Spirit Annual Report 2011

Spirit Pub Company plc Annual Report 2011
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Quick fact
Spirit Pub Company
Spirit Pub Company has over 800 Managed pubs with market leading brands and represents some of the highest quality pubs nationwide.
Spirit Pub Company plc
Spirit Pub Company

We operate some of the UKs most recognised Managed pub brands.
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We have pubs nationwide ranging from iconic London venues to community locals to market leading brands such as Chef & Brewer, Flaming Grill and Fayre & Square, each delivering an excellent guest experience.
Our pubs are well located throughout the UK with attractive exposure to London, the South East, the North West and other high population areas.
We want our pubs to be the best and we are proud of our continuing commitment to invest in our pubs and deliver consistently great guest experiences.
From the fantastic flame grilled steaks we serve in our Flaming Grills, to the famous Square Burgers In addition, we operate the UKs served up in our Fayre & Squares, leading indoor childrens playbarns, to the best British fish and chips Wacky Warehouse, and quality hotels in town at our Taylor Walkers, we have something for everyone. under our Good Night Inns brand.
For more information on Spirit Pub Company visit www.spiritpubcompany.com

Quick fact
Chef & Brewer
The Swan & Bottle in Uxbridge was the 100th Chef & Brewer pub to receive an investment in the last year and celebrated by releasing 100 balloons with five golden tickets offering a family meal at any Chef & Brewer pub.
Chef & Brewer

Traditional pub values are at the heart of every Chef & Brewer.
est forpub B ry t a coun re at f resh g er ving b food s pu

At Chef & Brewer we believe that food and drink should work in harmony to create the perfect partners for you to indulge in. Served by our friendly, knowledgeable teams and enjoyed in our delightful pubs, meals at Chef & Brewer will provide you with many great times and happy memories.
Chef & Brewer is a collection of charming, traditional pub restaurants with a modern service style and ethos, spread throughout the UK. Offering freshly prepared food and high quality drinks at a great price, traditional pub values are at the heart of every Chef & Brewer.
Guests can also find wonderfully comfortable bar areas for socialising with friends.
Our pubs are reassuringly genuine with old beams, nooks and crannies, roaring log fires in the winter and beautiful gardens in the summer. With a proper bar area, perfect to prop yourself up against From the launch of our first pub, while enjoying a pint of real ale or The Greyhound in Northampton, a chilled glass of Sauvignon Blanc, the brand has grown to well over 130 pubs nationwide. It has achieved and comfortable and relaxed dining this through focusing on becoming areas, Chef & Brewer is right for every time of day or day of the week. the UKs best pub restaurant offering high quality, seasonal food, complemented by a great range of drinks served in a relaxed dining environment.
For more information on Chef & Brewer visit www.chefandbrewer.com

Quick fact
Taylor Walker
Our number one selling dish is fish and chips. We serve 10,000 portions every week which equates to circa 779 tonnes a year.
Taylor Walker
Taylor Walker is an iconic brand that celebrates all thats best in British pubs.
gre at est for pubs B ish Bri t t radi t ion n built o

The name Taylor Walker, which is taken from the famous London brewery founded in 1730, now unites over 100 historic city centre pubs, the majority of which are based in London. Taylor Walker is an iconic brand that celebrates the great British pub traditional surroundings, real ales, great pub food, and the best fish and chips in town. The menu at all Taylor Walker pubs has been developed to reflect traditional British pub food of high quality and the drinks range is extensive with a wide variety of cask ales, wines, spirits and soft drinks on offer. All Taylor Walker pubs are branded externally with a Taylor Walker plaque symbolising to all guests that they can expect an authentic great British pub experience. Inside, these historic pubs have original features such as etched mirrors and traditional brass lighting complemented by the individual pub story and chalkboards. And, in every Taylor Walker pub guests receive a warm welcome and friendly service.
For more information on Taylor Walker visit www.taylor-walker.co.uk

Quick fact
Fayre & Square
Fayre & Square was launched in 2009 as a great value, branded pub restaurant proposition. The Rising Sun near Macclesfield was the very first Fayre & Square pub restaurant opened in June 2009.
Fayre & Square

Delicious meals, square deals thats Fayre & Square!
s eliciouals, d st foruare de Be sq meals, ndl y ser vice f rie

Fayre & Square Carvery includes delicious freshly roasted meats, cooked in pub and carved in front of our guests, with all the trimmings. Our Under 600 Calories range gives our guests the option of guilt free dishes with the same great taste they are used to from their Fayre & Square favourites.
Fayre & Square is all about those everyday excuses to get together with friends and family. Those chances to relax, catch up, indulge and share good times in good company. Thats it. Well take care of the rest; making sure you receive attentive service, never have to wait too long and can always be guaranteed a great meal at an affordable price.
At any Fayre & Square pub restaurant there will always be a deal on a great range of pub favourites. That means our guests can always enjoy a square deal, all day, every day! Our aim at Fayre & Square is simply to give our guests great food that is better than they could cook at home; with this in mind we have made some great new additions to the Fayre & Square family...
For more information on Fayre & Square visit www.fayre-square.com

Quick fact
Flaming Grill
On average, each pub sells over 600 steaks a week, the most popular steak is the 8oz rump, followed by the delicious sirloin.
Flaming Grill
Flaming great steaks in a flaming great pub.
r est foe aks B st laming f

Flaming Grill pubs offer a friendly welcome, unbeatable value, and are a great place to meet up with friends and family, catch up over a drink and enjoy fantastic flame grilled food. Our amazing range of steaks are flame grilled just the way you like them and are served on sizzling skillets. Since our first Flaming Grill opened in June 2009, increasing numbers of guests have experienced the great value chargrilled food; drawn by the eyecatching signage. The offer has been an instant success; people love steak, love the theatre of sizzling skillets and love everyday great prices.
Whats more, our great value pricing with fantastic beers and wines Steaks are our speciality and our and special food nights across the team are passionate about delivering week mean there is always a reason these to perfection. to visit your local Flaming Grill.
For more information on Flaming Grill visit www.flaminggrillpubs.com

Quick fact
Wacky Warehouse
Thousands of kids come to our Wacky parties every year where they can enjoy non stop fun with soft play, games, party food and decorations plus a take home party bag for every youngster.
Wacky Warehouse
Wacky Warehouse all day wacky fun for kids and grown-ups!
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Wacky Warehouse is the UKs largest soft play and activity centre brand for kids. Whether you are looking to meet up with friends, get messy with your kids during our arts and crafts sessions or let them run off some energy, Wacky Warehouse is the perfect venue. Our Wacky Warehouses can often be found attached to our family pubs, such as Fayre & Square, where we have a fantastic range of food and drink available including our great value kids menu with something delicious for even the fussiest of eaters.
With lots of great themed events and activities planned throughout the year, there is always something exciting going on at Wacky Warehouse. We also have sessions during school term time for toddlers at our Tot Club, where preschool kids can explore and play safely. At Wacky Warehouse we love a good party! And with thousands of kids coming to one of our parties every year you can see why we consider ourselves to be the party experts.
With several affordable party packages to choose from, mums and dads can relax while our experienced party hosts take care of everything and make sure their big day is great fun! Our commitment to all grown-ups and kids visiting Wacky Warehouse is to provide a caring, clean, safe and friendly environment combined with a fun and Wacky experience for your kids.
For more information on Wacky Warehouse visit www.wackywarehouse.co.uk

Quick fact
Good Night Inns
Our hotels are in great locations next to our well known pub restaurants such as Fayre & Square, Chef & Brewer, Flaming Grill and John Barras.
Good Night Inns

Our hotels have character, individual quirks and homely comforts.
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At Good Night Inns, we pride ourselves on giving a warm welcome. Our hotels have character, individual quirks and homely comforts, so well make you feel part of the family. After a long journey or a hard day, our hotels will offer you a home from home at a competitive price. From comfy, well furnished bedrooms to a cosy lounge, we will ensure you have a relaxed and enjoyable stay.
With WiFi access as standard in the majority of our hotels, you will be able to keep in touch with home and work from the comfort of your room.
With a wide variety of delicious food on offer, from perfectly cooked steaks to great British pub favourites, youll be spoilt for choice. And to get your day off to the perfect start, why not enjoy All our hotels are located next to our breakfast with us? well known pub restaurants such as Fayre & Square, Chef & Brewer, Whether you are looking for a full English or perhaps something Flaming Grill and John Barras, a little lighter, our breakfast menu where you can enjoy great food has something for everyone. and drink before heading back to your room. So come and stay the night with us well make you feel at home!
For more information on Good Night Inns visit www.goodnightinns.co.uk

Quick fact
Original Pub Company
Original Pub Company offers the best of sport from around the world, including football, rugby, cricket and more.

Whatever the time of day, a great place to be.
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With classic pub favourites both behind the bar and on the menu, regular entertainment, televised sport and a highly sociable team, Original Pub Company pubs offer a fantastic pub experience.
Original Pub Company represents a superb collection of high street pubs which all offer a friendly welcome and great value drink and food. These pubs are a great place to meet any time of day, whether after a long day at work, for a big night out with friends, to watch sport or to grab a bite to eat. As you would expect in Original Pub Company pubs, there is a great range of food and drink to
choose from. The choice of burgers is unrivalled and includes our signature Original Loaded Burger which sits alongside pub classics such as Steak Pie, Cod and Chips and a Large Mixed Grill. Original Pub Company pubs are also a great place to watch sport. All are equipped with TVs and many feature 3D or big screens, guaranteed to provide an electric atmosphere for the big event.
For more information on Original Pub Company visit www.originalpubco.com

Quick fact
John Barras
The John Barras name became synonymous with the pub industry as long ago as 1870, when John established his first brewery in Whickham, Gateshead.
John Barras
Your local where theres always something going on.
t a grea est forperience B x loc al e
We have a no nonsense approach at John Barras; a friendly atmosphere, great value food and drink, within walking distance of your home it really is that simple. John Barras offers a range of experiences including drink, food, sport and entertainment which are tailored to meet the needs of the local community.
You will always find a warm welcome at a John Barras pub and we will never forget who you are and what you want; its a home from home where guests can All John Barras pubs are branded externally with a John Barras plaque socialise whilst relaxing or having and inside showcase black and fun together. white pictures of local buildings and points of interest. There is always something going on to make you want to visit again and again.
At Spirit Pub Company our aim is simple to become the UKs best Managed pub company, thats
About us
Spirit Pub Company has a high quality estate of over 800 Managed pubs and over 500 Leased pubs, a strong portfolio of brands, an experienced and motivated executive management team and is well positioned to exploit the growing UK eating out market. Our aim is simple; we want to become the UKs best Managed pub company. The Group owns and operates some of the UKs leading Managed pub brands including Chef & Brewer, Flaming Grill and Fayre & Square and also operates a high quality Leased estate. We are proud of our continuing commitment to delivering consistently great guest experiences. Our focus is on delivering an attractive choice of food and drink and a fantastic guest experience, all at unbeatable value. Best for Team
We will have the most talented and motivated people who are passionate about hospitality and proud to deliver for our Teams, Guests and Investors.
Best for Guest

We will have the most delighted guests at Spirit our people work to place the guest at the heart of our business all day, every day to create consistently great experiences.
Best for Investor

We will deliver the highest shareholder returns in the pub sector through strong operating and capital investment disciplines, allied to market leading brands.
Best for Team Best for Guest Best for Investor
Highlights
> Earnings per share up 18%1 > Strong progress in all financial metrics > Strong momentum in both Managed and Leased pub businesses > Good start to the new financial year Managed > Like for like sales up 5.2%, consistently outperforming the market > EBITDA1 up 11% at 98m; margin up 125 basis points Leased > Like for like net income down 4.1%, down 1.9% in H2 > EBITDA1 of 42m (2010: 43m)
1 Before non underlying items.
KPIs
Revenue m
11 10 09 08 734 724 775 810
EBITDA1 m
11 10 09 08 140 131 152 187
Profit before tax1 m

11 10 09 08 48 41 45 77
Basic earnings per share1 pence

11 10 09 08 5.3 4.5 4.8 8.2
Contents
Business review 01 Highlights 02 Our business 03 Our Managed pubs 04 Our Leased pubs 06 Market overview 08 Chairmans statement 10 Chief Executive Officers review 12 Operational review 16 Best for team 18 Corporate social responsibility 22 Financial review 24 Spirits approach to managing risks and uncertainties 25 Our key risks and uncertainties Governance 28 Board of Directors and executive management team 30 Directors report 34 Corporate governance statement 36 Nomination & Governance Committee report 37 Audit & Risk Committee report 39 Report on Directors remuneration 46 Statement of Directors responsibilities in relation to the financial statements Financial statements 48 Consolidated income statement 49 Consolidated statement of comprehensive income 50 Consolidated balance sheet 51 Consolidated statement of changes in equity 52 Consolidated cash flow statement 53 Company balance sheet 54 Company statement of changes in equity 54 Company income statement 54 Company cash flow statement 55 Notes to the financial statements 94 Independent auditors report to the members of Spirit Pub Company plc 96 Four year financial record 97 Financial glossary 99 Company information 100 Advisers
Find out more: www.spiritpubcompany.com
Annual Report 2011
01
Business review
Business review
Our business
Spirit Pub Company
Spirit Pub Company has a high quality estate of over 800 Managed pubs and over 500 Leased pubs, a strong portfolio of brands, an experienced and motivated executive management team, well positioned to exploit the growing UK eating out market. Our vision is simple; we want to become the UKs best Managed pub company. The Group owns and operates some of the UKs leading Managed pub brands including Chef & Brewer, Flaming Grill and Fayre & Square and also operates a high quality Leased estate.
Managed pub business
Our Managed pubs represent some of the highest quality pubs nationwide, and we are proud of our continuing commitment to delivering consistently great guest experiences. Our focus is on delivering an attractive choice of food and drink and a fantastic guest experience, all at unbeatable value. We believe that by creating the best teams in our pubs we will deliver the best results for all our stakeholders: Best for Team recruiting, developing and retaining the highest calibre team Best for Guest the team in turn delivers consistently great guest experiences Best for Investor which delivers the maximum return for our investors, giving us the capital to reinvest in our pubs
Leased pub business
Our Leased pub estate is one of the highest quality in the UK. After a number of challenging years, we have seen performance improve, mainly through the success of our Pathway to Partnership programme combined with targeted investments.
Objective
Our objective is to maximise long term value for all of our stakeholders through a continued focus on operational excellence and a careful investment strategy to further develop our high quality Managed pub business. This strategy is not new; over the last two years we have made substantial progress in repositioning the Managed business through the improvement of operating discipline, the upgrading of talent, the revitalisation and development of brands and investment in the estate. We intend to continue to invest in new brands and refurbishments. In addition, over the next few years we will convert up to 100 pubs from the Leased estate into Managed pubs and dispose, over time, of those Leased pubs that are not suitable for conversion, with a view to Spirit becoming a solely Managed business. Our Managed pubs are some of the UKs most profitable pubs, having been actively repositioned to exploit the growth in the UK eating out market. In the last two years, this has been accelerated, with a detailed focus on improving our operating discipline, recruiting and retaining the best people, revitalising and developing our brands to meet changing consumer needs and investing in our pubs.
Our Circle of Success
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Annual Report 2011
Our Managed pubs
Our pubs
We have over 800 pubs nationwide ranging from iconic London venues to community locals to market leading branded operations such as Chef & Brewer, Flaming Grill and Fayre & Square, each delivering an excellent guest experience. In addition, we operate the UKs leading indoor childrens playbarns, Wacky Warehouse, and quality hotels under our Good Night Inns brand. Over the last 12 months we have continued to invest in our estate, refurbishing over 200 pubs, focusing on the development of our market leading brands.
Our brands
Traditional pub values are at the heart of every Chef & Brewer.
Taylor Walker
Taylor Walker is an iconic brand that celebrates all thats best in British pubs.
Fayre & Square
Delicious meals, square deals thats Fayre & Square!
Our locations
Flaming Grill
Our pubs are well located throughout the UK with attractive exposure to London, the South East, the North West and other high population areas.
Flaming great steaks in a flaming great pub.
Wacky Warehouse
Spirit Pub Company has a high quality estate of over 800 Managed pubs.
Wacky Warehouse all day wacky fun for kids and grown-ups!
Good Night Inns
Our hotels have character, individual quirks and homely comforts.
Whatever the time of day, a great place to be.
John Barras
Your local where theres always something going on. See our brand pullout for further information on our market leading brands.
Annual Report 2011
03
Business review
Chef & Brewer
Business review
Our Leased pubs
We have over 500 high quality Leased pubs nationwide. These pubs are run by individual licensees and entrepreneurs with the backing and support of a major national pub company dedicated to developing their business.
The Spirit Leased business forms a key part of our strategy; it provides growth potential together with significant cash generation to finance continued investment in the Managed business. These are high quality Leased pubs, geographically spread from Aberdeen to Dover to Plymouth with an average net income per pub of 97,000. Spirit Leased pubs are run by individual licensees and entrepreneurs (our partners) with the backing and support of a major national pub company dedicated to developing their business. We have a high calibre operational team in place to help to develop our partners businesses and the pubs also benefit from a raft of additional activity including promotions and marketing support. Our priority is to maximise the value of these pubs by enhancing performance through increased operational focus and developing a business plan to create a platform for growth.
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Annual Report 2011
Total EBITDA1 contribution from Spirit Leased pubs in 2010/2011.
42m
We also plan to convert a number of our Spirit Leased pubs into our market leading Managed brands. We have a strong conversion programme in place to ensure that pubs are transferred to Managed operations in the most effective way. These pubs will usually be larger, multi room sites that have the potential to realise the return on investment that our Managed pub brands typically deliver. To date, we have converted three Spirit Leased pubs to Managed with initial trading being positive.
Case study
First Leased to Managed conversion

