Directors' report and disclosures
The directors present their annual report together with the audited financial statements of the company and the group for the 52 weeks ended 1 May 2016. The company has chosen, in accordance with section 414C(11) of the Companies Act 2006, to include matters of strategic importance, such as future developments in the business of the group, and details of the greenhouse gas emissions, in the strategic report which otherwise would be required to be disclosed in the director’s report.
Profits and dividends
The group’s profit before taxation and exceptional items for the period amounted to £256.5 million (2015 – £168.5 million). An interim dividend of 8.45p per share (2015 – 7.95p) was paid on 22 January 2016. The directors recommend a final dividend of 23.6p per ordinary share (2015 – 21.8p), making a total dividend for the year of 32.05 per share (2015 – 29.75p). Subject to the approval of shareholders at the AGM, the final dividend will be paid on 12 September 2016 to shareholders on the register at the close of business on 12 August 2016.
Details of the current directors are given on the Board of directors page. Philip Yea was appointed to the board on 2 February 2016. At the end of the year Tim Bridge retired as chairman, having served as a director for 39 years.
The board has recommended that all of the directors offer themselves for re-election at the forthcoming AGM, with the exception of Philip Yea who will be standing for election for the first time.
Details of the directors’ service agreements, remuneration, and interests in long term incentives and awards are set out in the directors’ remuneration report.
Directors’ interests in shares
The beneficial interests of each of the directors and their immediate families in the ordinary share capital of the company are shown below:
|3 May 2015||1 May 2016|
At 1 May 2016, Tim Bridge had a non-beneficial interest in 87,900 (2015: 87,900) shares, in addition to the holding shown above.
There have been no changes in the interests of the current directors between 1 May 2016 and the date of this report.
Interests in contracts
No director had a material interest in any contract, other than an employment contract, that was significant in relation to the group’s business at any time during the period.
The company has been notified of the following significant holdings (3% or more) of voting rights:
|1 May 2016||28 June 2016|
|Standard Life Investments (Holdings) Limited||4.774%||4.774%|
|The Capital Group Companies, Inc||16.28%||16.28%|
Details of the authorised and issued share capital of the company, which comprises a single class of shares, ordinary shares of 12½p, are set out in note 27 to the financial statements. The rights attaching to the shares are set out in the articles of association. There are no special control rights in relation to the company’s shares and the company is not aware of any agreements between holders of securities that may result in restrictions on the transfer of securities or on voting rights.
In connection with the acquisition of Spirit Pub Company the consideration was satisfied by the allotment of 89,095,959 ordinary shares, with an aggregate nominal value of £11,136,995.
A total of 371,620 ordinary shares, with an aggregate nominal value of £46,453 were allotted, for cash, during the period in connection with the company’s share save and executive option schemes.
The company makes regular use of the employee benefit trust (EBT) to satisfy the exercise of share options and will make market purchases of the company’s shares from time to time to ensure that it has sufficient shares to enable it to do so.
Purchase of own shares
In accordance with the company’s articles of association, authority was sought at the last AGM to purchase up to 10% of the company’s shares in issue as at 27 July 2015. The authority, which has not been exercised, was approved and remains exercisable until the next annual general meeting or 8 February 2017, whichever is earlier. The directors have again sought approval for the authority to purchase the company’s own shares.
In a general meeting of the company, on a show of hands, every member who is present in person or by proxy and entitled to vote shall have one vote. On a poll every member who is present in person or by proxy shall have one vote for every share of which they are the holder. The AGM notice gives full details of deadlines for exercising voting rights in respect of resolutions to be considered at the meeting.
No voting rights will be exercised in respect of any own shares held by the company.
Transfer of shares
There are no restrictions on the transfer of shares in the company other than those which may from time to time be applicable under existing laws and regulations (for example under the Market Abuse Directive).
In addition, pursuant to the Listing Rules of the Financial Conduct Authority, directors of the company and persons discharging managerial responsibility are required to obtain prior approval from the company to deal in the company’s securities, and are prohibited from dealing during close periods.
Change of control
All of the company’s share incentive plans contain provisions relating to a change of control and full details of these plans are provided in the directors’ remuneration report. Outstanding options and awards would normally vest and become exercisable on a change of control, subject to the satisfaction of performance conditions, if applicable, at that time.
The group’s banking facility agreements contain provisions entitling the counterparties to exercise termination or other rights in the event of a change of control. Certain of the company’s trading contracts also contain similar provisions.
There is one employee who, on a change of control of the company resulting in the termination of their employment, would be entitled to compensation for loss of office. However, in the context of the company as a whole, this agreement is de minimis.
