
chairman of the remuneration committee angus porter  
aged 55 was appointed as senior independent director and 
chairman of the remuneration committee in april 2012 he is 
currently the ceo of the professional cricketers’ association 
and a nonexecutive director of direct wines limited and tdc 
in his career to date angus has been a nonexecutive director 
of mytravel group alliance and leicester and thomas cook 
and has held senior executive positions at mars british telecom 
abbey national and wpp 
ian dyson nonexecutive director
ian dyson 50 joined punch taverns as ceo in september 2010 
following the demerger of spirit in august 2011 ian was 
appointed chief executive officer of spirit pub company and 
became a nonexecutive director of punch taverns ian was 
previously with marks and spencer plc where he was group 
finance and operations director and prior to that group 
finance director he also held roles as finance director of the 
rank group plc and financial controller of hilton group plc  
ian is also a nonexecutive director of betfair group plc punch taverns plc annual report and financial statements 2012
18
directors’ report
the directors present their annual report to shareholders on 
the affairs of the group and the company together with the 
audited financial statements for the 52 weeks ended  
18 august 2012
certain information required for disclosure in this report is 
provided in other appropriate sections of the full annual report 
and financial statements 2012 these include the business 
review the corporate governance statement the report on 
directors’ remuneration and the group financial statements  
and these are accordingly incorporated into this directors’ 
report by reference
results and dividends
the results of the group for the period are set out in the 
consolidated income statement on page 37 as announced on 
24 october 2012 the directors will not be proposing the 
payment of a final dividend 
principal activity and review of the business
the group’s main trading activity is the operation of public 
houses under the leased model this involves the granting of 
leases to tenants who operate the pub as their own business 
paying rent to the group purchasing beer and other drinks 
from the group and entering into profitsharing arrangements 
for income from leisure machines 
a review of the period’s activities and future developments  
and information on the risks and uncertainties faced by the 
group are included in the business review the management of 
business risk is set out in the corporate governance statement 
and our risks and uncertainties on pages 21 and 07 of this 
report and key performance indicators are shown on page 01 
the group’s risk management policies in relation to the use of 
financial instruments are set out in note 23 to the group 
financial statements
directors and their interests
the current directors of the company are listed on pages 16  
to 17 
during the period the following board changes took place
•	 on 15 september 2011 peter cawdron retired as chairman  
of the board and stephen billingham was appointed in his 
place and
•	 on 31 march 2012 mark pain stepped down as senior 
independent nonexecutive director and angus porter was 
appointed in his place
on 25 october 2012 subsequent to the year end john allkins 
will be appointed a nonexecutive director
details of directors’ service contracts are contained within  
the report on directors’ remuneration on pages 27 to 35
the procedure for the appointment replacement and 
reelection of directors and the role of the nomination  
and governance committee is disclosed in the corporate 
governance statement on pages 21 to 26
at the company’s forthcoming annual general meeting 
agm to be held on 14 december 2012 angus porter and 
john allkins will offer themselves for election in accordance 
with the company’s articles of association this being the first 
opportunity for shareholders to approve their appointments 
stephen billingham ian dyson roger whiteside and  
steve dando will all stand for reelection at the forthcoming 
agm ian fraser will retire at the forthcoming agm and will not 
seek reelection the biographical details of each director can 
be found on pages 16 to 17 of this report
the beneficial interests of directors and their connected 
persons who held office at 18 august 2012 in the share capital 
of the company are shown below
at
19 october
2012
ordinary
shares
at
18 august
2012
ordinary
shares
at
20 august
2011
ordinary
shares
stephen billingham 0 0 na
roger whiteside 31465 31465 29892
steve dando 24535 24535 23146
ian dyson 304168 404168 402084
ian fraser 29177 29177 29177
angus porter 0 0 na
a statement of the directors’ remuneration and their interests 
in the various share incentive schemes of the company is set 
out in the report on directors’ remuneration on pages 27  
to 35
no notification has been received of any change in the interests 
of the directors and their connected persons during the period 
18 august 2012 to 19 october 2012 with the exception of the 
sale on 22 august 2012 of 100000 ordinary shares held by ian 
dyson through a personal pension plan these shares were sold 
due to an administrative action taken by the manager of the 
pension plan and not as a result of an instruction from  
ian dyson
no director had a material interest in any significant contract 
with the company or any of its subsidiaries during the period
powers of the directors
subject to the articles of association the companies act 2006 
and any directions given by the company by special resolution 
the business of the company is managed by the directors who 
may exercise all the powers of the company
directors’ conflicts of interests
during the period the board has continued to review the 
interests of the directors and their connected persons and  
has authorised any interests which conflicted or potentially 
conflicted with the interests of the company the nomination 
and governance committee will continue to conduct periodic 
reviews of conflict authorisations to determine whether the 
authorisation given should continue be added to or be revoked 
by the board
directors’ indemnity
as governed by the companies act 2006 the group maintains 
liability insurance for its directors and officers on 26 february 
2006 a subsidiary company within the group punch taverns 
pge limited granted indemnity cover for the benefit of the 
group’s directors and officers the indemnity is uncapped in 
amount in relation to certain losses and liabilities which they 
may incur to third parties in the course of acting as a director  
or officer of the group and was in effect during the financial 
year and continues to date neither the indemnity nor insurance 
cover provides cover in the event that a director or officer is 
proved to have acted fraudulently or dishonestly annual report and financial statements 2012 punch taverns plc
19
governance
substantial shareholdings
as at 19 october 2012 being the last practicable day prior to 
the publication of this report the company has been notified  
of the following substantial interests representing 3 or more 
in the ordinary shares of the company
shareholding made up of
shareholder
total 
holding
ordinary
 shares
contracts for
 difference
total return
 swaps
glenview capital   
 management llc 1821 1821 – –
luxor capital  
 group llc 1179 – – 1179
octavian 
 advisors lp 934 – – 934
aberforth   
 partners 933 933 – –
alchemy special   
 opportunities llp 760 760 – –
avenue europe   
 management ltd 604 – 604 –
legal  general   
 investment   
 management ltd 345 345 – –
 
political and charitable contributions
during the period the group made charitable contributions  
of £28250 which included £20000 of trade volunteer 
sponsorship and £6750 sponsorship of trade awards  
2011 £17943 no political contributions were made  
during the period 2011 nil
the company does not make political donations and has no 
intention of making donations nor incurring such expenditure 
as the relevant legislation is very broadly drafted the company 
as a precautionary measure includes a resolution at the agm  
to permit the company to make political donations and incur 
political expenditure
employees 
the total number of employees at the end of the period was 
454 the group recognises the value of its employees and seeks 
to create an energetic dynamic and responsive environment  
in which to work it places considerable importance on 
communications with employees which take place at many 
levels through the organisation on both a formal and informal 
level we hold regular staff briefings and events and  
evaluate staff motivation and morale through an annual 
engagement survey
employees are encouraged to own shares in the company and 
the group operates an hmrc approved share incentive plan 
sip which is open to all employees of the group including the 
executive directors currently 130 eligible employees participate 
in the sip which provides employees with the opportunity of 
purchasing £1500 of shares per annum out of pretax salary 
either as a oneoff amount or on a monthly basis partnership 
shares and the company awarding additional shares on a  
11 ratio matching shares the partnership shares are held  
in trust using an employee benefit trust ebt for a period  
of three years at the end of which the matching shares will 
normally be released provided that the partnership shares have 
been retained and that the employee is still employed by the 
group at this time during this time the shares are beneficially 
owned by employees attract voting rights and are eligible  
for dividends the voting rights in respect of these shares  
are exercised by the trustees on behalf of the employees 
if after three years the employee elects to keep the matching 
shares in the ebt for a further two years ie after a total period 
of five years the matching shares are released to the employee 
free of tax and national insurance
the group is committed to promoting diversity across the 
group to this end the group is committed to providing equal 
opportunities in recruitment promotion career development 
training and reward to all employees without discrimination 
the group gives full consideration to applications for 
employment from disabled persons where the requirements of 
the job can be adequately fulfilled by such persons the group 
continues to be supportive of the employment of disabled 
persons in accordance with their abilities and aptitudes 
provided that they can be employed in a safe working 
environment where existing employees become disabled  
it is the group’s policy wherever practicable to provide 
continuing employment under normal terms and conditions
the environment
the group regards compliance with relevant environmental 
laws and the adoption of responsible standards as integral  
to its business operation
creditor payment policy and practice
it is the group’s policy that payments to suppliers are made in 
accordance with those terms and conditions agreed between 
the company and its suppliers provided that all trading terms 
and conditions have been complied with at 18 august 2012 
the company had nil 2011 nil days’ purchases outstanding  
in trade creditors
significant agreements
the company is party to certain nonmaterial agreements 
including trust deeds relating to the company’s employee share 
incentive plans that contain change of control provisions in the 
event of the takeover of the company but these are not 
considered to be significant on an individual basis
additional information for shareholders
at 18 august 2012 the company’s issued share capital 
comprised a single class of shares known as ordinary shares 
the share capital note on page 75 of this report contains full 
details of shares allotted and provides an explanation of the 
movements in share capital during the period only 1165508 
partnership shares in respect of the company’s sip totalling 
£55781 were purchased by the company during the period
at the last agm held on 16 december 2011 the company 
obtained shareholder authority to buy back up to 65993084 
shares representing approximately 10 of the company’s 
ordinary shares in issue as 31 october 2011 it was made clear 
that this authority would only be exercised by the directors after 
they had given due consideration to the effects on earnings per 
share and the benefits for shareholders during the period the 
directors did not exercise their right to buy back any of the 
company’s shares currently in issue this authority is due to 
expire at the conclusion of the company’s next agm where 
new authority to buy back up to 66484671 shares 
representing approximately 10 of the company’s ordinary 
shares in issue as at the date of the agm notice will be sought  punch taverns plc annual report and financial statements 2012
20
directors’ report continued
authority will also be sought at the forthcoming agm for 
directors to allot up to 221615571 shares in the company 
representing approximately onethird of the company’s 
ordinary shares in issue excluding treasury shares as at the date 
of the agm notice and up to 443231141 equity securities 
representing approximately twothirds of the company’s 
ordinary shares in issue excluding treasury shares as at the date 
of the agm notice this will replace the authority granted by 
shareholders at the company’s previous agm the board  
will also seek authority to disapply preemption rights over 
33242336 shares representing approximately 5 of the 
company’s ordinary shares in issue as at the date of the  
agm notice 
the directors have no present intention to exercise any of the 
above authorities except to satisfy the allotment of shares  
under the company’s employee share incentive plans
further details of the above resolutions are contained within  
the notice of meeting sent to shareholders with this report
there are no restrictions on transfer of shares in the company 
other than i those which may from time to time be applicable 
under existing laws and regulations for example under the 
market abuse directive ii pursuant to the company’s dealing 
code whereby persons discharging managerial responsibilities 
and their connected persons of the company require approval 
from the company to deal in the company’s securities and are 
prohibited from dealing during a ‘close period’ and iii those 
contained in any restriction notice as defined in the articles  
of association issued by the company
there are no restrictions on the voting rights of the shares in the 
company other than those contained in any restriction notice 
issued by the company of which none is currently in issue
the company is not aware of any agreements between 
shareholders that may result in restrictions on the transfer of 
securities or on voting rights in addition there are no people 
holding securities that carry special rights with regard to control 
of the company
there are no provisions contained in any of the directors’ or 
employees’ service contracts which provide for compensation 
for loss of office or employment that occurs because of a 
takeover bid
general meetings
at a general meeting of the company’s shareholders the 
company’s articles of association may be amended by special 
resolution also at a general meeting of the company’s 
shareholders on a show of hands every member who is present 
in person and by proxy entitled to vote shall have one vote  
on a poll every member who is present in person and by proxy 
shall have one vote for every share of which he is the holder  
a shareholder may appoint more than one proxy in relation  
to their holdings provided that each proxy does not vote in 
relation to the same shares the notice of meeting sent to 
shareholders with this report gives full details of deadlines for 
exercising voting rights and appointing a proxy or proxies to 
vote in relation to resolutions to be considered at the 
forthcoming agm
postbalance sheet events
subsequent to the year end there were no post balance  
sheet events
forward looking statements
the financial information in the business review should be read 
in conjunction with the audited financial statements readers 
are cautioned that forward looking statements are not 
guarantees of future performance and involve risks and 
uncertainties the discussion of estimated amounts generated 
from the sensitivity analyses is forward looking and also involves 
risks and uncertainties caution should be exercised in relying 
on these analyses actual results may differ materially from 
those in forward looking statements
going concern
in determining the appropriate basis of preparation of the 
annual report the directors are required to consider whether 
the group can continue as a going concern for the foreseeable 
future that is for at least 12 months from the date of signing of 
this report after making enquiries and considering the matters 
which are described in note 1 the directors have concluded 
that it is appropriate to prepare the financial statements on a 
going concern basis however the directors are making full 
disclosure as required by accounting standards to indicate the 
existence of material uncertainties facing parts of the business 
further details are set out in note 1
directors’ statement as to disclosure of information  
to auditors
the directors confirm that so far as they are aware there is no 
relevant audit information of which the auditors are unaware 
and that each director has taken all reasonable steps to make 
themselves aware of any relevant audit information and to 
establish that the auditors are aware of that information 
auditors
a resolution to reappoint kpmg audit plc as the company’s 
auditors will be put to the forthcoming agm
by order of the board of directors
ed bashforth
company secretary annual report and financial statements 2012 punch taverns plc
21
governance
corporate governance statement
the company is committed to high standards of corporate 
governance and demonstrates this by being fully compliant with 
all the provisions of the 2010 uk corporate governance code 
the ‘code’ and chapter 7 of the disclosure and transparency 
rules the ‘dtr’ throughout the period from 21 august 2011 to 
18 august 2012 a copy of the code is available on the financial 
reporting council’s website wwwfrcorguk
this report together with the directors’ report which  
includes information as required by section 726 of the dtr  
as permitted by section 729 of the dtr and the report on 
directors’ remuneration provides an overview of how the 
group has applied the principles of the code throughout the 
period it details the work and activities undertaken by the 
company’s relevant committees and sets out the key features 
of the company’s governance structure 
the role of the board
the company is headed by an effective board which  
is collectively responsible for the longterm success  
of the company 
the work of the board is structured around scheduled board 
meetings which are linked to key events in the company’s 
corporate calendar with additional meetings and conference 
calls convened to consider matters which are timecritical or 
which require further discussion
together the board is collectively responsible to the company’s 
shareholders for the group’s performance and sets the strategic 
aims and objectives of the group to fulfil this responsibility  
the board determines the company’s key policies agrees on 
performance criteria and delegates to senior management their 
planning and implementation overall the board ensures that 
all necessary resources are in place in order for the company to 
meet its objectives and that all decisions are taken objectively 
and in the interest of the company and its shareholders
whilst the board has delegated the normal operational 
management of the company to the executive directors and 
other senior management it retains a schedule of matters 
which are dealt with by the board these include amongst 
others strategy and management structure and capital 
financial reporting and controls significant contracts material 
acquisitions and disposals investments and capital projects
during the period the board held 14 scheduled board meetings 
the attendance of which was as follows
director meetings
board
 meetings
nomination
 and
 governance
 committee
 meetings
audit 
and risk
 committee
 meetings
remuneration
 committee
 meetings
roger whiteside 1414 na na na
steve dando 1414 na na na
stephen billingham
1
1414 44 na 22
angus porter
2
66 11 22 11
ian dyson
3
1414 44 66 33
ian fraser
4
1414 44 66 33
peter cawdron
5
11 00 na 11
mark pain
6
88 33 44 22
1
  stephen billingham was appointed to the board as chairman on  
15 september 2011 to replace peter cawdron stephen was appointed 
chairman of the nomination and governance committee and was appointed 
as a member of the remuneration committee
2
  angus porter was appointed to the board as the senior independent 
nonexecutive director in place of mark pain on 31 march 2012 and was 
appointed as chairman of the remuneration committee and a member of the 
audit and risk committee and the nomination and governance committee
3
   ian dyson is a member of the audit and risk committee the nomination and 
governance committee and the remuneration committee
4
   ian fraser will step down as chairman of the audit and risk committee on  
25 october 2012 and will be replaced by the newly appointed nonexecutive 
director john allkins ian remains a member of the audit and risk committee 
remuneration committee and the nomination and governance committee
5
  peter cawdron retired as chairman of the board on 15 september 2011  
and was replaced by stephen billingham peter also retired as chairman  
of the nomination and governance committee and as a member of the 
remuneration committee
6
  mark pain resigned as the senior independent nonexecutive director and 
chairman of the remuneration committee on 31 march 2012 mark also 
resigned as a member of the audit and risk committee and the nomination 
and governance committee
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  
there is a clear division of responsibility between the chairman 
and chief executive officer which has been formally 
documented and approved by the board
the chairman and chief executive officer
the chairman is responsible for leadership of the 
board and ensuring its effectiveness on all aspects 
of its role 
on 15 september 2011 stephen billingham was appointed 
chairman following the retirement of peter cawdron  
on appointment stephen billingham met the independence 
criteria set out in the code
 