Business review
A famous landmark pub, the Alsager Arms, has reopened its doors thanks to a 370,000 makeover. The pub on Sandbach Road, Alsager is the first within Spirit Pub Company to transfer from a Leased operation to a branded Managed pub. The Alsager Arms is now trading as a John Barras local; a home from home where communities can gather to have fun through a range of experiences including quality food, drink, sport and entertainment. Experienced general managers, Mark and Sharon Bennett are now running the pub and they are thrilled to be part of the John Barras family. Mark said: We have had a great response from the local community who are delighted to see the fortunes of the Alsager Arms revived. The money that has been spent on the pub has really transformed it into a superb venue. As well as serving food, the Alsager Arms also shows live sports on HD television and has a large 3D screen. In addition, theres entertainment throughout the week such as live music and quiz and poker nights.
Annual Report 2011 Spirit Pub Company plc 05
We have a portfolio of high quality Leased pubs, with an average net income per pub of 97,000.
Business review
Market overview
Spirit operates in a highly competitive marketplace, which is impacted by changes in the economic climate, consumer confidence and the regulatory environment.
Overview
Continued economic volatility and pressure on consumers has continued to present challenging market conditions for the retail and leisure sectors. Competition remains fierce, and although consumers have enjoyed a year of discounts, sales and offers that has seen their money go further than ever before, confidence remains low. Through a combination of our compelling portfolio of brands, creative marketing activity and online presence, we believe we are well positioned to respond quickly to changing trends and to continue to grow market share.
The economy
Competition within the eating out and leisure sector remains intense and we have adapted our strategy to ensure that we are well placed to respond.
The economic climate continues to be challenging with significant shifts in the Eurozone and stock markets affecting investor confidence and in turn the willingness of consumers to spend. In this climate, we have been more proactive with our marketing activity, including the creation of dedicated websites for each of our brands, and we have actively reached out to consumers through direct mail and social media. We also continue to manage our costs prudently through continuous cost reduction and the negotiation of supply agreements. Our Corporate Social Responsibility (CSR) activity has also led to a significant reduction in fuel bills.
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Annual Report 2011
Consumer trends
The long term decline in drinking out in pubs is expected to continue, driven by changing consumer behaviour, relative price positioning compared to the off trade and the impact of regulation. Conversely, the long term growth in eating out in pubs will also continue, driven by economic growth, changing consumer behaviour and improvements in the quality, service and value for money offering of the pub industry, with the managed sector prominent.
We invest heavily to ensure that we comply with all relevant legislation; we have comprehensive policies and training procedures in place to ensure that our pubs are compliant, and we use external auditors to ensure that our health and safety standards are high. We would welcome positive initiatives to reduce the legislative and red tape burden on our pubs and continue to work with industry bodies to lobby for positive change.
The Governments duty escalator will automatically increase alcohol duty each year for the next five years by Consumers are undoubtedly more discerning, demanding and sophisticated. two per cent above the Retail Price Index. This regulation impacts the They expect value for money, good whole pub industry and we continue quality service tailored to the needs of the particular occasion. All of this points to actively lobby the Government to change its stance on taxation. to the importance of brands and the distinction between the managed and leased segments of the market. Outlook Looking ahead, we expect the UK Spirit is in a strong position to capitalise consumer environment to be more and our compelling portfolio of brands challenging and we are continuing to means that we are well positioned see pressure on costs. However, the to exploit the growth in the eating out actions we have taken to reposition sector. Over the last 12 months our the business, and the plans we have sales growth was largely volume led in place, leave us well positioned to with an increase of 3.3% in covers move forward. being particularly encouraging and reflecting the increasing appeal of our brands and the loyalty of our guests. Our key measure of guest advocacy has built through the year and is now consistently around 70%, which is at the top end of industry benchmarks.
Annual Report 2011
07
Business review
The consumer landscape continues to change at pace and we have been quick to respond to changing consumer behaviour. Competition within the eating out and leisure sector remains intense and we have adapted our strategy to ensure that we cater for the shift in consumer needs.
Regulation
The UK pub sector is highly regulated with extensive regulation relating to employment, licensing, alcoholic drinks control, taxation, health and safety and gaming machines.
Spirit is in a strong position to capitalise and our compelling portfolio of brands means that we are well positioned to exploit the growth in the eating out sector.
Business review
Chairmans statement
I am delighted to have been appointed Chairman of Spirit Pub Company, following the demerger from Punch Taverns which was completed on 1 August 2011. It is a very exciting time for the business as we look to build on the progress we have made over the last year or so to achieve our goal of becoming the UKs best Managed pub company. The business has a strong and experienced executive management team in place with a clear brief to drive the strategy of the business forward and realise maximum return for our stakeholders.
Walker Boyd Non-executive Chairman
We are now in great shape to deliver sustainable growth and value for all our stakeholders.
The Spirit Board was appointed by 1 August 2011 when I assumed the role of Chairman with Ian Dyson as Chief Executive Officer, Mike Tye as Deputy Chief Executive Officer and Russell Margerrison as Interim Finance Director. Tony Rice became Senior Independent Non-executive Director and Mark Pain and Chris Bell Independent Non-executive Directors. In September 2011, we announced the appointment of Paddy Gallagher as Finance Director to replace Russell Margerrison. I would like to take this opportunity to thank Russell for his great contribution to the business, firstly leading the operational separation of the business from Punch and secondly as Interim Finance Director. In October 2011, we announced that Chief Executive Officer, Ian Dyson, will step down from his role at the Companys AGM on 16 December 2011. Ian Dyson will be succeeded by Deputy Chief Executive Officer, Mike Tye, who will assume the role on 16 December 2011.
Details of our business performance in the 2011 financial year are set out in the Operational review on pages 12 to 15.
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Annual Report 2011
I have every confidence that Spirit has a bright, vibrant future based on our leading brands and dedicated people.
On behalf of the Board, I would like to thank Ian for his significant contribution. He has led the business through a period of major change, leading to the successful demerger of Spirit, a significant improvement in operating performance and results and has put in place strong foundations for the separate businesses to move forward. He will leave Spirit with a clear and exciting strategy, strong operational momentum, a high calibre executive management team and a well qualified successor in Mike Tye. We wish Ian every success for the future. Mike Tye has done an excellent job over the last three years to reposition the Managed business as a leading operator in the UK market. This success, together with his previous track record in the hospitality and leisure industry, makes him the perfect candidate to succeed Ian and to lead Spirit in the next phase of its development. Together, the Board of Directors have a wealth of experience ranging from WHSmith to Cable & Wireless and Whitbread. This breadth of knowledge and talent gives the business robust leadership and a clear direction for the development of its future strategy. The demerger process has been complex and I would like to take this opportunity to thank all of our employees for their hard work over the last 12 months; without their support and dedication the demerger and the turnaround in Spirits performance would not have happened.
Annual Report 2011
09
Business review
Business review
Chief Executive Officers review
This has been a year of great progress for Spirit. We have delivered a substantial improvement in performance, with earnings per share1 up 18%, whilst at the same time preparing for our demerger from Punch Taverns plc, which was concluded on 1 August 2011. The newly created Spirit Pub Company plc has a high quality estate of over 800 Managed pubs and over 500 Leased pubs, a strong portfolio of brands, an experienced and motivated executive management team and is well positioned to exploit the growing UK eating out market. The combination of these strengths and the growing operating momentum in the business gives us a strong platform to move the business forward in the coming years and to maximise long term value for our stakeholders. Our vision is simple; we want to become the best Managed pub company in the UK.
Ian Dyson Chief Executive Officer
Spirit has made great progress this year. We have delivered strong growth in sales and margins and an 18% growth in earnings per share1.
Our vision is simple; we want to become the best Managed pub company in the UK.
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Annual Report 2011
Over the last year we have made real progress against this aim. We have improved operating discipline, upgraded talent, revitalised the Chef & Brewer and Taylor Walker brands and developed exciting new brands such as Fayre & Square and Flaming Grill. We have invested substantial amounts in the estate and begun the process of converting some of our Leased pubs to our Managed brands. Like for like Managed sales were up 5.2% in the year and operating profit1 was up 14% and we have consistently outperformed the market2. Looking ahead to 2011/12, our priority is to build on the progress made by continued investment in our brands, our estate and our people. We will refurbish around 200 more pubs in the year, which will complete the revitalisation of Chef & Brewer and truly establish Flaming Grill and Fayre & Square as leading Managed pub brands. We will continue to improve the calibre of our people at all levels and build on our industry leading training programmes such as our Masters Degree and Apprenticeship. We will also begin the rollout of new systems that will substantially improve our guest experience and operating efficiency.
Our Leased estate is an important part of our plans. It is a high quality estate that generates substantial cash flow that is being used to fund the investment in the Managed estate and provides a source of growth in our Managed estate through Leased to Managed conversions. We expect to convert up to 100 Leased pubs over the coming few years, a process which began over the summer. In the longer term, we expect to dispose of the remaining pubs that arent converted, in line with our long term aim to be a focused Managed pub company. Overall, we have made great progress this year. We have delivered a strong set of financial results, substantially improved our operational performance and successfully completed the demerger from Punch. We are well positioned to build on this progress through continued investment, expansion of our brands and growth in our estate to achieve our aim of becoming the best Managed pub company in the UK.
2 Source: The Peach Factory Tracker.
Annual Report 2011
11
Business review
Our priority is to build on the progress made by continued investment in our brands, our estate and our people.
Business review
Operational review
We have made strong progress in all key financial metrics, and in repositioning the business for the future.
We are very pleased with the performance of the business over the last year, with strong progress in all key financial metrics. Strong growth in Managed pub sales and margins and an improving trend in Leased pubs resulted in growth in profit before tax1 of 17% and growth in earnings per share1 of 18%. We generated a net cash inflow of 48m, after investing 78m in the business, and net debt was 704m at year end. The Groups financial position has improved and we are now in a position to upstream cash from the Spirit securitisation ahead of expectations. At the same time, substantial progress has been made in repositioning the business for the future, through a combination of investment in our brands, our estate and our people.
Business overview
Current trading and outlook
78m
Investment in the business.
We have made a good start to the new financial year. Helped by the recent good autumn weather, Managed like for like sales in the first eight weeks were up 4.8%. Food sales were up 5.0% and drink sales were up 5.4%. We continue to outperform the market. Looking ahead, we expect the UK consumer environment to be more challenging this year and are continuing to see pressure on costs. However, the actions we have taken to reposition the business, and the plans we have in place, leave us well positioned to move forward.
17%
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12
Growth in profit before tax1.
Annual Report 2011
215
Our Managed pubs
Our Managed business is a high quality, well located estate of over 800 pubs with attractive exposure to London and the South East and areas with other high population densities. The business operates a portfolio of market leading brands such as Chef & Brewer, Fayre & Square, Flaming Grill and Taylor Walker. The turnaround of this business gathered further momentum in 2011. Like for like sales were up 5.2%, driven by a combination of our continued focus on operational excellence and investment in the estate, brands and people. The increase of 3.3% in the number of covers is particularly encouraging and reflects the increasing appeal of our brands and the loyalty of our guests. Our key measure of guest advocacy has increased through the year and is now consistently around 70%, at the top end of industry benchmarks. Our investment programme continues to reposition the business and to deliver strong returns. During the year, we completed 215 refurbishments which are achieving an average return on investment in excess of 25%. At the year end, 61% of our estate had been refurbished. The focus of this programme has been on the rollout of Chef & Brewer, Fayre & Square, Flaming Grill and Taylor Walker. All of these brands are now established as leading consumer brands with clear promises, providing a distinctive offering in a very competitive market, backed by innovative marketing and online presence. We will continue to focus on the development of these brands and plan to refurbish around 200 more pubs in 2011/12. The combination of strong sales performance and rigorous cost control resulted in EBITDA1 being up 11% with a 125 basis point increase in margin. Operating profit1 increased 14% to 65m with a 100 basis point improvement in margin to 10.0%. This was achieved despite a 6m increase in central support costs. This increase is largely due to increased bonus and share scheme costs following the strong performance of the business and reflects the huge effort and commitment of our teams during a period of significant change. We recognise that, in the key metrics of average weekly take (AWT) and EBITDAR margin, we remain behind the best performers in the industry and have set clear objectives to narrow the gap. We have made significant inroads this year, with trading estate AWT up 7% and EBITDAR margin up 130 basis points, an industry leading performance. We closely monitor our performance against the competition using the Peach Factory Tracker benchmarking system and have consistently outperformed over the last year.
Refurbishments completed in the year.
Managed like for like sales were up 5.2%.
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Operational review
continued
Leased like for like net income was down 4.1% with a much improved second half decline of 1.9%.
Our Leased pubs
Our Leased estate of over 500 pubs is one of the highest quality in the UK. These well located pubs, the majority of which were formerly Managed sites, have an average net income of 97,000. After a number of difficult years, we were pleased with the improved trading performance in 2010/11. Like for like net income was down 4.1% with a much improved second half decline of 1.9%. Average net income was down only 2.0% reflecting both pub disposals and improving trading trends. This improvement reflects the success of the Pathway to Partnership programme combined with selective investments in the estate and the decision to pass on price increases from the major brewers at the end of February 2011. EBITDA1 for the Leased business declined 3% to 42m, after a 4% reduction in pub numbers. Operating cash flow was strong and supported capital expenditure of 6m.
Our plan for the Leased business is to maximise operating performance and cash generation whilst converting up to 100 pubs to our Managed brands over the next few years. This process is underway; three pubs were converted over the summer and additional sites have been identified for conversion by Christmas. In the longer term, we plan to sell any pubs which are not suitable for conversion and use the proceeds to invest in the Managed business and reduce debt.
Capital structure and cash flow
Our strong operating performance led to a net cash inflow of 48m, after capital expenditure of 78m, and an overall improvement in the financial position of the Group. At the year end, net debt was 704m, with a net debt to EBITDA1 ratio of 5.0 times. Within the Spirit securitisation, net debt was 817m and the DSCR was 1.7 times at year end, a marked improvement on the 1.57 times at August 2010. At this level we can now upstream cash to plc, a position that has been reached ahead of previous expectations.
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18%
Group cash and bonds, outside of the securitisation, were 114m at the year end. These resources will be used to fund plc cash outflows (e.g. onerous leases, pensions), invest in the growth of the business, make dividend payments to shareholders, consistent with the policy set out at the time of the demerger, and potentially to fund market repurchases of bonds. Key objectives for the Group are to further reduce the Group net debt to EBITDA1 ratio and to further improve the debt service cover ratio (DSCR) within the securitisation. In this context, our target is to be cash neutral in 2011/12 after funding further capital expenditure and dividend payments, but before any bond repurchases. This will require a continuation of the successful disposal programme of the last few years across both the Managed and Leased estates. Disposals in 2010/11 generated 29m of cash proceeds.
Increase in earnings per share1.
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Business review
Best for team
17 ,000
We employ over 17,000 people.
One of our biggest achievements has been building a highly engaged team across the whole business.
We are committed to recruiting, developing and retaining the highest calibre team and believe that high levels of employee engagement are key to our success. This year, we were rated number 21 by our employees in The Sunday Times Best Big Companies To Work For based on criteria including employee commitment, benefits, salary and career development. This endorses our commitment to build a high performing team and be an employer of choice within the industry and beyond. In an industry first, we unveiled a new range of flexible benefits for salaried pub teams and Support Centre employees. Called the Benefits Bar and themed around a pub bar, the innovative scheme offers a range of flexible benefits to employees from gym membership to childcare vouchers and private medical cover. Effective communication is key; we give our employees the opportunity to feedback through several mechanisms including regular Listening Groups. The Groups are hosted by members of our executive management team to enable them to hear direct feedback and we invite employees from every part of the business; support team members, business development managers, general managers and team players.
We have also introduced an employee opinion survey which we use to shape our engagement strategy and action plan for the future. Employee engagement and building a great place to work is a key goal since we know it underpins superior performance. We actively manage our culture and strive to create an environment in which talented people can deliver their best. We recruit skilled and motivated individuals and believe that the key to retaining high calibre employees is providing learning and development opportunities in line with their career aspirations. We believe in growing our own talent; last year, we invested heavily in raising the calibre of our employees. And, in the last 12 months more than 400 members of our pub teams were promoted to team leader positions and 44 deputy general managers were promoted to general managers with several of our field team members also moved into roles at our Support Centre. We believe that we are leading the industry with the development of other key qualifications. Last year, we launched our Apprenticeship programme and 171 pub team members under the age of 25 have become qualified Apprentices. We enhanced the Apprenticeship programme this year with a team leader qualification to ensure progression to the next level, and we also have Advanced Apprenticeships on offer for progression to the next level of deputy general manager. Our aim is to have an Apprentice in every pub by August 2012. We have recently launched a Graduate Recruitment programme designed to attract the brightest talent.
top 25
We are a Sunday Times Top 25 Best Big Company*.
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* Achieved whilst part of the Punch Taverns group.
Annual Report 2011
We offer award winning training programmes including Apprenticeships, Degree and Masters Degree qualifications.
439
Pub team members promoted to team leaders in the last year.
As part of our Employee Assistance Programme (EAP) a confidential helpline is available to all employees to provide advice and support on all aspects of their lives from financial concerns through to quitting smoking. Our employee caf regularly holds healthy eating promotions and constantly review their offer based on feedback and recommendations. We are building on this with a full strategy around employee wellbeing for all of our employees in 2012. To promote the fun element of our culture, we operate a social committee which coordinates employee events. All proceeds of our annual employee party, barbeque and Christmas raffle have gone to local charities that promote and support young people within the Burton upon Trent area, where our Support Centre is located.
We now have more than 200 employees participating in our Apprenticeship programme, which provides a clear pathway for those working in the hospitality sector and offers an alternative to university for those keen to progress through a vocational route. More than 60 team players were invited to an award ceremony to receive their certificates.
Graduates get into the spirit
A key part of our strategy is to attract and recruit the best people. To support this, we have introduced a Graduate programme, designed to attract the brightest talents looking to develop a career in pub retailing, with the potential to be fast tracked to a general manager position within 12 to 18 months compared to the standard three to five years. The first graduate to be appointed to general manager is Clare Smith, 31, who is now firmly behind the bar at the Chelsea Potter, Taylor Walker, London.
171
Pub team members under the age of 25 have become qualified Apprentices.
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We are also particularly proud to have launched a Level 7 Masters Degree qualification in conjunction with Leeds Metropolitan University. This is an aspirational qualification aimed at our high performers and future leaders and is fully funded by Spirit. Our key goal is to promote the hospitality industry as a place where people can build careers.
Apprenticeships say cheers to success
Business review
Corporate social responsibility
As a leading pub company, we strive to place corporate responsibility at the core of everything we do.
From our approach to the recruitment, training and retention of the highest calibre people, to the responsible operation of our pubs in the interests of our guests, employees and the local community; to the maintenance of appropriate working relationships with suppliers and Government agencies, we are changing the way we do business to ensure that we behave in the right way with all our stakeholders.
This year, we developed a range of low calorie dishes within our brands and continue to gain calorific information for all products. We promote healthy alternatives which include the option for guests to swap chips for salad or jacket potatoes. Product quality is a high priority for us and our suppliers and we constantly monitor our products to ensure that they satisfy all current food manufacturing legislation and environmental health requirements. Over the past year we have increased our focus on driving food quality and the speed of delivery to our guests by introducing an initiative called Quality with Pace. Quality with Pace, led by our food team, has made great progress in changing the culture and behaviour of the business. Our focus on food quality and delivery, our menus and investment training has also been improved and we now have a structured approach to driving the awareness and importance of food.
Responsible retailing
Responsible retailing is not solely about providing a safe and controlled environment in which to sell alcohol, with the majority of our pubs also serving food we have to make sure that we promote a balanced and healthy diet too. We are committed to working with the Department of Health (DoH) to support campaigns to reduce levels of salt and artificial trans fat from our meals and will continue to work with them on future pledges.
Hats off to the Royal Oak

Our pubs raise thousands of pounds every year for charitable causes. The team at The Royal Oak, Ambleside, raised an impressive 1,100 by hosting a Royal Ascot Ladies Day at the pub. General manager Lorraine Smith proudly presented a cheque to the team at Furness General Hospital in July 2011.
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Spirit is also a signatory of the Portman Group and a funder of Drinkaware. Through these campaigns, as well as through our retail training, we do all we can to ensure that our pubs are not serving underage drinkers or people under the influence of alcohol. In addition, we actively support the Why let good times go bad campaign to tackle binge drinking amongst 18 to 24 year olds across our estate.
We have further improved our relationships with local Enforcement Officers including our Home Authority, Birmingham City Council. As a result, Guests we have continued to see a reduction The safety and wellbeing of our in the number of communications from guests and team players remains the Enforcement Officers, an increase in paramount concern across our estate and we have maintained the significant the number of pubs that get top hygiene progress made since the introduction of rating scores and have not been subject our Operational Excellence programme to any prosecutions for health and safety breaches for the last two years. in 2009.
We have improved our Professional Safety Audit (PSA) score to 89%.
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As responsible retailers of alcohol our aim is to provide an appropriate environment for its safe and lawful consumption. Responsible retailing forms a key part of our general manager and team player training.
We have implemented robust health and safety policies and procedures and have made significant progress in improving standards as a result. We subject all of our pubs to bi-annual Professional Safety Audits (PSA) conducted by external auditors. Audits involve an unannounced visit to the pub to assess overall standards and compliance. The PSA forms a key part of the overall performance matrix for general managers and is linked to their reward package. Our pubs had an average PSA score of 89% for the combined bi-annual PSAs.
100% of our cardboard is recycled.
Business review
Corporate social responsibility

continued
4,000 tonnes of waste is recycled to create green power.
Environment
Our commitment to the environment has become integral to our business strategy, both at our Support Centre and across the business, as a result we have reduced our carbon footprint by 13% and working towards reducing it by 15%. We have already saved 6m in energy consumption in the last few years. In addition, 98% of our pubs have smart meters installed and 86% have energy efficient lightbulbs. We aim to have the entire estate operating on LED bulbs by 2012 which will reduce lamp wattage from 40 watts to 3 watts, generating more than 3,000 in annual savings for each site.
Recycling
In addition to energy efficiency, we have made significant progress in reducing our landfill waste with the launch of a new recycling scheme. Most of the waste we produce is associated with the preparation of food and drink in our pubs and therefore consists of food and packaging waste. Packaging is essential to our business, although it has an impact on the environment and contributes to the 100 million tonnes of waste from households, commerce and industry combined produced every year.
We have developed a unique solution for our waste streams that not only minimises our impact on the environment Our low carbon Support Centre building by reducing landfill but also removes won a number of awards for its green substantial vehicle miles from the credentials, including first place in the road. Working with our food and drink Staffordshire heats of the Sustainable distributors we are now using reverse Development and Accessible Building logistics solutions in nearly all of our Awards, run by Local Authority Building estate. The scheme has delivered Control (LABC), and a Burton upon Trent a substantial reduction to our carbon Civic Society New Buildings Award. footprint and financial savings.
Spirit Pub Company cleans up

We are committed to reducing our landfill. We developed a solution for our waste streams that not only minimises our impact on the environment by minimising landfill but also removes substantial vehicle miles from the road. We are now using reverse logistics solutions in nearly all of our pubs, which have delivered a substantial reduction in our carbon footprint.
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Key achievements include: Food waste 4,000 tonnes per year now goes to anaerobic digestion to create green power Glass to date, 682 pubs (83% of the estate) have glass recycling units installed. We are also trialling glass crushers in 25 pubs which are showing encouraging benefits. The aim for 2012 is to get 100% back via our drinks supply chain Cardboard 100% of our cardboard is recycled via our food distributor Cooking oil last year, one million litres was collected from our pubs. We are now looking at using this to power heating units at selected pubs Tin and plastic these materials are also recycled via our food distributor We are now focusing our efforts on making packaging 100% recyclable, reducing packing use or looking at using returnable assets in our drink supply to further reduce landfill. We ensure that suppliers look to procure their raw materials through sustainable sources wherever possible. We also continue to work closely with our suppliers to identify where we can utilise our current furniture in the estate by refurbishing or reconditioning rather than buying new products, which will further reduce impact on the environment. This approach is consistent across the business; for example, in sourcing a uniform supplier for nearly 15,000 pub team members, we appointed a business with strong ethical principles that has reduced its energy consumption by 20%.
Sustainability
Community
Pubs are the heart of local communities and the driving force behind many charitable events. Our pub teams raise hundreds of thousands of pounds every year for local causes. Monies raised in the last year include 69,000 for The Prostate Cancer Charity, 7,700 for Help for Heroes and 2,800 for Comic Relief. We are also one of the biggest supporters of Pubaid, which aims to highlight the fantastic work that pubs do to support the communities they serve and we encourage our pub teams to register their fundraising totals. To reinforce our pubs strong commitment to charitable causes, Spirit is committed to local charities that will promote and support young people within the Burton upon Trent area, where our Support Centre is located. This year, we supported over 30 local causes to the amount of 25,000, from local Scout and football clubs to camping trips for the Happy Days childrens charity. This was part funded by employees through a combination of charity activities. Earlier this year, we also raised over 5,000 for the Queens Hospital (Burton) CT Scanner Appeal.
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Our Support Centre in Burton upon Trent reflects our commitment to creating a sustainable environment. Solar panels on the roof heat water for the building and its design and construction have been managed to deliver a high BRE Environmental Assessment Model (BREEAM) rating and mitigate its environmental impact.
This year our pubs raised 69,000 for The Prostate Cancer Charity.
Business review
Financial review
14%
Operating profit
Growth in Managed operating profit1.
The Groups financial position has improved, and we are now in a position to upstream cash from Spirit securitisation ahead of expectations.
Operating profit1 was up 7% at 105m, with a 14% growth in Managed and a slight decline in Leased. This profit includes the benefit of 18m in respect of the utilisation of the onerous lease provision. The increase in this credit from the prior year reflects the reversion of 26 properties early in the financial year. Central costs were 4m higher than the prior year, reflecting increased bonus and share scheme costs.
Net finance costs
We generated a net cash inflow of 48m, after investing 78m in the business.
Net finance costs1 were 57m (2010: 57m). This includes 6m in respect of finance charges associated with the onerous lease provision. The weighted average interest rate for group borrowings was 6.9% in the year. This is expected to increase to 7.3% in 2011/12 due to scheduled interest rate step ups in the securitisation.
Tax
The pre-non underlying items effective tax rate was 27.2% (2010: 28.3%). We expect the effective rate in 2011/12 to be around 26% reflecting the reduction in corporation tax rates to 25% in April 2012. The Group did not pay any corporation tax in 2011/12 and does not anticipate any payment in 2011/12 due to the utilisation of brought forward losses. Adjusted basic earnings per share1, which excludes the effect of non underlying items, was up 18% at 5.3p per share (2010 pro forma: 4.5p per share). The weighted average number of shares, for the purposes of the earnings per share calculation, was 659.7m (pro forma 2010: 659.7m).
Earnings per share
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Annual Report 2011
Spirit Group FY11 FY10 m m
Managed FY11 FY10 m m
Leased FY11 m FY10 m
Average number of pubs Revenue Gross profit Outlet costs Outlet EBITDAR Rent Onerous lease provision Outlet EBITDA Central costs EBITDA Depreciation and amortisation Operating profit
1,353 734 510 (282) 228 (65) 18 181 (41) 140 (35) 105
1,402 724 502 (288) 214 (60) 14 168 (37) 131 (33) 98
798 644 456 (281) 175 (59) 18 134 (36) 98 (33) 65
824 630 446 (288) 158 (54) 14 118 (30) 88 (31) 57
555 91 54 (1) 53 (6) 47 (5) 42 (2) 40
578 94 57 (1) 56 (6) 50 (7) 43 (2) 41
Non underlying items
A number of non underlying items arose in the year resulting in a net charge of 185m. This comprises 138m, of related party interest prior to the demerger from Punch Taverns, 76m impairment to the carrying value of pub assets, 10m write off of goodwill in connection with the asset impairment, 21m charge to the onerous lease provision following lease reversions in the year, 5m gain on the repurchase of debt, 4m gain on asset disposals, 19m loss on the mark-to-market of interest rate swaps and 1m of restructuring costs, net of tax of 70m.
Cash flow
Cash flow from operating activities1 was 159m (2010: 99m). This reflects the strong operating performance of the business, working capital inflows, some of which reflect the timing of payments to suppliers, and 19m repayment of gaming machine VAT. After accounting for capital expenditure, interest and tax, net cash inflow was 48m.
Net debt and covenants
Onerous lease provision
Gross debt within the Spirit securitisation was 885m at the year end, offset by cash within the securitisation of 68m, leading to net securitisation debt of 817m. The Group holds Spirit bonds purchased prior to the demerger by Punch of 42m nominal value and 71m of cash giving net debt of 704m at the balance sheet date. Net debt to EBITDA was 5.0 times at year end. Within the securitisation, the debt service coverage ratio was 1.7 times (2010: 1.57 times). This is a level at which cash upstream payments are permitted.
Capital expenditure
Capital expenditure was 78m (2010: 67m), with 72m in Managed (last year 61m) and 6m in Leased. The focus of expenditure has been on the continuing major refurbishment to the Managed pub estate and the rollout of brands. We expect capital expenditure for 2011/12 to be around 80m.
Disposals
The onerous lease provision was 79m at the year end. This represents an increase of 9m over the prior year, reflecting a 21m additional provision following 26 lease reversions, offset by a net utilisation after interest of 12m. The year end provision covers a total of 124 properties. Of these, 65 pubs are part of the core estate but are currently loss making due to onerous lease arrangements and 59 properties are either closed or sub-let to third parties. The provision reflects an estimate of the future losses expected to be incurred and represents three year losses for trading properties and ten year losses for non trading properties. Looking ahead, the focus is to improve the trading performance of the pubs within the core estate through a combination of operational improvements and investment, and to execute property solutions for the non core properties.
Pensions
The triennial valuation of the defined benefit pension schemes, both of which are closed to new members, led to additional pension contributions of 9m being made in the year. Additional payments of around 5m per annum have been agreed through to 2017. At 20 August 2011, there was an IAS 19 net retirement liability of 9m (2010: 14m liability).
We disposed of 42 pubs in the year for net proceeds of 29m, generating a profit to book value of 4m.
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Business review
Spirits approach to managing risks and uncertainties

The Audit & Risk Committee of the Company has reviewed the formal risk management framework for Spirit and this has been approved by the Board. This framework continues and builds on the risk management activities carried out by the Spirit executive management team before the demerger when the business formed part of Punch Taverns plc. The aim of the Spirit risk management framework is to identify, evaluate and manage the risks and uncertainties to which it is exposed. The work of the Spirit executive management team before the demerger included regular risk workshops and regular updating of the risk register. Risks were highlighted and then assessed based on the probability of them occurring and the impact they may have on the business. As part of the demerger process a separate risk register for Spirit, based upon risk analysis done between 2006 and the demerger, was established. Using a consistent approach for reporting risks ensures that Spirit is able to present a coherent hierarchy of its risks. Mitigation plans are implemented where necessary to ensure that risks are managed appropriately. The Board has ultimate responsibility for the risk management framework and will regularly and formally review the material risks, which will be updated quarterly to reflect changes or emerging risks on an ongoing basis. The Board is responsible for ensuring that business risks are appropriately managed by the executive management team and will monitor key risk performance measures on a periodic basis. Spirit is exposed to a variety of financial, operational, economic and regulatory risks and uncertainties. Our main risks and how we manage them are shown in the table on pages 25 to 27; however, this is not an exhaustive list of all of the risks to which the business is exposed.
Some of the risks Spirit faces are external and therefore beyond our control. Some risks may be considered A Risk Assurance team, comprising to be currently immaterial, but could internal audit, operational auditors and, emerge as material risks in the future. where appropriate, specialist outsourced The risk management processes are internal audit resource, provides therefore designed to manage the assurance to the Board on key controls risks which may have a material impact and the management of risks. On an on our ability to meet our strategic annual basis the Audit & Risk Committee objectives, rather than fully mitigate will review the overall effectiveness all risks. of the risk management framework. Day to day evaluation of risk is carried The Board is aware that these risks and out by the executive management team. uncertainties may either singularly or collectively affect the Groups revenue, costs, value of assets, reputation or ability to meet strategic objectives and is therefore committed to continually reviewing and improving the risk management framework.
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Our key risks and uncertainties
Risks and their impact Market and economic risks Economic and market climate
The recent recession and continued uncertain outlook for the UK economy have affected consumer confidence and discretionary spending across both the retail and leisure industries. Any delay in economic recovery or further challenges could affect consumer expenditure, our partners businesses and Spirits revenue and cash flows. In addition, consumer perceptions towards food and alcohol may change. Further consolidation in the pub industry could affect Spirits ability to compete with larger competitors, and Spirits revenue is affected also by the weather and the timing of major sporting events.
Mitigating actions and controls

We carry out regular reviews of the impact of economic conditions on our budget and five year strategic plan. We have successfully launched new brands in the Managed estate providing new consumer offers and we regularly review pricing and promotional offers to adapt to the needs of our guests. We provided circa 1.2m to support our Leased estate partners during difficult trading conditions. We continue to monitor the financial health of our partners.
Property
Fluctuations in the UK property market as well as the current uncertain market conditions could impact the value of Spirits property portfolio, our ability to dispose of pubs at an appropriate value or to sub-let leased sites. ln relation to leasehold properties, the day to day running of which Spirit does not control, rental payments may increase and Spirit may be liable for sites sold or sub-let to third parties, when the occupier defaults.
We have conducted full estate reviews and regularly update these to allow us to assess the future strategy of pubs within the Managed and Leased estate. This has allowed us to invest where appropriate; consider possible alternative use; or dispose of those which no longer fit our future strategy. We have refurbished 215 Managed pubs in the year at a cost of 51m so that as a result over 60% of the estate has benefited from capital programmes in the last three years. We carry out a bi-annual review for any indicators of impairment.
Increasing costs
Increases in any of our key supply costs including food, drink, and utility costs, due to availability of products, the economic climate or inflationary price increases, as well as increases in taxes and duties, is an ongoing risk to our business.
We have negotiated supplier contracts to protect us against significant increases in food and drink costs. We have forward purchased our electricity and gas for the next financial year and have a dedicated focus within our Supplies and Services Team on monitoring and reducing utility usage. Careful cost control processes ensure that all costs, including labour, are budgeted and closely monitored and are subject to appropriate authorisation. Cash flow forecasts are produced to assist management in identifying liquidity requirements and are stress tested for possible scenarios. This includes assessments of the ability to meet the restricted payment conditions in the securitisation structure in order that cash can be released to top company level. Cash balances are invested in short term deposits such that they are readily available to settle short term liabilities or fund capital additions. Covenants are closely monitored and stress tested to ensure we are able to generate sufficient returns to service our debt and meet our covenant requirements. The securitised debt is monitored by a variety of measures which are reported to debt providers on a quarterly basis. We employ derivative financial instruments such as interest rate swaps to generate the desired interest rate profile. We have taken out derivative financial instruments such that 100% of all loans (August 2010: 100%) were either at fixed rate or were converted to fixed rate as a result of swap arrangements, thereby reducing our exposure to changes in interest rates and producing a stable long term debt profile.
Financial Liquidity and covenant risk

Spirits capital structure is made up of debt, issued share capital and reserves. Secured loan notes make up the majority of our financing, with approximately 90% (August 2010: 93%) of the capital balance on these loan notes being repayable after more than five years. These borrowings are subject to financial covenants.
Interest rate risk
Spirit is exposed to interest rate risk from our loan notes and borrows at both fixed and floating rates of interest. Spirit is also exposed to counter party credit risk.
Further information on Spirits financial instruments can be found in note 22 to the financial statements.
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Our key risks and uncertainties

continued
Risks and their impact Financial continued Pensions

Spirit has two defined benefit pension schemes which must be funded to meet required benefit payments. The value and funding of the schemes are subject to risk of changes in life expectancy, actual and expected price inflation, changes in bond yields and future salary increases. The difference in value between scheme assets and scheme liabilities may vary resulting in an increased deficit (or reduced surplus) being recognised on our balance sheet.

