Overview of Results

The Business Review incorporates those sections of the Annual Report which, in previous years, were included in the Chief Executive’s Review and the Financial Review.

We have achieved these good results in a challenging environment, which included the introduction of a smoking ban in Wales on 2 April 2007 and in England on 1 July 2007. We completed, in advance of the ban, a well planned £20 million investment programme in over 90% of our pubs which have outside trading areas, contributing to the robust performance of our managed and tenanted pubs.

Additionally, around 150 pubs were significantly affected by flooding in June and July which either resulted in pub closure or prevented customers from visiting. The weather in May, June and July was unseasonably wet, particularly so in comparison to the previous year which benefited from good summer weather and the 2006 football World Cup.

Turnover increased by 9.6% to £652.8 million (2006: £595.5 million) including the acquisitions of Sovereign Inns, Eldridge Pope and Ringwood Brewery.

Underlying operating margin was 25.0% (2006: 25.6%). This good performance was achieved, despite significant cost and legislative pressures, by maximising synergies from acquisitions, transferring smaller managed pubs to tenancy and maintaining good cost control.

Profit before tax and exceptional items was £98.0 million (2006: £101.5 million) reflecting increased interest costs associated with the share buy-back programme described in the Chairman’s Statement. This was slightly below our original expectations due to the impact of higher interest rates, flood related repair costs and the poor summer weather.

Underlying basic earnings per share before exceptional items increased by 10.1% to 26.2 pence per share reflecting the benefit of a lower underlying tax charge of 21.0% (2006: 27.8%) as described in the Financial Review.