G R E E N E K I N G P L C
R E G I S T E R E D I N E N G L A N D N O. 2 4 5 1 1 .
R E G I S T E R E D O F F I C E : W E S T G AT E B R E W E RY . B U RY S T E D M U N D S . S U F F O L K I P 3 3 1 Q T
T E L E P H O N E 0 1 2 8 4 7 6 3 2 2 2
W W W. G R E E N E K I N G. C O. U K

We would like to thank our customers and employees who co-operated with such good nature in the taking of the photographs shown in this report.
Profit before tax, goodwill and exceptional items +15 per cent to £62.8 million
Net debt reduced by 19 per cent, with gearing down from 84 to 64 per cent, as a result of strong cash flow generation and property disposals
Strong performance by managed pubs with like-for-like sales +1.2
per cent in undeveloped outlets and average turnover per pub
+14 per cent to £9,700 per week
Managed house average trading profit per pub +17 per cent due to our rationalisation of the estate and investment in people
Excellent underlying performance by tenanted and leased pub estate with like-for-like turnover +3.6 per cent and average beer barrels per pub +2.4 per cent
Pub Partners voted 2001 Pub Company of the Year by the Publican newspaper in recognition of its excellence
Encouraging growth of our beer brands in testing markets:
• Greene King IPA now number two standard cask ale in Britain
• Abbot Ale +14 per cent and in its sixth consecutive year of growth
• Old Speckled Hen +16 per cent and now number one premium bottled ale
Record 11.5 per cent market share achieved by our cask ale brands
Clear strategy achieving sustainable organic growth in competitive markets
TIMELESS QUALITY.
Traditional values of hospitality reinterpreted for the discerning 21st century consumer, generating sustainable long-term value and growth for our shareholders. The people in our team, the pubs we own, the beers we sell, the strategy we follow, are imbued with this approach.
"There is nothing which as yet has been contrived by man, by which so much happiness is produced as by a good tavern or inn"
Samuel Johnson
1

2
We aim to create long-term shareholder value by building a business founded on timeless quality. To achieve this, we are pursuing a strategy with several distinctive features.
MARKET FOCUS
Long-term socio-economic trends are fragmenting our established markets, as customers’ expectations become more disparate and demanding. Those businesses which trade in our markets are responding by specialising in particular sectors.
These trends offer us significant opportunities for future growth, which we can attain by focusing our efforts on attractive segments in which we can create sustainable competitive advantage.
DIFFERENTIATION
We believe that the best long-term response to market fragmentation is to differentiate our customer offerings by:
• strengthening our positions in the traditional drinks and hospitality markets
• utilising our inherent qualities and adding new skills where appropriate
• building distinctive brands and formats with genuine consumer appeal.
We aim to reinvigorate the more mature sectors of the market, offering traditional pubs and beer brands of timeless quality, which appeal to the consumer of the 21st century.
SUSTAINABILITY
We run our businesses for the long-term and seek to underpin all our decisions about the future with two key criteria, sustainability and quality. Two important aspects of this are our preference for:
• freehold properties, which give much greater flexibility
• trading formats and brands which do not target the fashionconscious end of our markets.
QUALITY TRADITIONAL PUBS
The quality traditional pub will continue to offer a real point of difference to the consumer, appealing in particular to an older, more affluent population seeking a more personal and genuine experience.
The high quality of our licensees and properties is therefore crucial if we are to operate individual pubs which successfully deliver a premium offer to their customers. We will therefore continue to strengthen our employee calibre and property portfolio to realise more fully our estate’s potential.
BEER BRANDS
We target one key sector of the beer market – traditional British beers in both cask and take-home formats – in which we wish to become leaders. The national brewers have largely withdrawn from this sector and most of the competing brands are declining.
We will achieve our goal by investing in:
• sustained and heavy advertising of our brands
• the highest standards of customer service
• excellent product quality from brewery to the point-of-sale.
GEOGRAPHY
We continue to focus on southern England because of its attractive demographics and our existing strength in the area, and because it offers us significant potential for further expansion. However, our beer brands and Hungry Horse businesses are increasingly national in character as their success creates further customer demand in wider geographies.
STRATEGIC DEVELOPMENT
We will pursue acquisition opportunities in support of our longterm organic growth strategy. We are not an acquisition-led business, but believe that we must deliver sustainable shareholder value. We will therefore not be drawn into overpaying for an acquisition which might deliver a shortterm increase in headline profits, but would not produce an acceptable return over the long-term.
3

4
FINANCIAL HIGHLIGHTS for the fifty-two weeks ended 28 April 2001
+ 4% to £431.7m
Turnover
Trading profit before goodwill and exceptionals
Profit before tax, goodwill and exceptionals
EBITDA
Adjusted earnings per share
Dividends per share
+ 9% to £87.1 m
+ 15% to £62.8m
+ 7% to £105.9m
+ 10% to 65.0p
+ 10% to 24.8p
70
60
50
40
30
PROFIT BEFORE TAXATION ,
GOODWILL AND EXCEPTIONALS (£ M )
50
40
30
70
60
1997 1998 1999 2000 2001
COMPARABLE EARNINGS
PER SHARE ( P )
1997 1998 1999 2000 2001
TURNOVER (£ M )
500
400
300
80
60
200
100
1997 1998 1999 2000 2001
100
TRADING PROFIT BEFORE GOODWILL
AND EXCEPTIONALS
(£
M
)
80
60
40
20
120
100
1997 1998 1999 2000 2001
EBITDA
(£
M
)
20
15
10
40
30
25
1997 1998 1999 2000 2001
DIVIDENDS PER SHARE ( P )
1997 1998 1999 2000 2001
RESULTS
I am pleased to announce another good set of results, which have been achieved during a year of significant progress in all areas of our business. Turnover in the 52 weeks ended 28 April 2001 was up 4 per cent at
£431.7 million, while profit before tax, goodwill and exceptional items rose 15 per cent to £62.8 million.
This encouraging result produced a 10 per cent rise in adjusted earnings per share to 65.0 pence compared with the prior year.
We are recommending a final net dividend of 17.65 pence per share, making a total dividend of 24.8 pence per share for the year, an increase of 10 per cent. This dividend will, if approved, be paid on 7 September 2001 to those shareholders on the register at the close of business on 3 August 2001.
This performance has been generated by our pursuit of a proven strategy, high quality assets and excellent people. We are confident that, as long as we remain true to this approach, our company will continue to develop successfully in the future.
FINANCE
Following two major acquisitions in 1999-2000, which were financed mainly by additional borrowings, this year saw our balance sheet benefit from a series of property disposals. The proceeds of these, combined with strong operational cash flows, produced a £68.3 million net inflow of funds and enabled our total debt to equity ratio to fall from 84 per cent at the start of the year to 64 per cent by the year end.
Interest cover improved in line with this reduction in borrowings to a robust 3.6 times, while the recommended dividend is covered 2.6 times. This strengthening of our balance sheet and the inherently cash generative nature of the business provides us with significant funding potential for any strategic opportunities which may arise in the future.
INVESTMENT
We maintained our policy of prudent investment in the core business as we pursued our strategy of optimising investment quality rather than maximising short-term profit growth. This policy not only enabled us to obtain the best value out of the investments we undertook this year, but also leaves us scope for successful investment in the future. We reduced our capital expenditure from £38.0 million in 2000 to £32.4 million, but have produced very encouraging returns from it. We are confident that there are significant numbers of attractive investment opportunities within the business for future exploitation.
ASSET DISPOSALS
We continued the rationalisation of those non-core assets identified for disposal following the acquisition of Morland and the southern Marston’s businesses. Many of these properties were either leasehold sites or smaller pubs of limited future sustainability. We sold 75 properties during the year, producing net proceeds of £31.5 million and a profit over book value of
£2.0 million. We envisage a continued, albeit lower, level of disposal activity and have a number of properties currently being sold.
PUB COMPANY
Our managed pub division aims to lead the market in developing the qualities of the traditional pub to meet the rising demands of the 21st century consumer. In pursuit of this strategy, Pub Company took advantage of a year of relative consolidation to implement a series of major operational improvements. These initiatives focused on two critical areas:
• developing further the calibre of our people
• strengthening our consumer offers through innovative marketing and category management techniques.
These initiatives delivered successful results in the business’ five operating segments, with our two town centre divisions showing the most marked improvement over the previous year as they further differentiated themselves from their largely branded high street competitors.
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6
PUB PARTNERS
Our tenanted and leased pub business was able to take advantage of a year without any major acquisitions to complete the implementation of a number of major initiatives started in the previous year. These included:
• an operational restructuring following the transfer of 100 managed outlets to tenancy in 1999-2000 and the sale of 57 pubs during the year
• a major improvement in our licensee recruitment programme
• working more closely with our licensees to reinforce the effectiveness of the liquor tie.
Pub Partners aims to be a market-leading operator of quality tenancies. Its broad mix of distinctive and individual businesses competes successfully against the large national pub chains because each licensee is able to offer customers the highest quality in terms of service, product and property appropriate to each local market.
BREWING AND BRANDS
Our beer brands and wholesaling business’ objective is to seize leadership in the traditional beer sector. This strategy was pursued with further success, with all our key brands - Greene
King IPA, Abbot Ale, Old Speckled Hen and Ruddles County in growth by the year-end and our market share at record levels.
Founded on sustained investment in our high quality brands, the business also implemented significant improvements in our customer service operations during the year, while a major review has identified a range of future initiatives in order to differentiate our service from that of the competition.
THE BOARD
I reported at the half year that Brian Field had left the company in August. His successor as managing director of Brewing &
Brands is Rooney Anand, who is joining us from Sara Lee. I would like to thank Brian for his contribution to us since he joined us in 1986 and to welcome Rooney to the company.
PROSPECTS
We are encouraged by the start to our new financial year. Although trading continues to be volatile, our pub businesses are performing strongly and our beer brands continue to make headway against their competitors. Those business initiatives which we have implemented over the past year are continuing to bear fruit, while further improvements are planned which should reinforce our present trading momentum. All these factors, encompassed within our proven strategy, enable us to look to the future with confidence.
PEOPLE
The past year has been one of consolidation, following the integration of two major acquisitions and a number of improvement projects in the expanded business. Huge progress has been made in all areas of the company, as our employees have responded to the call to generate continued organic growth in ever more competitive markets. It is the quality and commitment of our employees which ultimately distinguishes this company from its competitors and I wish to thank each and every one of them for their energy and hard work in achieving such a successful outcome.
David McCall
Chairman
26 June 2001
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8
This year we have demonstrated the potential of the enlarged company to grow on a faster and more sustainable basis to deliver additional shareholder value.
Our current structure, which is based on empowered and accountable business units operating in support of the corporate strategy, is an important component of this success:
• Pub Company – managed pubs, both branded and unbranded
• Pub Partners – tenanted and leased pubs
• Brewing & Brands – traditional beer brands, their brewing, marketing and wholesaling
• Corporate services – central functions such as company secretarial, IT, property and purchasing.
Our business comprises a number of complementary strands, which are all focused on serving the same end consumer and which together allow us to achieve significant scale benefits and share skills within one corporate brand identity.
PUB COMPANY
Our managed pubs business includes those larger pubs which can, when well managed, be operated most profitably under our direct control rather than indirectly as tenancies. This business unit is organised into five operational sub-divisions focused on particular markets.
Pub Company’s goal is to grow on an economically profitable basis and to become the leading operator of traditional managed pubs. This strategy will be achieved by:
• developing the sustainability and quality of each outlet, only adding a further brand identity where it clearly adds consumer appeal to the individual operation
• expanding the core business by acquiring additional sites where we can improve trading levels.
Hungry
Horse
Neighbourhood pubs
Town locals
Larger branded pubs with a great value food business, appealing to both the local community and guests travelling from a broader area
Community pubs primarily serving local guests, with an emphasis on local trade building activities
Traditional town and suburban centre pubs with a complex mix of guests including shoppers and business people at lunch or early evening, and a younger profile later in the evening
Circuit bars
Inns
Prime city/town centre sites appealing to a younger market, often with a strong music or entertainment theme
Traditional pubs in semi-rural or edge of town locations with a range of quality food offers, drawing guests from a wider area
Number Number of outlets at of outlets at
29 April 2000 28 April 2001
117 117
146
113
59
79
152
105
51
71
Total 514 496
The pursuit of this strategy has four important elements:
• recognising that the calibre, training and motivation of our customer facing employees is our fundamental success driver
• the continued development of our successful Hungry Horse brand through the further strengthening of its consumer appeal and the opening of additional outlets across the country
• the successful innovation of a second food-led pub format, based within our Inns division, to target the growing consumer demand for premium quality food
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• improving outlet turnover-profit conversion in the face of considerable regulatory cost inflation by increasing average outlet takings per week to achieve individual unit scale efficiencies: we achieved a 14 per cent rise in average weekly sales to £9,700 per outlet compared with last year.
The number of pubs operated by Pub Company fell by 18 to
496 at the year end as the asset rationalisation programme disposed of non-strategic businesses. This equates to a timeweighted reduction in the average number of pubs of 14 per cent.
Pub
Company
Average number of outlets
2000
2001
584
504
Turnover
(£m)
258.4
254.6
Trading profit Trading profit
(£m) margin (%)
45.0
45.6
17.4
17.9
Turnover for the 52 weeks to 28 April 2001 fell by 1 per cent to
£254.6 million on a headline basis. Trading profit, however, was up 1 per cent at £45.6 million, and was up 17 per cent per pub.
This strong underlying profit performance was reflected in an increase in trading profit margin to 17.9 per cent as the acquisition synergies and larger average outlet size boosted profitability.
This improvement occurred despite the additional cost of implementing further government regulation and the impact of the growth in our food sales, for which margins are lower than liquor. Our food share of turnover increased from 26.1 to 27.0
per cent in 2001.
Both our like-for-like sales and our return on new capital investment improved during the year. The operational improvements made over the last year produced a 1.2 per cent increase in like-for-like sales, which is one of the best in our sector. We were similarly pleased by a further improvement in our new investment returns, which continued to strengthen and exceed our hurdle rates, as we undertook a larger number of smaller improvement schemes, averaging £79,000 each, rather than major developments.
In summary, our managed estate enjoyed a successful year. The quality of the people and assets in the business are first class, which augurs well for its long-term success.
PUB PARTNERS
Pub Partners used the opportunity of a year of consolidation to refine its strategy, embed its new businesses and further improve its operations. The drive to keep ahead of the competition is of great importance because the only sustainable sources of outperformance for any tenanted or leased pub operator are the quality of its:
• outlets, in terms of location, environment and standards, and even more importantly
• licensees, who bring the outlets to life for their customers.
The rising cost of complying with government regulation, combined with declining like-for-like sales in much of the industry, has led many smaller managed pubs to be converted to tenancy in the last couple of years. Tenanted pubs, because the licensee is self-employed, are less operationally geared and consume less head-office resource, allowing the pub operator to boost profits by reducing overheads and securing revenues through rental income.
However, converting a managed house to tenancy should not be seen as an easy route to making more profit. A poorly run managed house should not be transferred to tenancy as a quick fix for an operator – the management issues should be resolved.
A well-run pub, which has the potential to be managed, should always be capable of making more profit under management than as a tenancy.
11