The defined benefit pension schemes are closed to new members; and instead we operate defined contribution schemes for our employees. We continue to examine strategies which will further mitigate the risks of an increased deficit or reduced surplus and we are currently reviewing our medium to long term risk reduction strategy. We maintain a close relationship with the trustees of the pension scheme.
Internal financial control
Spirit is committed to maintaining a robust internal control environment. This includes controls within our Support Centre and our Managed pubs. A lack of control could result in financial fraud or material error in our financial statements.
Robust internal controls operate over all key processes including general controls such as segregation of duties, and authorisation of contracts and expenditure. An Internal Audit team review and report on strengths and weaknesses in the internal control environment. Our operational auditors provide assurance on controls within our Managed pubs and have completed 1,136 risk based control audits during the year. We continue to make significant investment in IT systems and infrastructure. Formal project management processes are used across the business to prepare project objectives and plans and to ensure progress is tracked and results measured. Major projects are well communicated across the business so that a joined up approach is maintained. Our Guest at the Heart initiative was successfully implemented during the year. This is focused on providing consistently great hospitality. An incident management and disaster recovery plan is in place for critical business processes to ensure the business is able to continue operating in the event of a major incident. The business has tested these plans during the year and made further improvements to them. We have an off-site disaster recovery facility if access to our Support Centre, or its systems, is affected. Safety measures are in place to ensure that product integrity is maintained and that all food and drink products are fully traceable. Our incident management plan ensures that products can be recalled quickly if required. We have a formal food accreditation process based on a programme of robust supplier audits by an external food assurance company. We have a Professional Safety Audit carried out in every pub (1,678 audits in total) which includes food safety. Results have improved slightly during the year with our average score being 89% against a pass rate of 80%. We have a policy of providing food hygiene and safety training and guidance for all team members. Our guests are at the heart of our business. We have continued our Operational Excellence programme with a Guest at the Heart programme. This is supported by award winning training for all team members to ensure our team are motivated to create a great guest experience. A third party supplier carries out mystery guest audits and we invite all of our guests to complete satisfaction surveys so we can continue to improve our standards.
Operational and people Change management

The Group is reliant on the successful implementation of operational initiatives to deliver both day to day improvements and our five year strategic plan.
Information systems, technology and security

Spirit is reliant upon information systems and technology for many aspects of its business which could be damaging if they were to fail for any length of time.
Product quality
Spirit is exposed to product quality risk in relation to food and drink which is supplied to us and prepared within our Managed pubs. Food contamination, a food scare, poor quality, or wrongly prepared food could result in a food safety issue for our guests, impact our guest satisfaction and, ultimately Spirits reputation.
Service standards and threats to our brands and reputation
Poor service or an incident may occur which could materially impact or damage the reputation of one of our Managed pub brands. This could affect the ability of the brand to attract future guests or negatively impact the ability of that brand to generate income.
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Annual Report 2011
Risks and their impact Operational and people continued Supply chain management
Spirit places reliance on our key suppliers and distributors to ensure continuous supply of food, drink and other products into our pubs. Spirit is exposed to the risk of interruption or failure of suppliers or distributors resulting in our products not being delivered on time or to our required standards.

We have taken action to improve our supply chain arrangements. We have reviewed the disaster recovery and business continuity plans of our key distributors. We monitor product quality closely and consider action which may be required to provide substitute products or suppliers if required.
People risks
Failure to recruit, train and successfully retain successful partners for our Leased pubs, key executives, talented managers and team players for our Managed pubs and high calibre people for our support teams could impact the ability to deliver our strategic five year plan and operational objectives.
We were ranked 21 out of 25 in The Sunday Times Best Big Company 2011 survey. We provide industry leading recruitment, induction training and coaching programmes for our Managed employees and our new partners within the Leased estate. We have improved our succession planning at all levels to ensure we retain high calibre people and accelerate talent development. We have introduced a range of formal qualifications including an Apprenticeship programme available to all employees and a Masters Degree programme for our high performers. We carry out an annual Employee Engagement survey and regular Listening Groups to obtain direct feedback from our employees. Very high levels of engagement and commitment were shown by the most recent survey. We have a formal remuneration strategy to ensure our teams are paid fairly and competitively. A health and safety management committee meets on a regular basis to consider all aspects of health and safety across Spirit and to report to the Board of Directors on the status of health and safety. We have formally documented and briefed health and safety policies for our Support Centre, field based teams, and our Managed pubs and carry out annual risk assessments in key areas. Our Be Safe, Legal and Compliant hardline introduced as part of the Operational Excellence programme has significantly improved the health and safety culture within our Managed pubs and resulted in a significantly reduced number of accidents and environmental health incidents. We work closely with the rest of the industry to address the key issues facing the pub sector. We actively participate in consultation processes and have attended consultation meetings for discussion of Rebalancing the Licensing Act. We work closely with industry bodies and have provided input into the Institute of Licensings response to Rebalancing the Licensing Act. We ensure that our training covers all aspects of licensing requirements and have due diligence in place to confirm that all of our pubs meet all licensing legislation. We work closely with local Licensing Boards, to ensure all individual pub licensing requirements are met and any issues are highlighted as soon as possible.
Regulatory Health and safety

A health and safety accident or incident could lead to serious illness, injury or even loss of life to one of our guests, employees or visitors could significantly impact Spirits reputation.
Changes in legislation
Spirit is subject to many different areas of regulation, many due to the high level of control over the sale of alcohol, and can be subject to delay and failure to obtain required licences, permits and approvals. Increasing public focus in areas such as binge drinking, underage drinking, and health impacts over recent years, means that the Government may introduce further regulation which may significantly affect our business. The Policing and Crime Act 2009 introduced a new mandatory code of practice for licensing the sale of alcohol and the Police Reform & Social Responsibility Act 2011 further tightened controls on the sale of alcohol. The Government also issued a Consultation paper in July 2010 entitled Rebalancing the Licensing Act which may impose additional changes for our business.
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27
Business review
Governance
Board of Directors and executive management team
Walker Boyd Non-executive Chairman
Ian Dyson Chief Executive Officer
Mike Tye Deputy Chief Executive Officer
Russell Margerrison Interim Finance Director
Tony Rice Senior Independent Non-executive Director
Mark Pain Independent Non-executive Director
Christopher Bell Independent Non-executive Director
Karen Caddick Director of Human Resources executive management team
Peter Brook Managing Director Leased executive management team
(
28
Annual Report 2011
Walker Boyd Non-executive Chairman Walker Boyd, 59, was appointed Nonexecutive Chairman in July 2011. Walker was formerly Non-executive Director of Punch Taverns from April 2011 prior to the demerger of Spirit. He is Non-executive Chairman of WHSmith, a position he has held since 1 September 2010 after joining the Board as Non-executive Director in February 2010. He has substantial retail expertise both in the UK and the USA. He was Group Finance Director at Signet Jewellers Limited, previously Signet Group plc, until June 2010, having held this position since 1995. Ian Dyson Chief Executive Officer Ian Dyson, 49, was appointed Chief Executive Officer in June 2011 following the demerger of Spirit from Punch Taverns, and was formerly Chief Executive Officer of Punch Taverns from September 2010. Ian was previously with Marks & Spencer plc where he was Group Finance and Operations Director and prior to that Group Finance Director. He was formerly Finance Director of The Rank Group plc and Financial Controller of Hilton Group plc. Ian was appointed a Non-executive Director of Betfair Limited in February 2010. Mike Tye Deputy Chief Executive Officer Mike Tye, 57, was appointed Deputy Chief Executive Officer in June 2011. Prior to this, Mike was Managing Director of Punch Pub Company, the Managed division of Punch Taverns, from July 2008. Mike has spent over 20 years working in many different areas of the leisure business, mainly with Whitbread, Forte and Aramark. In recent years, he has been Managing Director of Costa Coffee, Managing Director of Premier Travel Inn (where he led the acquisition and integration of Premier Lodge to Travel Inn) and David Lloyd Leisure, where he led the business turnaround and subsequent sale. His early career was spent managing FMCG brands and running his own wine and spirit retail and wholesale business. Russell Margerrison Interim Finance Director Russell Margerrison, 51, was appointed Interim Finance Director in July 2011. Prior to this, Russell was Group Business Planning Director at Punch Taverns from January 2011 and was responsible for leading the operational demerger of the Spirit business.
Russell was previously Managing Director Trading and Finance Director for Tour Operations at Thomas Cook, Finance Director at Rank Holidays and spent 15 years in various management positions with Bass. Tony Rice Senior Independent Non-executive Director Tony Rice, 59, was appointed Senior Independent Non-executive Director in July 2011. Formerly Senior Independent Nonexecutive Director of Punch Taverns from March 2010 and Independent Non-executive from December 2007. Tony brings with him many years of experience at board level with some of the UKs leading companies. Tony was also a Non-executive Director and Chairman of the Audit Committee at Cable & Wireless from 2003 to 2006 and at Telewest from 2000 to 2003. Tony is Chief Executive Officer of Cable & Wireless Communications. He spent 16 years with BAE Systems (formerly British Aerospace) where he had various roles from 1986 to 2002, culminating in the role of Group Managing Director of Commercial Aircraft. He then spent three years at Tunstall plc as Chief Executive Officer from 2002 until its sale to Bridgepoint in 2005. Mark Pain Independent Non-executive Director Mark Pain, 50, was appointed Independent Non-executive Director in July 2011. Mark brings with him a wealth of experience as a FTSE 100 main board director, covering a range of sectors, including property, media, housebuilding, retail and wholesale banking, consumer finance, life assurance and general insurance. Mark served as Chief Financial Officer of Barratt Developments Plc from 2006 to 2009. He was previously at Abbey National where he held a number of senior executive and group board positions, including Group Finance Director, from 1998 to 2001 and Customer Sales Director from 2002 to 2005. He was also an Independent Non-executive Director at Punch Taverns from 2007 to 2011. Mark is a Fellow of the Institute of Chartered Accountants.
Christopher Bell Independent Non-executive Director Christopher Bell, 53, was appointed Independent Non-executive Director in August 2011. Christopher has been Chairman of GAME Group plc since June 2011, having joined the board in 2001 as a Non-executive Director. He was Chief Executive Officer of Ladbrokes plc between 2006 and 2010. Prior to that, he spent six years as Managing Director at Ladbroke Group. Christopher is also currently Senior Independent Director of Quintain Estates and Development. He has also been a board member of the Responsible Gaming Strategy Board (RGSB) since 2009. Executive management team Karen Caddick Director of Human Resources Karen Caddick, 42, was appointed HR Director in July 2011. Karen started her career with Royal & Sun Alliance in 1993 and performed several HR roles including Head of HR for MORE TH>N. Karen then moved to Barclays as Head of Employee Relations & HR Policy. She also led the HR functions at Channel Five Broadcasting, The Financial Times and Punch Taverns. Karen is a Graduate of the Chartered Insurance Institute and a Fellow of The Institute of Personnel & Development. Peter Brook Managing Director Leased Peter Brook, 57, was appointed Managing Director Leased in July 2011 with responsibility for the Spirit Leased business. Peter has worked in the managed and tenanted pub sector for several years. He was Chief Executive Officer of Innspired, a venture capital backed business with Alchemy, until September 2004, at which time Innspired was sold to Punch Taverns. Peter spent a number of months with Punch before moving onto another venture with Alchemy and was latterly MD of Admiral Taverns Turnaround business. Peter rejoined Punch in January 2011 to work on the strategic review and a number of property related projects.
Annual Report 2011
29
Governance
Governance
Directors report
Results and dividends
The Directors present their report to shareholders on the affairs of the Company from incorporation on 8 June 2011 through to 20 August 2011 together with the audited financial statements for the Group covering the 52 weeks from 22 August 2010 to 20 August 2011.
The results of the Group for the period are set out in the Consolidated income statement on page 48. As announced on 20 October 2011 the Directors will not be proposing the payment of a final dividend.
Principal activity
The Groups main trading activities are divided into two divisions: a Managed pub business and a Leased pub business. The Managed division consists of pubs that are directly managed by the Group. During the period, substantial progress has been made in repositioning the business through the improvement of operating disciplines, the upgrading of talent, the revitalisation and development of brands and investment in the estate. The Leased division is operated separately and involves the granting of leases to tenants who run the pub as their own business, paying rent to the Group, purchasing beer and other drinks from the Group and entering into profit sharing arrangements for income from leisure machines.
Demerger
At a general meeting of Punch Taverns plc on 26 July 2011, shareholders approved the demerger of the Spirit business and on 1 August 2011 the Company was admitted to the Official List of the UK Listing Authority and to trading on the London Stock Exchange.
Directors
At 20 August 2011, the Board comprised seven members, consisting of the Chairman, three Executive Directors and three Non-executive Directors, all three of whom were independent. During the period, the following Board changes took place: Ian Dyson and Mike Tye were appointed Directors of the Company on incorporation on 8 June 2011; Walker Boyd, Russell Margerrison, Tony Rice and Mark Pain were appointed Directors of the Company on 4 July 2011 when the Group became operationally independent from Punch; and Christopher Bell was appointed Director of the Company on 1 August 2011 upon demerger. Since the year end, the following announcements have been made with regard to the composition of the Companys Board: on 12 September 2011 it was announced that Paddy Gallagher will join the Company as Finance Director on 7 November 2011 when Russell Margerrison will step down from the role of Interim Finance Director; and on 20 October 2011 it was announced that Ian Dyson would step down as Chief Executive Officer on 16 December 2011 and will be replaced by Mike Tye. At the Companys first AGM all Directors, with the exception of Ian Dyson and Russell Margerrison, will offer themselves for election, this being the first opportunity for shareholders to approve their appointment since the demerger. The biographical details of each Director can be found on page 29 of this report. The procedure for the appointment, replacement and re-election of Directors and the role of the Nomination & Governance Committee is disclosed in the report on page 36. There are no special provisions contained in any of the Directors contracts for loss of office beyond normal contractual obligations; further details of Directors contracts are contained within the Report on Directors remuneration on pages 39 to 45.
Business review
A full review of the periods activities and future developments and information on the risks and uncertainties faced by the Group, are included in the Business review. The management of business risk is set out in the Audit & Risk Committee report and Our risks and uncertainties on pages 24 to 27 of this report and key performance indicators (KPIs) are shown on page 1. Certain information required for disclosure in this report is provided in other appropriate sections of the full Annual Report and Financial Statements 2011. These include the Business review, the Corporate governance statement, the Audit & Risk Committee report, the Nomination & Governance Committee report, Report on Directors remuneration and the Group financial statements and these are accordingly incorporated into this Directors report by reference. The Business review has been prepared solely to assist the shareholders in assessing the Groups strategies and the potential of those strategies. It should not be relied upon by any other party for any other purpose. Forward looking statements have been made by the Directors in good faith using information available up to the date of this report and such statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks.
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Annual Report 2011
Directors interests
The beneficial interests of Directors and their connected persons, who held office at 20 August 2011, in the share capital of the Company are shown below.
At 31 October 2011 Ordinary shares At 20 August 2011 Ordinary shares
Walker Boyd Ian Dyson Mike Tye Russell Margerrison Tony Rice Mark Pain Christopher Bell
200,000 404,168 294,473 503,013 29,177 110,266
150,000 404,168 188,707 503,013 29,177
The indemnity was granted by the Company on 22 July 2011 with an effective date of 7 July 2011, and was in effect during the financial year and continues to date. The indemnity is uncapped in amount but does not provide cover in the event that the act or omission constitutes wilful misconduct or recklessness, is conduct which would entitle the Company to dismiss the Director or officer summarily without compensation or pay in lieu of notice or if the Director or officer is entitled to recover any amount in relation to the liability from any other person. In accordance with section 236 of the Companies Act 2006, the Group also maintains liability insurance for its Directors and officers.
Substantial shareholdings
None of the Directors have any other interests in the shares or other securities of the Company or of any other company in the Group. No Director had a material interest in any significant contract with the Company or any of its subsidiaries during the period.
As at 31 October 2011, being the last business day prior to the publication of this report, the Company has been notified of the following substantial interests (representing 3% or more) in the ordinary shares of the Company.
Total holding % Shareholding made up of: Contracts Ordinary for shares difference
Shareholder
Glenview Capital Management Schroders Alchemy Special A statement of the Directors remuneration is set out in Opportunities the Report on Directors remuneration on pages 39 to 45. Old Mutual Asset Managers Directors conflicts of interests During the period, the Board has reviewed the interests Aberforth Partners of the Directors and their connected persons and has GLG Partners LP authorised any interests which conflicted or potentially D. E. Shaw conflicted with the interests of the Company. The Nomination Barclays plc & Governance Committee will continue to conduct periodic Norges Bank reviews of conflict authorisations to determine whether Royal Bank of Canada the authorisation given should continue, be added to or Legal & General be revoked by the Board.
19.98 131,792,314 7.50 49,484,017 6.30 40,522,000 5.42 5.24 4.71 4.50 4.23 4.07 3.63 3.04
30,484,937 4,371,689 34,574,520 21,596,799 8,692,975 1,268,883 27,677,639 27,140,174 26,196,682 23,337,957 20,083,254
Directors indemnity
Political and charitable contributions
As at the date of this report, there are qualifying third party indemnity provisions governed by the Companies Act 2006 in place under which the Company has agreed to indemnify the Directors and the Company Secretary of the Company and the Directors and the Company Secretary of any member of the Group or of an associated company or certain companies in which the Company has a direct or indirect minority shareholding or other interest, to the extent permitted by law and the Companys Articles of Association against all liability arising in respect of any act or omission in their duties.
During the period the Group made no charitable or political contributions. The Company does not make political donations and has no intention of making donations to what are generally regarded as political parties or political organisations within the European Union. However, as the legislation is very broadly drafted, as a precautionary measure a resolution to permit the Company to make political donations and incur political expenditure is included as a resolution at the AGM.
Annual Report 2011
31
Governance
Governance continued
Directors report
Employees Financial instruments
The total number of employees at the end of the period was 17,316. The Group recognises the value of its employees and seeks to create an energetic, dynamic and responsive environment in which to work. It places considerable importance on communications with employees which take place at many levels through the organisation on both a formal and informal level. The business runs an annual employee engagement survey and in the last Sunday Times Top 100 survey we were voted the 21st Best Big Company to work for; this is testament to the high levels of commitment and engagement that we have within the business. We also run regular listening groups which are attended by employees from all work groups and are hosted by members of the executive management team. Hearing the views and opinions of our employees on our business is vitally important in helping us make the right decisions for our guests. The Group is committed to promoting diversity across the Group. To this end, the Group is committed to providing equal opportunities in recruitment, promotion, career development, training and reward to all employees without discrimination. The Group gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by such persons. The Group continues to be supportive of the employment and training of disabled persons in accordance with their abilities and aptitudes, provided that they can be employed in a safe working environment. Where existing employees become disabled, it is the Groups policy wherever practicable to provide continuing employment and training under normal terms and conditions.
The Groups policy on the use of financial instruments is set out in note 22 to the financial statements.
Significant agreements
The Company is party to certain non-material agreements (including trust deeds relating to the Companys employee share incentive plans) that contain change of control provisions in the event of the takeover of the Company but these are not considered to be significant on an individual basis. The secured loan notes, referred to in note 21 to the financial statements, are not subject to any change of control provision.
Additional information for shareholders
At 20 August 2011, the Companys issued share capital comprised 659,655,957 ordinary shares of 1 pence each. Upon incorporation, the Company issued 50,000 redeemable preference shares of 1.00 each which were redeemed by the Company on 1 July 2011 and are no longer in issue. As at the date of this report, the Company does not hold any shares in Treasury. At a General Meeting of the Company held on 1 July 2011, the Company obtained shareholder authority to buy back up to 66,500,000 shares (representing approximately 10% of the Companys issued equity share capital at the time). At the Companys forthcoming AGM, authority will be sought to buy back up to 65,965,596 shares (representing approximately 10% of the Companys issued equity share capital at the time). This authority will only be exercised by the Directors if it is considered that it will result in an increase in earnings per share and will benefit shareholders generally as a whole. Authority will also be sought at the forthcoming AGM for Directors to allot up to 219,885,319 shares in the Company (representing approximately one-third of the Companys issued equity share capital (excluding treasury shares)) and up to 439,770,638 equity securities (representing approximately two-third of the Companys issued equity share capital (excluding treasury shares)). The Board will also seek authority to disapply pre-emption rights over 32,982,798 shares (representing approximately 5% of the Companys issued equity share capital at the time). Further details of the above resolutions are contained within the Notice of Meeting sent to shareholders with this report. There are no restrictions on 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) and the Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities or on voting rights. In addition, there are no people holding securities that carry special rights with regard to control of the Company.
The environment
The Group regards compliance with relevant environmental laws and the adoption of responsible standards as integral to its business operation. It is also committed to introducing measures to limit any adverse effects its business may have on the environment and will promote continuous improvement in accordance with best available techniques.
Creditor payment policy and practice
The Group is responsible for agreeing the detail of terms and conditions relating to transactions with its suppliers. It is Group policy to ensure that suppliers are made aware of the terms of payment and to abide by the agreed terms of payment with suppliers where the goods and services have been supplied in accordance with the relevant terms and conditions of contract. The Group does not adopt different policies for different types of supplier. At 20 August 2011 the Company had no days purchases outstanding in trade creditors.
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Annual Report 2011
In addition, pursuant to the Listing Rules of the Financial Services Authority, Directors and persons discharging managerial responsibility (PDMRs) of the Company require prior approval from the Company to deal in the Companys securities, and are prohibited from dealing during the Companys Close Period.
Post balance sheet events Going concern
There have been no significant post balance sheet events. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial review on pages 22 and 23 of this report. Note 22 to the consolidated financial statements includes the Groups objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit and liquidity risk. After reviewing budgets and other longer term plans and making enquiries, the Directors have a reasonable expectation that the Company and the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they adopt the going concern basis of accounting in preparing the financial statements.
General meetings
At a general meeting of the shareholders, the Companys Articles of Association may be amended by special resolution, and on a show of hands every member who is present in person and proxy entitled to vote shall have one vote. On a poll every member who is present in person and proxy shall have one vote for every share of which he is the holder. A shareholder may appoint more than one proxy in relation to their holdings provided that each proxy does not vote in relation to the same shares. The Notice of Meeting sent to shareholders with this report gives full details of deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be considered at the meeting. The Board uses the AGM to communicate with institutional and private shareholders and welcomes participation from all. The Chairman aims to ensure that the Chairmen of the Audit & Risk, Remuneration and Nomination & Governance Committees and the Senior Independent Non-executive Director attend the AGM to answer any relevant questions. All members of the Board are available to meet with major shareholders if requested. Communications with shareholders are given high priority to ensure that a balanced and understandable assessment of the Groups position and prospects is given. The Company aims to provide as much information as is commercially sensible to both existing and potential investors, recognising that transparency is the best way to develop understanding of the Groups strategy, performance and growth potential. The Company encourages two-way communication with both its institutional and private shareholders and aims to provide a timely response to all enquiries. There is a regular dialogue with institutional shareholders as well as presentations after the Companys preliminary announcement of the year end and interim results. The Chairman also writes to the top ten major shareholders on an annual basis inviting them to correspond with the Non-executive Directors if they so wish.
Directors statement as to disclosure of information to auditors
Auditors
A resolution to re-appoint KPMG Audit plc as the Companys auditors will be put to the forthcoming AGM. By order of the Board
John Grime
Company Secretary 31 October 2011
Annual Report 2011
33
Governance
The Directors confirm that, so far as they are aware, there is no relevant audit information of which the auditors are unaware and that each Director has taken all reasonable steps to make himself aware of any relevant audit information and to establish that the auditors are aware of that information.
Governance
Corporate governance statement

