Punch Taverns plc 2011 Annual Report

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102 Punch Taverns plc Annual Report and Financial Statements 2011 Financial glossary Beta model A model for pricing share options which applies the same principles as the binomial model but takes into account the relationship of the share price to a portfolio of a comparator group of companies’ shares. Binomial model A model for pricing share options which applies the same principles as decision-tree analysis by considering the possibilities that prices may increase or decrease by a certain percentage. Black-Scholes model A model for pricing share options using the share price, the time to expiration of the option, the risk-free interest rate and the expected standard deviation of the share return. Cash flow hedges A hedge of the exposure to variability in cash flows. Combined Code The Combined Code on corporate governance sets out standards of good practice in relation to issues such as Board composition and development, remuneration, accountability and audit, and relations with shareholders. Convertible bond A corporate bond that can be exchanged for a specific number of ordinary shares. Convertible bonds generally have lower interest rates than non-convertible bonds because they accrue value as the price of the underlying shares rise. Convertible bonds therefore reflect a combination of the benefits of shares and corporate bonds. Corporate governance Corporate governance describes the system by which an organisation is directed and controlled. Debenture notes A form of bond taken out by a company, which it agrees to repay at a specified future date and which bears interest (either fixed or variable) until maturity. Debt Service Cover Ratio (DSCR) covenant The DSCR covenant calculates the ratio of EBITDA over debt service (being interest and capital amortisation). Derivative financial instruments Financial instruments whose value changes in response to changes in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, or other variable, and are settled at a future date. Diluted earnings per share Diluted earnings per share is earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period and shares from the assumed conversion of convertible bonds. Earnings per share (EPS) Earnings per share is a performance measure that expresses the earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period. EBITDA EBITDA represents earnings before finance income, finance costs, movement in fair value of interest rate swaps, UK income tax, depreciation, amortisation and profit on sale of non-current assets. Effective interest rate method A method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or expense over the relevant period. Experience gains / losses Changes in the valuation of a defined benefit pension scheme that arise when events have not coincided with the actuarial assumptions made for the previous valuation. Fair value The amount at which assets can be exchanged, or liabilities settled, between knowledgeable, willing parties in an arm’s length transaction. Finance lease A method of purchasing an asset by making rental payments throughout the expected lifetime of the asset. The lessee shows an asset and a corresponding liability in the balance sheet. Finance lease payments are accounted for as a reduction in the liability.
Punch Taverns plc Annual Report and Financial Statements 2011 103 Financial glossary continued Goodwill Goodwill is the excess of the amount paid for a company over the fair value of the net assets acquired at the date of acquisition. IAS International Accounting Standards. IASB International Accounting Standards Board. IFRIC International Financial Reporting Interpretations Committee. IFRS International Financial Reporting Standards. Indexation allowance Indexation allowance is tax relief given when calculating capital gains that takes into account inflation based on the Retail Prices Index (RPI). Indexation allowance can only reduce an un-indexed gain to nil and cannot create or increase a capital loss. Interest cover A performance measure that shows the number of times EBITDA covers the net finance income and finance cost. Interest rate swap A derivative financial instrument used to minimise exposure to changes in interest rates by payment to receive a fixed interest rate in exchange for a floating rate interest rate, or payment to receive a floating rate interest rate in exchange for a fixed interest rate. LIBOR London Inter Bank Offered Rate. The interest rate quoted between banks, which is a recognised basis for calculating a floating interest rate. Monte Carlo valuation method A model for pricing share options that generates many random possible price paths, calculates assumed exercise values, then averages and discounts to give the value of the option. Net debt Loans, convertible bonds, derivative financial instruments and finance leases net of other interest-bearing deposits and cash and cash equivalents. Nominal value of net debt The value of a security stated by the issuer; unrelated to market value. For bonds, it is the amount paid to the holder at maturity. Non-underlying items Items which management consider will distort comparability, either due to their significant non-recurring nature or because of specific accounting treatments. These are separately identified in order to provide a trend measure of underlying performance. Operating lease A method of renting assets over a period that is less than the expected life of the asset. The lessee does not show an asset or liability on their balance sheet and periodic payments are accounted for by the lessee as operating expenses in the period. Operating result Profit after deducting all operating expenses including depreciation and amortisation. Over-hedge An over-hedge occurs when the notional principal amount of the hedging instrument is greater than that of the hedged item. PBT Profit before tax. Projected unit credit method The accounting method used to calculate provisions for pensions. It includes not only the pensions and vested interests accrued at the date of calculation, but also anticipated increases in salaries and pensions. Securitisation The process of raising finance by creating a financial instrument secured by pooling other financial assets to back the instrument. Segmental reporting Information regarding the financial position and results of operations in different business areas. Total shareholder return (TSR) The growth in value of a shareholding over a specific period, assuming that dividends are reinvested to purchase additional shares. UK GAAP UK Generally Accepted Accounting Principles. Working capital Short-term disposable capital used to finance day-to-day operations. It is calculated as current assets less current liabilities. Governance Business review Financial statements
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