back cover front cover
spirit pub company plc annual report 2012
further business 
transformation 
through 
investment
spirit pub company plc
sunrise house
ninth avenue
burton upon trent
staffordshire
de14 3jz 
 
t 44 01283 498400
w wwwspiritpubcompanycom
spirit pub company plc annual report 2012 inside front cover inside back cover
in our brands 
estate people  
and infrastructure
business review
01 highlights
02 our business
04 managed division
06 our brands
10 leased division
12 chairman’s statement
13  chief executive officer’s review
14 best for team
16  corporate social responsibility
20 financial review
22  principal risks and uncertainties
23 our key risks and uncertainties
governance
26  board of directors 
28 executive management team
30 directors’ report
34  corporate governance statement
37  nomination  governance  
committee report
38  audit  risk committee report
40  report on directors’ remuneration
50  statement of directors’ responsibilities  
in relation to the financial statements
financial statements
51  consolidated income statement
52  consolidated statement  
of comprehensive income
53  consolidated statement  
of financial position
54  consolidated statement  
of changes in equity
55  consolidated cash flow statement
56  company statement  
of financial position
57  company statement  
of changes in equity
57  company income statement
57   company cash flow statement
5 8   notes to the financial statements
95   independent auditor’s report to the 
members of spirit pub company plc
97   five year financial record
98   company information
99 advisers
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your recycled paper waste thank you 01 spirit pub company plc
annual report 2012
business review governance financial statements
kpis
revenue £m
2008 2009 2010 2011
810
775
724 734
760
2012
ebitda £m
2008 2009 2010 2011
187
152
131
140
146
2012
profit before tax £m
2008 2009 2010 2011
73
40 40
44
51
2012
basic earnings per share pence
2008 2009 2010 2011
78
43 44
48
58
2012
highlights
  strong earnings growth
  continued market outperformance 
and margin expansion in managed
  foundations in place to drive 
performance improvement in leased
  ebitda up 5
  profit before tax up 16
  earnings per share up 21
 
managed
  like for like sales up 48 continuing 
to outperform the market
  ebitda up 11 at £109m ebitdar 
margin up 120 basis points
 
leased
  like for like net income down 49
  ebitda of £38m 2011 £42m
  before exceptional items
 the year ended 23 august 2008 is a 53 week year 02 spirit pub company plc
annual report 2012
business review
our business
our circle of success represents how we 
achieve our ambition – we believe that by 
creating the best team we will deliver the  
best results for all our stakeholders
•	 best for team – recruiting developing  
and retaining the highest calibre team
•	 best for guest – the team in turn delivers 
consistently great guest experiences
•	 best for investor – which delivers the 
maximum return to reinvest in our pubs
objective
our objective is to maximise long term value 
for all our shareholders through continued 
investment in our brands estate people and 
infrastructure this strategy has been in place 
for over two years and we intend to continue 
to pursue this strategy
a key focus is the continual development  
and evolution of our brands to ensure they  
are well positioned in today’s ever changing 
market and remain appealing to the  
consumer guests have continued to respond 
enthusiastically as we continue to innovate 
pursue operational improvements and invest 
in our managed estate our strategy of 
investing in our brands has proved successful 
we believe that our existing brands have  
the potential to expand across a bigger  
estate of pubs and we will continue to identify  
any further growth opportunities through 
selective acquisition
we have put foundations in place this year  
in our managed division that should allow  
us to grow our sales and margins in 201213 
work is already well underway in areas such 
as improving the guest experience further 
developing our brands improving our 
marketing effectiveness taking advantage  
of the benefits from the transfer of our  
supply chain operation to kuehne  nagel 
and the rollout of ‘pub in a box’ a leading 
back office system
spirit pub company has a high quality estate 
of 1278 pubs nationwide consisting of  
791 managed pubs and 487 leased pubs and  
a strong portfolio of award winning brands
we recognise that brands are important to  
the consumer and we are well positioned in 
this respect with our brands delivering great 
value for money we are well placed to exploit 
the casual dining out market which is expected 
to grow over the medium and long term 
our leased estate is one of the highest 
potential estates in the leased and tenanted 
sector attracting the highest calibre licensees 
and providing strong profit opportunities  
we are able to use our retail expertise and 
skillset to enhance performance in our  
leased division 
at spirit our ambition is to be the best  
pub company in the uk that’s best for team  
guest and investor our high calibre teams  
are fully aligned behind our ambition  
goals and values – all of which are critical  
to our success 
our objective is to maximise long term  
value for all our shareholders through 
continued investment in our brands  
estate people and infrastructure 03 spirit pub company plc
annual report 2012
business review governance financial statements
we have already made substantial progress  
in transforming and revitalising the managed 
division through further improvement to our 
brands estate people and infrastructure  
and have made good progress on improving 
performance in our leased division  
which only came under our full control  
on 5 march 2012
our objective is to build the best long  
term sustainable leased estate providing  
the most profitable pub opportunities  
for licensees spirit and our shareholders  
our focus will be to leverage our retail 
expertise to develop and grow in areas  
such as innovation in the leased operating 
model and achieve cost saving synergies  
to gain the best value for money
we continue to focus on calibre and people 
development and measured investment  
to maintain or improve our asset quality 
our ambition is to be the best pub 
company in the uk that’s best for team 
guest and investor
best for 
investor
best for 
guest
best for 
team 04 spirit pub company plc
annual report 2012
business review
managed division
our managed division contains 791 high 
quality pubs many in prime locations and  
a strong portfolio of award winning brands 
our portfolio of award winning brands 
includes chef  brewer fayre  square 
flaming grill taylor walker john barras and 
original pub company each offering great 
value for money and delivering an excellent 
guest experience from our high calibre teams 
in addition we operate wacky warehouse  
the uk’s largest soft play and activity centre 
brand for children and good night inns  
a group of hotels in great locations next  
to our pub restaurants
this brand portfolio gives us broad coverage 
of the mass consumer markets and we 
continue to focus on delivering the right  
quality at the right price for the right consumer 
occasion offering great value for money has 
helped us in a tough value seeking consumer 
environment and as a result advocacy has 
grown right across the brands our guests 
have continued to respond enthusiastically  
as we continue to invest innovate and pursue 
operational improvements throughout our 
managed estate 
compelling brand portfolio higher price
food led drink led
lower price 05 spirit pub company plc
annual report 2012
business review governance financial statements
over the last 12 months our investment 
programme has continued with circa 180 
investments during the year which continue  
to deliver returns in excess of 25 79  
of our managed estate is now invested  
to brand standards and investments in  
the remainder of the estate will mostly  
be completed during 201213 
our focus is on the continual development  
and evolution of our brands to ensure they  
are well positioned in today’s ever changing 
market and remain appealing to the consumer 
a key opportunity is to grow sales further  
by leveraging our brands harder and our 
approach is to ensure that we deliver a great 
experience to our guests to further increase 
their loyalty and confidence 
we will continue to build our understanding  
of guests and target guests more tightly 
through our increasingly sophisticated 
customer relationship management crm 
activity this year we evolved our brand 
websites to improve the online experience  
for our guests which included the introduction 
of an online booking facility for chef  brewer 
fayre  square and taylor walker as part  
of our social media strategy our brands  
now have social channels in place with 
encouraging levels of engagement 
we want to ensure that our guests receive  
the very best experience in our pubs and  
from september 2012 we adopted a new 
approach to how we measure the guest 
journey after listening to the 750000 guests 
who completed our guest recommends 
online survey we are focusing on the things 
that really matter to our guests with our new 
approach ‘guest journey measures’ will 
enable us to more frequently measure the 
guest journey through mystery guest feedback 
on key questions to ensure we consistently 
deliver a great guest experience across  
all our branded pub restaurants
fayre  square – best pub brand
•	launched in 2009
•	 focus is on attentive service  
and guaranteed great meals  
at an affordable price
•	square deals all day every day
•	no quibble guarantee
•	 voted ‘best pub brand’ at  
the publican awards 2012 06 spirit pub company plc
annual report 2012
business review
chef  brewer
delivers delicious 
freshly cooked food 
made from the best 
seasonal products
our brands
award winning
chef  brewer scooped 
‘best branded pub 
restaurant’ in the  
menu innovation  
development midas 
awards 2012
chef  brewer
famous for food and drink
chef  brewer is a collection of country style 
pub restaurants with a modern service style 
and ethos offering freshly prepared seasonal 
food and high quality drinks
chef  brewer pubs are warm and welcoming 
with old beams nooks and crannies roaring 
log fires in the winter and beautiful gardens  
in the summer they are the perfect setting  
for a variety of occasions from a relaxed family 
gathering to celebrate something special to 
catching up with friends
highlights this year
•	 winner of ‘best branded pub restaurant’  
in the menu innovation  development 
midas awards 2012
•	new draught range installed
•	cask ale range improved
•	social media channels launched
•	online booking facility introduced
for more information visit
wwwchefandbrewercom 
wwwfacebookcomchefandbrewer 
wwwtwittercomchefandbrewer 
good night inns
we make you feel at home
good night inns are a collection of charming 
hotels with plenty of character offering  
a comfortable homely stay for business  
or leisure all of the hotels are conveniently 
connected to one of our pub restaurants 
fayre  square chef  brewer flaming grill 
and john barras
whilst all of the hotels are different the priority 
remains the same – the guests’ comfort  
the well furnished rooms offer a home from 
home experience with modern facilities at 
competitive prices
highlights this year
•	11 hotels refurbished
•	significant website development
for more information visit
wwwgoodnightinnscouk 07 spirit pub company plc
annual report 2012
business review governance financial statements
flaming guarantee
‘always sizzling hot  
if not we’ll replace it’ 
that’s the flaming 
guarantee launched 
this year in flaming grill
john barras
all you would expect 
from a real pub a large 
range of drinks and 
food all at great value
flaming grill
flaming great steaks in a flaming  
great pub
since the first one opened in 2009 flaming 
grill pubs have offered a friendly welcome  
and provide a vibrant and eye catching 
environment to enjoy a drink after work  
meet up with family and friends watch a 
match or sit back and relax whilst enjoying 
delicious flamegrilled food at pub prices 
flamegrilled steaks served on sizzling  
skillets are the brand speciality and the 
flaming guarantee ensures that skillets will 
‘always be sizzling hot if not we’ll replace it’ 
flaming grill also caters for children with  
mini mixed grills and tasty tortillas served on 
wooden boards from the grill bill kid’s menu
highlights this year
•	40 investments completed
•	premium draught range installed
•	flaming guarantee introduced
•	social media channels launched
for more information visit
wwwflaminggrillpubscom  
wwwfacebookcomflaminggrillpubs 
wwwtwittercomflaminggrillpub
john barras
your local where there’s always 
something going on
john barras pubs offer guests a real pub 
experience with a wide range of drinks  
great value pub food all the sporting action 
and a host of entertainment and activities 
there is always something going on at  
a john barras pub with a food deal every  
day of the week and regular entertainment 
often tailored to each individual pub based  
on guest feedback sport is a fundamental 
part of the john barras mix offering  
a fantastic atmosphere with table service 
during key sporting events 
highlights this year
•	60 investments completed
•	social media channels launched
for more information visit
wwwjohnbarrascom 
wwwfacebookcomjohnbarraspubs 
wwwtwittercomjohnbarraspubs 08 spirit pub company plc
annual report 2012
business review
our brands continued
cask marque 
accredited
this year sees all  
taylor walker pubs 
cask marque accredited 
– an independent award 
to prove they all serve 
great quality cask ale
original pub 
company
the new and  
improved food range
taylor walker
the great british pub experience
whatever the occasion taylor walker pubs 
offer authenticity quality and comfort for  
all guests – locals shoppers day trippers  
and overseas tourists
each taylor walker pub has a fascinating 
history and retains many of its original 
features the brand celebrates all that is  
best in british pubs delivering great british 
hospitality every day along with the best of 
british pub food the extensive drinks range 
features great quality real ales wines spirits 
and soft drinks located in the heart of the city 
close to transport links and main attractions 
taylor walker pubs are the perfect place  
to refresh and refuel
highlights this year
•	social media channels launched
•	new draught range installed
•	online booking facility introduced
•	cask marque accredited
for more information visit
wwwtaylorwalkercouk 
wwwfacebookcomtaylorwalkerpubs 
wwwtwittercomtaylorwalkerpub
original pub company
best pub in town morning to night
with a great range of food and drink and  
a buzzing atmosphere original pub company 
opc pubs are the place to meet in town 
morning to night located on the high street 
they are in the perfect place for grabbing  
a light lunch whilst shopping popping into  
after a long day at work watching the next  
big match or getting together with friends
the menu offers a great range of drinks  
and pub food from burgers wraps and 
sandwiches to pub classics and sunday 
roasts – all at great value
highlights this year
•	 food offer cocktail and wine range greatly 
improved
•	new draught range installed
for more information visit
wwworiginalpubcocom 09 spirit pub company plc
annual report 2012
business review governance financial statements
no quibble 
guarantee
the no quibble 
guarantee launched 
this year at fayre  
square offers our 
guests replacement 
meals no quibble  
if for any reason  
they are unhappy  
with their food
fayre  square
delicious meals square deals and 
friendly service
fayre  square is all about those everyday 
excuses to get together with family and 
friends those chances to relax catch up 
indulge and share good times in good 
company 
the focus is on friendly service and 
guaranteed great meals at an affordable  
price there are 2 for £10 deals on a great 
range of pub favourites so guests can always 
enjoy a square deal all day every day  
we are proud of our food and we offer our 
guests a no quibble guarantee – if for any 
reason our guests are not happy with their 
meal it will be replaced no quibble 
highlights this year
•	 winner of the publican  
‘best pub brand 2012’ award
•	46 investments completed
•	social media channels launched
•	online booking facility introduced
for more information visit
wwwfayresquarecom 
wwwfacebookcomfayreandsquare 
wwwtwittercomfayreandsquare
wacky warehouse
all day wacky fun
wacky warehouse is the uk’s largest  
soft play and activity brand for children 
venues are located nationwide and the 
majority are colocated with our fayre  
square family pubs
with lots of great themed events and activities 
running throughout the year there is always 
something exciting going on tot club  
runs during school term time with sessions 
just for toddlers and every year thousands  
of kids attend a wacky party our commitment 
to everyone visiting wacky warehouse is  
to provide a caring clean safe and friendly 
environment combined with a fun and wacky 
experience for kids
highlights this year
•	29 investments completed
•	kids’ party proposition greatly improved
•	social media channels launched
for more information visit
wwwwackywarehousecouk 
wwwfacebookcomwackywarehouse 
wwwtwittercomwackywarehouse 
awardwinning
fayre  square was 
voted ‘best pub brand’ 
at the publican awards 
2012 10 spirit pub company plc
annual report 2012
business review
leased division
our leased estate is one of the highest 
potential estates in the leased and tenanted 
sector attracting the highest calibre licensees 
and providing strong profit opportunities 
spirit leased provides growth potential 
together with significant cash generation  
to fund our continued investment in our 
brands estate people and infrastructure  
our priority is to maximise the value of each 
pub by enhancing performance taking control 
of the retail offer through measured alternative 
operating models and leveraging our brand 
and retail expertise 
we carried out a pub by pub review taking  
into account a number of factors including 
demographics and market opportunities  
to create a plan for every pub the review 
identified the best option for each pub 
including those that we intend to sell  
earlier in the year we announced our planned 
disposal of the tail of the leased estate  
of around 100 pubs over time and we are 
pleased to report that we have already 
disposed of 54 pubs 
our estate offers a whole range of different 
styles of pubs from the very best in dining  
to really great sports and community locals 
our leased pubs are operated by individual 
licensees with the backing and support  
of a major pub company the experience  
and values of our well established managed 
division mean our licensees benefit from  
a consumer focused team striving to  
give our licensees the best possible tools  
to make the most of their businesses
we are committed to attracting and retaining 
the highest calibre people experienced 
licensees already from the sector with  
the knowhow and expertise for the large 
profitable leased sites we offer we are 
developing an industry leading web profile  
in order to attract entrepreneurial licensees 
into a spirit leased pub business
we have built a strong management team  
and made substantial progress to help focus 
and stabilise the leased division which only  
came under our full control on 5 march 2012 
our leased division will capitalise on the 
advantages and expertise of our quality 
managed division to develop and grow in 
areas such as innovation in the operating 
model and achieve cost saving synergies  
to gain the best value for money
our objective is to build the best long term 
sustainable leased estate providing the most 
profitable pub opportunities for licensees 
spirit and our shareholders financial statements governance business review
11 spirit pub company plc
annual report 2012
our priority is to maximise  
the value of each pub by 
enhancing performance  
taking control of the retail 
offer through measured 
alternative operating models 
and leveraging our brand  
and retail expertise 12 spirit pub company plc
annual report 2012
business review
chairman’s statement
i am pleased to report on a strong 
performance in spirit’s first full year as  
a standalone company the managed division 
has continued to outperform the sector  
as the rollout of brands across the estate  
has continued following a transitional period 
the group took full control of the leased 
division in march 2012 and we have now 
developed plans to stabilise the performance 
of these pubs 
the wider economic backdrop continues  
to present challenges but in our mix of brands 
and operating models geographic spread 
across the uk and the talented team that  
we have in place i believe that we are well 
placed to continue to deliver sustainable 
growth and value for all our stakeholders
i said last year that we had a strong and 
experienced executive management team  
and a board with a wealth of experience  
to further supplement the team i was 
delighted to announce in january 2012  
that julie chakraverty joined the board  
julie brings invaluable financial experience 
and insight having previously spent 13 years 
at ubs investment bank where she was a 
board member and held a number of senior 
global leadership positions with a specialist 
background in risk management and  
fixed income 
chris welham and debbie moore also joined 
spirit’s executive committee during the year 
chris welham as managing director of our 
leased estate brings extensive industry 
experience and has set out a clear strategy  
for our leased pubs to stabilise performance 
and then further improve it by ensuring that 
our licensees are well placed to deliver an 
enhanced retail experience as group hr 
director debbie moore is instrumental in 
ensuring that we deliver on our ‘best for team’ 
objective in addition ian powell joined the 
company in june as general counsel and 
company secretary
i am confident that as a result of these 
changes we have further strengthened the 
group’s ability to deliver on spirit’s strategic 
aims to maximise long term value for all 
stakeholders through continued focus  
on ‘best for team’ ‘best for guest’ and  
‘best for investor’ through continued focus 
on our corporate responsibility strategy  
we also ensure that the interests of all 
stakeholders such as our suppliers and  
the wider communities in which we operate 
are appropriately considered
continued focus has enabled the group  
to deliver another year of growth and i am 
delighted that this has enabled us to be able  
to start to return value to our shareholders 
through the payment of our first dividend  
an interim dividend of 065 pence per share 
was paid to shareholders in june 2012  
and this will be followed by a proposed  
final dividend of 130 pence per share in 
february 2013
i also want to take this opportunity to thank  
all of our employees for their continued hard 
work and commitment during the last year 
their talent and enthusiasm has enabled spirit 
to continue to grow despite the challenging 
economic conditions 
walker boyd
chairman
continued focus has enabled the  
group to deliver another year of growth 13 spirit pub company plc
annual report 2012
business review governance financial statements
business review
chief executive officer’s review
transformation through retail 
excellence
our business has been on a transformational 
journey over the past three years towards  
a position of retail excellence
i am delighted with the progress we have 
made during our first year as an independent 
business profit before tax is up 16  
earnings per share are up 21 and we  
have commenced the payment of dividends  
we have delivered further strong growth in 
managed sales through continued investment 
in our brands estate infrastructure and 
people while cost control has been robust  
in the face of inflationary pressures enabling 
continued expansion of managed margin  
our leased pubs have performed in line  
with our expectations this year and we have 
now laid the foundations from which to drive 
performance improvement the consumer 
environment remains tough but we are  
well placed to make further progress in  
the year ahead
in our managed pubs the performance 
improvement has been driven by our  
well established strategy which remains 
unchanged over the last two years we have 
increased like for like sales by 10 and 
improved ebitdar margin by 25 percentage 
points which demonstrates an increasingly 
efficient and productive business it is also 
very encouraging to see the initial benefits 
coming from our new drinks category 
management programme following  
the renegotiation of all key contracts  
on demerger 
we have continued to invest in our brands 
ensuring that we build on our philosophy  
of putting the guest at the heart of all major 
decisions we understand that consumer 
trends and preferences evolve quickly and 
therefore we must keep refining the relevance 
of each of our brands through guest research 
and insight which will ensure we pull the right 
levers in each brand we are investing heavily 
in our social and digital communication 
capability and state of the art customer 
relationship management tools for our brands 
– to work alongside our new inpub epos  
and data capture systems we are only just 
starting to fully understand the potential 
transformation this could make in the way  
we relate to our guests
we said last year that we had made  
great progress we have continued to  
do so this year and we are in the process  
of transforming the group through  
a continuation of investment and an 
unrelenting focus on retail excellence
with regard to our leased pubs we have 
established some firm foundations in the  
year we have refined our strategic focus to 
maximise value we expect the next financial 
year to show an improved performance and 
considerable innovation as well as leveraging 
the areas of managed expertise within the 
leased business
during the first half of the year the leased 
estate was operated on a transitional basis 
under a management services arrangement 
with punch taverns plc in march 2012 we 
brought the operation of this estate inhouse 
with our own lower cost infrastructure 
including a new high calibre team to lead this 
division our primary focus is on transferring 
our retail expertise to our licensees whilst 
innovating and evolving the traditional leased 
model to drive sales and income growth for 
both spirit and our licensees
overall during the year we have made  
strong progress on strategy execution and 
performance for our managed pubs this  
has meant considerable further improvement 
on all key metrics in the year with regard  
to our leased pubs we have built solid 
foundations and have a clear future strategy 
for this part of our business
i am confident we are on track to achieve  
our vision of being the best pub company  
in the uk
mike tye
chief executive officer 14 spirit pub company plc
annual report 2012
business review
best for team
we are taking our employees with us on our 
journey to become the best pub company in 
the uk and according to our last employee 
engagement survey 92 of those who 
responded are fully aligned behind our 
ambition and goals our values launched  
this year support our ambition across three  
of our key stakeholders team guest and 
investor by recognising the synergies  
derived from a coherent approach
our values
•	 we are authentic and engaging people  
we are determined to be the best  
as individuals and as teams
•	 we are obsessed with delivering the  
best guest hospitality all day every day
•	 we are in business to make money for  
our investors we make every penny count
communications and engagement
we want to ensure that our employees 
continue to see spirit as a great place to work  
last year we ran an engagement survey 
across our 16000 employees with an overall 
response rate of 723 against a 479 
average for companies of our size and  
our scores across a number of measures 
improved in comparison to last year from 
september 2012 we introduced quarterly 
pulse surveys in addition to our annual 
engagement survey
we maintain high levels of employee 
engagement and focus through effective 
communications which are engaging and fun 
and through our internal engagement activity 
for example we set up a fun and fundraising 
team called grin made up of representatives 
across our support teams to help drive some 
of the engagement activity the grin team 
organise a number of social events throughout 
the year providing opportunities for 
employees to socialise
two way communication is important to us  
it allows us to listen and take appropriate 
action on what matters most to our 
employees this year we have increased  
the frequency of our listening groups and 
consultation groups
 source best companies wwwbestcompaniescouk
reward and recognition
we treat our people fairly and last year in 
recognition of a great business performance 
we rewarded those people at the support 
centre who made the biggest contribution  
we also awarded bonus payments to our 
operations team linked to performance in  
our pubs 
salaries were benchmarked and a pay  
review was carried out to ensure we remain 
competitive we introduced a share incentive 
plan sip giving employees the opportunity  
to buy shares in spirit from their pretax 
salary matched by the company dividends 
on these shares were also used to buy extra 
shares in the plan
 