Compliance statement Appointment and replacement of directors
The Board attaches the highest priority to corporate governance, the system by which the Company is directed, managed and controlled in the interests of all its stakeholders. Since acquiring listed status on 1 August 2011, the Company has demonstrated its commitment to the UK Corporate Governance Code (the Code)1 by being fully compliant with all of the provisions set out in the Code and with chapter 7 of the Disclosure and Transparency Rules (the DTR). This report, together with the Directors report (which includes information as required by section 7.2.6 of the DTR, as permitted by section 7.2.9 of the DTR), the Nomination & Governance Committee report, the Audit & Risk Committee report and the Report on Directors remuneration, provide an overview of how the Group has applied the principles of the Code throughout the period. It details the work and activities undertaken by the Companys relevant committees and sets out the key features of the Companys governance structure.
Directors may be appointed by the Company by ordinary resolution, by notice from majority shareholders or by the Board. As this years AGM will be the Companys first AGM, all of the Directors will stand for election by the shareholders. In the future, in accordance with the Code, each Director will stand for annual re-election by shareholders at the AGM. The Company may, by special resolution, remove any Director before the expiration of his period of office. The office of a director shall be vacated if: (i) he resigns or offers to resign and the Board resolves to accept such offer; (ii) he becomes physically or mentally incapable of acting as a director and remains so for more than three months; (iii) he is absent without the permission of the Board from meetings of the Board (whether or not an alternate director appointed by him attends) for six consecutive months and the Board resolves that his office is vacated; (iv) he becomes bankrupt or compounds with his creditors generally; (v) he is prohibited by law from being a director; (vi) he ceases to be a director by virtue of the Companies Act 2006; or (vii) he is removed from office pursuant to the Companys Articles of Association.
Role of the Board
The work of the Board is structured around scheduled Board meetings which are linked to key events in the Companys corporate calendar, with additional meetings and conference calls convened to consider matters which are time critical or which require further discussion. Whilst the Board has delegated the normal operational management of the Company to the Executive Directors and executive management team, it retains a schedule of matters which are specifically reserved for its decision. These matters include, amongst others: strategy and management; structure and capital; financial reporting and controls; internal controls; significant contracts; communication; material acquisitions and disposals; investments; and capital projects. The Company has also established Audit & Risk, Remuneration and Nomination & Governance Committees with formally delegated duties and responsibilities and written terms of reference which are available on www.spiritpubcompany.com. From time to time, separate committees are set up by the Board to consider specific issues when the need arises.
Powers of directors
Subject to the Companys Articles of Association, the Companies Act 2006 and any directions given by the Company by special resolution, the business of the Company will be managed by the Board who may exercise all the powers of the Company, whether relating to the management of the business or not. In particular, the Board may exercise all the powers of the Company to borrow money, to mortgage or charge any of its undertaking, property, assets (present and future) and uncalled capital and to issue debentures and other securities and to give security for any debt, liability or obligation.
Meeting attendance
Since incorporation, the Board met three times, attendance at these meetings and those of its committees was as follows:
Audit & Risk Committee2 Remuneration Committee3 Nomination & Governance Committee4
Board1
Together, however, the Board is collectively responsible to the Companys shareholders for the Groups performance and sets the strategic aims and objectives of the Group to 1 Board meetings were held on 10 June 2011, 1 July 2011 and 4 July 2011. fulfil this responsibility. The Board determines the Companys 2 Audit & Risk Committee meeting held on 8 August 2011. key policies, agrees on performance criteria and delegates 3 Remuneration Committee meeting held on 8 August 2011. 4 Nomination & Governance meeting held on 4 July 2011. to the executive management team their planning and implementation. Overall, the Board ensures that all necessary 5 Appointed on 4 July 2011. 6 Appointed on 1 August 2011. resources are in place in order for the Company to meet its objectives and that all decisions are taken objectively and In addition to their attendance at Board and committee in the interest of the Company and its shareholders. meetings, the Chairman and the Non-executive Directors also meet without the Executive Directors in accordance 1 A copy of the Code can be found on the Financial Reporting Councils with section A.4.2 of the Code. website: www.frc.org.uk
34 Spirit Pub Company plc Annual Report 2011
Walker Boyd5 Ian Dyson Mike Tye Russell Margerrison5 Tony Rice5 Mark Pain5 Christopher Bell6
1 out of 1 3 out of 3 3 out of 3 1 out of 1 1 out of 1 1 out of 1 None
n/a n/a n/a n/a 1 out of 1 1 out of 1 1 out of 1
1 out of 1 n/a n/a n/a 1 out of 1 1 out of 1 1 out of 1
1 out of 1 n/a n/a n/a 1 out of 1 1 out of 1 None
Chairman and Chief Executive Officer
The roles of the Chairman and the Chief Executive Officer are distinct and separate, with a clear division of responsibilities. The Chairman leads the Board and ensures the effective engagement and contribution of all Non-executive Directors and Executive Directors. The Chief Executive Officer is responsible for all the Groups businesses and acts in accordance with the authority delegated by the Board. Responsibility for the development of policy and strategy, and operational management is delegated to the Chief Executive Officer, other Executive Directors and the executive management team.
The Directors believe that the initial composition of the Board and its committees is appropriate for Spirit as a newly independent company and that the balance of skills and experience is appropriate to the size of the business. The composition offers continuity to shareholders and removes the risk of introducing a number of new directors to the Group within a short period of time. Upon appointment as Chairman, Walker Boyd was considered to be independent in accordance with the criteria set out in B.1.1 of the Code, despite the fact that he was a Non-executive Director of Punch Taverns plc. Upon their appointment as Non-executive Directors, Tony Rice, Mark Pain and Christopher Bell were also considered to be, and continue to be, independent. This equates to half of the Board of Directors (excluding the Chairman) being independent in character and judgement and free from relationships or circumstances which are likely to affect, or could appear to affect, their judgement and means that the Board is balanced, in accordance with B.1.2 of the Code. The terms and conditions of appointment of the Companys Non-executive Directors are available for inspection at the Companys registered office during normal business hours and from 15 minutes prior to and during the Companys AGM. The Chairman, together with the Company Secretary, ensures that the Board receives accurate, timely and clear information. In preparation for every Board meeting, each Director receives documentation including a detailed report on current trading and full papers on matters where the Board will be required to make a decision or give its approval. These matters are discussed during the Board meeting, with the Chief Executive Officer, Deputy Chief Executive Officer and Finance Director giving an overview of how the Group is performing against expectations. In addition, the Board receives presentations from other members of the executive management team and external advisers to aid their understanding when applicable. All Directors have access to independent professional advice, at the Companys expense, should they require it to discharge their duties. They also have access to the advice and services of the Company Secretary who is responsible for: advising the Board, through the Chairman, on all governance matters; providing assistance and information on corporate administration and legal matters; ensuring that good information flows within the Board, its committees and between the Non-executive Directors and the executive management team; and ensuring that Board procedures are followed and that all applicable legislation and regulations are complied with. By order of the Board
Senior Independent Non-executive Director (SID)
Tony Rice was appointed SID on 4 July 2011. As the Companys SID, Tony Rice is responsible for: supporting the Chairman; leading the other Non-executive Directors in the annual review of the Chairmans performance; and monitoring the division of responsibilities between the Chairman and the Chief Executive Officer. He is also available to shareholders to express any concerns which have not been satisfactorily resolved by either the Chairman or the Executive Directors.
Non-executive Directors
The Company actively encourages its Non-executive Directors to: challenge constructively the strategy proposed by the Chief Executive Officer and Executive Directors; scrutinise and challenge the Companys performance; satisfy themselves of the integrity of financial information and that financial controls are robust and defensible; and ensure that appropriate remuneration and succession planning arrangements are in place in relation to the Executive Directors and the executive management team. Where Non-executive Directors have concerns regarding the running of the Company, they are encouraged to escalate the matter with the relevant individual Executive Director, at a meeting of the Board or with the Company Secretary. If not satisfied with the corrective treatment of their concern, the Non-executive Directors concern is recorded in the minutes until further action is taken to remedy it. To supplement their knowledge and experience, Non-executive Directors are authorised to serve on other company boards as long as they set aside enough time to make a satisfactory commitment to their role at Spirit. To ensure they remain focused however, Executive Directors are not permitted to take more than one Non-executive directorship in, or the chairmanship of, a FTSE 100 company.
Balance and independence
John Grime
The Board includes a strong presence of both Executive and Non-executive Directors so that no individual or small group can dominate proceedings or the Boards decision making.
Company Secretary 31 October 2011
Annual Report 2011
35
Governance
Access to advice
Governance
Nomination & Governance Committee report

The members of the Nomination & Governance Committee (the Committee) comprise Walker Boyd (Chairman of the Committee), Tony Rice, Mark Pain and Christopher Bell. The terms of reference of the Committee state that it will meet at least once annually and then, as and when required and that the executive management team, together with the Chief Executive Officer and the Company Secretary, are permitted to be invited to attend for part or all of each meeting. During the period, only one meeting of the Committee took place which discussed the appointment of Christopher Bell as Non-executive Director. The main purpose of the Committee is to review the structure, size and composition (including the skills, knowledge and experience) of the Board and make recommendations to the Board with regard to any adjustments that are deemed necessary. Other areas of responsibility include: consideration of the Companys succession plans which are in place for Board members and the executive management team; the identification, evaluation and nomination of candidates to fill Board vacancies; reviewing Directors conflicts of interests and making recommendations to the Board to authorise such conflicts where applicable; and regularly reviewing the membership of the Companys committees to ensure that undue reliance is not placed upon certain individuals. Company and considers whether, despite any such conflict, there are nevertheless grounds for recommending the candidate for appointment. On appointment, the Chairman together with the Company Secretary and executive management team ensures that each new director receives a tailored induction programme that includes: individual time with the Chairman, the Chief Executive Officer and other members of the Board and executive management team; meetings with the Companys external advisers, substantial shareholders, brokers and lawyers; an internal induction course which introduces the Group, its divisions and its employees; visits to the Groups Managed and Leased pubs and those of competitors; and external training courses, if required.
Performance evaluation
Appointments to the Board
In order to ensure Board effectiveness, the Committee is also responsible for carrying out an annual performance evaluation of the Board, its committees and individual Directors. The Committee makes recommendations to the Board as regards succession planning for both Executive and Non-executive Directors. The Committee takes into account the challenges and opportunities facing the Group and what skills and expertise will be needed on the Board in the future. During the first three months, the Board has not evaluated itself, given the short period of time it has been in existence. However, it is planned that the Board will undergo a formal evaluation of its own performance and that of its committees and individual Directors during the next financial year via the process of a detailed questionnaire as well as self and peer assessment. The process will be led by the Chairman, assisted by the Company Secretary (with the exception of his own performance as Chairman, which will be led by the SID). It is further expected that an externally facilitated evaluation of the Board will be performed in line with the requirements of the Code within the next three years. To assist personal development each Director on a biannual basis will undergo a personal development review to set their goals and assess their progress during the year. Ongoing training and proactive coaching will be provided by the Company to develop, support and update the knowledge and skills of its Board, including days out in trade, regular meetings with the executive management team, internal and external courses and continual dialogue with peers and colleagues. Directors are expected to take responsibility for their own individual developmental needs in conjunction with the Chairman, Company Secretary and Director of Human Resources. On behalf of the Committee
The Committee is responsible for assisting the Board in the selection and appointment of Directors. When considering new appointments the Company has a formal, rigorous and transparent procedure which is based on merit and against objective criteria including the time available to and the level of commitment which will be required of the potential director. The Committee is aware of the new requirements introduced by the Code regarding the benefits of diversity, including gender. To ensure that the Board continues to have the right balance of skills, diversity in all forms and experience, when changes to the Board are next contemplated, the Committee will consider all aspects of diversity as part of the appointment procedure. The Committee evaluates the balance of skill, knowledge and experience required for the position and prepares a detailed description of the role and capabilities required. To ensure that the best candidate is found, the Company uses an external search consultancy firm to aid its search and supplements this with several interviews to guarantee the highest level of calibre and suitability for the role. Prior to the demerger from Punch, an external search consultancy was used to assist with the recruitment of the Chairman and the Non-executive Directors. Before any appointment is formally made the Committee obtains details of any interests the candidate may have which conflict or may conflict with the interests of the
Walker Boyd
Nomination & Governance Committee Chairman 31 October 2011
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Annual Report 2011
Governance
Audit & Risk Committee report

Risk management, internal control and internal audit
The members of the Audit & Risk Committee (the Committee) comprise Mark Pain (Chairman of the Committee), Tony Rice and Christopher Bell all of whom are independent Non-executive Directors of the Company and have recent and relevant financial experience. The Committee is therefore compliant with section C.3.1 of the Code and satisfies the requirements of chapter 7.1 of the DTR. Under its terms of reference, the Committee will hold at least three meetings each financial year, which will be held prior to the publication and release of the interim management statements and the release of interim and annual financial statements. Further meetings may be called as required. The internal and external auditors together with relevant Executive Directors, the Company Secretary and other persons may also attend the meetings by invitation. During the period, only one meeting of the Committee took place which focused on the: appointment of the Companys external auditors; Companys risk management framework and internal controls; internal audit function and non-audit services provided by the auditor; and Companys financial controls, treasury and whistle blowing policies. The Committees responsibilities are set out in its terms of reference, which are available on the Companys website. They comprise all matters indicated by the DTR and the Code including: monitoring and reviewing the integrity of the annual and interim financial statements of the Company and any formal announcements relating to the Companys financial performance; reviewing the policies and process for identifying and assessing business risks and the management of those risks by the Company; reviewing the internal audit plan and resourcing and monitoring and reviewing the effectiveness of the Companys internal audit function; making recommendations to the Board in relation to the appointment, re-appointment and removal of the auditor and approving the remuneration and terms of engagement of the auditor; approving and reviewing the policy on the use of the auditor for non-audit services; and reviewing and monitoring the auditors independence and objectivity and the effectiveness of the audit process, taking into consideration relevant guidance.
The responsibility for managing risk is retained by the Board, but the Committees terms of reference provide that the Companys risk management policy and framework, the effectiveness of the internal control environment and the adequacy of risk information and reporting and the effectiveness of internal audit to the Board are reviewed by the Committee. During the period the Committee reviewed the Companys risk register and the risk management framework, which provides that business risks are reviewed at least quarterly.
Internal control
The features of the Companys systems of internal control include: an established organisational structure with clearly defined lines of responsibility and delegation of authority; documented and enforced policies and procedures; appointment of staff of the highest calibre to fulfil their allotted responsibilities; comprehensive budgets and forecasts reviewed and revised on a regular basis, with performance monitored against them and explanations obtained for material variances; a detailed investment approval process with a hierarchical approval structure and post investment appraisals; an internal audit function which performs continuous assessments of the quality and effectiveness of risk management and the internal control environment; regular reporting on internal audit, control updates, changes to accounting policies as well as any accounting and legal developments; documented fraud, bribery and whistle blowing policies and procedures, regular review of current whistle blowing regulations, and reporting of any whistle blowing incidents to the Committee; a regular review of treasury policies and activities by the Committee; an established programme of management and staff development and succession planning; and formal financial reporting processes for preparation of the consolidated accounts.
Annual Report 2011
37
Governance
Audit & Risk Committee report

Employee concerns
During the 2011/12 financial year the Committee will conduct a review of the effectiveness of the system of internal control of the Company to ensure the effectiveness of those controls in order to safeguard shareholders interests and the Companys assets and guarantee that robust financial reporting processes are in place, and will report to the Board that they have done so. Such systems, including controls for financial, operational, compliance and risk management matters, are designed to manage rather than eliminate the risk of failure to achieve the Companys strategic objectives. However, it should be recognised that these systems can only provide reasonable and not absolute assurance against material misstatement or loss.
The Company has in place documented fraud, bribery and whistle blowing policies and procedures to enable employees to raise concerns about possible improprieties that may occur within the Group. Any reported incidents are internally investigated and documented with follow up action taken as appropriate. During the period, it was agreed that the whistle blowing policy should be reviewed to encourage reporting on an identified or anonymous basis, and that the Companys policies and training in respect of the Bribery Act 2010 be refreshed and rolled out. On behalf of the Committee
External auditors
To maintain the independence of the external auditors, the Board has determined a policy detailing what non-audit services can be provided by the Companys external auditors. Under this policy, work of a consultancy nature is not offered to the external auditors unless there are clear efficiencies and value-added benefits to the Company. The total value of work carried out by the Companys auditor for non-audit services, without specific Committee approval, cannot exceed the agreed audit fee for the relevant financial year of the Company. During the period no non-audit fees were paid to the external auditors. One of the primary purposes of the Committee is to make a recommendation on the appointment or re-appointment of the external auditors. During the period the Committee approved the appointment of KPMG Audit plc as the first auditors of the Company, having reviewed their independence and objectivity, and recommended to the Board that the auditors be re-appointed and agreed their fees.
Mark Pain
Audit & Risk Committee Chairman 31 October 2011
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Annual Report 2011
Governance
Report on Directors remuneration

Dear Shareholder
Following the demerger of the Spirit business from Punch Taverns plc on 1 August 2011, I am pleased to present the first remuneration report for the period from the Companys incorporation on 8 June 2011 to 20 August 2011. We will be seeking approval for this report from shareholders at the 2011 AGM. The policy of the Remuneration Committee (the Committee) has been designed to help drive business performance and maximise shareholder value from the demerger. The main features of the remuneration structure for Executive Directors, which came into effect on 1 August 2011 following the completion of the demerger, are as follows: base salaries and pension provision were unchanged on demerger; annual bonus potential is capped at 150% of base salary for the Chief Executive Officer and Deputy Chief Executive Officer and 100% of base salary for the Finance Director; Targets will be 75% based on financial metrics and 25% based on the achievement of individual targets although no bonus, under either section, will be payable unless a threshold profit before tax target is exceeded; long term incentive awards will be granted under the Spirit Pub Company plc Long Term Incentive Plan 2011 which effectively replicates the arrangement operated by Punch. A normal grant policy of 80% to 150% of base salary in any financial year will be operated as per previous discussions with shareholders. Performance targets will be based on a combination of sliding scale relative total shareholder return and earnings per share performance targets; and Executive Director service contracts contain 12 month notice periods (with an exception of three months for the Interim Finance Director) with payments in lieu of notice periods limited to base salary and benefits and mitigation will be sought as appropriate.
The Companys largest investors and representative bodies were consulted in advance with respect to the post demerger remuneration arrangements and their feedback was incorporated prior to arrangements being finalised. The Companys largest investors and representative bodies were generally very supportive of our arrangements. We have announced that Mike Tye will be stepping up to the role of Chief Executive Officer on 16 December 2011 to succeed Ian Dyson. Reflecting his new role, Mike will be granted the maximum award of 200% of salary this year (thereafter reverting to a range between 80% and 150% of salary) under the Long Term Incentive Plan 2011 and will receive an increase of 16% in his salary taking it to 475,000 p.a. Ian Dysons departure terms are in line with his contract of employment. The Committee unanimously recommends that shareholders vote to approve the Report on Directors remuneration. Approved by the Board
Tony Rice
Annual Report 2011
39
Governance
Remuneration Committee Chairman 31 October 2011

Introduction
This report has been prepared in accordance with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the Regulations). The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority, and describes how the Board has complied with the provisions of the Code relating to remuneration matters. The report is divided into two parts. The first part contains the commentary on remuneration policy which is not required to be audited. The second part contains the remuneration tables that have been audited in accordance with the relevant statutory requirements.
time, whether the appointment of HNBS remains appropriate or should be put out to tender as part of its effectiveness review. In addition, Computershare Investor Services plc provides administration services connected to the Groups Executive and all-employee share plans. The Committee also consults with the Chief Executive Officer, the Company Secretary and the Director of Human Resources. However, no Director is permitted to participate in discussions or decisions about their personal remuneration.
Remuneration policy
Unaudited information The Remuneration Committee
The members of the Committee comprise Tony Rice (Chairman of the Committee), Walker Boyd, Mark Pain and Christopher Bell. The Committee is responsible for determining and agreeing with the Board the broad policy for the remuneration of the Chief Executive Officer, the Chairman and such other members of the executive management team as it is designated to consider. The Committee, within the terms of the agreed policy, determines the total individual remuneration package of each Executive Director and agreed members of the executive management team. In addition, the Committee ensures that provisions regarding disclosure of remuneration are fulfilled. The Committee makes recommendations to the Board on the remuneration and incentives for the Executive Directors, members of the executive management team and the Chairman and monitors the consistency and rigour of their implementation. The Committee also oversees the remuneration policy of the Group and ensures that no Director is involved in decisions as to his or her own remuneration. The Committee is constituted in accordance with the recommendations of the Code. During the period, only one meeting of the Committee took place which focused on the Committees terms of reference; outcomes for legacy bonus plans; targets and quantum for annual bonus plans; documentation for new share incentive plans; and Executive Director remuneration.
The Committees remuneration policy is designed to help drive business performance and maximise shareholder value from the demerger. In order to align the interests of the Executive Directors and other members of executive management team with shareholders, the Committee has developed a remuneration policy which achieves an appropriate balance between fixed and variable pay. Accordingly, a significant proportion of remuneration is linked to the achievement of challenging short and long term performance targets. There are five main elements of the remuneration package for Executive Directors and executive management which are explained in detail below: base salary; benefits; pension; annual bonus; and long term incentives. In future the Committee will review its policy on an annual basis in light of market conditions, performance, strategy, key performance indicators, the structure and levels of remuneration across the Group and developments in corporate governance and best practice. The Committee will also consider the level of environmental, social and governance risk associated with the remuneration policy to ensure that there are sufficient safeguards in this regard.
Base salary and benefits
Base salaries and pension provision have been set by reference to pre-existing remuneration (no increases were awarded at demerger). The table below shows the current Executive Director base salaries:
Name Position Base salary
Advisers to the Committee
The Committee received independent remuneration advice from Hewitt New Bridge Street (HNBS), part of Aon Corporation during the period. This independent adviser was appointed by the Committee and is accountable to it. Aon Corporation also provide consulting advice to the Group in respect of its pension schemes and actuarial, investment and other advice to the pension scheme trustees. The Committee does not believe that the independence of its adviser is compromised by these other appointments. The terms of engagement between the Committee and HNBS are available from the Company Secretary on request. HNBS are signatories to the Remuneration Consultants Code and have provided a statement confirming their independence. In line with best practice, the Committee will assess, from time to
40 Spirit Pub Company plc Annual Report 2011
Ian Dyson Mike Tye Russell Margerrison
Chief Executive Officer 675,000 Deputy Chief Executive Officer 410,000 Interim Finance Director 250,000
On his promotion to Chief Executive Officer, Mike Tyes salary will increase to 475,000. Russell Margerrisons interim appointment will finish shortly with the appointment of a permanent successor, Paddy Gallagher who joins on 7 November 2011. Paddy Gallaghers salary will be 325,000. Base salary levels will be reviewed next in March 2012 and annually thereafter.
The Groups policy is to provide Executive Directors with a market competitive level of benefits, including company car or car allowance, pension, private medical insurance, lump sum life insurance for death in service and income protection insurance for long term disability.
One third of the total gross bonus awarded will be deferred into Company shares for a two year period and a clawback provision will operate in respect of the deferred portion of bonus in the event that results have been shown to be materially inaccurate. For 2011/12 the annual bonus arrangement for the Executive Directors will be structured as follows:
Key performance area Weighting
The Committee believes that the blend of EPS and TSR targets provides an appropriate balance between incentivising and rewarding good financial performance on the one hand whilst, on the other hand, providing a strong and direct alignment with the interests of institutional shareholders by rewarding stock market outperformance.
Punch Long Term Incentive Plan 2008 (Punch LTIP)
Group financial performance Performance of individuals own business area or function and their overall personal contribution to the business
75% 25%
The bonus is structured to pay modest bonus levels for meeting the annual business plans and higher levels of bonus are payable for outperformance. The maximum annual bonus is 150% of base salary for the Chief Executive Officer and 100% for the Finance Director. For any bonus to be payable under the individual targets, at least threshold profit performance must have been achieved. One third of the total gross bonus awarded will be deferred into Company shares for a two year period and a clawback provision will operate in respect of the deferred portion of bonus in the event that results have been shown to be materially inaccurate.
At demerger, all outstanding long term incentive awards held by Spirit employees under the Punch LTIP (including Ian Dysons recruitment award) were adjusted to keep individuals awards whole and ensure that awards continue to vest post demerger as normal. Consistent with the treatment of shareholders in Punch at demerger, each award over Punch shares became an award over a combined number of Punch and Spirit shares. TSR targets, which tracked the performance of Punch up to the demerger, will track the TSR performance of the Spirit share price thereafter. Further details of the outstanding awards granted under the Punch LTIP are set out within the audited section of this report.
Spirit Share Bonus Plan 2011
The Spirit Share Bonus Plan, which was introduced at demerger and replicates the Punch Share Bonus Plan, enables the Committee to award part or all of any annual bonus in the form of the Companys shares, which the recipient is not permitted to sell during a restricted period (normally two years). As stated above, the current deferral policy is for one third of any bonus paid to be deferred into Company shares for a two year period.
Annual Report 2011
41
Governance
Long term incentive awards will be granted under the Companys Long Term Incentive Plan which effectively replicates the arrangement operated by Punch. The initial awards are expected to be granted in November 2011, and annually thereafter, and the key terms of the arrangement are as follows: Pension Consistent with pre-existing arrangements prior to demerger, it is intended that awards granted to the Executive Directors will be made over shares worth a maximum Executive Directors are entitled to receive a defined of 150% of base salary; contribution to pension from the Group of 25% of base in exceptional circumstances, the maximum award which salary for the Chief Executive Officer and 20% for the other may be granted to an individual in any financial year is Executive Directors. As they elected not to join the Groups 200% of base salary (as operated by Punch prior to the Pension Scheme, the Company makes this payment to demerger); Ian Dyson and Mike Tye in lieu of a contribution to the Groups an award will be subject to a range of earnings per share Pension Scheme. The payment to Russell Margerrison growth targets and a total shareholder return (TSR) however is paid directly by the Company into his personal condition, each applying to a separate 50% of an award pension plan. and measured over a period of three years; for the EPS part of the award, 25% will vest for EPS growth Annual bonus of 7% p.a. compound increasing to 50% vesting for EPS For 2010/11 Executive Directors participated in the annual growth of 10% p.a. increasing to 100% vesting for EPS bonus arrangements which had previously been established growth of 15% p.a; and by Punch and had subsequently been adopted by the Committee. These arrangements were structured as follows: for the TSR part of the award, the condition will be based on the Companys performance against FTSE 250 Key performance area Weighting companies (excluding financial service sector companies and investment trusts) as at the date of grant. 25% of this Group financial performance 75% part of an award will vest if Spirits TSR is equal to the Performance of individuals own business area median TSR of the group of companies, with full vesting or function (for the Chief Executive Officer this is for upper quartile TSR performance. A sliding scale will the Group as a whole); and their overall personal operate between these points. contribution to the business 25%
Long Term Incentive Plan 2011 (LTIP)

Spirit Growth Value Plan (SGVP)
A specific long term incentive plan was approved by the Punch remuneration committee in accordance with Listing Rule 9.4.2 to facilitate the recruitment and retention of Mike Tye and transferred across to Spirit with Mike Tye upon demerger. The SGVP was intended to align the performance of the Managed business and the remuneration of Mike Tye to assist in driving performance of the Managed business over the three years from 2008. The SGVP required a hurdle growth rate of 6% compound for the award to vest. Following demerger a formal valuation was carried out and the required growth rate was not achieved. Accordingly the Committee determined that no award or payments should vest.
Dilution
In accordance with shareholder guidelines, the Committee applies a limit on the amount of shares that can be issued to satisfy all of its employee share plan awards of 10% of the Companys issued share capital in any rolling ten year period. Of this 10%, only half can be issued to satisfy awards under the discretionary arrangements. At demerger, shareholder approval was obtained to equitably divide Punchs historic dilution between Punch and Spirit based upon whether holders of awards were to be employed by Punch or Spirit post demerger. Accordingly, the Companys current dilution position is as follows:
Limit Current dilution level
10% in ten years 5% in ten years
1.45% 1.45%
Shareholding requirement
The Committee requires that all Executive Directors who participate in the Companys LTIP satisfy a minimum shareholding requirement within five years of appointment to the Board. Targets are set to encourage Executive Directors to retain shares received from share incentive schemes. The table below shows the shareholding requirement for Executive Directors, and their current personal shareholding.
Shareholding requirement (% of base salary) Current shareholding (% of base salary)
Name
Position
To be achieved by
Ian Dyson Mike Tye
Chief Executive Officer Deputy Chief Executive Officer
150% August 2015 150% August 2013
29% 34%
The shareholding requirement for the permanent position of Finance Director is 100% of salary and this will apply to Paddy Gallagher when he joins. This is to be achieved by November 2016. NB. These guidelines do not apply to interim roles.
All employee share arrangements
The Group introduced an HMRC Approved Share Incentive Plan (SIP) at demerger with the intention of operating the arrangement from 2011/12 onwards.
Directors contracts
The policy on termination is that the Group does not make payments beyond its contractual obligations. In addition, Executive Directors will be expected to mitigate their loss. The Committee ensures that there have been no unjustified payments for failure. None of the Executive Directors contracts provides for liquidated damages. There are no special provisions contained in any of the Executive Directors contracts which provide for longer periods of notice on a change of control of the Company. Further, there are no special provisions providing for additional compensation on an Executive Directors cessation of employment with the Group.
Executive Directors Company notice period Unexpired term of contract (months) Potential payment on change of control/liquidation
Contract date
Potential termination payment
Ian Dyson Mike Tye Russell Margerrison Paddy Gallagher
12 months 12 months 3 months 12 months
5 May 2010 26 June 2008 8 June 2011 7 November 2011
Rolling contract1 Rolling contract1 Rolling contract1 Rolling contract1
12 months salary and benefits 12 months salary and benefits 3 months salary and benefits 12 months salary and benefits
Nil Nil Nil Nil
1 Contract will continue until terminated by notice either by the Company or the Director.
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Annual Report 2011
Directors contracts continued
Subject to Board approval, Executive Directors are permitted to accept outside appointments on external boards or committees as long as these are not deemed to interfere with the business of the Company. Any fees received in respect of these appointments, which are disclosed as a footnote to the Directors emoluments table, are retained by the Executive Directors concerned, with the exception of Ian Dysons fee for his Non-executive appointment at Punch which is paid to the Company.
Company notice period Date of appointment Unexpired term of contract (months)
Non-executive Directors
Walker Boyd Mark Pain Tony Rice Christopher Bell
6 months 1 month 1 month 1 month
4 July 2011 4 July 2011 4 July 2011 1 August 2011
33 33 33 34
Non-executive Directors fees
Non-executive Directors have specific terms of engagement and their remuneration is determined by the Board based upon recommendations from the Chairman and Chief Executive Officer (or, in the case of the Chairman, is determined by the Committee based on recommendations from the Senior Independent Non-executive Director and the Chief Executive Officer) within the limits set by the Companys Articles of Association and based on the median level of fees payable to peers in the same comparator group as that used for Executive Directors remuneration. Non-executive Directors cannot participate in any of the Groups share incentive schemes or performance based plans and are not eligible to join any of the Groups pension schemes. It is the Boards policy to take into account the following factors in determining the fees of the Non-executive Directors: the median level of fees for similar positions in the market; and the time commitment each Non-executive Director makes to the Group (through membership of the Audit & Risk, Remuneration and Nomination & Governance Committees). The following table sets out the current Non-executive fees:
Role Fee
Chairman Base fee Senior Independent Director Additional fee for chairing the Audit & Risk or Remuneration Committee
180,000 42,000 3,000 10,000
NB. The Chairman chairs the Nomination & Governance Committee and does not receive further remuneration for this role.
Total shareholder return performance graph
The graph below shows the Companys performance, measured by total shareholder return (TSR), compared with the FTSE 250 Index (excluding investment trusts). The Committee considers this index to be appropriate as it is a broad equity index of which the Company is a constituent.
Total shareholder return