as chairman of the board stephen billingham is  
responsible for
•	 the leadership of the board ensuring its effectiveness and 
setting its agenda 
•	 ensuring that adequate time is available for discussion  
of all agenda items in particular strategic issues
•	 arranging the regular evaluation of the performance  
of the board its committees and individual directors
•	 promoting a culture of openness and debate by facilitating 
the effective contribution of nonexecutive directors and 
ensuring constructive relations between executive and 
nonexecutive directors
•	 ensuring that through the company secretary the members 
of the board receive clear accurate and timely information 
•	 ensuring effective communication with shareholders punch taverns plc annual report and financial statements 2012
22
corporate governance statement continued
the chief executive officer supported by the finance director 
is responsible for
•	 developing strategic operating plans
•	 preparing annual budgets and medium term projections for 
the group and closely monitoring performance against plans 
and budgets 
•	 ensuring effective communication with shareholders and 
•	 overseeing the daytoday management of the group
nonexecutive directors
as part of their role as members of a unitary board 
nonexecutive directors constructively challenge and  
help develop proposals on strategy 
in addition to their attendance at board and committee 
meetings the chairman and the nonexecutive directors met 
without the executive directors to discuss the operational 
performance of the group as a whole during the period the 
nonexecutive directors have also had the opportunity to meet 
without the chairman to review his performance in line with 
the company’s objectives
the company actively encourages its nonexecutive  
directors to
•	 challenge constructively the strategy proposed by the  
chief executive officer and executive directors
•	 scrutinise the performance of management in meeting 
agreed goals and objectives
•	 monitor the reporting of performance
•	 satisfy themselves on the integrity of financial information 
and that financial controls and systems of risk management 
are robust and defensible and
•	 ensure that appropriate remuneration and succession 
planning arrangements are in place in relation to the 
executive directors and other senior members of the 
management team
if not satisfied with the outcome the nonexecutive directors 
can record their concerns in the company’s board minutes until 
action is taken to remedy their concern
angus porter was appointed as the senior independent 
nonexecutive director replacing mark pain who stepped down 
from the board on 31 march 2012 the senior independent 
nonexecutive director is responsible for
•	 supporting the chairman
•	 leading the other nonexecutive directors in the review  
of the chairman
•	 monitoring the division of responsibilities between  
chairman and chief executive officer and
•	 being available to shareholders to express any concerns  
which the executive directors have failed to resolve  
in a satisfactorily manner
the composition 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  
the board includes an appropriate combination of executive 
and nonexecutive directors so that no individual or small  
group of individuals can dominate the board’s decisionmaking 
the board has two executive and four nonexecutive directors
on 15 september 2011 stephen billingham was appointed  
as chairman of the board following the retirement of  
peter cawdron
on 31 march 2012 mark pain stepped down as a nonexecutive 
director and was replaced by angus porter
on 25 october 2012 john allkins will be appointed a 
nonexecutive director
it is considered that the board is of sufficient size that the 
balance of skills and experience is appropriate to the size  
of the business
when deciding chairmanship and membership of committees 
the board takes into account that undue reliance is not placed 
on particular individuals
no one other than the committee chairman and members is 
entitled to be present at a meeting of the nomination and 
governance audit and risk or remuneration committees  
but others may attend at the invitation of the committee
the board has assessed the independence of its nonexecutive 
directors against the provisions of the code and has concluded 
that under the definitions used ian fraser angus porter and 
john allkins are independent in character and judgement and 
have no relationships that are likely to affect or could appear  
to affect their judgement as directors of the company due to 
his length of service as a nonexecutive director ian fraser will 
retire at the forthcoming agm and will not seek reelection 
stephen billingham was also considered independent upon  
his appointment as chairman ian dyson due to his previous 
appointment as chief executive officer of the company until  
his resignation from the role at demerger of the spirit business 
from the punch group ‘demerger’ on 1 august 2011 is not 
considered to be independent
appointments to the board
there is a formal rigorous and transparent procedure  
for the appointment of new directors to the board  
during the period peter cawdron resigned as chairman  
of the nomination and governance committee and stephen 
billingham was appointed in his place angus porter was 
appointed as a member of the committee to replace mark pain 
subsequent to the year end john allkins was appointed as  
a member of the committee the committee’s terms of 
reference can be found on the company’s website  
wwwpunchtavernscom  annual report and financial statements 2012 punch taverns plc
23
governance
during the period the nomination and governance committee 
held 4 scheduled nomination and governance committee 
meetings the attendance of which is shown in the table  
on page 21
senior management including the chief executive officer and 
the company secretary may be invited to attend for part or all 
of each meeting 
the main purpose of the nomination and governance 
committee is to review the structure size and composition 
including the skills knowledge and experience of the  
board lead the process for board appointments and  
make recommendations to the board with regard to any 
adjustments that are deemed necessary other areas of 
responsibilities include
•	 consideration of the company’s succession plans which are in 
place for board members and the senior management team
•	 the identification evaluation and nomination of candidates  
to fill board vacancies
•	 reviewing directors’ conflicts of interests and making 
recommendations to the board to authorise such conflicts 
where applicable
•	 regularly reviewing the membership of the company’s 
committees to ensure that undue reliance is not placed upon 
certain individuals and
•	 making recommendations in respect of board reelection  
by shareholders
the senior independent nonexecutive director chaired the 
nomination and governance committee meetings at which 
candidates for the appointment as successor of the chairman  
of the board were discussed and at which an appointment  
was recommended 
all nonexecutive directors are appointed for specified terms 
subject to reelection and to statutory provisions relating  
to the removal of a director any term beyond six years for  
a nonexecutive director is subject to particularly rigorous 
review and should take into account the need for progressive 
refreshing of the board ian fraser was appointed in september 
2004 and has therefore exceeded the six year term ian will 
retire as a nonexecutive director at the forthcoming agm  
and will not seek reelection
when considering new appointments the company has a 
formal rigorous and transparent procedure which is based  
on merit and assessed objective criteria the nomination  
and governance committee evaluates the balance of skills 
knowledge and experience required for the position and 
prepares a description of the role and capabilities required 
before any appointment is made the committee obtains details 
of any interests the candidate may have which conflict or may 
conflict with the interests of the company and considers 
whether despite any such conflict there are nevertheless 
grounds for recommending the candidate for appointment  
this procedure was utilised during the period in the 
appointments of stephen billingham and angus porter and also 
in the appointment of john allkins subsequent to the year end 
in conjunction with an external recruitment agency a job 
specification was drawn up open advertising used and 
interviews undertaken by the nomination and governance 
committee and other nonexecutive directors
the company has decided to voluntarily provide data on the 
proportion of women in the workforce in senior management 
and on the board as at the date of this report the percentage 
of women employed in the whole organisation was 43 11 
of the executive committee members are female and 25 of 
senior management positions are held by women 
whilst there are currently no women on the board the 
nomination and governance committee ensures that there  
is an appropriate balance of men and women on any short list 
for board positions
commitment
directors allocate sufficient time to the company to 
discharge their responsibilities effectively 
the terms and conditions of appointment of nonexecutive 
directors are available for inspection at the company’s 
registered office during normal business hours and from  
15 minutes prior to and during the company’s annual  
general meeting agm on appointment the company’s 
nonexecutive directors are informed of the expected time 
commitment that will be required and is recommended that 
they set aside enough time to demonstrate satisfactory time 
commitment to their new role details of other commitments 
and potential conflicts of interest are disclosed to the 
nomination and governance committee and approved before 
appointment and any subsequent changes are notified to the 
board for the appointment of the chairman the nomination 
and governance committee prepared a job description which 
included an assessment of the expected time commitment 
the company would not agree to the executive directors  
taking more than one nonexecutive directorship in or the 
chairmanship of a ftse 100 company
development
all directors should receive induction on joining the 
board and should regularly update and refresh their skills 
and knowledge 
on appointment the chairman together with the company 
secretary ensures that each director receives a tailored 
induction programme that includes
•	 individual time with the chairman the chief executive officer 
and other members of the board
•	 meetings with the company’s external advisors substantial 
shareholders brokers and lawyers
•	 an internal induction course which introduces the group  
its divisions and its employees
•	 visits to the group’s leased pubs and those of competitors 
and
•	 external training courses if required
the chairman regularly reviews and agrees with each director 
their training and development needs punch taverns plc annual report and financial statements 2012
24
corporate governance statement continued
information and support
the board is provided with timely information in a form 
and of quality appropriate to enable it to discharge  
its duties 
the chairman together with the company secretary ensures 
that the board receives accurate timely and clear information 
in preparation for every board meeting each director receives 
documentation including a detailed report on current trading 
and full papers on matters where the board will be required  
to make a decision or give its approval these matters are 
discussed during the board meeting with the chief executive 
officer and finance director giving an overview of how the 
group is performing against expectations in addition the 
board receives presentations from other members of senior 
management and external advisors to aid their understanding 
when applicable
all directors especially nonexecutive directors have access  
to independent professional advice at the company’s expense 
where it is judged necessary to discharge their responsibilities  
as directors
all the directors have access to the advice and services of the 
company secretary the company secretary is responsible for
•	 ensuring that good information flows within the board its 
committees and between the nonexecutive directors and 
senior management
•	 facilitating induction and assisting with professional 
development as required
•	 advising the board through the chairman on all  
governance matters
•	 providing assistance and information on corporate 
administration and legal matters and
•	 ensuring that board procedures are followed and that all 
applicable legislation and regulations are complied with
the appointment and removal of the company secretary  
is a matter for the board
evaluation
the board undertakes formal and rigorous annual 
evaluation of its own performance and that of its 
committees and individual directors 
the board agreed that due to the changes at demerger and the 
subsequent chairman and senior independent nonexecutive 
director appointments made during the year that it would  
be more effective during the period to undertake a formal 
evaluation of its own performance and that of its committees 
and individual directors the board considered that the best 
means of effectively undertaking this process was a 
combination of self and peerassessment this process was  
led by the chairman except in relation to his own performance 
as chairman which was led by the senior independent 
nonexecutive director the results of such reviews are 
discussed by the board and any appropriate action plan agreed
reelection
all directors are submitted for annual reelection subject 
to continued satisfactory performance 
under the company’s articles of association all new directors 
are required to stand for election at the first agm after their 
appointment following their appointments angus porter  
and john allkins will stand for election at the company’s 
forthcoming agm stephen billingham ian dyson roger 
whiteside and steve dando will stand for reelection at the 
forthcoming agm ian fraser will retire at the forthcoming 
agm and will not seek reelection the biographical details of 
each director can be found on pages 16 to 17 of this report
risk 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 
the audit and risk committee regularly reviews the 
effectiveness of the company’s system of internal controls to 
ensure the effectiveness of those controls in order to safeguard 
shareholders’ interests and company assets and guarantee that 
robust financial reporting processes are in place and reports to 
the board that it has done so such systems including controls 
for financial operational compliance and risk management 
matters are designed to manage rather than eliminate the risk 
of failure to achieve the company’s strategic objectives 
however it should be recognised that these systems can only 
provide reasonable and not absolute assurance against material 
misstatement or loss 
to enable the company to identify evaluate and manage the 
significant risks of the group the company has an ongoing 
process in the form of a risk management framework  
the company’s risk register which is regularly reviewed and 
updated by the board the processes are in accordance with the 
guidance of the turnbull committee and have been in place for 
the whole of the period and up to the date of this report 
the board has established with a view to providing effective 
internal control the following key procedures
•	 regular board meetings to consider the schedule of matters 
reserved for the board
•	 a formal annual review of corporate strategy including 
regular reviews of risks facing the business
•	 a company risk register which identifies the key risks facing 
the business and how these risks are monitored and managed 
on an ongoing basis
•	 an established organisational structure with clearly defined 
lines of responsibility and delegation of authority
•	 documented and enforced policies and procedures
•	 appointment of staff of the necessary calibre to fulfil their 
allotted responsibilities
•	 comprehensive budgets and forecasts approved by the 
board reviewed and revised on a regular basis with 
performance monitored against them and explanations 
obtained for material variances
•	 a detailed investment approval process requiring board 
approval for major projects post investment appraisals are 
conducted and are reviewed by the board annual report and financial statements 2012 punch taverns plc
25
governance
•	 an internal audit function which performs continuous 
assessments of the quality and effectiveness of risk 
management and the internal control environment
•	 an audit and risk committee of the board comprising 
nonexecutive directors which considers significant financial 
control matters as appropriate
•	 regular reporting by the audit and risk committee to the 
board of directors regarding internal audit control updates 
and any changes to accounting policies and any accounting 
and legal developments
•	 documented fraud antibribery and whistleblowing policies 
and procedures regular review of current whistleblowing 
regulations and reporting of any whistleblowing incidents  
to the audit and risk committee
•	 a regular review of treasury policies and activities by the  
audit and risk committee 
•	 an established programme of management and staff 
development and succession planning and
•	 formal financial reporting processes for preparation of the 
consolidated accounts
using this monitoring process the audit and risk committee 
on behalf of the board has conducted a review of the 
effectiveness of the system of internal control during the period 
and has considered the material developments which have 
taken place since the year end the board is satisfied that the 
review demonstrated that the company’s internal control 
system is effective
audit and risk committee and auditors
the board has established formal and transparent 
arrangements for considering how it should apply the 
corporate reporting and risk management and internal 
control principles and for maintaining an appropriate 
relationship with the company’s auditor 
during the period following the departure of mark pain  
angus porter became a member of the audit and risk 
committee on 25 october 2012 ian fraser will step down  
as chairman of the committee and will be replaced by  
john allkins ian remains as a member of the committee  
the committee is made up of four nonexecutive directors 
john allkins ian fraser angus porter and ian dyson at least 
one of whom has recent and relevant financial experience  
john allkins ian fraser and angus porter are independent  
the terms of reference of the committee can be found  
on the company’s website wwwpunchtavernscom 
during the period the audit and risk committee held 6 
scheduled committee meetings the attendance of which  
is detailed in the table on page 21
senior management including the finance director company 
secretary and internal and external auditors may be invited to 
attend for part or all of each meeting the internal and external 
auditors have unrestricted access to the audit and risk 
committee and its chairman
the audit and risk committee is responsible for
•	 monitoring and reviewing matters relating to the 
effectiveness of the company’s internal controls
•	 conducting a formal annual review of the effectiveness  
of the internal control environment on behalf of the board
•	 the company’s financial reporting process ensuring a 
balanced and understandable assessment of the company’s 
position and prospects are reported
•	 the scope and results of internal audit
•	 the statutory audit of the annual consolidated accounts
•	 reviewing the effectiveness of internal and external audit 
•	 making recommendations on the appointment or 
reappointment of the external auditors and
•	 the independence and objectivity of the auditors 
to maintain the independence of the external auditors the 
board has determined a policy detailing what nonaudit services 
can be provided by the company’s external auditors under  
this policy work of a consultancy nature is not offered to  
the external auditors unless there are clear efficiencies and 
valueadded benefits to the company the audit and risk 
committee monitors the level of nonaudit fees paid to the 
external auditors and details of these fees can be found in  
note 3 of the notes to the financial statements 
during the period and to the date of this report the work of 
the audit and risk committee has included consideration of the 
following matters
•	 the financial statements in the 2011 and 2012 annual report 
and financial statements and the interim report issued in 
april 2012 
•	 reports from the external auditors in relation to the 2011  
and 2012 final audits and the 2012 interim review
•	 the independence and objectivity of the external auditors
•	 the evaluation of the performance of the external auditors
•	 the approval of the 2012 external audit plan and fee proposal
•	 the progress of the internal audit programme and matters 
arising and the effectiveness and workload of the internal 
audit department and the adequacy of available resource
•	 the maintenance of an effective system of internal  
financial control 
•	 antibribery policy and procedures and
•	 the company’s whistleblowing procedures including 
reviewing any whistleblowing or fraud incidents  
which occurred punch taverns plc annual report and financial statements 2012
26
corporate governance statement continued
remuneration
the remuneration procedure is formal and transparent 
and levels of remuneration are appropriate 
during the period angus porter was appointed chairman  
of the remuneration committee following the departure of  
mark pain on 31 march 2012 on 25 october 2012 subsequent 
to the year end john allkins will be appointed as a member  
of the committee
all committee members were independent nonexecutive 
directors the terms of reference of the committee can be 
found on the company’s website wwwpunchtavernscom 
during the period the remuneration committee held 3 
scheduled committee meetings the attendance of which is 
detailed in the table on page 21 
senior management including the chairman chief executive 
officer and company secretary may be invited to attend for 
part or all of each meeting
the main purpose of the remuneration committee is to
•	 recommend to the board the company’s policy for the 
remuneration of the chief executive officer chairman 
executive directors and other members of senior 
management
•	 take into account factors which it deems necessary with the 
objective of ensuring that appropriate incentives are provided 
to encourage enhanced performance and are rewarded in a 
fair and responsible manner for their individual contributions 
to the success of the company 
•	 review the design of all share incentive plans for approval by 
the board and shareholders and determine each year whether 
awards will be made and when
•	 determine the overall amount of share awards and  
the individual award levels to executive directors and  
senior management 
•	 determine targets for any performancerelated payments 
and
•	 determine the policy for and scope of the pension 
arrangements service agreements termination payments and 
compensation commitments in relation to executive directors 
and senior management
the levels of remuneration are reviewed for all executive and 
nonexecutive directors by the remuneration committee at 
least annually to ensure that they are sufficient to attract  
retain and motivate the directors and are linked to both the 
company’s and their individual performance further details  
of the work of the remuneration committee and the levels of 
remuneration paid to the board during the period including 
details of how remuneration levels are set and external 
benchmarking procedures can be found in the report on 
directors’ remuneration which can be found on pages 27 to 35
relations with shareholders
there is a satisfactory dialogue with shareholders  
communications with shareholders are given high priority to 
ensure that a balanced and understandable assessment of the 
group’s position and prospects is given the company aims to 
provide as much information as is commercially sensible to both 
existing and potential investors recognising that transparency is 
the best way to develop understanding of the company’s 
strategy performance and growth potential 
the company encourages twoway communication with both 
its institutional and private shareholders and aims to provide a 
timely response to all enquiries there is a regular dialogue with 
institutional shareholders as well as presentations after the 
company’s announcement of the preliminary year end and 
interim results 
the agm is used to communicate with shareholders  
and encourage participation  
the board uses the agm to communicate with institutional  
and private shareholders and welcomes their participation  
the chairman aims to ensure that the chairmen of the audit 
and risk remuneration and nomination and governance 
committees and the senior independent nonexecutive 
director attend the agm to answer any relevant questions  
all members of the board are available to meet with major 
shareholders if requested
the notice of agm and related papers are sent to shareholders 
at least 20 working days before the meeting separate 
resolutions on each substantially separate issue are proposed 
and all valid proxy appointments received are properly counted 
and recorded  annual report and financial statements 2012 punch taverns plc
27
governance
report on directors’ remuneration
dear shareholder
i am pleased to present the punch taverns plc remuneration report for the year ended 18 august 2012 for which we will be 
seeking approval from shareholders at the 2012 agm
this is my first remuneration report as chairman of the remuneration committee and given that executive remuneration 
continues to be a high profile issue the committee has carried out a review of the post 2011 demerger remuneration policy  
in light of the company’s strategy and feedback received from investors during 2012 the conclusions of this review which have 
been discussed with the company’s major investors and representative bodies are summarised below
•	 base salary levels and pension provision for executive directors remain at appropriate levels and as such should not be increased 
for 201213
•	 annual bonus provision which was set at 250 of base salary for the chief executive and 200 of salary for the finance 
director post demerger reflecting the need to focus on shortterm performance improvement should be reduced going 
forward the maximum bonus potential will be set at 175 of salary for the chief executive and 150 of salary for the finance 
director for 201213 the ‘transitional year’ reducing to 150 of salary for the chief executive and 125 of salary for the 
finance director for 201314 onwards targets will be based around sliding scale profit hurdles underpinned by a number of 
strategicpersonal targets
•	 bonus deferral will continue to operate although to reflect the significant reduction in bonus potential rather than a third  
of any payout being deferred into shares for 2 years 50 of any bonus award over 50 of salary will be deferred into shares  
for 2 years a clawback provision will continue to operate
•	 the longterm incentive grant policy which was set at 50 of salary pa post demerger will be increased to a more market 
consistent 100 of salary award over the next two years however while the grant policy will be set at 100 of salary from 
201314 onwards the committee expects to grant an award over 50 of salary in november 2012 and may decide in the 
201213 transitional year to grant a further award of up to 100 of salary but only following a successful conclusion to the 
current capital restructuring project
to the extent that a 201213 transitional year post capital restructuring ltip award is granted in order to encourage greater 
executive director share ownership and therefore closer alignment to shareholders individuals may be given the opportunity to 
invest their own funds into punch taverns plc shares in order to receive an additional 11 matching award on up to 25 of salary 
ie taking the maximum ltip award which may be granted in 201213 to 200 of salary the matching arrangement which  
will be operated through the existing ltip is only intended to be operated once and will not therefore form part of the ongoing 
longterm incentive policy given the desire to ensure that packages are aligned with shareholders and given the difficulties in 
setting robust threeyear financial performance metrics at the current time relative tsr against a bespoke group of companies  
and a pansector group of companies will continue to be operated 
 
further details on the above are set out within the report overleaf
the committee unanimously recommends that shareholders vote to approve the report on directors’ remuneration
on behalf of the board
angus porter
remuneration committee chairman punch taverns plc annual report and financial statements 2012
28
report on directors’ remuneration continued
introduction
this report has been prepared in accordance with the requirements of the large and mediumsized companies and groups 
accounts and reports regulations 2008 the ‘regulations’ the report also meets the relevant requirements of the listing rules 
of the financial services authority and describes how the board has complied with the provisions of the uk corporate governance 
code the ‘code’ relating to remuneration matters the report is divided into two parts the first part contains the commentary on 
remuneration policy which is not required to be audited the second part contains the remuneration tables that have been audited 
in accordance with the relevant statutory requirements
unaudited information
the remuneration committee the ‘committee’
for details of the committee please see the corporate governance statement on pages 21 to 26
advisers to the committee
the committee received independent remuneration advice from new bridge street ‘nbs’ this independent adviser was 
appointed by the committee and is accountable to it and provides no other services to the company the terms of engagement 
between the committee and nbs are available from the company secretary on request in addition computershare provides 
administration services connected to the executive and allemployee share plans the committee also consults with the chief 
executive officer the company secretary and group human resources director however no executive is permitted to participate 
in discussions or decisions about their personal remuneration 
remuneration policy
the committee’s reward policy is designed to help drive business performance and maximise shareholder value it continues  
to be based on the following principles
•	 remuneration should be viewed holistically ‘total reward’ taking account of all reward elements
•	 total reward should be set at a marketcompetitive level to retain and recruit people of the required talent and experience
•	 packages should be structured so that most of total reward is dependent on performance
•	 total reward costs should be monitored and controlled and
•	 total reward should support the creation of shareholder value
total reward levels are compared against both listed uk pub restaurant and hospitality sector companies and those uk companies 
of a similar size and complexity to the group in other relevant sectors although external market comparisons are used with 
appropriate caution the table below summarises each element of the company’s total reward policy for executive directors  
and highlights any changes being made for 201213 and 201314 onwards which are described in more detail below
component purpose key features
201112
year just ended
201213
transitional year
201314 
ongoing policy
fixed remuneration
base salary to recognise the market 
value of the employee 
and the role
• 	 rev iewed 	 an n ual ly
• 		 n o 	 i ncr eas es 	 si nc e	
demerger
ceo  £430000
fd  £275000
ceo  £430000
fd  £275000
ceo  £430000
 fd  £275000
subject to annual 
review
pension to provide a market 
competitive level of 
contribution to pension
ceo  25 of salary
fd  20 of salary
ceo  25 of salary
fd  20 of salary
ceo  25 of salary
fd  20 of salary
variable remuneration
annual 
performance 
bonus
to drive and reward 
annual performance 
of individuals teams 
and the group
• 		 per f ormanc e 	 t arg et s	
based on sliding  
scale profit before  
tax targets and 
personalstrategic 
targets
ceo  250 of salary
fd  200 of salary
13rd of any bonus  
is deferred into shares  
for 2 years
ceo  175 of salary
fd  150 of salary
50 of any bonus  
above 50 of salary  
is deferred into shares  
for 2 years
ceo  150 of salary
fd  125 of salary
50 of any bonus 
above 50 of salary  
is deferred into shares 
for 2 years
long term 
incentive plan
to drive and reward 
sustained performance 
of the group and to 
align the interests with 
those of shareholders
• 		 per f ormanc e 	 t arg et s	
based on relative  
total shareholder  
return
ceo  50 of salary
fd  50 of salary
ceo  up to 50 of salary
fd  up to 50 of salary
in addition for 201213  
only i a further 100  
of salary award may be 
granted following a 
successful capital 
restructuring and ii subject 
to a successful capital 
restructuring grant being 
made individuals may invest 
up to 25 of salary in punch 
taverns plc shares to receive  
a 11 match ie taking the 
ltip award up to a maximum 
of 200 of salary for 
201213 only
ceo  100 of salary
fd  100 of salary annual report and financial statements 2012 punch taverns plc
29
governance
the chart below shows the relative proportions of package components for the chief executive officer’s ongoing policy assuming 
a 150 of salary annual bonus potential and a normal ltip award of 100 of salary
elements of remuneration
base salary and benefits
the table below shows the current base salaries for both executive directors
name position
201112 
base salary
201213 
base salary
roger whiteside chief executive officer £430000 £430000
steve dando finance director £275000 £275000
base salary levels for the executive directors were reviewed in march 2012 although no increases were awarded
the company’s policy is to provide executive directors with a marketcompetitive level of benefits including company car  
or car allowance private medical insurance lumpsum life insurance for death in service and income protection insurance  
for longterm disability
annual bonus
for 201112
for 201112 annual bonus arrangements were based on challenging sliding scale profit targets the maximum potential was set  
at 250 of salary for the chief executive officer and 200 of salary for the finance director one third of any bonus award is 
deferred into punch taverns plc shares for 2 years and a clawback provision is operated whereby the committee may seek to 
clawback any bonus amounts paid to executives which are subsequently found to have been based on materially inaccurate results
as a result of the company achieving an above threshold but below target result executive directors received a bonus equivalent  
to 365 of salary for 201112 details of the bonus awards made to executive directors are set out on page 33
for 201213
the 201213 annual bonus arrangements will continue to operate as above albeit the arrangement will be strengthened with  
the addition of a number of strategicpersonal underpins given the rebalancing of the package potential will be reduced
going forward the maximum bonus potential will be set at 175 of salary for the chief executive officer and 150 of salary  
for the finance director for 201213 the ‘transitional year’ reducing to 150 of salary for the chief executive officer and  
125 of salary for the finance director for 201314 onwards targets will be based around sliding scale profit hurdles underpinned 
by a number of strategicpersonal targets surrounding letting the performance of the core estate and the disposal programme  
ie failure to meet the strategicpersonal targets in full will reduce the profitrelated bonus
bonus deferral will continue to operate although to reflect the significant reduction in ongoing bonus potential rather than a third 
of any payout being deferred into shares for 2 years 50 of any bonus award over 50 of salary will be deferred into shares for  
2 years a clawback provision will continue to operate
n base salary and pension contribution 34
n annual bonus max 40
n longterm incentive max 26 punch taverns plc annual report and financial statements 2012
30
report on directors’ remuneration continued
long term incentive plan 2008 ‘ltip’
awards granted under the ltip have the following features
•	 performance shares
•	 vesting is dependent on total shareholder return tsr performance and continued service
•	 maximum annual award levels continue to be 200 of base salary face value although actual awards in 2011 were limited  
to 50 of base salary
•	 performance and vesting periods are normally three years
there are two tsr peer groups 50 of an award is measured against a peer group of uk listed pub companies enterprise inns 
fuller smith  turner greene king jd wetherspoon marston’s mitchells  butlers and spirit with the other 50 of an award 
measured against the ftse 250 index excluding investment trusts as follows
pub company
 group
ftse 250 
index
 of 
total award
below median  index 0 0 0
median  index 125 125 25
upper quartile median  index  5 pa 50 50 100
straightline vesting between points
in addition to the tsr targets above the committee will consider inter alia the group’s likeforlike sales performance underlying 
profit performance and debt levels when determining whether the group’s financial performance is consistent with level of vesting 
suggested by the relative tsr targets
these performance conditions were selected by the committee as they are important measures of the comparative value delivered 
to shareholders
for 201213
the longterm incentive grant policy which was set at 50 of salary pa post demerger the only grant to executive directors post 
demerger was made in november 2011 will be increased to a more market consistent 100 of salary award over the next two 
years however while the grant policy will be set at 100 of salary from 201314 onwards the committee expects to grant an 
award over 50 of salary in november 2012 and may decide in the 201213 transitional year to grant a further award of up to 
100 of salary but only following a successful conclusion to the current capital restructuring project 
connected to any 201213 transitional year post capital restructuring grant and to encourage greater executive director share 
ownership all recent ltip grants have either lapsed or the performance targets are significantly underwater and therefore closer 
alignment to shareholders individuals may invest their own funds into punch taverns plc shares in order to receive an additional 11 
matching award on up to 25 of salary ie taking the maximum ltip award which may be granted in 201213 to 200 of salary 
the matching arrangement which will be operated through the existing ltip at the remuneration committee’s discretion is only 
intended to be operated once and will not therefore form part of the ongoing longterm incentive policy which will comprise  
of a 100 of salary ltip award per annum as stated above 
given the desire to ensure that packages are aligned with shareholders and given the difficulties in setting robust threeyear 
financial performance metrics at the current time relative tsr against the bespoke group of companies and the pansector group 
of companies will continue to be operated in addition to tsr performance the committee will continue to consider likeforlike 
sales underlying profit performance and debt levels to assess whether the company’s financial performance is consistent with  
the level of vesting suggested by the tsr targets
share bonus plan
the share bonus plan enables the committee to award part or all of any annual bonus in the form of the company’s shares  
which the recipient is not permitted to sell during a restricted period normally two years as stated above the deferral policy 
going forwards will be for 50 of any bonus above 50 of salary will be deferred into company shares for a twoyear period annual report and financial statements 2012 punch taverns plc
31
governance
dilution
in accordance with shareholder guidelines the committee applies a limit on the amount of shares that can be issued to satisfy all 
its employee share plan awards of 10 of the company’s issued share capital in any rolling tenyear period of this 10 only  
half can be issued to satisfy awards under the discretionary arrangements based on awards granted since flotation in 2002 and 
excluding those awards held by spirit employees historic dilution was shared between punch and spirit at demerger based on 
whether awardholders were employed by punch or spirit post demerger the company’s current dilution position is as follows
limit
current 
dilution level
10 in ten years 199
5 in ten years 140
shareholding requirement
the committee requires that all individuals who participate in the company’s ltip satisfy a minimum shareholding requirement 
within five years of appointment to the board targets are set to encourage directors to retain shares received from share incentive 
schemes as a result of the particular circumstances of the demerger of the spirit business the committee will require these 
shareholding requirements to be achieved within five years of the demerger date the table below shows the shareholding 
requirement for executive directors and their current personal shareholding
name position
shareholding requirement 
 of base salary to be achieved by
current shareholding
  of base salary
roger whiteside chief executive officer 150 august 2016 05
steve dando finance director 100 august 2016 06
allemployee share arrangements
during 201112 the group operated an hmrc approved share incentive plan sip details of which can be found in the directors’ 
report on page 19 
directors’ contracts
the policy on termination is that the group does not make payments beyond its contractual obligations in addition executive 
directors will be expected to mitigate their loss the committee ensures that there have been no unjustified payments for failure 
none of the executive directors’ contracts provides for liquidated damages there are no special provisions contained in any of the 
executive directors’ contracts which provide for longer periods of notice on a change of control of the company further there are 
no special provisions providing for additional compensation on an executive director’s cessation of employment with the group
executive directors
company 
notice period contract date
unexpired term of 
contract months
1
potential 
termination 
payment
potential 
payment on 
change of 
control 
 liquidation
current directors
roger whiteside 12 months 14 october 2008 rolling contract 12 months’ salary nil
steve dando 12 months 2 june 2003 rolling contract 12 months’ salary nil
1
 contract will continue until terminated by notice either by the company or the director
nonexecutive directors
company 
notice period contract date
unexpired term of 
contract months
current directors
stephen billingham 6 months 15 september 2011 23
ian fraser 1 month 23 september 2004 10
mark pain
1
1 month 8 november 2007 na
ian dyson 1 month 1 august 2011 10
angus porter 1 month 26 march 2012 29
john allkins
2
1 month 25 october 2012 36
1
 stepped down from the board on 31 march 2012
2
 will be appointed as nonexecutive director on 25 october 2012 punch taverns plc annual report and financial statements 2012
32
report on directors’ remuneration continued
nonexecutive directors’ fees
all nonexecutive directors have specific terms of engagement and their remuneration is determined by the board based upon 
recommendations from the chairman and chief executive officer or in the case of the chairman is determined by the committee 
based on recommendations from the senior independent nonexecutive director and the chief executive officer within the limits 
set by the articles of association and based on the median level of fees payable to peers in the same comparator group as that 
used for executive directors’ remuneration nonexecutive directors cannot participate in any of the group’s share incentive 
schemes or performancebased plans and are not eligible to join any of the group’s pension schemes
it is the board’s policy to take into account the following factors in determining the fees of the nonexecutive directors
•	 the median level of fees for similar positions in the market and
•	 the time commitment each nonexecutive director makes to the group through membership of the audit and risk 
remuneration and nomination and governance committees
the following table sets out the current nonexecutive fees
201213 201112
company chairman £250000 £250000
basic fee £42000 £42000
senior independent nonexecutive director £45000 £45000
additional fees for chairing the audit and risk or remuneration committee £10000 £10000
additional fees for chairing the nomination and governance committee £5000 £5000
total shareholder return performance graph
the graph shows the company’s performance measured by total shareholder return tsr compared with the ftse 350 travel and 
leisure index and the ftse small cap index excluding investment trusts the committee considers these to be relevant indices for 
tsr comparison as the company was a constituent of the ftse 350 travel and leisure index for the majority of the fiveyear period 
presented and following the spirit demerger is now positioned in the ftse small cap
£120
£100
£80
£60
£40
£20
£0
aug 2007
aug 2008
aug 2009
aug 2010
aug 2011
aug 2012
punch taverns
ftse small cap index excluding investment trusts
ftse 350 travel  leisure index
source thompson reuters
the graph above shows the value at 18 august 2012 of £100 invested in punch taverns plc on 18 august 2007 compared with  
the value of £100 invested in the ftse smallcap and ftse 350 travel and leisure indexes over the same period the other points 
plotted are the values at the intervening year ends annual report and financial statements 2012 punch taverns plc
33
governance
audited information
the total of directors’ emoluments in the year was £1551000 2011 £3633000 including pension contributions of £153000 
2011 £322000 the remuneration of the directors during the year was as follows 
annual remuneration
basic salary  fees
 