best a recognition scheme aligned to our 
ambition and values allows us to recognise 
and reward our employees directly and 
instantaneously throughout the year with  
a discretionary scratch card or cash award 
we also recognise the best of the best our 
best performers across several categories  
at our annual best awards ceremony
learning and development
we want to help our employees to be the best 
they can be so this year we have developed  
an online training portal under the name  
of the training tree the training tree provides  
clear learning opportunities within each 
branch giving employees the opportunity to 
grow their career and reach their full potential 
spirit is leading the industry in terms of 
training and developing through work based 
learning and qualifications earlier this year we 
launched a level 3 advanced apprenticeship 
in leadership and management aimed at our 
deputy general managers this is another step 
towards providing our team with a clear career 
pathway in hospitality we now employ over 
500 apprentices 
723
response rate to  
our engagement  
survey across 16000 
employees
we received a grade 2 
‘good’ in an office for 
standards in education 
ofsted inspection for 
our apprenticeship 
programme – a hard 
result to achieve 15 spirit pub company plc
annual report 2012
business review governance financial statements
an office for standards in education ofsted 
inspection was carried out in july 2012  
on our apprenticeship programme and we 
were delighted with the results we received  
a grade 2 in all areas with an overall grade  
of ‘good’ – a hard result to achieve
we also offer a graduate trainee programme 
to both external graduates and those who  
are already working at spirit whilst studying  
for or after gaining a degree we currently  
have over 30 employees on this programme
recruitment 
this year we launched a new recruitment 
website intended to position spirit as an 
employer of choice by conveying the energy 
and passion that exists within our business 
this was complemented by the launch  
of our social media channels to shout about 
‘life at spirit’ and raise awareness of our 
employer brand 
we recognise that our employees are our 
biggest advocates and this year we introduced 
a refer a friend scheme where we pay £500 
for their talent spotting skills we regularly 
advertise our vacancies to encourage 
employees to nominate people they know
apprenticeship programmes
spirit now employs over 500 apprentices 
and offers five apprenticeship qualifications 
which have been specifically designed to 
map business as usual in a pub environment 
so that everyone no matter where they 
start within the business can gain skills  
and qualifications while working
the training tree 
we are passionate about bringing out the 
best in people and inspiring employees to 
be the best they can be the training tree 
our online development portal provides 
clear learning and development 
opportunities at every level linked to  
a career pathway giving employees  
the opportunity to grow and reach their  
full potential
for more information visit
wwwspiritpubcompanycareerscom 
wwwfacebookcomlifeatspirit 
wwwtwittercomspiritjobs  16 spirit pub company plc
annual report 2012
business review
corporate social responsibility
our intention is to be a responsible retailer in 
the communities in which we operate and to 
have appropriate regard for our wider position 
with stakeholders and others this section 
outlines the activity that we have undertaken 
this year in terms of our impact on our 
stakeholders and the wider environment 
highlights
•	 winner of the european supply chain 
excellence awards 2011 in the 
‘environmental improvement’ category
•	 £150k raised for charity – not including  
the additional local fundraising in our pubs
•	 invested £250k in glass crushing machines 
to improve recycling
•	 automated meter readers amrs installed  
in a number of our pubs to better manage 
our water consumption
•	 winner of the footprint awards 2012  
in the ‘waste management and  
reduction’ category
waste management 
during the year we received two awards for 
our innovative waste management solutions 
and we have continued to develop that  
award winning approach our aim is to 
minimise the amount of general waste sent  
to landfill and reduce vehicle mileage by using 
reverse logistics to return recyclable materials 
via our food distributor ultimately working 
towards zero landfill to further encourage 
participation by our pub teams from 
september 2012 the value of commodities 
recycled by each pub will be credited to the 
individual pub budget
this year our recycling activity produced  
an equivalent carbon saving of over  
800 tonnes for cardboard tin and plastic  
and over 5000 tonnes for food and oil over 
2500 tonnes of food waste per year goes to 
anaerobic digestion diverted from landfill and 
creating green energy while 13 million litres of 
our used cooking oil is turned into bio diesel 
the number of our pubs recycling glass has 
increased to 90 helped by our investment 
during the year of £250k on glass crushing 
machines in our city and urban pubs which 
have limited storage space
spirit is also a founder signatory of the new 
wrap voluntary agreement for the hospitality 
and food service sector which gives clear 
guiding principles to recycle more and  
waste less
environment and energy consumption 
improving our energy efficiency and reducing 
our carbon footprint remains a priority for us 
both in our pubs and at our support centre 
we recognise that employee behaviour can 
help and we encourage our teams to get 
involved recent activities included a  
‘switch on switch off’ campaign to reduce  
our utility consumption in our pubs and 
likewise within our support teams maximising 
the opportunities that exist from the design  
of our low carbon support centre building
in addition to smart meters installed in the 
majority of our pubs for gas and electricity this 
year we introduced amrs in a number of our 
pubs to better manage our water consumption 
we are sourcing an increased amount of 
energy efficient cellar cooling and refrigeration 
equipment from nominated suppliers who  
are committed to environmental and social 
responsibility striving to increase product 
efficiency and produce truly ‘green’ products 
a number of which benefit from the enhanced 
capital allowance eca scheme designed  
to encourage uk businesses to reduce  
carbon emissions by providing tax benefits 
winner of the 
european supply 
chain excellence 
awards 2011
winner of the 
footprint awards 
2012 17 spirit pub company plc
annual report 2012
business review governance financial statements
our supply chain strategy ensures that we 
have the carbon footprint of both spirit and 
our supply chain at the centre of our decisions 
for example approved repair contractors for 
our pubs are allocated by area to minimise 
travel and we insist that a stock of key items  
is contained in the vehicles to ensure  
the repair can be completed first time  
eliminating the need for additional travel 
responsible retailing – drink 
as a responsible retailer of alcohol spirit’s  
aim is to promote the four licensing objectives 
the prevention of crime and disorder public 
safety prevention of public nuisance and  
the protection of children from harm all whilst 
providing an appropriate environment for  
the safe and lawful consumption of alcohol
to ensure our team members deliver  
a responsible service across our estate  
we implement a challenge 21 and where 
required challenge 25 scheme of age 
verification we also use a mystery guest  
age verification scheme to regularly test  
our procedures
we are a member of the portman group  
the social responsibility body for alcohol 
producers and a substantial funder of 
drinkaware whose aim is to highlight the 
dangers of alcohol misuse through innovative 
and challenging campaigns to support this 
all our drinks menus point of sale promotional 
materials and websites feature the drinkaware 
logo to encourage responsible attitudes  
to drinking 
every year we consider what initiatives in 
drinks brands and drinks retailing can be 
appropriately employed to reinforce the 
message of responsible consumption for 
example stocking a wider range of reduced 
alcohol or alcohol free products this year we 
have introduced a lower abv wine in the range  
sold in our price led pub restaurants and a 
new lower abv lager and non alcoholic lager 
to the product range across all of our pubs
  lower abv wine and lower abv lager introduced for  
the summer
responsible retailing – food
we appreciate that attitudes towards food  
are changing and our guests want to know 
more about the food they eat in order to make 
an informed choice 
our aim is to have appropriate nutritional 
information including visibility of those dishes 
which are free from key allergen ingredients 
on our brand websites by the end of 2012 
we continue to work towards the department 
of health campaign guidelines of reducing 
levels of salt and removing artificial trans fats 
from our dishes as a result none of our 
products contain artificial trans fats and we 
have reduced our salt and saturated fat levels 
by an average of 23 and 29 respectively 
with further reduction work ongoing 
product quality remains a key priority  
in partnership with our suppliers we constantly 
monitor our products to ensure they satisfy  
all food manufacturing legislation and 
environmental health requirements 
responsible sourcing 
we acknowledge our responsibility to 
minimise our impact on the environment  
by only selecting suppliers with responsible 
and sustainable sourcing policies in place 18 spirit pub company plc
annual report 2012
business review
corporate social responsibility continued
key facts
•	 all our food suppliers are accredited to  
the british retail consortium brc audit 
standards or equivalent
•	 through our supply partners we support 
animal welfare and the sustainable and 
ethical sourcing of seafood
•	 we do not stock products containing 
genetically modified organisms
•	 through our partnership with aak and  
prep oil we support the production of 
sustainable palm oil
•	 we expect our suppliers to respect the 
human rights of those with whom they deal 
and proven instances of abuse of human 
rights including but not limited to use  
of child labour will result in removal from  
our list of approved suppliers
•	 we endeavour to ensure our suppliers 
procure their raw materials through 
sustainable sources wherever possible
community charity and not for  
profit activity
we appreciate that our pubs are the heartbeat 
of many communities across the uk and  
we actively encourage our pub teams to 
contribute to their local community by raising 
funds for worthy causes in their area in 
addition to this we create targeted campaigns 
by brand to further strengthen our support  
to the community we remain a member of  
the burton breweries charitable trust which 
supports young people’s charities locally
this year our pub teams raised over £150000 
for charitable causes
fundraising activity is not exclusive to our 
pubs we organise regular fundraising events 
for our support teams to help raise money for 
local causes in and around burton upon trent 
where our support centre is located 
we are also involved in a number of activities 
that drive down unemployment as well as 
supporting young people in their development 
and career planning
for instance spirit has signed up to the 
government’s get britain working campaign 
and is proactively working with key partner 
organisations to drive positive outputs against 
the campaign objectives and the youth 
contract we are particularly focused on  
two interventions offering work experience  
to 16 – 24 year olds in the neet group  
not in education employment or training 
and running hospitality sector based work 
academies offering a bespoke 2 – 8 week 
training programme for the unemployed with a 
guaranteed interview at the end the success 
rate of those interviewed is 60 this year  
we have demonstrated our commitment  
by holding several academies across the  
uk for our front of house roles
we also work in partnership with the blive 
foundation which provides curriculum led 
information advice and guidance to schools in 
the uk our work with the foundation includes 
not only providing hospitality careers advice 
but also project sponsorship career talks in 
schools and links to vacancies within spirit
highlights
•	 pub team members from over 200 pubs 
across our estate raised over £40000 for 
great ormond street hospital children’s 
charity by selling santa hats over the 
christmas period and creating their  
own fundraising activities ranging from 
raffles and auctions to live entertainment 
and special guest appearances
•	 our support centre employees and pub 
team members across our entire managed 
estate raised over £40000 in a month  
for prostate cancer uk by selling  
‘come on england’ badges throughout 
uefa euro 2012 19 spirit pub company plc
annual report 2012
business review governance financial statements
hospitality work academy 
we launched a hospitality sector based 
work academy to provide job seekers 
looking for a career in catering with relevant 
kitchen experience the five week course 
aims to provide candidates interested  
in a career at spirit with some hands on 
experience of life working in a kitchen 
our academy will not only provide 
candidates with invaluable practical kitchen 
work experience but also give them key 
employability skills and a guaranteed 
interview for a role in one of our pubs
prostate cancer uk 
spirit’s support centre added £5000  
to the £40000 raised by our pub teams  
for prostate cancer uk after 16 members 
of the chef  brewer marketing and 
operations team took up the three peak 
challenge completing the 24 mile trek  
in under 12 hours
tomlinsons dairies  
we now buy our milk directly from 
tomlinsons dairies which has developed 
strong working relationships with many 
local welsh farmers located within an 
average of 10 miles from their dairy to 
ensure their farmers can farm in a way 
which delivers a reasonable return for their 
efforts tomlinsons pays slightly more for 
their milk helping to protect and enhance 
the local rural community
mj seafood and visual foods limited 
working closely with our supply partners 
within the fish category mj seafood and 
visual foods limited we recognise our 
responsibility to ensure that fish and shellfish 
stocks remain at a sustainable level and  
that the required environmental ethical and 
sustainable stock management systems  
are in place
via chef  brewer we offer daily specials  
of fresh fish throughout the year utilising  
and serving in season species when they  
are at their best providing the right product 
at the right time for our guests 20 spirit pub company plc
annual report 2012
business review
financial review
results for the year
the financial review covers the 52 weeks to  
18 august 2012 group results have continued 
to be impacted by the challenging market 
conditions faced across the sector 
summary consolidated income statement 
before exceptional items
2012
£m
2011
£m

