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Wolv.& Dudley Brews. (WOLV)

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Friday 03 December, 2004

Wolv.& Dudley Brews.

Final Results

Wolverhampton& Dudley Breweries PLC
03 December 2004

3 December 2004



• Record underlying* earnings per share up 10% to 75.8p (2003: 68.9p)
  - basic earnings per share of 66.7 pence, up 25.8%. (2003: 53.0p)

• Dividend raised to 35.32p per share, up 10% (2003: 32.1p)

• Underlying profit before taxation up 6.3% to £77.7 million (profit before taxation
  and after goodwill and exceptionals up 17.8% to £70.2 million)

• The Union Pub Company like-for-like sales up 4.3%

• Pathfinder Pubs like-for-like sales up 3.2%

• Successful integration of Wizard Inns

• Property revaluation gains of £169.5 million

• Underlying profit and margins up in all three divisions

• Recommended £119.9 million cash offers for Burtonwood PLC

Ralph Findlay, Chief Executive, commented:-

'We have a clear strategy to develop the business through continuing investment
in our pubs and new sites, and in our beer brands.  Organic growth is being
achieved and the business has good momentum.

The first eight weeks of the new financial year have started well, and in the
light of market conditions we believe that our business model and our approach
to financing leave us well placed to outperform the sector.'

*   The underlying results reflect the performance of the Group before goodwill
and exceptional items.  The Directors consider that these figures provide a
useful indication of the underlying performance of the Group.


The Wolverhampton & Dudley Breweries, PLC                gcg hudson sandler
Ralph Findlay, Chief Executive                           Andrew Hayes/Nick Lyon/
Paul Inglett, Finance Director                           James Benjamin
Tel:   020 7796 4133 on Friday 3 December 2004 only      Tel:   020 7796 4133
         01902 329517 thereafter

High quality images for the media to access and download free of charge are
available from Visual Media Online at


These good results reflect the quality of our business and our focus on the
successful organic development of our high quality pub estates and beer brands.
The strong and consistent performance of the Group is being delivered from a
sound base of excellent, freehold community pubs and from our position as a
leading brewer and distributor of popular ale brands.  We are well positioned to
continue our successful development.

Today we have announced that we have reached agreement on the terms of
recommended cash offers for Burtonwood PLC.  Burtonwood has an excellent estate
of 460 pubs which are a good geographic fit with our existing 1,675 pubs.
Combining these estates represents an attractive opportunity to generate value
by strengthening our position as a leading operator of high quality pubs across
the country.  Full details of these offers are contained in a separate
announcement released today.


Strong growth in like-for-like sales (on a comparable 52-week basis) and the
acquisition of Wizard Inns on 14 June 2004 contributed to a 4.7% increase in
turnover to £513.7 million (2003: £490.5 million).

Underlying operating margin of 22.0% (2003: 22.1%) was maintained as planned by
increasing gross margins in all divisions, reducing controllable costs and
further improving efficiencies.  These positive actions offset increases in
pension and regulatory costs.  Underlying operating profit and operating margins
were increased in all three of our business divisions.

Underlying profit before taxation increased by 6.3% to £77.7 million (after
goodwill and exceptional items up 17.8% to £70.2 million), and underlying
earnings per share increased by 10.0% to 75.8 pence per share (2003: 68.9


The Board proposes a final dividend of 23.32 pence per share, which brings the
total net dividend for the year to 35.32 pence per share (2003: 32.1 pence).

The year-on-year increase in dividend per share is 10.0%, commensurate with the
10.0% increase in underlying earnings per share.  The Company has increased
dividends by an average of over 10% per annum for a period of at least 30 years,
and remains consistent in adopting a progressive dividend policy.

The final dividend, if approved, will be paid on 31 January 2005 to those
shareholders on the register at the close of business on 31 December 2004.

Property revaluation

Our accounting policy requires us to value our property assets every five years.
This year, 75% of our pubs fell into this category and were independently
re-valued.  The resulting uplift of £169.5 million has been adopted in the
balance sheet, and represents an average uplift of 25% on pub values since these
pubs were last re-valued in 1999.   Next year, the remaining 25% will be
re-valued in line with our accounting policy. By value, 96% of our property
assets are freehold or long leaseholds at peppercorn rents.

Following the acquisition of Wizard Inns, that estate was independently valued
at £85.8 million.  Goodwill of £9.1 million has been accounted for, and is being
amortised over twenty years.