benefits
1
bonus
gain on release 
of shares
 
pension
 other payments 
made to former 
directors total
2012
£000
2011
£000
2012
£000
2011
£000
2012
£000
2011
£000
2012
£000
2011
£000
2012
£000
2011
£000
2012
£000
2011
£000
2012
£000
2011
£000
executive directors
roger whiteside 430 405 23 23 157 430 – – 96 73 – – 706 931
steve dando 275 138 19 10 100 275 – – 57 22 – – 451 445
nonexecutive directors 
stephen billingham
2
236 – – – – – – – – – – – 236 –
angus porter
3
23 – – – – – – – – – – – 23 –
ian fraser 52 52 – – – – – – – – – – 52 52
ian dyson
4
42 – – – – – – – – – – – 42 –
peter cawdron
5
9 155 – – – – – – – – – – 9 155
mark pain
6
32 43 – – – – – – – – – – 32 43
former directors – 1212 – 41 – – – – – 227 – 527 – 2007
total 1099 2005 42 74 257 705 – – 153 322 – 527 1551 3633
1
 benefits comprise the following elements health cover car fuel death in service and income protection
2
  appointed chairman to the board on 15 september 2011 to replace peter cawdron stephen was appointed chairman of the nomination and governance 
committee and was appointed as a member of the remuneration committee
3
  appointed to the board as the senior independent nonexecutive director in place of mark pain on 31 march 2012 and was appointed as chairman of the 
remuneration committee appointed as a member of the audit and risk committee and the nomination and governance committee
4
  ian dyson was chief executive officer of punch taverns plc until the demerger in the last financial year when he became chief executive officer of spirit pub 
company plc ‘spirit’ and a nonexecutive director of punch taverns plc under the terms of the demerger ian’s nonexecutive director fees were paid to spirit 
until he ceased employment with spirit on 16 december 2011 from 17 december 2011 to the end of the financial year ian’s nonexecutive director fees have been 
paid directly to him ian’s executive director remuneration for the last financial year is included within the former directors figure 
5
  retired as chairman of the board on 15 september 2011 and was replaced by stephen billingham peter also retired as chairman of the nomination and governance 
committee and as a member of the remuneration committee
6
  resigned as the senior independent nonexecutive director and the chairman of the remuneration committee on 31 march 2012 mark also resigned as a member 
of the audit and risk committee and the nomination and governance committee 
pension
during the period roger whiteside received a group contribution into his personal pension arrangement representing 25 of his 
pensionable salary steve dando received a group contribution paid into the company’s pension scheme representing 20 of his 
pensionable salary punch taverns plc annual report and financial statements 2012
34
report on directors’ remuneration continued
directors’ interests in the group’s share plans
long term incentive plan ltip
the following table sets out the awards made under the ltip full details of the operation of the ltip are set out in the first part  
of this report 
value of shares conditionally awarded value of shares released
directors 
date of
 award
date of
 release
share price
 at date of
 award £
number 
as at 
21 august
 2011 £000
percentage
 of salary 
at date 
of award
awarded
 during the
 period
lapsed 
during the
 period
market 
price at 
date of
 release 
 lapse £
gain on
 release
£000
number
as at
18 august 
2012
£000
roger whiteside 101108 101111 166 488950 812 200 – 488950 011 – –
161009 161012 090 888888 800 200 – 888888 007 – –
191110 191113 058 860585 500 125 – – – – 860585
301111 301114 012 – 215 50 1779801 – – – 1779801
total 2238423 2640386
steve dando 101108 101111 166 91677 152 100 – 91677 011 – –
161009 161012 090 83333 75 50 – 83333 007 – –
191110 191113 058 301204 175 100 – – – – 301204
301111 301114 012 – 137 50 1138245 – – – 1138245
total 476214 1439449
ian dyson 131010 050313 072 2412150 1737 200 – 1305399 – – 1106751
191110 191113 058 2323580 1348 200 – 1492519 – – 831061
total 4735730 2797918 1937812
the 2008 2009 and 2010 awards were originally granted over ordinary shares in punch taverns plc as a result of the demerger  
in the last financial year consistent with the treatment of shareholders individuals received an award over one spirit share for each 
punch share under award to ensure they were kept whole awards will continue to run until the normal vesting dates and the total 
shareholder return tsr targets will continue to apply although post demerger performance relates only to punch’s share price 
ie it will exclude the share price performance of spirit
the award granted to ian dyson on 13 october 2010 as the then chief executive officer was awarded to compensate him for 
share awards which lapsed upon resigning from his previous employer this award was granted in accordance with listing rule 
9422 and will normally be released between 5 may 2013 and 4 may 2020 subject to the extent that total shareholder return 
targets are met this award along with the award granted to ian dyson on 19 november 2010 were both prorated upon him 
ceasing employment with spirit on 16 december 2011
as a result of failing to hit the threshold group relative tsr performance targets the november 2008 ltip awards and october 
2009 ltip awards lapsed in full in addition to the relevant underpin being deemed to have been met awards granted in november 
2010 and november 2011 will only be released if the group’s tsr is equal to or greater than the medianindex level of performance 
of the respective comparator groups over the three year period from grant at which point 25 of the award will be released  
full release of the award will occur for upperquartileindex5 pa performance with straightline release between the threshold 
and maximum performance levels full details of the performance conditions attached to the november 2010 and november 2011 
awards are detailed on page 30 in the first part of this report annual report and financial statements 2012 punch taverns plc
35
governance
inland revenue approved share incentive plan sip
the sip is the current all employee share plan operated by the group the following table sets out the shares purchased and 
awarded under the sip in respect of the executive directors full details of the operation of the sip are set out in the directors’ 
report on page 19 and in note 28 to the accounts which can be found on page 76
directors 
date of
award
date of 
release
share price 
at date of
 purchase of
 partnership
 shares and
 award of
 matching
 shares £
number
as at
21 august
 2011
partnership
 shares
 purchased
 during 
the period
matching
 shares
 conditionally
 awarded 
during 
the period
partnership 
or dividend
 shares 
released 
during 
the period
matching
 shares 
released 
during 
the period
matching
 shares 
forfeit 
during 
the period
gain on
 release of
 matching
 shares
number 
as at
18 august
 2012
roger whiteside 240709 240712 095 3146 – – 1573 1573 – – 0
270710 270713 078 3846 – – – – – – 3846
280611 280614 072 4168 – – – – – – 4168
total 11160 8014
steve dando 171008 171011 123 2 – – 1 1 – – 0
260609 260612 108 2778 – – 1389 1389 – – 0
270710 270713 078 3846 – – – – – – 3846
280611 280614 072 4168 – – – – – – 4168
total 10794 8014
ian dyson
1
280611 280614 072 4168 – – 2084 2084 – – 0
total 4168 0
1
  ian dyson purchased his partnership sip shares on 28 june 2011 when he was chief executive officer of the company under the terms of the sip the company 
awarded additional shares on a 11 ratio matching shares 
 