12
Tenancies are appropriate for smaller or highly specialist pubs where an individual entrepreneur can create a unique offer suited to the local market. We have had significant success in transferring some smaller managed houses to tenancy in the last 18 months, but have been highly selective in order to ensure that the transferred outlets add sustainable quality to our tenanted estate.
Those pubs that do not meet these criteria have been sold.
Across the industry, several thousand managed pubs have been, or are likely to be, transferred to tenancy in the near future. With only a limited number of high quality tenants or lessees available to take on all these outlets, only those operators able to secure a disproportionate share of the best licensees will be able to improve the performance of their estate and avoid the problems caused by the failure of less competent licensees.
Our strategy is therefore predicated on successfully recruiting the best licensees. We do this by:
• investing in the quality of our estate to maximise our licensees’ ability to succeed against the competition
• disposing of those outlets which we believe cannot offer an attractive livelihood to a good licensee
• operating a highly innovative licensee recruitment and training service designed to place a potential licensee in the most appropriate outlet for their expertise and, once in place, to equip that licensee with further skills to develop their business
• maintaining the commitment on a licensee to source their drinks requirements from us.
We are more likely to succeed as a company if our licensees’ own businesses are prospering. By running a high quality estate with well-motivated licensees, we have established an excellent reputation in the tenancy market and are therefore able to create a virtuous circle of attracting the best licensees to our business.
The effectiveness of this approach is demonstrated in our financial performance and, more importantly for the future, by the fact that we have a record number of high quality licensees on our waiting list for pubs. Finally, the Publican newspaper recognised the quality of Pub Partners by selecting it as the ‘Pub Company of the Year’ for 2001.
Turnover for the year was up 21 per cent to £89.9 million, with trading profit ahead by 23 per cent to £35.3 million and average profit per pub up 12 per cent.
Pub
Partners
2000
2001
Average number Trading profit Trading profit Profit per pub of outlets (£m) change (%) change (%)
990
1,091
28.7
35.3
+70
+23
+11
+12
We are particularly encouraged that the estate’s underlying trading performance was consistently strong:
• in the like-for-like estate of 420 pubs, turnover was up
3.6 per cent
• average beer barrels per pub were 2.4 per cent ahead of the previous year
• returns on development continued to be comfortably ahead of our internal 15 per cent hurdle rate
• the business’ return on capital rose 1.0 to 14.1 per cent, producing a healthy economic profit.
Pub Partners is in rude health, with excellent people, high quality assets and a clearly differentiated strategy, focused on sustainable economic profit, all contributing to a successful outcome.
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BREWING AND BRANDS
Our high quality traditional beer brands are the foundation of our brewing and wholesaling business. Comprising our four principal brands, each of which is a strong player in its market –
Greene King IPA, Abbot Ale, Old Speckled Hen and Ruddles
County – as well as a number of niche ale brands, Brewing &
Brands markets a full range of beers and lagers, ciders, wines, spirits and soft drinks through its trade channels:
• independent on-licensed customers such as pubs, clubs and restaurants
• pub groups, other brewers and wholesalers
• supermarkets and off-licences
• overseas customers.
Our strategy is to become the traditional beer market leader by concentrating all our efforts on growing our brands at the expense of those of other brewers. The traditional beer category is undergoing a period of dramatic rationalisation, with weaker brands struggling to hold their market share. We see this period of turbulence as a growth opportunity to be exploited by:
• the clearer positioning of our main brands to target the standard, mid-gravity, premium and super-premium market segments, while complementing them with a focused range of profitable niche brands, such as two-year oak-aged Strong Suffolk
• consistent advertising of our four principal brands to broaden their consumer franchises and distribution base
• the differentiation of our service infrastructure, particularly that supporting the individual on-licensed outlet, rather than competing solely on price or brand range
• driving our brands into the more dynamic trade sectors through effective sales support and brand building.
While we continued to advertise both Greene King IPA and
Abbot Ale heavily during the year, our principal attention was devoted to returning to growth those brands we acquired with
Morland, Old Speckled Hen and Ruddles County. Both brands had suffered previously from inconsistent advertising or insufficient distribution.
Old Speckled Hen was quickly restored to growth by means of up-weighting its advertising and pushing it through our strong on-trade distribution infrastructure, and was up 16 per cent by the year end.
Ruddles County, once the epitome of a traditional English ale, has suffered from a history of ownership changes and was thus a greater challenge. After extensive consumer research, we repositioned the brand in the mid-gravity sector, improved the product quality and invested £1 million in a re-launch from
March 2001. To-date, we have been very encouraged by our customers’ response and sales since the re-launch are in significant growth.
Market share
Cask ale – Great Britain
Cask ale – London/Anglia/Meridian/Central
Greene King Greene King
2000 (%)
10.3
17.3
Cask ale – London/Anglia/Meridian television regions 25.8
2001 (%)
11.5
18.6
27.2
Our market share reached record levels on the back of a 3 per cent increase in our own brand volumes, in a beer market which fell 1 per cent, with:
• Greene King IPA up 4 per cent to become the number two standard cask ale in Britain
• Abbot Ale up 14 per cent, its sixth consecutive year of growth
• Old Speckled Hen up 16 per cent and now the number one premium bottled ale in the off-trade.
Turnover increased 7 per cent to £87.2 million and trading profit was 8 per cent ahead at £11.5 million. This profit performance was achieved on the back of an increase in trading margin to
13.2 per cent and produced an excellent 18 per cent return on capital employed.
Brewing & Brands
2000
2001
Trading profit Trading profit Trading profit
(£m) change (%) margin (%)
10.6
11.5
+58
+8
13.0
13.2
The British beer market is extremely tough. While Brewing &
Brands’ performance is not immune from prevailing conditions, there is no doubt that we have significantly out-performed both the market and our competitors because of the quality of its brands, its clear strategic focus and the expertise of its management and employees. We believe that the division will continue to progress over the long-term and to be an important part of the whole Greene King business.
15