The strong performance of the Group is a reflection of the diligence and
creativity of our employees. We benefit significantly from having a blend of
those who have been with the Group for many years, proving adaptable in
different economic climates, and more recent recruits including those from
Wizard Inns.  I thank all of them for their contributions.

Over the last 24 months the Group has introduced new benefits for employees,
many of which were introduced as a result of recommendations made in response to
our annual employee feedback survey.  We have met the Investors in People
standards continuously since 1995, and aim to continue to be a business
attracting and retaining the best people.


The sector faces pressure from regulation which will have an impact on the way
we do business. Whether to do with health, drinking behaviour or smoking,
regulation places clear responsibilities upon us, and we take those
responsibilities seriously.  At the recent industry Responsible Drinks Retailing
Awards, The Union Pub Company won the national award for 'Most Responsible Pub

In recent years, our industry has experienced significant cost increases as a
consequence of regulation and other factors beyond our control, and it is likely
that such costs will continue to rise.

Notwithstanding the regulatory and cost environments, there are good
opportunities to develop the business, as demonstrated by these results.

The first eight weeks of the new financial year have started well, with total
like-for-like sales in Pathfinder Pubs 3.2% ahead of last year, and in the Union
Pub Company 4.2% ahead.  In WDB Brands, volumes of our own brewed ale brands
were 4.7% ahead of last year.

David Thompson


Business development

The combination of good like-for-like sales growth (on a comparable 52-week
basis) in our pubs and maintained operating margins were again amongst the best
in the industry, contributing to the 4.7% increase in turnover, the 6.3%
increase in underlying profit before taxation, and the 10.0% increase in
underlying earnings per share. We have a clear strategy to develop the business
through continuing investment in our pubs and new sites and in our beer brands.
Organic growth is being achieved and the business has good momentum.

This performance reflects the fact that we manage and operate high quality pubs
and beer brands and manage our assets flexibly. Since 1999 we have sold over 900
pubs and transferred around 550 formerly managed pubs to lease or tenancy, and
have achieved growth by accelerating pub investment through the development and
acquisition of both community and food-led pubs.  In WDB Brands, returns on
capital have more than doubled since 2000, whilst capital employed has halved.

We also benefit from our proven approach to estate management: we have a
preference for freehold rather than leasehold ownership of assets and for
community pubs over high street pubs. As a consequence, we have benefited from
capital appreciation in pub values and limited our exposure to the pitfalls
affecting high street trading.

We were amongst the first to identify that targeted refurbishment investment in
community pubs generates substantial returns, and relationships with tenants and
lessees improves after introducing new ideas such as high discounts and
independent rent review panels.  Our vertically integrated model allows
flexibility in dealing with regulatory or other cost pressures, and maximises
our opportunity when making acquisitions.

Pathfinder Pubs

Turnover in our managed pubs division increased by 9.0% to £275.2 million,
including a £13.4 million contribution from Wizard Inns.  Underlying operating
profit increased by 10.2% to £58.4 million, including a £2.0 million
contribution from Wizard Inns.

Total like-for-like sales increased by 3.2%, a strong performance despite poorer
summer weather than last year.

Like-for-like sales are, however, only one measure of performance.  Underlying
operating margin increased by 0.5% to 21.5%, an improvement achieved despite
significant regulatory cost increases.  This was the result of utilising the £6
million investment in electronic point of sale ('EPOS') systems made in 2003,
better purchasing, and productivity improvements which held labour costs at the
same percentage to sales ratio as in 2003.

Over the last four years, we have developed our food offering significantly.
Food now accounts for 29% of turnover in Pathfinder Pubs, and can be up to 60%
of turnover in our food-led pubs.  Food will be a more important component of
our business in the future, as refurbished and new-build pubs have higher than
average levels of food sales.

We have seen consistent growth in the informal eating-out market, and our
like-for-like sales growth in food this year was 7.8%.   The reasons for our
success include our focus on menu development, high standards of service and
hygiene, and a clear value-for-money position in the market.

The development of Pathfinder Pubs accelerated in June 2004 with the acquisition
of Wizard Inns. The Wizard Inns estate of 63 managed pubs is situated mainly in
the South of England, and comprises outlets in residential neighbourhoods and in
good locations in commercial areas.  The estate is of exceptional quality and
represents a very good fit with our existing business.  The integration of
Wizard Inns has gone smoothly with the head office and systems integration
completed within ten weeks. The anticipated synergies of at least £2.5 million
per annum are already being realised, and performance has been in line with
expectations. Opportunities exist to convert a number of sites to our existing
operating formats.