discretionary share plan dsp
the dsp is a legacy option scheme the company does not currently intend to make any future grants under the dsp the last 
award under the dsp was made in january 2006 full details of the operation of the dsp are set out in note 28 to the accounts 
which can be found on page 76 
exercise period
directors
date of 
grant from to
exercise
price £
number of
 options at
21 august
 2011
number of
 options at
18 august
 2012
number of
 options
already
vested
steve dando 171104 171107 171114 551 2203 2203 2203
161105 161108 161115 767 1656 1656 1656
total 3859 3859 3859
no options were granted lapsed or exercised during the period
the performance conditions for option vesting were 40 of options vest if eps growth of rpi 8 pa 100 vests if eps growth 
of rpi 12 pa
share bonus plan sbp
the following table sets out the award under the sbp in relation to the 20102011 annual bonus consistent with the requirement 
for executive directors to defer a third of any net of tax annual bonus award full details of the operation of the sbp are detailed  
on page 30 in the first part of this report and note 28 to the accounts which can be found on page 76 
directors
date 
of grant
deferral 
period
share price 
at date of
 award £
number of
 shares at 
21 august
 2011
awarded
 during 
the period
number of 
shares at
 18 august
 2012
roger whiteside 271011 2 years 01025 – 671219 671219
total 671219
steve dando 271011 2 years 01025 – 429268 429268
total 429268
the share price at the close of business on 18 august 2012 was £00739 during the period the highest share price was £0125  
and the lowest was £00561
this report has been prepared by the remuneration committee and has been approved by the board it complies with  
the companies acts and related regulations this report will be put to shareholders for approval at the forthcoming  
annual general meeting punch taverns plc annual report and financial statements 2012
36
statement of directors’ responsibilities in respect  
of the annual report and the financial statements
the directors are responsible for preparing the annual report and the group and parent company financial statements in 
accordance with applicable law and regulations
company law requires the directors to prepare group and parent company financial statements for each financial year under that 
law they are required to prepare the group financial statements in accordance with ifrss as adopted by the eu and applicable law 
and have elected to prepare the parent company financial statements on the same basis
under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair 
view of the state of affairs of the group and parent company and of their profit or loss for that period in preparing each of the 
group and parent company financial statements the directors are required to
•	 select suitable accounting policies and then apply them consistently
•	 make judgements and estimates that are reasonable and prudent
•	 state whether they have been prepared in accordance with ifrss as adopted by the eu and
•	 prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and  
the parent company will continue in business
the directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s 
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to 
ensure that its financial statements comply with the companies act 2006 they have general responsibility for taking such steps  
as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities
under applicable law and regulations the directors are also responsible for preparing a directors’ report directors’ remuneration 
report and corporate governance statement that complies with that law and those regulations
the directors are responsible for the maintenance and integrity of the corporate and financial information included on the 
company’s website legislation in the uk governing the preparation and dissemination of financial statements may differ from 
legislation in other jurisdictions
director’s responsibility statement
the directors confirm to the best of their knowledge
a  the group and parent company financial statements prepared in accordance with ifrs as adopted by the european union give 
a true and fair view of the assets liabilities financial position and profit or loss of the company and the group as a whole and
b  the management report includes a fair review of the development and performance of the business and the position of the 
company and group together with a description of the principal risks and uncertainties faced
on behalf of the board
roger whiteside   steve dando
chief executive officer   finance director
23 october 2012   23 october 2012 annual report and financial statements 2012 punch taverns plc
37
financial statements
consolidated income statement
for the 52 weeks ended 18 august 2012
 52 weeks to 18 august 2012 52 weeks to 20 august 2011
 notes
underlying
 items
£m
non
underlying
 items
note 6 
£m
total
£m
underlying
 items
£m
non
underlying
 items
note 6
£m
total
£m
continuing operations
revenue 2 4917 – 4917 5217 855 6072
operating costs before depreciation  
and amortisation 2571 40 2611 2680 788 3468
share of posttax profit from joint venture 34 – 34 40 – 40
ebitda
1
2380 40 2340 2577 67 2644
depreciation and amortisation 135 – 135 165 16 181
impairment – 34 34 – 3670 3670
goodwill charge – 11 11 – 827 827
profit on sale of noncurrent assets – 13 13 – 31 31
operating profit  loss 3 2245 72 2173 2412 4415 2003
finance income 4 64 70 134 56 387 443
finance costs 5 1669 – 1669 1705 17 1722
movement in fair value of interest rate swaps – 114 114 – 72 72
profit  loss before taxation 640 116 524 763 4117 3354
uk income tax charge  credit 8 160 147 13 213 21 234
profit  loss for the financial period  
from continuing operations 480 31 511 550 4138 3588
discontinued operations 9
loss on discontinued operations – – – – 5079 5079
profit  loss for the financial period 
attributable to owners of the parent company 480 31 511 550 9217 8667
earnings  loss per share 10
– basic pence 72 77 86 1348
– diluted pence 72 77 86 1348
1
  ebitda represents earnings before depreciation and amortisation impairment goodwill charge profit on sale of noncurrent assets finance income finance costs 
movement in fair value of interest rate swaps and tax of the group punch taverns plc annual report and financial statements 2012
38
consolidated statement of comprehensive income
for the 52 weeks ended 18 august 2012
notes
 52 weeks to
 18 august
 2012 
 £m
 52 weeks to
 20 august
 2011
£m
profit  loss for the period attributable to owners of the parent company 511 8667
actuarial gains  losses on defined benefit pension schemes 30 24 38
losses on cash flow hedges 574 644
transfers to the income statement on cash flow hedges 17 391
tax relating to components of other comprehensive income 8 72 81
other comprehensive losses for the period 461 210
total comprehensive income  losses for the period attributable  
to owners of the parent company 50 8877 annual report and financial statements 2012 punch taverns plc
39
financial statements
consolidated balance sheet
at 18 august 2012
notes
18 august
 2012
£m
20 august
 2011
£m
assets
noncurrent assets
property plant and equipment 12 24639 25417
operating leases 13 60 64
other intangible assets 13 09 23
goodwill 13 1800 1811
investments in joint venture 33 445 431
other investments 14 88 74
deferred tax assets 18 20 –
27061 27820
current assets
trade and other receivables 17 341 467
current income tax assets 08 44
noncurrent assets classified as held for sale 20 1069 1258
cash and cash equivalents 19 2639 1965
restricted cash 19 3150 –
7207 3734
total assets 34268 31554
liabilities
current liabilities
trade and other payables 21 1211 1459
shortterm borrowings 22 615 613
cashbacked borrowings 24 3150 –
derivative financial instruments 23 384 380
provisions 25 24 18
5384 2470
noncurrent liabilities
borrowings 22 23734 24487
derivative financial instruments 23 2931 2336
deferred tax liabilities 18 – 31
retirement benefit obligations 30 27 79
provisions 25 110 130
 26802 27063
total liabilities 32186 29533
net assets 2082 2021
equity
called up share capital 27 03 03
share premium 4550 4550
hedge reserve 2261 1797
share based payment reserve 97 121
retained earnings 307 856
total equity attributable to owners of the parent company 2082 2021
on behalf of the board
roger whiteside  steve dando
23 october 2012  23 october 2012 punch taverns plc annual report and financial statements 2012
40
consolidated statement of changes in equity
for the 52 weeks ended 18 august 2012
share 
capital
£m
share 
premium
£m
hedge 
reserve
£m
share based
 payment
 reserve
£m
retained
 earnings
£m
total 
equity
£m
total equity at 21 august 2010 03 4550 1626 85 11734 14746
loss for the period – – – – 8667 8667
other comprehensive losses for the period – – 171 – 39 210
total comprehensive loss for the period  
attributable to owners of the parent company – – 171 – 8706 8877
shares purchased and held in trust – – – – 17 17
share based payments – – – 36 14 50
demerger of the spirit business note 9 – – – – 3881 3881
total equity at 20 august 2011 03 4550 1797 121 856 2021
profit for the period – – – – 511 511
other comprehensive losses  gains for the period – – 464 – 03 461
total comprehensive loss  income for the period 
attributable to owners of the parent company – – 464 – 514 50
share based payments – – – 24 35 11
total equity at 18 august 2012 03 4550 2261 97 307 2082 annual report and financial statements 2012 punch taverns plc
41
financial statements
consolidated cash flow statement
for the 52 weeks ended 18 august 2012
52 weeks to
 18 august 
2012 
£m
 52 weeks to
 20 august
 2011 
£m
cash flows from operating activities
operating profit  loss 2173 2003
depreciation and amortisation 135 181
impairment 34 3670
goodwill charge 11 827
profit on sale of noncurrent assets 13 31
share based payment expense recognised in profit 11 30
decrease  increase in trade and other receivables 32 97
decrease in trade and other payables 154 495
difference between pension contributions paid and amounts recognised in the income statement 27 18
decrease in provisions and other liabilities 10 02
share of posttax profit from joint venture 34 40
cash generated from continuing operations 2158 2022
cash generated from discontinued operations – 1136
dividend received from joint venture – 80
income tax received 44 87
net cash from operating activities 2202 3325
cash flows from investing activities
purchase of property plant and equipment 412 475
proceeds from sale of property plant and equipment 330 617
proceeds from sale of operating leases 03 01
proceeds from sale of other noncurrent assets held for sale 968 567
purchase of other intangible assets 06 02
interest received 50 34
cash generated from continuing operations 933 742
cash generated from discontinued operations – 418
net cash generated from investing activities 933 324
cash flows from financing activities
repayment of borrowings 678 998
repayment of derivative financial instruments 51 178
interest paid 1713 1719
repayments of obligations under finance leases 13 20
interest element of finance lease rental payments 03 04
costs of terminating financing arrangements 03 12
cash used in continuing operations 2461 2931
cash used in discontinued operations – 770
net cash used in financing activities 2461 3701
net increase  decrease in cash and cash equivalents
– from continuing operations 674 –
– from discontinued operations – 52
– less cash held by the spirit business at demerger – 1148
net increase  decrease in cash and cash equivalents 674 1200
cash and cash equivalents at beginning of period 1965 3165
cash and cash equivalents at end of period 2639 1965 punch taverns plc annual report and financial statements 2012
42
company balance sheet
at 18 august 2012 
notes
18 august 
2012
£m
20 august
 2011
£m
assets
noncurrent assets
investments in subsidiary undertakings 16 13419 13408
receivables 17 10988 9733
deferred tax assets 18 82 105
24489 23246
current assets
receivables 17 02 40
cash and cash equivalents 19 43 06
45 46
total assets 24534 23292
liabilities
current liabilities
trade and other payables 21 02 02
02 02
noncurrent liabilities
other noncurrent payables 26 16170 16245
16170 16245
total liabilities 16172 16247
net assets 8362 7045
equity
called up share capital 27 03 03
share premium 4550 4550
share based payment reserve 97 121
retained earnings 3712 2371
total equity 8362 7045
on behalf of the board
roger whiteside   steve dando
23 october 2012   23 october 2012 annual report and financial statements 2012 punch taverns plc
43
financial statements
company statement of changes in equity
for the 52 weeks ended 18 august 2012
company income statement
for the 52 weeks ended 18 august 2012
share 
capital
£m
share 
premium
£m
share based 
payment 
reserve
£m
retained 
earnings
£m
total 
equity
£m
total equity at 21 august 2010 03 4550 85 7842 12480
loss for the period – – – 1604 1604
total comprehensive loss for the period – – – 1604 1604
share based payments – – 36 14 50
demerger of the spirit business note 9 – – – 3881 3881
total equity at 20 august 2011 03 4550 121 2371 7045
profit for the period – – – 1306 1306
total comprehensive income for the period – – – 1306 1306
share based payments – – 24 35 11
total equity at 18 august 2012 03 4550 97 3712 8362
as permitted by section 408 of the companies act 2006 the company’s income statement has not been included in these 
financial statements the company’s profit for the 52 weeks ended 18 august 2012 was £1306m august 2011 loss of £1604m punch taverns plc annual report and financial statements 2012
44
company cash flow statement
for the 52 weeks ended 18 august 2012
52 weeks to
 18 august
 2012 
£m
 52 weeks to
 20 august
 2011 
£m
cash flows from operating activities
operating loss 06 3032
release of intercompany debt – 3051
decrease  increase in receivables 19 18
increase in other payables – 02
net cash flow from operating activities 13 03
interest received 01 15
net cash generated from investing activities 01 15
cash flows from financing activities
proceeds from new intercompany debt 91 122
repayment of intercompany debt 66 1800
other financing costs 02 –
net cash used in financing activities 23 1678
net increase  decrease in cash and cash equivalents 37 1660
cash and cash equivalents at beginning of period 06 1666
cash and cash equivalents at end of period 43 06 annual report and financial statements 2012 punch taverns plc
45
financial statements
notes to the financial statements
for the 52 weeks ended 18 august 2012
1 accounting policies
basis of preparation
the consolidated financial statements presented in this document have been prepared in accordance with ifrs as adopted by the 
european union the company’s financial statements have been prepared in accordance with ifrs as adopted by the european 
union and as applied in accordance with the provisions of the companies act 2006 the company has taken advantage of the 
exemption provided under s408 of the companies act 2006 not to publish its individual income statement and related notes
the financial statements are prepared under the historical cost convention as modified by the revaluation of derivative financial 
instruments to fair value and in accordance with those parts of the companies act 2006 applicable to companies reporting under 
ifrs as adopted by the european union new standards and interpretations issued by the international accounting standards board 
iasb and the international financial reporting interpretations committee ifric becoming effective during the year have not 
had a material impact on the group’s financial statements
going concern
the financial statements have been prepared on a going concern basis the directors have prepared detailed operating and cash 
flow forecasts which cover a period of more than 12 months from the date of approval of these financial statements these show 
that the group has adequate funds for the foreseeable future to meet its liabilities as they fall due
the group is financed through two whole business securitisations the punch a securitisation £1477m of gross debt and the 
punch b securitisation £914m of gross debt as well as certain cash resources held across the group at 18 august 2012  
the group’s liquidity position was strong with £264m of cash resources of which £90m was held outside of the securitisation 
structures compared to loan amortisation due within 1 year of £57m the group is currently in full compliance with the financial 
covenants contained in its securitisation arrangements
whilst the securitisations generated underlying profits and positive net cash flow before debt repayments and disposals in the 
year they required financial support through the use of cash resources held outside of the securitisations to maintain compliance 
with their dscr debt service cover ratio covenants without this support both securitisations would have breached their 
respective dscr covenant levels in the year net support from cash resources held outside of the securitisations amounted to  
£21m for the year being £79m of gross support less £58m of cash payments from the securitisations to the wider group during 
the year
the ability of the group’s securitisations to continue to comply with their dscr covenants in the near term is dependent  
on either the continuation of group support or reaching agreement with the relevant stakeholders to amend the terms of the 
financial covenants
the group continues to engage in discussions with certain of its major shareholders and other significant stakeholders to review  
a range of restructuring options in respect of the securitisations following a process which will be initiated at the appropriate time 
to identify debt holders in both the securitisations the group will be seeking to engage in discussions with those debt holders 
ahead of recommending a proposal to restructure each of the securitisations in a consensual way so as to allow them to continue 
to comply with their financial covenants including the dscr covenants without the need for ongoing group support
the directors of punch taverns plc are of the opinion that it is in the best interests of stakeholders to agree to a consensual 
restructuring of both of the securitisations and the directors are of the view that a consensual restructuring can be achieved 
however given the differences in their stakeholder profiles their legal and financial structures and the contractual linkages 
between them and the wider group the restructuring solution and implementation timetable may differ for each securitisation
if a consensual restructuring of the group’s securitisations is not achieved and a covenant breach were to occur in a securitisation 
then this could lead to circumstances in which the lenders to that securitisation may be able to request early repayment of all 
outstanding borrowings were this to occur the relevant securitisation may have insufficient cash resources to repay all of its 
borrowings and cease to be a going concern which in turn would result in a significant reduction in the group’s operations  
these circumstances represent a material uncertainty that casts significant doubt on the ability of a significant part of the group  
to continue as a going concern and in such circumstances part of the group may be unable to realise its assets and discharge its 
liabilities in the normal course of business
further information in relation to the group’s business activities together with the factors likely to affect its future development 
performance and position is set out in the chief executive officer’s review on pages 03 to 06 and our risks and uncertainties 
on pages 07 to 09 
the financial position of the group its cash flows liquidity position and borrowings are described in the financial review on pages 
10 to 11 and in notes 19 22 and 23 together with information on the group’s strategies surrounding managing interest rate risk 
liquidity risk capital risk and credit risk 
the group and company financial statements are presented in sterling and all values are rounded to the nearest hundred thousand 
pounds except where indicated punch taverns plc annual report and financial statements 2012
46
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
1 accounting policies continued
new standards interpretations and amendments to existing standards
the iasb and ifric have issued the following standards interpretations and amendments which have been endorsed by the eu
effective for the group and the company in these financial statements
•	 amendments to ifric 14 ‘prepayment of a minimum funding requirement’
•	 amendments to ias 1 ‘presentation of financial statements’
•	 amendments to ias 24 ‘related party disclosures’ 
•	 amendments to ifrs 7 ‘financial instruments disclosures’
•	 amendments to certain ifrss and iass arising from the april 2010 annual improvements to ifrs by the iasb 
the above amendments to published standards have had no material impact on the results or the financial position of the group  
or the company for the 52 weeks ended 18 august 2012
effective for the group and the company for the next financial year
•	 ias 1 ‘presentation of financial statements’ – effective from 1 july 2012
•	 ias 12 ‘income taxes’ – effective from 1 january 2012
effective for the group and the company for future years
•	 ias 19 ‘employee benefits’ – effective from 1 january 2013
•	 ifrs 9 ‘financial instruments’ – effective from 1 january 2013
•	 ifrs 10 ‘consolidated financial statements’ – effective from 1 january 2013
•	 ifrs 11 ‘joint arrangements’ – effective from 1 january 2013
•	 ifrs 12 ‘disclosure of interests in other entities’ – effective from 1 january 2013
•	 ifrs 13 ‘fair value measurement’ – effective from 1 january 2013
the standards effective for future years have not yet been adopted by the european union and therefore do not form part  
of ifrs as adopted by the european union
basis of consolidation
consolidated financial statements comprise the financial statements of the parent company punch taverns plc and all  
of its subsidiaries 
the group’s interests in its joint ventures are incorporated in the financial statements using the equity method of accounting
subsidiaries are consolidated from the date on which control is transferred to the group and cease to be consolidated from the 
date on which control is transferred out of the group investments in subsidiaries are carried at cost less any impairment in value  
in the financial statements of the company investments in joint ventures are carried at cost plus postacquisition changes in the 
group’s share of accumulated comprehensive income less distributions received and less any impairment in value
other investments in which the group has an interest are reviewed dependent on how much control the group has if the group 
maintains daytoday control over the investment the investment is treated as a subsidiary and the results and position are 
consolidated into the group financial statements
all intragroup balances and transactions including unrealised profits arising from intragroup transactions are eliminated in full 
unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred
goodwill
goodwill on acquisition is initially measured at cost being the excess of the fair value of the consideration of the business 
combination over the fair value of the group’s share of the identifiable assets liabilities and contingent liabilities following  
initial recognition goodwill is measured at cost less any accumulated impairment losses where a significant level of assets are 
transferred between segments or disposed the goodwill attributable to these assets is also transferred or charged to the income 
statement respectively
goodwill carried in the balance sheet is not amortised goodwill is reviewed for impairment annually or more frequently if events  
or changes in circumstances indicate that the carrying value may be impaired 
if the cost of acquisition is less than the fair value of the net identifiable assets liabilities and contingent liabilities of the subsidiary 
acquired the gain is recognised immediately in the income statement annual report and financial statements 2012 punch taverns plc
47
financial statements
1 accounting policies continued
operating leases and other intangible assets
the fair values attached to operating head leasehold interests on acquisitions are deemed to represent lease premiums and are 
carried as intangible assets these operating leases together with other intangible assets are capitalised at cost amortisation  
is charged to the income statement on a straightline basis over the estimated useful lives of intangible assets the estimated  
useful lives are as follows
operating leases
over the term of the lease
software 
3 to 10 years
payments made on entering into or acquiring operating leases are accounted for as intangible assets and amortised over the lease 
term on a straightline basis
property plant and equipment
properties held at 22 august 2004 the date of transition to ifrs were revalued at that date and this revaluation is the deemed  
cost under ifrs
landlord’s fixtures and fittings include removable items which are generally regarded as within landlord ownership these are 
depreciated in accordance with the policy detailed below
property plant and equipment assets are carried at cost or deemed cost less accumulated depreciation and any recognised 
impairment in value depreciation is provided to write off the cost of property plant and equipment less estimated residual  
values by equal annual instalments as follows
licensed properties unlicensed properties and owneroccupied properties
50 years or the life of the lease if shorter
landlord’s fixtures and fittings office furniture and fittings and motor vehicles
5 years
information technology equipment
3 to 5 years
freehold land is not depreciated
an annual assessment of residual values is performed and there is no depreciable amount if residual values are the same as 
or more than book value residual values are based on the estimated amount that would be currently obtainable from disposal  
of the asset net of disposal costs if the asset were already of the age and condition expected at the end of its useful life
impairment 
assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment and if events or 
changes in circumstances indicate that the carrying amount may not be recoverable assets that are subject to depreciation or 
amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not 
be recoverable a review for indicators of impairment is performed annually an impairment loss is recognised for the amount by 
which the asset’s carrying amount exceeds its recoverable amount the recoverable amount is the higher of an asset’s fair value less 
costs to sell and value in use any impairment charge is recognised in the income statement in the year in which it occurs when  
an impairment loss other than an impairment loss on goodwill subsequently reverses due to a change in the original estimate the 
carrying amount of the asset is increased to the revised estimate of its recoverable amount up to the carrying amount that would 
have resulted net of depreciation had no impairment loss been recognised for the asset in prior years
provisions
provisions are recognised when the group has a present legal or constructive obligation to transfer economic resources as a result 
of past events
provisions are measured at management’s best estimate of the expenditure required to settle the present obligation at the balance 
sheet date provisions are discounted if the effect of the time value of money is material the discount rate used to determine the 
present value reflects current market assessments of the time value of money and the risks specific to the liability punch taverns plc annual report and financial statements 2012
48
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
1 accounting policies continued
borrowings
all loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with  
the borrowings 
after initial recognition interest bearing loans and borrowings are subsequently measured at amortised cost using the effective 
interest rate method amortised cost is calculated taking account of any issue costs and any discounts or premiums on settlement
gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the  
amortisation process
when debt is purchased from the market a profit or loss is recognised at the point of purchase the debt is then held  
at amortised issue value until it is cancelled 
equity instruments
equity instruments issued by the company are recorded at the fair value of the proceeds net of direct issue costs
taxation
income tax expense comprises both the income tax payable based on taxable profits for the year and deferred tax
deferred tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and 
their carrying amounts except where the deferred tax liability arises from the initial recognition of goodwill or where the deferred tax 
asset or liability arises on an asset or liability in a transaction which is not a business combination that at the time of the transaction 
affects neither accounting nor taxable profit or loss deferred tax assets are recognised for all deductible temporary differences 
carryforward of unused tax assets and unused tax losses to the extent that it is probable that taxable profit will be available against 
which the deductible temporary differences carryforward of unused tax assets and unused tax losses can be utilised
deferred tax is calculated using tax rates that are expected to apply in the period when the liability is settled or the asset is realised 
based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date movements in 
deferred tax are charged or credited in the income statement except where they relate to items charged or credited directly  
to equity in which case the deferred tax is also dealt with in equity
for properties acquired as part of a business combination movements in the deferred tax liability resulting from indexation 
allowance are taken to the income statement until the tax base cost plus indexation allowance reaches the fair value on acquisition 
and to other comprehensive income thereafter for historic revaluation surpluses
deferred tax balances are not discounted
leasing 
leases of property plant and equipment where the group has substantially all the risks and rewards of ownership are classified  
as finance leases finance leases are capitalised at the inception of the lease at the fair value of the leased asset or if lower  
the present value of the minimum lease payments a corresponding liability is included in the balance sheet as a finance lease 
obligation lease payments are apportioned between the finance charges and reduction of the lease liability to achieve  
a constant rate of interest on the remaining balance of the liability finance charges are charged directly against income
capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term
leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases 
operating lease payments are recognised as an expense in the income statement on a straightline basis over the lease term
payments made on entering into or acquiring operating leases are accounted for as intangible assets and amortised over the lease 
term on a straightline basis
pensions
the group operates one defined benefit scheme which requires contributions to be made to separately administered funds  
the asset or liability recognised in the balance sheet in respect of the group’s defined benefit arrangements is the difference 
between the fair value of scheme assets and the present value of scheme liabilities any defined benefit assets are limited to the 
total of any unrecognised past service costs and the present value of economic benefits in the form of any future refunds from  
the scheme or reductions in future contributions to the scheme the cost of providing benefits under the scheme is determined 
using the projected unit credit actuarial method the current service cost is charged to operating profit the interest cost and the 
expected return on assets are shown within finance costs and finance income respectively the cumulative net deficits on this 
defined benefit pension scheme have been recognised in full in equity at the date of transition to ifrs and subsequent actuarial 
gains and losses are recognised in full as they occur in the statement of comprehensive income 
the group also contributes to money purchase pension plans for employees contributions are charged to the income statement  
as they become payable annual report and financial statements 2012 punch taverns plc
49
financial statements
1 accounting policies continued
accounting for derivative financial instruments and hedging activities 
the group uses derivative financial instruments such as interest rate swaps to hedge its risk associated with interest rate 
fluctuations such derivative financial instruments are initially accounted for and subsequently remeasured to fair value  
the fair value of the interest rate swap contracts is determined by reference to market values for similar instruments 
the method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument  
and if so the nature of the item being hedged for the purposes of hedge accounting hedges are classified as either fair value 
hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability or cash flow hedges where  
they hedge exposure to variability in forecast transactions
the group documents at the inception of the transaction the relationship between the hedging instruments and the hedged items 
as well as its risk management objective and strategy for undertaking various hedge transactions the group also documents its 
assessment both at hedge inception and on an ongoing basis of whether the derivatives that are used in hedging transactions are 
highly effective in offsetting changes in fair values or cash flows of hedged items
cash flow hedges
the effective portion of changes in the fair value of derivatives that are designated as and qualify as cash flow hedges are 
recognised in equity the gain or loss relating to the ineffective portion is recognised immediately in the income statement
amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or loss 
hedge accounting is discontinued when the hedging instrument expires or is sold terminated or exercised or no longer qualifies  
for hedge accounting at that point in time any cumulative gain or loss on the hedging instrument recognised in equity is kept in 
equity until the forecasted transaction occurs if a hedged transaction is no longer expected to occur the net cumulative gain or 
loss recognised in equity is transferred to the income statement immediately the replacement or rollover of a hedging instrument 
into another hedging instrument is not an expiry sale or termination where such replacement or rollover is part of the documented 
hedging strategy
derivatives that do not qualify for hedge accounting
changes in fair value of any derivative financial instruments that do not qualify for hedge accounting are recognised immediately  
in the income statement 
share based payment transactions
a number of employees of the group including directors receive an element of remuneration in the form of share based payment 
transactions whereby employees render services in exchange for shares or rights over shares ‘equitysettled transactions’
equitysettled transactions are measured at fair value at the date of grant the fair value of transactions involving the granting of 
shares is determined by the share price at the date of grant the fair value of transactions involving the granting of share options  
is calculated by an external valuer based on a binomial model a beta model or the blackscholes model dependent upon the  
most appropriate valuation model for the individual scheme in valuing equitysettled transactions no account is taken of any 
performance conditions other than conditions linked to the price of the shares of punch taverns plc ‘market conditions’
the cost of equitysettled transactions is recognised together with a corresponding increase in equity on a straightline basis over 
the vesting period based on the group’s estimate of how many of the awards will eventually vest no expense is recognised for 
awards that do not ultimately vest except for awards where vesting is conditional upon a market condition which are treated as 
vesting irrespective of whether or not the market condition is satisfied provided that all other performance conditions are satisfied
where the terms of an equitysettled award are modified as a minimum an expense is recognised as if the terms had not been 
modified in addition an expense is recognised for any increase in the value of the transaction as a result of the modification  
as measured at the date of the modification
where an equitysettled award is cancelled it is treated as if it had vested on the date of cancellation and any expense not yet 
recognised for the award is recognised immediately however if a new award is substituted for the cancelled award and 
designated as a replacement award on the date that it is granted the cancelled and new awards are treated as if they were  
a modification to the original award as described in the previous paragraph the dilutive effect of outstanding options is reflected 
as additional share dilution in the computation of earnings per share
revenue
revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods  
and services provided in the normal course of business net of discounts and vat all operations take place solely in the  
united kingdom punch taverns plc annual report and financial statements 2012
50
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
1 accounting policies continued
drink sales 
revenue in respect of drink sales is recognised at the point at which the goods are provided net of any discounts or volume  
rebates allowed
rents receivable 
rents receivable are recognised on a straight line basis over the lease term 
machine income
the group’s share of net machine income is recognised in the period to which it relates 
discontinued operations
discontinued operations represent components of the group that have been disposed of in accordance with ifrs 5 ‘noncurrent 
assets for sale and discontinued operations’ the profit or loss after taxation from discontinued operations is disclosed as a single 
line in the income statement beneath profit after taxation from continuing operations the cash flows from discontinued operations 
are also disclosed as a single line item in each category of the cash flow statement
trade and other receivables
trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amount an estimate 
for doubtful debts is made when collection of the full amount is no longer probable receivables are written off against the 
doubtful debt provision when management deems the debt to be no longer recoverable
cash and cash equivalents
cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with an original 
maturity of three months or less
noncurrent assets held for sale
noncurrent assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell and  
are not depreciated
noncurrent assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale 
transaction rather than through continuing use this condition is regarded as met only when the sale is highly probable and the 
asset is available for immediate sale in its present condition management must be committed to the sale and completion should  
be expected within one year from the date of classification
other investments
other investments such as holdings in shares in other companies are held at fair value and any movements in the fair value are 
taken to the income statement in the period they occur
dividend distribution
final dividends are recognised as a liability in the group’s and the company’s financial statements in the period in which the 
dividends are approved by the company’s shareholders interim dividends are recognised when they are paid
nonunderlying items
in order to provide a trend measure of underlying performance profit is presented excluding items which management consider 
will distort comparability either due to their significant nonrecurring nature or as a result of specific accounting treatments 
further detail on the nature of nonunderlying items is included in note 6
significant accounting estimates and judgements
the preparation of financial statements requires management to make estimates and assumptions that affect the reported 
amounts of assets and liabilities disclosure of contingent assets and liabilities at the date of the financial statements and the 
reported amounts of revenues and expenses during the reporting period 
on an ongoing basis management evaluates its estimates and judgements including those relating to income taxes  
deferred tax financial instruments property plant and equipment goodwill intangible assets valuations provisions and  
postemployment benefits
management bases its estimates and judgements on historical experience and on various other factors that are believed to be 
reasonable under the circumstances the results of which form the basis for making judgements about the carrying value of assets 
and liabilities that are not readily available from other sources actual results may differ from these estimates under different 
assumptions and conditions annual report and financial statements 2012 punch taverns plc
51
financial statements
1 accounting policies continued
the estimates and judgements that have a significant effect on the amounts recognised in the financial statements are  
detailed below
goodwill impairment
the group assesses whether goodwill is impaired on at least an annual basis the recoverable amounts of the cash generating  
units cgus to which goodwill has been allocated is determined based on valueinuse calculations these calculations require 
assumptions to be made regarding future cash flows and the choice of a suitable discount rate in order to calculate the present 
value of those cash flows these assumptions are disclosed in note 15 actual outcomes could vary from these estimates
impairment of property plant and equipment and operating leases
property plant and equipment and operating leases are reviewed for impairment if circumstances suggest that the carrying amount 
may not be recoverable recoverable amounts are determined based on valueinuse calculations and estimated sale proceeds 
these calculations require assumptions to be made regarding future cash flows and the choice of a suitable discount rate in order 
to calculate the present value of those cash flows these assumptions are disclosed in note 15 actual outcomes may vary from 
these estimates
postemployment benefits
the present value of defined benefit pension scheme liabilities is determined on an actuarial basis and depends on a number  
of actuarial assumptions which are disclosed in note 30 any change in these assumptions could impact the carrying amounts  
of pension liabilities
onerous lease provisions 
the group provides for its onerous obligations under operating leases where the property is closed or vacant and for properties 
where rental expense is in excess of income the estimated timings and amounts of cash flows are determined using the experience 
of internal property experts however any changes to the estimated method of exiting from the property could lead to changes  
to the level of the provision recorded
effectiveness of cash flow hedges
the group performs an assessment of the probability of future cash flows on the floating rate notes and related interest rate 
swaps where future expected hedged cash flows are expected to still be highly probable the group continues to account for 
these as effective cash flow hedges with the effective portion being recognised in equity where future expected cash flows are 
deemed not to be highly probable but are still expected to occur the group discontinues hedge accounting from the date of the 
assessment from this date all movements in the fair value of the cash flow hedges are recognised in the income statement where 
future expected cash flows are deemed to no longer be expected to occur the group discontinues hedge accounting from this 
date and recycles the existing accumulated amounts in equity in the income statement from this date all future movements in the 
fair value of the cash flow hedges are recognised in the income statement
the implications of a potential debt restructuring of the securitisation arrangements have been considered with regards to the 
continued effectiveness of hedge accounting for the interest rate swaps and also in relation to whether the hedge reserve should 
be recycled through the income statement at the balance sheet date no firm decisions on the debt restructuring had been made 
and the interest rate swaps arrangements were considered to remain highly effective in matching the underlying cash flows of the 
floating rate notes 
following the year end and to the date of issuing these financial statements no firm decisions on the debt restructuring had been 
made the effectiveness of cash flow hedges and the appropriateness of continuing to hold the hedge reserve will continue  
to be reviewed as the group progresses towards a restructuring of its securitisation arrangements should a restructuring of  
the securitisation debt arrangements result in the cash flows related to a hedged transaction no longer being expected to occur 
the net cumulative gain or loss recognised in equity will be recycled through the consolidated income statement immediately
authorisation of financial statements
the group’s and company’s financial statements of punch taverns plc for the period ended 18 august 2012 were authorised for 
issue by the board of directors on 23 october 2012 and the balance sheets were signed on the board’s behalf by roger whiteside 
and steve dando
corporate information
punch taverns plc is a public limited company incorporated and domiciled in england the company’s shares are listed on the 
london stock exchange punch taverns plc annual report and financial statements 2012
52
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
2 segmental analysis 
the punch business consists of a core estate and a turnaround estate each having its own clear strategy each of these strategic 
business units consists of a number of cash generating units cgus which are individual pubs these cgus generate their  
own revenues which are consolidated to give the group revenue and as a result group revenue is not reliant on one  
significant customer 
the chief operating decision maker represented by the board reviews the performance of the core and turnaround divisions 
separately at an ebitda level as included in the internal management reports
the group operates solely in the united kingdom
 52 weeks to 18 august 2012
core
£m
turnaround
£m
unallocated
£m
total
£m
drink revenue 2691 823 – 3514
rental income 990 283 – 1273
other revenue 86 44 – 130
underlying revenue 3767 1150 – 4917
underlying operating costs
1
1673 579 319 2571
share of posttax profit from joint venture – – 34 34
ebitda before nonunderlying items 2094 571 285 2380
underlying depreciation and amortisation 135
operating nonunderlying items 72
net finance costs 1535
movement in fair value of interest rate swaps 114
uk income tax charge 13
profit for the financial period from continuing operations 511
1
 unallocated underlying operating costs represent corporate overheads that are not allocated down to the divisional performance
     52 weeks to 20 august 2011
core
£m
turnaround
£m
unallocated
£m
total
£m
drink revenue 2705 976 – 3681
rental income 1021 372 – 1393
other revenue 89 54 – 143
underlying revenue 3815 1402 – 5217
underlying operating costs
1
1639 721 320 2680
share of posttax profit from joint venture – – 40 40
ebitda before nonunderlying items 2176 681 280 2577
underlying depreciation and amortisation 165
operating nonunderlying items 4415
net finance costs 1279
movement in fair value of interest rate swaps 72
uk income tax charge 234
loss for the financial period from continuing operations 3588
1
 unallocated underlying operating costs represent corporate overheads that are not allocated down to the divisional performance
assets and liabilities
 18 august 2012
core
£m
turnaround
£m
unallocated
£m
total
£m
segment assets 22728 4689 151 27568
unallocated assets – – 6700 6700
total assets 22728 4689 6851 34268
segment liabilities – – – –
unallocated liabilities – – 32186 32186
total liabilities – – 32186 32186
net assets 22728 4689 25335 2082 annual report and financial statements 2012 punch taverns plc
53
financial statements
2 segmental analysis continued
assets and liabilities 
 20 august 2011
core
£m
turnaround
£m
unallocated
£m
total
£m
segment assets 22598 5833 119 28550
unallocated assets – – 3004 3004
total assets 22598 5833 3123 31554
segment liabilities – – – –
unallocated liabilities – – 29533 29533
total liabilities – – 29533 29533
net assets 22598 5833 26410 2021
capital expenditure 
   18 august 2012
core
£m
turnaround
£m
unallocated
£m
total
£m
acquisition spend – – – –
investment spend 382 16 20 418
total capital expenditure 382 16 20 418
capital expenditure 
 20 august 2011
  
core
£m
turnaround
£m
unallocated
£m
total
£m
acquisition spend – – – –
investment spend 290 116 71 477
total capital expenditure 290 116 71 477
there are no sales between the segments segment assets include property plant and equipment operating leases noncurrent 
assets held for sale and goodwill and exclude other intangible assets receivables cash taxation investments in joint ventures and 
other investments whilst all liabilities are unallocated
3 analysis of expenses 
the following items have been included in arriving at operating profit from continuing operations
 
