Punch Taverns plc 2011 Annual Report

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24 Punch Taverns plc Annual Report and Financial Statements 2011 Directors’ report The Directors present their Annual Report to shareholders on the affairs of the Group and the Company together with the audited financial statements for the 52 weeks ended 20 August 2011. Certain information required for disclosure in this report is provided in other appropriate sections of the full Annual Report and Financial Statements 2011. These include the Business review, the Corporate governance statement, the Report on Directors’ remuneration and the Group financial statements and these are accordingly incorporated into this Directors’ report by reference. Results and dividends The results of the Group for the period are set out in the Consolidated income statement on page 45. As announced on 20 October 2011 the Directors will not be proposing the payment of a final dividend. Principal activity and review of the business Following the demerger of the Spirit business from the Punch Group (the ‘demerger’) on 1 August 2011 the Group’s main trading activity is the operation of public houses under the leased model. This involves the granting of leases to tenants who operate the pub as their own business, paying rent to the Group, purchasing beer and other drinks from the Group and entering into profit-sharing arrangements for income from leisure machines. A review of the period’s activities and future developments, and information on the risks and uncertainties faced by the Group, are included in the Business review. The management of business risk is set out in the Corporate governance statement and Our risks and uncertainties on pages 27 and 16 of this report and key performance indicators (KPIs) are shown on the inside front cover. Directors and their interests The current Directors of the Company are listed on pages 22 to 23. During the period, the following Board appointments were made: Ian Dyson as Chief Executive Officer from 6 September 2010; Walker Boyd as a Non-executive Director from 12 April 2011; Steve Dando as Finance Director from 10 May 2011; Roger Whiteside became Chief Executive Officer on 1 August 2011. During the period, the following Board members resigned: Giles Thorley on 6 September 2010; Phil Dutton on 17 December 2010; Ian Wilson on 25 January 2011; Walker Boyd on 1 August 2011; Tony Rice on 1 August 2011; and Mike Tye on 1 August 2011. In addition, Ian Dyson stepped down as Chief Executive Officer on 1 August 2011 but remains on the Board as a Non-executive Director. On 15 September 2011, subsequent to the year end, Peter Cawdron retired as Chairman of the Board and Stephen Billingham was appointed in his place. 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 32 to 43. The procedure for the appointment, replacement and re-election of Directors and the role of the Nomination and Governance Committee is disclosed in the Corporate governance statement on pages 27 to 31. At the Company’s forthcoming Annual General Meeting (AGM), to be held on 16 December 2011, in accordance with the Company’s Articles of Association Stephen Billingham and Steve Dando offer themselves for election, this being the first opportunity for shareholders to approve their appointments.The UK Corporate Governance Code recommends that all Directors should be submitted for re-election 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, Ian Dyson, Ian Fraser, Mark Pain and Roger Whiteside will all stand for re-election at the forthcoming AGM. The biographical details of each Director can be found on pages 22 to 23 of this report. The beneficial interests of Directors who held office at 20 August 2011 in the share capital of the Company are shown below. At 19 October 2011 Ordinary shares At 20 August 2011 Ordinary shares At 21 August 2010 Ordinary shares Peter Cawdron n/a 29,018 29,018 Roger Whiteside 29,892 29,892 27,808 Steve Dando 23,146 23,146 15,582 Ian Dyson 402,084 402,084 200,000 Ian Fraser 29,177 29,177 29,177 Mark Pain 29,177 29,177 29,177 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. A statement of the Directors’ remuneration and their interests in the various share incentive schemes of the Company is set out in the Report on Directors’ remuneration on pages 32 to 43. Directors’ conflicts of interests During the period, the Board has continued to review the interests of the Directors and their connected persons and has authorised any interests which conflicted or potentially conflicted with the interests of the Company. The Nomination and Governance Committee will continue to conduct periodic reviews of conflict authorisations to determine whether the authorisation given should continue, be added to or be revoked by the Board.
Punch Taverns plc Annual Report and Financial Statements 2011 25 Directors’ indemnity In terms of section 236 of the Companies Act 2006, the Group maintains liability insurance for its Directors and officers. On 26 February 2006 a subsidiary company within the Group, Punch Taverns (PGE) Limited, granted indemnity cover for the benefit of the Group’s Directors and officers.The indemnity is uncapped in amount, in relation to certain losses and liabilities which they may incur to third parties in the course of acting as a Director or officer of the Group, and was in effect during the financial year and continues to date. Neither the indemnity nor insurance cover provides cover in the event that a Director or officer is proved to have acted fraudulently or dishonestly. Substantial shareholdings As at 19 October 2011, being the last business day prior to the publication of this report, the Company has been notified of the following substantial interests (representing 3% or more) in the ordinary shares of the Company. Total holding Shareholding made up of: Ordinary Contracts for shares difference Total return swaps Shareholder Glenview Capital Management 19.98% 19.98% – – Octavian Advisors 8.01% – – 8.01% Alchemy Special Opportunities 7.43% 7.43% – – Aberforth Partners LLP 4.94% 4.94% – – Schroders 4.91% 4.91% – – GLG Partners LP 4.59% 3.27% 1.32% – Legal & General 3.86% 3.86% – – Royal Bank of Canada 3.54% 3.54% – – Political and charitable contributions During the period the Group made charitable contributions of £17,943 (2010: £3,380) and no political contributions (2010: nil). Disabled employees The Group is committed to promoting diversity across the Group. To this end, the Group is committed to providing equal opportunities in recruitment, promotion, career development, training and reward to all employees without discrimination. The Group gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by such persons. The Group continues to be supportive of the employment of disabled persons in accordance with their abilities and aptitudes, provided that they can be employed in a safe working environment. Where existing employees become disabled, it is the Group’s policy wherever practicable to provide continuing employment under normal terms and conditions. The environment The Group regards compliance with relevant environmental laws and the adoption of responsible standards as integral to its business operation. 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. Employee involvement The total number of employees at the end of the period was 464. The Group recognises the value of its employees and seeks to create an energetic, dynamic and responsive environment in which to work. It places considerable importance on communications with employees which take place at many levels through the organisation on both a formal and informal level. Employees are encouraged to own shares in the Company and the Group operates an HMRC Approved Share Incentive Plan (SIP) which is open to all employees of the Group including the Executive Directors. Currently, 135 eligible employees participate in the SIP which provides employees with the opportunity of purchasing £1,500 of shares per annum out of pre-tax salary either as a one-off amount or on a monthly basis (partnership shares) and the Company awarding additional shares on a 1:1 ratio (matching shares). The partnership shares are held in trust, using an Employee Benefit Trust (EBT), for a period of three years at the end of which the matching shares will normally be released provided that the partnership shares have been retained and that the employee is still employed by the Group at this time. During this time the shares are beneficially owned by employees, attract voting rights and are eligible for dividends. The voting rights in respect of these shares are exercised by the trustees on behalf of the employees. If after three years the employee elects to keep the matching shares in the EBT for a further two years (i.e. after a total period of five years) the matching shares are released to the employee free of tax and National Insurance. 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 20 August 2011 the Company had nil (2010: nil) days’ purchases outstanding in trade creditors. Significant agreements The Company is party to certain non-material 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. Financial statements Governance Business review
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