During the year, we built or acquired five new community pubs with a further 30
sites in various stages of development.  Building new freehold pubs enables us
to grow our business in prime trading locations and in areas beyond our
traditional trading geography. With an average investment of around £1.5 million
per pub, we can create real value through organic development.  We aim to build
or acquire 20 new pubs in the new financial year.

During the year we completed 47 major refurbishments of existing pubs, with an
average investment of around £300,000 per pub.  We now have over 100 'Bostin'
Locals' - great value community pubs - and over 30 'Service That Suits' - larger
food-led pubs.  These investments have produced consistent cash returns in
excess of 20% over the last four years, and have provided us with the template
for new-build pubs on greenfield sites. The operating formats for 'Bostin'
Locals' and 'Service That Suits' have continued to evolve, and we believe that
our overall offer is amongst the best in the community pub sector.

We refurbished five Pitcher & Piano bars during the year, and have achieved good
results. Six more will be completed in the new financial year.

During the year we transferred 41 smaller managed pubs to The Union Pub Company.
These are good pubs which are more suited to being run flexibly by lessees or
tenants, and as such can be operated more cost effectively.

As a consequence of the development of the Pathfinder Pubs estate, average
turnover per pub is around £11,300 per week, up 11.9%, and the average annual
EBITDA (earnings before interest, tax, depreciation and amortisation) per pub is
£177,200, up 12.0%.

The Union Pub Company

Turnover in our leased and tenanted pub division increased by 2.1% to £118.2
million, and underlying operating profit by 3.9% to £50.9 million.  Underlying
operating margin increased from 42.3% to 43.1%.  Like-for-like sales increased
by 4.3%.

In addition to strong like-for-like sales growth, the average EBITDA per pub is
approximately £57,600 per year, up 7.7% compared to 2003.

The Union Pub Company is regarded by many as one of the best quality leased and
tenanted estates in the sector with an average barrelage per pub of over 280
barrels per year.  Of the 1,162 pubs in the estate, over 500 are now under
long-term (21-year) lease agreements.  The introduction of our 'Open House'
lease in 2002 has proved to be an extremely popular move, and the demand for
pubs to be let under this agreement has exceeded our initial expectations.

The Union Pub Company has consistently introduced innovative ideas which enhance
our relationship with licensees.  In 2000, we were the first pub operator to
insist on 'Plain English' agreements which help tenants and lessees understand
the nature of their obligations.  In 2001, we were the first to introduce
independently chaired 'rent panels' to ensure a fair rent setting process. In
2003, we were the first to commit resource to helping tenants through the
licensing reform process.

This year, we developed a facility which allows tenants and lessees to benefit
from our Group purchasing power for items such as utilities, food and equipment,
and introduced new programmes to help licensees exploit their pubs' potential to
make more from specific sales categories such as food and wine. Our training
programme 'The Skill Pool' saw a record number of attendees.

The development of our estate is also contributing to our good performance.  We
acquired 20 new pubs last year, investing £9.3 million, and we aim to acquire
around thirty in the new financial year.  The pubs we seek to acquire are
generally those suitable for lease, with an existing food operation or the
potential to develop one.

We also invested £18.3 million on pub refurbishment through a combination of
investment made before leasing pubs or joint schemes undertaken with the

During the year, 41 smaller managed pubs were transferred from Pathfinder Pubs.
In the last five years, we have moved over 550 pubs from management to tenancy
or lease.

WDB Brands

Turnover was £120.3 million compared to £122.3 million last year.  Turnover in
the second half-year was 1.9% ahead of last year, the first half-year reflecting
the termination of a large low-margin supply contract last year.  Underlying
operating margin increased by 0.4% to 17.8%, and underlying operating profit
increased by 0.5% to £21.4 million.

WDB Brands is the largest ale business amongst its peer group - those who both
brew beer and own and operate pubs (source: ACNielsen).  Although the market
overall is mature, there are real opportunities for beer businesses that are
truly passionate about ale - in terms of brand awareness, beer quality and all
areas of service and delivery.

In total, WDB Brands delivered 1.2 million equivalent barrels of all products to
the on-trade last year - the equivalent of nearly one million pints a day.   We
pride ourselves on very high standards of service from our customer service
centres, draymen and beer quality technicians, all of whom have direct customer
contact.   We adopt the same philosophy in the parts of the business that
customers do not see - in our maltings, breweries in Wolverhampton and Burton,
our modern bottling line and warehouses.  The feedback we have from customers
indicates that our high performance standards are amongst the key reasons why we
are winning new business.