130 120 110 100 90 80 70 Spirit Pub Company plc FTSE 250 (excluding investment trusts) Source: Thompson Datastream 1 August 2011 20 August 2011
This graph shows the value, by 20 August 2011, of 100 invested in Spirit Pub Company plc on 1 August 2011 (the first day of trading in Spirit shares) compared with the value of 100 invested in the FTSE 250 Index (excluding investment trusts).
Annual Report 2011
43
Governance

Share price
The share price at the close of business on 20 August 2011 was 0.415. During the period the highest share price was 0.550, and the lowest was 0.365.
Succession arrangements
The Board announced on 20 October 2011 that Mike Tye will succeed Ian Dyson as Chief Executive Officer following the AGM on 16 December 2011. The key terms of Mike Tyes appointment are: base salary 475,000; bonus maximum 150%; pension 25% of base salary; and LTIP 2011 grant to be 200% of salary; thereafter reverting to a range of 80% to 150% of salary p.a. Ian Dysons departure will take effect on 16 December 2011. He will receive a payment equivalent to half of his annual salary plus benefits at that time and another payment equivalent to half his salary and benefits in early April 2012. This is in line with his contract of employment. He will not receive any bonus for the period 21 August 2011 to 16 December 2011 and will forgo the above payments if he has accepted another role by the relevant date of payment. His long term incentive awards will be time pro rated to the date of his departure and only vest on the normal dates if the performance targets have been met. If Ian Dyson joins a competitor within 12 months of leaving the Company his good leaver status on these LTIPs will lapse.
In accordance with the Companies Act 2006, Spirit Pub Company plc is required to present the Directors Remuneration from incorporation on 8 June 2011 through to 20 August 2011. All Directors, with the exception of Christopher Bell, were paid by the Company with effect from 4 July 2011. The following sections of this report have been subject to audit.
Basic salary / fees 000 Benefits1 000 Bonus 000 Pension 000 Total 000
Chairman Walker Boyd Executive Directors Ian Dyson2 Mike Tye Russell Margerrison Non-executive Directors Tony Rice Mark Pain Christopher Bell6 Total
24 89 54 33 7 7 2 216
3 2 2 7
6753 4924 375 1,204
22 11 7 40
24 789 559 79 7 7 2 1,467
1 Benefits include the following elements; medical insurance, car or car allowance, fuel, death in service and income protection. 2 Ian Dyson also receives 65,000 per annum for his Non-executive Directorship at Betfair. 3 Bonus payment covers the period from 6 September 2010 to 20 August 2011. 4 Bonus payment covers the period from 22 August 2010 to 20 August 2011. 5 Bonus payment covers the period from 8 June 2011 to 20 August 2011. 6 Joined the Board on 1 August 2011.
Bonus payments made were in line with the annual bonus plan and reflect the strong results disclosed in these financial statements; namely: EBITDA1 up 7% to 140m (2010 131m); profit before tax1 up 17% to 48m (2010 41m); earnings per share1 up 18% at 5.3p (2010 4.5p); net cash flow of 48m, after 78m investment spend; net debt2 at 704m: net debt to EBITDA of 5.0 times; and securitisation DSCR increased to 1.7 times; cash upstream now permitted.
1 Before non underlying items. 2 Before fair value adjustments and finance leases.
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Annual Report 2011
Pension
During the period Ian Dyson, Mike Tye and Russell Margerrison received a Group contribution into their personal pension arrangements representing up to 25% of their pensionable salary. The payments were made to Ian Dyson and Mike Tye in lieu of a contribution to the Groups Pension Scheme as they have elected not to join the Groups Pension Scheme. The payment to Russell Margerrison was paid into his personal pension plan.
Directors interests in the Punch Long Term Incentive Plan (Punch LTIP)
At demerger, all outstanding share awards under the Punch LTIP (including Ian Dysons recruitment award) were adjusted so that every LTIP award became an award over a combined number of Punch and Spirit shares. At the general meeting of Punch held on 26 July 2011, shareholder approval was obtained to disapply time pro rating of Punch LTIP awards made to employees who transferred to Spirit and to amend the TSR performance targets. This meant that employees who continued to be employed by Spirit may therefore retain their awards until the normal vesting date instead of having their award time pro rated as a result of leaving Punch. However, if an employee ceases to be employed by Spirit under good leaver status, before the normal vesting date of the award the number of shares subject to the award will be time pro rated by reference to the date the employee ceases to be employed. If an employee leaves Spirit before the normal vesting date of the award as a bad leaver, the number of shares subject to the award will be time pro rated by reference to the date of completion of the demerger. If an Executive Director who transferred to Spirit leaves Spirit prior to the normal vesting date of their awards, other than as a good leaver, their awards will lapse in their entirety. The following table sets out the awards made under the Punch LTIP.
Punch share awards granted during the period 22 August 2010 to 31 July 2011
Executive Directors
Date of award
Date of release
Punch share price at date of award ()
Percentage of salary at date 000 of award
Punch share awards lapsed during the period
Gain on release 000
Ian Dyson Total Mike Tye
13.10.10 19.11.10 07.07.08 10.11.08 16.10.09 19.11.10
05.05.13 19.11.13 07.07.11 10.11.11 16.10.12 19.11.13
0.84 0.58 2.71 1.66 0.9 0.58
Total Russell Margerrison Total
299,954 488,950 888,888 1,677,792
2,026 1,350 800 799 800 500
300 200 200 200 200 125
2,412,150 2,323,580
299,954 860,585
2,412,150 2,323,580 4,735,730 488,950 888,888 860,585 2,238,423 442,008 442,008
2,412,150 2,323,580 4,735,730 888,888 860,585 1,749,473 442,008 442,008
11.07.11
11.07.14
0.71
312
125
442,008
1 Adjustment made to each individual holding in accordance with the demerger dividend of one share in Spirit Pub Company plc for every share held in Punch Taverns plc on 1 August 2010. Awards granted in 2008 were not hedged by Punch and failed to meet their performance targets and did not therefore benefit from the demerger dividend.
All outstanding Punch LTIP awards up to the point of demerger were measured by Punchs TSR against the median level of performance of the comparator groups TSR over the three year holding period from the date of grant. Since demerger, the awards (for Spirit employees) track the TSR performance of Spirit. Awards will vest (or become exercisable, in the case of the 2010 LTIP awards) three years from the date of grant, subject to continued employment and the extent to which the TSR performance targets have been met over the three year performance period. This report has been prepared by the Remuneration Committee and has been approved by the Board. It complies with the Companies Act 2006 and related regulations. This report will be put to shareholders for approval at the forthcoming AGM.
Annual Report 2011
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Governance
Number of share awards as at 21 August 2010 000
Total number of Punch share awards as at 31 July 2011
Spirit shares added to Punch share awards on demerger1
Governance
Statement of Directors responsibilities in relation to the financial statements

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable United Kingdom law and International Financial Reporting Standards (IFRS) as adopted by the European Union. The Directors are required to prepare financial statements for each financial period which fairly present the financial position of the Company and of the Group and the financial performance and cash flows of the Company and of the Group for that period. In preparing those financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entitys financial position and financial performance; and state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Directors responsibility statement
The Directors confirm that to the best of their knowledge: a) the financial statements prepared in accordance with IFRS, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the Group; and b) the Business Review on pages 1 to 27 includes a fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties faced. On behalf of the Board
Mike Tye
Deputy Chief Executive Officer 31 October 2011
Interim Finance Director 31 October 2011
Russell Margerrison
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Annual Report 2011
Financial statements
Contents for the consolidated financial statements and notes to the financial statements
Page no
Consolidated income statement Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity Consolidated cash flow statement Company balance sheet Company statement of changes in equity Company income statement Company cash flow statement 1. Accounting policies 2. Segmental analysis 3. Analysis of expenses 4. Finance income 5. Finance costs 6. Non-underlying items 7. Employees and directors 8. Taxation 9. Earnings per share 10. Dividends 11. Property, plant and equipment 12. Goodwill, operating leases and other intangible assets 13. Impairment losses 14. Investments in subsidiary undertakings and joint ventures 15. Trade and other receivables 16. Deferred tax 17. Inventories 18. Cash 19. Non-current assets classified as held for sale 20. Trade and other payables 21. Borrowings 22. Financial instruments 23. Provisions 24. Share capital 25. Net debt 26. Pensions and other post-retirement benefits 27. Operating lease commitments minimum lease payments 28. Capital and other financial commitments 29. Related party transactions 30. Contingent liabilities and assets 31. Post balance sheet events Independent auditors report to the members of Spirit Pub Company plc Four year financial record Financial glossary Company information Advisers
48 49 50 51 52 53 54 54 54 55 62 65 65 66 66 67 67 68 69 69 70 71 72 73 73 75 75 75 75 75 80 84 84 85 86 91 91 92 93 93 94 96 97 99 100
Annual Report 2011
47
Consolidated income statement

for the 52 weeks ended 20 August 2011
Notes
52 weeks to 20 August 2011 Nonunderlying Underlying items items (note 6) Total m m m
52 weeks to 21 August 2010 (unaudited) Nonunderlying Underlying items items (note 6) Total m m m
Revenue Operating costs before depreciation and amortisation EBITDA1 Depreciation and amortisation Impairment charge Goodwill charge Profit on sale of non-current assets Operating profit / (loss) Finance income Finance costs Movement in fair value of interest rate swaps Profit / (loss) before taxation UK income tax (charge) / credit Profit / (loss) for the financial period attributable to owners of the parent company Earnings / (loss) per share Basic (pence) Diluted (pence)
734.4 (594.8) 139.6 (34.8) 104.8 23.7 (80.4) 48.1 (13.1) 35.0
(21.4) (21.4) (75.4) (10.1) 3.9 (103.0) 5.1 (138.1) (18.7) (254.7) 70.0 (184.7)
734.4 (616.2) 118.2 (34.8) (75.4) (10.1) 3.9 1.8 28.8 (218.5) (18.7) (206.6) 56.9 (149.7)
724.0 (593.0) 131.0 (32.8) 98.2 19.6 (76.8) 41.0 (11.6) 29.4
(27.0) (27.0) (23.2) 1.3 (48.9) 50.8 (159.0) (46.8) (203.9) 31.5 (172.4)
724.0 (620.0) 104.0 (32.8) (23.2) 1.3 49.3 70.4 (235.8) (46.8) (162.9) 19.9 (143.0)
3 4 5 6 8
9 5.3 5.3 (22.7) (22.7) 4.5 4.5 (21.7) (21.7)
1 EBITDA represents earnings before depreciation and amortisation, impairment, profit on sale of non-current assets, finance income, finance costs, movement in fair value of interest rate swaps and tax of the Group.
48
Annual Report 2011
Consolidated statement of comprehensive income

52 weeks to 20 August 2011 Notes m Unaudited 52 weeks to 21 August 2010 m
Loss for the period attributable to owners of the parent company Actuarial (losses) / gains on defined benefit pension schemes Tax credit / (charge) relating to components of other comprehensive income Other comprehensive (losses) / gains for the period Total comprehensive loss for the period attributable to owners of the parent company
26 8
(149.7) (7.9) 2.2 (5.7) (155.4)
(143.0) 27.9 (7.8) 20.1 (122.9)
Annual Report 2011
49
Financial statements at 20 August 2011
Consolidated balance sheet
Notes
20 August 2011 m
Unaudited 21 August 2010 m
Unaudited 22 August 20091 m
Assets Non-current assets Property, plant and equipment Operating leases Goodwill Amounts owed by related parties Deferred tax assets Current assets Inventories Trade and other receivables Non-current assets classified as held for sale Cash and cash equivalents
11 12 12 15 16
1,714.2 54.8 216.8 58.8 2,044.6 7.2 30.5 4.2 139.6 181.5 2,226.1
1,718.0 73.8 227.2 193.9 16.8 2,229.7 7.7 27.7 37.2 37.9 110.5 2,340.2
1,768.2 78.0 231.2 247.1 31.1 2,355.6 7.5 31.8 29.2 73.4 141.9 2,497.5
17 15 19 18
Total assets Liabilities Current liabilities Trade and other payables Amounts owed to related parties Borrowings Derivative financial instruments Provisions Non-current liabilities Borrowings Subordinated loans owed to related parties Derivative financial instruments Retirement benefit obligations Provisions Amounts owed to related parties Other liabilities
20 29 21 22 23
(159.6) (6.4) (5.6) (24.7) (20.2) (216.5) (889.5) (136.3) (9.4) (63.4) (1,098.6) (1,315.1) 911.0
(130.1) (18.0) (5.9) (19.1) (20.0) (193.1) (920.5) (1,052.2) (128.5) (13.9) (57.9) (500.5) (1.1) (2,674.6) (2,867.7) (527.5)
(136.4) (16.9) (6.5) (19.4) (20.2) (199.4) (1,061.9) (906.7) (83.8) (45.9) (44.6) (558.1) (1.7) (2,702.7) (2,902.1) (404.6)
21 22 22 26 23 29
Total liabilities Net assets / (liabilities) Equity Called up share capital Other reserves Share based payment reserve Retained earnings Total equity attributable to owners of the parent company On behalf of the Board Mike Tye 31 October 2011
50
24
6.6 1,587.2 0.1 (682.9) 911.0
6.6 (6.6) (527.5) (527.5)
6.6 (6.6) (404.6) (404.6)
1 As these are the Companys first consolidated accounts, the balance sheet for 22 August 2009 has been presented in accordance with IFRS 1.
Russell Margerrison 31 October 2011

Annual Report 2011
Consolidated statement of changes in equity

Share capital m Other reserve m Share based payment reserve2 m Retained earnings m Total equity m
Total equity at 22 August 2009 (unaudited) Loss for the period Other comprehensive gains for the period Total comprehensive loss for the period attributable to owners of the parent company Total equity at 21 August 2010 (unaudited) Loss for the period Other comprehensive losses for the period Total comprehensive loss for the period attributable to owners of the parent company Share based payment expenses Capital contribution1 Total equity at 20 August 2011
6.6 6.6 6.6
(6.6) (6.6) 1,593.8 1,587.2
0.1 0.1
(404.6) (143.0) 20.1 (122.9) (527.5) (149.7) (5.7) (155.4) (682.9)
(404.6) (143.0) 20.1 (122.9) (527.5) (149.7) (5.7) (155.4) 0.1 1,593.8 911.0
1 During the period, and prior to the demerger, the Punch Taverns group undertook a group reorganisation resulting in a capital contribution of 1,533m being recognised. A further capital contribution was recognised on receipt of 61m cash, from Punch, as part of the demerger terms (as described in note 1 to the financial statements). 2 The share based payment reserve reflects the costs of the share based payment schemes, of Punch Taverns plc, for Spirit employees from 1 August 2011. Following demerger, a number of Spirit employees remain members of the Punch Taverns plc Long Term Incentive Plan 2008. The benefits accrued under this scheme in relation to Spirit employees are recognised as an expense in the period in which services are provided to the Group. Prior to the demerger these costs were recharged to the Group as part of a management services expense within operating costs.
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51
Consolidated cash flow statement

52 weeks to 20 August 2011 m
Unaudited 52 weeks to 21 August 2010 m
Cash flows from operating activities Operating profit Depreciation and amortisation Impairment Goodwill charge Profit on sale of non-current assets Share based payment expensed recognised in profit Decrease / (increase) in inventories Decrease / (increase) in trade and other receivables Increase / (decrease) in trade and other payables Difference between pension contributions paid and amounts recognised in operating profit Increase in provisions and other liabilities Cash generated from operations Income tax received Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of other non-current assets held for sale Interest received Net cash used in investing activities Cash flows from financing activities Cash received from Punch under demerger terms Repayment of borrowings Interest paid Repayments of obligations under finance leases Net cash used in financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
1.8 34.8 75.4 10.1 (3.9) 0.1 0.5 2.3 41.1 (9.3) 5.7 158.6 158.6
49.3 32.8 23.2 (1.3) (0.2) (3.6) (30.7) (3.4) 25.9 92.0 6.5 98.5
(77.6) 6.9 22.4 2.0 (46.3)
(66.8) 43.8 18.7 0.1 (4.2)
73.0 (18.8) (64.6) (0.2) (10.6) 101.7 37.9 139.6
(61.4) (68.3) (0.1) (129.8) (35.5) 73.4 37.9
52
Annual Report 2011
Company balance sheet

at 20 August 2011
Notes
20 August 2011 m
Assets Non-current assets Investments in subsidiary undertakings Current assets Cash and cash equivalents Total assets Total liabilities Net assets Shareholders equity Called up share capital Merger reserve Share based payment reserve Retained earnings Total shareholders equity On behalf of the Board Mike Tye 31 October 2011 Russell Margerrison 31 October 2011
14
336.4
18
0.1 336.5 336.5
24
6.6 329.8 0.1 336.5
Annual Report 2011
53
Company statement of changes in equity

for the period 8 June 2011 to 20 August 2011
Share capital m
Other reserve m
Share based payment reserve m
Retained earnings m
Total equity m
Profit for the period Share capital issued on acquisition of the Spirit Pub Company businesses Share based payments Total equity at 20 August 2011
6.6 6.6
329.8 329.8
0.1 0.1
336.4 0.1 336.5
On 1 August 2011, the Company issued 659,655,957 ordinary shares of 1 pence each at a premium of 50 pence per share, to Punch Taverns plc, in return for the receipt of the entire share capital of Spirit Pub Company (Holdco) Limited. The share based payment reserve reflects the costs of share based payment schemes, of Punch Taverns plc, for Spirit employees from 1 August 2011.
Company income statement

As permitted by section 408 of the Companies Act 2006, the Companys income statement has not been included in these financial statements. The Companys profit for the period from incorporation to 20 August 2011 amounted to nil.
Company cash flow statement

8 June 2011 to 20 August 2011 m
Cash flows from operating activities Operating profit Share based payment expense recognised in profit Cash generated from operations Income tax paid Net cash flow from operating, investing and financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
0.1 0.1 0.1 0.1 0.1
54
Annual Report 2011
Notes to the financial statements

1. Accounting policies
Basis of preparation The consolidated financial statements presented in this document have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Companys financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes. These are the first set of consolidated financial statements of Spirit Pub Company Plc. The financial statements have been presented as a continuation of the Spirit Pub Company business, which was previously wholly owned by the Punch Taverns group. The Spirit Pub Company business has not previously prepared consolidated financial statements in accordance with EU IFRS. As such, these financial statements represent its first EU IFRS financial statements and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. After applying IFRS 1, the assets and liabilities of the Group are not materially different to the assets and liabilities reported in its subsidiaries previously reported financial statements under UK GAAP (their previous GAAP). Business combinations made by the continuing Group since 21 August 2005 have been accounted for under IFRS 3 (Revised) Business Combinations on conversion to IFRS. As a consequence, goodwill recorded at 22 August 2009, the Groups IFRS transition date, is different to the goodwill previously recorded in the Punch Taverns plc consolidated financial statements at the same date because transaction costs that were included in goodwill (calculated using IFRS 3(2004)) in the Punch Taverns plc consolidated financial statements have been expensed as incurred under IFRS 3 (Revised). Since no consolidated financial statements were previously prepared for the Spirit Pub Company business, no reconciliation to previous GAAP has been presented. The financial statements are prepared under the historical cost convention, as modified by the revaluation of derivative financial instruments to fair value, and in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS as adopted by the European Union. New standards and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) becoming effective during the year have not had a material impact on the Groups financial statements. The financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Directors are of the opinion that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future, and feel it appropriate to adopt the going concern basis in preparing this Annual Report and Financial Statements. Further information in relation to the Groups business activities, together with the factors likely to affect its future development, performance and position is set out in the Operational review on pages 12 to 15 and Our key risks and uncertainties on pages 25 to 27. The financial position of the Group, its cash flows, liquidity position and borrowings are described in the Financial review on pages 22 to 23 and in notes 18, 21 and 22, together with information on the Groups strategies surrounding managing interest rate risk, liquidity risk, capital risk and credit risk. The Group and Company financial statements are presented in sterling and all values are rounded to the nearest million, except where indicated. Group reorganisation and demerger The Spirit Pub Company business was demerged from the Punch Taverns group with effect from 1 August 2011. As a result of the demerger, the Spirit Pub Company business was transferred to a new ultimate parent company, Spirit Pub Company plc. Punch shareholders received one share in Spirit for each ordinary share in Punch that they held at the demerger record date. Punch shareholders continue to own their existing Punch shares. The Spirit Pub Company business comprises a number of companies which were subsidiaries of Punch Taverns plc prior to the demerger, including the pub operating companies Spirit Pub Company (Managed) Limited, Spirit Pub Company (Leased) Limited and Spirit Pub Company (Trent) Limited. A new company, Spirit Pub Company plc, was formed to become the parent company of the group to be demerged.
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55

1. Accounting policies continued
On 30 June 2011 the Punch Taverns plc group was reorganised such that all of the Spirit Pub Company businesses were acquired by Spirit Pub Company (Holdco) Limited. On the same date, it was agreed that certain tax reliefs and allowable capital losses would be reallocated between various members of the Spirit Group and the Punch Taverns group and on 5 July 2011 an amount of 12 million cash was transferred in respect of that allocation to the Spirit Group. On 1 July 2011, an amount of 61 million cash was transferred to the Spirit Group by the Punch Taverns group as part of the cash allocation agreed prior to demerger. Prior to the demerger, the Punch Taverns plc group undertook a group reorganisation resulting in intercompany debt being written down to market value and resulting in a 1,533 million capital contribution being recognised in the accounts. At the date of the demerger, Spirit Pub Company plc acquired the entire issued share capital of Spirit Pub Company (Holdco) Limited in return for issuing shares to shareholders in Punch Taverns plc. The formation of a new holding company, Spirit Pub Company plc, prior to demerger was not a business combination involving a third party and, as such, the financial statements of Spirit Pub Company plc have been presented as a continuation of the Spirit Pub Company (Holdco) group. To do so, the principles of reverse acquisition accounting in IFRS 3 have been applied. New standards, interpretations and amendments to existing standards The IASB and IFRIC have issued and endorsed the following standards, interpretations and amendments: Effective for the Group and the Company in these financial statements: Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards Amendments to IFRS 2 Share-Based Payment Amendments to IFRS 3 Business Combinations Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Amendments to IFRS 8 Operating Segments Amendments to IAS 1 Presentation of Financial Statements Amendments to IAS 7 Statement of Cash Flows Amendments to IAS 17 Leases Amendments to IAS 27 Consolidated and Separate Financial Statements Amendment to IAS 32 Financial Instruments: Presentation Amendments to IAS 36 Impairment of Assets Amendments to IAS 39 Financial Instruments: Recognition and Measurement IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The above new standards, interpretations and amendments to published standards have had no material impact on the results or the financial position of the Group or the Company for the 52 weeks ended 20 August 2011.
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Annual Report 2011

Effective for the Group and the Company for future years: Effective date 1 January 2011: IAS 24 Related Party Disclosures (revised 2009) Prepayments of a Minimum Funding Requirement (Amendments to IFRIC 14) IFRS 1 First-time Adoption of IFRSs Improvements to IFRSs 2010 IFRS 7 Financial Instruments: Disclosures Improvements to IFRSs 2010 IAS 1 Presentation of Financial Statements Improvements to IFRSs 2010 IAS 34 Interim Financial Reporting Improvements to IFRSs 2010 IFRIC 13 Customer Loyalty Programmes Effective date 1 July 2011: Disclosures Transfers of Financial Assets (Amendments to IFRS 7) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS 1) Effective date 1 January 2012: Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12) Effective date 1 July 2012: Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) Effective date 1 January 2013: IFRS 9 Financial Instruments IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IAS 19 Employee Benefits (amended 2011) IAS 27 Separate Financial Statements (2011) IAS 28 Investments in Associates and Joint Ventures (2011) The amendments to published standards that have an effective date of after these financial statements have not been adopted early by the Group and the Directors do not anticipate that the adoption of this amendment will have a material impact on the Groups reported income or net assets in the period of adoption.
The Groups interest in its joint venture is incorporated in the financial statements using the equity method of accounting. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Investments in subsidiaries are carried at cost less any impairment in value in the financial statements of the Company. Investments in joint ventures are carried at cost plus post-acquisition changes in the Groups share of accumulated comprehensive income, less distributions received and less any impairment in value. All intra-group balances and transactions, including unrealised profits arising from intra-group transactions, are eliminated in full. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.
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Basis of consolidation Consolidated financial statements comprise the financial statements of the Company and its subsidiary undertakings.

for the 52 weeks ended 20 August 2011 continued
Goodwill Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the fair value of the Groups share of the identifiable assets, liabilities and contingent liabilities. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Where assets are transferred between segments or disposed, the goodwill attributable to these assets is also transferred or charged to the income statement respectively. Goodwill carried in the balance sheet is not amortised. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. If the cost of acquisition is less than the fair value of the net identifiable assets, liabilities and contingent liabilities of the subsidiary acquired, the gain is recognised immediately in the income statement. Operating leases and other intangible assets The fair values attached to operating head leasehold interests on acquisitions are deemed to represent lease premiums, and are carried as intangible assets. These operating leases together with other intangible assets are capitalised at cost. Payments made on entering into or acquiring operating leases are accounted for as intangible assets and amortised over the lease term on a straight-line basis. Property, plant and equipment Landlords fixtures and fittings include removable items, which are generally regarded as within landlord ownership. These are depreciated in accordance with the policy detailed below. Property, plant and equipment assets are carried at cost or deemed cost less accumulated depreciation and any recognised impairment in value. Depreciation is provided to write off the cost of property, plant and equipment, less estimated residual values, by equal annual instalments as follows: Licensed properties, unlicensed properties and owner-occupied properties 50 years or the life of the lease if shorter Landlords fixtures and fittings, office furniture and fittings and motor vehicles 5 to 15 years Information technology equipment 3 years Freehold land is not depreciated. An annual assessment of residual values is performed and there is no depreciable amount if residual values are the same as, or more than, book value. Residual values are based on the estimated amount that would be currently obtainable from disposal of the asset net of disposal costs if the asset were already of the age and condition expected at the end of its useful life.
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Annual Report 2011

Impairment Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment and if events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. A review for indicators of impairment is performed annually. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. Any impairment charge is recognised in the income statement in the year in which it occurs. When an impairment loss, other than an impairment loss on goodwill, subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, up to the carrying amount that would have resulted, net of depreciation, had no impairment loss been recognised for the asset in prior years. Provisions Provisions are recognised when the Group has a present legal or constructive obligation to transfer economic resources as a result of past events. Provisions are measured at managements best estimate of the expenditure required to settle the present obligation at the balance sheet date. Provisions are discounted if the effect of the time value of money is material. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. Borrowings All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowings. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated taking account of any issue costs, and any discounts or premiums on settlement. Gains and losses are recognised in the income statement when the liabilities are derecognised, as well as through the amortisation process. Equity instruments Equity instruments issued by the Company are recorded at the fair value of the proceeds, net of direct issue costs.
Deferred tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts except where the deferred tax liability arises from the initial recognition of goodwill or where the deferred tax asset or liability arises on an asset or liability in a transaction which is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised. Deferred tax is calculated using tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Movements in deferred tax are charged or credited in the income statement, except where they relate to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. For properties acquired as part of a business combination, movements in the deferred tax liability resulting from indexation allowance are taken to the income statement until the tax base cost plus indexation allowance reaches the fair value on acquisition, and directly to equity thereafter for historic revaluation surpluses. Deferred tax balances are not discounted.
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Taxation Income tax expense comprises both the income tax payable, based on taxable profits for the year, and deferred tax.