GROUP FINANCIAL RECORD
The table opposite reflects Greene King’s prime objective of delivering economic value to our shareholders. The last five years have seen our earnings per share increasing on a comparable basis at an annual compound rate of 12 per cent and dividends per share at 11 per cent. Our cash flow is healthy with EBITDA (earnings before interest, tax, depreciation and amortisation) now 25 per cent of turnover, which has helped create a strong balance sheet where our assets are primarily freehold pubs of high quality and our borrowings amount to just 64 per cent of shareholders’ funds.
FINANCIAL STRATEGY
Our financial strategy is to deliver sustained and superior growth in shareholder earnings and dividends taking appropriate commercial and financial risks. Rather than maximise earnings in year one, we aim to grow shareholder value year on year, focusing on organic development, selective investment and rigorous control over our cost base.
INTERNAL FINANCIAL MEASURES
Our measures to check financial progress are carefully selected to suit our shareholders’ interests and are rigorously monitored.
Successful organic development leads to superior like-for-like profits, our investment programme focuses on achieving returns on developments and acquisitions ahead of the cost of capital, whilst our cost base managers are measured on their ability to drive down the real unit costs of the services they provide.
ECONOMIC PROFIT
Economic profit is the indicator chosen to draw together the other measures and summarise the economic effect of action across the business. We use the EVA (economic value-added) method adopted by other shareholder focused companies, whereby the cost of the capital is deducted from trading profit to establish true economic contribution. Economic profit increased substantially during the year showing that our business is delivering real value for shareholders.
TREASURY
The chairman’s statement highlighted the inflow of funds of
£68.3 million during the year. This provided a healthy treasury position with debt reduced to £289.0 million and spare committed facilities of £111.0 million. This headroom provides us with a great deal of flexibility to make selective investments in future. To protect against increases in interest cost, 55 per cent of our borrowings are either fixed or hedged. Thus a 1 per cent increase in short-term interest rates would add £1.3 million to interest costs compared with £3.0 million were none of our borrowings fixed or hedged. Further treasury details are provided in note 19 to the accounts.
GOODWILL AND EXCEPTIONAL ITEMS
Our profit and loss account continues to separate out amortisation of goodwill and exceptional items to show the underlying profit performance of the business. Amortisation of goodwill amounted to £4.4 million and residual costs relating to last year’s acquisitions to £0.7 million, whilst the surplus on property disposals totalled £2.0 million.
TAXATION
The underlying tax charge was £14.6 million, representing 23 per cent of profits before tax, exceptionals and amortisation of goodwill, the same rate as for the previous year. This was below the standard rate of 30 per cent as a result of capital allowances exceeding depreciation. The relief obtained for exceptional costs amounted to £0.4 million.
Next year we shall be providing deferred tax for the excess of capital allowances over depreciation under the new accounting standard which will then be in force, FRS 19. This will have the effect of increasing our tax rate closer to the standard rate of 30 per cent.
SUMMARY
With a proven track record for delivering strong economic performance and a balance sheet with clear capacity for expansion, we face our financial future with confidence.
16
2001
£m
2000
£m
1999
£m
1998
£m
1997
£m
Profit and loss account
Turnover
Trading profit before goodwill and exceptionals
Profit before taxation
Profit before taxation, goodwill and exceptionals
Basic earnings per share
Adjusted earnings per share
Comparable earnings per share
Dividends per share
Adjusted trading profit/turnover
Adjusted taxation/profit
Adjusted interest cover (times)
Adjusted dividend cover (times)
431.7
87.1
59.7
62.8
61.3p
65.0p
65.0p
24.8p
20.2%
23%
3.6
2.6
414.1
80.1
39.1
54.5
46.7p
59.2p
59.2p
22.5p
19.3%
23%
3.1
2.6
292.6
60.5
46.7
46.5
59.5p
59.2p
55.4p
20.3p
20.7%
23%
4.3
2.9
282.9
57.7
45.3
43.5
57.7p
54.7p
51.2p
18.35p
20.4%
24%
4.1
3.0
Balance sheet
Intangible fixed assets
Tangible fixed assets
Investments
Working capital
Net debt
Net assets
Gearing
Net assets per share
Cash flow and investment
EBITDA
80.6
688.4
23.6
(52.6)
(289.0)
451.0
64%
607p
85.0
701.8
27.8
(34.1)
(357.3)
423.2
84%
571p
2.4
492.8
27.0
(31.8)
(173.2)
317.2
55%
521p
–
447.3
31.7
(30.5)
(162.8)
285.7
57%
472p
Cash inflow from operations
Interest, tax and dividends
Fixed asset purchases
Fixed asset sales
Trade loans and investments
Acquisitions
Shares issued
Decrease/(increase) in debt
105.9
107.6
(43.3)
(32.4)
31.5
4.2
–
0.7
68.3
98.9
92.4
(50.7)
(38.0)
59.3
5.1
(253.2)
1.0
(184.1)
71.0
71.6
(35.8)
(45.3)
5.9
4.9
(11.7)
–
(10.4)
67.0
60.7
(31.2)
(42.2)
24.5
3.2
–
0.9
15.9
Adjusted earnings per share, trading profit, taxation, interest cover and dividend cover exclude the effect of exceptional items and the amortisation of goodwill.
Comparable earnings per share illustrate earnings in 1999 and earlier years that would have been reported had the FRS 15 accounting standard then been in effect.
58.9
56.0
(26.9)
(40.5)
5.6
0.9
(198.8)
96.1
(107.6)
–
432.1
34.7
(33.0)
(178.7)
255.1
70%
422p
253.6
49.7
21.3
36.7
25.6p
46.9p
43.9p
16.35p
19.6%
26%
3.8
2.9
17

for the fifty-two weeks ended 28 April 2001
Turnover
Trading profit
Before goodwill and exceptionals
Amortisation of goodwill
Exceptional costs
Total
Disposal of fixed assets
Profit before interest
Interest
Profit before taxation
Taxation
Profit after taxation
Dividends
Retained profit
Note
1, 2
3
3
7
8
9
10
2001
Before goodwill and
Goodwill and
Change exceptionals exceptionals
% £m £m
+4 431.7
–
+9 87.1
–
–
87.1
–
87.1
(24.3)
62.8
(14.6)
48.2
(18.4)
29.8
–
(4.4)
(0.7)
(5.1)
2.0
(3.1)
–
(3.1)
0.4
(2.7)
–
(2.7)
Total
£m
431.7
87.1
(4.4)
(0.7)
82.0
2.0
84.0
(24.3)
59.7
(14.2)
45.5
(18.4)
27.1
2000
Profit before taxation, goodwill and exceptionals +15 62.8
54.5
Earnings per share
– adjusted
– basic
– diluted
Dividends per share
Adjusted trading profit/turnover
Adjusted taxation/profit
Adjusted interest cover (times)
Adjusted dividend cover (times)
11
11
11
+10
+10
65.0p
24.8p
20.2%
23%
3.6
2.6
61.3p
61.0p
Adjusted earnings per share, trading profit, taxation, interest cover and dividend cover exclude the effect of exceptional items and the amortisation of goodwill.
There were no other recognised gains or losses in the period.
59.2p
46.7p
46.7p
22.5p
19.3%
23%
3.1
2.6
Total
£m
414.1
80.1
(3.5)
(15.0)
61.6
3.1
64.7
(25.6)
39.1
(6.1)
33.0
(16.7)
16.3
18
as at 28 April 2001
Fixed assets
Intangible assets
Tangible assets
Investments
Current assets
Stocks
Debtors
Cash at bank
Creditors: due within one year
Net current liabilities
Total assets less current liabilities
Creditors: due after more than one year
Medium and long term debt
Net assets
Capital and reserves
Called-up share capital
Share premium account
Revaluation reserve
Other reserve
Profit and loss account
Equity shareholders’ funds
Net debt
Gearing
Net assets per share
Signed on behalf of the board on 26 June 2001
D S McCall
T J W Bridge
Directors
Note
12
13
14
21
22
22
22
22
22
18.6
180.3
101.8
–
150.3
451.0
289.0
64%
607p
2001
£m
Group
2000
£m
80.6
688.4
23.6
792.6
85.0
701.8
27.8
814.6
18.6
179.6
104.6
–
120.4
423.2
357.3
84%
571p
18.6
180.3
–
97.0
160.3
456.2
2001
£m
Parent
2000
£m
–
–
971.3
971.3
–
635.3
371.3
1,006.6
15
16
17
18
11.2
27.7
4.0
(91.5)
(48.6)
744.0
(293.0)
451.0
11.2
37.4
1.2
(82.7)
(32.9)
781.7
(358.5)
423.2
–
7.0
2.0
(231.1)
(222.1)
749.2
(293.0)
456.2
–
10.8
4.2
(208.7)
(193.7)
812.9
(358.5)
454.4
18.6
179.6
94.3
5.2
156.7
454.4
19

for the fifty-two weeks ended 28 April 2001
EBITDA
Working capital movements
Exceptional items
Cash inflow from operations
Cash inflow from operations
Returns on investments and servicing of finance
Interest paid
Interest received
Taxation
Capital expenditure and financial investment
Purchase of tangible fixed assets
Sales of tangible fixed assets
Movement in trade loans
Acquisitions
Equity dividends paid
Cash inflow/(outflow) before financing
Financing
Issue of shares
Advance on bank loans
Repayment of bank loans
Increase in cash
Reconciliation to movement in net debt
Increase in cash
Cash inflows/(outflows) from movement in debt
Decrease/(increase) in debt resulting from cashflows
Morland – debt acquired
Decrease/(increase) in debt
Opening net debt
Closing net debt
Note
23
24
25
25
Change
%
+7
–19
(24.8)
0.2
(24.6)
(1.5)
(32.4)
31.5
4.2
3.3
–
(17.2)
67.6
2001
£m
105.9
3.8
(2.1)
107.6
107.6
0.7
–
(65.5)
(64.8)
2.8
2.8
65.5
68.3
–
68.3
(357.3)
(289.0)
1.0
321.8
(222.0)
100.8
1.2
1.2
(99.8)
(98.6)
(85.5)
(184.1)
(173.2)
(357.3)
(27.2)
1.3
(25.9)
(11.2)
(38.0)
59.3
5.1
26.4
(167.7)
(13.6)
(99.6)
2000
£m
98.9
3.6
(10.1)
92.4
92.4
20
for the fifty-two weeks ended 28 April 2001
Total gains and losses recognised since last annual report
Ordinary dividends
Share capital issued
Opening shareholders’ funds
Closing shareholders’ funds
2001
£m
45.5
(18.4)
0.7
27.8
423.2
451.0
2000
£m
33.0
(16.7)
89.7
106.0
317.2
423.2
for the fifty-two weeks ended 28 April 2001
Profit on ordinary activities before taxation
Realisation of property revaluation gains
Historical cost profit on ordinary activities before taxation
Historical cost profit for the period retained after taxation and dividends
2001
£m
59.7
2.8
62.5
29.9
2000
£m
39.1
3.9
43.0
20.2
21

