DIRECTORS' REPORT

The directors present their annual report together with the audited financial statements of the company and the group for the 52 weeks ended 2 May 2010.

Profits and dividends

The group's profit before taxation and exceptional items for the period amounted to £123.0m (2009: £118.5m). An interim dividend of 5.9p per share (2009: 7.3p, equivalent to 5.9p when adjusted to take into account the impact of the bonus element of the rights issue) was paid on 29 January 2010. The directors recommend a final dividend of 15.6p per ordinary share (2009: 15.1p), making a total dividend for the year of 21.5p per share (2009: 22.4p, equivalent to 21.0p on an adjusted basis). Subject to the approval of shareholders at the AGM, the final dividend will be paid on 13 September 2010 to shareholders on the register at the close of business on 13 August 2010.

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, spirits and soft drinks.

Business review

Under the provisions of the Companies Act 2006, the company is required to produce a business review containing a fair review of the business of the company and a description of the principal risks and uncertainties facing the company. Shareholders are referred to the chief executive's review, the financial review, the KPIs, the risks and uncertainties section and the corporate social responsibility report for the required information. They are intended to provide a balanced and comprehensive analysis of the development and performance of the business of the group during the financial year and the position of the group at the end of the year.

Directors

Details of the current directors are given in the board of directors section. All of these directors held office throughout the period.

Under article 85 of the company's articles of association Rooney Anand, Ian Durant and Norman Murray retire by rotation and, being eligible, offer themselves for re-election at the forthcoming AGM.

During the year David Elliott retired as a director on 31 January 2010 and, on 30 April 2010, Justin Adams and Jonathan Lawson stepped down as directors whilst retaining their managerial responsibilities.

Details of the directors' service agreements, remuneration, and interests in share options and awards are set out in the directors' remuneration report. There have been no changes in their interests between 2 May 2010 and the date of this report.

Directors' interests in shares

The beneficial interests of each of the directors and their immediate families in the ordinary share capital of the company are shown below:

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At 2 May 2010, Tim Bridge had a non-beneficial interest in 89,768 (2009: 89,768) shares, in addition to the holding shown above.

There have been no changes in the interests of the directors between 2 May 2010 and the date of this report.

Interests in contracts

No director had a material interest in any contract, other than an employment contract, that was significant in relation to the group's business at any time during the period.

Substantial shareholdings

As at 29 June 2010, the company has been notified of the following interests in 3% or more of the issued share capital of the company:

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Share capital

Details of the authorised and issued share capital of the company, which comprises a single class of shares, ordinary shares of 12½p, are set out in note 24 to the accounts. The rights attaching to the shares are set out in the articles of association. There are no special control rights in relation to the company's shares and the company is not aware of any agreements between holders of securities that may result in restrictions on the transfer of securities or on voting rights.

On 23 April 2009, prior to the beginning of the year, the company announced an underwritten rights issue of 80,749,647 new shares at 270p per share to qualifying shareholders. The rights issue was undertaken on the basis of three new shares at 270p per share for every five shares held by qualifying shareholders. Shareholders approved the necessary resolutions at a general meeting of the company on 12 May 2009 and, on 29 May 2009, following the exercise of a number of options under the company's share schemes, a total of 80,755,421 new ordinary shares were issued to qualifying shareholders or subscribers for those shares.

A total of 25,873 ordinary shares, with an aggregate nominal value of £3,234, were allotted, for cash, during the period in connection with the company's sharesave and executive option schemes. In addition, a further 527,000 shares were transferred from treasury to satisfy the grant of awards to directors under the company's LTIP scheme.

The trustees of the company's employee benefit trust (EBT), Kleinwort Benson (Guernsey) Trustees Limited, transferred 27,856 ordinary shares to employees to satisfy the exercise of share options and the vesting of LTIP awards. Although no ordinary shares were purchased by the EBT during the period, 149,000 shares were transferred back to the EBT from directors in respect of lapsed LTIP awards. The company makes regular use of the EBT to satisfy the exercise of share options and will make market purchases of the company's shares from time to time to ensure that it has sufficient shares to enable it to do so.

Voting rights

In a general meeting of the company, on a show of hands, every member who is present in person or by proxy and entitled to vote shall have one vote. On a poll every member who is present in person or by proxy shall have one vote for every share of which they are the holder. The AGM notice gives full details of deadlines for exercising voting rights in respect of resolutions to be considered at the meeting.

Under the Free4All Employee Profit Share Scheme, participants are the beneficial owners of the shares but not the registered owners. The registered owner is the trustee, Killik & Co Trustees Ltd. The trustee will invite participants to direct it on the exercise of any voting rights attaching to the shares held under the scheme by the trustee on the participants' behalf. The trustee will only be entitled to vote on a show of hands if all directions received from participants are identical. The trustee is under no obligation to call for a poll. In the case of a poll, the trustee will follow the directions of the participants.