 52 weeks to
 18 august
 2012
£m
 52 weeks to
 20 august 
2011 
£m
drink costs 2035 2439
leasehold rentals
1
88 130
share of posttax profit from joint venture 34 40
depreciation 111 143
amortisation 24 38
impairment losses 34 3670
goodwill charge 11 827
profit on sale of noncurrent assets 13 31
other costs 488 899
total costs deducted from revenue to determine operating profit
2
2744 8075
1
 includes utilisation of property lease provisions of £09m august 2011 £19m
2
   included within total costs in the prior period are £1178m relating to the spirit leased estate these are shown in more detail in note 6 in addition there are further 
nonunderlying costs of £40m which are included within other costs above august 2011 £327m  punch taverns plc annual report and financial statements 2012
54
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
3 analysis of expenses continued
auditors’ remuneration is as follows
 52 weeks to 
18 august
 2012 
£m
 52 weeks to
 20 august 
2011 
£m
statutory audit services
audit of group financial statements 02 02
audit of subsidiary companies pursuant to legislation – –
 
nonaudit related services
other services
1
– 16
1
 relates to the demerger of the spirit business in the prior period note 9 
the accounts of the parent company do not include details of remuneration receivable by the auditor and its associates for 
nonaudit services as the group accounts are required to include this information as required by regulation 51b of the 
companies disclosure of auditor remuneration and liability limitation agreements regulations 2008 on a consolidated basis
4 finance income
 52 weeks to
 18 august
 2012 
£m
 52 weeks to
 20 august
 2011 
£m
bank interest receivable 35 27
pension finance income 29 29
nonunderlying finance income note 6 70 387
total finance income 134 443
5 finance costs
 52 weeks to
 18 august
 2012 
£m
52 weeks to
 20 august
 2011 
£m
interest payable on loan notes
1
1612 1644
interest payable on finance leases 01 04
pension finance costs 31 27
amortisation of deferred issue costs 18 20
effect of unwinding discounted provisions 07 10
nonunderlying finance costs note 6 – 17
total finance costs 1669 1722
1
  interest payable on loan notes is net of £57m credit august 2011 £59m credit for the amortisation of fair value adjustments and £23m net credit  
august 2011 £25m net credit for interest rate swaps all of which relates to financial liabilities not at fair value through profit or loss 
  annual report and financial statements 2012 punch taverns plc
55
financial statements
6 nonunderlying items
in order to provide a trend measure of underlying performance profit is presented excluding items which management consider 
will distort comparability either due to their significant nonrecurring nature or as a result of specific accounting treatments  
in addition the results of the leased pubs that formed part of the spirit business that was demerged in the prior period  
are shown as nonunderlying included in the income statement are the following nonunderlying items
  52 weeks to
 18 august 
2012 
£m
 52 weeks to
 20 august
 2011
£m
results of the spirit leased estate to demerger
revenue – 855
operating costs before depreciation and amortisation – 461
depreciation and amortisation – 16
impairment losses note 15 – 604
goodwill charge – 103
profit on sale of noncurrent assets – 06
operating loss for the spirit leased estate – 323
other operating nonunderlying items
business separation costs – 300
restructuring redundancy and other related oneoff costs 40 28
movement on property liabilities – 01
impairment losses note 15 34 3066
goodwill charge
1
11 724
profit on sale of noncurrent assets 13 25
72 4092
finance income
loan note redemptions
2
17 376
movement in fair value of provision for share scheme settlement
3
11 11
movement in fair value of spirit shares held
4
14 –
profit on sale of shares held in trust 17 –
other nonunderlying finance income 11 –
70 387
finance costs
movement in fair value of spirit shares held
4
– 17
– 17
movement in fair value of interest rate swaps
5
114 72
total nonunderlying items before tax 116 4117
tax
tax impact of nonunderlying items 96 34
adjustments to tax in respect of prior periods 51 13
147 21
total nonunderlying items after tax 31 4138
1
  represents the goodwill relating to those core pubs disposed of in the period and the £724m write down of goodwill relating to the apportioned value  
of goodwill allocated to those pubs transferred to the turnaround division in the prior period and subsequently impaired 
2
  represents profit on the purchase of securitised debt together with the writeoff of related deferred issue costs
3
  represents movement in fair value of shares held to settle future share schemes and release of provision for share schemes see note 9
4
  represents movement in fair value of shares held as an investment see note 9
5
  represents the movement in the fair value of interest rate swaps which do not qualify for hedge accounting whilst the interest rate swaps are considered to be 
effective in matching the amortising profile of existing or planned floating rate borrowings they do not meet the definition of an effective hedge due to changes  
in expected future maturity profiles  punch taverns plc annual report and financial statements 2012
56
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
7 employees and directors
the staff costs for continuing operations are set out below
 52 weeks to
 18 august 
2012 
£m
52 weeks to
 20 august
 2011
£m
wages and salaries 180 249
social security costs 21 28
share based payments 11 30
other pension costs 12 15
224 322
the average number of employees employed by the group in continuing operations during the period was as follows
 52 weeks to 
18 august 
2012
 52 weeks to
 20 august
 2011 
management and administration
1
458 651
1
 employee numbers relate to actual employees rather than full time employee equivalents
the directors are remunerated by the company
directors’ emoluments are disclosed in the ‘report on directors’ remuneration on pages 27 to 35
8 taxation
a tax on profit on ordinary activities
tax charged  credited in the income statement
 52 weeks to 18 august 2012 52 weeks to 20 august 2011
underlying
£m
non
underlying
£m
total
£m
underlying
£m
non
underlying
£m
total
£m
current tax on continuing operations 
uk corporation tax – current year 20 20 – 229 01 228
uk corporation tax – adjustments in respect of prior years – 08 08 – 04 04
20 28 08 229 03 232
deferred tax on continuing operations note 18
origination and reversal of temporary differences  
– current year 140 76 64 16 35 19
origination and reversal of temporary differences 
– adjustments in respect of prior years – 43 43 – 17 17
140 119 21 16 18 02
total tax charge  credit in the income statement  
on continuing operations 160 147 13 213 21 234
income tax credit on discontinued operations – – – – 462 462
total tax charge  credit 160 147 13 213 441 228 annual report and financial statements 2012 punch taverns plc
57
financial statements
8 taxation continued
tax on items credited to equity
in addition to the amount credited to the income statement tax movements recognised directly in equity through the consolidated 
statement of comprehensive income were as follows
 52 weeks to
 18 august 
2012 
£m
52 weeks to
 20 august 
2011
£m
deferred tax
deferred tax charge  credit on gain  loss on actuarial valuation of pension schemes 07 10
deferred tax credit on effective element of cash flow hedges 79 69
deferred tax credit on other items charged to equity – 02
deferred tax credit recognised directly in equity 72 81
b reconciliation of the total tax charge
the effective rate of tax is different to the full rate of corporation tax the differences are explained below 
 52 weeks to
 18 august
 2012 
£m
 52 weeks to
 20 august
 2011
£m
profit  loss on ordinary activities before tax on continuing operations 524 3354
tax at current uk tax rate of 2522 august 2011 2722 132 913
effects of
net effect of expenses not deductible for tax purposes and nontaxable income underlying items 01 05
adjustments to tax in respect of prior periods nonunderlying items 51 13
current period nonunderlying credits  charges 67 1155
total tax charge reported in the income statement on continuing operations 13 234
details of the nonunderlying tax credits and charges are included in note 6
9 discontinued operations
at a general meeting on 26 july 2011 the company’s shareholders approved the demerger of the spirit business 
on 1 august 2011 the spirit business was demerged from the group the demerger was effected by the following steps
•	 a new holding company spirit pub company holdco limited was incorporated into which the spirit business was transferred
•	 £61m of cash was transferred from punch taverns plc to spirit pub company holdco limited
•	 the entire share capital of spirit pub company holdco limited was transferred to spirit pub company plc a nongroup company 
in return spirit pub company plc issued one ordinary share in itself to each punch taverns plc shareholder for each one ordinary 
share of punch taverns plc held on 1 august 2011 
these transactions resulted in the demerger of the spirit business from the group 
the spirit business at the time of the demerger consisted of approximately 800 managed pubs and 550 leased pubs since the 
managed pub business represented a separate major line of business for the group the results of that segment are shown as 
discontinued in these financial statements however the 550 leased pubs that were demerged do not represent a separate major 
line of business under the definitions within ifrs 5 so the results of these pubs have not been shown as discontinued but instead 
are shown as nonunderlying in these financial statements
the disclosures below relate only to the demerged spirit managed business segment the disclosures do not include the spirit 
leased business segment as this segment cannot be classified as discontinued within the definitions of ifrs 5 punch taverns plc annual report and financial statements 2012
58
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
9 discontinued operations continued
a the results of the spirit managed business before demerger were as follows
 49 weeks to
 31 july 2011 
£m
revenue 6084
operating costs before depreciation and amortisation see note b below 5295
ebitda 789
depreciation and amortisation 300
impairment 49
profit on sale of noncurrent assets 07
operating profit 447
finance income 500
finance costs 574
movement in fair value of interest rate swaps 219
profit before taxation 154
uk income tax credit 462
profit for the financial period 616
b an analysis of operating costs incurred by the spirit managed business prior to demerger is as follows
 49 weeks to
 31 july 
2011
£m
drink and food costs 1769
managed pub running costs 2664
leasehold rentals 402
depreciation 269
amortisation 31
impairment losses 49
profit on sale of noncurrent assets 07
other costs 460
total costs deducted from revenue to determine operating profit 5637
c  income tax relating to the spirit managed business is as follows
 49 weeks to 
31 july 
2011
£m
current tax credit 254
deferred tax credit 208
total tax credit 462
d  the loss from discontinued operations shown in the income statement is made up as follows
 49 weeks to
 31 july
2011 
£m
profit in the financial period up to demerger of the discontinued business 616
dividend in specie 3881
share based payments 20
net assets of spirit business demerged
1
9596
5079
1
 the net assets of the spirit business demerged includes both the managed and leased businesses
the value of the dividend in specie represents the fair value of the spirit business this has been derived based on the fair value  
of a subordinated loan advanced by the group to the spirit business the value of spirit debenture bonds that were funded by 
punch taverns plc and an amount of cash that was transferred to the spirit business on demerger
prior to demerger the company allotted shares to cover future outstanding awards under the long term incentive plan which  
are being held in a trust controlled by the group at demerger a financial asset has been recognised by the group for the total 
number of spirit shares that are being held by the group and a provision has been recognised for the number of punch and spirit 
shares that have been allotted in order to satisfy awards that are outstanding to employees now employed by the spirit group  
the £20m profit on the recognition of these has been shown above annual report and financial statements 2012 punch taverns plc
59
financial statements
10 earnings per share
basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average 
number of ordinary shares outstanding during the year excluding those held in the employee share trust which are treated  
as cancelled
diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average 
number of ordinary shares outstanding during the year adjusted for the effects of dilutive options
reconciliations of the earnings and weighted average number of shares are set out below
 52 weeks to 
18 august 2012 
52 weeks to 
20 august 2011
earnings
£m
per share
 amount
pence
earnings
£m
per share
 amount
pence
results attributable to ordinary shareholders
basic earnings  loss per share 511 77 8667 1348
diluted earnings  loss per share 511 77 8667 1348
supplementary earnings per share figures
basic earnings per share before nonunderlying items 480 72 550 86
diluted earnings per share before nonunderlying items 480 72 550 86
basic loss per share on discontinued operations – – 5079 790
diluted loss per share on discontinued operations – – 5079 790
the impact of dilutive ordinary shares is to increase weighted average shares by nil august 2011 28000 for employee share options
 
 52 weeks to
 18 august
 2012
no m
52 weeks to
 20 august
 2011
no m
basic weighted average number of shares 6629 6428
diluted weighted average number of shares 6629 6428
11 dividends
other than the dividend in specie to effect the demerger of the spirit business as discussed in note 9 no dividends have been 
declared and paid during the current or prior year 
the directors will not be proposing the payment of a final dividend punch taverns plc annual report and financial statements 2012
60
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
12 property plant and equipment 
land and
 buildings
£m
public house
 fixtures 
and fittings
£m
other 
assets
£m
total
£m
cost or deemed cost
at 21 august 2010 49772 3247 269 53288
additions 592 493 12 1097
transfers to noncurrent assets classified as held for sale 1346 02 – 1348
disposals 1368 145 11 1524
demerger of the spirit business 18953 2854 113 21920
at 20 august 2011 28697 739 157 29593
additions 371 69 04 444
transfers to noncurrent assets classified as held for sale 1530 51 – 1581
disposals 579 37 01 617
at 18 august 2012 26959 720 160 27839
accumulated depreciation
at 21 august 2010 4512 1747 111 6370
charge for the year 54 330 28 412
impairment losses note 15 3526 14 – 3540
transfers to noncurrent assets classified as held for sale 637 02 – 639
disposals 652 94 – 746
demerger of the spirit business 3288 1467 06 4761
at 20 august 2011 3515 528 133 4176
charge for the year 13 83 15 111
impairment losses note 15 34 – – 34
transfers to noncurrent assets classified as held for sale 775 51 – 826
disposals 263 31 01 295
at 18 august 2012 2524 529 147 3200
net book value at 18 august 2012 24435 191 13 24639
net book value at 20 august 2011 25182 211 24 25417
the cost of work in progress within property plant and equipment at 18 august 2012 was £118m august 2011 £95m
the group leases various licensed properties offices and other commercial properties and other assets under finance leases  
the leases have various terms escalation clauses and renewal rights
included in property plant and equipment above are motor vehicles held under finance leases with a net book value of  
£05m august 2011 £11m and properties held under finance leases with a net book value of £23m august 2011 £30m
included in land and buildings are properties with a net book value of £24269m august 2011 £25052m over which the 
group’s borrowings are secured by way of fixed and floating charges annual report and financial statements 2012 punch taverns plc
61
financial statements
13 goodwill operating leases and other intangible assets
operating
 leases
£m
other
 intangible
 assets
£m
goodwill
£m
cost
at 21 august 2010 1602 164 4951
additions – 05 –
disposals 32 – –
demerger of the spirit business 1161 13 2416
at 20 august 2011 409 156 2535
additions – 06 –
disposals 15 – 16
at 18 august 2012 394 162 2519
amortisation
at 21 august 2010 739 111 –
charge for the year 40 29 –
disposals 27 – –
impairment note 15 112 – 827
demerger of the spirit business 519 07 103
at 20 august 2011 345 133 724
charge for the year 04 20 –
disposals 15 – 05
at 18 august 2012 334 153 719
net book value at 18 august 2012 60 09 1800
net book value at 20 august 2011 64 23 1811
included within operating leases are properties with a net book value of £44m august 2011 £48m over which the group’s 
borrowings are secured by way of fixed and floating charges
other intangible assets relate to computer software
14 other investments
£m
spirit shares held
at 20 august 2011 74
movement in fair value of shares held note 6 14
at 18 august 2012 88
15 impairment losses
property plant and equipment and operating leases
when any indicators of impairment are identified property plant and equipment and operating leases are reviewed for impairment 
based on each cashgenerating unit cgu the cgus are individual pubs the carrying values of these individual pubs are 
compared to the recoverable amount of the cgus which is the higher of value in use viu and fair value less costs to sell fvlcs
during the 52 week period to 20 august 2011 the group commissioned independent market research on the uk eating and 
drinking out market and its position in it this review was undertaken as part of a comprehensive review of the group’s strategy 
operating performance and capital structure the outcome of which was announced on 22 march 2011
this review reinforced the group’s view that the long term decline in drinking out in pubs will continue driven by changing 
consumer behaviour relative price positioning and the impact of regulation conversely the long term growth in eating out  
in pubs will continue driven by economic growth changing consumer behaviour and improvements in the quality service and 
value for money offering in the pub industry punch taverns plc annual report and financial statements 2012
62
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
15 impairment losses continued
the outcome of this review led the group to conclude that given the structural challenges faced by the leased estate a more 
aggressive reduction in the estate size is required this will enable the group to move more quickly to a position from which we can 
deliver sustainable growth in profits and cash flow this analysis led to the conclusion that our turnaround estate comprising those 
properties that can generate more value through disposal than retention was around 2400 pubs at the time of the review it is 
expected that these pubs will be disposed of over a five year period 
the values of these turnaround pubs were then reviewed with the carrying value of these individual pubs being written down to 
the higher of their fvlcs and their viu as a result a £3066m impairment was charged in the prior year in addition a £604m 
impairment charge was incurred on the spirit leased estate
during the 52 week period to 18 august 2012 the fvlcs of the noncurrent assets classified as held for sale have been reviewed 
and a further impairment of £34m has been identified
the impairments recognised in the current and prior periods are as follows
52 weeks to
 18 august
2012
£m
52 weeks to 
20 august
 2011
£m
property plant and equipment 34 3591
operating leases – 79
34 3670
 