In the last two years, we have developed a strong business offering services
which include bottling, packaging and distribution to a wide range of customers,
including regional and national brewers.   In 2005, we will become the brewer of
Draught Bass at the Burton brewery on behalf of Interbrew UK - a move that will
see us become the largest cask ale brewer in the UK, and brewer of two of the
top premium ales in the country - Marston's Pedigree and Draught Bass.

Over the last two years we have introduced a number of new products, including
Marston's Old Empire - 'the authentic IPA'.  Together with Marston's Pedigree's
strong performance, they contributed to a 4.6% increase in premium ale volumes
last year, and an increase in market share.

In standard ale, which includes the Banks's and Mansfield brands, our
performance was in line with the market.

We continue to invest in our breweries and our brands.  Early in the New Year we
will complete a £2.3 million investment at the Burton brewery, including a new
brewhouse and refrigeration plant which will improve efficiency and
environmental performance.  We have also just launched a new television
marketing campaign for Marston's Pedigree.

In the new financial year, we will benefit from new distribution agreements with
J D Wetherspoon and Mitchells & Butlers, which represent excellent opportunities
to increase the availability of our brands.


We continue to make good progress in acquiring new sites and pubs in line with
our plans and we believe that we are in a strong position to exploit good
acquisition opportunities. In evaluating opportunities, the most important
benchmark is the extent to which acquisitions can generate sustainable returns
at a satisfactory margin above our cost of capital. We would expect any
acquisition to be earnings enhancing.

The Chairman has referred to regulatory pressures in his Statement.  The
Government recently published a White Paper proposing a ban on smoking in public
places, including the majority of pubs, by the end of 2008.  There will be a
consultation process before proposals are eventually finalised, but in the
meantime we have already carried out significant investment in pub gardens and
patios, which would not be affected by a ban, and we will increase the number of
smoke free pubs over time.

Our gearing level is prudent, providing us with considerable flexibility to take
advantage of opportunities as they arise.  From current levels, we have scope to
increase debt whilst still remaining conservatively financed.

The first eight weeks of the new financial year have started well, and in the
light of market conditions, we believe that our business model and our approach
to financing leave us well placed to out-perform the sector.

Ralph Findlay
Chief Executive


Trading overview

                                               Turnover                     Underlying                     Margin
                                                                         operating profit
                                                                             (note 1)
                                           2004           2003            2004           2003           2004       2003
                                             £m             £m              £m             £m              %          %

Pathfinder Pubs                           261.8          252.4            56.4           53.0           21.5       21.0
The Union Pub Co.                         118.2          115.8            50.9           49.0           43.1       42.3
WDB Brands                                120.3          122.3            21.4           21.3           17.8       17.4
Central costs                                 -              -           (17.8)         (15.1)          (3.5)      (3.1)
Continuing operations                     500.3          490.5           110.9          108.2           22.2       22.1
Acquisition of Wizard                      13.4              -             2.0              -           14.9          -
Group                                     513.7          490.5           112.9          108.2           22.0       22.1

We have again delivered strong earnings growth, driven by good underlying
like-for- like sales in the pub divisions and very tight cost management across
the Group. Underlying operating profit increased by 4.3% to £112.9 million
(operating profit after goodwill and exceptionals was up 4.6% to £100.9
million). The 2004 results are based on a 53-week financial year, with profit
before tax benefiting by approximately £1.5 million compared to the previous


Underlying operating margins (excluding the impact of the Wizard Inns
acquisition) increased to 22.2% - an excellent performance given the significant
cost increases the Group has had to absorb over the last year, particularly from
pension contributions and a 7.1% increase in the National Minimum Wage.

Strong cashflow

We continue to be a strongly cash generative business. Cashflow from operating
activities increased by 13.4% to £148.4 million.  Free cashflow, after the
payment of interest, tax and maintenance capital, increased by 23.8% to £68.1

Earnings per share

Underlying earnings per share increased by 10.0% to 75.8 pence per share, driven
by a 6.3% increase in profit before taxation, and a lower effective tax rate
(basic earnings per share was 66.7 pence, an increase of 25.8%).