No voting rights will be exercised in respect of any own shares.

Transfer of shares

There are no restrictions on the transfer of shares in the company other than those which may from time to time be applicable under existing laws and regulations (for example under the Market Abuse Directive).

In addition, pursuant to the Listing Rules of the Financial Services Authority, directors of the company and persons discharging managerial responsibility are required to obtain prior approval from the company to deal in the company's securities, and are prohibited from dealing during closed periods.

Change of control

All of the company's share incentive plans contain provisions relating to a change of control and full details of these plans are provided in the directors' remuneration report. Outstanding options and awards would normally vest and become exercisable on a change of control, subject to the satisfaction of performance conditions, if applicable, at that time.

The group's banking facility agreements contain provisions entitling the counterparties to exercise termination or other rights in the event of a change of control. Certain of the company's trading contracts also contain similar provisions.

There are two employees who, on a change of control of the company resulting in the termination of their employment, would be entitled to compensation for loss of office. However, in the context of the company as a whole, these agreements are de minimis.

Articles of association

The company's articles of association may only be amended by special resolution at general meetings of shareholders.

Appointment and replacement of directors

The number of directors on the board shall be no less than five nor more than twelve. Directors may be appointed by the company by ordinary resolution or by the board of directors. A director appointed by the board of directors holds office until the next following AGM, and is then eligible for election by the shareholders.

At each AGM all those directors who were elected, or last re-elected, at the AGM held in the third calendar year before the current year shall retire from office and may stand for re-election.

The company may by ordinary resolution, of which special notice has been given, remove any director from office.

Any director automatically ceases to be a director if (i) they give the company a written notice of resignation, (ii) they give the company a written offer to resign and the directors decide to accept this offer, (iii) all of the other directors remove them from office by notice in writing served upon them, (iv) they are or have been suffering from mental ill health and have a court order for their detention or the appointment of a guardian made in respect of them, (v) a bankruptcy order is made against them or they make any arrangement or composition with their creditors generally, (vi) they are prohibited from being a director by law or (vii) they are absent from board meetings for six months without leave and the other directors resolve that their office should be vacated.

Powers of the directors

The business of the company is managed by the directors who may exercise all the powers of the company, subject to its articles of association, any relevant legislation and any directions given by the company by passing a special resolution at a general meeting. In particular, the directors may exercise all the powers of the company to borrow money, issue shares, appoint and remove directors and recommend and declare dividends.

Communications with shareholders

Shareholders who are interested in signing up to e-communications should refer to the shareholders' information page for further information on how to register via www.greeneking-shares.com.

Charitable donations

Donations by the company for charitable purposes made during the period amounted to £18,400 (2009: £18,700). The group makes no political donations.

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 60 days following the end of month of invoicing. This policy is dependent on suppliers providing accurate, timely and sufficiently detailed invoices. Payment in respect of 67 days' average purchases from trade creditors of the group was outstanding at the end of the period (2009: 72 days).

Directors' and officers' indemnity insurance

The group has taken out insurance to indemnify, against third party proceedings, the directors of the company whilst serving on the board of the company and of any subsidiary. This cover indemnifies all employees of the group who serve on the boards of all subsidiaries. These indemnity policies subsisted throughout the year and remain in place at the date of this report.

Financial instruments

The group's policy on the use of financial instruments is set out in note 23.

Post balance sheet events

Details of events occurring after the year end are set out in note 30.

Directors' statement as to disclosure of information to auditors

The directors who were members of the board at the time of approving the directors' report are listed in the board of directors section. Having made enquiries of fellow directors and of the company's auditors, each of these directors confirms that:

  • to the best of each director's knowledge and belief, there is no information relevant to the preparation of their report of which the company's auditors are unaware; and
  • each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the company's auditors are aware of that information.

Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the chief executive's review. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in the financial review. In addition, note 23 to the financial statements include the group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit and liquidity risk.

The directors are of the opinion that the group's forecast and projections, taking account of reasonably possible changes in trading performance, show that the group should be able to operate within its current borrowing facilities and comply with its financing covenants.

After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

Auditors

Ernst & Young LLP has expressed its willingness to continue in office and a resolution to re-appoint the firm as the company's auditors will be proposed at the AGM.

Annual general meeting

The AGM will be held at 12 noon on Tuesday 7 September 2010 at the Millennium Grandstand, Rowley Mile Racecourse Conference Centre, Newmarket, Suffolk. The notice of the AGM is set out in the separate circular to shareholders.

The directors consider that all of the resolutions set out in the notice of AGM are in the best interests of the company and its shareholders as a whole. The directors will be voting in favour of them and unanimously recommend that shareholders vote in favour of each of them.

By order of the board


Lindsay Keswick
Company Secretary
30 June 2010

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