cash flows used in the viu calculation of noncore pubs are based on earnings before interest and taxation since noncore pubs 
have been identified as not having a viable future to punch as a pub their viu has been calculated by extrapolating the earnings  
of these pubs for a period of three years and then using the fvlcs at that time as the terminal value at the end of year three  
the cash flow forecasts used assume an ongoing trading decline for these pubs the pretax risk adjusted discount rate applied  
to cash flow projections is 80 august 2011 80 in practice due to the projected decline in profits in the turnaround estate 
the majority of pubs were written down to their fvlcs as their viu is below this level estimates of fvlcs were based on valuations 
undertaken by inhouse property experts
included within the above are reversals of impairment losses of property plant and equipment of £nil august 2011 £274m  
the impairment reversals were primarily due to the identification of pubs where expected future cash flows have risen to a level 
such that their viu is now above carrying value
goodwill
goodwill represents the synergistic benefits of operating a large pub estate and is allocated to groups of cgus in the prior period 
the leased estate was reorganised from one group of cgus to separate core and turnaround property structures the allocation of 
leased goodwill between core and turnaround indicated that no goodwill should be allocated to the turnaround estate given the 
low value of the properties in the estate and the low level of synergistic benefits 
during the prior period following the strategic review a further c 1400 pubs were transferred in to the turnaround estate and  
at that stage goodwill of £724m was reallocated to the turnaround estate the intention to dispose of these turnaround properties  
in the medium term triggered an impairment review and an impairment charge of £827m was taken against this goodwill which 
included a £103m charge on goodwill allocated to pubs in the spirit leased estate for goodwill impairment purposes the 
recoverable amount of the turnaround group of cgus was based on an aggregate of the higher of the fvlcs and the viu for the 
turnaround pubs the basis of these calculations is set out in the property plant and equipment and operating lease impairment 
disclosures above
in addition during the prior period a review for impairment was carried out on the remaining goodwill allocated to pubs in the core 
estate this review compared the carrying amount of the goodwill to the net realisable value being the higher of the fvlcs and 
viu cash flows used in the viu calculation were based on earnings before interest and taxation and used the forecasted cash 
flows included within the group business plan for the first five years and then the cash flows were extrapolated for a further  
45 years applying a multiple of ten as the terminal value the pretax risk adjusted discount rate applied to cash flow projections 
was 80 the growth rate applied to cash flows over the 45 year period was 225 based on this review no impairment of 
goodwill on the core estate was identified 
during the current period a review completed using the same criteria as the previous period on the remaining goodwill allocated  
to pubs in the core estate also concluded that no impairment was required 
neither a 2 decrease in the growth rate assumption nor a 1 increase in the discount rate assumption would have led to an 
impairment in either the current or prior period 
  annual report and financial statements 2012 punch taverns plc
63
financial statements
16 investments in subsidiary undertakings and joint ventures
company
total
£m
at 21 august 2010 13358
additions 50
at 20 august 2011 13408
additions 11
at 18 august 2012 13419
during the period the company made a capital contribution of £11m august 2011 £50m to its immediate subsidiary 
undertaking punch taverns pge limited 
details of the principal subsidiary undertakings and joint ventures at 18 august 2012 are as follows
name of company nature of business
subsidiary undertakings owned directly
punch taverns pge limited holding company
all of which are directly or indirectly wholly owned subsidiaries of punch taverns pge limited
punch partnerships pgrp limited pub operating company
punch partnerships ptl limited pub operating company
punch partnerships pml limited pub operating company
punch taverns services limited 
formerly punch partnerships ppcs limited intermediate supply company
punch taverns finance plc financing company
punch taverns finance b limited financing company
punch taverns finco limited financing company
punch taverns praf limited financing company
punch taverns offices limited property company
joint ventures
matthew clark holdings limited intermediate holding company of matthew clark
the company owns 100 of the ordinary share capital directly or indirectly and controls 100 of the voting rights of the 
companies listed above with the exception of matthew clark holdings limited of which the company indirectly owns 50  
of the ordinary share capital and exercises joint control
all the companies listed above are incorporated in england and wales other than punch taverns finance b limited which  
is incorporated in the cayman islands
in addition to those investments listed above the group also maintains daytoday control over punch taverns plc general 
employee benefit trust a trust set up purely for holding shares related to share based payment schemes although no company  
in the group owns any shares either directly or indirectly in punch taverns plc general employee benefit trust the financial 
statements are also consolidated into the group financial statements in accordance with sic 12
exemption has been taken to exclude subsidiary undertakings whose results or financial position do not principally affect the 
financial statements from the above disclosure
  punch taverns plc annual report and financial statements 2012
64
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
17 trade and other receivables
 group company
18 august 
2012
£m
20 august 
2011
£m
18 august
 2012
£m
20 august 
2011
£m
amounts falling due within one year
trade receivables 243 350 – –
amounts owed by group undertakings – – 02 21
prepayments and accrued income 89 108 – 17
tax and social security receivable – – – 02
other receivables 09 09 – –
341 467 02 40
amounts falling due after more than one year
amounts due from group undertakings – – 10988 9733
18 deferred tax
the movement on the deferred tax account is as follows
deferred tax
 group  company
18 august
 2012
£m
20 august 
2011
£m
18 august 
2012
£m
20 august
 2011
£m
liabilities  assets at beginning of period 31 107 105 –
charged  credited to income statement note 8 21 208 23 105
credited to other comprehensive income 72 81 – –
demerger of the spirit business – 213 – –
assets  liabilities at end of period 20 31 82 105
the movements in deferred tax assets and liabilities during the period are shown below 
deferred tax assets
group 
tax losses
£m
retirement 
benefit 
liabilities
£m
financial 
instruments
£m
other
£m
total
£m
at 21 august 2010 263 62 1091 77 1493
credited  charged to income statement 461 39 193 27 256
credited to other comprehensive income – 10 69 02 81
demerger of the spirit business 584 14 222 61 881
at 20 august 2011 140 19 745 45 949
charged to income statement 46 06 11 09 72
charged  credited to equity – 07 79 – 72
at 18 august 2012 94 06 813 36 949
company 
tax losses
£m
at 21 august 2010 –
credited to income statement 105
at 20 august 2011 105
charged to income statement 23
at 18 august 2012 82 annual report and financial statements 2012 punch taverns plc
65
financial statements
18 deferred tax continued
deferred tax liabilities
group
accelerated
 capital 
allowances
£m
at 21 august 2010 1600
charged to income statement 48
demerger of the spirit business 668
at 20 august 2011 980
credited to income statement 51
at 18 august 2012 929
at the balance sheet date the group has unused tax losses of £431m august 2011 £577m and unused capital losses of 
£16524m august 2011 £16566m available for offset against future profits a deferred tax asset has been recognised in respect 
of £408m august 2011 £560m of such losses which are expected to be utilised against future profit streams within the group 
no deferred tax asset has been recognised in respect of the remaining £16547m august 2011 £16589m of losses due to the 
unpredictability of future profit streams current legislation deems that these losses may be carried forward for an unlimited 
number of years
the 2011 budget on 23 march 2011 announced that the uk corporation tax rate will reduce to 23 over a period of 4 years from 
2011 the first reduction in the uk corporation tax rate from 28 to 27 effective from 1 april 2011 was substantively enacted 
on 20 july 2010 and further reductions to 26 effective from 1 april 2011 and 25 effective from 1 april 2012 were 
substantively enacted on 29 march 2011 and 5 july 2011 respectively
the 2012 budget on 21 march 2012 announced a further reduction in the corporation tax rate to 24 effective from 1 april 2012 
and to 23 effective from 1 april 2013 these rates were substantively enacted on 26 march 2012 and 3 july 2012 respectively  
a further 1 rate reduction in a future period will reduce the uk corporation tax rate to 22 this will reduce the company’s 
future current tax charge accordingly
the deferred tax asset at 18 august 2012 has been calculated based on the future rate of 23 which was substantively enacted  
at the balance sheet date
19 cash
 group company
18 august
 2012
£m
20 august 
2011
£m
18 august 
2012
£m
20 august
 2011
£m
cash and cash equivalents 2639 1965 43 06
restricted cash
1
3150 – – –
1
 represents ring fenced funds drawn down following a rating downgrade of one of the liquidity facility providers note 23  punch taverns plc annual report and financial statements 2012
66
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
20 noncurrent assets classified as held for sale
18 august
 2012
£m
20 august 
2011
£m
noncurrent assets classified as held for sale 1069 1258
noncurrent assets classified as held for sale represents pubs that are individually being actively marketed for sale with varying 
expected completion dates within one year the value of noncurrent assets classified as held for sale represents the expected net 
disposal proceeds and is the value after an impairment charge of £34m as at 18 august 2012 £1069m of the noncurrent assets 
classified as held for sale population were situated in the turnaround estate august 2011 £1258m
21 trade and other payables
 group company
18 august 
2012
£m
20 august
 2011
£m
18 august 
2012
£m
20 august 
2011
£m
trade payables 371 358 – –
other tax and social security payable 88 127 02 –
other payables 266 294 – 02
accruals and deferred income 486 680 – –
1211 1459 02 02
22 financial liabilities
 18 august 2012 20 august 2011
 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
issued by punch taverns finance plc 274 14506 14780 265 14817 15082
issued by punch taverns finance b limited 334 9201 9535 338 9633 9971
total interest bearing loans and borrowings 608 23707 24315 603 24450 25053
obligations under finance leases 07 27 34 10 37 47
total financial liabilities 615 23734 24349 613 24487 25100 annual report and financial statements 2012 punch taverns plc
67
financial statements
22 financial liabilities continued
secured loan notes
the secured loan notes have been secured by way of fixed and floating charges over various assets of the group
interest is paid quarterly in arrears on all secured loan notes scheduled capital repayments are made quarterly on those loan  
notes that are amortising the details for the secured loan notes including the date of the final scheduled instalment for each class 
of note as indicated in its description are as follows
issued by punch taverns finance plc
 18 august 2012 20 august 2011
 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 a1 secured fixed rate notes repayable  
by april 2022 at 7274 per annum – 2700 2700 – 2700 2700
class a2 secured fixed rate notes repayable  
by july 2020 at 682 per annum 222 2109 2331 222 2331 2553
class b1 secured fixed rate notes repayable  
by april 2026 at 7567 per annum – 795 795 – 795 795
class b2 secured fixed rate notes repayable  
by july 2029 at 8374 per annum – 837 837 – 874 874
class b3 secured floating rate notes repayable  
by july 2031 at libor
1
 024 to july 2014  
and libor
1
 060 thereafter – 1340 1340 – 1340 1340
class c secured fixed rate notes repayable  
by april 2033 at 6468 per annum – 851 851 – 851 851
class m1 secured fixed rate notes repayable  
by october 2026 at 5883 per annum 57 1033 1090 48 1090 1138
class m2n secured floating rate notes repayable  
by july 2029 at libor
1
 020 to july 2014  
and libor
1
 050 thereafter – 3987 3987 – 3987 3987
class d1 secured floating rate notes repayable  
by october 2032 at libor
1
 082 to july 2014  
and libor
1
 205 thereafter – 837 837 – 837 837
279 14489 14768 270 14805 15075
add premium arising from fair value adjustment 06 48 54 07 55 62
less deferred issue costs 11 31 42 12 43 55
274 14506 14780 265 14817 15082
1
 for 3 month deposits
in the current period the group redeemed class b2 notes with a nominal value of £37m
in the prior period the group redeemed notes with a nominal value of £1114m being £203m class b1 £302m class b2  
£250m class b3 £122m class c £39m class m1 and £198m class d1 notes
these figures are net of notes held by the group not yet cancelled which as at 18 august 2012 were £nil 20 august 2011  
£15m class b1 £120m class b2 and £50m class b3 notes held by punch taverns finco limited
  punch taverns plc annual report and financial statements 2012
68
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
22 financial liabilities continued
issued by punch taverns finance b limited
 18 august 2012 20 august 2011
 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 a3 secured fixed rate notes repayable  
by june 2022 at 7369 per annum 153 1668 1821 150 1821 1971
class a6 secured fixed rate notes repayable  
by december 2024 at 5943 per annum – 2200 2200 – 2200 2200
class a7 secured fixed rate notes repayable  
by june 2033 at 4767 per annum 115 1650 1765 110 1765 1875
class a8 secured floating rate notes repayable  
by june 2033 at libor
1
 028 until june 2015  
and libor
1
 07 thereafter 27 463 490 32 589 621
class b1 secured fixed rate notes repayable  
by june 2025 at 844 per annum – 615 615 – 615 615
class b2 secured fixed rate notes repayable  
by june 2028 at 6962 per annum – 994 994 – 994 994
class c secured floating rate notes repayable  
by june 2035 at libor
1
 11 until june 2015  
and libor
1
 275 thereafter – 1250 1250 – 1250 1250
295 8840 9135 292 9234 9526
add premium arising from fair value adjustment 45 382 427 51 427 478
less deferred issue costs 06 21 27 05 28 33
334 9201 9535 338 9633 9971
1
 for 3 month deposits
in the current period the group redeemed class a8 notes with a nominal value of £103m
in the prior period the group sold notes with a nominal value of £342m being £25m class a3 £247m class a7 and £70m  
class b2 notes
these figures are net of notes held by the group not yet cancelled which as at 18 august 2012 were £131m class a7 £160m 
class b1 and £256m class b2 notes held by punch partnerships pml limited 20 august 2011 £139m class a7 £160m class b1 
and £256m class b2 notes held by punch partnerships pml limited annual report and financial statements 2012 punch taverns plc
69
financial statements
22 financial liabilities continued
interest rate swaps
the group has taken out various interest rate swaps to reduce the interest rate risk associated with floating rate loans as follows
punch taverns finance plc
interest rate swap agreements have been entered into which swap the libor interest rate on the class b3 class m2n and class 
d1 floating rate notes to a fixed rate of 5954 the capital amount of these swaps reduces over time to match the contractual 
repayment profile of the floating rate notes 
punch taverns finance b limited
interest rate swap agreements have been entered into which swap the libor interest rate on the class a8 and class c notes  
to a fixed rate of 51 and 47577 respectively the capital amount of these swaps reduces over time to match the contractual 
repayment profile of the floating rate notes although the class a8 swap ensures that cash flows are perfectly hedged over the life 
of the notes it was deemed ineffective as at 21 august 2010 due to the intention to purchase and cancel a portion of these notes 
ahead of their expected legal maturity
after taking account of the various interest rate swaps entered into by the group the interest rate exposure of the group’s financial 
liabilities is set out below there are no financial liabilities other than short term payables and provision for share schemes excluded 
from this analysis
  18 august 2012 20 august 2011
fixed
£m
floating
£m
total
£m
fixed
£m
floating
£m
total
£m
secured loan notes
issued by punch taverns finance plc 14780 – 14780 15082 – 15082
issued by punch taverns finance b limited 9535 – 9535 9971 – 9971
total interestbearing loans and borrowings 24315 – 24315 25053 – 25053
obligations under finance leases 34 – 34 47 – 47
total financial liabilities 24349 – 24349 25100 – 25100
interest rate analysis
the weighted average effective interest rates of interestbearing loans and borrowings including the effect of interest rate swaps 
at the balance sheet date are as follows
18 august
 2012

20 august
 2011

secured loan notes 69 69
finance leases 65 65
the average interest rate for group loans and borrowings is 69 august 2011 69
obligations under finance leases
the minimum lease payments under finance leases fall due as follows
 18 august 2012 20 august 2011
minimum
 lease 
payments
£m
present value
 of future
 obligations
£m
minimum
 lease 
payments
£m
present value
 of future
 obligations
£m
within one year 07 07 10 10
within one to five years 15 11 23 18
over five years 71 16 84 19
93 34 117 47 punch taverns plc annual report and financial statements 2012
70
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
22 financial liabilities continued
maturity of group debt
the table below summarises the maturity profile of the group’s debt at 18 august 2012 and 20 august 2011 based on contractual 
undiscounted cash flows including interest
 period ended 18 august 2012
within 
one year
£m
one to
 two years
£m
two to 
five years
£m
more than
 five years
£m
total
£m
interest bearing loans and borrowings
– capital 574 642 2932 19755 23903
– interest 1137 1098 3007 5586 10828
– interest rate swaps 499 497 1780 6785 9561
2210 2237 7719 32126 44292
 period ended 20 august 2011
within 
one year
£m
one to
 two years
£m
two to 
five years
£m
more than 
five years
£m
total
£m
interest bearing loans and borrowings
– capital 562 578 2448 21013 24601
– interest 1186 1149 3211 6680 12226
– interest rate swaps 498 495 1664 7308 9965
2246 2222 7323 35001 46792
the contractual maturity of trade and other payables is within one year
23 financial instruments
categories of financial instruments
18 august 
2012
£m
20 august
 2011
£m
financial assets
receivables amortised cost 243 350
cash and shortterm deposits 2639 1965
liquidity facility agreement drawdown 3150 –
other investments 88 74
6120 2389
financial liabilities
interest rate swaps – at fair value through profit or loss 132 130
interest rate swaps – not at fair value through profit or loss 3183 2586
amortised cost 24686 25411
finance lease obligations 34 47
liquidity facility agreement drawdown 3150 –
provision for share schemes 48 59
31233 28233
the company holds financial assets and financial liabilities at amortised cost as shown in note 33
all derivative financial instruments are held on the balance sheet at fair value the effective portion of changes in the fair value  
of derivative financial instruments that are designated and qualify as cash flow hedges are recognised in equity the gain or loss 
relating to the ineffective portion is recognised immediately in the income statement amounts accumulated in equity are recycled 
in the income statement in the periods when the hedged item will affect profit or loss changes in fair value of any derivative 
financial instruments that do not qualify for hedge accounting are recognised immediately in the income statement annual report and financial statements 2012 punch taverns plc
71
financial statements
23 financial instruments continued
the group’s principal financial instruments other than derivative financial instruments comprise borrowings cash and liquid 
resources the main purpose of these financial instruments is to provide finance for the group’s operations the group has various 
other financial instruments such as trade receivables and trade payables which arise directly from its operations
following the demerger of the spirit business a financial asset has been recognised by the group for the total number of spirit 
shares that are being held by the group and a provision has been recognised for the number of punch and spirit shares that have 
been allotted in order to satisfy awards that are outstanding to employees now employed by the spirit group
the main risks arising from the group’s financial instruments are interest rate risk liquidity risk capital risk credit risk and market 
risk there is no material currency exposure as all material transactions and financial instruments are in sterling the group has no 
material exposure to equity securities or commodity price risk and it is the group’s policy that no speculative trading in financial 
instruments shall be undertaken the board reviews and agrees policies for each of these risks and they are summarised on  
pages 07 to 09
interest rate risk
as the group has no significant interest bearing assets other than cash and cash equivalents the group’s income and operating 
cash flows are substantially independent of changes in market interest rates income and cash flows from cash and cash equivalents 
fluctuate with interest rates
the group finances its operations through a mixture of equity shareholders’ funds and loan notes the group borrows at both 
fixed and floating rates of interest and then employs derivative financial instruments such as interest rate swaps to generate the 
desired interest rate profile and to manage the group’s exposure to interest rate fluctuations the cash balances attract interest  
at floating rates 
where overhedging arises for example due to early repayment of floating rate notes the group will seek to eliminate the 
overhedging where this is financially practicable by terminating the overhedge as at the year end the group held £nil  
august 2011 £50m of floating rate notes for which interest swaps remain outstanding 
the group has taken out derivative financial instruments such that 100 of all loans at 18 august 2012 august 2011 100  
were either at fixed rate or were converted to fixed rate as a result of swap arrangements thereby largely eliminating the group’s 
exposure to changes in interest rates
cash flows associated with cash deposits debt and interest rate swaps and the fair value of these instruments fluctuate with 
changes in interest rates if the interest rates had been 1 higher or lower during the period the effect on the income statement 
would be as follows
interest 
receivable
£m
interest 
payable
£m
movement 
in fair value 
of interest 
rate swaps
£m
period ended 18 august 2012
impact on income statement if interest rates increased by 1 gain  loss 26 – 50
impact on income statement if interest rates decreased by 1 gain  loss 26 – 57
impact on equity if interest rates increased by 1 gain  loss – – 1090
impact on equity if interest rates decreased by 1 gain  loss – – 1267
period ended 20 august 2011
impact on income statement if interest rates increased by 1 gain  loss 24 – 59
impact on income statement if interest rates decreased by 1 gain  loss 24 – 68
impact on equity if interest rates increased by 1 gain  loss – – 1049
impact on equity if interest rates decreased by 1 gain  loss – – 1227
whilst cash flow interest rate risk is largely eliminated the use of fixed rate borrowings and derivative financial instruments exposes 
the group to fair value interest rate risk such that the group would not benefit from falls in interest rates and would be exposed  
to unplanned costs such as breakage costs should debt or derivative financial instruments be restructured or repaid early punch taverns plc annual report and financial statements 2012
72
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
23 financial instruments continued
liquidity risk
the group’s funding strategy is to ensure a mix of financing methods offering flexibility and costeffectiveness to match the 
requirements of the group the group is primarily financed by secured loan notes with approximately 83 august 2011 85  
of the capital balance on these loan notes being repayable after more than five years from the balance sheet date subject to 
relevant covenants being met the board continues to review alternative sources of finance the group’s objective is to smooth  
the debt maturity profile and to arrange funding ahead of requirements where required so maturing short term debt may be 
refinanced or paid as it falls due cash flow forecasts are frequently produced to assist management in identifying liquidity 
requirements and are stresstested for possible scenarios this includes assessments of the ability to meet the restricted payment 
conditions in the two securitisation structures in order that cash can be released to the top company level should either 
securitisation not meet the restricted payment conditions then cash generated may under certain circumstances become trapped 
within that securitisation not made available to the wider group to naturally delever that securitisation cash balances are 
invested in short term deposits such that they are readily available to settle short term liabilities or to fund capital additions 
the group holds a £1470m august 2011 £2940m undrawn liquidity facility within the punch a securitisation and £nil  
august 2011 £1680m within the punch b securitisation the liquidity facilities are available to meet debt service obligations 
falling due in the securitisations to the extent that there are insufficient funds available from operations to meet such payments 
and for no other purpose
following a downgrade by moody’s investors service of the short term rating of the royal bank of scotland group plc in june 
2012 the provider of part of the group’s total liquidity facility arrangements the group exercised its contractual entitlement under 
the liquidity facility agreement and a drawing was made for £3150m being the available commitment amount of £1470m for the 
punch a securitisation and £1680m for the punch b securitisation the funds drawn down are ring fenced from an operational 
perspective and cannot be utilised for any activities other than their original purpose an asset note 19 and a corresponding 
liability note 24 have been recognised in these financial statements 
capital risk
the group’s capital structure is made up of net debt issued share capital and reserves these are managed effectively to minimise 
the group’s cost of capital to add value to shareholders and to service debt obligations the group’s debt is divided into two 
separate securitisations the securitised debt is monitored by a variety of measures which are reported to the debt providers on  
a quarterly basis the group assesses the performance of the business the level of available funds and the short to medium term 
strategic plans concerning capital spend as well as the need to meet financial covenants and such assessment influences the level  
of dividends payable in the current period the group has reduced the nominal value of its securitised debt by £698m through 
normal amortisation of the loan notes and by prepaying some debt ahead of schedule the period end debt service cover ratio 
dscr covenants for the two securitisations at 18 august 2012 were 136 times ebitda and 151 times ebitda ahead of the 
financial covenant of 125 times ebitda the group has provided support into the securitisations during the period to ensure  
that the dscr remains above its covenanted level
credit risk
with the exception of cash and short term deposits invested with banks and financial institutions there are no significant 
concentrations of credit risk within the group the maximum credit risk exposure relating to financial assets is represented by  
the carrying value as at the balance sheet date the group’s objective is to minimise credit risk by ensuring that surplus funds are 
invested with banks and financial institutions with high credit ratings and that the group deals with third parties that have been 
subject to credit checks or that have good credit scores where appropriate trade and other receivables as shown on the 
consolidated balance sheet comprise a large number of individually small amounts from unrelated customers and are shown  
net of a provision for doubtful debts management estimates the provision for doubtful debts based on a review of all individual 
receivable accounts experience and known factors at the balance sheet date taking into account any collateral held in the form of 
cash deposits which is quantified these cash deposits are applied against unpaid debt when licensees leave the pubs and vary in 
size the amount of cash deposits held at 18 august 2012 is £242m august 2011 £262m these are held on the balance sheet 
within trade and other payables receivables are written off against the doubtful debt provision when management deems the 
debt no longer recoverable 
an analysis of the provision held against trade receivables for doubtful debts is shown below
18 august
 2012
£m
20 august
 2011
£m
provision for doubtful debts at beginning of period 31 53
charged to income statement 21 64
utilised during the period 22 35
released during the period 08 41
derecognised on demerger of spirit business – 10
provision for doubtful debts at end of period 22 31 annual report and financial statements 2012 punch taverns plc
73
financial statements
23 financial instruments continued
the ageing of trade receivables at the balance sheet date net of the doubtful debt provision is as follows
18 august 
 2012
£m
20 august
 2011
£m
live debt current 222 316
035 days past due – –
over 35 days past due 21 34
closed debt – –
243 350
live debt represents balances outstanding from current licensees closed debt relates to outstanding balances from customers  
that are no longer current licensees of the group
there are no indicators at 18 august 2012 that debtors will not meet their payment obligations in respect of the net amount  
of trade receivables recognised in the balance sheet 
market risk
following the demerger of the spirit business the group is exposed to market risk since it holds an investment in spirit pub 
company plc shares in order to satisfy outstanding share awards the value of the financial asset recognised being all spirit  
shares held by the group and the financial liability recognised being the obligation to deliver punch and spirit shares to satisfy 
outstanding awards for spirit group employees will vary with the share price of the spirit shares with any gain or loss being 
recognised in the income statement at each balance sheet date there is no risk that the group will not be able to satisfy the 
awards in the future since sufficient shares were allotted to satisfy all outstanding awards
derivative financial instruments
the carrying values of derivative financial instruments in the balance sheet are as follows
 group
 18 august 2012
current
 liabilities
£m
noncurrent
 liabilities
£m
interest rate swaps 384 2931
     
 group
 20 august 2011
current 
liabilities
£m
noncurrent
 liabilities
£m
interest rate swaps 380 2336
the interest rate swaps replace the libor rate on the group’s secured floating rate loan notes and bank loans with a fixed rate  
the capital amount of the swaps reduces over time to match the contractual repayment profile of the associated notes over their 
life see note 22 for more detail of the total carrying value of the interest rate swaps £3183m august 2011 £2586m qualify  
as and are treated as cash flow hedges in accordance with ias 39 and movements in their fair values are recognised in other 
comprehensive income the remaining £132m august 2011 £130m do not qualify for hedge accounting with movements  
in their fair value being recognised in the income statement
fair value of nonderivative financial assets and liabilities
with the exception of the group’s secured loan notes there are no material differences between the carrying value  
of nonderivative financial assets and financial liabilities and their fair values as at the balance sheet date
the carrying value of the group’s secured loan notes at 18 august 2012 is £24315m august 2011 £25053m and the fair value 
measured at market value of this debt at that date is £14911m august 2011 £15997m  punch taverns plc annual report and financial statements 2012
74
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
23 financial instruments continued
fair value hierarchy
financial instruments carried at fair value are required to be measured by reference to the following levels
level 1 – quoted prices in active markets for identical assets or liabilities 
level 2 –  inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly  
ie as prices or indirectly ie derived from prices and
level 3 – inputs for the asset or liability that are not based on observable market data unobservable inputs
the value of the spirit shares held as a financial asset and the value of the punch and spirit shares held as a financial liability  
have been measured by a level 1 valuation method
all other financial instruments carried at fair value have been measured by a level 2 valuation method
24 cashbacked borrowings
 group company
 
18 august
 2012
£m
20 august 
2011
£m
18 august
 2012
£m
20 august
 2011
£m
cashbacked borrowings
1
3150 – – –
1
 representing a draw down of funds following a rating downgrade of one of the liquidity facility providers note 23
25 provisions
group
onerous
 contracts
£m
property 
leases
£m
insurance
£m
share 
schemes
£m
total
£m
at 21 august 2010 38 803 54 – 895
unwinding of discount effect of provisions 10 61 – – 71
charged to income statement – 569 43 59 671
utilised during the period 44 157 43 – 244
released during the period – 405 – – 405
demerger of the spirit business 04 782 54 – 840
at 20 august 2011 – 89 – 59 148
unwinding of discount effect of provisions – 07 – – 07
charged  credited to income statement – 02 – 11 09
utilised during the period – 09 – – 09
released during the period – 03 – – 03
at 18 august 2012 – 86 – 48 134
provisions have been analysed between current and noncurrent as follows
18 august
 2012
£m
20 august
 2011
£m
current 24 18
noncurrent 110 130
134 148
onerous contracts
the onerous contracts provision related to the termination costs for supply contracts acquired on the acquisition of the spirit group 
in january 2006 that expired in august 2011 the onerous cost element of these contracts was provided for based on anticipated 
future volumes and the difference between contract prices and market prices
property leases
the provision for property leases has been set up to cover operating costs of vacant or lossmaking premises the provision covers 
the expected shortfall between operating income and rents payable payments are expected to be ongoing on these properties  
for a number of years annual report and financial statements 2012 punch taverns plc
75
financial statements
25 provisions continued
insurance
the provision for insurance related to an estimate of monies that may become payable on claims not yet made to the group  
the insurance provision was wholly related to the managed business and has been derecognised on the demerger of that business
share schemes
the provision for share schemes represents the liability that will be due to spirit employees should the share schemes that they  
are eligible employees vest the group currently holds punch and spirit shares in order to satisfy these share schemes which  
are held at cost and fair value respectively and remeasured at each balance sheet date with any movement being taken to the  
income statement
the company has no provisions
26 other noncurrent payables
 company
 