 change
revenue 760 734
outlet costs 523 506
outlet ebitdar 237 228 4
rent 66 65
onerous lease provision 15 18
outlet ebitda 186 181 3
central costs 40 41
ebitda 146 140 5
depreciation 37 35
operating profit 109 105 4
net finance costs 58 61
profit before taxation 51 44 16
tax 13 12
profit after tax 38 32 21
basic eps 58p 48p 21
operating profit before exceptional items  
was up 4 at £109m with 14 growth in  
the managed division and a decline of 10  
in the leased division operating profit 
includes the benefit of £15m in respect of  
the utilisation of the onerous lease provision  
a reduction of £3m from the prior year 
reflecting the benefits of management actions 
to improve the performance of these 
properties the majority of which are leases 
which reverted to the group in prior years 
central costs were in line with the prior year 
demonstrating strong cost control following 
the full integration of the leased division in 
march 2012 prior to which this division was 
operated on a transitional basis following  
the demerger under a management services 
agreement with the punch taverns plc group 
punch the prior year profit before tax  
also benefited from net £2m utilisation  
of an onerous contract provision which  
was fully utilised as at august 2011
net finance costs
net finance costs were £58m 2011 £61m 
and include £6m 2011 £7m in respect of 
finance charges associated with discounted 
provisions the weighted average interest  
rate for borrowings was 77 in the year  
an increase of 08 from the prior year  
due to scheduled interest rate stepups on  
the debenture bonds 
tax
the underlying tax charge of £13m represents 
an effective rate of 250 2011 280  
with the fall in rate being due to the reduction 
in the corporation tax rate to 24 in april 2012  
we expect the effective rate in 201213 to be 
around 24 reflecting the further reduction  
in the corporation tax rate to 23 in april 
2013 the group did not pay any corporation 
tax in the year due to the utilisation of brought 
forward losses and does not expect to make 
any payments in 201213
exceptional items
a number of exceptional items were 
recognised in the period resulting in a net 
charge of £602m the principal charges  
were £595m relating to the write down of our 
properties following the decision to change 
accounting policy to carry pubs at market 
value £39m charge for the marktomarket  
of interest rate swaps and £9m impact of 
future annual uplifts in property head lease 
rentals all of which are noncash items
in addition exceptional charges include  
£18m loss on disposal of properties and  
£7m for the costs of restructuring our central 
support team following the demerger from 
punch in august 2011 these charges are 
offset by the recognition of £19m vat on 
gaming machines following a ruling by the 
european court of justice in november 2011 
the cash for which had been repaid by hmrc 
in the prior year together with a £9m gain on 
the repurchase of debenture bonds
the tax effect of these exceptional items  
gave rise to an exceptional tax credit of £50m  
with an exceptional tax charge of £12m also 
recognised for the change in tax rate and 
changes to prior year tax
 before exceptional items 21 spirit pub company plc
annual report 2012
business review governance financial statements
capital expenditure and disposals
the continued rollout of our brands across  
the managed division together with the 
overhaul of our pub back of house systems 
has resulted in £86m capital expenditure in  
the managed estate 2011 £72m we have 
also taken opportunities to invest in the 
leased estate where appropriate at a  
cost of £5m 2011 £6m we expect capital 
expenditure levels to reduce in 201213  
as our brand rollout nears completion
during the year we disposed of 62 pubs for 
net proceeds of £28m at an average multiple 
of 12 times ebitda 
property valuation
following the demerger from punch in  
august 2011 we have taken the opportunity  
to review all of our accounting policies to 
ensure that they are appropriate for the 
business as a result we have changed our 
accounting policy to carry our pub estate  
at open market valuation which gives  
greater transparency on the underlying value 
of our property assets and commissioned 
external valuers to assist with this valuation  
as at august 2012 prior to this change in 
accounting policy a full impairment review of 
the estate was performed with an impairment 
recognised on any properties for which the 
carrying value was in excess of value in use
the result of the impairment review and 
change in accounting policy has resulted  
in a net reduction in our property plant and 
equipment and capitalised operating lease 
values of £440m of which £81m is an 
impairment charge the net impact has been 
recognised as a £595m charge to income  
for pubs for which book values were higher 
than market value offset by a £155m credit  
to equity reflecting the reversal of previous 
impairment charges for a number of properties 
on which book values were below current 
market value this net downward valuation 
reflects the fact that the majority of the estate 
was previously held at amortised historic 
acquisition values 
cash flow
cash flow from operating activities was £119m 
down from £159m in the prior year due to 
oneoff restructuring costs £7m and the 
buyout of historical selfinsured liabilities 
£5m with prior year cash flows benefiting 
from the £19m repayment of gaming machine 
vat after accounting for capital expenditure 
interest and tax net cash outflow was £14m 
prior to the repurchase of debenture debt
onerous lease provision
profit before tax benefited from £9m relating 
to onerous provision utilisation 2011 £14m 
the reduction in the utilisation of the onerous 
lease provision in the year is as a result of 
management actions to mitigate the losses on 
these properties either through our managed 
investment programme or through alternative 
property solutions such as sublets for 
alternate use
financing
the structure of our debenture means that  
all of our debt is in the form of long term 
mortgage type finance secured on our 
sizeable property portfolio the debt fully 
repays over terms extending to 20 years  
and is all effectively at fixed rates of interest 
gross debt within the debenture was £847m  
at the year end august 2011 £885m offset 
by cash within the debenture of £60m august 
2011 £68m leading to net debenture debt  
of £787m august 2011 £817m the group 
holds £40m nominal value of its own 
debenture bonds and £37m of cash outside  
of the debenture structure giving net debt of 
£710m at august 2012 august 2011 £704m  
our net debt to ebitda ratio was 49 times  
at the year end august 2011 50 times 
within the debenture the debt service cover 
ratio was 20 times august 2011 20 times 
there is significant headroom above the 
default covenant debt service cover ratio  
of 13 times and is at a level at which  
cash upstream payments are permitted
pensions
the group operates two defined benefit 
pension schemes both of which are closed  
to new entrants movements in equity markets 
and corporate bond yields in the year have 
resulted in a decrease of £9m in the net 
pension liability with the net pension liability  
of £nil at 18 august 2012 22 spirit pub company plc
annual report 2012
business review
principal risks and uncertainties
the audit  risk committee of the company 
has reviewed the formal risk management 
framework for spirit and this has been 
approved by the board 
the aim of the spirit risk management 
framework is to identify evaluate and manage 
the risks and uncertainties to which the group 
is exposed over the past year the company  
has continued to build on that framework by 
the risk management activities which have 
been undertaken
the spirit management team have held regular 
risk management meetings and the risk 
register compiled by the company has been 
regularly updated in compiling the register 
risks were highlighted and then assessed 
based on the probability of their occurence 
and the impact they could have on the 
business to identify the material risks facing 
the business mitigation plans were then 
identified and implemented to ensure that 
risks which are rated on the basis of impact 
probability or both as requiring mitigation  
are managed appropriately 
the board has ultimate responsibility for the 
risk management framework and regularly  
and formally reviews the material risks  
the board is responsible for ensuring that 
business risks are appropriately managed  
by those responsible in the business and  
the board monitors key risk performance 
measures on a periodic basis
additional risk assurance is provided from  
a number of sources including but not limited 
to internal audit operational audit and where 
appropriate specialist outsourced internal 
audit resource they provide assurance to the 
board on key controls and the management  
of risk on an annual basis the audit  risk 
committee review the overall effectiveness  
of the risk management framework day to  
day evaluation of risk is carried out by the 
management of the group
spirit is exposed to a variety of financial 
operational economic and regulatory  
risks and uncertainties which it categorises  
under the following headings ‘market and 
economy’ ‘financial’ ‘operations people  
and infrastructure’ ‘regulatory’ and 
‘reputational’ key risks and how they are 
managed are detailed below however  
this is not an exhaustive list of all of the risks  
to which the business is exposed
some of the risks spirit faces are external and 
therefore beyond its control some risks may 
be considered to be currently immaterial but 
could emerge as material risks in the future 
the risk management processes are therefore 
designed to manage those risks which may  
have a material impact on the group’s ability 
to meet strategic objectives and which the  
group can mitigate by appropriate and timely 
management action rather than to fully 
mitigate all risks
the board is aware that these risks and 
uncertainties may either singularly or 
collectively affect the group’s revenue costs 
value of assets reputation or ability to  
meet strategic objectives and is therefore 
committed to continually reviewing and 
improving the risk management framework 23 spirit pub company plc
annual report 2012
business review governance financial statements
our key risks and uncertainties
risks and their impact mitigating actions and controls
market and economy
economic and market climate
there is a risk that economic factors such as rising interest 
rates declining wages higher unemployment tax increases 
lack of consumer credit and falling house prices could all 
adversely affect the level of consumer confidence which 
could result in a negative effect on the level of spending 
across both the retail and leisure industries any delay  
in economic recovery or further challenges could affect 
consumer expenditure spirit’s suppliers’ or tenants’ 
businesses and spirit’s revenue and cash flows
fluctuations in the uk property market as well as the current 
uncertain market conditions could impact the value of 
spirit’s property portfolio the ability to dispose of pubs  
at an appropriate value or the ability to sublet leased sites
•	 regular reviews of the impact of economic conditions on spirit’s budget  
and three year strategic plan are performed
•	 menus pricing and promotional offers are continually reviewed to adapt to the 
needs of guests
•	spirit continues to monitor the financial health of licensees
•	 spirit operates a flexible cost structure that allows quick cost reduction if demand 
weakens hence limiting damage to the business
price fluctuations 
there is an ongoing risk to the business of increases in 
supply costs including food drink utility costs taxes and 
duties these could be due to unavailability of products  
the economic climate inflationary price increases or 
changes in legislation
•	 supplier contracts have been negotiated to protect spirit against significant 
increases in food and drink costs and spirit has the potential to source products 
from a number of alternative suppliers
•	 electricity has been forward purchased for the next financial year and within  
the supply and services team there is a dedicated focus on monitoring and 
reducing utility usage
•	 careful cost control processes ensure that all costs including labour are 
budgeted and closely monitored and are subject to appropriate authorisation
competition and market innovation
there is a risk that spirit could lose market share andor 
revenue to competitors through aggressive market 
innovation from all sectors including retail
•	 active monitoring of all competitor activity including casual dining and  
grocery sectors 
•	 quarterly ‘brand strategy reviews’ ensure that emerging trends in both the  
pub and casual dining market are reflected in the evolution of brand offers
•	 measurement of guest satisfaction through guest recommends direct 
feedback and guest journey independent audit programmes allows a quick 
reaction to changes in guest behaviour
•	 innovation opportunities are taken through food and drink andor brand 
developments where appropriate
•	 digital media is used to obtain a quicker route to market to better realise any  
marketing opportunities
financial
liquidity and covenant risk
spirit’s capital structure is made up of debt issued share 
capital and reserves secured loan notes make up the 
majority of the group’s financing with approximately  
87 august 2011 90 of the capital balance on these 
loan notes being repayable after more than five years  
these borrowings are subject to financial covenants
•	 cash flow forecasts are produced to assist management in identifying liquidity 
requirements and are stress tested for possible scenarios this includes 
assessments of the ability to meet the restricted payment conditions in the 
securitisation structure in order that cash can be released to top company level
•	 cash balances are invested in short term deposits such that they are readily 
available to settle short term liabilities or fund capital additions
•	 covenants are closely monitored and stress tested to ensure the group is able  
to generate sufficient returns to service debt and meet covenant requirements
•	 the securitised debt is monitored by a variety of measures which are reported  
to debt providers on a quarterly basis
interest rate risk
spirit is exposed to interest rate risk from loan notes  
and borrows at both fixed and floating rates of interest
•	 derivative financial instruments such as interest rate swaps continue to be 
employed to generate the desired interest rate profile
•	 derivative financial instruments were employed such that 100 of all loans 
august 2011 100 are either at fixed rate or are converted to fixed rate  
as a result of swap arrangements over the terms of the loans thereby reducing 
exposure to changes in interest rates and producing a stable long term debt 
profile thus protecting the group from future movements in interest rates 24 spirit pub company plc
annual report 2012
business review
our key risks and uncertainties continued
risks and their impact mitigating actions and controls
financial continued
pensions
spirit has two defined benefit pension schemes which must 
be funded to meet required benefit payments the value and 
funding of the schemes are subject to risk of changes in life 
expectancy actual and expected price inflation changes  
in bond yields and future salary increases these could 
result in an increase in the pension fund deficit leading to 
unexpected increases in funding requirements the next 
triennial valuation of the schemes is being carried out as at 
october 2012
there is also a risk of unplanned cost and complexity 
impacting the group due to the introduction of auto 
enrolment pension legislation
•	 the defined benefit pension schemes are closed to new members and future 
accrual and instead defined contribution schemes are operated for the  
group’s employees
•	 the company continues to examine strategies which will further mitigate the  
risks of an increased deficit or reduced surplus – the medium to long term risk 
reduction strategy is currently being reviewed 
•	 a close relationship is maintained with the trustees of the pension scheme
•	 expert resource has been put into place to deal with the auto enrolment  
pension legislation
internal financial control
spirit is committed to maintaining a robust internal control 
environment this includes controls within the support 
centre and the managed pubs a lack of control could result 
in financial fraud or material error in the financial statements
•	 robust internal controls operate over all key processes including general controls 
such as segregation of duties and authorisation of contracts and expenditure
•	 an internal audit team reviews and reports on strengths and weaknesses in the 
internal control environment
•	 operational auditors provide assurance on controls within managed pubs and 
have completed 1199 risk based control audits during the year
•	 significant investment in it systems and infrastructure has continued in the year
operations people and infrastructure
change management
spirit is reliant on the successful implementation  
of operational initiatives to deliver both day to day 
improvements and the five year strategic plan the key 
change during the year which is currently ongoing is the 
‘pub in a box’ project – an update of business processes  
and it systems for electronic point of sale equipment  
stock management ordering and labour management
•	 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
•	 a ‘pub in a box’ steering group including business users has been set up to 
monitor delivery of business benefits in line with the business case for the project
information systems technology and security
business continuity management
there is a risk that critical business processes could be 
adversely impacted by the failure of systems upon which 
they depend which could result in loss of revenue
•	 work continues to increase the resilience and recoverability of business critical  
it infrastructure – this includes improved disaster recovery capability a new 
storage area network san and replacementvirtualisation of physical servers  
a new data centre and core switch replacement
•	 an incident management and disaster recovery plan is in place for critical 
business processes to mitigate the effects of the business being unable to 
operate in the event of a major incident
•	 the business has made further improvements to the plans during the year
•	 there is an offsite disaster recovery facility if access to the support centre  
or its systems are affected
supply chain management
spirit places reliance on a number of key suppliers and 
distributors to ensure continuous supply of food drink  
and other products into the group’s pubs failure of these 
suppliers or distributors could result in products not being 
delivered on time or to required standards
•	 supply chain arrangements have been improved in the year and are being 
reviewed on an ongoing basis
•	 disaster recovery and business continuity plans of key distributors are  
regularly reviewed
•	 product quality is closely monitored and the group has access to alternative 
products or suppliers if required
people risks
failure to recruit train and successfully retain key 
executives talented managers team players for managed 
pubs high calibre people for the support teams and 
successful licensees for leased pubs could impact the 
ability to deliver the company’s strategic five year plan and 
operational objectives
•	 a well developed and coherent programme of recruitment induction training  
and coaching is provided for managed employees and new licensees within the 
leased estate
•	 succession planning at all levels is being improved to ensure high calibre people 
are retained and talent development is accelerated
•	 a range of formal qualifications are available for employees throughout the 
business – these include an apprenticeship programme available to all  
employees and a masters degree programme for high performers
•	 the group carries out an annual employee engagement survey and regular 
listening groups to obtain direct feedback from employees very high levels  
of engagement and commitment were shown by the most recent survey  
more regular but shorter pulse surveys have been introduced in september 2012
•	 there is a formal remuneration strategy to ensure individuals and teams are  
paid fairly and competitively
•	 further initiatives in the year include focus on a new recruitment website  
social media activity a common understanding of calibre training to increase  
the skills of recruiting managers and personality tests at the identification stage 
of recruitment 25 spirit pub company plc
annual report 2012
business review governance financial statements
risks and their impact mitigating actions and controls
operations people and infrastructure continued
performance of the leased division
there is a risk that the strategy to innovate and change 
within the leased division is not implemented as a result  
of remaining reliant on the current operating model and 
therefore the leased business might not stabilise its 
performance in the expected timeframe this could result  
in nondelivery of future ebitda and the leased division 
falling behind the leased pub market
•	 a number of alternative operating models are currently being developed  
and tested at a detailed level to assess the options to develop the existing  
leased model 
•	 a performance management culture has been built with the focus on creating 
opportunities for each business to grow providing relevant pricing and range to 
help keep licensees competitive and the development of a recruitment pipeline  
of quality licensees
regulatory
changes in legislation
spirit is subject to many different areas of regulation 
particularly due to the high level of control over the sale of 
alcohol and can be subject to delay and failure to obtain 
required licences permits and approvals increasing public 
focus in areas such as binge drinking underage drinking 
and health impacts over recent years means that the 
government may introduce further regulation which may 
significantly affect the group
the policing and crime act 2009 introduced a new 
mandatory code of practice for licensing the sale of alcohol 
and the police reform  social responsibility act 2011 
further tightened controls on the sale of alcohol a late night 
levy and early morning alcohol restriction orders are to be 
introduced on 31 october 2012 as an enabling measure 
which local licensing authorities may then decide  
to implement
•	 spirit works closely with the rest of the industry to address the key issues facing 
the pub sector
•	 with regard to the late night levy and early morning alcohol restriction orders 
consideration has been given to being ready in the event that local authorities 
decide to implement
•	 the group ensures that training provided covers all aspects of licensing 
requirements and has due diligence in place to confirm that all pubs meet  
all licensing legislation
•	 spirit works closely with local licensing boards to ensure all individual  
pub licensing requirements are met and any issues are highlighted as soon  
as possible
health and safety
a health and safety accident or incident could lead to 
serious illness injury or even loss of life which could 
significantly impact spirit’s reputation
•	 health and safety is a standing agenda item at the monthly operations risk meeting 
which considers all aspects of health and safety across the managed estate
•	 independent inspectors are engaged to carry out professional safety audits  
on a regular basis
•	 health and safety policies have been formally documented and briefed to the 
support centre field based teams and the managed pubs and the company 
carries out an annual risk assessment for key areas
•	 the ‘be safe legal and compliant’ hardline introduced in the prior year as part 
of the operational excellence programme has continued to improve the health 
and safety culture within the managed pubs and has resulted in a significantly 
reduced number of accidents and environmental health incidents
reputational
service standards and threats to brands and 
reputation
poor service or an adverse incident could materially  
impact or damage the reputation of one of the managed  
pub brands this could affect the ability of the brand to 
attract future guests or negatively impact its ability to 
generate income
•	 guests are considered to be at the heart of the business and the operational 
excellence and ‘guest at the heart’ programmes introduced in the prior year  
have continued to deliver focus on the guest experience
•	 these initiatives are supported by a coherent programme of training for all team 
members to ensure teams are motivated to create a great guest experience
•	 a third party supplier performs independent guest journey audits and all of  
our guests are invited to complete a guest recommends satisfaction survey  
so standards can continue to improve
•	 independent inspectors and an independent operational audit team provide 
assurance on internal controls within the managed pubs
•	 safety measures are in place to ensure that product integrity is maintained  
and that all food and drink products are fully traceable
•	 an incident management plan ensures that products can be recalled quickly  
if required
•	 external experts have been identified and briefed to provide advice quickly  
if required 26 spirit pub company plc
annual report 2012
governance
board of directors
walker boyd aged 60
chairman
appointed nonexecutive chairman in july 2011 
in preparation for the demerger of spirit from 
punch taverns plc punch taverns where he 
was nonexecutive director from april 2011
he is nonexecutive chairman of whsmith  
a position he has held since 1 september 2010 
after joining the board as nonexecutive 
director in february 2010 he has substantial 
retail expertise both in the uk and the usa 
he was group finance director at signet 
jewellers limited previously signet group 
plc until june 2010 having held this position 
since 1995
mike tye aged 58
chief executive officer
appointed chief executive officer in 
december 2011 after briefly holding the 
position of deputy chief executive officer 
from june 2011 this was in connection with 
the demerger of spirit from punch taverns 
where he was managing director for the 
managed estate from july 2008
mike has spent over 20 years working in many 
different areas of the leisure business mainly 
with whitbread forte and aramark in recent 
years he has been managing director of 
costa coffee premier travel inn where he led 
the acquisition and integration of premier 
lodge to travel inn and david lloyd leisure 
where he led the business turnaround and 
subsequent sale his early career was spent 
managing fmcg brands and running his own 
wine and spirit retail and wholesale business
paddy gallagher aged 49
finance director
appointed finance director in november 2011 
prior to that paddy held a number of high 
profile finance positions including chief 
financial officer at rank group plc chief 
financial officer at quadriga worldwide ltd 
uk finance director at dell emea and director 
of financial operations at wang international 27 spirit pub company plc
annual report 2012
business review governance financial statements
tony rice aged 60
senior independent nonexecutive 
director
appointed senior independent nonexecutive 
director of spirit in july 2011 formerly senior 
independent nonexecutive director of punch 
taverns from march 2010 and independent 
nonexecutive director from december 2007 
tony has many years’ experience at board 
level with some of the uk’s leading companies 
he spent 16 years with bae systems from 
1986 to 2002 culminating in the role of group 
managing director of commercial aircraft  
he then spent three years at tunstall plc as 
chief executive from 2002 until its sale to 
bridgepoint in 2005 tony is chief executive 
officer of cable  wireless communications 
tony was also nonexecutive director and 
chairman of the audit committee at cable  
wireless from 2003 to 2006 and at telewest 
from 2000 to 2003
mark pain aged 51
independent nonexecutive director
appointed independent nonexecutive 
director of spirit in july 2011 in preparation  
for the demerger of spirit from punch taverns 
where he was independent nonexecutive 
director from december 2007
mark has a wealth of experience as a listed 
company main board director mark served  
as chief financial officer of barratt 
developments plc from 2006 to 2009 he was 
previously at abbey national where he held  
a number of senior executive and group board 
positions including group finance director 
from 1998 to 2001 and customer sales 
director from 2002 to 2005 mark is a  
nonexecutive director at aviva uk johnston 
press and lsl property services and is also 
chairman of london square mark is a fellow 
of the institute of chartered accountants
christopher bell aged 54
independent nonexecutive director 
appointed independent nonexecutive 
director of spirit in august 2011
christopher was chief executive officer  
of ladbrokes plc between 2006 and 2010  
prior to that he spent 12 years at alliedlyons 
and held a number of senior positions six years 
as managing director at hilton group and 
eight years as managing director at ladbroke 
group christopher is also currently senior 
independent director of quintain estates and 
development and was appointed as a director 
of bet butler limited in september 2012  
he has also been a board member of the 
responsible gaming strategy rgsb  
since 2009
julie chakraverty aged 40
independent nonexecutive director
appointed independent nonexecutive 
director of spirit in january 2012 
julie is a nonexecutive director of aberdeen 
asset management plc she spent 13 years  
at ubs investment bank where she was a 
board member and held a number of senior 
global leadership positions with a specialist 
background in risk management and fixed 
income julie was also nonexecutive director 
of paternoster the specialist pensions insurer 
she started her financial services career with 
jp morgan 28 spirit pub company plc
annual report 2012
governance
executive management team
mike tye aged 58
chief executive officer
appointed chief executive officer in 
december 2011 after briefly holding the 
position of deputy chief executive officer 
from june 2011 this was in connection with 
the demerger of spirit from punch taverns 
where he was managing director for the 
managed estate from july 2008
mike has spent over 20 years working in many 
different areas of the leisure business mainly 
with whitbread forte and aramark in recent 
years he has been managing director of 
costa coffee premier travel inn where he  
led the acquisition and integration of premier 
lodge to travel inn and david lloyd leisure 
where he led the business turnaround and 
subsequent sale his early career was spent 
managing fmcg brands and running his own 
wine and spirit retail and wholesale business
paddy gallagher aged 49
finance director
appointed finance director in november 2011 
prior to that paddy held a number of high 
profile finance positions including chief 
financial officer at rank group plc chief 
financial officer at quadriga worldwide ltd 
uk finance director at dell emea and director 
of financial operations at wang international
alan morgan aged 35
national operations director
appointed national operations director  
in january 2011 prior to that alan was an 
operations director within spirit and had  
held a number of senior operational and 
commercial roles within whitbread and  
david lloyd leisure 29 spirit pub company plc
annual report 2012
business review governance financial statements
chris welham aged 41
managing director spirit leased 
appointed managing director spirit leased  
in february 2012 prior to that chris was 
operations director at greene king pub 
partners leading half of their leased business 
chris has over 15 years’ experience in the 
industry and has held a number of senior 
operational roles in greenalls pubmaster  
and punch taverns
clive briscoe aged 51
commercial director
appointed commercial director in june 2010 
clive joined spirit from ideal shopping direct 
where he was director for customer operations 
and business development with responsibility 
for marketing ecommerce call centres and 
new business development
clive has held a number of high profile 
marketing roles with carlsberg tetley  
gus home shopping and argos retail group  
in 2003 he joined littlewoods shop direct 
group where he played a key role in 
transforming the brands from traditional 
catalogues into a predominantly online 
business with web sales in excess of £500m
debbie moore aged 50
hr director
appointed hr director in february 2012  
prior to that debbie held a number of high 
profile hr roles including hr director at  
the post office from 2007 to 2012 leading  
the people agenda of that organisation 
through significant change which impacted 
both employee engagement and business 
profitability previously debbie was also  
hr director at hays plc and uk retail  
hr director at the dixons group
bob broadbridge aged 53 
it director
appointed it director in may 2010
bob joined spirit from the health lottery 
where he held the position of chief operating 
officer for it and operations previously he 
was it director at the tote whsmith and 
superdrug his early career was spent with 
mars and cadburyschweppes 30 spirit pub company plc
annual report 2012
governance
directors’ report
the directors present to shareholders their report on  
the affairs of the company together with the audited  
financial statements for the group for the 52 weeks ended  
18 august 2012
certain information required for disclosure as part of this 
report is provided in other sections of the annual report and 
financial statements 2012 as appropriate these include the 
business review the corporate governance statement the 
audit  risk committee report the nomination  governance 
committee report report on directors’ remuneration and the 
financial statements and these are accordingly incorporated 
into this directors’ report by reference
principal activity
the group’s main trading activities are divided into two 
divisions a managed division which involves pubs that are 
directly managed by the group and a leased division which 
involves the granting of leases to licensees who run the pub 
as their own business paying rent to the group purchasing 
beer and other drinks from the group and entering into profit 
sharing arrangements for income from leisure machines
business review
a full review of the year’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 audit  risk committee 
report and our key risks and uncertainties on pages 38 to 39 
and 23 to 25 respectively and kpis are shown on page 1
the business review has been prepared solely to assist  
the shareholders in assessing the group’s strategies and  
the potential of those strategies it should not be relied upon  
by any other party for any other purpose forward looking 
statements have been made by the directors in good faith 
using information available up to the date of this report  
such forward looking statements involve risk and uncertainty 
because they relate to events and depend on circumstances 
that may or may not occur in the future and any such 
statements may be influenced by factors that could cause 
actual results and outcomes to be materially different  
such statements should be regarded with caution and the 
group undertakes no obligation to revise or update them
results and dividends
the results of the group for the year are set out in the 
consolidated income statement on page 51 an interim 
dividend of 065 pence per share was paid to shareholders 
on 8 june 2012 the directors have proposed a final dividend 
of 130 pence per share payable on 5 february 2013 to 
shareholders on the register as at 11 january 2013 this will 
bring the total dividend for the year to 195 pence per share
directors
at 18 august 2012 the board comprised seven members 
consisting of the chairman two executive directors and  
four nonexecutive directors all four of whom were 
independent in accordance with the criteria set out in  
b11 of the uk corporate governance code 
during the year the following board changes took place
•	 on 7 november 2011 russell margerrison resigned  
as interim finance director and paddy gallagher was 
appointed finance director
•	 on 16 december 2011 ian dyson left the business  
by stepping down as chief executive officer and was 
replaced by mike tye and
•	 on 20 january 2012 julie chakraverty was appointed  
as nonexecutive director
the procedure for the appointment replacement and 
reelection of directors and the role of the nomination  
 governance committee is set out in the corporate 
governance statement and nomination  governance 
committee report on pages 34 to 36 and 37 respectively
there are no special provisions contained in any of the 
directors’ contracts for loss of office beyond normal 
contractual obligations further details of directors’ contracts 
are contained within the report on directors’ remuneration 
on pages 40 to 49
 wherever in this report we refer to ‘he’ ‘his’ or ‘him’ those references  
are deemed to include ‘she’ ‘hers’ or ‘her’ as the context requires 31 spirit pub company plc
annual report 2012
business review governance financial statements
directors’ interests
the beneficial interests of directors who held office at  
18 august 2012 in the share capital of the company are 
shown below
at
15 october
2012
ordinary
shares
at
18 august
 2012
ordinary
shares
at
20 august
2011
ordinary
shares
walker boyd 200000 200000 150000
mike tye 662131 568075 188707
paddy gallagher 101276 75000 –
tony rice 503013 503013 503013
mark pain 29177 29177 29177
christopher bell 110266 110266 –
julie chakraverty 100000 100000 –
none of the directors have any other interests in the shares 
or other securities of the company or of any other company 
in the group
no director has a material interest in any significant contract 
with the company or any of its subsidiaries during the year
a statement of the directors’ remuneration is set out in the 
report on directors’ remuneration on pages 40 to 49
directors’ conflicts of interest
during the year the board has reviewed 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  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 at the date of this report there are qualifying third party 
indemnity provisions governed by the companies act 2006  
in place under which the company has agreed to indemnify 
the directors and the company secretary of the company 
and the directors and the company secretary of any 
member of the group or of an associated company or  
certain companies in which the company has a direct  
or indirect minority shareholding or other interest to the 
extent permitted by law and the articles of association 
against all liability arising in respect of any act or omission 
in their duties 
the company’s indemnity provision was in place throughout 
the year and remains in place as at the date of this report 
the indemnity is uncapped in amount but does not provide 
cover in the event that the act or omission constitutes wilful 
misconduct or recklessness is conduct which would entitle 
the company to dismiss the director or officer summarily 
without compensation or pay in lieu of notice or if the 
director or officer is entitled to recover any amount in relation 
to the liability from any other person in accordance with 
section 236 of the companies act 2006 the group also 
maintains liability insurance for its directors and officers 
substantial shareholdings
as at 15 october 2012 being the last business day prior  
to the publication of this report the company had 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
glenview capital   
 management
1553 102517502 –
schroders 750 49484017 –
alchemy special   
 opportunities
630 40522000 –
norges bank 601 39638812 –
aberforth partners 524 34574520 –
old mutual asset   
 managers
520 34298997 –
standard life 494 31764819 –
glg partners lp 471 21596799 8692975
barclays plc 423 27140174 –
royal bank of canada 363 23337957 –
legal  general 304 20083254 –
political and charitable contributions
during the year the group made no charitable or  
political contributions 
the company does not make political donations and has  
no intention of making donations to what are generally 
regarded as political parties or political organisations within 
the european union however as the legislation is very 
broadly drafted as a precautionary measure a resolution  
to permit the company to make political donations and  
incur political expenditure is included as a resolution  
at the company’s annual general meeting agm 32 spirit pub company plc
annual report 2012
governance
directors’ report continued
employees
the total number of employees at the end of the year was 
17157 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 
emphasis on communications with employees which  
take place at many levels through the organisation on both  
a formal and informal basis the business runs an annual 
employee engagement survey and regular listening and 
consultation groups which are attended by employees from 
all work groups and which are hosted by members of the 
executive committee 
the group is committed to diversity in employment  
across the group and to providing equal opportunities  
in recruitment promotion career development training  
and reward to all employees without discrimination after 
reasonable adjustment 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 seek to provide continuing employment
employees are also offered the opportunity to share in  
the company’s success by owning shares in the company 
via the group’s hmrc approved share incentive plan which 
is open to all employees of the group including the executive 
directors launched in november 2011 currently 272 eligible 
employees participate and have the opportunity to purchase 
up to £1500 of shares per annum out of pretax salary 
partnership shares with the company awarding additional 
shares on a 11 ratio matching shares the 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 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 the shares are held in 
the ebt for five years the matching shares are released to 
the employee free of tax and national insurance
the environment
the group regards compliance with relevant environmental 
laws and the adoption of responsible standards as integral  
to its business operation it is also committed to introducing 
measures to limit any adverse effects its business may  
have on the environment and will promote continuous 
improvement in accordance with best available techniques 
further information on corporate social responsibility can  
be found on pages 16 to 19 
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 no days’ purchases 
outstanding in trade creditors
financial instruments
the group’s policy on the use of financial instruments  
is set out in note 22 to the financial statements
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 ordinary shares the share 
capital note on page 87 contains full details of shares allotted 
during the year as at the date of this report the company 
does not hold any shares in treasury
at the first agm of the company held on 16 december 2011 
the company obtained shareholder authority to buy back up 
to 65965596 shares representing approximately 10 of the 
company’s issued equity share capital at the time at the 
company’s forthcoming agm authority will be sought to buy 
back up to 66009571 shares representing approximately 
10 of the company’s issued equity share capital as at the 
time of the agm this authority will only be exercised by the 
directors if it is considered that it will result in an increase in 
earnings per share and will benefit shareholders generally 
authority will also be sought at the forthcoming agm for 
directors to allot up to 220031904 shares in the company 
representing approximately onethird of the company’s 
issued equity share capital excluding treasury shares 
and up to 440063808 equity securities representing 
approximately twothirds of the company’s issued equity 
share capital excluding treasury shares the board  
will also seek authority to disapply preemption rights  
over 33004786 shares representing approximately 5  
of the company’s issued equity share capital at the time 33 spirit pub company plc
annual report 2012
business review governance financial statements
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 those which may from time to time be 
applicable under existing laws and regulations for example 
under the market abuse directive and 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
in addition pursuant to the listing rules of the financial 
services authority directors and persons discharging 
managerial responsibility of the company require prior 
approval from the company to deal in the company’s 
securities and are prohibited from dealing during  
a close period
general meetings
at a general meeting of the shareholders the company’s 
articles of association may be amended by special 
resolution and on a show of hands every member who  
is present in person and proxy entitled to vote shall have  
one vote on a poll every member who is present in person 
and 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 meeting
the board uses the agm to communicate with institutional 
and private shareholders and welcomes participation from  
all shareholders the chairman seeks to ensure that the 
chairmen of the audit  risk remuneration and nomination 
 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
communications with shareholders are given high priority  
to ensure that there is a balanced and well understood 
assessment of the group’s position and prospects  
the company aims to provide as much information as is 
commercially sensible in each case to existing and potential 
investors recognising that transparency is the best way to 
develop understanding of the group’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 annual and interim 
results announcements the chairman also writes to the top 
ten major shareholders on an annual basis inviting them to 
correspond with the nonexecutive directors if they so wish
subsequent events
there have been no significant subsequent events
going concern
the financial position of the group its cash flows liquidity 
position and borrowing facilities are described in the 
financial review on pages 20 and 21 note 22 to the financial 
statements includes the group’s objectives policies and 
processes for managing its capital its financial risk 
management objectives details of its financial instruments 
and hedging activities and its exposures to credit and 
liquidity risk
after reviewing budgets and other longer term plans  
and making enquiries the directors have a reasonable 
expectation that the company and the group have adequate 
resources to continue in operational existence for the 
foreseeable future accordingly they adopt the going concern 
basis of accounting in preparing the financial statements
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
ian powell
general counsel and company secretary
15 october 2012 34 spirit pub company plc
annual report 2012
governance
corporate governance statement
compliance statement
the board attaches the highest priority to corporate 
governance and during the year the company has 
demonstrated its commitment to the uk corporate 
governance code the code
1
 by being fully compliant with 
all of the provisions set out in the code and with chapter 7  
of the disclosure and transparency rules the dtr 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 the nomination  
governance committee report the audit  risk committee 
report and the report on directors’ remuneration provide 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 
role of the board
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 convened to 
consider matters which are time critical or which require 
further discussion
whilst the board has delegated the normal operational 
management of the company to the executive directors  
and its executive committee it retains a schedule of matters 
which are specifically reserved for its decision 
the company has also established audit  risk 
remuneration and nomination  governance committees 
with formally delegated duties and responsibilities and 
written terms of reference which are available on the 
company’s website wwwspiritpubcompanycom
from time to time separate committees are set up by the 
board to consider specific issues when the need arises 
together however 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 
its executive committee 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
appointment and replacement of directors
directors may be appointed by the company by ordinary 
resolution or by the board at the company’s forthcoming 
agm in accordance with the company’s articles of 
association julie chakraverty will offer herself for election 
this being the first opportunity since she joined the board  
for shareholders to approve her appointment the code 
recommends that all directors should be submitted for 
reelection at regular intervals which for directors of  
ftse 350 index companies should be annually and  
the company has decided to comply with this provision 
accordingly all other directors will offer themselves for 
reelection at the agm each of the directors has been 
subject to a formal performance evaluation process  
and it is believed that they all continue to be effective in  
and demonstrate commitment to their respective roles  
the biographical details of each director can be found  
on pages 26 and 27 
the company may by special resolution remove any 
director before the expiration of his period of office  
the office of a director shall be vacated if i he resigns or 
offers to resign and the board resolves to accept such offer 
ii he becomes physically or mentally incapable of acting  
as a director and remains so for more than three months  
iii he is absent without the permission of the board from 
meetings of the board whether or not an alternate director 
appointed by him attends for six consecutive months and 
the board resolves that his office is vacated iv he becomes 
bankrupt or compounds with his creditors generally  
v he is prohibited by law from being a director vi he 
ceases to be a director by virtue of the companies act 2006 
or vii he is removed from office pursuant to the company’s 
articles of association
powers of directors
subject to the company’s 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 board which may exercise all the powers  
of the company whether relating to the management of the 
business or not in particular the board may exercise all the 
powers of the company to borrow money to mortgage or 
charge any of its undertakings property assets present  
and future and uncalled capital and to issue debentures  
and other securities and to give security for any debt  
liability or obligation
1  a copy of the code can be found on the financial reporting council’s 
website wwwfrcorguk 35 spirit pub company plc
annual report 2012
business review governance financial statements
meeting attendance
during the year the board met twelve times attendance at 
these meetings and those of its committees was as follows
board
audit  risk
 committee 
nomination 
 governance
 committee 
remuneration
 committee
 