Acquisition of Wizard Inns

Wizard Inns was acquired on 14 June 2004 for £91.3 million, including
acquisition costs and the repayment of £68.5 million of debt.  The acquisition
was funded from existing bank facilities.  The estate of 63 pubs has been
independently valued at £85.8 million. Goodwill arising as a result of the
acquisition was £9.1 million and is being amortised over 20 years (see note 10).

Estate revaluation

The net uplift from the revaluation of our estate of £169.5 million has been
reflected in the balance sheet, comprising a £171.7 million gain to reserves and
a £2.2 million charge to the profit and loss account. The majority of this
surplus relates to our pub divisions, with a £76.8 million gain in Pathfinder
Pubs and a £78.0 million gain in The Union Pub Company. The remainder relates to
a £7.0 million gain on our brewing assets and a £7.7 million gain on our
unlicensed property estate.

As a result of the revaluation gain, balance sheet gearing has fallen to 86% at
the year-end from 102% as at September 2003.

Capital expenditure

In addition to the acquisition of Wizard Inns there has been a significant
increase in capital expenditure, with total spend across the Group increasing by
£34.0 million to £81.9 million. The majority of this has been driven by
increased investment in pub acquisitions and an increase in new build
developments and sites within Pathfinder Pubs.  We expect Group capital
expenditure to rise by a further £13 million in 2005, driven by the new build
development program in Pathfinder Pubs.


Despite the significant increase in capital expenditure and the acquisition of
Wizard Inns, the Group remains conservatively financed relative to the sector.
Interest cover as defined by our banking facilities is 3.3 times, whilst the
ratio of debt to EBITDA including the contribution of Wizard Inns on an
annualised basis has increased to 3.7 times.

We now have £300 million of medium term interest rate swaps in place, in
addition to £220 million of debentures. As a result, around 93% of the Group's
net debt is either fixed or hedged.


The underlying rate of taxation (before goodwill and exceptional items) reduced
from 31.5% in 2003 to 29.2% in 2004 as a result of the release of various
provisions following the agreement of prior year tax computations.


We continue to account for pensions under SSAP 24. If FRS 17 had been adopted,
the Group's pension net deficit after tax would have reduced to £46.0 million
this year-end compared to £56.6 million last year-end.

Exceptional items and goodwill

Goodwill amortisation and impairment in the year amounted to £8.7 million.
There was a £2.1 million profit on exceptional items excluding goodwill. This
comprised a £4.5 million profit on the sale of fixed assets, a taxation credit
of £0.9 million, offset by £1.1 million of costs relating to the reorganisation
of Wizard Inns and a £2.2 million write down of certain property values
following the estate revaluation (see note 2).

Accounting policies

The Group has adopted UITF 38 'Accounting for ESOP Trusts'. There have been no
other changes to our accounting policies since last year's annual report.

International Financial Reporting Standards

The Group will be required to adopt International Financial Reporting Standards
(IFRSs) when reporting its accounts for the year ending September 2006.  In
preparation, a project team has been formed.  It has reviewed all current IFRSs
and is considering the likely impact on the Group's results.

Paul Inglett
Finance Director

Group profit and loss account

                                                          2004                                     2003

                                               Before                                    Before  Goodwill and
                                         goodwill and  Goodwill and                goodwill and  exceptionals
                                         exceptionals  exceptionals     Total      exceptionals                  Total
for the 53 weeks ended 2 October 2004              £m            £m        £m                £m            £m       £m

Turnover                                        500.3             -     500.3             490.5             -    490.5
    Continuing operations
    Acquisition of Wizard Inns                   13.4             -      13.4                 -             -        -
Total turnover                                  513.7             -     513.7             490.5             -    490.5
Trading expenses                               (400.8)        (12.0)   (412.8)           (382.3)        (11.7)  (394.0)
Operating profit
    Continuing operations                       110.9         (10.8)    100.1             108.2         (11.7)    96.5
    Acquisition of Wizard Inns                    2.0          (1.2)      0.8                 -             -        -
Total operating profit                          112.9         (12.0)    100.9             108.2         (11.7)    96.5
Fixed asset disposals                               -           4.5       4.5                 -          (1.8)    (1.8)
Profit on ordinary activities before            
interest                                        112.9          (7.5)    105.4             108.2         (13.5)    94.7
Interest                                        (35.2)            -     (35.2)            (35.1)            -    (35.1)
Profit on ordinary activities before             
taxation                                         77.7          (7.5)     70.2              73.1         (13.5)    59.6
Taxation                                        (22.7)          0.9     (21.8)            (23.0)          1.9    (21.1)
Profit on ordinary activities after             
taxation                                         55.0          (6.6)     48.4              50.1         (11.6)    38.5
Dividends paid and proposed                                             (25.6)                                   (23.3)
Profit for the period transferred to                                    
reserves                                                                 22.8                                     15.2
Earnings per share:
Basic earnings per share                                                 66.7p                                    53.0p
Basic earnings per share before goodwill                                 
and exceptionals                                                         75.8p                                    68.9p
Diluted earnings per share                                               65.9p                                    52.5p
Diluted earnings per share before                                       
goodwill and exceptionals                                                74.9p                                    68.3p