for the fifty-two weeks ended 28 April 2001
Basis of accounting and consolidation
The accounts are prepared in accordance with the Companies Act 1985 and applicable accounting and financial reporting standards.
They are prepared under the historical cost convention modified by the revaluation of property. The group accounts incorporate the accounts of the company, its subsidiaries under the acquisition method and its associates under the equity method.
Turnover
Turnover represents the value of goods and services supplied to third parties net of discounts and excluding value added tax.
Revaluation of properties
Fixed asset properties were revalued in earlier years and the surplus reflected in the balance sheet. With effect from 2 May 1999, and following the implementation of the FRS 15 accounting standard, revaluations are no longer undertaken. Earlier valuations are retained but not updated.
Depreciation
Freehold land is not depreciated, freehold buildings are depreciated to their estimated residual values over periods up to fifty years, long leasehold properties are depreciated to their estimated residual values over periods up to fifty years, short leasehold properties are depreciated to their estimated residual values over the remaining term of the lease and furniture, fixtures and equipment assets are depreciated over their estimated lives which range from three to twenty years. Where the carrying value of properties may not be recoverable an impairment in the value of fixed assets is charged to the profit and loss account.
Stocks
Stocks are valued at the lower of cost and net realisable value and where applicable include an element of production overheads.
Loan capital
Loan capital and equivalent financial instruments include the premium realised on issue, or recognised on acquisition, which is amortised over the term of the loan to keep the effective interest rate constant.
Deferred taxation
Provision for deferred taxation is made only where there is reasonable probability of payment in the foreseeable future at the tax rate which is expected to be in force at the date of settlement.
Financial instruments
Amounts payable or receivable in respect of interest rate swaps are recognised as adjustments to the interest expense over the period of the swap contracts.
Pensions
The cost of providing defined benefit pensions is charged against profits on a systematic basis taking account of actuarial surpluses and deficits arising which are allocated over the remaining average service life of current qualifying employees. The cost of providing defined contribution pensions amounts to the value of contributions made.
Goodwill
Goodwill arising from the premium paid on businesses acquired after 3 May 1998 is amortised over its estimated useful life of 20 years.
Previously goodwill was written off to reserves and has not been re-instated.
Operating leases
Rental payments in respect of operating leases are charged against trading profit on a straight line basis over the period of the lease.
22
for the fifty-two weeks ended 28 April 2001
1.
2001
Pub Company
Pub Partners
Brewing and Brands
Corporate
Amortisation of goodwill and exceptionals (see note 3)
Net debt
Assets employed
£m
369.6
250.3
65.1
55.0
740.0
–
(289.0)
451.0
Turnover
£m
254.6
89.9
87.2
–
431.7
–
–
431.7
EBITDA
£m
57.6
37.7
14.4
(3.8)
105.9
–
–
105.9
Trading profit
£m
45.6
35.3
11.5
(5.3)
87.1
(5.1)
–
82.0
Trading profit change
%
+1*
+23*
+8
+9
2000
Pub Company
Pub Partners
Brewing and Brands
Corporate
Assets employed
£m
379.9
253.5
65.2
81.9
780.5
–
(357.3)
Turnover
£m
258.4
74.1
81.6
–
414.1
–
–
EBITDA
£m
57.7
30.6
13.3
(2.7)
98.9
–
–
Trading profit
£m
45.0
28.7
10.6
(4.2)
80.1
(18.5)
–
Amortisation of goodwill and exceptionals (see note 3)
Net debt
423.2
414.1
98.9
61.6
Pub Company covers the results of managed houses, Pub Partners covers the results of tenanted houses and Brewing and Brands covers the results of brewing, brands and free trade wholesaling.
*The business segment statistics were affected by the net transfer of 98 pubs from Pub Company to Pub Partners during 2000, and additional pension costs of £1.8 million recognised following the actuarial revaluation as at April 2000 (£0.1 million Pub Company,
£0.1 million Pub Partners, £0.4 million Brewing and Brands, £1.2 million Corporate).
Goodwill and exceptionals are detailed in note 3 and are analysed as follows:
Pub Company
Pub Partners
Brewing and Brands
Corporate
2001
£m
0.2
0.1
0.3
4.5
5.1
2000
£m
3.9
0.3
2.4
11.9
18.5
23

for the fifty-two weeks ended 28 April 2001
2.
Raw materials, consumables and excise duty
Changes in stocks of finished goods and work in progress
Employment costs (see note 4)
Depreciation
Amortisation of goodwill
Other operating charges
Trading profit is stated after charging:
Depreciation
Amortisation of goodwill
Operating lease rentals
Plant and machinery
Property
Auditors – audit services
Auditors – other services
2001
£m
157.8
(0.5)
86.3
18.8
4.4
82.9
349.7
2001
£m
18.8
4.4
2.2
3.9
0.1
0.1
3.
Amortisation of goodwill
Exceptionals
Impairment of tangible fixed assets
Exceptional costs associated with the integration of the Marston’s southern business and Morland
2001
£m
4.4
–
0.7
5.1
2000
£m
18.8
3.5
2.3
4.1
0.1
0.1
2000
£m
153.1
1.7
93.5
18.8
3.5
81.9
352.5
2000
£m
3.5
3.0
12.0
18.5
24
for the fifty-two weeks ended 28 April 2001
4.
Pay costs
Social security costs
Other pension costs (see note 6)
Employee profit sharing scheme
Exceptional costs associated with the integration of Morland
The average number of employees during the period was as follows:
Pub Company
Pub Partners
Brewing and Brands
Corporate
2001
7,516
75
673
99
8,363
2001
£m
75.8
5.7
4.0
0.8
–
86.3
The figures above include 3,340 (2000 – 4,425) part-time employees.
5.
Details of directors’ emoluments are shown in the remuneration report on pages 44 to 48.
6.
The company maintains a defined contribution scheme, which is open to all new employees, a Greene King defined benefit scheme which closed to new members on 2 May 1997 and a Morland defined benefit scheme for former Morland employees which was closed to new members on 12 December 2000.
Member funds for the defined contribution scheme are held and administered by the Prudential Assurance Company.
Member funds for the defined benefit schemes are held in separate funds independently of the group’s finances and are administered by pension trustees.
An actuarial valuation of the Greene King defined benefit scheme was carried out by Watson Wyatt as at 5 April 2000. The principal assumptions were that retail price inflation would be 3% per annum, pension increases would be in line with price inflation, real salary growth would be 1.75 per cent per annum and the real investment return would be 3 per cent per annum.
The market value of the assets at 5 April 2000 was £83.6 million. Assets represented 89 per cent of the value of benefits that had accrued to members to that date, and the shortfall in value is being funded by increased contributions from the company.
An actuarial valuation of the Morland defined benefit scheme was carried out as at 1 October 1997 using broadly similar assumptions.
The value of the assets of the scheme was £12.0 million which represented 105 per cent of the accrued member benefits.
A further actuarial valuation of the Morland defined benefit scheme is being undertaken as at 1 October 2000 and the results of this revaluation will be incorporated in the group accounts for the fifty-three weeks to 4 May 2002.
As a result of the actuarial revaluation of the Greene King defined benefit scheme an additional charge has been recognised in the
2000/01 accounts amounting to £1.8 million, which will continue in future years.
2000
8,643
77
813
97
9,630
2000
£m
81.1
5.7
2.4
0.5
3.8
93.5
25

for the fifty-two weeks ended 28 April 2001
7.
Interest payable on bank loans and overdrafts
Interest payable on other loans
Interest receivable on loans and short term deposits
2001
£m
17.9
6.6
(0.2)
24.3
8.
2001 2000
On profits before exceptional items
£m
Exceptional items
£m
Total
£m
Total
£m
Current taxation
Corporation tax
Recoverable on exceptional costs
Credit in respect of prior years
16.0
–
16.0
(1.4)
–
(0.4)
(0.4)
–
16.0
(0.4)
15.6
(1.4)
14.6
(0.4) 14.2
The effective rate of taxation is lower than the full rate of corporation tax as a result of the group’s investment programme which leads to capital allowances exceeding depreciation. There is no tax effect arising from the non-operating exceptional profits on disposal of fixed assets.
9.
Attributable to parent company
2001
£m
19.5
2000
£m
18.8
12.7
(2.5)
10.2
(4.1)
6.1
As permitted by the Companies Act 1985 the profit and loss account of the parent company has not been separately presented.
10.
Interim 7.15p paid per share (2000 – 6.5p)
Final 17.65p proposed per share (2000 – 16.0p)
2001
£m
5.3
13.1
2000
£m
4.8
11.9
Total 24.8p per share (2000 – 22.5p) 18.4
16.7
2000
£m
22.5
4.4
(1.3)
25.6
26
for the fifty-two weeks ended 28 April 2001
11.
Basic earnings per share has been calculated by dividing the profit after taxation of £45.5 million (2000 – £33.0 million) by the weighted average number of shares in issue of 74.2 million (2000 – 70.6 million).
Diluted earnings per share has taken account of 0.3 million (2000 – 0.1 million) additional contingent shares.
Adjusted earnings per share excludes the effect of exceptional items and the amortisation of goodwill and is presented to show the underlying performance of the group.
Earnings Earnings per share
2001
£m
2000
£m
2001 p
2000 p
Basic
Goodwill and exceptionals
45.5
2.7
33.0
8.8
61.3
3.7
46.7
12.5
Adjusted 48.2
41.8
65.0
59.2
12.
Assets
Cost at 29 April 2000 and 28 April 2001
Amortisation
At 29 April 2000
Charged during the year
At 28 April 2001
Net book value
At 28 April 2001
At 29 April 2000
Goodwill is being amortised evenly over the directors’ estimate of its useful economic life of 20 years.
Goodwill
£m
88.6
3.6
4.4
8.0
80.6
85.0
27