walker boyd 12 na 2 3
mike tye 12 na na na
paddy gallagher
 
9 na na na
tony rice 12 4 2 3
mark pain 12 4 2 3
christopher bell 10 4 2 2
julie chakraverty 5 2 0 1
following his appointment to the board paddy gallagher 
attended all board meetings held christopher bell and  
julie chakraverty also attended all board and committee 
meetings held with the exception of one due to commitments 
predating their appointments as directors
in addition to their attendance at board and committee 
meetings the chairman met with the nonexecutive 
directors independently of the executive directors in 
accordance with the requirements of section a42 of  
the code the nonexecutive directors led by the senior 
independent director also met without the chairman being 
present to assess the performance of the chairman
chairman and chief executive officer
the roles of the chairman and the chief executive officer are 
distinct and separate with a clear division of responsibilities 
the chairman leads the board and ensures the effective 
engagement and contribution of all nonexecutive directors 
and executive directors the chief executive officer is 
responsible for all the group’s businesses and acts in 
accordance with the authority delegated by the board 
responsibility for the development of policy and strategy 
and operational management is delegated to the  
chief executive officer finance director and the  
executive committee
senior independent nonexecutive director sid
tony rice has been appointed sid and is responsible for
•	supporting the chairman
•	 leading the other nonexecutive directors in the annual 
review of the chairman’s performance and
•	 monitoring the division of responsibilities between the 
chairman and the chief executive officer
 
he is also available as the person to whom shareholders may 
express any concerns which have not been satisfactorily 
resolved by either the chairman or the executive directors
nonexecutive directors
the company actively encourages its nonexecutive 
directors to
•	  constructively challenge the strategy proposed by  
the chief executive officer and executive directors
•	 scrutinise and challenge the company’s performance
•	 satisfy themselves as to the integrity of financial 
information and that financial controls are robust and 
defensible and
•	 ensure that appropriate remuneration and succession 
planning arrangements are in place in relation to the 
executive directors and the executive committee
where nonexecutive directors have concerns regarding  
the running of the company they are encouraged to refer  
the matter to the relevant individual executive director  
at a meeting of the board or the company secretary  
should there remain a concern this is recorded in the  
relevant minutes until further action is taken to remedy it
to supplement their knowledge and experience  
nonexecutive directors are authorised to serve on other 
company boards as long as they set aside enough time  
to make a satisfactory commitment to their role at spirit
other appointments
to ensure they remain focused executive directors are not 
permitted to take more than one nonexecutive directorship 
in or the chairmanship of a ftse 100 company furthermore 
any fees received in respect of these appointments are 
disclosed in the audited section of the report on directors’ 
remuneration as a footnote to the directors’ emoluments 
table and are retained by the executive directors concerned 36 spirit pub company plc
annual report 2012
governance
corporate governance statement continued
balance and independence
the board includes a combination of both executive and 
nonexecutive directors so that no individual or small group 
can dominate proceedings or the board’s decision making 
as a company spirit values diversity in its workforce for the 
strength and vitality that it brings to the business diversity  
is an equally important consideration at board level and  
the company considers the need for the board to reflect  
an appropriately diverse balance of skills and experience 
whenever it makes a board appointment
following changes to the board during the year the directors 
believe that the composition of the board and the 
committees is appropriate for spirit with a correct balance  
of skills and experience in each case further information  
on the changes to the board’s composition can be found in 
the nomination  governance committee report on page 37
upon his appointment as chairman walker boyd was 
considered to meet the independence criteria set out  
in section a31 of the code furthermore upon their 
appointment as nonexecutive directors tony rice  
mark pain christopher bell and julie chakraverty were  
also considered to be and continue to be independent 
accordingly over half of the directors on the board are 
independent in character and judgement and free from 
relationships or circumstances which are likely to affect  
or could appear to affect their judgement 
the terms and conditions of appointment of the company’s 
nonexecutive directors are available for inspection at the 
company’s registered office during normal business hours 
and for the period 15 minutes prior to and during the 
company’s agm at the place of the agm
access to advice
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 the executive committee and 
external advisers to aid its understanding when and  
if applicable
all directors have access to independent professional 
advice at the company’s expense should they require  
it to discharge their duties they also have access to the 
advice and services of the company secretary who is 
responsible for
•	 advising the board through the chairman on all 
governance matters
•	 providing assistance and information on corporate 
administration and legal matters
•	 ensuring that information flows freely between the board 
its committees its nonexecutive directors and the 
executive committee and
•	 ensuring that board procedures are followed and that all 
applicable legislation and regulations are complied with
by order of the board
ian powell
general counsel and company secretary
15 october 2012 37 spirit pub company plc
annual report 2012
business review governance financial statements
nomination  governance committee report
the members of the nomination  governance committee 
the committee comprise walker boyd chairman of the 
committee tony rice mark pain christopher bell and  
julie chakraverty
the committee’s terms of reference state that it will meet 
twice annually and then as and when required and that  
the chief executive officer and the company secretary  
are permitted to be invited to attend for part or all of  
each meeting 
during the year two meetings of the committee took place 
which focused on
•	the appointment of paddy gallagher as finance director
•	a review of the committee’s terms of reference
•	a review of the board’s conflicts of interest
•	 a review of the company’s compliance with the uk 
corporate governance code and
•	 the appointment of julie chakraverty as  
nonexecutive director
board composition
the main purpose of the committee is to review the 
structure size and composition including the skills 
knowledge and experience of the board and make 
recommendations to the board with regard to any 
adjustments that are deemed necessary 
in its assessment of the board during the year the 
committee reviewed the board’s mix of skills and experience 
and identified three main areas to strengthen finance  
risk management and diversity this resulted in the 
appointments of paddy gallagher and julie chakraverty
upon demerger from punch taverns plc in august 2011  
the role of finance director was undertaken by russell 
margerrison in an interim capacity whilst a recruitment 
process took place on 12 september 2011 it was announced 
that paddy gallagher would join the board as finance 
director on 7 november 2011 bringing with him a wealth  
of financial and industry experience 
on 20 january 2012 julie chakraverty who has a 
background of senior global leadership positions finance 
and risk management joined the board as a nonexecutive 
director and sits on all three of the company’s committees 
audit  risk nomination  governance and remuneration
an external search consultancy was used for both  
paddy gallagher and julie chakraverty’s appointments  
this selection process was also supplemented with  
several interviews to guarantee the calibre and suitability  
of candidates for the positions 
upon their appointment paddy gallagher and  
julie chakraverty each undertook extensive induction 
programmes tailored to their positions which included
•	 individual time with the chairman the chief executive 
officer and other members of the board and  
executive committee
•	 meetings with the company’s external advisers brokers 
and substantial shareholders
•	 an internal induction course which introduces the group 
its divisions and its employees and
•	 visits to the group’s managed and leased pubs and  
those of its competitors
performance evaluation
during the year the board undertook a formal evaluation  
of its own performance and that of its committees and 
chairman the process was led by the chairman assisted  
by the company secretary except in relation to his own 
performance which was led by the sid the evaluation took 
the form of a detailed questionnaire and peer assessment 
with supplemental meetings between the chairman and 
individual directors to discuss the findings further a separate 
meeting between the sid and the board excluding the 
chairman also took place to discuss the chairman’s 
evaluation the final results of the evaluation were discussed 
by the board and an appropriate action plan was agreed 
furthermore it is recognised that an externally facilitated 
evaluation of the board needs to be performed within the 
next two financial years in line with the requirements of 
section b62 of the code
to assist personal development each director biannually 
reviews their personal development plan to set their goals 
and assess their progress during the year ongoing training 
and proactive coaching is provided by the company to 
develop support and update the knowledge and skills  
of its board including days out in trade regular meetings 
with the executive committee internal and external courses 
and continual dialogue with peers and colleagues directors 
are expected to take responsibility for their own individual 
developmental needs in conjunction with the chairman 
company secretary and hr director
on behalf of the committee
walker boyd
nomination  governance committee chairman
15 october 2012 38 spirit pub company plc
annual report 2012
governance
audit  risk committee report
the members of the audit  risk committee the committee 
comprise mark pain chairman of the committee tony rice 
christopher bell and julie chakraverty all of whom are 
independent nonexecutive directors of the company and 
at least one of the members has recent and relevant financial 
experience the committee is compliant with section c31  
of the code and satisfies the requirements of chapter 71  
of the dtr in accordance with its terms of reference the 
committee holds a minimum of four meetings each financial 
year with further meetings called as required the internal 
and external auditors together with the chairman finance 
director the company secretary and other persons may  
also attend the meetings by invitation
during the year four meetings of the committee took place 
which focused on
•	 the 2011 annual report and financial statements and 2012  
interim results 
•	 the bribery act and the company’s antibribery procedures 
and policies
•	 reviewing the effectiveness of the external auditors and 
their overall performance
•	 the company’s risk management framework and  
internal controls
•	 the internal audit function and nonaudit services provided 
by the external auditor and
•	 the company’s financial controls treasury and whistle 
blowing policies
the committee’s responsibilities are set out in its terms  
of reference which are available on the company’s website 
they comprise all matters indicated by the dtr and the 
code including
•	 monitoring and reviewing the integrity of the annual and 
interim financial statements of the company and any 
formal announcements relating to the company’s  
financial performance
•	 reviewing the policies and process for identifying and 
assessing the company’s business risks 
•	 reviewing the internal audit plan and resourcing monitoring 
and reviewing the effectiveness of the company’s internal 
audit function
•	 making recommendations to the board in relation to the 
appointment reappointment and removal of the external 
auditor and approving the remuneration and terms of 
engagement of the external auditor
•	 approving and reviewing the policy on the use of the 
external auditor for nonaudit services and
•	 reviewing and monitoring the external auditor’s 
independence and objectivity and the effectiveness of the 
audit process taking into consideration relevant guidance
risk management internal control and  
internal audit
the responsibility for managing risk is retained by the board 
but the committee’s terms of reference provide that the 
company’s risk management policy and framework the 
adequacy of risk information and reporting the effectiveness 
of the internal control environment and the effectiveness  
of internal audit are monitored by the committee
risk management
during the year the committee reviewed the company’s  
risk register and the risk management framework which 
requires that business risks are reviewed at least quarterly  
a summary of these risks can be found in our key risks  
and uncertainties on pages 23 to 25
internal control 
the features of the company’s systems of internal  
control include
•	 an established organisational structure with clearly defined 
lines of responsibility and delegation of authority
•	 documented and enforced policies and procedures
•	 comprehensive budgets and forecasts reviewed  
and revised on a regular basis with performance 
monitored against them and explanations obtained  
for material variances
•	 a detailed investment approval process with a hierarchical 
approval structure and post investment appraisals
•	 an internal audit function which performs regular 
assessments of the quality and effectiveness of risk 
management and the internal control environment
•	 regular reporting on internal audit control updates 
changes to accounting policies and any accounting  
and legal developments
•	 documented fraud ethics bribery and whistle blowing 
policies and procedures regular review of current whistle 
blowing regulations and reporting of any whistle blowing 
incidents to the committee
•	 a regular review of treasury policies and activities  
by the committee
•	 appointment of staff of the highest calibre to fulfil their 
allotted responsibilities together with an established 
programme of management and staff development  
and succession planning and
•	 formal financial reporting processes for preparation  
of the consolidated accounts 39 spirit pub company plc
annual report 2012
business review governance financial statements
internal audit
during the year a review of the effectiveness of the system  
of internal controls of the company took place to ensure  
the effectiveness of those controls in order to safeguard 
shareholders’ interests and the company’s assets and 
guarantee that robust financial reporting processes are  
in place 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  
it should therefore be recognised that these systems can 
only provide reasonable and not absolute assurance against 
material misstatement or loss 
 
