Punch Taverns plc 2011 Annual Report

54
Punch Taverns plc
Annual Report and Financial Statements 2011
Notes to the financial statements
for the 52 weeks ended 21 August 2011
1 Accounting policies
Basis of preparation
The consolidated financial statements presented in this document have been prepared in accordance with IFRS as adopted by the
European Union. The Company’s financial statements have been prepared in accordance with IFRS as adopted by the European Union
and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption
provided under s408 of the Companies Act 2006 not to publish its individual income statement and related notes.
On 1 August 2011, the Spirit business was demerged from the Group. The demerger was effected by the following steps:
• A new holding company, Spirit Pub Company (Holdco) Limited was incorporated, into which the Spirit business was transferred
• £61m of cash was transferred from Punch Taverns plc to Spirit Pub Company (Holdco) Limited
• The entire share capital of Spirit Pub Company (Holdco) Limited was transferred to Spirit Pub Company plc, a non-group company.
In return, Spirit Pub Company plc issued one ordinary share in itself to each Punch Taverns plc shareholder for each one ordinary share
of Punch Taverns plc held on 1 August 2011.
These transactions resulted in the demerger of the Spirit business from the Group.
The Spirit business at the time of the demerger consisted of approximately 800 managed pubs and 550 leased pubs. Since the
managed pub business represented a separate major line of business for the Group, the results of that segment are shown as
discontinued in these financial statements. However the 550 leased pubs that were demerged do not represent a separate major
line of business under the definitions within IFRS 5, so the results of these pubs have not been shown as discontinued, but instead
are shown as non-underlying in these financial statements. Prior year comparatives have been restated as necessary.
The financial statements are prepared under the historical cost convention, as modified by the revaluation of derivative financial
instruments to fair value, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under
IFRS as adopted by the European Union. New standards and interpretations issued by the International Accounting Standards Board
(IASB) and the International Financial Reporting Interpretations Committee (IFRIC), becoming effective during the year, have not
had a material impact on the Group’s financial statements.
The financial statements have been prepared on a going concern basis. The Directors have considered this issue in light of the
operating loss in the current period and the significant reduction in net assets following the demerger of the Spirit business. The
continued pressure on the leisure sector and decline in wet-led pubs creates uncertainty over the future performance of the Group.
Day-to-day working capital requirements are met through cash generated from operations, and the servicing of the long-term debt
is met as it falls due.
The Directors have prepared detailed operating and cash flow forecasts, which cover a period of more than 12 months from the
date of approval of these financial statements. These show that the Group has adequate funds to be able to operate within its agreed
facilities and covenants for the foreseeable future. Headroom is maintained over covenants through appropriate cash management,
including the Group supply fee arrangement. Following the demerger of Spirit and in light of the changed strategy, size and focus
of the Group, the Directors continue to review the nature and structure of the Group’s future long-term funding requirements.
For these reasons, the Directors feel it appropriate to adopt the going concern basis in preparing this 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 in the Operating review on pages 8 to 15 and Our risks and uncertainties on pages 16 to 19.
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 19, 22 and 23, together with information on the Group’s strategies surrounding managing interest
rate risk, liquidity risk, capital risk and credit risk.
The Group and Company financial statements are presented in sterling and all values are rounded to the nearest hundred thousand
pounds, except where indicated.
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:
• Amendment to IFRS 2 ‘Group cash-settled share-based payment transactions’
• IFRIC 19 ‘Extinguishing financial liabilities with equity instruments’.
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 20 August 2011.