Leasing Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments. A corresponding liability is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between the finance charges and reduction of the lease liability to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Payments made on entering into or acquiring operating leases are accounted for as intangible assets and amortised over the lease term on a straight-line basis. Pensions The Group operates two defined benefit schemes which require contributions to be made to separately administered funds. The asset or liability recognised in the balance sheet in respect of the Groups defined benefit arrangements is the difference between the fair value of scheme assets and the present value of scheme liabilities. Any defined benefit assets are limited to the total of any unrecognised past service costs and the present value of economic benefits in the form of any future refunds from the plan or reductions in future contributions to the plan. The cost of providing benefits under the plans is determined separately for each plan using the projected unit credit actuarial method. The current service cost is charged to operating profit. The interest cost and the expected return on assets are shown as a net amount within finance income or finance expense. The cumulative net deficits on these defined benefit pension schemes have been recognised in full in equity at the date of transition to IFRS and subsequent actuarial gains and losses are recognised in full as they occur in the statement of comprehensive income. The Group also contributes to money purchase pension plans for employees. Contributions are charged to the income statement as they become payable. Accounting for derivative financial instruments and hedging activities The Group uses derivative financial instruments such as interest rate swaps to hedge its risk associated with interest rate fluctuations. Such derivative financial instruments are initially accounted for and subsequently remeasured to fair value. The fair value of the interest rate swap contracts is determined by reference to market values for similar instruments. Changes in fair value of any derivative financial instruments that do not qualify for hedge accounting are recognised immediately in the income statement. Revenue Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and VAT. All operations take place solely in the United Kingdom. Drink and food sales Revenue in respect of drink and food sales is recognised at the point at which the goods are provided, net of any discounts or volume rebates allowed. Rents receivable Rents receivable are recognised on a straight-line basis over the lease term. Other income Other income includes the Groups share of net machine income which is recognised in the period to which it relates; revenue in respect of hotel rooms is recognised at the time of the guest visit.
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Annual Report 2011

Trade and other receivables Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amount. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Receivables are written off against the doubtful debt provision when management deems the debt to be no longer recoverable. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less. Inventories Inventories are valued at the lower of cost (calculated on a first in first out basis) and net realisable value. Non-current assets held for sale Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell and are not depreciated. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale and completion should be expected within one year from the date of classification. Dividend distribution Final dividends are recognised as a liability in the Groups and the Companys financial statements in the period in which the dividends are approved by the Companys shareholders. Interim dividends are recognised when they are paid. Non-underlying items In order to provide a trend measure of underlying performance, profit is presented excluding items which management consider will distort comparability, either due to their significant non-underlying nature or as a result of specific accounting treatments. Further detail on the nature of non-underlying items is included in note 6. Significant accounting estimates and judgements The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Management bases its estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions. The estimates and judgements that have a significant effect on the amounts recognised in the financial statements are detailed below. Goodwill impairment The Group assesses whether goodwill is impaired on at least an annual basis. The recoverable amounts of the cash generating units (CGUs) to which goodwill has been allocated is determined based on value in use calculations. These calculations require assumptions to be made regarding future cash flows and the choice of a suitable discount rate in order to calculate the present value of those cash flows. These assumptions are disclosed in note 13. Actual outcomes could vary from these estimates.
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On an ongoing basis, management evaluates its estimates and judgements including those relating to income taxes, deferred tax, financial instruments, property, plant and equipment, goodwill, intangible assets, valuations, provisions and post-employment benefits.

Significant accounting estimates and judgements continued Impairment of property, plant and equipment Property, plant and equipment is reviewed for impairment if circumstances suggest that the carrying amount may not be recoverable. Recoverable amounts are determined based on value in use calculations and estimated sale proceeds. These calculations require assumptions to be made regarding future cash flows and the choice of a suitable discount rate in order to calculate the present value of those cash flows. These assumptions are disclosed in note 13. Actual outcomes may vary from these estimates. Post-employment benefits The present value of defined benefit pension scheme liabilities are determined on an actuarial basis and depend on a number of actuarial assumptions, which are disclosed in note 26. Any change in these assumptions could impact the carrying amounts of pension liabilities. Onerous lease provisions The Group provides for its onerous obligations under operating leases where the property is closed or vacant and for properties where rental expense is in excess of income. The estimated timings and amounts of cash flows are determined using the experience of internal and external property experts; however, any changes to the estimated method of exiting from the property could lead to changes to the level of the provision recorded. Authorisation of financial statements The Groups and Companys financial statements for Spirit Pub Company plc for the period ended 20 August 2011 were authorised for issue by the Board of Directors on 31 October 2011 and the balance sheets were signed on the Boards behalf by Mike Tye and Russell Margerrison. Corporate information Spirit Pub Company plc is a public limited company incorporated and domiciled in England. The Companys shares are listed on the London Stock Exchange.
2. Segmental analysis
The Group has two reportable segments, a Managed estate and a Leased estate, which are the Groups strategic business units. Each strategic business unit consists of a number of cash generating units (CGUs), which are individual pubs. These CGUs generate their own revenues, which are consolidated to give the Group revenue and as a result, Group revenue is not reliant on one significant customer. The Groups risks and returns are affected predominantly by the differences in the products and services provided by the strategic business units. Between 21 August 2010 and 20 August 2011, three pubs with a fair value of 1.3m transferred from the Leased to the Managed estate. Between 22 August 2009 and 21 August 2010, one pub with a fair value of 1.2m transferred from the Managed to the Leased estate. The Chief Operating Decision Maker is represented by the Executive Directors and the executive management team of the Group. Performance is measured based on segmental EBITDA (adjusted for disposals), as included in the internal management reports that are reviewed by the Executive Directors and the executive management team. The Spirit Pub Company plc Board consider adjusted segmental EBITDA when assessing the performance of the business and making decisions about the allocation of resources.
62
Annual Report 2011
2. Segmental analysis continued

The Group operates solely in the United Kingdom, and therefore has only one geographical segment.
52 weeks to 20 August 2011 Managed Leased Total m m m
Drink revenue Food revenue Rental income Other revenue Revenue Operating costs1 EBITDA1 Depreciation and amortisation Operating profit before non-underlying items Operating non-underlying items Net finance costs Movement in fair value of interest rate swaps UK income tax credit Loss attributable to owners of the parent company
357.0 253.4 33.2 643.6 (545.9) 97.7 (32.8) 64.9
64.7 22.8 3.3 90.8 (48.9) 41.9 (2.0) 39.9
421.7 253.4 22.8 36.5 734.4 (594.8) 139.6 (34.8) 104.8 (103.0) (189.7) (18.7) 56.9 (149.7)
52 weeks to 21 August 2010 Managed Leased Total m m m
1 Before non-underlying items.
Annual Report 2011
63
Drink revenue Food revenue Rental income Other revenue Revenue Operating costs1 EBITDA1 Depreciation and amortisation Operating profit before non-underlying items Operating non-underlying items Net finance costs Movement in fair value of interest rate swaps UK income tax credit Loss attributable to owners of the parent company
353.7 243.6 32.6 629.9 (542.2) 87.7 (30.9) 56.8
65.8 24.5 3.8 94.1 (50.8) 43.3 (1.9) 41.4
419.5 243.6 24.5 36.4 724.0 (593.0) 131.0 (32.8) 98.2 (48.9) (165.4) (46.8) 19.9 (143.0)

2. Segmental analysis continued
Managed m 20 August 2011 Leased Unallocated m m Total m
Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Net assets
1,570.1 1,570.1 (236.1) (236.1) 1,334.0
598.6 598.6 (7.1) (7.1) 591.5
57.4 57.4 (1,071.9) (1,071.9) (1,014.5)
2,168.7 57.4 2,226.1 (243.2) (1,071.9) (1,315.1) 911.0
Managed m
21 August 2010 Leased Unallocated m m
Total m
Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Net assets / (liabilities)
1,368.4 1,368.4 (201.9) (201.9) 1,166.5
716.3 716.3 (14.0) (14.0) 702.3
255.5 255.5 (2,651.8) (2,651.8) (2,396.3)
2,084.6 255.5 2,340.2 (215.9) (2,651.8) (2,867.7) (527.5)
Managed m
22 August 2009 Leased Unallocated m m
Total m
Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Net assets / (liabilities)
741.5 741.5 (23.5) (23.5) 718.0
1,396.8 1,396.8 (190.1) (190.1) 1,206.7
359.2 359.2 (2,688.5) (2,688.5) (2,329.3)
2,138.3 359.2 2,497.5 (213.6) (2,688.5) (2,902.1) (404.6)
20 August 2011 Managed Leased m m
Total m
Capital expenditure Investment spend Total capital expenditure
74.5 74.5
6.3 6.3
21 August 2010 Leased m
80.8 80.8
Managed m
Total m
Capital expenditure Investment spend Total capital expenditure
60.6 60.6
4.7 4.7
65.3 65.3
With the exception of the transfer of pubs, there are immaterial sales between the business segments. Segment assets include property, plant and equipment, operating leases, goodwill, other intangible assets, inventories, receivables and non-current assets classified as held for sale, and exclude centrally held cash (57.4m) and amounts due from related parties (nil); while segment liabilities comprise operating liabilities and exclude amounts owed to related parties (6.4m), corporate borrowings (895.1m) and related derivatives (161.0m) and retirement benefit liabilities (9.4m). Capital expenditure comprises additions to property, plant and equipment and operating leases.
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Annual Report 2011
3. Analysis of expenses
The following items have been included in arriving at operating profit:
52 weeks to 20 August 2011 m 52 weeks to 21 August 2010 m
Drink and food costs Managed pub running costs Leasehold rentals Depreciation Amortisation Impairment losses Goodwill charge Profit on sale of non-current assets Other costs1 Total income / (costs) added to / deducted from revenue to determine operating profit
1 Included within other costs are 21.4m (August 2010: 27.0m) of non-underlying items.
(225.0) (280.6) (47.7) (31.0) (3.8) (75.4) (10.1) 3.9 (62.9) (732.6)
(221.8) (288.1) (46.2) (29.0) (3.8) (23.2) 1.3 (63.9) (674.7)
Auditors remuneration is as follows:

Statutory audit services Audit of Group financial statements Audit of subsidiary companies pursuant to legislation Non-audit related services Other services Audit fees for the 52 weeks to 21 August 2010 were incurred by the Punch Taverns plc group and the charge for the services provided to the Spirit Pub Company plc group was included within a management recharge, and cannot be separately identified.
0.1
4. Finance income
Bank interest receivable Pension finance income (note 26) Non-underlying finance income (note 6) Total finance income
2.0 21.7 5.1 28.8
0.2 19.4 50.8 70.4
Annual Report 2011
65
The accounts of the parent company do not include details of remuneration receivable by the auditor and its associates for non-audit services, as the Group accounts are required to include this information as required by Regulation 5(1)(b) of the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 on a consolidated basis.

5. Finance costs
Interest payable on bank loans Pension finance costs (note 26) Other interest payable Effect of unwinding discounted provisions (note 23) Non-underlying finance costs (note 6) Total finance costs
53.3 18.6 2.0 6.5 138.1 218.5
52.2 18.7 1.5 4.4 159.0 235.8
6. Non-underlying items
In order to provide a trend measure of underlying performance, profit is presented excluding items which management consider will distort comparability, either due to their significant non-underlying nature or as a result of specific accounting treatments. Included in the income statement are the following non-underlying items:
Operating Redundancy and other related one-off costs Movement on property liabilities1 Impairment losses (note 13) Goodwill charge Profit on sale of non-current assets Finance income Loan note redemptions2 Related party interest receivable Finance costs Subordinated loan interest3 Related party interest payable
(0.5) (20.9) (75.4) (10.1) 3.9 (103.0) 4.9 0.2 5.1 (137.7) (0.4) (138.1) (18.7) (254.7) 71.4 3.7 (5.1) 70.0 (184.7)
(2.2) (24.8) (23.2) 1.3 (48.9) 49.3 1.5 50.8 (145.4) (13.6) (159.0) (46.8) (203.9) 28.9 2.0 0.6 31.5 (172.4)
Movement in fair value of interest rate swaps4 Total non-underlying items before tax Tax Tax impact of non-underlying items Adjustments to tax in respect of prior periods Tax credit in respect of the change in tax rate5 Total non-underlying items after tax
1 Represents provision for rent payments following the reversion of onerous leases to the Group. 2 Represents profit on the purchase of securitised debt at a discount to nominal value together with the write-off of related deferred issue costs. 3 Subordinated loan interest payable is capitalising interest expense on related party borrowings. Due to the size and nature of this interest, being interest on related party instruments, it has been presented separately in order to provide a clearer presentation of the interest expense of the Group. As a result of the group reorganisation undertaken prior to the demerger from Punch, this interest expense will be nil ongoing. 4 Represents the movement in the fair value of interest rate swaps that are classified as fair value through profit and loss. 5 See note 16 for detail of the changes in tax rate.
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Annual Report 2011
7. Employees and directors

Staff costs
Wages and salaries Social security costs Share based payments1 Other pension costs
170.6 11.1 2.1 1.3 185.1
167.0 10.7 0.9 1.1 179.7
1 Share based payment costs relate to Punch Taverns plc share based payment costs which were recharged to the Group. As at 20 August 2011 no awards have been made under Spirit Pub Company plc share based payment schemes.
The average number of employees during the period was as follows:

52 weeks to 20 August 2011 No. 52 weeks to 21 August 2010 No.
Management and administration1 Retail staff1

1 Employee numbers relate to actual employees rather than full-time employee equivalents.
297 16,632 16,929
254 16,615 16,869
Directors emoluments are disclosed in the Report on Directors remuneration on pages 39 to 45.
8. Taxation
(a) Tax on profit on ordinary activities Tax charged / (credited) in the income statement
52 weeks to 20 August 2011 NonUnderlying underlying Total m m m 52 weeks to 21 August 2010 NonUnderlying underlying Total m m m
Current tax UK corporation tax current year UK corporation tax adjustments in respect of prior years Deferred tax (note 16) Origination and reversal of temporary differences current year Origination and reversal of temporary differences adjustments in respect of prior years Total tax charge / (credit) in the income statement
3.7 3.7
(18.7) 0.1 (18.6)
(15.0) 0.1 (14.9)
(3.6) (3.6)
(16.7) (6.1) (22.8)
(20.3) (6.1) (26.4)
9.4 9.4 13.1
(47.6) (3.8) (51.4) (70.0)
(38.2) (3.8) (42.0) (56.9)
15.2 15.2 11.6
(12.7) 4.0 (8.7) (31.5)
2.5 4.0 6.5 (19.9)
Annual Report 2011
67

8. Taxation continued
Tax on items credited / (charged) to equity In addition to the amount credited to the income statement, tax movements recognised directly in equity through the Consolidated statement of comprehensive income were as follows:
Deferred tax Deferred tax (credit) / charge on (loss) / gain on actuarial valuation of pension schemes Deferred tax (credit) / charge recognised directly in equity (b) Reconciliation of the total tax credit The effective rate of tax is different to the full rate of corporation tax. The differences are explained below:
(2.2) (2.2)
7.8 7.8
Loss on ordinary activities before tax Tax at current UK tax rate of 27.22% (August 2010: 28%)1 Effects of: Net effect of expenses not deductible for tax purposes and non-taxable income (underlying items) Adjustments to tax in respect of prior periods (non-underlying items) Current period non-underlying debits Total tax credit reported in the income statement
1 See note 16 for detail of the changes in tax rate.
(206.6) (56.2)
(162.9) (45.6)
(3.7) 3.0 (56.9)
0.1 (2.0) 27.6 (19.9)
Details of the non-underlying tax credits and debits are included in note 6.
9. Earnings per share

Basic earnings per share is based on the profit for the year attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding. As a result of the demerger, Spirit Pub Company plc became the new parent of the Spirit Pub Company businesses. Therefore the weighted average number of ordinary shares outstanding has been calculated using the number of ordinary shares issued by the Spirit Pub Company plc to the shareholders of Punch Taverns plc at the date of the demerger (1 August 2011) and adjusted for: movements in the number of ordinary shares of Spirit Group Holdings Limited in the prior period to 21 August 2010 and from 21 August 2010 to the date of demerger; and movements in the number of ordinary shares outstanding from the demerger date to 20 August 2011 using the actual number of ordinary shares of the Spirit Pub Company plc outstanding during that period. The weighted average number of shares is 659.7 million throughout the reported period.
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Annual Report 2011
9. Earnings per share continued

Reconciliations of the earnings are set out below:
52 weeks to 20 August 2011 Per share Earnings amount m pence 52 weeks to 21 August 2010 Per share Earnings amount m pence
Basic loss per share Diluted loss per share Supplementary earnings per share figures: Basic earnings per share before non-underlying items Diluted earnings per share before non-underlying items There are nil potential dilutive ordinary shares at 20 August 2011 (August 2010: nil).
(149.7) (149.7)
(22.7) (22.7)
(143.0) (143.0)
(21.7) (21.7)
35.0 35.0
5.3 5.3
29.4 29.4
4.5 4.5
10. Dividends
No dividends have been declared and paid during the current or prior year. The Directors do not propose the payment of a final dividend.
11. Property, plant and equipment

Land and buildings m Public house fixtures and fittings m Total m
Accumulated depreciation At 22 August 2009 Charge for the year Impairment losses (note 13) Transfers to non-current assets classified as held for sale Disposals At 21 August 2010 Charge for the year Impairment losses (note 13) Transfers from non-current assets classified as held for sale Disposals At 20 August 2011 Net book value at 20 August 2011 Net book value at 21 August 2010 Net book value at 22 August 2009
Annual Report 2011
344.0 3.9 22.0 (33.0) (14.1) 322.8 7.2 54.0 19.6 (30.8) 372.8 1,625.9 1,635.9 1,700.8
194.0 25.1 1.2 (3.5) (2.5) 214.3 23.8 6.2 1.9 (4.6) 241.6 88.3 82.1 67.4
538.0 29.0 23.2 (36.5) (16.6) 537.1 31.0 60.2 21.5 (35.4) 614.4 1,714.2 1,718.0 1,768.2
69
Cost At 22 August 2009 Additions Transfers to non-current assets classified as held for sale Disposals At 21 August 2010 Additions Transfers from non-current assets classified as held for sale Disposals At 20 August 2011
2,044.8 22.1 (64.7) (43.5) 1,958.7 44.4 32.1 (36.5) 1,998.7
261.4 43.2 (4.7) (3.5) 296.4 36.4 2.7 (5.6) 329.9
2,306.2 65.3 (69.4) (47.0) 2,255.1 80.8 34.8 (42.1) 2,328.6

11. Property, plant and equipment continued
The cost of work in progress within property, plant and equipment at 20 August 2011 was 32.4m (August 2010: 21.4m, August 2009: 15.3m). The Group leases various licensed properties, offices and other commercial properties and other assets under finance leases. The leases have various terms, escalation clauses and renewal rights. Included in property, plant and equipment above are motor vehicles held under finance leases with a net book value of nil (August 2010: 0.5m, August 2009: 0.4m) and properties held under finance leases with a net book value of 9.2m (August 2010: 9.5m, August 2009: 9.7m). Included in land and buildings are properties with a net book value of 1,599.4m (August 2010: 1,618.3m, August 2009: 1,684.6m) over which the Groups borrowings are secured by way of fixed and floating charges.
12. Goodwill, operating leases and other intangible assets

Operating leases m Goodwill m
Cost At 22 August 2009 Disposals At 21 August 2010 Disposals At 20 August 2011 Amortisation At 22 August 2009 Charge for the year Disposals At 21 August 2010 Charge for the year Impairment losses (note 13) Disposals At 20 August 2011 Net book value at 20 August 2011 Net book value at 21 August 2010 Net book value at 22 August 2009
140.1 (1.2) 138.9 (0.9) 138.0
231.2 (4.0) 227.2 (0.3) 226.9
62.1 3.8 (0.8) 65.1 3.8 15.2 (0.9) 83.2 54.8 73.8 78.0
10.1 10.1 216.8 227.2 231.2
Included within operating leases are properties with a net book value of 54.2m (August 2010: 69.2m, August 2009: 73.1m) over which the Groups borrowings are secured by way of fixed and floating charges. While there was no goodwill impairment, goodwill was written down by 10.1m in the year following the reallocation of pubs from core to non-core prior to the demerger from Punch. Goodwill has been reduced further in the year by 0.3m (2010: 4.0m, 2009: 13.1m), representing the apportioned value of goodwill allocated to those pubs disposed of during the year. At August 2011, the goodwill assigned to the Managed estate is 145.0m (August 2010: 146.9m, August 2009: 150.2m) and the goodwill assigned to the Leased estate is 71.8m (August 2010: 80.3m, August 2009: 81.0m).
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Annual Report 2011
13. Impairment losses

Property, plant and equipment and operating leases When any indicators of impairment are identified, property, plant and equipment and operating leases are reviewed for impairment based on each cash generating unit (CGU). The cash generating units are individual pubs. The carrying value of these individual pubs is compared to the recoverable amount of the CGUs, which was based predominantly on value in use. Where it is considered more likely than not that a pub will be disposed of in the near term rather than continue to be held and traded by the Group, the carrying value of these individual pubs is written down to the higher of their fair value less costs to sell and their value in use. The fair value less costs to sell is calculated using managements best estimate of market value following consideration of past experience and the current market environment. At the Punch Taverns plc interim reporting date of 5 March 2011, an impairment review was performed, triggered by a strategic review of the business, which resulted in a number of Leased pubs being identified as non-core to the Punch group and their carrying value being written down to the higher of their fair value less costs to sell and their value in use. In addition, an impairment charge was made against the Spirit Managed estate, representing the write-down in asset values on pubs included in the onerous lease provision. This resulted in a total impairment charge of 65m being recognised at 5 March 2011. Cash flows used in the value in use calculation of the Leased non-core pubs were based on earnings before interest and taxation. Since these non-core pubs had been identified as not having a viable future to the Punch group as a pub, their value-in-use was calculated by extrapolating the earnings of these pubs for a period of three years, and then using the fair value less costs to sell at that time as the terminal value at the end of year three. The cash flow forecasts used assumed an ongoing trading decline for these pubs. The pre-tax risk adjusted discount rate applied to the cash flow projections is 8.0%. In practice, due to the projected decline in profits in the non-core estate, the majority of pubs were written down to their fair value less costs to sell as their value in use was below this level. Estimates of fair value less costs to sell were based on valuations undertaken by Punch groups in-house property valuation experts. The total impairment charge recognised in the year is as follows:
52 weeks to 20 August 2011 Managed Leased Total m m m 52 weeks to 21 August 2010 Managed Leased Total m m m
Property, plant and equipment Operating leases
4.3 10.9 15.2
55.9 4.3 60.2
60.2 15.2 75.4
8.5 8.5
14.7 14.7
23.2 23.2
Sensitivity to changes in assumptions The level of impairment is predominantly dependent upon judgements used in arriving at projected disposal values, future growth rates and the discount rate applied to cash flow projections. Key drivers to future growth rates are dependant on the Groups ability to maintain drinks, food and gaming machine profit streams whilst effectively managing pub operating costs in the Managed business, whilst in the Leased business, future growth rates are dependent on the ability to maintain drinks, rental and gaming machine profit streams. The impact on the impairment charge, in the period to 5 March 2011, of applying different assumptions to the disposal values, growth rates used in the five year financial forecasts and in the pre-tax discount rates was as follows:
Impairment charge / (credit) and reduction / (increase) in net assets m
Impact if disposal value was: Impact if discount rate was: Impact if business plan growth rates were:
increased by 10% decreased by 10% increased by 1% decreased by 1% increased by 2% in each year decreased by 2% in each year
(5.4) 5.4 0.6 (0.6) (0.2) 0.2
Annual Report 2011
71
At 20 August 2011, and after the demerger from the Punch Taverns group, the Spirit group performed a further review of indicators of impairment. There were no indicators of impairment and therefore no further impairment was identified, with the exception of 10.4m relating to pubs identified for disposal and held as assets held for sale at 20 August 2011.