external 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 the external auditor is invited  
to provide services where their position as auditor renders 
them best placed to undertake the work in the case of other 
services no contracts in excess of £50000 in value can be 
awarded to the external auditor and no contracts can be 
awarded once commitments of half the current audit fee have 
been made without prior approval during the year £15000 
in nonaudit fees were paid to the external auditors 
one of the primary purposes of the committee is to make  
a recommendation on the appointment or reappointment  
of the external auditors during the year the committee 
approved the reappointment of kpmg audit plc as auditors 
of the company having reviewed their independence and 
objectivity and recommended to the board that they be 
reappointed and their proposed fees authorised
employee concerns
the company has in place documented fraud bribery and 
whistle blowing policies and procedures to enable employees 
to raise concerns about any possible improprieties within  
the group any reported incidents are internally investigated 
and documented with follow up action taken as appropriate 
during the year substantial work has been undertaken in 
respect of the company’s policies and training with regards 
to the bribery act 2010 
on behalf of the committee
mark pain
audit  risk committee chairman
15 october 2012 40 spirit pub company plc
annual report 2012
governance
report on directors’ remuneration
dear shareholder
i am pleased to present the report on directors’ remuneration 
for the year ended 18 august 2012 the board will be seeking 
approval for this report from shareholders at the next agm 
the policy of the remuneration committee the committee 
has been designed to help drive business performance and 
maximise shareholder value the main features of the 
remuneration policy for executive directors are as follows
•	base salaries and pension provision remain unchanged
•	 annual bonus potential is capped at 150 of base salary 
for the chief executive officer and 100 of base salary for 
the finance director in each case 75 of bonus potential 
is based on financial metrics and 25 on the achievement 
of individual targets no bonus will be payable unless a 
threshold level of profit before tax is achieved
•	 long term incentive awards are granted under the 
company’s long term incentive plan 2011 grant levels  
will normally be in the range of 80 to 150 of base salary 
in any financial year awards will vest for a combination of 
sliding scale relative total shareholder return and earnings 
per share performance targets
as highlighted in my letter last year mike tye stepped up 
to the role of chief executive officer to succeed ian dyson  
this year has also seen paddy gallagher join the  
board as our finance director from 7 november 2011  
julie chakraverty has also joined the board as an additional 
nonexecutive director from 20 january 2012
this year has seen the announcement of the much publicised 
department of business innovation and skills bis proposals 
on executive pay the committee will monitor the final 
outcome and remains committed to consulting shareholders 
and their representative bodies on any policy changes we 
might make
the committee unanimously recommends that shareholders 
vote to approve the report on directors’ remuneration
tony rice
remuneration committee chairman
15 october 2012 41 spirit pub company plc
annual report 2012
business review governance financial statements
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 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 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 committee
the members of the committee comprise tony rice 
chairman of the committee walker boyd mark pain 
christopher bell and julie chakraverty the committee  
is responsible for determining and agreeing with the board 
the broad policy for the remuneration of the chief executive 
officer the finance director the chairman and such other 
members of the executive committee as it is designated  
to consider the committee within the terms of the agreed 
policy determines the total individual remuneration package 
of each executive director and agreed members of the 
executive committee in addition the committee ensures 
that provisions regarding disclosure of remuneration are 
fulfilled the committee makes recommendations to the 
board on the remuneration and incentives for the executive 
directors members of the executive committee and  
the chairman and monitors the consistency and rigour  
of their implementation the committee also oversees  
the remuneration policy of the group and ensures that  
no director is involved in decisions as to his own 
remuneration the committee is constituted in accordance 
with the recommendations of the code in accordance  
with its terms of reference the committee holds a minimum 
of two meetings each financial year with further meetings 
called as required
during the year three meetings of the committee took  
place which focused on the following key tasks
•	increasing clawback provision
•	 approving the remuneration packages for paddy gallagher 
and mike tye
•	approving the departure terms of ian dyson
•	 reviewing base salaries of executive directors and  
the executive committee
•	recommending long term incentive award levels
•	approving levels of annual bonus payout and
•	keeping up to date with bis proposals
advisers to the committee
during the year the committee received independent 
remuneration advice from new bridge street nbs part  
of aon plc this independent adviser was appointed by the 
committee and is accountable to it aon plc also provides 
consulting advice to the group in respect of its pension 
schemes and actuarial investment and other advice to  
the pension scheme trustees the committee does not 
believe that the independence of its adviser is compromised 
by these other appointments the terms of engagement 
between the committee and nbs are available from the 
company secretary on request nbs is a signatory to  
the remuneration consultants’ code and has provided  
a statement confirming its independence in line with best 
practice the committee will assess from time to time 
whether the appointment of nbs remains appropriate  
or should be put out to tender as part of its effectiveness 
review the committee also consults with the chief executive 
officer the company secretary and the hr director 
however no director is permitted to participate in discussions 
or decisions about his or her own personal remuneration
remuneration policy
the committee’s remuneration policy is designed to help 
drive business performance and maximise shareholder  
value in order to align the interests of the executive directors 
and other members of the executive committee with 
shareholders the committee has developed a remuneration 
policy which achieves an appropriate balance between fixed 
and variable pay accordingly a significant proportion of 
remuneration is linked to the achievement of challenging 
short and long term performance targets
there are five main elements of the remuneration package  
for executive directors and the executive committee  
which are explained in detail below
•	base salary
•	benefits
•	pension
•	annual bonus and
•	long term incentives 42 spirit pub company plc
annual report 2012
governance
report on directors’ remuneration continued
the following graph demonstrates the on target levels  
and maximum levels of remuneration for the chief  
executive officer 
in the future the committee will review its policy on an annual 
basis in light of market conditions performance strategy  
key performance indicators the structure and levels of 
remuneration across the group and developments in 
corporate governance and best practice the committee  
will also consider the level of environmental social and 
governance risk associated with the remuneration policy  
to ensure that there are sufficient safeguards in this regard 
base salary and benefits
base salaries and pension provision were originally set by 
reference to preexisting remuneration and no increases  
have since been awarded the table below shows the current 
executive director base salaries
name position base salary
mike tye chief executive officer £475000
paddy gallagher finance director £325000
on his promotion to chief executive officer mike tye’s salary 
was increased to £475000 paddy gallagher’s salary was  
set upon appointment at £325000 base salaries were 
reviewed in march 2012 with the committee determining  
that current levels remained appropriate this compares  
to an average increase of 18 across the wider workforce 
base salary levels will be next reviewed in october 2013  
and annually thereafter 
the group’s policy is to provide executive directors with  
a market competitive level of benefits including company  
car or car allowance pension private medical insurance 
lump sum life insurance for death in service and income 
protection insurance for long term disability
pension
consistent with preexisting arrangements prior to the 
demerger from punch taverns plc punch executive 
directors are entitled to receive a defined contribution to 
pension from the group of 25 of base salary for the  
chief executive officer and 20 for the finance director  
as he elected not to join the group’s pension scheme the 
company makes this payment to mike tye in lieu of a 
contribution to the group’s pension scheme 
annual bonus
for 201112 executive directors participated in the annual 
bonus arrangements which had previously been established 
by punch and which were subsequently adopted by the 
committee during the year the clawback provision has been 
extended to include not just the deferred portion of bonuses 
as in previous years but the full amount of any bonus  
the key terms of the arrangements are as follows
•	 the maximum annual bonus is 150 of base salary for the 
chief executive officer and 100 for the finance director
•	 for any bonus to be payable under the individual targets  
at least threshold profit performance must have  
been achieved 
•	 onethird of the total gross bonus awarded will be deferred 
into company shares for a two year period and
•	 a clawback provision operates in the event that results 
have been shown to be materially inaccurate
performance in 201112 was measured against the  
following criteria
key performance area weighting
group financial performance 75
performance of individual’s own business area  
 or function and their overall personal   
 contribution to the business 25
the bonus is structured to pay modest bonus levels for 
meeting the annual business plans and higher levels of  
bonus for outperformance onethird of the total gross  
bonus awarded will be deferred into company shares  
for a two year period 
in 201112 payments equivalent to up to 50 of the 
maximum were awarded to each director these reflect  
the strong financial performance of the group in this  
financial year 
target maximum
£0
£500
£1000
£1500
£2000
£2500
remuneration 000s
salary benefits pension annual bonus ltip 43 spirit pub company plc
annual report 2012
business review governance financial statements
long term incentive plan 2011 ltip
long term incentive awards will be granted under the 
company’s ltip awards for 201112 were granted in 
november 2011 with 201213 awards expected to be  
made in november 2012 the key terms of the arrangement 
are as follows
•	 it is intended that awards granted to the executive 
directors will be made over shares worth a maximum  
of 150 of base salary 
•	 in exceptional circumstances the maximum award which 
may be granted to an individual in any financial year  
is 200 of base salary
•	 an award will be subject to a range of earnings per share 
growth targets and a total shareholder return tsr 
condition each applying to a separate 50 of an  
award and measured over a period of three years
•	 for the earnings per share eps part of the award 25  
will vest for eps growth of 7 pa compound increasing 
to 50 vesting for eps growth of 10 pa increasing  
to 100 vesting for eps growth of 15 pa and
•	 for the tsr part of the award the condition is based  
on the company’s performance against ftse 250 
companies excluding financial service sector companies 
and investment trusts as at the date of grant 25 of  
this part of an award will vest if spirit’s tsr is equal  
to the median tsr of the relevant group of companies  
with full vesting for upper quartile tsr performance  
a sliding scale operates between these points
the committee believes that the blend of eps and tsr 
targets provides an appropriate balance between incentivising 
and rewarding good financial performance on the one hand 
whilst on the other hand providing a strong and direct 
alignment with the interests of institutional shareholders  
by rewarding stock market outperformance the ftse 250 
remains an appropriate benchmark in the opinion of  
the committee 
as explained in last year’s report in 201112 mike tye  
was awarded 200 of salary as permitted under the plan  
in exceptional circumstances the committee deemed  
his promotion to chief executive officer met this criterion  
paddy gallagher was awarded 100 of salary on  
his appointment 
punch long term incentive plan 2008 punch ltip
at demerger all outstanding long term incentive awards held 
by spirit employees under the punch ltip were adjusted  
to keep individuals’ awards whole and ensure that awards 
continue to vest post demerger as normal consistent with 
the treatment of shareholders in punch at demerger each 
award over punch shares became an award over a combined 
number of punch and spirit shares tsr targets which 
tracked the performance of punch up to the demerger  
will track the tsr performance of the spirit share price 
thereafter further details of the outstanding awards granted 
under the punch ltip are set out within the audited section  
of this report on pages 48 to 49
share bonus plan 2011 sbp
the sbp 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 current deferral 
policy is for one third of any bonus paid to be deferred into 
company shares for a two year period
clawback
this year the committee has increased the scope of its 
clawback provision clawback now operates in respect  
of deferred annual bonuses and long term incentive awards  
in the event that results have been shown to be materially 
inaccurate or in the case of the ltip include an error in  
the calculation of the size of the awards
dilution
in accordance with shareholder guidelines the committee 
applies a limit on the number of shares that can be issued  
to satisfy all of its employee share plan awards of 10 of the 
company’s issued share capital in any rolling ten year period 
of this 10 only half can be issued to satisfy awards under 
the discretionary arrangements accordingly the company’s 
current dilution position is as follows
limit current dilution level
10 in ten years 243
5 in ten years 238 44 spirit pub company plc
annual report 2012
governance
report on directors’ remuneration continued
shareholding requirement
the committee requires that all executive directors 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 executive directors to retain shares 
received from share incentive schemes 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
mike tye chief executive officer 150 august 2016 50
paddy gallagher finance director 100 november 2016 13
all employee share arrangements
the group introduced an hmrc approved share incentive plan sip in november 2011 further information about the  
sip can be found in the directors’ report on page 32 and in note 24 to the financial statements on page 85
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 neither of the executive directors’ contracts provides for liquidated damages there are no special 
provisions contained in either 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 potential termination payment
potential 
payment
on change 
of control
liquidation
mike tye 12 months 26 june 2008 rolling contract
1
 12 months’ salary and benefits nil
paddy gallagher 12 months 7 november 2011 rolling contract
1
12 months’ salary and benefits nil
1 contract will continue until terminated by notice either by the company or the director
subject to the board approval executive directors are permitted to accept outside appointments on external boards or 
committees as long as these are not deemed to interfere with the business of the company any fees received in respect  
of these appointments which are disclosed as a footnote to the directors’ emoluments table are retained by the executive 
directors concerned with the exception of ian dyson’s fee for his nonexecutive appointment at punch which was paid  
to the company for so long as he was employed by the company
nonexecutive directors’ contracts
name
company
notice period date of appointment
unexpired
 term of
 contract
months
walker boyd 6 months 4 july 2011 21
mark pain 1 month 4 july 2011 21
tony rice 1 month 4 july 2011 21
christopher bell 1 month 1 august 2011 22
julie chakraverty 1 month 20 january 2012 27 45 spirit pub company plc
annual report 2012
business review governance financial statements
nonexecutive directors’ fees
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 sid and the chief executive officer within the limits set by the 
company’s articles of association nonexecutive directors cannot participate in any of the company’s share incentive 
schemes or performance based 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  risk 
remuneration and nomination  governance committees
the following table sets out the current nonexecutive fees
role fee
chairman
2
£180000
base fee £42000
senior independent director £3000
additional fee for chairing the audit  risk or remuneration committee £10000
2 the chairman does not receive further remuneration for the role of chairing the nomination  governance committee
total shareholder return performance graph
the graph below shows the company’s performance measured by tsr compared with the ftse 250 index excluding 
financial service sector companies and investment trusts the committee considers this index to be appropriate as it is  
a broad equity index of which the company is a constituent
total shareholder return 
this graph shows the value by 20 august 2012 of £100 invested in the company on 1 august 2011 the first day of trading in 
spirit shares compared with the value of £100 invested in the ftse 250 index excluding financial service sector companies 
and investment trusts
share price
the share price at the close of business on 18 august 2012 was £058 during the year the highest share price was £064 and 
the lowest was £033
120
100
80
60
40
20
0
value £
1 august 2011 20 august 2011 18 august 2012
spirit pub company plc
ftse 250 excluding financial service sector 
companies and investments trusts
source thomson reuters 46 spirit pub company plc
annual report 2012
governance
report on directors’ remuneration continued
ian dyson’s departure
ian dyson’s departure took effect on 16 december 2011 he received a payment equivalent to half of his annual salary  
plus benefits at that time and another payment equivalent to half his annual salary and benefits in early april 2012 this  
is in line with his contract of employment he did not receive any bonus for the period 21 august 2011 to 16 december 2011  
his long term incentive awards were time pro rated to the date of his departure and will only vest on the normal dates if the 
performance targets have been met
if ian dyson joins a competitor before 16 december 2012 his ‘good leaver’ status on these long term incentive awards  
will lapse
report on directors’ remuneration
the following tables and related disclosures on directors’ remuneration pensions the long term incentive plan 2011  
the share bonus plan 2011 the share incentive plan and the punch long term incentive plan 2008 have been audited  
by kpmg audit plc
the total of directors’ emoluments in the year was £3123000 2011 £1467000 including pension contributions of 
£213000 2011 £40000
in 2011 all directors with the exception of christopher bell paddy gallagher and julie chakraverty were paid by  
the company with effect from the date of appointment or operational separation on 4 july 2011 as the case may be 
the remuneration of the directors during the year was as follows
basic salary 
fees
£000
benefits
1
 
£000
bonus
10
£000
pension
£000
other 
payments
 made to 
former 
directors
£000
company
 pension 
contributions 
2012 
£000
 total
 £000
2012 2011
chairman
walker boyd 180 – – – – 180 24 –
executive directors
mike tye 463 23 356 98 – 940 559 –
paddy gallagher
2
 250 14 100 45 – 409 – 45
nonexecutive directors
tony rice 55 – – – – 55 7 –
mark pain 52 – – – – 52 7 –
christopher bell
3
42 – – – – 42 2 –
julie chakraverty
4
 24 – – – – 24 – –
former directors
ian dyson
56
 234 6 – 58 863 1161
7
 789 –
russell margerrison
8
 58 3 – 12 187 260
9
 79 –
total 1358 46 456 213 1050 3123 1467 45
1  benefits include the following elements medical insurance car or car allowance fuel death in service cover and income protection
2  joined the board on 7 november 2011
3  joined the board on 1 august 2011
4  joined the board on 20 january 2012
5  stepped down as ceo on 16 december 2011
6  also received £65000 per annum for his nonexecutive directorship at betfair
7  notice payment is equivalent to his annual salary plus benefits at that time
8  stepped down from the board on 7 november 2011
9    payment includes salary and pension paid from date of cessation as director to the contract termination date notice period and compensation for loss  
of office
10  an award of shares that will be deferred for two years is made following announcement of financial results which is equal to one third of the cash bonus  
shown above 47 spirit pub company plc
annual report 2012
business review governance financial statements
bonus payments 
these were made in line with the annual bonus plan and reflect individual performance against objectives together with  
the strong results disclosed in these financial statements namely
•	ebitda
11
 up 5 to £146m 2011 £140m
•	profit before tax
11
 up 16 to £51m 2011 £44m
•	earnings per share
11
 up 21 at 58p 2011 48p and
•	net debt
12
 at £710m 2011 £704m net debt to ebitda
11
 of 49 times 2011 50 times
pension
during the period mike tye paddy gallagher ian dyson and russell margerrison received a group contribution into their 
personal pension arrangements representing up to 25 of their pensionable salary the payments were made to ian dyson 
and mike tye in lieu of a contribution to the group’s pension scheme as they elected not to join the group’s pension scheme 
the payment to russell margerrison was paid into his personal pension plan 
directors’ interests in the company’s share plans
long term incentive plan 2011 ltip
the following table sets out the awards made under the ltip full details of the operation of the ltip are set out on page 43  
in the first part of this report 
executive directors
date 
of award
date 
of release
share price 
at date of
 award £
number 
of share
 awards 
as at
20 august
 2011
total value
of shares
at date
of award
£000
percentage 
of salary 
at date 
of award
shares
 awarded
 during the
 period
number 
of share
 awards 
as at
18 august
 2012
mike tye 021111 021114 045 – 950 200 2128613 2128613
paddy gallagher 091111 071114 045 – 325 100 728209 728209
no ltip shares lapsed or were exercised during the period
ltip shares can be exercised subject to continued three year employment from the date of award and to the extent that the 
performance conditions set by the remuneration committee at the time the option is granted are satisfied full details of the 
performance conditions are detailed on page 43 in the first part of this report
share bonus plan 2011 sbp
the following table sets out the awards made under the sbp full details of the operation of the sbp are given on page 43  
in the first part of this report 
executive directors
date 
of award
date 
of release
share price 
at date of 
award £
number 
of share
 awards 
as at
20 august
 2011
total value
of shares
at date
of award
£000
shares
 awarded
 during the
 period
number 
of share
 awards 
as at
18 august
 2012
mike tye 271011 261013 048 – 78 161605 161605
ian dyson 271011 151212 048 – 106 221714 221714
no sbp shares lapsed or were released during the period
11 before exceptional items
12 before fair value adjustments and finance leases 48 spirit pub company plc
annual report 2012
governance
report on directors’ remuneration continued
hmrc 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 32 and in note 24 to the financial statements which can be found on page 85
executive directors
date 
of award
date 
of release
share price at
date of purchase
of partnership and
 dividend shares
and award of
 matching shares
  £
number 
of share
 awards 
as at
20 august
 2011
partnership
 shares
 purchased
 during the
 period
matching
 shares
 conditionally
 awarded
 during the
 period
dividend
 shares 
purchased
 during the
 period
number 
of share
 awards 
as at
18 august
 2012
mike tye 251111 251114 038 – 328 328 – 656
161211 161214 042 – 296 296 – 592
170112 170115 044 – 284 284 – 568
100212 100215 054 – 233 233 – 466
060312 060315 060 – 207 207 – 414
030412 030415 063 – 199 199 – 398
010512 010515 056 – 223 223 – 446
290512 290515 051 – 245 245 – 490
080612 080615 049 – – – 46 46
260612 260615 050 – 251 251 – 502
240712 240715 055 – 226 226 – 452
160812 160815 058 – 216 216 – 432
total   –   5462
no sip shares lapsed or were released during the period
directors’ interests in the punch long term incentive plan punch ltip 
at demerger all outstanding share awards under the punch ltip including ian dyson’s recruitment award were adjusted  
so that every ltip award became an award over a combined number of punch and spirit shares
in july 2011 punch obtained shareholder approval to remove time pro rating of punch ltip awards made to employees who 
transferred to spirit and to amend the tsr performance targets this meant that employees who continued to be employed 
by spirit may therefore retain their awards until the normal vesting date instead of having their award time pro rated as  
a result of leaving punch however if an employee ceases to be employed by spirit and does not have ‘good leaver’ status 
before the normal vesting date of the award the number of shares subject to the award will be time pro rated by reference  
to the date the employee ceases to be employed if an employee leaves spirit before the normal vesting date of the award  
as a bad leaver the number of shares subject to the award will be time pro rated by reference to the date of completion  
of the demerger
if an executive director who transferred to spirit leaves spirit prior to the normal vesting date of their awards other than  
as a ‘good leaver’ their awards will lapse in their entirety 49 spirit pub company plc
annual report 2012
business review governance financial statements
the following table sets out the awards made under the punch ltip
executive
directors
date 
of award
date 
of release
punch 
share price 
at date 
of award £
number 
of share
 awards 
as at
20 august
 2011
total value
of shares
at date
of award
£000
percentage 
of salary 
at date 
of award
punch 
share 
awards
 lapsed 
during the
 period
gain 
on release
 £000
total number
 of punch
 share 
awards 
as at
18 august
 2012
total number
 of spirit
 shares 
added to
 punch
 awards 
as at
18 august
 2012
13
 
mike tye 101108 101111 166 488950 799 200 488950 – – –
161009 161012 090 888888 800 200 – – 888888 888888
191110 191113 058 860585 500 125 – – 860585 860585
total   2238423 1749473 1749473
ian dyson 131010 050513 084 2412150 2026 300 1305399 – 1106751 1106751
191110 191113 058 2323580 1350 200 1492519 – 831061 831061
total 4735730 1937812 1937812
russell   
margerrison 110711 110714 071 442008 312 125 369416 – 72592 72592
total 442008 72592 72592
13  prior year adjustment made to each individual holding in accordance with the demerger dividend of one share in spirit pub company plc for every share 
held in punch taverns plc on 1 august 2010
all outstanding punch ltip awards up to the point of demerger were measured by punch’s tsr against the median level  
of performance of the comparator group’s tsr over the three year holding period from the date of grant since demerger  
the awards for spirit employees track the tsr performance of spirit awards will vest or become exercisable in the case  
of the 2010 ltip awards three years from the date of grant subject to continued employment and the extent to which the 
tsr performance targets have been met over the three year performance period
this report has been prepared by the remuneration committee and has been approved by the board it complies with  
the companies act 2006 and large and mediumsize companies and groups accounts  reports regulations 2008  
this report will be put to shareholders for approval at the forthcoming agm
on behalf of the committee
tony rice
remuneration committee chairman
15 october 2012 50 spirit pub company plc
annual report 2012
governance
statement of directors’ responsibilities  
in relation to the financial statements
the directors are responsible for preparing the annual 
report and financial statements in accordance with 
applicable united kingdom law and international  
financial reporting standards ifrs as adopted  
by the european union
the directors are required to prepare financial statements  
for each financial period which fairly present the financial 
position of the company and of the group and the financial 
performance and cash flows of the company and of  
the group for that period in preparing those financial 
statements the directors are required to
•	 select suitable accounting policies and then apply  
them consistently
•	 present information including accounting policies in  
a manner that provides relevant reliable comparable  
and understandable information
•	 provide additional disclosures when compliance with 
specific requirements in ifrs is insufficient to enable  
users to understand the impact of particular transactions 
other events and conditions on the entity’s financial 
position and financial performance and
•	 state that the group has complied with ifrs subject  
to any material departures disclosed and explained  
in the financial statements
the directors are responsible for keeping proper accounting 
records which disclose with reasonable accuracy at any  
time the financial position of the group and enable them  
to ensure that the financial statements comply with the 
companies act 2006 and article 4 of the ias regulation 
they are also responsible for safeguarding the assets  
of the group and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities
directors’ responsibility statement
the directors confirm that to the best of their knowledge
a  the 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 of the company and the group and
b  the business review on pages 1 to 25 includes a fair 
review of the development and performance of the 
business and the position of the company and the group 
together with a description of the principal risks and 
uncertainties faced
on behalf of the board
mike tye  paddy gallagher
chief executive officer  finance director
15 october 2012   15 october 2012 51 spirit pub company plc
annual report 2012
business review governance financial statements
f in an c i al 	 s t at e m e n ts
consolidated income statement
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
 52 weeks to 18 august 2012 52 weeks to 20 august 2011
 notes
pre
 exceptional 
items
£m
exceptional 
items
1
 