Articles of association
The company’s articles of association may only be amended by special resolution at general meetings of shareholders.
Appointment and replacement of directors
The number of directors on the board shall be no less than five nor more than twelve. Directors may be appointed by the company by ordinary resolution or by the board of directors. A director appointed by the board of directors holds office until the next following AGM, and is then eligible for election by the shareholders.
The articles provide that at each AGM all those directors who were elected, or last re-elected, at the AGM held in the third calendar year before the current year shall retire from office and may stand for re-election. In practice directors submit themselves for annual re-election in accordance with the provisions of the UK Corporate Governance Code.
The company may by ordinary resolution, of which special notice has been given, remove any director from office.
Any director automatically ceases to be a director if (i) they give the company a written notice of resignation, (ii) they give the company a written offer to resign and the directors decide to accept this offer, (iii) all of the other directors remove them from office by notice in writing served upon them, (iv) they are or have been suffering from mental ill health and have a court order for their detention or the appointment of a guardian made in respect of them, (v) a bankruptcy order is made against them or they make any arrangement or composition with their creditors generally, (vi) they are prohibited from being a director by law or (vii) they are absent from board meetings for six months without leave and the other directors resolve that their office should be vacated.
Powers of the directors
The business of the company is managed by the directors who may exercise all the powers of the company, subject to its articles of association, any relevant legislation and any directions given by the company by passing a special resolution at a general meeting. In particular, the directors may exercise all the powers of the company to borrow money, issue shares, appoint and remove directors, and recommend and declare dividends.
Communications with shareholders
The group continues to support community initiatives and charitable causes, in particular Macmillan Cancer Support, full details of which are given in the corporate social responsibility section of this online annual report. The group makes no political donations.
Employment and recruitment policies
It is the company’s policy to ensure that employees are recruited, selected, developed, remunerated and promoted on the basis of their skills and suitability for the work performed. The company is committed to treating all employees fairly and equally and will endeavour to provide workplace adaptations and training for employees or candidates who have a disability and colleagues who become disabled during their employment.
The company values employee engagement across the business and produces a monthly publication that is circulated to all employees containing company news and articles, which is circulated to all employees. In addition, the company provides regular briefings and presentations to staff on the company’s performance and strategy as well as annual and interim results. The company operates an HMRC approved sharesave scheme open to all employees which helps to align employees with the performance of the company.
We are a people business so it is vitally important that we recruit and train the right people to deliver value, service and quality to our customers. The company works in partnership with local communities to promote and provide opportunities for all.
Even though the company does not have a formal human rights policy, it is committed to conducting business with integrity and fairness.
Disclosure of the group’s greenhouse gas emissions is contained within the corporate responsibility statement.
Directors’ and officers’ indemnity insurance
The group has taken out insurance to indemnify the directors of the company against third party proceedings whilst serving on the board of the company and of any subsidiary. This cover indemnifies all employees of the group who serve on the boards of all subsidiaries. These indemnity policies subsisted throughout the year and remain in place at the date of this report.
The group’s policy on the use of financial instruments is set out in note 24 to the financial statements.
Post balance sheet events
Details of events occurring after the year-end are set out in note 33 to the financial statements.
Directors’ statement as to disclosure of information to the auditor
The directors who were members of the board at the time of approving the directors’ report are listed on the Board of directors page. Having made enquiries of fellow directors and of the company’s auditor, each of these directors confirms that:
- to the best of each director’s knowledge and belief, there is no information relevant to the preparation of their report of which the company’s auditor is unaware; and
- each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the company’s auditor is aware of that information.
The group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the chief executive’s review. The financial position of the group, its cash-flows, liquidity position and borrowing facilities are described in the financial review. In addition, note 24 to the financial statements includes the group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit and liquidity risk.
The directors are of the opinion that the group’s forecast and projections, which take account of reasonably possible changes in trading performance, and its stress testing to take account of expected payments in respect of uncertain tax positions show that the group should be able to operate within its current borrowing facilities and comply with its financing covenants.
After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.
Ernst & Young LLP has expressed its willingness to continue in office and a resolution to re-appoint the firm as the company’s auditor will be proposed at the AGM.
Annual general meeting
The AGM will be held at 12 noon on Friday 9 September 2016 at the Millennium Grandstand, Rowley Mile Racecourse Conference Centre, Newmarket, Suffolk. The notice of the AGM is set out in the separate circular to shareholders.
The directors consider that all of the resolutions set out in the notice of AGM are in the best interests of the company and its shareholders as a whole. The directors will be voting in favour of them and unanimously recommend that shareholders vote in favour of each of them.
By order of the board
28 June 2016