13. Impairment losses continued
Goodwill Goodwill is allocated to groups of cash generating units (CGUs) based on the benefits to the Group that arise from each business combination. The two groups of CGUs are identified by their pub operating format (Managed or Leased) and this is the lowest level at which goodwill is monitored by the Group. During the period ended 21 August 2010, and whilst the Group was part of the Punch group, the Leased estate was reorganised from one group of CGUs to separate core and non-core reporting structures. The allocation of Leased goodwill between core and non-core indicated that no goodwill should be allocated to the non-core estate given the low value of the properties in the estate and the low level of synergistic benefits. During the year to 20 August 2011, and prior to the demerger from Punch, a further 98 pubs were transferred in to non-core and at that stage goodwill of 10.1m was reallocated to the non-core estate. The intention to dispose of these properties in the medium term triggered an impairment review and an impairment charge of 10.1m was taken against this goodwill. No further impairment was identified at 20 August 2011. The goodwill impairment reviews were performed by means of comparing the recoverable amount of the CGUs to the carrying value of the unit including goodwill. The recoverable amount of the CGUs was determined based on value in use calculations. These value in use calculations are based on earnings before interest and tax and extrapolated for a period of 50 years using a multiple of ten as the terminal value. The pre-tax risk adjusted discount rate applied to cash flow projections is 9.0%. The growth rate applied to cash flows over the 50 year period is 2.25%. Based on this review no impairment of goodwill has been identified. Neither a reduction in the growth rate to 0.25% in each of the next five years nor an increase in the discount rate to 10.0% would have led to an impairment of goodwill.
14. Investments in subsidiary undertakings and joint ventures

Company Total m
At incorporation Additions At 20 August 2011 Details of the principal subsidiary undertakings and joint ventures as at 20 August 2011 are as follows:
Name of company Nature of business
336.4 336.4
Investments Spirit Pub Company (Managed) Limited Spirit Pub Company (Leased) Limited Spirit Pub Company (Trent) Limited Spirit Pub Company (Holdco) Limited Spirit Pub Company (SGE) Limited Spirit Group Holdings Limited Spirit Pub Company (Supply) Limited Spirit Pub Company (Services) Limited Spirit Pub Company (Investments) Limited Joint Ventures Allied Kunick Entertainments Limited
Pub operating company Pub operating company Pub operating company Holding company Intermediate holding company Intermediate holding company Intermediate supply company Management and administration company Financing company
Property company
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Annual Report 2011
14. Investments in subsidiary undertakings and joint ventures continued

The Company owns 100% of the ordinary share capital or indirectly controls 100% of the voting rights of the companies listed above, with the exception of Allied Kunick Entertainments Limited, of which the Company indirectly owns 51% of the ordinary share capital but can only exercise joint control as both parties have equal voting rights on all decisions. All companies are incorporated in England and Wales. In addition to those investments listed above, the Group also maintains day-to-day control over Spirit Issuer Parent Limited and its wholly owned subsidiary, Spirit Issuer plc, a special purpose entity that provides financing to the group of companies. Although no company in the Group owns any shares either directly or indirectly in Spirit Issuer Parent Limited or Spirit Issuer plc, the financial statements are also consolidated into the Group financial statements in accordance with SIC 12. Exemption has been taken to exclude subsidiary undertakings whose results or financial position do not principally affect the financial statements from the above disclosure.
15. Trade and other receivables

20 August 2011 m Group 21 August 2010 m 22 August 2009 m
Amounts falling due within one year Trade receivables Amounts owed by related parties Prepayments and accrued income Other receivables Amounts falling due after more than one year Amounts owed by related parties
10.3 0.4 15.3 4.5 30.5
11.4 6.8 9.5 27.7 193.9
8.8 7.7 13.3 2.0 31.8 247.1
16. Deferred tax

The movement on the deferred tax account is as follows:
Group 21 August 2010 m
20 August 2011 m
22 August 2009 m
At beginning of period Credited / (charged) to income statement Credited / (charged) to equity At end of period The Company has no deferred tax balances.
16.8 39.8 2.2 58.8
31.1 (6.5) (7.8) 16.8
(69.7) 82.7 18.1 31.1
Annual Report 2011
73

16. Deferred tax continued
The movements in deferred tax assets and liabilities during the period are shown below: Deferred tax assets
Retirement benefit liabilities m Financial instruments m
Group
Tax losses m
Other m
Total m
At 22 August 2009 (Charged) / credited to income statement Charged to equity At 21 August 2010 Credited / (charged) to income statement Credited to equity At 20 August 2011 Deferred tax liabilities
29.0 (4.1) 24.9 37.6 62.5
12.9 (1.3) (7.8) 3.8 (3.6) 2.2 2.4
21.4 9.8 31.2 0.5 31.7
5.5 (2.3) 3.2 2.7 5.9
68.8 2.1 (7.8) 63.1 37.2 2.2 102.5
Group
Accelerated capital allowances m
Other m
Total m
At 22 August 2009 (Charged) / credited to income statement At 21 August 2010 Credited to income statement At 20 August 2011
(35.8) (8.7) (44.5) 2.5 (42.0)
(1.9) 0.1 (1.8) 0.1 (1.7)
(37.7) (8.6) (46.3) 2.6 (43.7)
At the balance sheet date, the Group has unused tax losses of 268.9m (August 2010: 283.5m) and unused capital losses of 504.2m (August 2009: nil) available for offset against future profits. A deferred tax asset has been recognised in respect of 250.2m (August 2010: 92.4m) of such losses, which are expected to be utilised against future profit streams within the Group. No deferred tax asset has been recognised in respect of the remaining 18.7m (August 2010: 191.0m) of losses due to the unpredictability of future profit streams. Current legislation deems that these losses may be carried forward for an unlimited number of years. The 2011 Budget on 23 March 2011 announced that the UK corporation tax rate will reduce to 23% over a period of four years from 2011. The first reduction in the UK corporation tax rate from 28% to 27% (effective from 1 April 2011) was substantively enacted on 20 July 2010, and further reductions to 26% (effective from 1 April 2011) and 25% (effective from 1 April 2012) were substantively enacted on 29 March 2011 and 5 July 2011 respectively. This will reduce the Groups future current tax charge accordingly. The deferred tax asset at 20 August 2011 has been calculated based on the rate of 25% substantively enacted at the balance sheet date. It has not yet been possible to quantify the full anticipated effect of the announced further 2% rate reduction, although this will further reduce the Groups future current tax charge and reduce the Groups deferred tax asset accordingly.
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Annual Report 2011
17. Inventories
20 August 2011 m 21 August 2010 m 22 August 2009 m
Goods held for resale
7.2
7.7
7.5
The Group consumed 190.8m of inventories during the year (August 2010: 186.3m, August 2009: 199.5m) and charged nil to the income statement for the write down of inventories during the year (August 2010: nil, August 2009: nil).
18. Cash
20 August 2011 m Group 21 August 2010 m 22 August 2009 m Company 20 August 2011 m
Cash and cash equivalents
139.6
37.9
73.4
0.1
19. Non-current assets classified as held for sale

Non-current assets classified as held for sale
4.2
37.2
29.2
At the current period end, non-current assets classified as held for sale represents 4.2m (August 2010: 27.3m, August 2009: 13.9m) of pubs from the Managed estate that are individually being actively marketed for sale with varying expected completion dates within one year, and nil (August 2010: 9.9m, August 2009: 15.3m) of pubs from the Leased estate. The value of non-current assets classified as held for sale represents the expected net disposal proceeds, and is the value after an impairment charge of 10.4m at August 2011.
20. Trade and other payables

20 August 2011 m Group 21 August 2010 m 22 August 2009 m
21. Borrowings
20 August 2011 Amounts falling due after more within one than one year year m m 21 August 2010 Amounts falling due after more within one than one year year m m
Total m
Total m
Secured loan notes issued by Spirit Issuer plc Obligations under finance leases Total borrowings Subordinated loans owed to related parties Total financial liabilities
5.0 0.6 5.6 5.6
880.1 9.4 889.5 889.5
885.1 10.0 895.1 895.1
5.0 0.9 5.9 5.9
910.7 9.8 920.5 1,052.2 1,972.7
915.7 10.7 926.4 1,052.2 1,978.6
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Trade payables Other tax and social security payable Other payables Accruals and deferred income
37.3 19.4 10.2 92.7 159.6
39.2 13.6 5.1 72.2 130.1
36.8 17.5 9.4 72.7 136.4

21. Borrowings continued
22 August 2009 Amounts falling due after more within one than one year year m m
Total m
5.7 0.8 6.5 6.5
1,052.0 9.9 1,061.9 906.7 1,968.6
1,057.7 10.7 1,068.4 906.7 1,975.1
Secured loan notes The secured loan notes have been secured by way of fixed and floating charges over various assets of the Group. Interest is paid quarterly in arrears on all secured loan notes. The details for the secured loan notes, including the date of the final scheduled instalment for each class of note, as indicated in its description, are as follows: Issued by Spirit Issuer plc:
20 August 2011 Amounts falling due after more within than one one year year m m 21 August 2010 Amounts falling due after more within than one one year year m m
Total m
Total m
Class A1 secured floating rate debenture notes repayable by September 2026 at LIBOR1 +0.22% per annum to September 2011 and LIBOR1 +0.55% thereafter Class A2 secured floating rate debenture notes repayable by June 2029 at LIBOR1 +1.08% per annum to September 2011 and LIBOR1 +2.7% thereafter Class A3 secured fixed / floating rate debenture notes repayable by September 2019 at 5.86% to September 2014 and LIBOR1 +0.55% thereafter Class A4 secured fixed / floating rate debenture notes repayable by March 2025 at 6.582% to September 2018 and LIBOR1 +2.775% thereafter Class A5 secured fixed / floating rate debenture notes repayable by December 2032 at 5.472% to September 2028 and LIBOR1 +0.75% thereafter Add: premium arising from fair value adjustment
1 For three month deposits.
5.0 5.0
144.7 186.6 116.7 227.5 168.0 843.5 36.6 880.1
144.7 186.6 116.7 227.5 168.0 843.5 41.6 885.1
5.0 5.0
144.7 188.6 116.7 242.5 174.0 866.5 44.2 910.7
144.7 188.6 116.7 242.5 174.0 866.5 49.2 915.7
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Annual Report 2011

22 August 2009 Amounts falling due after more within than one one year year m m
Total m
Class A1 secured floating rate debenture notes repayable by September 2026 at LIBOR1 +0.22% per annum to September 2011 and LIBOR1 +0.55% thereafter Class A2 secured floating rate debenture notes repayable by June 2029 at LIBOR1 +1.08% per annum to September 2011 and LIBOR1 +2.7% thereafter Class A3 secured fixed / floating rate debenture notes repayable by September 2019 at 5.86% to September 2014 and LIBOR1 +0.55% thereafter Class A4 secured fixed / floating rate debenture notes repayable by March 2025 at 6.582% to September 2018 and LIBOR1 +2.775% thereafter Class A5 secured fixed / floating rate debenture notes repayable by December 2032 at 5.472% to September 2028 and LIBOR1 +0.75% thereafter Add: premium arising from fair value adjustment
1 For three month deposits.
5.7 5.7
150.0 191.0 126.1 303.3 225.8 996.2 55.8 1,052.0
150.0 191.0 126.1 303.3 225.8 996.2 61.5 1,057.7
In the current period, the Group redeemed notes with a nominal value of 23.0m, being 2.0m Class A2, 15.0m Class A4 and 6.0m Class A5 notes. In the period ended 21 August 2010, the Group redeemed notes with a nominal value of 131.5m being 5.3m Class A1, 2.4m Class A2, 9.4m Class A3, 60.8m Class A4 and 51.8m Class A5 notes. The Group also sold Class A3 notes with a nominal value of 1.8m in the prior period. In the period ended 22 August 2009, the Group redeemed notes with a nominal value of 253.8m, being 9.0m Class A2, 123.9m Class A3, 46.7m Class A4 and 74.2m Class A5 notes. These figures are net of notes held by the Group not yet cancelled, which as at 20 August 2011 were 20.6m Class A4, 2.0m Class A2 and 19.0m Class A5 notes (21 August 2010: 15.9m Class A4 and 28.2 Class A5 notes; 22 August 2009: 5.3m Class A1, 2.4m Class A2, 11.2m Class A3, 27.1m Class A4 and 48.1m Class A5 notes). Interest rate swaps The Group has taken out various interest rate swaps to reduce the interest rate risk associated with floating rate loans as follows: Spirit Issuer plc Interest rate swap agreements have been entered into which swap the LIBOR interest rate to a fixed rate of 6.581% to March 2012 and 6.831% thereafter on the Class A1 and Class A2 debenture notes and, after their respective step-up dates, 4.555% on the Class A3, Class A4 and Class A5 debenture notes. The capital amount of these swaps reduces over time to match the contractual repayment profile of the floating rate notes. Although these swaps ensure that cash flows are perfectly hedged over the life of the notes they were deemed ineffective at the time of the 2006 acquisition of the Group by the Punch group, in accordance with the requirements of IAS 39, and accordingly all future movements in fair value will be recognised in the income statement.
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After taking account of the various interest rate swaps entered into by the Group, the interest rate exposure of the Groups financial liabilities is as set out below. There are no financial liabilities other than short term payables excluded from this analysis:
20 August 2011 Fixed Floating m m Total m Fixed m 21 August 2010 Floating m Total m
885.1 10.0 895.1 895.1
885.1 10.0 895.1 895.1
915.7 10.7 926.4 1,052.2 1,978.6

22 August 2009 Floating m
915.7 10.7 926.4 1,052.2 1,978.6
Fixed m
Total m
1,057.7 10.7 1,068.4 906.7 1,975.1
1,057.7 10.7 1,068.4 906.7 1,975.1
Interest rate analysis The weighted average effective interest rates of interest bearing loans and borrowings, including the effect of interest rate swaps, at the balance sheet date are as follows:
20 August 2011 % 21 August 2010 % 22 August 2009 %
Secured loan notes Finance leases The average interest rate for Group loans and borrowings is 6.9% (August 2010: 6.9%).
6.9 6.5
6.9 6.5
7.4 6.5
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Annual Report 2011

Obligations under finance leases The minimum lease payments under finance leases fall due as follows:
20 August 2011 Present Minimum value of lease future payments obligations m m 21 August 2010 Present Minimum value of lease future payments obligations m m
Within one year Within one to five years Over five years
0.7 2.7 35.1 38.5
0.6 2.2 7.2 10.0
0.9 3.0 36.4 40.3
0.9 2.4 7.4 10.7
22 August 2009 Minimum Present value lease of future payments obligations m m
Within one year Within one to five years Over five years
0.9 3.0 37.3 41.2
0.8 2.5 7.4 10.7
Maturity of Group debt The table below summarises the maturity profile of the Groups debt at 20 August 2011, 21 August 2010 and 22 August 2009 based on contractual, undiscounted cash flows including interest.
Within one year m One to two years m Two to five years m More than five years m Total m
Period ended 20 August 2011
Interest bearing loans and borrowings capital interest interest rate swaps
6.6 57.1 63.7

Within one year m
6.6 57.1 63.7

One to two years m
81.8 19.7 171.3 272.8

Two to five years m
761.8 72.4 628.6 1,462.8

More than five years m
843.6 105.3 914.1 1,863.0

Total m
Interest bearing loans and borrowings capital interest interest rate swaps
6.2 53.4 59.6

Within one year m
6.2 53.4 59.6

One to two years m
58.0 18.7 160.1 236.8

Two to five years m
808.6 67.0 572.8 1,448.4

More than five years m
866.6 98.1 839.7 1,804.4

Total m
Interest bearing loans and borrowings capital interest interest rate swaps The contractual maturity of trade and other payables is within one year.
5.7 53.4 59.1
5.7 53.4 59.1
24.0 18.3 171.9 214.2
972.2 63.1 592.1 1,627.4
996.2 92.8 870.8 1,959.8
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79

22. Financial instruments
Categories of financial instruments
Financial assets Trade receivables (amortised cost) Cash and short term deposits
10.3 139.6 149.9
11.4 37.9 49.3
8.8 73.4 82.2
Financial liabilities Interest rate swaps at fair value through profit or loss Amortised cost Finance lease obligations
161.0 922.4 10.0 1,093.4
147.6 2,007.1 10.7 2,165.4
103.2 2,001.3 10.7 2,115.2
All derivative financial instruments are held on the balance sheet at fair value. Changes in fair value of any derivative financial instruments are recognised immediately in the income statement. The Groups principal financial instruments, other than derivative financial instruments, comprise borrowings, cash and liquid resources. The main purpose of these financial instruments is to provide finance for the Groups operations. The Group has various other financial instruments such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Groups financial instruments are interest rate risk, liquidity risk, capital risk and credit risk. There is no material currency exposure as all material transactions and financial instruments are in sterling. The Group has no material exposure to equity securities or commodity price risk and it is the Groups policy that no speculative trading in financial instruments shall be undertaken. The Board reviews and agrees policies for each of these risks and they are summarised on pages 25 to 27. Interest rate risk As the Group has no significant interest-bearing assets, other than cash and cash equivalents, the Groups income and operating cash flows are substantially independent of changes in market interest rates. Income and cash flows from cash and cash equivalents fluctuate with interest rates. The Group finances its operations through a mixture of equity shareholders funds and loan notes. The Group borrows at both fixed and floating rates of interest and then employs derivative financial instruments such as interest rate swaps to generate the desired interest rate profile and to manage the Groups exposure to interest rate fluctuations. The cash balances attract interest at floating rates. Where over-hedging arises (for example, due to early repayment of floating rate notes) the Group will seek to eliminate the over-hedging, where this is financially practicable, either by embedding the cost in new swaps or by terminating the over-hedge. At 20 August 2011, the Group held 49.5m of floating rate notes for which interest swaps remain outstanding (August 2010: 24.0m, August 2009: nil). The Group has taken out derivative financial instruments such that 100% of all loans at 20 August 2011 (August 2010: 100%, August 2009: 100%) were either at fixed rate or were converted to fixed rate as a result of swap arrangements, thereby largely eliminating the Groups exposure to changes in interest rates.
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Annual Report 2011
22. Financial instruments continued

Cash flows associated with cash deposits, debt and interest rate swaps and the fair value of these instruments fluctuate with changes in interest rates. If the interest rates had been 1% higher or lower during the period, the effect on the income statement would be as follows:
Movement in fair value of interest rate swaps m
Interest receivable m
Interest payable m
Period ended 20 August 2011 Impact on income statement if interest rates increased by 1%: gain Impact on income statement if interest rates decreased by 1%: loss Period ended 21 August 2010 Impact on income statement if interest rates increased by 1%: gain Impact on income statement if interest rates decreased by 1%: loss Period ended 21 August 2009 Impact on income statement if interest rates increased by 1%: gain Impact on income statement if interest rates decreased by 1%: loss
2.0 (2.0)
57.4 (57.4)
2.5 (2.5)
56.5 (56.5)
1.3 (1.3)
54.9 (54.9)
Whilst cash flow interest rate risk is largely eliminated, the use of fixed rate borrowings and derivative financial instruments exposes the Group to fair value interest rate risk such that the Group would not benefit from falls in interest rates and would be exposed to unplanned costs, such as breakage costs, should debt or derivative financial instruments be restructured or repaid early. Liquidity risk The Groups funding strategy is to ensure a mix of financing methods offering flexibility and cost effectiveness to match the requirements of the Group. The Group is primarily financed by secured loan notes, with approximately 90% (August 2010: 93%, August 2009: 98%) of the capital balance on these loan notes being repayable after more than five years from the balance sheet date, subject to relevant covenants being met. These covenants are formally reported on after each quarter end, but are monitored internally on a periodic basis. The Board continues to review alternative sources of finance. The Groups objective is to smooth the debt maturity profile and to arrange funding ahead of requirements where required so maturing short term debt may be refinanced or paid as it falls due. Cash flow forecasts are frequently produced to assist management in identifying liquidity requirements and are stress tested for possible scenarios. This includes assessment of the ability to meet the restricted payment condition in the securitisation structure in order that cash can be released to the top company level. Should the securitisation not meet the restricted payment condition, then cash generated may, under certain circumstances, become trapped within the securitisation (not made available to the wider Group) to naturally de-lever that securitisation. Cash balances are invested in short term deposits such that they are readily available to settle short term liabilities or to fund capital additions. Capital risk The Groups capital structure is made up of net debt, balances with related parties, issued share capital and reserves. These are managed effectively to minimise the Groups cost of capital, to add value to shareholders and to service debt obligations, ultimately ensuring that the Group continues as a going concern. The Groups principal external debt is held within one securitisation. The securitised debt is monitored by a variety of measures, which are reported to the debt providers on a quarterly basis. The primary measure is a debt service cover ratio (DSCR). The Group assesses the performance of the business, the level of available funds and the short to medium strategic plans concerning capital spend, as well as the need to meet financial covenants, and such assessment influences the level of dividends payable as well as decisions as to whether to buy back debt. In the current financial period, the Group has reduced the nominal value of its outstanding securitised debt from 866.5m to 845.5m (August 2010: reduced from 996.2m to 866.5m, August 2009: reduced from 1,250.0m to 966.2m). The period end DSCR default financial covenant at 20 August 2011 was 2.01 times EBITDA (August 2010: 1.92 times, August 2009: 1.92 times) compared to a financial covenant of 1.30 times.
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81

Credit risk With the exception of cash and short term deposits invested with banks and financial institutions, there are no significant concentrations of credit risk within the Group. The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the balance sheet date. The Groups objective is to minimise credit risk by ensuring that surplus funds are invested with banks and financial institutions with high credit ratings and that the Group deals with third parties that have been subject to credit checks or that have good credit scores, where appropriate. Trade and other receivables, as shown on the consolidated balance sheet, comprise a large number of individually small amounts from unrelated customers and are shown net of a provision for doubtful debts. Management estimates the provision for doubtful debts based on a review of all individual receivable accounts, experience and known factors at the balance sheet date, taking into account any collateral held in the form of cash deposits, which is quantified. These cash deposits are applied against unpaid debt when licensees leave the pubs, and vary in size. The amount of cash deposits held at 20 August 2011 is 5.1m (August 2010: 4.9m, August 2009: 5.5m). These are held on the balance sheet within trade and other payables. Receivables are written off against the doubtful debt provision when management deems the debt no longer recoverable. An analysis of the provision held against trade receivables for doubtful debts is shown below:
Provision for doubtful debts at beginning of period Charged to income statement Utilised during the period Released during the period Provision for doubtful debts at end of period
1.0 0.8 (0.4) (0.7) 0.7
1.4 1.0 (0.9) (0.5) 1.0
1.2 1.5 (1.3) 1.4
The ageing of trade receivables at the balance sheet date, net of the doubtful debt provision, is as follows:
Live debt
Current 0 35 days past due Over 35 days past due
Closed debt
8.8 0.5 1.0 10.3
9.8 0.7 0.8 0.1 11.4
7.1 0.8 0.9 8.8
Live debt represents balances outstanding from current licensees. Closed debt relates to outstanding balances from customers that are no longer current licensees of the Group. There are no indicators at 20 August 2011 that debtors will not meet their payment obligations in respect of the net amount of trade receivables recognised in the balance sheet.
82
Annual Report 2011

Derivative financial instruments The carrying values of derivative financial instruments in the balance sheet are as follows:
Group 20 August 2011 Current Non-current Current Non-current assets assets liabilities liabilities m m m m
Interest rate swaps
24.7
136.3
Interest rate swaps
19.1
128.5
Interest rate swaps
19.4
83.8
The interest rate swaps replace the LIBOR rate on the Groups secured floating rate loan notes and bank loans with a fixed rate. The capital amount of the swaps reduces over time to match the contractual repayment profile of the associated notes over their life (see note 21 for more detail). The swaps do not qualify for hedge accounting, with movements in their fair value being recognised in the income statement. Fair value of non-derivative financial assets and liabilities With the exception of the Groups secured loan notes, there are no material differences between the carrying value of non-derivative financial assets and financial liabilities and their fair values as at the balance sheet date. The carrying value of the Groups secured loan notes at 20 August 2011 is 885.1m (August 2010: 915.7m, August 2009: 1,057.7m) and the fair value, measured at market value, of this debt at that date is 719.9m (August 2010: 658.2m, August 2009: 810.6m). Fair value hierarchy Financial instruments carried at fair value are required to be measured by reference to the following levels: Level 1 quoted prices in active markets for identical assets or liabilities; Level 2 inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs). All financial instruments carried at fair value have been measured by a level 2 valuation method.
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83

23. Provisions
Group Onerous contracts m Property leases m Insurance m Total m
At 22 August 2009 Unwinding of discount effect of provisions Charged to income statement Utilised during the period Released during the period At 21 August 2010 Unwinding of discount effect of provisions Charged to income statement Utilised during the period Released during the period At 20 August 2011 Provisions have been analysed between current and non-current as follows:
5.0 0.1 (2.5) 2.6 0.6 (3.0) (0.2)
54.1 4.3 39.8 (13.3) (15.0) 69.9 5.9 20.9 (17.7) 79.0
5.7 1.1 (1.4) 5.4 1.4 (2.2) 4.6
64.8 4.4 40.9 (17.2) (15.0) 77.9 6.5 22.3 (22.9) (0.2) 83.6
20 August 2011 m
21 August 2010 m
22 August 2009 m
Current Non-current
20.2 63.4 83.6
20.0 57.9 77.9
20.2 44.6 64.8
Onerous contracts The onerous contracts provision related to the termination costs for supply contracts, acquired on the acquisition of the Group in January 2006, that expired in August 2011. The onerous cost element of these contracts was provided for based on anticipated future volumes and the difference between contract prices and market prices. Property leases The provision for property leases has been set up to cover operating costs of vacant or loss making premises. The provision covers the expected shortfall between operating income and rents payable for a period of three years for trading properties and ten years for non trading properties, being the estimated period to mitigate the losses. These properties are not expected to become profitable in the future. Insurance The provision for insurance relates to an estimate of monies that may become payable on claims not yet made to the Group. The majority of this provision is expected to be utilised within five years of the balance sheet date.
24. Share capital

Share capital history The ultimate parent company of the Group, Spirit Pub Company plc, was incorporated on 8 June 2011. As discussed in note 1, during the period Spirit Pub Company plc became the ultimate parent of the Spirit Pub Company Group. This transaction has been accounted for using the principles of reverse acquisition. The main principles used in the presentation of share capital and other reserves of the Spirit Pub Company Group are as follows: The equity instruments of Spirit Pub Company plc were initially recognised at their fair value on the date of demerger. The movements in share capital prior to 1 August 2011 reflect the movements in the share capital of Spirit Pub Company (Holdco) Limited (the former parent of the companies that form part of the Spirit Pub Company Group).
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Annual Report 2011
24. Share capital continued

Accordingly, the issued and fully paid share capital of Spirit is as follows:
20 August 2011 No. 20 August 2011 m 21 August 2010 No. 21 August 2010 m 22 August 2009 No. 22 August 2009 m
Allotted, called-up and fully paid Ordinary shares of 1 pence
659,655,957
6.6 659,655,957
6.6 659,655,957
6.6
Rights of shareholders All ordinary shares in issue at 20 August 2011 rank pari passu in all respects.
25. Net debt

(a) Analysis of net debt
Secured loan notes Subordinated loans from related parties Cash and cash equivalents Nominal value of net debt Fair value adjustments on acquisition of secured loan notes Fair value of interest rate swaps Finance lease obligations Net debt Balance sheet: Borrowings Subordinated loans from related parties Derivative financial instruments Cash and cash equivalents Net debt
(843.5) 139.6 (703.9) (41.6) (161.0) (10.0) (916.5)
(866.5) (1,052.2) 37.9 (1,880.8) (49.2) (147.6) (10.7) (2,088.3)
(996.2) (906.7) 73.4 (1,829.5) (61.5) (103.2) (10.7) (2,004.9)
(b) Analysis of changes in net debt

At 22 August 2009 m Cash flow m Non-cash movements m At 21 August 2010 m Cash flow m Non-cash movements m At 20 August 2011 m
Current assets Cash at bank and in hand Debt Borrowings Subordinated loans from related parties Derivative financial instruments Net debt per balance sheet
73.4 73.4 (1,068.4) (906.7) (103.2) (2,078.3) (2,004.9)
(35.5) (35.5) 61.4 61.4 25.9
80.6 (145.5) (44.4) (109.3) (109.3)
37.9 37.9 (926.4) (1,052.2) (147.6) (2,126.2) (2,088.3)
101.7 101.7 18.8 18.8 120.5
12.5 1,052.2 (13.4) 1,051.3 1,051.3
139.6 139.6 (895.1) (161.0) (1,056.1) (916.5)
Net debt incorporates the Groups borrowings, subordinated loans, derivative financial instruments and obligations under finance leases, less cash and cash equivalents. Non-cash movements relate to amortisation of premium on loan notes and fair value movement in derivative financial instruments.
Annual Report 2011
85
(895.1) (161.0) 139.6 (916.5)
(926.4) (1,052.2) (147.6) 37.9 (2,088.3)
(1,068.4) (906.7) (103.2) 73.4 (2,004.9)