£m
total
£m
pre
 exceptional 
items
£m
exceptional 
items
1
£m
total
£m
revenue 2 7600 – 7600 7344 – 7344
operating costs before depreciation  
and amortisation 6139 45 6094 5948 214 6162
ebitda
2
2 1461 45 1506 1396 214 1182
depreciation and amortisation 367 – 367 348 – 348
goodwill charge – – – – 101 101
property related losses including impairment 6 – 5952 5952 – 754 754
loss  profit on sale of noncurrent assets – 194 194 – 39 39
operating profit  loss 3 1094 6101 5007 1048 1030 18
finance income 4 07 296 303 20 278 298
finance costs 5 590 201 791 628 1567 2195
movement in fair value of interest rate swaps 6 – 394 394 – 187 187
profit  loss before taxation 511 6400 5889 440 2506 2066
uk income tax charge  credit 8 128 384 256 123 692 569
profit  loss for the year attributable to 
owners of the parent company 383 6016 5633 317 1814 1497
earnings  loss per share 9
basic pence 58 912 854 48 275 227
diluted pence 58 912 854 48 275 227
dividends 10
interim paid pence 065 –
proposed pence 130 –
1  exceptional items are explained in note 1 and analysed in note 6 pension finance income of £217m and pension finance cost of £186m have been reclassified 
as exceptional items in the prior year
2  ebitda represents earnings before depreciation and amortisation goodwill charge property related losses including impairment profit or loss on sale of 
noncurrent assets finance income finance costs movement in fair value of interest rate swaps and tax of the group 52 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
consolidated statement of comprehensive income
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
notes
 52 weeks to 
18 august
 2012
£m
52 weeks to
20 august 
2011
£m
loss for the year attributable to owners of the parent company 5633 1497
actuarial gains  losses on defined benefit pension schemes 27 29 79
unrealised gain on revaluation of the property portfolio 1552 –
tax charge  credit relating to components of other comprehensive income 8 07 22
other comprehensive gains  losses for the year 1574 57
total comprehensive loss for the year attributable to owners of the parent company 4059 1554 53 spirit pub company plc
annual report 2012
business review governance financial statements
consolidated statement of financial position
at 	 1 8 	 a u gus t 	 2 0 1 2
notes
18 august
 2012
£m
20 august 
2011
£m
assets
noncurrent assets
property plant and equipment 11 12762 17142
operating leases 12 484 548
goodwill 12 2146 2168
deferred tax assets 16 837 588
retirement benefit asset 27 31 –
16260 20446
current assets
inventories 17 77 72
trade and other receivables 15 247 305
noncurrent assets held for sale 19 169 42
cash and cash equivalents 18 974 1396
1467 1815
total assets 17727 22261
liabilities
current liabilities
trade and other payables 20 1519 1596
amounts owed to related parties – 64
borrowings 21 51 56
derivative financial instruments 22 210 247
provisions 23 121 202
1901 2165
noncurrent liabilities
borrowings 21 8462 8895
derivative financial instruments 22 1741 1363
retirement benefit obligations 27 31 94
provisions 23 570 634
10804 10986
total liabilities 12705 13151
net assets 5022 9110
equity
called up share capital 25 66 66
revaluation reserve 1552 –
other reserves 15886 15873
retained earnings 12482 6829
total equity attributable to owners of the parent company 5022 9110
on behalf of the board
mike tye  paddy gallagher
15 october 2012  15 october 2012 54 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
consolidated statement of changes in equity
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
share 
capital
£m
other 
reserve
£m
revaluation
 reserve
£m
retained
 earnings
£m
total 
equity
£m
at 21 august 2010 unaudited 66 66 – 5275 5275
loss for the year – – – 1497 1497
other comprehensive losses – – – 57 57
total comprehensive loss – – – 1554 1554
share based payment expense – 01 – – 01
capital contribution
1
– 15938 – – 15938
at 20 august 2011 66 15873 – 6829 9110
loss for the year – – – 5633 5633
other comprehensive gains – – 1552 22 1574
total comprehensive loss – – 1552 5611 4059
dividends paid – – – 42 42
share based payment expense – 13 – – 13
at 18 august 2012 66 15886 1552 12482 5022
1  during the prior year and prior to demerger the punch taverns plc punch group undertook a group reorganisation resulting in a capital contribution  
of £1533m being recognised a further capital contribution was recognised in the prior year on receipt of £61m cash from punch as part of the terms  
of the demerger 55 spirit pub company plc
annual report 2012
business review governance financial statements
consolidated cash flow statement
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
52 weeks to 
18 august
 2012
£m
52 weeks to
20 august
 2011
£m
cash flows from operating activities
operating loss  profit 5007 18
depreciation and amortisation 367 348
impairment 806 754
losses related to the revaluation of the property portfolio 5146 –
impact of annual uplifts in rent and rentfree periods 94 –
goodwill charge – 101
loss  profit on sale of noncurrent assets 194 39
share based payment expense recognised in profit 17 01
increase  decrease in inventories 05 05
increase  decrease in trade and other receivables 18 23
decrease  increase in trade and other payables 148 411
difference between pension contributions paid and amounts recognised in operating profit 62 93
decrease  increase in provisions and other liabilities 199 57
cash generated from operations 1185 1586
income tax paid – –
net cash generated from operating activities 1185 1586
cash flows from investing activities
purchase of property plant and equipment 940 776
proceeds from sale of property plant and equipment 278 69
proceeds from sale of other noncurrent assets held for sale 02 224
interest received 07 20
net cash used in investing activities 653 463
cash flows from financing activities
cash received from punch under demerger terms – 730
repayment of borrowings 280 188
interest paid 631 646
repayments of obligations under finance leases 01 02
dividends paid 42 –
net cash used in financing activities 954 106
net decrease  increase in cash and cash equivalents 422 1017
cash and cash equivalents at beginning of year 1396 379
cash and cash equivalents at end of year 974 1396 56 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
company statement of financial position
at 	 1 8 	 a u gus t 	 2 0 1 2
notes
18 august
 2012
£m
20 august
 2011
£m
assets
noncurrent assets
investments in subsidiary undertakings 14 3377 3364
current assets
amounts owed by related parties 15 82 –
cash and cash equivalents 18 05 01
total assets 3464 3365
net assets 3464 3365
shareholders’ equity
called up share capital 25 66 66
merger reserve 3298 3298
share based payment reserve 14 01
retained earnings 86 –
total shareholders’ equity 3464 3365
on behalf of the board
mike tye   paddy gallagher
15 october 2012  15 october 2012 57 spirit pub company plc
annual report 2012
business review governance financial statements
company statement of changes in equity
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
company income statement
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
company cash flow statement
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
share 
capital
£m
other 
reserve
£m
share based
 payment 
reserve
£m
retained
 earnings
£m
total 
equity
£m
total equity at 8 june 2011 – – – – –
profit for the period – – – – –
share capital issued on acquisition of the spirit pub company 
businesses 66 3298 – – 3364
share based payment expense – – 01 – 01
total equity at 20 august 2011 66 3298 01 – 3365
profit for the year – – – 128 128
dividends paid – – – 42 42
share based payment expense – – 13 – 13
total equity at 18 august 2012 66 3298 14 86 3464
on 1 august 2011 the company issued 659655957 ordinary shares of 1 pence each at a premium of 50 pence per share  
to punch taverns plc in return for the receipt of the entire share capital of spirit pub company holdco limited
the share based payment reserve reflects the costs of the share based payment schemes of spirit pub company plc and 
punch taverns plc for spirit employees from 1 august 2011
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 year was £128m from 8 june 2011 to 20 august 2011 £nil
52 weeks to 
18 august
 2012
£m
8 june 2011 to
 20 august 
2011
£m
cash flows from operating activities
operating loss – –
share based payment expense recognised in profit – 01
cash generated from operations – 01
dividends received from subsidiary undertakings 46 –
net cash flow from investing activities 46 –
dividends paid 42 –
net cash flow from financing activities 42 –
net increase in cash and cash equivalents 04 01
cash and cash equivalents at beginning of year  period 01 –
cash and cash equivalents at end of year  period 05 01 58 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
1 accounting policies
corporate information
spirit pub company plc is a public limited company incorporated and domiciled in england the company’s shares are  
listed on the london stock exchange
basis of preparation
the consolidated financial statements have been prepared in accordance with international financial reporting standards 
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 section 408 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 certain items 
principally land and buildings derivative financial instruments and retirement benefits 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
the financial statements have been prepared on a going concern basis in determining the appropriate basis of preparation 
of the financial statements the directors are required to consider whether the group can continue in operational existence 
for the foreseeable future further details regarding cash forecasting and the monitoring of financial covenants are contained 
in note 22 the directors are of the opinion that the group and the company have adequate resources to continue in 
operational existence for the foreseeable future and feel it appropriate to adopt the going concern basis in preparing  
the annual report and financial statements 
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 within the business review on pages 2 to 11 and our key risks and 
uncertainties on pages 23 to 25 
the financial position of the group its cash flows liquidity position and borrowings are described in the financial review  
on pages 20 to 21 and in notes 18 21 and 22 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
change of accounting policy
as at 18 august 2012 the group adopted a policy of revaluing its property portfolio to market value in accordance  
with the fair value provisions of ias 16 property plant and equipment in accordance with ias 8 accounting policies 
changes in accounting estimates and errors no prior year adjustment has been recognised in relation to this change  
in accounting policy
this is a change from the previous policy under which property plant and equipment and operating leases were stated  
at historic cost the impact on the financial statements of this change in accounting policy has been to
•	decrease the net book value of property plant and equipment as at 18 august 2012 by £3496m
•	decrease the net book value of operating leases as at 18 august 2012 by £98m
•	 recognise an exceptional charge against operating profit of £5146m this reflects the difference for all assets where  
the fair value of the asset as determined by the revaluation as at 18 august 2012 is below the net book value prior to  
the revaluation and
•	£1552m impact of upwards valuations recognised in reserves 59 spirit pub company plc
annual report 2012
business review governance financial statements
1 accounting policies con tin ued
group reorganisation and demerger
the spirit pub company business was demerged from the punch taverns group with effect from 1 august 2011 as a result 
of the demerger the spirit pub company business was transferred to a new ultimate parent company spirit pub company plc 
the formation of a new holding company spirit pub company plc prior to demerger was not a business combination 
involving a third party and as such the financial statements of spirit pub company plc for the year ended 20 august 2011 
were presented as if the continuing operations of the group were in existence for the whole of the year ended 20 august 2011 
to do so the principles of reverse acquisition accounting in ifrs 3 were applied
new standards interpretations and amendments to existing standards
the iasb and ifric have issued and endorsed the following standards interpretations and amendments
effective for the group and the company in these financial statements
•	ias 24 related party disclosures revised 2009
•	prepayments of a minimum funding requirement amendments to ifric 14
•	improvements to ifrs 2010 – ifrs 7 financial instruments disclosures
•	improvements to ifrs 2010 – ias 1 presentation of financial statements
•	improvements to ifrs 2010 – ias 34 interim financial reporting
•	improvements to ifrs 2010 – ifric 13 customer loyalty programmes
•	disclosures – transfers of financial assets amendments to ifrs 7
the above new standards interpretations and 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 future years
effective date 1 january 2012
•	deferred tax recovery of underlying assets amendments to ias 12
effective date 1 july 2012
•	presentation of items of other comprehensive income amendments to ias 1
effective dates from 1 january 2013
•	ifrs 9 financial instruments
•	ifrs 10 consolidated financial statements
•	ifrs 11 joint arrangements
•	ifrs 12 disclosure of interests in other entities
•	ifrs 13 fair value measurement
•	ias 19 employee benefits amended 2011
•	ias 27 separate financial statements 2011
•	ias 28 investments in associates and joint ventures 2011
the amendments to published standards that have an effective date of after these financial statements have not been 
adopted early by the group and the directors do not anticipate that the adoption of these amendments will have a material 
impact on the group’s reported income or net assets in the year of adoption  60 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
1 accounting policies con tin ued
basis of consolidation
consolidated financial statements comprise the financial statements of the company and its subsidiary undertakings
the group’s interest in its joint venture is 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
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 cost of the business combination over the  
fair value of the group’s share of the identifiable assets liabilities and contingent liabilities costs related to the acquisition 
other than those associated with the issue of debt or equity securities are expensed as incurred following initial recognition 
goodwill is measured at cost less any accumulated impairment losses where assets are transferred between segments  
or disposed the apportioned value of goodwill allocated to those assets is also transferred or charged to the income 
statement respectively
goodwill carried in the statement of financial position 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
property plant and equipment
the group has adopted a policy of revaluing its property portfolio as at 18 august 2012 with properties now stated  
at open market value
the change in accounting policy reflects the adoption by the group of best practice among uk listed companies  
the revaluation of the group’s property portfolio provides shareholders with a more representative value than the 
depreciated historic cost basis
freehold and long leasehold land and buildings as at 20 august 2011 were stated at historic cost or deemed cost less 
accumulated depreciation and any impairment in value these were depreciated in accordance with the policy detailed  
below during the 52 weeks ended 20 august 2011
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
depreciation is provided to write off the cost of property plant and equipment less estimated residual values by equal 
annual instalments as follows
li ce n s ed 	 p r o p e rti e s  	 unli ce n sed 	 p r o p e rti e s 	 an d 	 o w n e r  occu p i ed 	 p r o p e rti e s
50 years or the life of the lease if shorter
l a n d l o r d ’ s	fi x t u r e s	a n d	fi t t i n g s 	o f fi c e	fu r n i t u r e	a n d	fi t t i n g s	a n d	m o t o r	v e h i c l e s
5 to 15 years
i n f o r m a t i o n	t e c h n o l o g y	e q u i p m e n t
6 years
freehold land is not depreciated 61 spirit pub company plc
annual report 2012
business review governance financial statements
1 accounting policies con tin ued
property plant and equipment c on t i n ue d
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
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 
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
the group has adopted a policy of revaluing its property portfolio as at 18 august 2012 with properties now stated at open 
market value
impairment 
assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more 
frequently 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
revaluation
surpluses which arise from the revaluation are recorded directly within the revaluation reserve unless they are reversing  
a revaluation decrease which has been recognised in the income statement previously in which case it is recognised in the 
income statement where the revaluation exercise gives rise to a deficit this is reflected directly in the revaluation reserve  
to the extent that a surplus exists against the same asset any residual amount is then recognised in the income statement
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
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 62 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
1 accounting policies con tin ued
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 18 august 2012 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 year 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 18 august 2012 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 directly to equity 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 statement of 
financial position 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 
recognised in finance costs
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
following a change in accounting policy at 18 august 2012 finance leases and capitalised operating leases relating to the 
group’s property portfolio are subject to annual revaluations 63 spirit pub company plc
annual report 2012
business review governance financial statements
1 accounting policies con tin ued
pensions
the group operates two defined benefit schemes which require contributions to be made to separately administered funds 
the asset or liability recognised in the statement of financial position 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 plan or reductions in future contributions to the plan the cost of providing benefits  
under the plans is determined separately for each plan 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 income  
and finance costs respectively 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
sharebased payment transactions 
a number of employees of the company’s subsidiaries including directors receive an element of remuneration in the form  
of sharebased 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 in valuing equitysettled transactions no account  
is taken of any performance conditions other than conditions linked to the price of the shares of spirit pub company 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 company’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
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 
changes in fair value of any derivative financial instruments that do not qualify for hedge accounting are recognised 
immediately in the income statement 64 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
1 accounting policies con tin ued
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
d r i n k	a n d	f o o d	s a l e s	
revenue in respect of drink and food sales is recognised at the point at which the goods are provided net of any discounts 
or volume rebates allowed
r e n t s	r e c e i v a b l e	
rents receivable are recognised on a straightline basis over the lease term 
o t h e r	i n c o m e
other income includes the group’s share of net machine income which is recognised in the year to which it relates revenue 
in respect of hotel rooms is recognised at the time of the guest visit
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 statement of financial position comprise cash at bank and in hand and short term deposits 
with an original maturity of three months or less
inventories
inventories are valued at the lower of cost and net realisable value
noncurrent assets held for sale
noncurrent assets 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
dividend distribution
final dividends are recognised as a liability in the group’s and the company’s financial statements in the year in which the 
dividends are approved by the company’s shareholders interim dividends are recognised when they are paid
exceptional items
in order to provide a trend measure of underlying performance profit is presented excluding items which management 
considers will distort comparability either due to their significant nonrecurring nature or as a result of specific accounting 
treatments further detail on the nature of exceptional items is included in note 6 65 spirit pub company plc
annual report 2012
business review governance financial statements
1 accounting policies con tin ued
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 year 
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
the estimates and judgements that have a significant effect on the amounts recognised in the financial statements are 
detailed below
p r o p e r t y	v a l u a t i o n s
the group carries its property portfolio at open market valuation the valuations which are supported by market evidence 
are prepared with regard to factors such as current and future projected income levels taking account of the location  
quality of the pub and recent market transactions in the sector changes in these assumptions such as the valuation basis 
applied in comparable market transactions or the income level generated by a pub could materially impact the valuation of 
these properties
i m p a i r m e n t	o f	p r o p e r t y 	p l a n t	a n d	e q u i p m e n t
property plant and equipment is reviewed for impairment if circumstances suggest that the carrying amount may not be 
recoverable recoverable amounts are determined based on value in use 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 13 actual outcomes may vary 
from these estimates
g o o d w il l	i m pa irm e n t
the group assesses whether goodwill is impaired on at least an annual basis the recoverable amounts of the groups of 
cash generating units cgus to which goodwill has been allocated is determined based on value in use 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 value in use of those cash flows these assumptions are disclosed in note 13 actual outcomes could vary 
from these estimates
p ost  em p l o y m en t	b en efi ts
the present value of defined benefit pension scheme liabilities are determined on an actuarial basis and depend on a number 
of actuarial assumptions which are disclosed in note 27 any change in these assumptions could impact the carrying amounts 
of pension liabilities
o n e r o u s	l e a s e	p r o v i s i o n s	
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 and external 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
authorisation of financial statements
the group’s and company’s financial statements for spirit pub company plc for the year ended 18 august 2012 were 
authorised for issue by the board of directors on 15 october 2012 and the statements of financial position were signed on 
the board’s behalf by mike tye and paddy gallagher 66 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
2 segmental analysis 
the group has two reportable segments a managed estate and a leased estate which are the group’s strategic business 
units each strategic business unit 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 group’s risks and returns are affected predominantly by the differences in the products and services provided by the 
strategic business units between 20 august 2011 and 18 august 2012 seven pubs with a fair value of £38m transferred 
from the leased to the managed estate between 21 august 2010 and 20 august 2011 three pubs with a fair value of  
£13m transferred from the leased to the managed estate
the chief operating decision maker is represented by the executive directors and the executive committee of the group 
performance is measured based on segmental ebitda as included in the internal management reports that are reviewed  
by the executive directors and the executive committee the spirit pub company plc board considers adjusted segmental 
ebitda when assessing the performance of the business and making decisions about the allocation of resources
the group operates solely in the united kingdom and therefore has only one geographical segment 
 2012
managed 
£m
leased
£m
total
£m
drink revenue 3697 628 4325
food revenue 2704 – 2704
rental income – 205 205
other revenue 335 31 366
revenue 6736 864 7600
operating costs
1
5651 488 6139
ebitda
1
1085 376 1461
depreciation and amortisation 351 16 367
operating profit before exceptional items 734 360 1094
operating exceptional items 6101
net finance costs 488
movement in fair value of interest rate swaps 394
uk income tax credit 256
loss attributable to owners of the parent company 5633
 2011
managed
£m
leased
£m
total
£m
drink revenue 3570 647 4217
food revenue 2534 – 2534
rental income – 228 228
other revenue 332 33 365
revenue 6436 908 7344
operating costs
1
5459 489 5948
ebitda
1
977 419 1396
depreciation and amortisation 328 20 348
operating profit before exceptional items 649 399 1048
operating exceptional items 1030
net finance costs 1897
movement in fair value of interest rate swaps 187
uk income tax credit 569
loss attributable to owners of the parent company 1497
1 before exceptional items 67 spirit pub company plc
annual report 2012
business review governance financial statements
2 segmental analysis con tin ued
 2012
managed 
£m
leased
£m
unallocated
£m
total
£m
assets and liabilities
segment assets 13248 3791 – 17039
unallocated assets – – 688 688
total assets 13248 3791 688 17727
segment liabilities 2028 102 – 2130
unallocated liabilities – – 10575 10575
total liabilities 2028 102 10575 12705
net assets  liabilities 11220 3689 9887 5022
 2011
managed
£m
leased
£m
unallocated
£m
total
£m
assets and liabilities
segment assets 15701 5986 – 21687
unallocated assets – – 574 574
total assets 15701 5986 574 22261
segment liabilities 2361 71 – 2432
unallocated liabilities – – 10719 10719
total liabilities 2361 71 10719 13151
net assets  liabilities 13340 5915 10145 9110
 2012 2011
managed
£m
leased
£m
total
£m
managed
£m
leased
£m
total
£m
capital expenditure
investment spend 863 53 916 745 63 808
with the exception of the transfer of pubs there are immaterial sales between the business segments segment assets 
include property plant and equipment operating leases goodwill other intangible assets inventories receivables and 
noncurrent assets held for sale and exclude centrally held cash of £288m 2011 £574m deferred tax assets of  
£366m 2011 £nil retirement assets of £31m 2011 £nil and other assets of £03m 2011 £nil while segment liabilities 
comprise operating liabilities and exclude corporate borrowings of £8414m 2011 £8951m related derivatives of  
£1951m 2011 £1610m retirement liabilities of £31m 2011 £94m and other liabilities of £179m 2011 £64m  
capital expenditure comprises additions to property plant and equipment and operating leases 68 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
3 analysis of expenses
the following items have been included in arriving at operating profit  loss
2012 
£m
2011
£m
drink and food costs 2358 2250
managed pub running costs 2848 2806
leasehold rentals 515 477
depreciation 331 310
amortisation 36 38
impairment losses 806 754
goodwill charge – 101
loss  profit on sale of noncurrent assets 194 39
losses related to the revaluation of the property portfolio 5146 –
other costs
1
373 629
total costs deducted from revenue to determine operating profit  loss 12607 7326
1 included within other costs is £45m net income 2011 £214m net costs relating to exceptional items
auditor’s remuneration is as follows
2012 
£m
2011
£m
statutory audit services 
audit of group financial statements 02 01
audit of subsidiary companies pursuant to legislation – –
 