for the fifty-two weeks ended 28 April 2001
13.
Land and buildings
£m
Group
Fixtures and plant
£m
Total
£m
Land and buildings
£m
Parent
Fixtures and plant
£m
Total
£m
Assets
Cost or valuation at
29 April 2000
Additions during period
Group transfers
Disposals during period
Balances at 28 April 2001
607.0
17.3
–
(24.7)
599.6
163.5
15.2
–
(10.3)
168.4
770.5
32.5
–
(35.0)
768.0
590.1
6.4
(591.0)
(5.5)
–
59.6
2.4
(60.1)
(1.9)
–
649.7
8.8
(651.1)
(7.4)
–
Depreciation
Accumulated depreciation at 29 April 2000
Written back on disposals
Group transfers
Provided in these accounts
Balances at 28 April 2001
9.0
(1.6)
–
3.9
11.3
59.7
(6.3)
–
14.9
68.3
68.7
(7.9)
–
18.8
79.6
8.9
(0.1)
(9.8)
1.0
–
5.5
(0.8)
(7.9)
3.2
–
14.4
(0.9)
(17.7)
4.2
–
Net book value
At 28 April 2001
At 29 April 2000
588.3
598.0
100.1
103.8
688.4
701.8
–
581.2
–
54.1
–
635.3
On 20 October 2000 Greene King plc transferred the beneficial interest in its tangible assets valued at £633.4 million to Greene King
Brewing and Retailing Limited.
The net book value of land and buildings comprises:
Freehold properties
Long leasehold properties
Short leasehold properties
2001
£m
552.7
27.1
8.5
Group
2000
£m
568.5
18.6
10.9
588.3
598.0
2001
£m
–
–
–
Parent
2000
£m
551.7
18.6
10.9
– 581.2
for the fifty-two weeks ended 28 April 2001
13.
continued
Until 1999 licensed properties were valued on the basis of existing use value, the brewery and depots were valued at depreciated replacement cost and other properties at open market value. These valuations have been retained but they have not been updated.
Subsequent additions have been included at cost or, in the case of acquisitions, at fair value.
Cost or valuation of properties:
As valued 1996
As valued 1997
As valued 1998
As valued 1999
Subsequent additions at cost
Subsequent acquisitions at fair value
2001
£m
131.8
32.2
51.1
88.8
104.3
191.4
599.6
2000
£m
142.3
42.7
52.4
90.0
79.3
200.3
607.0
Historical cost
The historical cost amounts for land and buildings are:
Historical cost
Accumulated depreciation
Net book value
2001
£m
502.0
(8.7)
Group
2000
£m
506.9
(6.4)
493.3
500.5
2001
£m
–
–
Parent
2000
£m
489.0
(6.5)
323.8
482.5
Future capital expenditure
Contracted for
2001
£m
1.6
Group
2000
£m
4.3
2001
£m
–
Parent
2000
£m
4.3
28 29

for the fifty-two weeks ended 28 April 2001
14.
Trade loans less provisions
Share of net assets of associates
Shares in associates
Shares in subsidiaries
Loans to subsidiaries
2001
£m
20.6
3.0
–
–
–
Group
2000
£m
24.8
3.0
–
–
–
23.6
27.8
Trade loans
Balances at 20 April 2000
Acquired from Marston’s
Acquired from Morland
Advances
Repayments and provisions
Balances at 28 April 2001
2001
£m
24.8
–
–
3.5
(7.7)
Group
2000
£m
23.8
1.6
4.5
3.9
(9.0)
20.6
24.8
Associates
Butterfly Hotels Limited
Pubco PLC
Country of incorporation and operation
England
England
Issued capital
£325,000 ordinary shares
£100,000 ordinary shares
The results of Pubco PLC have not been included as the amounts are not material.
Principal subsidiaries
Greene King Brewing and Retailing Limited
Greene King Services Limited
Greene King Retail Services Limited
Greene King Employment Services Limited
Beards of Sussex Limited
All of the companies above are incorporated in England.
Country of operation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Principal activity
Brewing and retailing
Employment
Employment
Employment
Pub retailing
2001
£m
0.7
545.6
–
–
425.0
Parent
2000
£m
0.7
245.6
–
–
125.0
971.3
371.3
2001
£m
–
–
–
–
–
Parent
2000
£m
–
–
–
–
–
– –
Holding
45%
33%
Holding
100%
100%
100%
100%
100%
30
for the fifty-two weeks ended 28 April 2001
14.
continued
Parent
Loan to subsidiaries
Balances at 29 April 2000
Advances
2001
£m
125.0
300.0
2000
£m
124.9
0.1
Balances at 28 April 2001 425.0
125.0
On 20 October 2000 Greene King plc transferred the beneficial interest in its tangible assets to Greene King Brewing and Retailing
Limited in exchange for the issue of £300 million of ordinary shares and £300 million of loan stock, with the balance of £33.4 million funded through an intercompany loan.
15.
Raw materials and work in progress
Finished goods and goods for resale
Consumable stores
2001
£m
1.1
8.9
1.2
Group
2000
£m
1.0
9.1
1.1
11.2
11.2
2001
£m
–
–
–
Parent
2000
£m
–
–
–
– –
16.
Trade debtors
Other debtors
Prepayments and accrued income
Amounts owed by subsidiaries
Included above are the following amounts falling due after more than one year:
Other debtors
Prepayments and accrued income (pension fund prepayment)
2001
£m
22.0
3.2
2.5
–
Group
2000
£m
24.2
8.1
5.1
–
27.7
37.4
0.5
0.2
0.6
2.0
2001
£m
–
0.1
–
6.9
Parent
2000
£m
–
3.7
–
7.1
7.0
10.8
–
–
–
–
31

for the fifty-two weeks ended 28 April 2001
17.
:
Trade creditors
Current corporation tax
Other taxation and social security costs
Proposed dividend
Accruals and deferred income
Amounts owed to subsidiaries
2001
£m
29.7
16.6
19.5
13.1
12.6
–
Group
2000
£m
33.7
3.9
19.0
11.9
14.2
–
91.5
82.7
2001
£m
–
1.4
–
13.1
1.2
215.4
Parent
2000
£m
–
11.9
–
–
1.5
195.3
231.1
208.7
18.
:
Group
2001
£m
2000
£m
Medium and long term debt
Bank loans
Loan from associate
Debenture
Loan notes
204.0
52.8
31.3
4.9
267.4
53.8
31.9
5.4
293.0
358.5
204.0
52.8
31.3
4.9
293.0
2001
£m
Parent
2000
£m
267.4
53.8
31.9
5.4
358.5
32
for the fifty-two weeks ended 28 April 2001
19.
The group’s objectives and policies on the use of financial instruments, which are all denominated in sterling, can be found in the
Financial Review.
Nominal Nominal Nominal Carrying Carrying
Repayment date interest rate
Facility amount
£m value
2001
£m value
2000
£m value
2001
£m value
2000
£m
Parent – secured
Loan from associate
Debenture
2006
2027
11.25%
7.75%
47.5
25.0
47.5
25.0
52.8
31.3
53.8
31.9
Parent – unsecured
Bank loans
Loan notes
2002 to 2004
2003
Variable
Variable
315.0
204.0
4.9
267.4
5.4
204.0
4.9
267.4
5.4
The loan from associate and debenture stock are repayable in more than five years and are secured by a first floating charge over the group’s principal trading companies. The £204.0 million drawn down bank loan is repayable between two and five years. Of the total facility of £315 million, £15million expires in June 2002, £20 million in June 2003 and £280 million, including the undrawn facility, in June 2004.
Effective interest rate
Period rate fixed
Fair value
2001
£m
Fair value
2000
£m
Carrying value
2001
£m
Carrying value
2000
£m
Loan from associate – fixed rate
Debenture – fixed rate
Bank loans – swapped into fixed interest
8.4%
5.8%
7.4%
5 years
26 years
4 years
56.8
27.2
78.6
59.6
28.5
86.6
52.8
31.3
75.0
53.8
31.9
85.0
Bank loans – variable
Loan notes – variable
Cash – nil interest
Net debt
162.6
129.0
4.9
296.5
174.7
182.4
5.4
362.5
293.0
159.1
129.0
4.9
293.0
(4.0)
289.0
358.5
170.7
182.4
5.4
358.5
(1.2)
357.3
Fair values and effective interest rates have been calculated by discounting future cash flows by reference to the market yield curve at the balance sheet date.
The fair value liability of the interest rate swaps was £3.6 million (2000 – £1.6 million). The expected loss to be recognised in the profit and loss account in the following year was £0.9 million (2000 – £0.5 million). The actual loss recognised in the profit and loss account during the year was £0.9 million (2000 – £1.2 million).
The weighted average effective fixed interest rate is 7.5% (2000 – 7.5%), with weighted average maturity in 8.0 years (2000 – 7.9 years).
Interest on variable rate loans are all linked to LIBOR.
Short term debtors and creditors are excluded from the above.
33

for the fifty-two weeks ended 28 April 2001
19.
continued
Trade loans are advanced to customers on terms linked to supply terms such that returns are significantly greater than interest income.
The fixed rate trade loans amounted to £16.9 million (2000 – £23.2 million) and variable rate trade loans amounted to £3.7 million
(2000 – £1.6 million).
The fixed rate trade loans had weighted average interest rate of 1.6% (2000 – 1.8%) and a weighted average period of 5.8 years
(2000 – 5.6 years). Interest rates on variable rate trade loans are linked to base rate.
20.
Deferred taxation
Provision for deferred taxation has not been made as the directors do not consider that there is reasonable probability of payment in the foreseeable future.
The potential liabilities at 28 April 2001 were as follows:
Accelerated capital allowances
2001
£m
8.0
Group
2000
£m
5.1
2001
£m
–
Parent
2000
£m
11.2
The directors expect to retain substantially all of the group’s properties and consequently have not estimated the potential taxation liability that would arise if these properties were disposed of at their revalued amounts.
21.
-
Ordinary shares of 25p each
Authorised – 100 million shares (2000 – 100 million)
Issued – 74.3 million shares (2000 – 74.1 million)
2001
£m
25.0
18.6
At 28 April 2001 there were outstanding options under the executive share option scheme for directors and employees to purchase up to 1.9 million (2000 – 1.3million) ordinary shares of 25p each up to 2008 at prices ranging between 463.5p and 716p per share.
Further information on the executive share options are shown in the remuneration report.
2000
£m
25.0
18.6
There were also outstanding options under the sharesave scheme to purchase up to 1.0 million (2000 – 0.8 million) ordinary shares between 1999 and 2002 at prices ranging between 382p and 589p per share.
During the year 161,489 ordinary shares were issued for cash in connection with profit sharing, sharesave and executive share option schemes.
34
for the fifty-two weeks ended 28 April 2001
22.
’
Group
At 29 April 2000
Retained profit
Share capital issued
Transfer
Share capital
£m
18.6
–
–
–
Share premium
£m
179.6
–
0.7
–
Revaluation Profit and reserve loss account
£m £m
104.6
–
–
(2.8)
120.4
27.1
–
2.8
At 28 April 2001 18.6
180.3
101.8
150.3
451.0
The cumulative amount of goodwill written off to reserves in respect of acquisitions made prior to May 1999 amounts to £89.7 million
(2000 – £89.7 million).
Parent company
At 29 April 2000
Retained profit
Share capital issued
Transfer
Share capital
£m
18.6
–
–
–
Share premium
£m
179.6
–
0.7
–
Revaluation reserve
£m
94.3
–
–
(94.3)
Other Profit and reserve loss account
£m £m
5.2
–
–
91.8
156.7
1.1
–
2.5
Total
£m
454.4
1.1
0.7
–
At 28 April 2001 18.6
180.3
– 97.0
160.3
456.2
The movement to Other reserve arose from the transfer of tangible fixed assets to a subsidiary undertaking (see note 13).
Total
£m
423.2
27.1
0.7
–
23. EBITDA
Trading profit
Amortisation of goodwill and exceptionals
Depreciation
2001
£m
82.0
5.1
18.8
105.9
2000
£m
61.6
18.5
18.8
98.9
EBITDA represents earnings before interest, tax, depreciation, amortisation of goodwill and exceptionals.
24.
Decrease in stocks
Decrease/(increase) in debtors
(Decrease)/increase in creditors
2001
£m
–
7.3
(3.5)
3.8
2000
£m
1.8
(4.5)
6.3
3.6
35