18 august
2012
£m
20 august
 2011
£m
amounts owed to group undertakings 16170 16245
16170 16245
included within amounts owed to group undertakings are various loan balances for which additional detail is disclosed in note 33 
remaining balances have no restrictive terms or conditions associated with them
27 share capital 
18 august
 2012
no 000
18 august
 2012
£m
20 august
 2011
no 000
20 august
 2011
£m
allotted calledup and fully paid
ordinary shares of 004786p 664479 03 659656 03
the movements in the calledup share capital are set out below
ordinary
 shares
no 000
ordinary
 shares
£m
at 21 august 2010 642781 03
issued on exercise of share options 16875 –
at 20 august 2011 659656 03
issued on exercise of share options 4823 –
at 18 august 2012 664479 03
rights of shareholders 
all ordinary shares in issue at 18 august 2012 rank pari passu in all respects punch taverns plc annual report and financial statements 2012
76
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
28 share based payments
the company has five share incentive schemes by which directors and employees are able to acquire shares in the company  
all of these schemes are equitysettled schemes ifrs 2 has been applied to all grants of equitysettled awards after  
7 november 2002 that had not vested before 1 january 2005
discretionary share plan
the first scheme is a discretionary share plan dsp whereby options are granted to senior management over ordinary shares  
in the company at the prevailing market price at time of grant these options vest after a three year performance period with 
performance targets set by the remuneration committee and are then exercisable for a period of between seven and ten years 
performance targets for options granted on 31 january 2006 and 16 november 2005 are set on a sliding scale of earnings per 
share growth with 40 of options vesting on growth of rpi 8 per annum up to 100 vesting on growth of rpi 10 per 
annum performance targets for options granted on 17 november 2004 are set on a sliding scale of earnings per share growth with 
40 of options vesting on growth of rpi 8 per annum up to 100 vesting on growth of rpi 12 per annum performance 
targets for options granted on 2 march 2004 are set on a sliding scale of earnings per share growth with 40 of options vesting 
on growth of rpi 12 per annum up to 100 vesting on growth of rpi 15 per annum no options have been granted under 
this scheme since 31 january 2006
long term incentive plan
the second scheme is a long term incentive plan ltip whereby senior management will receive conditional rights over ordinary 
shares in the company eligible employees are awarded rights to the issue of a maximum number of shares at the beginning of  
a three year period a proportion of which they will be entitled to receive at the end of that period depending on the extent to 
which the performance conditions set by the remuneration committee at the time the allocation is made are satisfied further 
information on the performance conditions of the long term incentive plan are shown in the report on directors’ remuneration  
on pages 27 to 35 at 18 august 2012 eligible employees held rights over ordinary shares that may result in the issue  
of 2926490 shares on 16 october 2012 3420744 shares on 19 november 2013 and 3725164 shares on 30 november 2014
deferred share bonus plan
the third scheme is a deferred share bonus plan dsb whereby senior management received part of their posttax annual bonus 
in shares no awards were made in relation to the dsb during the period and no shares are being held in trust
share bonus plan
the fourth scheme is a share bonus plan sbp whereby senior management received part of their posttax annual bonus in shares 
during the period 1473951 shares were awarded under the sbp and are being held in trust these awards as they formed part of 
the individuals’ annual bonuses are not subject to further performance criteria and will be released to the individuals on the second 
anniversary of the award 
share incentive plan
the fifth scheme is a share incentive plan sip open to all eligible employees whereby proceeds contributed by employees are  
used to buy shares in the company at prevailing market values these shares are called partnership shares and are held in a trust on 
behalf of the employee for every partnership share bought by the employee the company will give the employee one share free  
of charge ‘matching share’ the employees have to take their shares out of the plan on leaving the group and will not be entitled 
to the matching share if they leave within three years of buying the partnership shares if the company awards dividends to its 
shareholders the employee will receive a dividend on each of the partnership and matching shares they hold the company 
arranges for the dividends to be used to buy extra shares ‘dividend shares’ dividend shares must be held in the plan for three 
years before they can be removed unless the employee leaves the group in which case they must be taken out the scheme  
was introduced in june 2004 with shares being acquired at market values on an annual or monthly basis as at 18 august 2012 
2697852 shares august 2011 2023918 shares had been issued by the company to the trust at par value the par value of the 
shares issued that has been deducted from reserves is negligible the market value of these punch taverns plc and spirit pub 
company plc shares at 18 august 2012 was £15m august 2011 £11m
fair value of share awards
the fair value is measured using the valuation technique that is considered to be the most appropriate to value each class of award 
discretionary share plan
there were no awards made in relation to the discretionary share plan during the current or the previous period  annual report and financial statements 2012 punch taverns plc
77
financial statements
28 share based payments continued
long term incentive plan
the key assumptions for awards made in the current and previous period are as follows
grant date
30 november
2011
11 july 
2011
19 november
 2010
13 october 
2010
valuation model monte carlo monte carlo monte carlo monte carlo
share price at date of grant £012 £071 £060 £077
shares under option 3725164 442008 9910452 2412150
vesting period 3 years 3 years 3 years 3 years
expected volatility 430 390 530 540
expected life 3 years 3 years 3 years 3 years
risk free rate 06 09 11 09
expected dividend yield 00 00 00 00
expectation of meeting performance criteria 100 100 100 100
fair value per option £007 £041 £030 £042
expected volatility has been calculated based on the historic volatility of the company’s share price corresponding to the expected 
life of the option or share award
the expected term of the options is based on the life to the point of expected exercise this is determined through analysis of 
historically evidenced exercise patterns of option holders
the riskfree rate of return is the yield on zerocoupon uk government bonds of a term consistent with the assumed option life
share incentive plan
the fair value of the matching shares issued under the company’s share incentive plan is recognised as the market value  
of the shares issued at the date of purchase this charge is spread over the threeyear vesting period on a straight line basis
deferred share bonus plan
there were no awards made in relation to the deferred share bonus plan during the current or the previous period
movements in options and awards under share based payment schemes
reconciliations of movements for the dsp ltip dsb sbp and sip schemes over the 52 weeks to 18 august 2012 are shown below
discretionary share plan 
52 weeks to
 18 august 
2012
no
 52 weeks to 
18 august
 2012 
waep
1
52 weeks to
 20 august 
2011
no
 52 weeks to
 20 august 
2011 
waep
1
outstanding at beginning of period 1976000 237 2005076 241
expired during the period 1938561 232 29076 502
forfeited during the period 2347 866 – –
outstanding at end of period 35092 478 1976000 237
outstanding at end of period due to group employees 35092 1967953
outstanding at end of period due to spirit employees – 8047
exercisable at end of period 35092 478 1976000 237
1
 weighted average exercise price pence punch taverns plc annual report and financial statements 2012
78
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
28 share based payments continued
long term incentive plan  
18 august 
2012
no
20 august 
2011
no
outstanding at beginning of period 21101421 12719903
granted during the period 3725164 12764610
expired during the period 7376065 3061498
forfeited during the period 25862 1321594
outstanding at end of period 17424658 21101421
outstanding at end of period due to group employees 10072398 8681817
outstanding at end of period due to spirit employees 7352260 12419604
deferred share bonus plan  
18 august 
2012
no
20 august 
2011
no
outstanding at beginning of period – 84537
removed during the period – 57774
expired during the period – 26206
forfeited during the period – 557
outstanding at end of period – –
share bonus plan  
18 august 
2012
no
20 august 
2011
no
outstanding at beginning of period – 104144
granted during the period 1473951 –
expired during the period – 5080
released during the period – 99064
outstanding at end of period 1473951 –
share incentive plan  
18 august 
2012
no
20 august
 2011
no
outstanding at beginning of period 1564542 1303145
granted during the period 1097872 438026
forfeited during the period 60691 134900
released during the period 23052 41729
outstanding at end of period 2578671 1564542
outstanding options
options outstanding at 18 august 2012 comprise the following
discretionary share plan    
exercise date
number of
 share options
exercise price
 pence per share
5 december 2005 to 5 december 2012 11428 194
2 march 2007 to 1 march 2014 4016 519
17 november 2007 to 17 november 2014 12023 551
16 november 2008 to 16 november 2015 7625 767
no options were exercised during the current period the options outstanding at 18 august 2012 had a weighted average 
remaining contractual life of 17 years august 2011 09 years 
the total charge for the year relating to employee share based plans was £11m 52 weeks ended 20 august 2011 £30m  
all of which related to equity settled share based payment transactions  annual report and financial statements 2012 punch taverns plc
79
financial statements
29 net debt
a analysis of net debt
18 august
2012
£m
20 august
 2011
£m
secured loan notes 23903 24601
cashbacked borrowings 3150 –
cash and cash equivalents 2639 1965
restricted cash 3150 –
nominal value of net debt 21264 22636
capitalised debt issue costs 69 88
fair value adjustments on acquisition of secured loan notes 481 540
fair value of interest rate swaps 3315 2716
finance lease obligations 34 47
net debt 25025 25851
balance sheet
borrowings 24349 25100
cashbacked borrowings 3150 –
derivative financial instruments 3315 2716
cash and cash equivalents 2639 1965
restricted cash 3150 –
net debt 25025 25851
b analysis of changes in net debt
at 
21 august 
2010
£m
cash
 flow
£m
noncash
 movements
£m
demerger 
of spirit
£m
at 
20 august
 2011
£m
cash
flow
£m
 noncash
 movements
£m
at 
18 august
 2012
£m
current assets
cash at bank and in hand 3165 52 – 1148 1965 674 – 2639
restricted cash – – – – – 3150 – 3150
3165 52 – 1148 1965 3824 – 5789
debt 
borrowings 35752 1180 516 8956 25100 691 60 24349
cashbacked borrowings – – – – – 3150 – 3150
derivative financial instruments 4071 178 58 1235 2716 51 650 3315
39823 1358 458 10191 27816 2408 590 30814
net debt per balance sheet 36658 1306 458 9043 25851 1416 590 25025
net debt incorporates the group’s borrowings cashbacked borrowings derivative financial instruments and obligations  
under finance leases less cash and cash equivalents and restricted cash
noncash movements relate to amortisation of deferred issue costs and premium on loan notes and fair value movement  
in derivative financial instruments and profit on the purchase of securitised debt  punch taverns plc annual report and financial statements 2012
80
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
29 net debt continued
c reconciliation of net cash flow to movement in net debt
18 august
 2012
£m
20 august
 2011
£m
increase  decrease in cash and cash equivalents in the period 674 52
increase in restricted cash 3150 –
cash outflow from change in debt financing 729 1338
increase in cashbacked borrowings 3150 –
change in net debt resulting from cash flows 1403 1286
noncash movements in net debt 590 467
change in net debt resulting from noncash flows 590 467
obligations under finance leases 13 11
demerger of spirit business – 9043
movement in net debt 826 10807
net debt at beginning of period 25851 36658
net debt at end of period 25025 25851
30 pensions and other postretirement benefits
during the period the group operated one funded defined benefit pension scheme the pubmaster pension scheme during the 
previous period the group operated an additional two funded defined benefit pension schemes the punch pub company pension 
scheme ppcps and the punch pub company retail pension scheme ppcrps these two schemes were derecognised on the 
demerger of the spirit business as the schemes were wholly associated with that business the pension plans have not invested  
in any of the group’s own financial instruments nor in properties or other assets used by the group
the tables below illustrate the impact of defined benefit schemes on the income statement and the balance sheet and relate to  
all three schemes which were operated during the previous year up to the point of the demerger in the prior period and then  
only to the pubmaster pension scheme thereafter
the amounts recognised in the income statement are as follows
analysis of amounts charged to operating costs from continuing operations
 52 weeks to
 18 august
 2012 
£m 
 52 weeks to 
20 august
 2011
£m
current service cost 01 01
analysis of amounts credited to other finance income
52 weeks to 
18 august
 2012 
£m
52 weeks to
 20 august
 2011
£m
expected return on assets 29 229
interest on scheme liabilities 28 198
net credit 01 31
analysis of amounts recognised in the soci in the period
 52 weeks to
 18 august 
2012 
£m
52 weeks to
 20 august 
2011
£m
actual return on assets 58 408
expected return on assets 29 229
actuarial loss  gain on liabilities 05 35
expected actuarial gains recognised in the soci 24 214
restriction on surplus recognised – 252
actuarial gains  losses recognised in the soci 24 38 annual report and financial statements 2012 punch taverns plc
81
financial statements
30 pensions and other postretirement benefits continued
cumulative amounts recognised in the soci
18 august 
2012
£m
20 august
 2011
£m
at beginning of period 47 09
net actuarial gains  losses in the period 24 38
at end of period 23 47
the amounts recognised in the balance sheet are as follows
18 august 
2012
£m
20 august 
2011
£m
present value of scheme liabilities 556 544
fair value of scheme assets 529 465
net retirement benefit liability recognised in the balance sheet 27 79
movements in the present value of scheme liabilities are as follows
52 weeks to
 18 august
 2012
£m
52 weeks to
 20 august
 2011
£m
present value of scheme liabilities at beginning of year 544 4186
current service cost 01 01
interest cost 28 198
actuarial loss  gain 05 35
benefits paid 22 128
demerger of spirit business – 3678
present value of scheme liabilities at end of year 556 544
movements in the fair value of scheme assets are as follows
 52 weeks to
 18 august
 2012
£m
52 weeks to
 20 august
 2011
£m
fair value of scheme assets at beginning of year 465 3956
expected return on scheme assets 29 229
actuarial gains 29 179
contributions paid by employer 28 108
benefits paid 22 128
demerger of spirit business – 3879
fair value of scheme assets at end of year 529 465
scheme assets are stated at their market values at the balance sheet date and the expected return on scheme assets is derived  
as a weighted average of the expected return on each asset class recognising the proportions of the assets invested in each  
the expected return on each asset class is determined after taking external expert advice and by reference to relevant equity  
and bond indices
the major categories of plan assets as a percentage of total plan assets are as follows
18 august 
2012
20 august 
2011
equities 257 546
bonds 281 417
diversified growth funds 422 –
other 40 37 punch taverns plc annual report and financial statements 2012
82
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
30 pensions and other postretirement benefits continued
the history of experience adjustments on the schemes for the current and previous financial years is as follows
18 august 
2012
£m
20 august
 2011
£m
21 august 
2010
£m
22 august 
2009
£m
18 august
 2008
£m
present value of retirement benefit liabilities 556 544 4186 4166 3423
fair value of plan assets 529 465 3956 3571 3765
net liability  asset in the scheme 27 79 230 595 342
experience adjustments on scheme liabilities 05 08 06 45 243
percentage of scheme liabilities 09 15 01 11 71
experience adjustments on scheme assets 29 15 256 338 300
percentage of scheme assets 55 32 65 95 80
the expected contributions to defined benefit schemes for the next financial year beginning 19 august 2012 are £17m
scheme funding
pubmaster pension scheme
the pubmaster pension scheme is a defined benefit scheme operated in the uk the values of the scheme’s liabilities have been 
determined by a qualified actuary based on the results of an actuarial valuation as at 6 april 2010 updated to 18 august 2012 the 
balance sheet date the mortality assumptions at the year end are based on standard mortality tables that allow for future mortality 
improvements the assumptions are that the life expectancy of a member who retires at the age of 65 is as follows
18 august
 2012
£m
20 august
 2011
£m
male currently aged 50 230 years 229 years
male currently aged 65 213 years 212 years
female currently aged 50 253 years 251 years
female currently aged 65 235 years 233 years
the assumptions used in determining the valuations are as follows
18 august
 2012
£m
20 august 
2011
£m
rate of increase of salaries 400 490
rate of increase in pensions 245 300
discount rate 460 540
inflation assumption rpi 275 365
inflation assumption cpi 200 290
the assets in the scheme and the expected rate of return were
long term 
rate of 
return 
expected at 
18 august 
2012
value at 
18 august
 2012
£m
long term
rate of 
return 
expected at 
20 august 
2011
value at 
20 august
 2011
£m
equities 700 136 750 254
bonds 380 149 450 194
diversified growth funds 600 223 – –
insured pensions 460 14 540 15
cash 250 07 400 02
total market value of assets 529 465
present value of scheme liabilities 556 544
net pension liability before deferred tax 27 79
deferred tax asset 06 20
net pension liability 21 59 annual report and financial statements 2012 punch taverns plc
83
financial statements
30 pensions and other postretirement benefits continued
the pension costs for the defined contribution schemes are as follows
 52 weeks to
 18 august 
2012 
£m 
 52 weeks to 
20 august
 2011
£m
defined contribution schemes 12 15
pension risk
the group operates one defined benefit pension scheme which is closed to new members the scheme is subject to risk regarding 
the relative amount of the scheme’s assets which are affected by the value of investments and the returns generated by such 
investments compared to the scheme’s liabilities which are affected by changes in the life expectancy actual and expected price 
inflation changes in bond yields and future salary increases the difference in value between scheme assets and scheme liabilities 
may vary significantly in the short term potentially resulting in an increased deficit being recognised on the group’s balance sheet 
following the demerger of the spirit business the group has agreed to deficit reduction payments of £17m for the year ending  
17 august 2013 and £1m per annum to april 2018 in the current period the group has made payments to the scheme  
totalling £28m
31 operating lease commitments – minimum lease payments
group
18 august 
2012
£m
20 august
2011
£m
future minimum rentals payable under noncancellable operating leases
within one year 84 85
between one and five years 311 318
after five years 1537 1601
1932 2004
the future minimum rentals payable under noncancellable operating leases when discounted to present value are £846m  
august 2011 £870m
the group leases various licensed properties offices and other commercial properties under noncancellable operating lease 
agreements the leases have various terms escalation clauses and renewal rights the group also leases vehicles under 
noncancellable operating lease agreements
the total future minimum sublease payments expected to be received are £684m august 2011 £641m
the group is a lessor of licensed properties to retailers the leases have various terms escalation clauses and renewal rights 
the total noncancellable future minimum lease payments expected to be received are
land and
 buildings 
18 august
 2012
£m
land and
 buildings 
20 august 
2011
£m
within one year 1149 1277
between one and five years 3392 3792
after five years 3627 3971
8168 9040
the company has no operating lease commitments at 18 august 2012 august 2011 £nil punch taverns plc annual report and financial statements 2012
84
notes to the financial statements continued
for the 52 weeks ended 18 august 2012
32 capital and other financial commitments
group
capital commitments for property plant and equipment
18 august 
2012
£m
20 august
 2011
£m
contracted but not provided 133 66
the company has no capital commitments at 18 august 2012 august 2011 £nil
33 related party transactions
group
transactions with key management personnel
the key management personnel of the group in the current period comprise members of the punch taverns plc board of directors
the key management personnel compensation is as follows
 52 weeks
18 august 
2012 
£m
 52 weeks 
20 august 
2011
£m
short term employee benefits 14 33
postemployment employee benefits 02 03
share based payments – –
16 36
there are no other longterm benefits or termination benefits payable to key management personnel in the current or prior period
transactions with joint ventures
punch taverns finco limited a wholly owned subsidiary of the company holds 50 of the entire issued share capital of  
matthew clark holdings limited the holding company of the matthew clark group of companies the group’s investment in  
this joint venture at 18 august 2012 is £445m august 2011 £431m the group had transactions of £111m with matthew clark 
during the 52 weeks to 18 august 2012 52 weeks to 20 august 2011 £145m and there was £14m owing to matthew clark  
at 18 august 2012 august 2011 £20m
year end balances arising from transactions with joint ventures
18 august 
2012
£m
20 august 
2011
£m
amounts owed to joint ventures 14 20
transactions with the spirit business
since the beginning of the current period the spirit business has ceased to be a related party at 20 august 2011 amounts owed 
by the spirit business were £64m and amounts owing to the spirit business were £04m annual report and financial statements 2012 punch taverns plc
85
financial statements
33 related party transactions continued
company
transactions with key management personnel
the key management personnel of the company comprise members of the punch taverns plc board of directors for part  
of the period the directors received their remuneration from the company for part of the period and for the previous period  
their emoluments were borne by other group companies the company did not have any transactions with the exception of 
transactions related to sharebased payments with the directors during the financial period august 2011 £nil details of these 
transactions are provided in the report on directors’ remuneration
transactions with subsidiary undertakings
the company enters into loans with its subsidiary undertakings at both fixed and floating rates of interest on a commercial basis 
hence the company incurs interest expense and earns interest income on these loans and advances 
 52 weeks
18 august 
2012 
£m
 52 weeks 
20 august
 2011
£m
loans and advances 
increase in loan notes owed by subsidiary undertakings 1426 1238
decrease in loans owed by subsidiary undertakings – 4192
decrease in other loans and advances owed to subsidiary undertakings 25 1062
the loans are repayable on demand but the company will not request repayment for at least 12 months
year end balances arising from transactions with subsidiary undertakings  
18 august 
2012
£m
20 august 
2011
0£m
receivables 10990 9754
payables 16170 16245
the amounts owed by subsidiary undertakings include £10895m august 2011 £9469m of loan notes all of which are interest 
bearing the loan notes accrue interest at fixed rates ranging between 12 and 15 which is capitalised quarterly in arrears  
in addition the company has £5609m august 2011 £5609m of loans and £10561m august 2011 £10636m of other 
balances owed to subsidiary undertakings that are noninterest bearing punch taverns plc annual report and financial statements 2012
86
independent auditor’s report  
to the members of punch taverns plc
we have audited the financial statements of punch taverns plc for the 52 week period ended 18 august 2012 which comprise the 
consolidated income statement the consolidated statement of comprehensive income the consolidated and company balance 
sheets the consolidated and company cash flow statements the consolidated and company statements of changes in equity and 
the related notes the financial reporting framework that has been applied in their preparation is applicable law and international 
financial reporting standards ifrss as adopted by the eu and as regards the parent company financial statements as applied in 
accordance with the provisions of the companies act 2006 
this report is made solely to the company’s members as a body in accordance with chapter 3 of part 16 of the companies act 
2006 our audit work has been undertaken so that we might state to the company’s members those matters we are required to 
state to them in an auditor’s report and for no other purpose to the fullest extent permitted by law we do not accept or assume 
responsibility to anyone other than the company and the company’s members as a body for our audit work for this report  
or for the opinions we have formed 
respective responsibilities of directors and auditor 
as explained more fully in the directors’ responsibilities statement set out on page 36 the directors are responsible for the 
preparation of the financial statements and for being satisfied that they give a true and fair view our responsibility is to audit  
and express an opinion on the financial statements in accordance with applicable law and international standards on auditing  
uk and ireland those standards require us to comply with the auditing practices board’s apb’s ethical standards for auditors 
scope of the audit of the financial statements 
a description of the scope of an audit of financial statements is provided on the apb’s website at wwwfrcorgukapbscopeprivatecfm
opinion on financial statements 
in our opinion 
•	 the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs  
as at 18 august 2012 and of the group’s and parent company’s profit for the period then ended 
•	 the group financial statements have been properly prepared in accordance with ifrss as adopted by the eu
•	 the financial statements have been prepared in accordance with the requirements of the companies act 2006 and  
as regards the group financial statements article 4 of the ias regulation 
emphasis of matter – uncertain outcome of restructuring of securitisation facilities
in forming our opinion on the financial statements which is not modified we have considered the adequacy of the disclosures 
made in note 1 to the financial statements concerning the uncertain outcome of the intended restructuring of the terms of two 
securitisation facilities that are each a significant proportion of the group’s operations the ultimate outcome of the matter cannot 
presently be determined and failure to achieve a successful renegotiation could result in a part of the group ceasing to be a going 
concern which in turn would result in a significant reduction in the group’s operations 
opinion on other matters prescribed by the companies act 2006 
in our opinion 
•	 the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the companies  
act 2006
•	 the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent 
with the financial statements and 
•	 information given in the corporate governance statement set out on pages 21 to 26 with respect to internal control and risk 
management systems in relation to financial reporting processes and about share capital structures is consistent with the  
financial statements  
matters on which we are required to report by exception 
we have nothing to report in respect of the following 
under the companies act 2006 we are required to report to you if in our opinion 
•	 adequate accounting records have not been kept by the parent company or returns adequate for our audit have not been 
received from branches not visited by us or 
•	 the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement 
with the accounting records and returns or 
•	 certain disclosures of directors’ remuneration specified by law are not made or 
•	 we have not received all the information and explanations we require for our audit or 
•	 a corporate governance statement has not been prepared by the company
under the listing rules we are required to review 
•	 the directors’ statement set out on page 36 in relation to going concern 
•	 the part of the corporate governance statement on pages 21 to 26 relating to the company’s compliance with the nine 
provisions of the uk corporate governance code specified for our review and
•	 certain elements of the report to shareholders by the board on directors’ remuneration
g a watts senior statutory auditor 
for and on behalf of kpmg audit plc statutory auditor
chartered accountants 
one snowhill snow hill queensway birmingham b4 6gh
23 october 2012 annual report and financial statements 2012 punch taverns plc
87
financial statements
financial glossary
beta model
a model for pricing share options which applies the same 
principles as the binomial model but takes into account the 
relationship of the share price to a portfolio of a comparator 
group companies’ shares
binomial model
a model for pricing share options which applies the  
same principles as decisiontree analysis by considering  
the possibilities that prices may increase or decrease by  
a certain percentage
blackscholes model
a model for pricing share options using the share price  
the time to expiration of the option the riskfree interest  
rate and the expected standard deviation of the share return
cash flow hedges
a hedge of the exposure to variability in cash flows
the 2010 uk corporate governance code
the 2010 uk corporate governance code is a guide to a 
number of key components of effective board practice it is 
based on the underlying principles of all good governance 
accountability transparency probity and focus on the 
sustainable success of an entity over the longer term
corporate governance
corporate governance describes the system by which an 
organisation is directed and controlled
debenture notes
a form of bond taken out by a company which it agrees  
to repay at a specified future date and which bears interest  
either fixed or variable until maturity
debt service cover ratio dscr covenant
the dscr covenant calculates the ratio of ebitda over debt 
service being interest and capital amortisation
derivative financial instruments
financial instruments whose value changes in response to 
changes in a specified interest rate financial instrument price 
commodity price foreign exchange rate or other variable  
and are settled at a future date
diluted earnings per share
diluted earnings per share is earnings per share after allowing 
for the dilutive effect of the conversion into ordinary shares of 
the weighted average number of options outstanding during 
the period and shares from the assumed conversion of 
convertible bonds
earnings per share eps
earnings per share is a performance measure that expresses the 
earnings attributable to ordinary shareholders divided by the 
weighted average number of ordinary shares in issue during  
the period
ebitda
ebitda represents earnings before finance income finance 
costs movement in fair value of interest rate swaps uk  
income tax depreciation amortisation and profit on sale  
of noncurrent assets
effective interest rate method
a method of calculating the amortised cost of a financial asset 
or financial liability and of allocating the interest income or 
expense over the relevant period
experience gains  losses
changes in the valuation of defined benefit pension scheme 
that arise when events have not coincided with the actuarial 
assumptions made for the previous valuation
fair value
the amount at which assets can be exchanged or liabilities 
settled between knowledgeable willing parties in an arm’s 
length transaction
finance lease 
a method of purchasing an asset by making rental payments 
throughout the expected lifetime of the asset the lessee  
shows an asset and a corresponding liability in the balance 
sheet finance lease payments are accounted for as a reduction 
in the liability
goodwill
goodwill is the excess of the amount paid for a company  
over the fair value of the net assets acquired at the date  
of acquisition
ias
international accounting standards
iasb
international accounting standards board
ifric
international financial reporting interpretations committee
ifrs 
international financial reporting standards punch taverns plc annual report and financial statements 2012
88
financial glossary continued
indexation allowance
indexation allowance is tax relief given when calculating capital 
gains that takes into account inflation based on the retail prices 
index rpi indexation allowance can only reduce an unindexed 
gain to nil and cannot create or increase a capital loss
interest cover
a performance measure that shows the number of times 
ebitda covers the net finance income and finance cost
interest rate swap
a derivative financial instrument used to minimise exposure to 
changes in interest rates by payment to receive a fixed interest 
rate in exchange for a floating rate interest rate or payment to 
receive a floating rate interest rate in exchange for a fixed 
interest rate
libor
london inter bank offered rate the interest rate quoted 
between banks which is a recognised basis for calculating  
a floating interest rate
monte carlo valuation method
a model for pricing share options that generates many random 
possible price paths calculates assumed exercise values  
then averages and discounts to give the value of the option
net debt
loans convertible bonds derivative financial instruments and 
finance leases net of other interestbearing deposits and cash 
and cash equivalents
nominal value of net debt
the value of a security stated by the issuer unrelated to market 
value for bonds it is the amount paid to the holder at maturity 
nonunderlying items
items which management consider will distort comparability 
either due to their significant nonrecurring nature or  
because of specific accounting treatments these are  
separately identified in order to provide a trend measure  
of underlying performance
operating lease
a method of renting assets over a period that is less than the 
expected life of the asset the lessee does not show an asset  
or liability on their balance sheet and periodic payments are 
accounted for by the lessee as operating expenses in the period
operating result
profit after deducting all operating expenses including 
depreciation and amortisation
overhedge
an overhedge occurs when the notional principal amount of 
the hedging instrument is greater than that of the hedged item
pbt 
profit before tax
projected unit credit method
the accounting method used to calculate provisions for 
pensions it includes not only the pensions and vested interests 
accrued at the date of calculation but also anticipated increases 
in salaries and pensions
securitisation
the process of raising finance by creating a financial  
instrument secured by pooling other financial assets to back  
the instrument
segmental reporting
information regarding the financial position and results  
of operations in different business areas
total shareholder return tsr
the growth in value of a shareholding over a specific  
period assuming that dividends are reinvested to purchase  
additional shares
uk gaap
uk generally accepted accounting principles
working capital
shortterm disposable capital used to finance daytoday 
operations it is calculated as current assets less  
current liabilities company information
registered office
jubilee house
second avenue
burton upon trent
de14 2wf
44 01283 501600
company number
3752645
advisers
auditors 
kpmg audit plc
one snowhill
snow hill queensway
birmingham
b4 6gh
44 0121 232 3000
principal bankers
barclays bank plc
one snowhill
snow hill queensway
birmingham
b3 2wn
44 0121 480 5562
solicitors
slaughter and may
one bunhill row
london
ec1y 8yy
44 020 7600 1200
broker  financial adviser
goldman sachs international
peterborough court
133 fleet street
london
ec4a 2bb
44 020 7774 1000
financial adviser
the blackstone group international partners llp
40 berkeley square
london
w1j 5al
44 020 7451 4000
registrar
computershare investor services plc
po box 82
the pavilions
bridgwater road
bristol
bs99 7nh
44 0870 702 0003 
financial calendar
q1 interim management statement december 2012
annual general meeting december 2012
half year end 2 march 2013 
interim results announcement april 2013
q3 interim management statement june 2013
year end 17 august 2013
preliminary results announcement october 2013
directors of the company
stephen billingham chairman 
roger whiteside chief executive officer 
steve dando finance director
angus porter senior independent director
john allkins independent nonexecutive director
ian dyson nonexecutive director
ian fraser independent nonexecutive director 
designed and produced by the college  wwwthecollegecom
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 punch taverns plc
jubilee house
second avenue
burton upon trent
staffordshire
de14 2wf
wwwpunchtavernscom
tel 44 01283 501600
fax 44 01283 501601