nonaudit related services
other services – –
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
2012
£m
2011
£m
bank interest receivable 07 20
exceptional finance income note 6 296 278
total finance income 303 298
5 finance costs
2012 
£m
2011
£m
interest payable on bank loans 519 543
other interest payable 06 20
effect of unwinding discounted provisions note 23 65 65
exceptional finance costs note 6 201 1567
total finance costs 791 2195 69 spirit pub company plc
annual report 2012
business review governance financial statements
6 exceptional 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 included in the consolidated income statement are the following exceptional items
2012 
£m
2011
£m
operating
restructuring redundancy and other related oneoff costs
1
65 05
movement on property liabilities
2
15 209
goodwill charge – 101
repayment of vat
3
189 –
loss  profit on sale of noncurrent assets 194 39
losses related to the revaluation of the property portfolio
4
5146 –
impairment losses note 13 806 754
noncash impact of annual uplifts in rent and rentfree periods 94 –
6101 1030
finance income
loan note redemptions
5
91 59
related party interest receivable – 02
pension finance income
6
205 217
296 278
finance costs
subordinated loan interest
7
– 1377
related party interest payable – 04
pension finance costs
6
201 186
201 1567
movement in fair value of interest rate swaps
8
394 187
total exceptional items before tax 6400 2506
tax
tax impact of exceptional items 501 706
adjustments to tax in respect of prior periods 41 37
tax credit in respect of the change in tax rate
9
76 51
384 692
total exceptional items after tax 6016 1814
1 primarily relates to restructuring costs incurred following the demerger from punch
2   represents release of provision on disposal of properties in the prior year represents provision for rent payments following the reversion of onerous leases 
to the group
3   represents recognition of £189m of vat on machine income repaid from hmrc in the year to 20 august 2011 now recognised following a ruling of the 
european court of justice in november 2011
4  represents £5146m charge arising from the revaluation of the property portfolio
5  represents profit on the purchase of securitisation debt at a discount to nominal value together with the write off of related deferred issue costs
6   represents pension finance income and pension finance cost related to the defined benefit schemes these are noncash items and are excluded from 
underlying profit pension finance income of £217m and pension finance cost of £186m have been reclassified as exceptional items in the prior year
7   subordinated loan interest payable in the 52 weeks to 20 august 2011 was capitalised interest expenses on related party borrowings due to the size and 
nature of this interest being interest on related party instruments it was presented separately in order to provide a clearer presentation of the interest expense 
of the group as a result of the reorganisation undertaken prior to the demerger from punch this interest expense is £nil in the 52 weeks to 18 august 2012
8  represents the movement in the fair value of interest rate swaps that are classified as fair value through profit and loss
9  see note 16 for detail of the changes in tax rate 70 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
7 employees and directors
staff costs
2012 
£m
2011
£m
wages and salaries 1839 1706
social security costs 107 111
share based payments
1
17 21
pension costs 18 13
1981 1851
1 share based payment costs relate to spirit pub company plc and punch taverns plc share based payment schemes
the average number of employees during the year was as follows
2012 
no
2011
no
management and administration
1
438 297
retail staff
1
16796 16632
17234 16929
1 employee numbers relate to actual employees rather than fulltime employee equivalents
directors’ emoluments are disclosed in the report on directors’ remuneration on pages 40 to 49
8 taxation
a tax on profit on ordinary activities
tax charged  credited in the income statement
 2012 2011
pre
 exceptional 
items
£m
exceptional 
items
£m
total
£m
pre
 exceptional
 items
£m
exceptional 
items
£m
total
£m
current tax
uk corporation tax 
– current year 12 12 – 29 179 150
uk corporation tax  
– adjustments in respect of prior periods – – – – 01 01
12 12 – 29 178 149
deferred tax note 16
origination and reversal of temporary differences  
– current year 116 413 297 94 476 382
origination and reversal of temporary differences  
– adjustments in respect of prior periods – 41 41 – 38 38
116 372 256 94 514 420
total tax charge  credit in the income statement 128 384 256 123 692 569 71 spirit pub company plc
annual report 2012
business review governance financial statements
8 taxation con tin ued
tax on items charged  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
 2012 
£m
2011
£m
deferred tax
deferred tax charge  credit on gain  loss on actuarial valuation of pension schemes 07 22
deferred tax charge  credit recognised directly in equity 07 22
b reconciliation of the total tax credit
the effective rate of tax is different to the full rate of corporation tax the differences are explained below 
2012 
£m
2011
£m
loss on ordinary activities before tax 5889 2066
tax at current uk tax rate of 252 2011 272
1
1485 562
effects of
net effect of expenses not deductible for tax purposes and nontaxable income  
before exceptional items 02 –
adjustments to tax in respect of prior periods exceptional items 41 37
current year exceptional debits 1190 30
total tax credit reported in the income statement 256 569
1 see note 16 for detail of the changes in tax rate
details of the exceptional tax credits and debits are included in note 6
9 earnings per share
basic earnings per share is based on the profit for the year attributable to ordinary shareholders and the weighted average 
number of ordinary shares outstanding 
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
the weighted average number of shares is 6598 million throughout the year 2011 6597 million
reconciliations of the earnings are set out below
 2012 2011
earnings
£m
per share
 amount
pence
earnings
£m
per share
 amount
pence
basic profit  loss per share 5633 854 1497 227
diluted profit  loss per share 5633 854 1497 227
supplementary earnings per share figures
basic earnings per share before exceptional items 383 58 317 48
diluted earnings per share before exceptional items 383 58 317 48
there were 25 million potential dilutive ordinary shares at 18 august 2012 20 august 2011 nil in relation to employee  
share awards 72 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
10 dividends
2012 
£m
2011
£m
amounts paid and recognised in equity
in respect of the 52 weeks ended 18 august 2012
– interim dividend of 065 pence per share 42 –
proposed final dividend of 130 pence per share 2011 nil 86 –
the board recommended on 15 october 2012 the proposed final dividend for the 52 weeks ended 18 august 2012 this did 
not qualify for recognition in the financial statements at 18 august 2012 as it had not been approved by the shareholders at 
that date
11 property plant and equipment
land and
 buildings
£m
public house 
fixtures and
 fittings
£m
total
£m
cost or valuation
at 21 august 2010 19587 2964 22551
additions 444 364 808
net transfers to noncurrent assets held for sale 321 27 348
disposals 365 56 421
at 20 august 2011 19987 3299 23286
reclassification 1318 215 1533
additions 435 443 878
revaluation 6708 2234 8942
net transfers to noncurrent assets held for sale 106 18 124
disposals 741 62 803
at 18 august 2012 11549 1213 12762
accumulated depreciation
at 21 august 2010 3228 2143 5371
charge for the year 72 238 310
impairment losses note 13 540 62 602
net transfers to noncurrent assets held for sale 196 19 215
disposals 308 46 354
at 20 august 2011 3728 2416 6144
reclassification 651 882 1533
charge for the year 39 292 331
impairment note 13 850 30 880
revaluation 3617 1829 5446
net transfers to noncurrent assets held for sale – 14 14
disposals 349 13 362
at 18 august 2012 – – –
net book value at 18 august 2012 11549 1213 12762
net book value at 20 august 2011 16259 883 17142 73 spirit pub company plc
annual report 2012
business review governance financial statements
11 property plant and equipment con tin ued
as of 18 august 2012 the group’s property portfolio has been revalued to open market value the directors have performed  
this valuation with reference to a sample valuation of 232 properties which were valued at that date by colliers international 
independent chartered surveyors
the sample of properties was valued at market value in accordance with the provisions of royal institution of chartered 
surveyors rics appraisal and valuation standards ‘the red book’ assuming each asset is sold as part of the continuing 
enterprise in occupation individually as a fully operational trading entity the market value has been determined having regard  
to assumptions such as current and future projected income levels taking account of the location the quality of the pub or 
restaurant recent market transactions in the sector and potential alternative use value
surpluses which arise from the revaluation are recorded directly within the revaluation reserve unless they are reversing  
a revaluation decrease which has been recognised in the income statement previously in which case the surplus is 
recognised in the income statement up to the amount previously recognised in the income statement where the revaluation 
gives rise to a deficit this is reflected directly in the revaluation reserve to the extent that a surplus exists against the same 
asset any residual amount is then recognised in the income statement 
prior to the revaluation a detailed impairment review was performed at 18 august 2012 and as a result an impairment charge 
of £806m was identified at that date representing the £880m charge to property plant and equipment shown above and  
a £74m credit to operating leases shown in note 12 for further information on the impairment review please see note 13
if the properties had not been revalued the historical cost net book value would be £16258m 2011 £17142m
a reclassification between cost and accumulated depreciation has been made as at 18 august 2012 there is no impact  
on net book value as a result of this reclassification
the cost of work in progress within property plant and equipment at 18 august 2012 was £531m august 2011 £324m
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 properties held under finance leases with a net book value of £89m 
august 2011 £92m
included within the net book value above are licensed properties with a net book value of £12432m august 2011£15994m 
over which the group’s borrowings are secured by way of fixed and floating charges 74 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
12 goodwill and operating lease intangible assets
operating
 leases
£m
goodwill
£m
cost or valuation
at 21 august 2010 1389 2272
disposals 09 03
at 20 august 2011 1380 2269
reclassification 64 –
net transfers to noncurrent assets held for sale 04 –
disposals 08 22
revaluation 820 –
at 18 august 2012 484 2247
amortisation
at 21 august 2010 651 –
charge for the year 38 –
impairment losses note 13 152 101
disposals 09 –
at 20 august 2011 832 101
reclassification 64 –
charge for the year 36 –
disposals 08 –
impairment note 13 74 –
revaluation 722 –
at 18 august 2012 – 101
net book value at 18 august 2012 484 2146
net book value at 20 august 2011 548 2168
as detailed in note 11 the group has adopted a policy of revaluing its property portfolio and as a result a revaluation charge 
was recognised in operating leases at 18 august 2012 prior to the revaluation exercise an impairment review was triggered 
which led to an impairment credit of £74m being recognised at 18 august 2012 for further details on the impairment review 
see note 13 
if the properties had not been revalued the historical cost net book value of operating leases would be £584m 2011 £548m
included within operating leases are properties with a net book value of £450m august 2011 £542m over which the 
group’s borrowings are secured by way of fixed and floating charges
goodwill has been reduced in the year by £22m 2011 £03m representing the apportioned value of goodwill allocated  
to those pubs disposed of during the year in the prior year goodwill was further written down by £101m following the 
reallocation of pubs from core to noncore prior to the demerger from punch 
at 18 august 2012 the goodwill assigned to the managed estate was £1450m august 2011 £1450m and the goodwill 
assigned to the leased estate was £696m august 2011 £718m 75 spirit pub company plc
annual report 2012
business review governance financial statements
13 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 cash generating unit cgu the cash generating units are individual pubs the carrying values  
of these individual pubs are compared to the recoverable amount of the cgus which is the higher of value in use and  
fair value less costs to sell 
when a pub is being actively marketed for disposal it is written down to fair value less costs to sell when this is lower than 
carrying value and transferred to assets held for sale
at 18 august 2012 a detailed impairment review was performed prior to the change in accounting policy and resultant 
revaluation of the pub estate the value in use of each property was calculated and compared to the recoverable amount and 
historic net book value of each pub where a downward revaluation was identified and the value in use of that property was 
lower than the current net book value an impairment charge as at 18 august 2012 has been recognised where a previous 
impairment was found to be reversed this has been recognised in the income statement 
cash flows used in the valueinuse calculation were based on earnings before interest and taxation extrapolated over  
a 50 year period using a multiple of ten 2011 ten as the terminal value the pretax risk adjusted discount rates applied  
to the cash flow projections range between 8 and 9 2011 range between 8 and 9 the growth rate applied to  
cash flows over the 50 year period is 225 2011 225 based on this detailed review a net impairment charge  
of £806m 2011 £754m was booked to exceptional costs during the year
the impairment charges  credits recognised in both the managed and leased estates are as follows
2012 2011
managed
£m
leased
£m
total
£m
managed
£m
leased
£m
total
£m
property plant and equipment 394 486 880 43 559 602
operating leases 66 08 74 109 43 152
328 478 806 152 602 754
goodwill
goodwill is allocated to groups of cgus based on the benefits to the group that arise from each business combination  
the two groups of cgus are identified by their pub operating format managed or leased and this is the lowest level at 
which goodwill is monitored by the group 
during the year to 18 august 2012 a goodwill impairment review was performed by comparing the recoverable amount of  
the cgus to the carrying value of the unit including goodwill the recoverable amount of the cgus was determined based  
on valueinuse calculations these valueinuse calculations are based on earnings before interest and tax and extrapolated 
for a period of 50 years using a multiple of ten as the terminal value the pretax risk adjusted discount rates applied to cash 
flow projections range between 8 and 9 2011 range between 8 and 9 the growth rate applied to cash flows over 
the 50 year period is 225 based on this review no impairment of goodwill has been identified neither a reduction in the 
growth rate to 025 in each of the next five years nor an increase in the discount rate to 100 would lead to an impairment 
of goodwill 
during the prior year to 20 august 2011 and prior to the demerger from punch 98 pubs were transferred to a noncore  
estate and at that stage goodwill of £101m was reallocated to this noncore estate the intention to dispose of these 
properties in the medium term triggered an impairment review and an impairment charge of £101m was taken against  
this goodwill no further impairment was identified at 20 august 2011
during the year to 18 august 2012 £22m of goodwill was disposed of as a result of disposals from the leased estate  
20 august 2011 £03m 76 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
14 investments in subsidiary undertakings and joint ventures
company
total
£m
at 20 august 2011 3364
additions 13
at 18 august 2012 3377
details of the principal subsidiary undertakings and joint venture as at 18 august 2012 are as follows
name of company nature of business
subsidiaries
spirit pub company managed limited pub operating company
spirit pub company leased limited pub operating company
spirit pub company trent limited pub operating company
spirit pub company holdco limited holding company
spirit pub company sge limited intermediate holding company
spirit group holdings limited intermediate holding company
spirit pub company supply limited group supply company
spirit pub company services limited management and administration company
spirit pub company investments limited financing company
joint venture
allied kunick entertainments limited property company
the company owns 100 of the ordinary share capital or indirectly controls 100 of the voting rights of the companies 
listed above with the exception of allied kunick entertainments limited of which the company indirectly owns 51  
of the ordinary share capital but can only exercise joint control as both parties have equal voting rights on all decisions 
all companies are incorporated in england and wales
in addition to those investments listed above the group also maintains daytoday control over spirit issuer parent limited 
and its wholly owned subsidiary spirit issuer plc a special purpose entity that provides financing to the group although  
no company in the group owns any shares either directly or indirectly in spirit issuer parent limited or spirit issuer plc  
the financial statements are also consolidated into the group financial statements in accordance with sic 12
exemption has been taken to exclude from the above disclosure subsidiary undertakings whose results or financial position 
do not principally affect the financial statements
15 trade and other receivables
 group company
2012 
£m
2011
£m
2012 
£m
2011
£m
amounts falling due within one year
trade receivables 48 103 – –
amounts owed by related parties – 04 82 –
prepayments and accrued income 158 153 – –
other receivables 41 45 – –
247 305 82 – 77 spirit pub company plc
annual report 2012
business review governance financial statements
16 deferred tax
the movement on the deferred tax account is as follows
group
2012 
£m
2011
£m
at beginning of year 588 168
credited to income statement 256 398
charged  credited to equity 07 22
at end of year 837 588
the company has no deferred tax balances
the movements in deferred tax assets and liabilities during the year are shown below 
deferred tax assets
group
tax losses
£m
retirement
 benefit
 liabilities
£m
financial 
instruments
£m
accelerated
 capital
 allowances
£m
other
£m
total
£m
at 21 august 2010 249 38 312 – 32 631
credited  charged to income statement 376 36 05 – 27 372
credited to equity – 22 – – – 22
at 20 august 2011 625 24 317 – 59 1025
credited  charged to income statement 205 17 48 – 132 306
charged to equity – 07 – – – 07
transfer – – – 141 73 214
at 18 august 2012 420 – 365 141 – 926
deferred tax liabilities
group
accelerated
 capital
 allowances
£m
other
£m
total
£m
at 21 august 2010 445 18 463
credited to income statement 25 01 26
at 20 august 2011 420 17 437
credited to income statement 561 01 562
transfer 141 73 214
at 18 august 2012 – 89 89
at 18 august 2012 the group has unused tax losses of £2003m august 2011 £2689m and unused capital losses of 
£8115m august 2011 £5042m available for offset against future profits a deferred tax asset has been recognised in 
respect of £1826m august 2011 £2502m 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 £177m august 2011 £187m 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 2012 budget on 21 march 2012 announced that the uk corporation tax rate will reduce to 22 by 2014 a reduction  
in the rate from 26 to 25 effective from 1 april 2012 was substantively enacted on 5 july 2011 and further reductions  
to 24 effective from 1 april 2012 and 23 effective from 1 april 2013 were substantively enacted on 26 march 2012  
and 3 july 2012 respectively  78 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
16 deferred tax con tin ued
this will reduce the group’s future current tax charge accordingly the deferred tax asset at 18 august 2012 has been 
calculated based on the rate of 23 substantively enacted at 18 august 2012
it has not yet been possible to quantify the full anticipated effect of the announced further 1 rate reduction in addition  
to the 1 reduction already substantively enacted on 26 march 2012 although this will further reduce the group’s future 
current tax charge and reduce the group’s deferred tax asset accordingly
17 inventories
2012 
£m
2011
£m
goods held for resale 77 72
the group consumed £1990m of inventories during the year 2011 £1908m and charged £nil to the income statement for 
the write down of inventories during the year 2011 £nil 
18 cash
 group company
2012 
£m
2011
£m
2012
£m
2011
£m
cash and cash equivalents 974 1396 05 01
19 noncurrent assets held for sale
2012 
£m
2011
£m
noncurrent assets held for sale 169 42
at 18 august 2012 noncurrent assets held for sale represent £106m august 2011 £42m of pubs from the managed estate 
that are individually being actively marketed for sale with varying expected completion dates within one year and £63m 
august 2011 £nil of pubs from the leased estate the value of noncurrent assets held for sale represents the expected  
net disposal proceeds and is the value after an impairment charge in the year of £66m 2011 £104m
20 trade and other payables
 group
2012 
£m
2011
£m
trade payables 416 373
other tax and social security payable 229 194
other payables 82 102
accruals and deferred income 792 927
1519 1596
included within accruals and deferred income is an amount of £94m 2011 £nil falling due after more than one year 79 spirit pub company plc
annual report 2012
business review governance financial statements
21 borrowings
 2012 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 spirit issuer plc 45 8369 8414 50 8801 8851
obligations under finance leases 06 93 99 06 94 100
total borrowings 51 8462 8513 56 8895 8951
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 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
i s s u e d	b y	s p i r i t	i s s u e r	p l c 
 2012 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 floating rate debenture notes 
repayable by september 2026 at libor
1
 022  
per annum to december 2011 and libor
1
 055 
thereafter – 1447 1447 – 1447 1447
class a2 secured floating rate debenture notes 
repayable by june 2029 at libor
1
 108 per annum  
to december 2011 and libor
1
 27 thereafter – 1866 1866 – 1866 1866
class a3 secured fixed  floating rate debenture  
notes repayable by september 2019 at 586 to 
december 2014 and libor
1
 055 thereafter – 1099 1099 – 1167 1167
class a4 secured fixed  floating rate debenture  
notes repayable by march 2025 at 6582  
to december 2018 and libor
1
 2775 thereafter – 2077 2077 – 2275 2275
class a5 secured fixed  floating rate debenture  
notes repayable by december 2032 at 5472  
to december 2028 and libor
1
 075 thereafter – 1585 1585 – 1680 1680
– 8074 8074 – 8435 8435
add premium arising from fair value adjustment 45 295 340 50 366 416
45 8369 8414 50 8801 8851
1 for three month deposits
in the current year the group redeemed notes with a nominal value of £361m being £68m class a3 £198m class a4 and 
£95m class a5 notes in the year ended 20 august 2011 the group redeemed notes with a nominal value of £230m being 
£20m class a2 £150m class a4 and £60m class a5 notes
these figures are net of notes held by the group not yet cancelled which as at 18 august 2012 were £20m class a2  
£68m class a3 £156m class a4 and £155m class a5 notes 20 august 2011 £20m class a2 £206m class a4 and 
£190m class a5 notes 80 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
21 borrowings con tin ued
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
s p i r i t	i s s u e r	p l c
interest rate swap agreements have been entered into which swap the libor interest rate to a fixed rate of 6581 to  
march 2012 and 6831 thereafter on the class a1 and class a2 debenture notes and after their respective stepup dates 
4555 on the class a3 class a4 and class a5 debenture notes the capital amount of these swaps reduces over time  
to match the contractual repayment profile of the floating rate notes although these swaps ensure that cash flows are 
perfectly hedged over the life of the notes they were deemed ineffective at the time of the 2006 acquisition of the group  
by the punch group in accordance with the requirements of ias 39 and accordingly all future movements in fair value will  
be recognised in the income statement
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 as set out below there are no financial liabilities other than short term payables excluded from  
this analysis
 2012  2011
fixed
£m
floating
£m
total
£m
fixed
£m
floating
£m
total
£m
secured loan notes issued by spirit issuer plc 8414 – 8414 8851 – 8851
obligations under finance leases 99 – 99 100 – 100
total borrowings 8513 – 8513 8951 – 8951
interest rate analysis
the weighted average effective interest rates of interest bearing loans and borrowings including the effect of interest rate 
swaps at 18 august 2012 are as follows
2012