for the fifty-two weeks ended 28 April 2001
25.
Cash in hand, at bank
Overdrafts
Debt due after one year
At 1 May
1999
£m
0.7
(0.7)
(173.2)
(173.2)
Cash flows
£m
0.5
0.7
(185.3)
At 29 April
2000
£m
1.2
–
(358.5)
(184.1) (357.3)
Cash flows
£m
2.8
–
65.5
68.3
At 28 April
2001
£m
4.0
–
(293.0)
(289.0)
2 6 .
Group
Annual payments under operating leases which expire:
Within one year
Between two and five years
After five years
Parent
Annual payments under operating leases which expire:
Within one year
Between two and five years
After five years
2001
£m
Property
2000
£m
0.1
0.4
3.2
3.7
0.4
0.8
4.0
5.2
2001
£m
Property
2000
£m
–
–
–
–
0.4
0.8
4.0
5.2
Plant and machinery
2001 2000
£m £m
–
2.1
–
2.1
–
1.9
–
1.9
36
David McCall, CBE, DL
Chairman and independent non-executive director (66).
Appointed to the board as non-executive chairman in 1995.
Former chairman of Anglia Television Group Limited, and chairman of the Norfolk & Norwich Millennium Company and of the Council of the University of East Anglia.
Tim Bridge
Chief executive (52). Joined the company in 1970 and appointed to the board in 1977. Became managing director in
1990 and chief executive in 1994.
Michael Shallow, FCA
Finance director (46). Joined the company from Kingfisher and
Andersen Consulting and was appointed to the board in 1991.
David Elliott
Managing director, Pub Partners (47). Joined the company from Scottish & Newcastle Retail and was appointed to the board in 1998.
Neil Gillis
Managing director, Pub Company (36). Joined the company from Heinz and was appointed to the board in 2000.
Alan Bowkett
Independent non-executive director (50). Joined the board in
1993. Former chief executive of Berisford plc, now a European adviser to CVC Capital Partners, chairman of Metzeler APS SA and of the supervisory board of Acordis BV.
Jonathan Clarke
Non-executive director (62). Joined the company in 1963 and appointed to the board in 1967. Retired from an executive role in 1998.
Graham Greene, CBE
Senior independent non-executive director (65). Appointed to the board in 1979. Chairman of the Trustees of the British
Museum and of London Merchant Securities plc.
Howard Phillips
Independent non-executive director (60). Appointed to the board in 1998. Formerly chief executive of Perkins Foods plc, now a non-executive director of Transport Development Group plc and Martin Currie European Investment Trust plc.
Members of the audit committee
Alan Bowkett (chairman)
Graham Greene
Howard Phillips
Members of the remuneration committee
David McCall (chairman)
Alan Bowkett
Graham Greene
Howard Phillips
Members of the nomination committee
David McCall (chairman)
Alan Bowkett
Tim Bridge
Graham Greene
Management board
The management board comprises the executive directors, together with the following:
Rob Bellhouse
Company secretary (37)
John Redman
Brewing and distribution director (49)
Malcolm Chadwick
IT director (38)
Jonathan Paveley
Strategy director (37)
John Roberts
HR director (44)
Donald Stevenson
Property director (46)
37

Overview
Greene King is committed to high standards of corporate governance, for which the board is accountable to shareholders. The company complied with the provisions of Section 1 of the Combined Code throughout the year under review, except that the system of internal control only became fully operational from 20 October 2000.
Governance structure
The board comprises a non-executive chairman and four other non-executive directors and, since 30 August 2000, four executive directors. The division of the roles of chairman and chief executive and the balanced nature of the board are felt to create an effective forum that provides leadership and control. The non-executive directors all exercise independent judgement and have a range of skills and experience. In view of his previous long career as an executive director, Jonathan Clarke is not regarded as being independent of management. The board considers that Graham Greene, whilst having been a non-executive director for many years, has diverse business interests which ensure his independence of management. He is regarded as being the senior independent non-executive director.
The board meets regularly, has a formal schedule of matters reserved to it for decision and has an agreed procedure for directors to take independent professional advice at the company’s expense. All directors have access to the advice and services of the company secretary and are provided with full and timely access to all relevant information, plus the opportunity to question management as required.
Board appointments are considered by the nomination committee under agreed terms of reference, with non-executive directors being appointed for terms of three years. All directors are subject to re-election following their appointment and subsequently in every third year. Where directors are appointed to the board and it is the first time they have held office in a quoted company, they are provided with access to appropriate external training, which continues to be made available during their tenure in office.
Communication
Shareholder communication is regarded as a key priority, with the annual report and interim statements being the principal media used. In addition, the AGM, which is well attended, is fully utilised as a means of communicating directly with shareholders, who have a full opportunity to ask questions. The chairman of the board, as chairman of the remuneration and nomination committees, and the chairman of the audit committee, are available to answer questions at the AGM. All substantive items of business at shareholders’ meetings are dealt with under separate resolutions, including a resolution to adopt the report and accounts. The chairman announces the results of the proxy voting on each resolution after it has been dealt with on a show of hands. The notice of meeting is issued in compliance with both the articles and the Combined Code. Regular dialogue is maintained with key shareholders involving an exchange of views and information.
Financial reporting
The annual report and interim statement are felt to present a balanced and understandable assessment of the company’s position and prospects and the board ensures that all other public, regulatory and statutory reports are similarly presented.
Internal control
The company has assessed the key risks to which it is exposed and has formalised the ongoing control environment needed to address these and other issues. From 20 October 2000 and to the date of this report, the company had ongoing processes in place to implement in full the guidance on internal controls produced by the Turnbull Committee, and in particular to identify, evaluate and manage the significant risks faced.
Such systems can only be designed to manage, rather than eliminate, the risk of failure to achieve business objectives and provide reasonable, but not absolute, assurance that the group’s assets are safeguarded, that the financial information used within the business and for external reporting is reliable, and against material misstatement or loss. Similarly, the system can reduce, but not eliminate, the possibility of poor judgement in decision-making, human error, control processes being deliberately circumvented, management overriding the controls and the occurrence of unforeseen circumstances.
38
The board and the management board regularly review risk management and internal controls, including the provision of key performance indicator data on the significant risks faced. A risk management group, comprising senior managers from all parts of the company, meets regularly to consider the effective management of risk throughout the business. This group oversees the development of risk management strategies, monitors progress and reports to the audit committee, to whom it is accountable, and to the management board, on risk issues within the business.
The board acknowledges that it is ultimately responsible for the company’s system of internal control and for reviewing its effectiveness. A formal assessment of the risk and control environment in place during the year and to the date of this report has been undertaken, based on a detailed report from, and subsequent discussions with, senior management. No significant problems were disclosed in this report.
The control environment comprises the elements set out below:
• Control environment
The board of directors and the management board routinely monitor all aspects of risk management and internal control, and regularly assess the data provided by the risk management group on the significant risks faced. Any issues arising from this process are discussed with operational management as needed.
• Risk management process
Major risks are identified, the financial implications of each risk assessed and the adequacy and effectiveness of the associated control environment analysed. Appropriate steps are then taken to mitigate and monitor the effect of these risks. Data on the key exposures is prepared and reviewed regularly by the risk management group, who report their findings to the management board and the audit committee of the board.
• Internal audit
The controls over the group’s managed houses are enhanced by an internal audit team and the availability of comprehensive information from the EPOS till system. On behalf of the board, the audit committee regularly monitors the procedures and scope of internal audit within the group, including seeking the views of the external auditors.
• Business plans and budgets
Business plans and detailed annual budgets covering all financial aspects of the group’s business are evaluated and approved by the board. The actual results are compared against these plans and budgets on a four-weekly basis and variances analysed in order that any appropriate action can be taken.
• Capital and project control
There are clearly defined evaluation and approval processes for acquisitions and disposals, capital expenditure and project control.
These include escalating levels of authority, detailed appraisal and review procedures and post-completion reviews of all major projects to compare the actual outcome with the original plan. Certain clearly defined transactions are reserved for approval by the board. Limits of delegated responsibility and areas of authority have been identified for employees.
Relationship with auditors
The audit committee, which comprises solely independent non-executive directors, continuously monitors the relationship with the auditors and agrees the scope and reviews the results of the full year audit and interim review each year. The committee assesses the costeffectiveness, objectivity and independence of the auditors from time to time. The company uses both the auditors and other accounting firms for non-audit work, and considers maintenance of objectivity, value for money and experience when making such decisions.
39