Summary:
 annual report and financial statements 2012 punch taverns plc
03
business review
chief executive officer’s review
our strategy is to focus on our  
high quality well located core  
estate of approximately 3000 pubs 
roger whiteside chief executive officer
business review
we underwent a significant reorganisation of our field teams  
in 2011 with 73 of pubs having a change of partnership 
development manager pdm following the transfer of  
c550 leasehold pubs to spirit at the time of the demerger and 
the transfer of pubs to the turnaround division this disruption  
had an impact on our rate of letting and investment activity  
in the first half of the year as our field teams improved their 
understanding of their new areas and established strong 
relationships with their new partners i am pleased to report 
that this slowdown in activity has been more than compensated 
for by record levels of letting and investment activity in  
the second half of the year 
while our pubs had made strong plans to maximise the 
opportunities offered by the jubilee and sporting events over 
the summer these were outweighed by the impact of the wet 
weather on market demand notwithstanding these shortterm 
challenges we continued to make good progress towards  
our longterm goal of growth in the core estate this includes 
record levels of investment in over 400 core pubs and an 
additional 1100 partners joining the punch buying club  
we also benefited from a positive mix shift towards food  
during the year which was up 3 percentage points to 24  
of partner revenue
we are committed to improving on the level of support we 
provide to our partners and see this as being fundamental  
to returning the core estate to growth we have successfully 
launched our new punch franchise tenancy agreement in  
a limited number of pubs and will roll this out nationally this 
year we have strong plans in place to build on the progress we 
have made including increasing the size of specialist field teams 
in the areas of investment marketing and food development 
the rollout of free wifi across our pub estate and the provision 
of nontied goods and services through the punch buying club 
we intend to deliver these improvements without increasing  
the cost base of the business and will continue to focus on cost 
reduction as we downsize the noncore estate and improve 
back office efficiency
market and strategic overview
the combination of a longterm decline in drinkingout of 
approximately 35 per annum changing customer behaviour 
relative price positioning and the impact of regulation means 
that the number of pubs in the uk is expected to continue to 
decline whilst we believe the longterm growth in eatingout 
will continue to support the pub industry we believe the  
benefit will favour the larger food led destination pubs and  
so a disproportionate number of the closures will be from 
smaller predominantly drinks led pubs
 
punch’s stated strategy is therefore to focus on its high quality 
well located core estate of approximately 3000 pubs these 
pubs are well positioned to outperform the broader market 
drinks volume declines and grow food revenues while net 
income in the core estate remained in decline this year and  
we anticipate a comparable decline in the shortterm as we 
continue to rebalance rents in the coming year we expect a 
return to growth the following financial year in the medium 
term we have a clear operational plan to return the core estate 
to growth of c2 per annum in both partner earnings and 
punch net income 
the strategy for the noncore estate also remains consistent 
with a focus on maximising cash returns whilst the pubs are let 
and then to deliver in excess of book value on the disposal of 
the pubs the disposal programme remains on track and the 
group expects to deliver c£630m from the disposal of the 
2278 pub noncore estate over the next five years of which 
£172m has already been delivered from 683 pub disposals  
over the last 18 months against a book value of £169m  
whilst these pubs continue to have access to the same 
operational tools and infrastructure as the core estate they  
are expected to continue to suffer volume declines materially 
greater than the broader market as a result we expect these 
pubs to continue to experience profit declines albeit with an 
improving trend as we dispose of the worst performing  
pubs first punch taverns plc annual report and financial statements 2012
04
chief executive officer’s review continued
core turnaround central punch
aug 2012 pub 
numbers 2934 1595 – 4529
revenue £377m £115m – £492m
net income £222m £66m – £287m
ebitda £209m £57m £28m £238m
core estate
the core division comprising 2934 pubs accounts for 79 of 
punch outlet ebitda these pubs have a much higher average 
net income per pub than the turnaround estate at c£75000 
and have experienced a decline in net income of 37 in  
the year 
trading performance has been impacted this year by disruption 
following the demerger of spirit combined with the wettest 
april to june period since records began in line with the 
performance of the core division market statistics confirm  
a sharp decline in beer sales during this period
underlying performance in the business continues to be robust 
with likeforlike net income in pubs that have been on full 
substantive agreements for more than one year being down just 
1 within this trading in the south of england continues to 
outperform the rest of the uk
despite the difficult market conditions the level of pub failures 
remains in line with last year the majority of these pubs will 
receive investment to reposition their offering in their local 
marketplace and are currently in the process of being relet on 
full substantive agreements as at the year end date 94 of  
the pubs in the core estate were let on substantive agreements 
leaving 183 core pubs 6 available for letting of which 73 
have new partners in place awaiting legal completion
throughout the year management actions have been focused 
on delivering our four key objectives
i  investing to improve the customer environment and 
increase food sales we invested in over 400 core pubs 
during the year and increased our average spend per pub to 
£90000 with the rate of investment having accelerated in 
the second half of the year our focus has been on new lets 
where there is an opportunity to invest to improve food 
participation and the consumer environment 
  alongside increased investment in the core estate we are 
increasing the level of pub support providing more influence 
over the customer offer we are in the process of introducing 
dedicated pub launch teams to help design and implement 
the full customer offer including product ranging events 
planning service delivery and promotional activity
  food sales represent a significant opportunity for our 
partners and we have a 5 year target to increase the food 
sales mix to 35 of partner revenue our catering experts 
have performed 1900 partner visits in the year to develop 
the food offer increasing the estimated food sales mix in 
our pubs by 3 to 24 of partner revenue our strategy  
is to improve the food offering across our estate using 
managed house principles and supporting our partners  
with food specifications and menu costing 
 
ii   attracting high quality partners the core estate remains 
stable with pub failures remaining in line with previous years 
and an average tenure of over 5 years new applicant 
enquiries continue to be very strong at approximately  
400 enquiries per month representing a 25 increase 
compared to the prior year and we are experiencing a trend 
moving back towards long leases we now have over 200  
of our punch buying club leases in place which reward our 
partners for outperformance and our new agreements are 
attracting an increased interest from small multiple pub 
operators and micro brewers alike our recruitment website 
has been completely overhauled and will be relaunched in 
october with greatly enhanced crm capabilities
iii   driving sales growth the use of the punch buying club 
has doubled in the year with 45 of our drinks orders now 
being taken online up from 21 as at august 2011 the 
punch buying club now has 2800 partners and gives access 
to exclusive deals and through the punch buying club blog 
partners can provide feedback on issues seek advice share 
best practice and access exclusive marketing and point of 
sale materials 
  the product offers marketing and promotional support  
we offer our partners have proved extremely popular  
with 48 of our partners attending our industry leading 
roadshows a doubling in our design and print service and 
record participation in sales activities such as the uk’s 
largest darts competition up 12 quiz nights up 72 
and siba cask ale sales up 40
iv   effective punch support partnership development 
managers pdms are key to driving the performance of  
our pubs we have invested in industry leading training  
in partnership with the bii piloting the first level 4 
qualification in multiple retail management which we 
expect all of our pdms to complete by the end of this year 
  the new punch franchise tenancy agreement has been 
successfully launched aimed at community local pubs and 
new entrants to the sector this fully supported open book 
agreement provides more support to our partners and 
increases our influence over the customer offer initial results 
in the limited number of pubs with the new agreement have 
been encouraging and we aim to roll it out nationally  
this year
  in a drive to support our partners to improve retail standards 
in our pubs we introduced a mystery visit programme this 
year providing independent feedback on the consumer 
experience and beer quality the programme which has 
been well received and clearly demonstrates the link 
between high retail standards and pub performance  
will be rolled out across the core estate this year
  annual report and financial statements 2012 punch taverns plc
05
business review
 building on the success of the punch buying club we are now 
extending the services and range of products we offer to 
include the rollout of free wifi across our pub estate and the 
provision of further nontied goods and services through the 
buying club we are committed to simplifying the administrative 
burden for our existing and prospective partners and to drive 
down the cost to our partners of running a pub
turnaround estate
the turnaround division comprising 1595 pubs with a book 
value of £469m accounts for 21 of punch outlet ebitda 
these pubs are predominately small wet led and have a much 
lower average net income per pub at c£36000 and which 
have declined by 9 in the last financial year given the limited 
scope for investment these pubs are more likely to be impacted 
by the longterm decline in drinking out and as a result are 
expected in time to generate more value through disposal  
than retention 
since we created the turnaround division we have further 
refined our operating strategy segmenting the division into two 
groups ‘sell now  sell later’ and ‘protect and grow’ the ‘sell 
now  sell later’ pubs 1029 pubs will be sold over the next 13 
years while the ‘protect and grow’ pubs 566 pubs will be held 
and operated over the nearterm and sold over the next 35 
years this additional segmentation supports our objectives of 
maximising our profits for as long as we own the pub including 
limited targeted investment in ‘protect and grow’ pubs and in 
optimising our disposal proceeds by selling at the right time
maximising shortterm returns while these noncore pubs 
remain in our portfolio we remain committed to driving 
operating performance and maximising the profits from  
these outlets net income in noncore pubs on substantive 
agreements is broadly stable with all the decline coming  
from nonsubstantive pubs in the process of disposal
maximising value on disposal during the year we sold  
475 pubs together with other assets for proceeds of £130m 
£1m ahead of book value the disposed pubs generated  
just £74m of ebitda over the last 12 months equating to  
a disposal multiple of 18x demonstrating the accretive nature 
of these disposals
we are on track with our disposal programme in extracting 
maximum value from our noncore assets in line with book 
value and reducing our estate down to c3000 core pubs within 
the next 5 years we aim to sell c400 noncore pubs in the 
20122013 financial year
matthew clark joint venture
matthew clark the 50 joint venture with accolade owned 
by champ private equity continues to perform satisfactorily  
in a very competitive market providing a posttax contribution 
to punch of £34m for the year matthew clark has significant 
scale in its marketplace as the largest independent drinks 
wholesaler and distributor to the uk leisure and hospitality 
industry with gross annual turnover of c£700m and c20000 
customers turnover increased by 9 in the joint venture’s  
last financial year and the business has clear plans for continued 
growth in market share from which punch will benefit
regulatory
punch is committed to developing a responsible approach in 
working with our partners and in the marketplace in which we 
operate our biibas accredited code of practice is now firmly 
embedded in the business and lays out clearly what our partners 
should expect from us when committing to a lease agreement 
our code of practice goes further than the requirements of the 
industry framework code which has been made legally binding 
in the year
further progress has been made towards self regulation with 
two complaint review bodies now available to licensees pirrs 
exists to provide low cost resolution for rent disputes and our 
partners are now able to take complaints relating to any other 
part of our code of practice to picas
punch continues to play a full role in the pub sector through 
membership of the bbpa and support for the bii almr and 
flva pubs play a vital role in the economy providing local 
employment particularly for young people and we continue  
to engage with government on the need for investment in the 
sector as a key part of the wider growth agenda for the uk 
economy we believe the economic case for reduction in vat  
in the hospitality sector is compelling with the potential to 
create thousands of new jobs and have given our full support  
to the vat club campaign led by jacques borel 
social responsibility
pubs play a vital role at the heart of the community and punch 
continues to support key initiatives such as pub is the hub and 
work with the licensed trade charity our pubs are significant 
contributors to local fund raising with many of them recording 
their achievements through pubaid our teams in our support 
centre in burton are also involved in the local community 
providing help to local causes through the punch community 
promise scheme 
we believe that pubs provide a safe supervised environment  
for the consumption of alcohol and punch is committed to the 
alcohol responsibility agenda providing support to drinkaware 
and the portman group punch taverns plc annual report and financial statements 2012
06
chief executive officer’s review continued
capital structure review 
objectives
during the year the board appointed goldman sachs and 
blackstone as advisors to assist in undertaking a detailed review 
of the options to optimise the group’s capital structure this 
review examined i punch’s current business strategy in light  
of current and expected operating conditions and ii punch’s 
current capital structure position
the key objective of the review was to identify all options that 
could deliver shareholder and wider stakeholder value and to 
assess them against the following criteria
• creation of a sustainable capital structure and
• feasibility of successful execution
current capital structure 
the group is financed through two whole business 
securitisations the punch a securitisation £1477m of gross 
debt and the punch b securitisation £914m of gross debt  
as well as certain cash resources held across the group  
as at the year end the group held £264m of cash resources  
of which £90m was held outside the securitisation structures 
compared to loan amortisation due within 1 year of £57m  
in addition to cash resources held outside the securitisations 
punch also holds a 50 interest in the matthew clark  
joint venture 
the majority of the trading assets of the group are held in the 
two securitisation structures and whilst the securitisations 
generated underlying profits and positive net cash flow before 
debt repayments and disposals in the year they required 
financial support through the use of cash resources held outside 
of the securitisations to maintain compliance with their dscr 
debt service cover ratio covenants without this support 
both the punch a and punch b securitisations would have 
breached their respective dscr covenant levels in the year 
august 2012
punch a
 securitisation
punch b 
securitisation
reported 2qtr dscr  
including support 136x 151x
underlying 2qtr dscr  
excluding support 108x 105x
dscr covenant level 125x 125x
net support from cash resources held outside of the 
securitisations amounted to £21m for the year being £79m  
of gross support less £58m of cash payments from the 
securitisations to the wider group during the year given 
expectations for the level of performance of the group and the 
anticipated debt service requirements it is expected that the 
level of support required will increase in the next financial year
while this financial support provides valuable time to identify 
appropriate legal and capital restructuring options it is not 
sustainable over the medium to longterm a restructuring  
of both securitisations is therefore required in order to avoid  
a covenant default and deliver value to stakeholders 
since the year end the group has continued to provide financial 
support to the securitisations to allow restructuring options  
to be developed the continuation of that support into each 
securitisation will continue to be reviewed on a regular basis  
in light of all relevant circumstances 
status of the review
the scope of the review undertaken by the board has been 
extensive with a number of alternatives considered while  
no decision has been taken as to the preferred solution to 
restructure the group’s capital structure the following 
conclusions have been drawn from the review
•  both securitisations are over levered and unsustainable in 
their current form
•  significant amendments to each of the punch a and punch b 
securitisation structures are necessary including one or more 
of a material reduction in debt an increase in the maturities 
of the debt and changes to the financial covenants 
•  although both the punch a and punch b securitisations need 
to be restructured given the differences in their stakeholder 
profiles their legal and financial structures and the 
contractual linkages between them and the wider group the 
optimal restructuring solution and implementation timetable 
may differ for each securitisation
•  proposed changes to the capital structure should be 
developed for both the punch a and punch b securitisation 
structures to protect the material financial and operational 
benefits that both enjoy as being part of the wider group
•  operational covenant amendments are also required to allow 
the securitised businesses to continue to maximise returns 
through further investment in the core estate and the 
ongoing disposal of noncore assets
•  the board believes that it is likely that a covenant default 
would have a material adverse impact on the value of the 
underlying businesses and
•  while the group continues to maintain significant cash 
balances providing time and optionality it is preferable  
to work towards identifying a preferred solution as soon as 
practicable so that any uncertainty around potential changes 
to the legal and capital structure of the securitisations does 
not impact on the underlying performance of what is a very 
profitable and high quality pub business
given the adverse impact that a covenant default could have on 
all stakeholders the board believes that it is in the best interests 
of the stakeholders to pursue a consensual restructuring 
solution on the basis of the dialogue with stakeholders to date 
the board remains confident that a restructuring can be 
successfully implemented
next steps and discussions with stakeholders
the board is mindful that uncertainty around the group’s 
capital structure could have a negative impact on the group’s 
underlying business and that as a result it is likely to be in the 
best interest of all stakeholders to identify and implement a 
preferred solution to restructure the group’s capital structure  
as soon as practicable
as part of the review process the board initiated discussions 
with certain of its major shareholders and other significant 
stakeholders to seek their input on the range of options under 
consideration while these discussions have assisted the board 
in reaching the conclusions set out today they remain ongoing 
at the appropriate time the board will be initiating a process  
to identify debt holders in both the punch a and punch b 
securitisations and extending these discussions to the 
bondholders in both securitisations