25. Net debt continued
(c) Reconciliation of net cash flow to movement in net debt
20 August 2011 m 21 August 2010 m
Increase / (decrease) in cash and cash equivalents in the period Cash outflow from change in debt financing Change in net debt resulting from cash flows Non-cash movements in net debt Change in net debt resulting from non-cash flows Obligations under finance leases Movement in net debt Net debt at beginning of period Net debt at end of period
101.7 18.8 120.5 1,050.8 1,050.8 0.5 1,171.8 (2,088.3) (916.5)
(35.5) 61.4 25.9 (109.3) (109.3) (83.4) (2,004.9) (2,088.3)
26. Pensions and other post-retirement benefits

During the period, the Group operated two funded defined benefit pension schemes: the Spirit Group Pension Scheme (SGPS) and the Spirit Group Retail Pension Scheme (SGRPS). The pension plans have not invested in any of the Groups own financial instruments, nor in properties or other assets used by the Group. The two schemes have always been separate from the Punch group, and the demerger did not have any effect on the schemes. The tables below illustrate the impact of defined benefit schemes on the income statement and the balance sheet and relate to the SGPS and the SGRPS. The amounts recognised in the income statement are as follows: Analysis of amounts charged to operating costs:
52 weeks to 20 August 2011 m 52 weeks to 21 August 2010 m 52 weeks to 22 August 2009 m
Current service cost Analysis of amounts credited to other finance income:
Expected return on assets Interest on scheme liabilities Net credit Analysis of amounts recognised in the SOCI in the period:
21.7 (18.6) 3.1
19.4 (18.7) 0.7
23.0 (18.3) 4.7
Actual return on assets Expected return on assets Actuarial gain / (loss) on liabilities Expected actuarial gains / (losses) recognised in the SOCI (Restriction) / release on surplus recognised Minimum funding restriction Actuarial (losses) / gains recognised in the SOCI
29.6 (21.7) 3.5 11.4 (8.4) (10.9) (7.9)
41.6 (19.4) 5.7 27.9 27.9
(7.7) (23.0) (63.8) (94.5) 29.1 (65.4)
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Annual Report 2011
26. Pensions and other post-retirement benefits continued

Cumulative amounts recognised in the SOCI:
At beginning of period Net actuarial (losses) / gains in the period At end of period The amounts recognised in the balance sheet are as follows:
5.5 (7.9) (2.4)
(22.4) 27.9 5.5
(43.0) (65.4) (22.4)
20 August 2011 m
21 August 2010 m
22 August 2009 m
Present value of scheme liabilities Fair value of scheme assets Net retirement benefit asset / (liability) Restriction on surplus recognised Minimum funding restriction Net retirement benefit liability recognised in the balance sheet Movements in the present value of scheme liabilities are as follows:
(367.5) 377.4 9.9 (8.4) (10.9) (9.4)
(364.1) 350.2 (13.9) (13.9)
(362.5) 316.6 (45.9) (45.9)
Present value of scheme liabilities at beginning of year Current service cost Interest cost Actuarial (gains) / losses Benefits paid Present value of scheme liabilities at end of year Movements in the fair value of scheme assets are as follows:
364.1 18.6 (3.5) (11.7) 367.5
362.5 18.7 (5.7) (11.4) 364.1
293.1 18.3 63.8 (12.7) 362.5
Fair value of scheme assets at beginning of year Expected return on scheme assets Actuarial gains / (losses) Contributions paid by employer Benefits paid Fair value of scheme assets at end of year
350.2 21.7 7.9 9.3 (11.7) 377.4
316.6 19.4 22.2 3.4 (11.4) 350.2
333.5 23.0 (30.6) 3.4 (12.7) 316.6
Scheme assets are stated at their market values at the balance sheet date and the expected return on scheme assets is derived as a weighted average of the expected return on each asset class, recognising the proportions of the assets invested in each. The expected return on each asset class is determined after taking external expert advice and by reference to relevant equity and bond indices.
Annual Report 2011
87

The major categories of plan assets as a percentage of total plan assets are as follows:
20 August 2011 21 August 2010 22 August 2009
Equities Bonds Property Other
33.7% 56.9% 9.0% 0.5%
45.5% 45.1% 9.1% 0.3%
53.0% 39.0% 7.7% 0.3%
The history of experience adjustments on the schemes for the current and previous financial years is as follows:
20 August 2011 m 21 August 2010 m 22 August 2009 m 23 August 2008 m 24 August 2007 m
Present value of retirement benefit liabilities Fair value of plan assets Net asset / (liability) in the scheme Experience adjustments on scheme liabilities Percentage of scheme liabilities Experience adjustments on scheme assets Percentage of scheme assets
(367.5) 377.4 9.9 1.0 -0.3% 7.9 2.1%
(364.1) 350.2 (13.9) 22.2 6.3%
(362.5) 316.6 (45.9) (0.4) 0.1% (30.6) 9.7%
(293.1) 333.5 40.4 21.5 7.3% (23.6) 7.1%
(322.4) 332.4 10.0 (0.7) 0.2% (0.5) 0.2%
In July 2010, the UK Government announced a proposal to replace the Retail Price Index (RPI) with the Consumer Price Index (CPI) for pension increases in the private sector on the basis that the CPI is a more appropriate measure in the change of cost of living for pensioners than RPI. Due to a number of differences between the indices, including both constituents and construction, CPI is expected to be less than RPI over the long term, which means that the defined benefit obligation has reduced. Following discussions with the Groups pension advisers, this reduction has been recognised as an assumption change that is, a change to the estimate of future inflation which will be used to increase deferred benefits. Scheme funding Spirit Group Pension Scheme The SGPS is a defined benefit scheme operated in the UK. The values of the schemes liabilities have been determined by a qualified actuary based on the results of an actuarial valuation as at 31 October 2009, updated to the balance sheet date. The mortality assumptions at the year end are based on standard mortality tables that allow for future mortality improvements. The assumptions are that the life expectancy of a member who retires at the age of 65 is as follows:
Male currently aged 45 Male currently aged 65 Female currently aged 45 Female currently aged 65 The assumptions used in determining the valuations are as follows:
23.9 years 21.7 years 24.8 years 22.8 years
20 August 2011
21 August 2010
22 August 2009
Rate of increase of salaries Rate of increase in pensions Discount rate Inflation assumption (RPI) Inflation assumption (CPI)
2.70% 3.25% 5.20% 3.60% 2.70%
3.20% 5.20% 3.40%
3.60% 3.30% 5.20% 3.60%
88
Annual Report 2011

Scheme funding continued Spirit Group Pension Scheme continued The assets in the scheme and the expected rate of return were:
Long term rate of return expected at 20 August 2011 Long term rate of return expected at 21 August 2010 Long term rate of return expected at 22 August 2009
Value at 20 August 2011 m
Equities Government bonds Property Corporate bonds Other Total market value of assets Present value of scheme liabilities Net pension liability before deferred tax Deferred tax asset Net pension liability
7.25% 3.50% 6.75% 5.00% 1.60%
46.0 30.9 11.9 30.0 1.3 120.1 (122.4) (2.3) 0.6 (1.7)
7.75% 4.00% 7.00% 5.00% 1.50%
57.0 19.2 11.3 20.0 0.5 108.0 (120.5) (12.5) 3.4 (9.1)
7.25% 4.25% 6.25% 5.25% 1.50%
56.9 14.5 6.4 16.0 0.8 94.6 (120.9) (26.3) 7.4 (18.9)
Spirit Group Retail Pension Scheme The SGRPS is a defined benefit scheme operated in the UK. The values of the schemes liabilities have been determined by a qualified actuary based on the results of an actuarial valuation as at 31 October 2009, updated to the balance sheet date. The mortality assumptions at the year end are based on standard mortality tables that allow for future mortality improvements. The assumptions are that the life expectancy of a member who retires at the age of 65 is as follows:
Male currently aged 45 Male currently aged 65 Female currently aged 45 Female currently aged 65 The assumptions used in determining the valuations are as follows:
20 August 2011
21 August 2010
22 August 2009
Annual Report 2011
89
Rate of increase of salaries Rate of increase in pensions Discount rate Inflation assumption (RPI) Inflation assumption (CPI)
2.70% 2.00% 5.20% 3.60% 2.70%
1.80% 5.20% 3.40%
3.60% 1.90% 5.30% 3.60%

Spirit Group Retail Pension Scheme continued The assets in the scheme and the expected rate of return were:
Long term rate of return expected at 20 August 2011 Long term rate of return expected at 21 August 2010 Long term rate of return expected at 22 August 2009
Equities Government bonds Corporate bonds Property Other Total market value of assets Present value of scheme liabilities Adjustment due to IFRIC 14 Net pension liability before deferred tax Deferred tax asset Net pension liability
7.25% 3.50% 5.00% 6.75% 1.6%
81.2 78.7 75.0 21.9 0.5 257.3 (245.1) (19.3) (7.1) 1.8 (5.3)
7.75% 4.00% 5.00% 7.00% 1.50%
102.1 58.2 60.6 20.7 0.6 242.2 (243.6) (1.4) 0.4 (1.0)
7.25% 4.25% 5.25% 6.25% 1.50%
110.8 44.3 49.2 17.4 0.3 222.0 (241.6) (19.6) 5.5 (14.1)
In the period ended 20 August 2011, the pension asset of 12.2m was restricted to 3.8m, due to the Group not having the entitlement to recover all surpluses at the conclusion of the scheme. The asset was restricted to the amount that could be recovered through reduced contributions to the related defined contribution scheme. An additional liability of 10.9m has been recognised, being the minimum funding agreed following the triennial valuation of the scheme, completed in 2010. The pension costs for the defined contribution schemes are as follows:
Defined contribution schemes
1.3
1.1
1.4
Pension risk The Group operates two defined benefit pension schemes which are both closed to new members. The schemes are subject to risk regarding the relative amount of the schemes assets, which are affected by the value of investments and the returns generated by such investments, compared to the schemes liabilities, which are affected by changes in life expectancy, actual and expected price inflation, changes in bond yields and future salary increases. The difference in value between scheme assets and scheme liabilities may vary significantly in the short term, potentially resulting in an increased deficit (or reduced surplus) being recognised on the Groups balance sheet.
90
Annual Report 2011
27. Operating lease commitments minimum lease payments

Group 20 August 2011 m 21 August 2010 m
Future minimum rentals payable under non-cancellable operating leases: Within one year Between one and five years After five years
61.6 244.6 993.6 1,299.8
60.6 238.8 1,002.9 1,302.3
The future minimum rentals payable under non-cancellable operating leases when discounted to present value are 564.3m (August 2010: 581.7m). The Group leases various licensed properties, offices and other commercial properties under non-cancellable operating lease agreements. The leases have various terms, escalation clauses and renewal rights. The Group also leases vehicles under non-cancellable operating lease agreements. The total future minimum sub-lease payments expected to be received are 47.6m (August 2010: 51.9m). The Group is a lessor of licensed properties to retailers. The leases have various terms, escalation clauses and renewal rights. The total non-cancellable future minimum lease payments expected to be received are:
Land and buildings 20 August 2011 m Land and buildings 21 August 2010 m
Within one year Between one and five years After five years The Company has no operating lease commitments at 20 August 2011 (August 2010: nil).
21.0 75.9 94.6 191.5
21.3 79.5 111.8 212.6
28. Capital and other financial commitments
20 August 2011 m
21 August 2010 m
Contracted but not provided The Company has no capital commitments at 20 August 2011 (August 2010: nil).
17.0
5.7
Annual Report 2011
91
Group Capital commitments for property, plant and equipment

29. Related party transactions
Group Transactions with the Punch Taverns group prior to demerger All transactions of Spirit Pub Company plc and its subsidiaries with the Punch Taverns plc group of companies prior to the demerger have been considered related party transactions on the basis of common control. The following balances have arisen from transactions between the Spirit Pub Company group and the Punch Taverns group companies:
Amounts owed by related parties falling due within one year Amounts owed by related parties falling due after more than one year Amounts owed to related parties falling due within one year Subordinated loans Amounts owed to related parties falling due after more than one year
0.4 (6.4) (6.0)
6.8 193.9 (18.0) (1,052.2) (500.5) (1,370.0)
7.7 247.1 (16.9) (906.7) (558.1) (1,226.9)
On 30 June 2011, it was agreed that certain tax reliefs and allowable capital losses would be reallocated between various members of the Spirit Group and the Punch Taverns group and on 5 July 2011 an amount of 12m was transferred in respect of that allocation to the Spirit Group. On 1 July 2011, an amount of 61m was transferred to the Spirit Group by the Punch Taverns group as part of the cash allocation agreed prior to demerger. In addition, on 5 July 2011, the Spirit Group received an aggregate amount of 6m from the Punch Taverns group in respect of the reimbursement of certain prepayments. Prior to the demerger a company within the Punch Taverns plc group provided subordinated debt funding to the Spirit Group. This debt was written down to market value, prior to demerger, resulting in a 1,228m capital contribution being recognised. A further capital contribution of 305m was recognised following the writing down of additional intercompany debt to market value. The Punch Taverns group continues to provide certain management and central operational services to the Spirit Group to facilitate the operation of the Leased division. These management services will continue to be provided for a period of up to nine months from 1 August 2011, and the costs for these services are charged on a four weekly basis based on an agreed budget. The amounts owed to related parties represent balances between the Punch Taverns and Spirit sub groups, and have various repayment dates and interest rates. Transactions with key management personnel The key management personnel of the Group comprise members of the Spirit Pub Company plc Board of Directors and other nominated members of the executive management team. The key management personnel compensation is as follows:
Short term employee benefits Post-employment employee benefits Share based payments
3.2 0.3 0.1 3.6
0.4 0.1 0.5
0.5 0.5
92
Annual Report 2011
29. Related party transactions continued

Transactions with joint ventures The Group holds 51% of the share capital of Allied Kunick Entertainments Limited, but can only exercise joint control as both parties have equal voting rights. During the period, the Group has paid invoices and raised sales invoices on behalf of this joint venture which have been recharged via an intercompany account. At 20 August 2011, the Group owed Allied Kunick Entertainments Limited 0.6m (August 2010: the Group owed Allied Kunick Entertainments Limited 0.5m, 2009: Allied Kunick Entertainments Limited owed the Group 0.2m). Year end balances arising from transactions with joint ventures
Unsecured loan stock receivable Amounts owed to joint ventures Total amounts due from joint ventures
11.3 (0.6) 10.7
10.6 (0.5) 10.1
10.0 (0.5) 10.2
All rights, together with the joint venture partner of Allied Kunick Entertainments Limited, to receive interest on the unsecured loan stock, have been waived. The amount outstanding at the period end has been fully provided by the Group due to the uncertainty of its recoverability. Neither the Group nor the Company have had any transactions with any of the pension schemes during the current or prior period, other than those disclosed in note 26. Company Transactions with key management personnel The key management personnel of the Company comprise members of the Spirit Pub Company plc Board of Directors. The Directors do not receive any remuneration from the Company (August 2010: nil, August 2009: nil) as their emoluments are borne by other Group companies. The Company did not have any transactions with the Directors during the financial year (August 2010: nil, August 2009: nil). Transactions with subsidiary undertakings The Company has had no transactions with subsidiary undertakings in the period to 20 August 2011.
30. Contingent liabilities and assets
At 21 August 2010 a contingent asset of 18.8m existed in relation to the Groups outstanding gaming machine VAT claim. A decision was released during 2010 in respect of the Rank Group plcs gaming claim, and this latest ruling fell in the taxpayers favour. As a result, the Group was able to further pursue its own gaming claim and, during the period to 20 August 2011, the Groups claim was repaid by HMRC. HMRC agreed to make the repayment of the existing claim, subject to the Group providing a guarantee to HMRC that, in the event that the existing decision in the Rank Group plc is overturned in a higher court, the amount will be repayable in full. The decision in relation to the Rank Group plcs claim has been referred to the Court of Justice of the European Union. The Group has therefore recognised the repayment amount as a provision, until the Rank Group plc case has reached its final conclusion.
31. Post balance sheet events

The financial statements were authorised by Mike Tye and Russell Margerrison on 31 October 2011. At this date there were no adjusting or non-adjusting events after the reporting period.
Annual Report 2011
93
In prior years, the Group has disposed of a number of properties for which it remains contingently liable for the head leases should the assignee default on the terms of the lease. This may result in a number of leases reverting to the Group for which the annual net exposure to the Group is considered unlikely to exceed 6m per annum.
Independent auditors report to the members of Spirit Pub Company plc

We have audited the financial statements of Spirit Pub Company plc for the year ended 20 August 2011 set out on pages 48 to 93. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Companys members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Companys members those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Companys members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors responsibilities in relation to the financial statements set out on page 46, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Boards (APBs) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APBs website at www.frc.org.uk/apb/ scope/private.cfm.
Opinion on financial statements
In our opinion: the financial statements give a true and fair view of the state of the Groups and of the parent companys affairs as at 20 August 2011 and of the Groups loss for the year then ended; the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
Other matter prior period financial statements
In forming our opinion on the financial statements, which is not qualified, we note that the prior period financial statements were not audited. Consequently, International Standards on Auditing (UK and Ireland) require the auditor to state that the corresponding figures contained within these financial statements are unaudited.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion: the part of the Directors remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; the information given in the Directors report for the financial year for which the financial statements are prepared is consistent with the financial statements; and information given in the Corporate governance statement set out on pages 34 to 35 in the Annual Report with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.
94
Annual Report 2011
Matters on which we are required to report by exception
We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements and the part of the Directors remuneration report to be audited are not in agreement with the accounting records and returns; or certain disclosures of Directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit; or a Corporate Governance Statement has not been prepared by the company. Under the Listing Rules we are required to review: the Directors statement, set out on page 33, in relation to going concern; the part of the Corporate governance statement on pages 34 to 35 in the Annual Report relating to the Companys compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and certain elements of the report to shareholders by the Board on Directors remuneration.
G A Watts (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants, One Snowhill, Snow Hill Queensway, Birmingham B4 6GH 31 October 2011
Annual Report 2011
95
Four year financial record

Consolidated trading results
20 August 2011 m Unaudited 21 August 2010 m Unaudited 22 August 2009 m Unaudited 23 August 20081 m
Revenue2 Operating expenses before depreciation and amortisation2 EBITDA 2 Depreciation and amortisation2 Operating profit2 Net finance costs2 Profit before tax 2 Taxation2 Profit after tax 2 Non-underlying items Earnings per share: Basic adjusted (pence) 3
1 The period ended 23 August 2008 is a 53 week period. 2 Before non-underlying items. 3 Earnings adjusted for the impact of non-underlying items.
734.4 (594.8) 139.6 (34.8) 104.8 (56.7) 48.1 (13.1) 35.0 (184.7)
724.0 (593.0) 131.0 (32.8) 98.2 (57.2) 41.0 (11.6) 29.4 (172.4)
775.1 (623.4) 151.7 (42.5) 109.2 (64.5) 44.6 (12.7) 31.9 (312.7)
810.1 (623.1) 186.9 (43.2) 143.7 (66.5) 77.2 (22.7) 54.5 (274.6)
5.3
4.5
4.8
8.2
Consolidated balance sheets

20 August 2011 m Unaudited 21 August 2010 m Unaudited 22 August 2009 m Unaudited 23 August 2008 m
Property, plant and equipment Goodwill Operating leases and other intangible assets Other non-current assets Total non-current assets Non-current assets classified as held for sale Other current assets Current liabilities Non-current liabilities Net assets Share capital Reserves Shareholders equity Nominal value of gross debt
1,714.2 216.8 54.8 58.8 2,044.6 4.2 177.3 (216.5) (1,098.6) 911.0 6.6 904.4 911.0 843.5
1,718.0 227.2 73.8 210.7 2,229.7 37.2 73.3 (193.1) (2,674.6) (527.5) 6.6 (534.1) (527.5) 866.5
1,768.2 231.2 78.0 278.2 2,355.6 29.2 112.7 (199.4) (2,702.7) (404.6) 6.6 (411.2) (404.6) 996.2
2,153.9 258.5 106.9 294.7 2,813.9 4.5 148.5 (199.7) (2,829.6) (62.4) 6.6 (69.0) (62.4) 1,250.0
96
Annual Report 2011
Financial glossary
Corporate governance Corporate governance describes the system by which an organisation is directed and controlled. Debenture notes A form of bond taken out by a company, which it agrees to repay at a specified future date and which bears interest (either fixed or variable) until maturity. Debt service cover ratio Debt service cover ratio (DSCR) is the ratio of EBITDA to debt service. Derivative financial instruments Financial instruments whose value changes in response to changes in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, or other variable, and are settled at a future date. Diluted earnings per share Diluted earnings per share is earnings per share after allowing for the dilutive effect of the conversion into ordinary shares of the weighted average number of options outstanding during the period and shares from the assumed conversion of convertible bonds. Earnings per share (EPS) Earnings per share is a performance measure that expresses the earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period. EBITDA EBITDA represents earnings before finance income, finance costs, movement in fair value of interest rate swaps, UK income tax, depreciation, amortisation and profit on sale of non-current assets. Effective interest rate method A method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or expense over the relevant period. Experience gains / losses Changes in the valuation of a defined benefit pension scheme that arise when events have not coincided with the actuarial assumptions made for the previous valuation. Fair value The amount at which assets can be exchanged, or liabilities settled, between knowledgeable, willing parties in an arms length transaction. Finance lease A method of purchasing an asset by making rental payments throughout the expected lifetime of the asset. The lessee shows an asset and a corresponding liability in the balance sheet. Finance lease payments are accounted for as a reduction in the liability. Goodwill Goodwill is the excess of the amount paid for a company over the fair value of the net assets acquired at the date of acquisition. IAS International Accounting Standards IASB International Accounting Standards Board IFRS International Financial Reporting Standards IFRIC International Financial Reporting Interpretations Committee Interest cover A performance measure that shows the number of times EBITDA covers the net finance income and finance cost. Interest rate swap A derivative financial instrument used to minimise exposure to changes in interest rates by payment to receive a fixed interest rate in exchange for a floating rate interest rate, or payment to receive a floating rate interest rate in exchange for a fixed interest rate. LIBOR London Inter Bank Offered Rate. The interest rate quoted between banks, which is a recognised basis for calculating a floating interest rate.
Annual Report 2011
97
Financial statements continued
Financial glossary
Net debt Loans, convertible bonds, derivative financial instruments and finance leases net of other interest bearing deposits and cash and cash equivalents. Nominal value of net debt The value of a security stated by the issuer; unrelated to market value. For bonds, it is the amount paid to the holder at maturity. Non-underlying items Items which management consider will distort comparability, either due to their significant non-underlying nature or because of specific accounting treatments. These are separately identified in order to provide a trend measure of underlying performance. Operating lease A method of renting assets over a period that is less than the expected life of the asset. The lessee does not show an asset or liability on their balance sheet and periodic payments are accounted for by the lessee as operating expenses in the period. Operating result Profit after deducting all operating expenses including depreciation and amortisation. PBT Profit before tax Projected unit credit method The accounting method used to calculate provisions for pensions. It includes not only the pensions and vested interests accrued at the date of calculation, but also anticipated increases in salaries and pensions. Securitisation The process of raising finance by creating a financial instrument secured by pooling other financial assets to back the instrument. Segmental reporting Information regarding the financial position and results of operations in different business areas. SOCI Statement of comprehensive income Total shareholder return (TSR) The growth in value of a shareholding over a specific period, assuming that dividends are reinvested to purchase additional shares. UK Corporate Governance Code The UK Corporate Governance Code on corporate governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit, and relations with shareholders. UK GAAP UK Generally Accepted Accounting Principles Working capital Short term disposable capital used to finance day-to-day operations. It is calculated as current assets less current liabilities.
98
Annual Report 2011
Company information
Directors of the Company Walker Boyd Chairman Ian Dyson Chief Executive Officer Mike Tye Deputy Chief Executive Officer Russell Margerrison Interim Finance Director Mark Pain Non-executive Director Tony Rice Non-executive Director Christopher Bell Non-executive Director Financial calendar Q1 Interim Management Statement Annual General Meeting Half year end Interim results announcement Q3 Interim Management Statement Year end Preliminary results announcement Registered office Sunrise House Ninth Avenue Burton upon Trent Staffordshire DE14 3JZ +44 (0)1283 498 400 Company number 07662835
December 2011 16 December 2011 3 March 2012 April 2012 June 2012 18 August 2012 October 2012
Annual Report 2011
99
Advisers
Auditors KPMG Audit Plc One Snowhill Snow Hill Queensway Birmingham B4 6GH +44 (0) 121 232 3000 Principal bankers Barclays Bank plc One Snowhill Snow Hill Queensway Birmingham B3 2WN +44 (0)121 480 5562
Joint broker Citigroup Global Markets Limited 33 Canada Square Canary Wharf London E14 5LB +44 (0)20 7986 4000 Legal adviser Slaughter and May One Bunhill Row London EC1Y 8YY +44 (0)20 7600 1200 Registrar Computershare Investor Services plc PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH +44 (0)870 702 0003
Financial adviser & joint broker Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB +44 (0)20 7774 1000
100
Annual Report 2011
This report is printed using papers which are FSC Mixed Credit certified. If you have finished reading this report and no longer wish to retain it, please pass it on to interested readers, return it to Spirit Pub Company plc or dispose of it in your recycled paper waste. Thank you.
Designed and produced by The College www.thecollege.uk.com
Spirit Pub Company plc Sunrise House Ninth Avenue Burton upon Trent Staffordshire DE14 3JZ Tel: +44 (0)1283 498400 www.spiritpubcompany.com

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Spirit Pub Company plc Annual Report 2011

Spirit Pub Company plc

Spirit Pub Company

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For more information on Spirit Pub Company visit www.spiritpubcompany.com

Spirit Pub Company plc

Chef & Brewer

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For more information on Chef & Brewer visit www.chefandbrewer.com

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For more information on Taylor Walker visit www.taylor-walker.co.uk

Spirit Pub Company plc

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For more information on Fayre & Square visit www.fayre-square.com

Spirit Pub Company plc

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For more information on Flaming Grill visit www.flaminggrillpubs.com

Spirit Pub Company plc

For more information on Wacky Warehouse visit www.wackywarehouse.co.uk

Spirit Pub Company plc

Good Night Inns

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For more information on Good Night Inns visit www.goodnightinns.co.uk

Spirit Pub Company plc

Original Pub Company

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For more information on Original Pub Company visit www.originalpubco.com

Spirit Pub Company plc

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Spirit Pub Company plc

Spirit Pub Company plc

Best for Guest

Best for Investor

Best for Team Best for Guest Best for Investor

Profit before tax1 m

Basic earnings per share1 pence

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Annual Report 2011

Spirit Pub Company plc

Spirit Pub Company

Managed pub business

Leased pub business

Our Circle of Success

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Spirit Pub Company plc

Annual Report 2011

Our Managed pubs

Fayre & Square

Delicious meals, square deals thats Fayre & Square!

Flaming great steaks in a flaming great pub.

Good Night Inns

Our hotels have character, individual quirks and homely comforts.

Original Pub Company

Whatever the time of day, a great place to be.

Annual Report 2011

Spirit Pub Company plc

Chef & Brewer

Our Leased pubs

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Spirit Pub Company plc

Annual Report 2011