The directors present their annual report together with the audited financial statements of the company and the group for the 52 weeks ended 28 April 2001.
Profits and dividends
The group’s profit before taxation, exceptional items and the amortisation of goodwill for the period amounted to £62.8 million
(2000 – £54.5 million). A net interim dividend of 7.15p per share (2000 – 6.50p) was paid on 29 January 2001. The directors recommend a net final dividend of 17.65p per ordinary share (2000 – 16.00p), making a total dividend for the year of 24.80p per share
(2000 – 22.50p). Subject to the approval of shareholders at the annual general meeting, the final dividend will be paid on 7 September
2001 to shareholders on the register at the close of business on 3 August 2001. The total dividends for the year amount to £18.4 million and the retained profit of £27.1 million will be transferred to reserves.
Activities
Greene King plc is the holding company for a group whose principal activities are operating managed, tenanted and leased public houses, brewing beer, and wholesaling beers, wines and soft drinks. The chairman’s statement, the chief executive’s review and the financial review provide further details of the group’s activities during the year and likely future developments and form part of this report. The disclosures within the corporate governance statement and remuneration report also form part of this report.
There were no significant changes in the company’s activities during the year.
Directors
Details of the current directors are given on page 37. All of these directors held office throughout the year. In addition, Brian Field served as a director of the company until 30 August 2000.
It is intended that Rooney Anand will be appointed to the board shortly before the annual general meeting. In accordance with article
90 of the company's articles of association, he will retire at that meeting and, being eligible, offers himself for election. Mr Anand, aged
37, will be appointed managing director of Brewing & Brands and joins the company this summer from Sara Lee, where he has been president and managing director of their UK bakery division.
Under article 85 of the company's articles of association David McCall, Howard Phillips and Michael Shallow retire by rotation and, being eligible, offer themselves for re-election at the forthcoming annual general meeting.
Details of the directors’ service agreements, remuneration, and interests in shares and share options are set out in the remuneration report on pages 44 to 48. Save as disclosed, there have been no changes in their interests between 28 April 2001 and the date of this report.
Interests in contracts
No director had a material interest in any contract that was significant in relation to the group’s business at any time during the year.
Share capital
Details of the share capital of the company are set out in note 21 to the accounts on page 34.
Under the authority granted to the directors by shareholders in 2000, the company has allotted a total of 161,489 ordinary shares of
25p each with an aggregate nominal value of £40,372.25, for cash, in connection with the company’s profit-sharing, sharesave and executive share option schemes.
40
A number of resolutions will be proposed at the forthcoming annual general meeting in connection with the company’s share capital:
• Share allotment authority
This resolution seeks to renew the authority of the directors to allot securities in the company up to an aggregate nominal amount of £6,422,800, being the authorised but unissued capital of the company and representing approximately 34.6 per cent of the current issued ordinary share capital, for up to fifteen months after the AGM.
• Dis-application of statutory pre-emption rights
This resolution seeks to renew the authority of the directors to dis-apply pre-emption rights and allot equity securities for cash in connection with a rights issue and otherwise up to an aggregate nominal amount of £928,850, being approximately 5 per cent of the current issued ordinary share capital, for up to fifteen months after the AGM.
• Authority for purchase of own shares
This resolution seeks to renew shareholders’ authority for the company to make market purchases of its own shares, as permitted by article 8 of the Articles of Association. Any shares so purchased would be cancelled. A purchase of own shares would only be undertaken when the directors believed this would result in an increase in expected earnings per share and be in the best interests of shareholders generally.
The authority that will be sought contains several important restrictions, being:
• the authority is limited to a specific period of time and only permits 7,430,879 shares with a nominal value of £1,857,720, being 10 per cent of the company’s current issued share capital, to be purchased on the London Stock Exchange;
• the minimum price per share which may be paid is the nominal value of 25p;
• the maximum price per share that may be paid is 105 per cent of the average mid-market price for the company’s shares as shown in the Stock Exchange Daily Official List for the five business days immediately preceding the purchase.
Full exercise of all options outstanding at the date of this report would require the issue of 2,848,319 ordinary shares. This represents
3.8% of the current issued share capital and 4.3% of the company’s share capital if the proposed authority to purchase own shares had been obtained and exercised in full. The company has issued no warrants to subscribe for share capital.
Substantial shareholdings
At the date of this report, the company had been notified of the following interests of 3 per cent or more in its issued ordinary share capital:
Britannic Investment Managers Ltd
Royal & Sun Alliance Investments
Ordinary Shares of 25p each
5,249,000
3,721,040
%
7.06
5.01
41

Employment policies
• Internal communications
The group is committed to involving employees in its activities and believes that effective communication brings important business benefits. This is achieved through regular briefings and a weekly internal news bulletin, whilst information about the business is published in the in-house magazines and the annual report. Since the year end, the group has introduced an intranet to improve access to core information across the business.
• Employee benefits
The group operates a profit-sharing scheme open to the employees of Greene King Services Limited and a sharesave option scheme open to all employees. The schemes are intended to enhance commitment to the success of the company and details of them can be found in the notes to the accounts. Recent legal changes mean that the company will be unable to operate the profit-sharing scheme in future but, in recognition of the importance the company attaches to employee share schemes, an All Employee Share Ownership
Plan is proposed to be adopted at the 2001 AGM. All employees are offered access to a stakeholder-compliant defined contribution pension scheme, which was launched in 1997 to provide pension benefits for subsequent recruits to the company.
• Training and development
The group is committed to developing its people. Training and development opportunities are provided at all levels, from bar skills training to MBA programmes. By giving employees the skill and knowledge essential to perform their jobs effectively, the group believes it will create a professional and highly motivated workforce that will enhance the company’s operations.
• Equal opportunities
The group is committed to the principle of equal opportunities for all. The rationale for recruitment and selection is the ability and aptitude of applicants. Disabled people are offered the same opportunities as all others in respect of recruitment, training, promotion and career development, taking account of their skills and qualifications. Employees who become disabled will be retained and retrained wherever possible.
Environmental policy
The group regards compliance with relevant environmental laws and the adoption of responsible standards as integral parts of its business operations. 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 the best available techniques.
The overall responsibility for environmental policy rests with the board, but specific responsibility for ensuring that adequate arrangements are made to implement that policy effectively throughout the group is delegated to the managing director of the Brewing and Brands business unit. All business unit managers are responsible for the sound environmental management of their particular operations.
Charitable donations
Donations for charitable purposes made during the year amounted to £37,100 (2000 – £30,373). The group made no political donations.
Going concern
The directors expect the group to continue in operational existence for the foreseeable future and have therefore used the going concern basis in preparing the financial statements.
Payments to suppliers
The group understands the benefits to be derived from maintaining good relationships with its suppliers and where possible enters into agreements over payment terms. Where such terms have not been agreed, it is the group policy to settle invoices close to the end of the month following invoicing. This policy is dependent on suppliers providing accurate, timely and sufficiently detailed invoices.
Payment in respect of 33 days’ average purchases from trade creditors was outstanding at the end of the period (2000 – 32 days).
42
Annual general meeting and special business
The annual general meeting will be held at 12 noon on Friday 31 August 2001 at Culford School, Culford, Suffolk. The notice of the annual general meeting and an explanation of the items of non-routine business are set out in the explanatory circular that accompanies this annual report.
Auditors
Ernst & Young has stated that it intends to transfer its business to a limited liability partnership incorporated under the Limited
Liability Partnerships Act 2000, to be called Ernst & Young LLP, on 28 June 2001. The directors have consented to treat the appointment of Ernst & Young as extending to Ernst & Young LLP from 28 June 2001, and a resolution to re-appoint the firm as the company's auditor will be proposed at the forthcoming annual general meeting.
By order of the board
Rob Bellhouse
Company secretary
26 June 2001
43

Composition of the remuneration committee
The remuneration committee is appointed by the board and comprises David McCall (committee chairman), Alan Bowkett, Graham
Greene and Howard Phillips, all of whom are independent non-executive directors. There are no cross-directorships or other factors that may interfere with their judgement.
Terms of reference and reporting
The committee determines all elements of the executive directors’ and management board members’ remuneration, which is reviewed annually. It approves all contracts with executive directors and any compensation arrangements arising from the early termination of such service contracts. It also approves all grants of options over shares. This report has been prepared by the remuneration committee on behalf of the board.
Service contracts
The notice period generally required from the company to terminate the service agreements of the executive directors appointed after
1991 is one year. Executive directors who held office before that date retain a notice period of two years, which was reduced from five years in September 1995 at no cost to the company. The committee views the current arrangements as consistent with the objectives of the remuneration policy. In the event of the employment of an executive director being terminated, the committee would have regard to both the Combined Code and the executive’s legal duty to mitigate their loss. The non-executive directors hold letters of appointment and are each appointed for three-year terms.
Michael Shallow, an executive director proposed for re-election, has a service agreement with the company terminable on two years’ notice. Rooney Anand, who is also standing for election to the board, has not yet entered into a formal service agreement, but would be entitled to a notice period of one year. David McCall and Howard Phillips, who are seeking re-election to the board are non-executive directors and do not therefore have service contracts.
Remuneration policy
The objective of the company’s remuneration policy is to attract, motivate and retain high quality directors and senior executives who will contribute fully to the success of the group and so add shareholder value. In order to achieve this, regular comparisons are made with current practice in a selected group of companies. The principal criteria used in the selection of the appropriate companies are turnover, market capitalisation and range of operations, and external advice is sought in order to ensure an objective review. The committee also consults with the chief executive on its proposals and has regard to pay and conditions elsewhere within the group. No director plays any part in determining his own remuneration.
A significant proportion of each executive director’s potential remuneration package is performance-related, thus aligning the directors’ interests with those of shareholders and encouraging performance at the highest levels. The remuneration package of each executive director consists of the following elements:
• Annual pay
The annual pay reflects the responsibilities, market value and sustained performance level of executive directors. Pay is reviewed annually or when a change in responsibility occurs.
• Benefits in kind
The executive directors are eligible for a range of taxable benefits, which include the provision of a fully expensed company car and private medical insurance.
• Bonus
Bonus payments are determined by the committee and awarded where justified by performance. The executive directors are eligible to receive an annual incentive award which may be paid up to a maximum percentage of their annual pay. The maximum incentive award for the financial year 2000-01 was 50 per cent of each individual’s annual pay. The amount payable is based upon the achievement of financial performance targets for the year, which are agreed by the remuneration committee.
44
• Pensions
Tim Bridge and Michael Shallow are entitled to receive a pension of up to two-thirds of their annual pay on their retirement, subject to their length of service and Inland Revenue limits, under the group’s defined benefit pension scheme, which also provides a cash lump sum accrual. The directors contribute five per cent of their annual pay to the scheme and have a retirement age of sixty.
David Elliott participated in the group’s defined contribution pension scheme throughout the year. Neil Gillis participates in an independently arranged defined contribution pension scheme to which the company contributes at a level equivalent to that for
David Elliott.
All four executive directors participate in the group’s defined benefit pension scheme for death-in-service purposes, subject to the
Inland Revenue earnings cap where appropriate. Death benefits in excess of the Revenue maximum are provided through insurance, the cost of which is taxable as a benefit in kind on the relevant directors and disclosed as such in the table below.
The Inland Revenue earnings cap restricts the pension that the scheme can provide for Michael Shallow. The scheme pension will, therefore, be supplemented through a funded unapproved pension arrangement, operating on a targeted defined contribution basis.
The company‘s contribution to the fund for the year in respect of Michael Shallow is £10,200, in addition to which £6,800 will be payable to him to meet the tax liability created (2000 – £14,700 total).
Similar restrictions apply to the pensions for David Elliott and Neil Gillis who also participate in funded unapproved arrangements, operating on a defined contribution basis. During the year, the company contributed £46,355 into David Elliott’s overall pension arrangements, of which £23,145 was in respect of approximately 18 months’ prior service. He will receive an amount of £7,670 to meet the tax liability so created. During the year, the company also contributed £16,305 to Neil Gillis’ overall pension arrangements, including £2,163 in respect of two months’ prior service, and will pay him an additional amount of £3,695 to meet the tax liability so created.
• Executive share option scheme
Executive directors and selected senior executives are rewarded for long-term performance by the phased granting of options at nil cost, up to a maximum grant value of four times taxable pay. The committee approves any grants of executive share options and does not grant options at a discount to the prevailing mid-market price.
Options issued under this scheme can only be exercised between the third and tenth anniversary of the date of grant and then only if attaching performance conditions have been met. Specifically, options may not be exercised, in whole or in part, unless the growth in audited adjusted earnings per share over the performance period has exceeded RPI inflation by a stated margin
Full details of the directors’ shareholdings and share options are contained in the company’s register of directors’ interests, which is open to inspection.
Remuneration for non-executive directors
The fees paid to the chairman and the other non-executive directors are determined by the board as a whole. They are agreed after taking external advice and making market comparisons, and relate to the services of the directors in connection with the company’s business. The non-executive directors do not have service contracts, are not eligible for pension scheme membership and cannot participate in any of the group's bonus or share option schemes. The retention of executive share options by Jonathan Clarke relates to his previous service as an executive director. No non-executive director participates in any decision relating to his own remuneration.
Their service is regulated by letters of appointment under which three-year terms are granted.
45