2011

secured loan notes 77 69
finance leases 65 65
the average interest rate for group loans and borrowings is 77 august 2011 69
obligations under finance leases
the minimum lease payments under finance leases fall due as follows
 2012 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 06 07 06
within one to five years 27 22 27 22
over five years 335 71 351 72
369 99 385 100 81 spirit pub company plc
annual report 2012
business review governance financial statements
21 borrowings con tin ued
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
 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 – 231 799 7044 8074
– interest 72 72 211 549 904
– interest rate swaps 542 542 1581 4110 6775
614 845 2591 11703 15753
 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 – – 818 7618 8436
– interest 66 66 197 656 985
– interest rate swaps 505 505 1516 5038 7564
571 571 2531 13312 16985
the contractual maturity of trade and other payables is within one year
22 financial instruments
categories of financial instruments
2012
£m
2011
£m
financial assets
trade receivables amortised cost 48 103
cash and short term deposits 974 1396
1022 1499
financial liabilities
interest rate swaps – at fair value through profit or loss 1951 1610
borrowings amortised cost 8830 9224
finance lease obligations 99 100
10880 10934
all derivative financial instruments are held on the statement of financial position at fair value changes in fair value of any 
derivative financial instruments are recognised immediately in the income statement
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
the main risks arising from the group’s financial instruments are interest rate risk liquidity risk capital risk and credit risk 
there is no 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 23 to 25 82 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
22 financial instruments con tin ued
interest rate risk
as the group has no significant interestbearing 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 secured 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 either by embedding the cost in new swaps or by terminating the over
hedge at 18 august 2012 there are £873m august 2011 £495m of interest swaps outstanding on cancelled floating  
rate notes
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 year 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
2012
impact on income statement and equity if interest rates increased by 1 gain 10 – 540
impact on income statement and equity if interest rates decreased by 1 loss 10 – 540
2011
impact on income statement and equity if interest rates increased by 1 gain 20 – 574
impact on income statement and equity if interest rates decreased by 1 loss 20 – 574
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
liquidity risk
the group’s funding strategy is to ensure a mix of financing methods offering flexibility and cost effectiveness to match  
the requirements of the group the group is primarily financed by secured loan notes with approximately 87 august 2011 
90 of the capital balance on these loan notes being repayable after more than five years from 18 august 2012 subject to 
relevant covenants being met these covenants are formally reported on after each quarter end but are monitored internally 
on a periodic basis 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 stress tested for possible scenarios this includes assessment of the ability to meet the restricted 
payment condition in the securitisation structure in order that cash can be released to the top company level should the 
securitisation not meet the restricted payment condition then cash generated may under certain circumstances become 
trapped within the 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  83 spirit pub company plc
annual report 2012
business review governance financial statements
22 financial instruments con tin ued
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 for shareholders and to service debt obligations ultimately ensuring that 
the group continues as a going concern the group’s principal external debt is held within one securitisation the securitised 
debt is monitored by a variety of measures which are reported to the debt providers on a quarterly basis the primary measure 
is a debt service cover ratio dscr 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 as well as decisions as to whether to buy back debt  
in the current financial year the group has reduced the nominal value of its outstanding securitised debt from £8435m to 
£8074m 2011 reduced from £8665m to £8435m the dscr default financial covenant at 18 august 2012 was 20 times 
ebitda august 2011 20 times compared to a financial covenant of 13 times
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 18 august 2012 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 statement of financial position 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 18 august 2012 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 £44m 
august 2011 £51m these are held on the statement of financial position 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
2012
£m
2011
£m
provision for doubtful debts at beginning of year 20 10
charged to income statement 08 21
utilised during the year 06 04
released during the year 01 07
provision for doubtful debts at end of year 21 20
the ageing of trade receivables at 18 august 2012 net of the doubtful debt provision is as follows
2012
£m
2011
£m
live debt current 33 88
0 – 35 days past due 03 05
over 35 days past due 12 10
48 103
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 and is fully provided
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 statement of financial position  84 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
22 financial instruments con tin ued
derivative financial instruments
the carrying values of derivative financial instruments in the statement of financial position are as follows
 2012 2011
group
current
 liabilities
£m
noncurrent 
liabilities
£m
current
 liabilities
£m
noncurrent 
liabilities
£m
interest rate swaps 210 1741 247 1363
the interest rate swaps replace the libor rate on the group’s secured floating rate loan notes 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 21 for more detail the swaps 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 18 august 2012 
the carrying value of the group’s secured loan notes at 18 august 2012 is £8414m august 2011 £8851m and the fair value 
measured at market value of this debt at that date is £6131m august 2011 £7199m 
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
all financial instruments carried at fair value have been measured by a level 2 valuation method
23 provisions
group
onerous
 contract
£m
property
 leases
£m
insurance
£m
total
£m
at 21 august 2010 26 699 54 779
unwinding of discount effect of provisions 06 59 – 65
charged to income statement – 209 14 223
utilised during the year 30 177 22 229
released to income statement 02 – – 02
at 20 august 2011 – 790 46 836
unwinding of discount effect of provisions – 65 – 65
credited  charged to income statement – 15 47 32
released to income statement on disposal – 11 – 11
utilised during the year – 154 77 231
at 18 august 2012 – 675 16 691 8 5 spirit pub company plc
annual report 2012
business review governance financial statements
23 provisions con tin ued
provisions have been analysed between current and noncurrent as follows
group
2012 
£m
2011
£m
current 121 202
noncurrent 570 634
691 836
property leases
the provision for property leases has been set up to cover operating costs of vacant or loss making premises the provision 
covers the expected shortfall between operating income and rents payable for a period of three years for trading properties 
and ten years for non trading properties being the estimated period to mitigate the losses 
insurance
the provision for insurance relates to an estimate of monies that may become payable on claims not yet made to the group 
the majority of this provision is expected to be utilised within five years from 18 august 2012
24 share based payments
at 18 august 2012 the group had three share incentive schemes by which directors and employees are able to acquire 
shares in the company all of these schemes are equitysettled schemes 
long term incentive plan 2011
the first scheme is a long term incentive plan ltip whereby eligible senior management are granted awards of ltip 
shares the shares are issued to ltip members subject to their continued three year employment from the date of award 
and to the extent that the performance conditions set by the remuneration committee at the date the award is made are 
satisfied further information on the performance conditions of the ltip are shown in the report on directors’ remuneration 
on pages 40 to 49 at 18 august 2012 eligible employees held rights over ordinary shares that may result in the issue of 
7486127 shares on 7 november 2014 and 655589 shares on 8 may 2015
the exception to this is an award of 59207 shares made under the ltip rules on 2 march 2012 which is not subject to 
performance conditions and was satisfied by market purchases of shares
share bonus plan 2011
the second scheme is a share bonus plan sbp in which at the discretion of the board certain senior management who  
are eligible for an annual bonus can participate eligible employees are awarded rights to the issue of a maximum number  
of shares at the beginning of a two year period which they will be entitled to receive at the end of that period if the eligibility 
condition set by the remuneration committee at the time the allocation is made is satisfied at 18 august 2012 eligible 
employees held rights over ordinary shares which have been satisfied by market purchases of these shares 
share incentive plan 2011
the third 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 
company and will not be entitled to the matching share if they leave within three years of purchasing 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 
company in which case they must be taken out the scheme was introduced in november 2011 with shares being acquired 
at market values on a monthly basis 
as at 18 august 2012 726703 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 shares at 18 august 2012 was £04m 8 6 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
24 share based payments con tin ued
fair value of share awards
l o n g	t e r m	i n c e n t i v e	p l a n
the key assumptions used in the measurement of the fair values of awards made are as follows
grant date 8 may 2012 2 march 2012 9 november 2011
valuation model tsr element monte carlo – monte carlo
valuation model eps element black scholes – black scholes
valuation model – black scholes –
share price at date of grant £056 £061 £044
exercise price £nil £nil £nil
expected volatility 323 na 603
expected life 3 years 19 years 3 years
riskfree interest rate 052 na 066
expected dividend yield 353 321 427
fair value per award £041 £057 £033
expected volatility has been calculated based on a proxy volatility for the company using the average volatility of  
six companies in the same sector for a period corresponding to the expected life of the option or share award
the riskfree rate of return is the yield on zerocoupon uk government bonds of a term consistent with the assumed  
option life
s h a r e	i n c e n t i v e	p l a n
the fair value of the matching shares is recognised as the market value of the shares issued at the date of purchase  
this charge is spread over the three year vesting period on a straightline basis 
movements in awards under share based payment schemes
reconciliations of movements for the ltip sbp and sip schemes over the 52 weeks to 18 august 2012 are shown below
 2012
long term
 incentive 
plan
no
share 
bonus 
plan
no
share
 incentive 
plan
no
outstanding at beginning of year – – –
granted during the year 8767285 383319 394611
expired during the year – – 11308
forfeited during the year 566362 – –
outstanding at end of year 8200923 383319 383303 87 spirit pub company plc
annual report 2012
business review governance financial statements
25 share capital 
the ultimate parent company of the group spirit pub company plc was incorporated on 8 june 2011
 2012 2011
no £m no £m
allotted issued called up and fully paid
ordinary shares of 1 pence 660012199 66 659655957 66
changes in share capital
under the long term incentive plan and share bonus plan no ordinary shares were issued during the year 2011 nil  
under the share incentive plan 356242 matching shares were issued at par consideration see note 24 for further details  
of these schemes the issue of these shares resulted in net cash proceeds of £nil 2011 £nil
all ordinary shares in issue at 18 august 2012 rank pari passu in all respects
26 net debt
a analysis of net debt
2012
£m
2011
£m
secured loan notes 8074 8435
cash and cash equivalents 974 1396
nominal value of net debt 7100 7039
fair value adjustments on acquisition of secured loan notes 340 416
fair value of interest rate swaps 1951 1610
finance lease obligations 99 100
net debt 9490 9165
statement of financial position
borrowings 8513 8951
derivative financial instruments 1951 1610
cash and cash equivalents 974 1396
net debt 9490 9165
b analysis of changes in net debt
at 
21 august
 2010
£m
cash flow
£m
noncash
 movements
£m
at
20 august
2011 
movements
£m
cash flow
£m
noncash
 movements
£m
at 
18 august
 2012
£m
current assets
cash at bank and in hand 379 1017 – 1396 422 – 974
379 1017 – 1396 422 – 974
debt 
borrowings 9264 188 125 8951 280 158 8513
subordinated loans from related parties 10522 – 10522 – – – –
derivative financial instruments 1476 – 134 1610 – 341 1951
21262 188 10513 10561 280 183 10464
net debt per statement of financial position 20883 1205 10513 9165 142 183 9490
net debt incorporates the group’s borrowings subordinated loans derivative financial instruments and obligations under 
finance leases less cash and cash equivalents
noncash movements relate to amortisation of premium on loan notes and fair value movement in derivative financial instruments 88 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
26 net debt con tin ued
c reconciliation of net cash flow to movement in net debt
2012
£m
2011
£m
decrease  increase in cash and cash equivalents in the year 422 1017
cash outflow from change in debt financing 280 188
change in net debt resulting from cash flows 142 1205
noncash movements in net debt 184 10508
obligations under finance leases 01 05
change in net debt resulting from noncash flows 183 10513
movement in net debt 325 11718
net debt at beginning of year 9165 20883
net debt at end of year 9490 9165
27 pensions and other postretirement benefits
the group operates two funded defined benefit pension schemes the spirit group pension scheme sgps and the  
spirit group retail pension scheme sgrps 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 the statement of comprehensive 
income soci and the statement of financial position and relate to both the sgps and the sgrps 
the amounts recognised in the income statement are as follows
analysis of amounts charged to operating costs
2012
£m
 2011
£m
current service cost – –
analysis of amounts credited  charged to finance income and finance costs
2012
£m
2011
£m
expected return on assets 205 217
interest on scheme liabilities 201 186
net credit 04 31
analysis of amounts recognised in the soci in the year
2012
£m
2011
£m
actual return on assets 486 296
expected return on assets 205 217
actuarial loss  gain on liabilities 159 35
expected actuarial gains recognised in the soci 122 114
restriction on surplus recognised – 84
minimum funding restriction 93 109
actuarial gains  losses recognised in the soci 29 79 89 spirit pub company plc
annual report 2012
business review governance financial statements
27 pensions and other postretirement benefits con tin ued
cumulative amounts recognised in the soci
2012
£m
2011
£m
at beginning of year 24 55
net actuarial gains  losses in the year 29 79
at end of year 05 24
the amounts recognised in the statement of financial position are as follows
2012
£m
2011
£m
present value of scheme liabilities 3903 3675
fair value of scheme assets 4190 3774
net retirement benefit asset 287 99
restriction on surplus recognised – 84
minimum funding restriction 287 109
net retirement benefit liability recognised in the statement of financial position – 94
movements in the present value of scheme liabilities are as follows
2012
£m
2011
£m
present value of scheme liabilities at beginning of year 3675 3641
interest cost 201 186
actuarial losses  gains 159 35
benefits paid 132 117
present value of scheme liabilities at end of year 3903 3675
movements in the fair value of scheme assets are as follows
2012
£m
2011
£m
fair value of scheme assets at beginning of year 3774 3502
expected return on scheme assets 205 217
actuarial gains 281 79
contributions paid by employer 62 93
benefits paid 132 117
fair value of scheme assets at end of year 4190 3774
scheme assets are stated at their market values at 18 august 2012 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
2012 2011
equities 347 337
bonds 552 569
property 83 90
other 18 04 90 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
27 pensions and other postretirement benefits con tin ued
the history of experience adjustments on the schemes for the current and previous financial years is as follows
2012
£m
2011
£m
2010
£m
2009
£m
2008
2009
present value of retirement benefit liabilities 3903 3675 3641 3625 2931
fair value of plan assets 4190 3774 3502 3166 3335
net asset  liability in the scheme 287 99 139 459 404
experience adjustments on scheme liabilities 28 10 – 04 215
percentage of scheme liabilities 07 03 – 01 73
experience adjustments on scheme assets 281 79 222 306 236
percentage of scheme assets 67 21 63 97 71
scheme funding
s p i r i t	g r o u p	p e n s i o n	s c h e m e
the sgps 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 31 october 2009 updated to 18 august 2012
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
2012 2011
male currently aged 45 24 years 24 years
male currently aged 65 22 years 22 years
female currently aged 45 25 years 25 years
female currently aged 65 23 years 23 years
the assumptions used in determining the valuations are as follows
2012 2011
rate of increase in pensions 26 33
discount rate 45 52
inflation assumption rpi 29 36
inflation assumption cpi 20 27
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 725 520 725 460
government bonds 250 312 350 309
property 675 122 675 119
corporate bonds 400 352 500 300
other 150 45 160 13
total market value of assets 1351 1201
present value of scheme liabilities 1320 1224
net pension asset  liability before deferred tax 31 23
deferred tax liability  asset 07 06
net pension asset  liability 24 17 91 spirit pub company plc
annual report 2012
business review governance financial statements
27 pensions and other postretirement benefits con tin ued
s p i r i t	g r o u p	r e t a i l	p e n s i o n	s c h e m e
the sgrps 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 31 october 2009 updated to 18 august 2012
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
2012 2011
male currently aged 45 24 years 24 years
male currently aged 65 21 years 21 years
female currently aged 45 26 years 26 years
female currently aged 65 21 years 21 years
the assumptions used in determining the valuations are as follows
2012 2011
rate of increase in pensions 26 20
discount rate 45 52
inflation assumption rpi 29 36
inflation assumption cpi 20 27
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 725 933 725 812
government bonds 250 769 350 787
property 675 225 500 750
corporate bonds 400 879 675 219
other 150 33 160 05
total market value of assets 2839 2573
present value of scheme liabilities 2583 2451
adjustment due to ifric 14 287 193
net pension liability before deferred tax 31 71
deferred tax asset 07 18
net pension liability 24 53
in the year ended 18 august 2012 the pension asset of £256m 2011 £122m was restricted by £nil 2011 £84m due to 
the group not having the entitlement to recover all surpluses at the conclusion of the scheme the asset was restricted to  
the amount that could be recovered through reduced contributions to the related defined contribution scheme an additional 
liability of £287m 2011 £109m has been recognised being the minimum funding agreed following the triennial valuation of 
the scheme completed in 2010
the pension costs for the defined contribution schemes are as follows
2012
£m
2011
£m
defined contribution schemes 13 13 92 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
27 pensions and other postretirement benefits con tin ued
pension risk
both of the group’s defined benefit pension schemes are closed to new members the schemes are subject to risk regarding 
the relative amount of the schemes’ assets which are affected by the value of investments and the returns generated by 
such investments compared to the schemes’ 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 or reduced surplus 
being recognised on the group’s statement of financial position 
28 operating lease commitments – minimum lease payments
group
2012
£m
2011
£m
future minimum rentals payable under noncancellable operating leases
within one year 656 616
between one and five years 2586 2446
after five years 9889 9936
13131 12998
the future minimum rentals payable under noncancellable operating leases when discounted to present value are £5899m 
august 2011 £5643m
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 £417m august 2011 £476m
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 in respect of these leases are
2012
£m
2011
£m
within one year 199 210
between one and five years 813 759
after five years 1198 946
2210 1915
the company has no operating lease commitments at 18 august 2012 august 2011 £nil
29 capital and other financial commitments
group
c a p i t a l	c o m m i t m e n t s	f o r	p r o p e r t y 	p l a n t	a n d	e q u i p m e n t
2012
£m
2011
£m
contracted but not provided 109 170
the company has no capital commitments at 18 august 2012 august 2011 £nil 93 spirit pub company plc
annual report 2012
business review governance financial statements
30 related party transactions
group
t r a n s a c t i o n s	w i t h	k e y	m a n a g e m e n t	p e r s o n n e l
the key management personnel of the group comprise members of the spirit pub company plc board of directors and 
other nominated members of the executive committee
the key management personnel compensation is as follows
2012
£m
2011
£m
short term employee benefits 41 32
postemployment employee benefits 03 03
share based payments 09 01
53 36
t r a n s a c t i o n s	w i t h	jo i n t	v e n t u r e s
the group holds 51 of the share capital of allied kunick entertainments limited but can only exercise joint control as  
both parties have equal voting rights during the year the group has paid invoices and raised sales invoices on behalf of  
this joint venture which have been recharged via an intercompany account at 18 august 2012 the group owed allied kunick 
entertainments limited £06m august 2011 the group owed allied kunick entertainments limited £06m
year end balances arising from transactions with joint ventures
2012
£m
2011
£m
unsecured loan stock receivable 118 113
amounts owed to joint ventures 06 06
total amounts due from joint ventures 112 107
all rights to receive interest on the unsecured loan stock have been waived by the relevant members of the group and by  
the joint venture partner of allied kunick entertainments limited the amount outstanding at the year end has been fully 
provided by the group due to the uncertainty of its recoverability
t r a n s a c t i o n s	w i t h	p e n s i o n	s c h e m e s
neither the group nor the company have had any transactions with any of the pension schemes during the current or prior 
year other than those disclosed in note 27
company
t r a n s a c t i o n s	w i t h	k e y	m a n a g e m e n t	p e r s o n n e l
the key management personnel of the company comprises members of the spirit pub company plc board of directors  
the directors do not receive any remuneration from the company 2011 £nil as their emoluments are borne by other  
group companies the company did not have any transactions with the directors during the financial year 2011 £nil 
t r a n s a c t i o n s	w i t h	s u b s i d i a r y	u n d e r t a k i n g s
during the year the company has received a dividend from its subsidiary spirit pub company holdco limited of £46m 
2011 £nil there have been no other transactions with subsidiary undertakings in the year to 18 august 2012 8 june 2011 
to 20 august 2011 nil 94 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
notes to the financial statements con ti n ued
f o r 	 th e 	 5 2 	 w e e k s 	 e n d e d 	 1 8 	 a u gus t 	 20 1 2
31 contingent liabilities
in prior years the group has disposed of a number of properties for which it remains contingently liable for the head leases 
should the assignee default on the terms of the lease this may result in a number of leases reverting to the group for which 
the annual net exposure to the group is considered unlikely to exceed £6m per annum 
at 21 august 2010 a contingent asset of £189m existed in relation to the group’s outstanding gaming machine vat  
claim a decision was reached during 2010 in respect of the rank group plc’s gaming claim and this latest ruling fell  
in the taxpayer’s favour as a result the group was able to further pursue its own gaming claim and during the year to  
20 august 2011 the group’s claim was repaid by hmrc hmrc agreed to make the repayment of the existing claim  
subject to the group providing a guarantee to hmrc that in the event that the existing decision in the rank group plc  
is overturned in a higher court the amount will be repayable in full the decision in relation to the rank group plc’s claim 
was referred to the court of justice of the european union and at 20 august 2011 the group recognised the repayment 
amount as a provision during november 2011 the court of justice of the european union considered the rank group plc’s 
gaming claim and found in favour of the taxpayer as a result of this decision the group has recognised the £189m in 
exceptional items during the year to 18 august 2012 and a contingent liability for the amount exists at that date
32 subsequent events
the financial statements were authorised by mike tye and paddy gallagher on 15 october 2012 at this date there were  
no adjusting or nonadjusting events after 18 august 2012 95 spirit pub company plc
annual report 2012
business review governance financial statements
independent auditor’s report to the  
members of spirit pub company plc
we have audited the financial statements of spirit pub company plc for the year ended 18 august 2012 set out on  
pages 51 to 94
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 50 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 loss for the year then ended
•	the group financial statements have been properly prepared in accordance with ifrss as adopted by the eu 
•	 the parent company financial statements have been properly prepared in accordance with ifrss as adopted by the eu 
and as applied in accordance with the provisions of the companies act 2006 and 
•	 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
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 and
•	 the information given in the directors’ report for the financial year for which the financial statements are prepared  
is consistent with the financial statements 96 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
independent auditor’s report to the  
members of spirit pub company plc con ti n ued
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 33 in relation to going concern
•	 the part of the corporate governance statement on pages 34 to 36 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
15 october 2012 97 spirit pub company plc
annual report 2012
business review governance financial statements
five year financial record
consolidated trading results 
18 august
 2012
£m
20 august 
2011
£m
21 august 
2010 
unaudited
£m
22 august
 2009
 unaudited
£m
23 august
2008
1
unaudited
£m
revenue
2
7600 7344 7240 7751 8101
operating expenses before depreciation and amortisation
2
6139 5948 5930 6234 6232
ebitda
2
1461 1396 1310 1517 1869
depreciation and amortisation
2
367 348 328 425 432
operating profit
2
1094 1048 982 1092 1437
net finance costs
2
583 608 579 693 712
profit before tax
2
511 440 403 399 725
taxation
2
128 123 114 114 214
profit after tax
2
383 317 289 285 511
exceptional items 6016 1814 1718 3093 2712
earnings per share
basic adjusted pence
3
58 48 44 43 78
1  the year ended 23 august 2008 is a 53 week year
2  before exceptional items
3 earnings adjusted for the impact of exceptional items
consolidated statements of financial position 
18 august 
2012
£m
20 august
 2011
£m
21 august
 2010
 unaudited
£m
22 august 
2009
 unaudited
£m
23 august
2008
unaudited
£m
property plant and equipment 12762 17142 17180 17682 21539
goodwill 2146 2168 2272 2312 2585
operating leases and other intangible assets 484 548 738 780 1069
other noncurrent assets 868 588 2107 2782 2946
total noncurrent assets 16260 20446 22297 23556 28139
noncurrent assets held for sale 169 42 372 292 45
other current assets 1298 1773 733 1127 1485
current liabilities 1901 2165 1931 1994 1997
noncurrent liabilities 10804 10986 26746 27027 28296
net assets  liabilities 5022 9110 5275 4046 624
share capital 66 66 66 66 66
reserves 4956 9044 5341 4112 690
shareholders’ equity  deficit 5022 9110 5275 4046 624
nominal value of gross debt 8074 8435 8665 9962 12500 98 spirit pub company plc
annual report 2012
f in an c i al 	 s t at e m e n ts
company information
directors of the company
walker boyd chairman
mike tye chief executive officer
paddy gallagher finance director
tony rice nonexecutive director
mark pain nonexecutive director
christopher bell nonexecutive director
julie chakraverty nonexecutive director
financial calendar
q1 interim management statement 15 january 2013
annual general meeting 15 january 2013
half year end 2 march 2013
interim results announcement april 2013
q3 interim management statement june 2013
year end 17 august 2013
annual results announcement october 2013
registered office
sunrise house
ninth avenue
burton upon trent
de14 3jz
44 01283 498 400
company number
07662835
       99 spirit pub company plc
annual report 2012
business review governance financial statements
advisers
auditor     
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
financial adviser and joint broker   
goldman sachs international
peterborough court
133 fleet street
london
ec4a 2bb
44 020 7774 1000
joint broker 
citigroup global markets limited
33 canada square
canary wharf
london 
e14 5lb
44 020 7986 4000
legal adviser
slaughter and may
one bunhill row
london
ec1y 8yy
44 020 7600 1200
registrar
computershare investor services plc
the pavilions
bridgwater road
bristol
bs99 7nh
44 0870 702 0003 100 spirit pub company plc
annual report 2012
notes inside front cover inside back cover
in our brands 
estate people  
and infrastructure
business review
01 highlights
02 our business
04 managed division
06 our brands
10 leased division
12 chairman’s statement
13  chief executive officer’s review
14 best for team
16  corporate social responsibility
20 financial review
22  principal risks and uncertainties
23 our key risks and uncertainties
governance
26  board of directors 
28 executive management team
30 directors’ report
34  corporate governance statement
37  nomination  governance  
committee report
38  audit  risk committee report
40  report on directors’ remuneration
50  statement of directors’ responsibilities  
in relation to the financial statements
financial statements
51  consolidated income statement
52  consolidated statement  
of comprehensive income
53  consolidated statement  
of financial position
54  consolidated statement  
of changes in equity
55  consolidated cash flow statement
56  company statement  
of financial position
57  company statement  
of changes in equity
57  company income statement
57   company cash flow statement
5 8   notes to the financial statements
95   independent auditor’s report to the 
members of spirit pub company plc
97   five year financial record
98   company information
99 advisers
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spirit pub company plc annual report 2012
further business 
transformation 
through 
investment
spirit pub company plc
sunrise house
ninth avenue
burton upon trent
staffordshire
de14 3jz 
 
t 44 01283 498400
w wwwspiritpubcompanycom
spirit pub company plc annual report 2012


Summary:
 12 spirit pub company plc
annual report 2012
business review
chairman’s statement
i am pleased to report on a strong 
performance in spirit’s first full year as  
a standalone company the managed division 
has continued to outperform the sector  
as the rollout of brands across the estate  
has continued following a transitional period 
the group took full control of the leased 
division in march 2012 and we have now 
developed plans to stabilise the performance 
of these pubs 
the wider economic backdrop continues  
to present challenges but in our mix of brands 
and operating models geographic spread 
across the uk and the talented team that  
we have in place i believe that we are well 
placed to continue to deliver sustainable 
growth and value for all our stakeholders
i said last year that we had a strong and 
experienced executive management team  
and a board with a wealth of experience  
to further supplement the team i was 
delighted to announce in january 2012  
that julie chakraverty joined the board  
julie brings invaluable financial experience 
and insight having previously spent 13 years 
at ubs investment bank where she was a 
board member and held a number of senior 
global leadership positions with a specialist 
background in risk management and  
fixed income 
chris welham and debbie moore also joined 
spirit’s executive committee during the year 
chris welham as managing director of our 
leased estate brings extensive industry 
experience and has set out a clear strategy  
for our leased pubs to stabilise performance 
and then further improve it by ensuring that 
our licensees are well placed to deliver an 
enhanced retail experience as group hr 
director debbie moore is instrumental in 
ensuring that we deliver on our ‘best for team’ 
objective in addition ian powell joined the 
company in june as general counsel and 
company secretary
i am confident that as a result of these 
changes we have further strengthened the 
group’s ability to deliver on spirit’s strategic 
aims to maximise long term value for all 
stakeholders through continued focus  
on ‘best for team’ ‘best for guest’ and  
‘best for investor’ through continued focus 
on our corporate responsibility strategy  
we also ensure that the interests of all 
stakeholders such as our suppliers and  
the wider communities in which we operate 
are appropriately considered
continued focus has enabled the group  
to deliver another year of growth and i am 
delighted that this has enabled us to be able  
to start to return value to our shareholders 
through the payment of our first dividend  
an interim dividend of 065 pence per share 
was paid to shareholders in june 2012  
and this will be followed by a proposed  
final dividend of 130 pence per share in 
february 2013
i also want to take this opportunity to thank  
all of our employees for their continued hard 
work and commitment during the last year 
their talent and enthusiasm has enabled spirit 
to continue to grow despite the challenging 
economic conditions 
walker boyd
chairman
continued focus has enabled the  
group to deliver another year of growth