Director’s emoluments
David McCall*
Tim Bridge
Alan Bowkett*
Jonathan Clarke*
David Elliott
Brian Field†
Neil Gillis
Graham Greene*
Howard Phillips*
Michael Shallow
Annual pay
2001
£’000
–
250
–
–
140
37
140
–
–
170
Bonus
2001
£’000
–
125
–
–
70
–
70
–
–
85
Fees
2001
£’000
–
23
–
–
95
–
23
15
23
–
Benefits
2001
£’000
17
5
13
–
–
17
–
–
–
20
Total
2001
£’000
95
392
23
15
227
42
223
23
23
275
Total
2000
£’000
89
331
20
15
180
151
24
20
20
231
737 350 179 72 1,338 1,149
†resigned 30 August 2000. He received approximately £84,000 after tax, plus the payment of £70,000 into his pension arrangements by the company, in connection with the termination of his contract of employment.
*non-executive
The fees for David McCall include amounts paid under a consultancy agreement, which are taken into account by the remuneration committee when assessing overall payments to him.
The remuneration paid to, and accrued pension rights of, the highest paid director are as follows:
Aggregate emoluments
Accrued annual pension entitlement at end of year
Accrued lump sum at end of year
2001
£’000
392
170
19
2000
£’000
331
138
18
Directors’ defined benefit pensions
Tim Bridge
Brian Field (resigned 30 August 2000)
Michael Shallow
Increase in period
(excluding inflation)
Pension
£’000 pa
27
2
2
Lump sum
£’000
1
–
1
Accrued entitlement at 28 April 2001 (or earlier date of leaving)
Pension
£’000 pa
170
31
20
Lump sum
£’000
19
17
10
Transfer value of period’s accruals net of employees’ contributions
£’000
364
31
17
46
Directors’ interests in shares
The beneficial interests of each of the directors and their immediate families in the ordinary share capital of the company at the start and end of the year were as follows:
28 April 2001
76,640
207,654
15,896
49,565
5,570
–
99,788
10,850
27,621
29 April 2000
David McCall
Tim Bridge
Alan Bowkett
Jonathan Clarke
David Elliott
Neil Gillis
Graham Greene
Howard Phillips
Michael Shallow
At 28 April 2001, Tim Bridge had a non-beneficial interest in 44,884 (2000 – 44,884) ordinary shares, in addition to the holding shown above. In their capacity as trustees of the company’s profit-sharing scheme, Tim Bridge and Michael Shallow were also interested in 297,672 (2000 – 289,693) ordinary shares at the year-end. Their beneficial interests arising through the profit sharing scheme are included in these figures and reflected in the table above. Between 29 April 2000 and 26 June 2000 the scheme holding reduced by 738 ordinary shares. Save for this, there have been no changes to the date of this report.
76,640
206,609
15,896
49,565
5,000
–
99,788
10,850
26,890
Executive share options
The directors’ interests in options granted under the executive share option scheme are:
Tim Bridge
Jonathan Clarke
David Elliott
Neil Gillis
Michael Shallow
Granted Outstanding during the at 28 April year 2001
65,000
–
80,000
100,000
20,000
260,000
65,000
150,000
100,000
180,000
Weighted average Outstanding option price at 29 April
2000
542p
595p
504p
489p
541p
195,000
65,000
70,000
–
160,000
No options were exercised or lapsed during the year. The weighted average option prices relate to all options outstanding at 28 April
2001. Jonathan Clarke retains the right to exercise options granted to him whilst he was an executive director, subject to the rules of the scheme and the performance conditions attaching to the options. There have been no changes to the date of this report.
A grant of options under the scheme was made on 21 July 2000 at an exercise price of 463 1 ⁄
2 p per share, these options being exercisable between 21 July 2003 and 20 July 2010, subject to the relevant performance conditions having been met. A further grant of options under the scheme was made on 22 December 2000, at an exercise price of 527p per share, these options being exercisable between 22 December 2003 and 21 December 2010, subject to the relevant performance conditions having been met.
The other executive share options outstanding were granted on 12 October 1994 at 489p per share, on 18 January 1996 at 576p per share (in both cases as adjusted after the rights issue in July 1996), on 18 July 1996 at 586p per share, on 8 January 1997 at 649p per share, on 1 July 1997 at 678p per share, on 22 December 1997 at 716p per share, on 3 December 1998 at 537 1 ⁄
2 p per share and on
23 December 1999 at 487 1 ⁄
2 p per share.
47

Sharesave scheme
The Inland Revenue-approved sharesave scheme is open to all employees, including directors and part-time employees. Under this scheme options are granted over the company’s ordinary shares, at an option price which, at board discretion, can be at a discount of up to 20 per cent to the mid-market price at the time of granting. The company has historically granted all such options at a 20 per cent discount and has taken advantage of the UITF17 exemption for schemes of this type.
A grant of options was made under the sharesave scheme at an exercise price of 440p per share on 6 February 2001. Options granted under this scheme can be exercised at any time during the six month period commencing on either 1 April 2004 or 1 April 2006, as selected by the participant at the commencement of the savings contract.
The directors’ interests in options granted under the sharesave scheme are:
Tim Bridge
Jonathan Clarke
David Elliott
Michael Shallow
Granted Outstanding during the at 28 April period 2001
–
–
2,201
–
3,470
3,470
2,201
2,535
Option price
497p
497p
440p
382p
Outstanding at 29 April
2000
3,470
3,470
–
2,535
Mr Elliott’s option can be exercised between 1 April and 30 September 2004. Mr Shallow’s option can be exercised between 1 April and 30 September 2003. The remaining directors’ options can be exercised between 1 November 2001 and 30 April 2002.
Profit-sharing scheme
The Inland Revenue approved profit-sharing scheme is open to all employees of Greene King Services Limited who have been employed in the group throughout the pervious financial year. Shares are appropriated once a year according to a pre-set formula relating to the year-on-year increase in the company’s profits. The directors’ beneficial interests resulting from participation in this scheme are reflected in the shareholding data given above.
The closing mid-market value of the company’s shares on 27 April 2001 (being the last business day before the financial year-end) was
553p (2000 – 424 1 ⁄
2 p). The closing mid-market value of the company’s shares during the year ranged between 424p and 600 1 ⁄
2 p.
The following statement, which should be read in conjunction with the auditors’ statement of their responsibilities overleaf, is made with a view to distinguishing for shareholders the respective responsibilities of the directors and the auditors in relation to the financial statements.
The directors are required by law to prepare accounts for each financial year which give a true and fair view of the state of affairs of the company and the group as at the end of the financial period and of the profit or loss for the period.
The directors are responsible for ensuring that the group maintains proper accounting records, which disclose with reasonable accuracy at any time the financial position of the group and which enable them to ensure that the accounts comply with the Companies Act
1985. They are also responsible for safeguarding the assets of the group and taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors consider that the accounts have been prepared using suitable accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates and confirm that all applicable accounting standards have been followed.
48 49

to the members of Greene King plc
We have audited the accounts on pages 18 to 36 which have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets and the accounting policies set out on page 22.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the annual report. As described on page 49, this includes responsibility for preparing the accounts in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in the United Kingdom by statute, the Auditing Practices Board, the Listing Rules of the Financial Services Authority and by our profession’s ethical guidance.
We report to you our opinion as to whether the accounts give a true and fair view and are properly prepared in accordance with the
Companies Act. We also report to you if, in our opinion, the directors’ report is not consistent with the accounts, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if the information specified by law or the Listing Rules regarding directors’ remuneration and transactions with the group is not disclosed.
We review whether the corporate governance statement on pages 38 and 39 reflects the company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of either the group’s corporate governance procedures or its risk and control procedures.
We read the other information contained in the annual report, including the corporate governance statement, and consider whether it is consistent with the audited accounts. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the accounts.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts.
Opinion
In our opinion the accounts give a true and fair view of the state of affairs of the company and of the group as at 28 April 2001 and of the profit of the group for the year then ended and have been properly prepared in accordance with the Companies Act 1985.
Ernst & Young
Registered Auditor
Cambridge
26 June 2001
50
Financial calendar
Annual report circulated
Shares trade ex-dividend from
Record date for final dividend
Annual general meeting
Payment of final dividend
Announcement of interim results
Payment of interim dividend
Preliminary announcement of the 2001 results
Capital gains tax
13 July 2001
1 August 2001
3 August 2001
31 August 2001
7 September 2001
December 2001
February 2002
June 2002
For the purpose of computing capital gains tax, the market value of ordinary shares on 31 March 1982, after adjustment for the capitalisation issues in 1980 and 1982 was 145.125 pence. After take up of the rights issue in July 1996, the March 1982 value becomes 259.375 pence.
Registrars
Company secretary and registered office
Northern Registrars Limited
Northern House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0LA
Telephone : 01484 600900
Fax : 01484 600911
Website : www.northernregistrars.co.uk
Rob Bellhouse, FCIS
Westgate Brewery, Bury St Edmunds, Suffolk IP33 1QT
Share dealing service NatWest Corporate and Employee Services
Greene King plc service
55 Mansell Street, London E1 8AN
Telephone : 020 7895 5448
Financial advisers Schroder Salomon Smith Barney
The Citigroup Centre, 33 Canada Square, Canary Wharf, London E14 5LB
Stockbrokers
Auditors
Solicitors
Deutsche Bank AG London
Winchester House, 1 Great Winchester Street, London EC2N 3EQ
Ernst & Young
Compass House, 80 Newmarket Road, Cambridge CB5 8DZ
Linklaters
One Silk Street, London EC2Y 8HQ
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