Group cash flow statement

                                                                 2004                              2003
for the 53 weeks ended 2 October 2004                           £m             £m                    £m             £m

Net cash inflow from operating activities                                   148.4                                130.9
Returns on investments and servicing of finance
Interest received                                              0.6                                  0.6
Interest paid                                                (34.9)                               (35.4)
Arrangement cost of new bank facilities                       (2.1)                                   -
Net cash outflow from returns on investments and                           
servicing of finance                                                        (36.4)                               (34.8)
Taxation                                                                    (21.0)                               (19.2)
Capital expenditure and financial investment
Investment in existing pubs                                  (61.0)                               (43.6)
Purchase of new pubs/sites development                       (20.9)                                (4.3)
Sale of tangible fixed assets                                 13.5                                 21.0
Decrease in trade loans and other investments                  3.5                                  3.0
Net cash outflow for capital expenditure and                    
financial investment                                                        (64.9)                               (23.9)
Purchase of subsidiary undertaking                           (30.3)                                   -
Net cash acquired with subsidiary undertaking                  7.5                                    -
Repayment of debt of subsidiary upon acquisition             (68.5)                                   -
Net cash outflow for acquisition                                            (91.3)                                   -
Equity dividends paid                                                       (24.1)                               (22.0)
Cash (outflow)/inflow before financing                                      (89.3)                                31.0
Issue of ordinary share capital                                3.0                                  2.4
Purchase of ordinary share capital for cancellation           (8.0)                                (7.5)
Net sale of own shares from share trust                        1.1                                  2.4
Capital element of finance lease payments                        -                                 (0.3)
Advance/(repayment) of bank loans                             99.4                                (36.7)
Net cash inflow/(outflow) from financing                                     95.5                                (39.7)
Increase/(decrease) in cash in the period                                     6.2                                 (8.7)
Reconciliation of net cash flow to movement in net
Increase/(decrease) in cash in the period                      6.2                                 (8.7)
Cash (inflow)/outflow from (increase)/decrease in            (97.3)                                37.0
Change in debt resulting from cash flows                                    (91.1)                                28.3
Non-cash movements                                                           (0.6)                                (0.1)
Movement in net debt in the period                                          (91.7)                                28.2
Net debt at 28 September 2003                                              (468.7)                              (496.9)
Net debt at 2 October 2004                                                 (560.4)                              (468.7)

The comparative cash flow statement has been restated, as explained in note 9.

Statement of total Group recognised gains and losses

                                                                                       2004                       2003
for the 53 weeks ended 2 October 2004                                                    £m                         £m
Profit on ordinary activities after taxation                                           48.4                       38.5
Unrealised surplus on revaluation of properties                                       171.7                          -
Total recognised gains relating to the period                                         220.1                       38.5

Note of Group historical cost profits and losses
                                                                                       2004                       2003
for the 53 weeks ended 2 October 2004                                                    £m                         £m
Profit on ordinary activities before taxation                                          70.2                       59.6
Realisation of property revaluation gains of previous periods                           2.3                        1.8
Difference between the historical cost depreciation and actual                       
depreciation on the revalued amount                                                     0.9                        0.7
Historical cost profit before taxation                                                 73.4                       62.1
Historical cost profit after taxation and dividends                                    26.0                       17.7

Reconciliation of movements in Group shareholders' funds

                                                                                       2004                       2003
for the 53 weeks ended 2 October 2004                                                    £m                         £m

Profit on ordinary activities after taxation                                           48.4                       38.5
Dividends                                                                             (25.6)                     (23.3)
Profit for the period transferred to reserves                                          22.8                       15.2
Revaluation of properties                                                             171.7                          -
Proceeds of ordinary share capital issued                                               3.0                        2.7
Purchase of own shares for cancellation                                                (8.0)                      (7.5)
Net sale of own shares from share trust                                                 1.1                        2.4
Contribution to QUEST                                                                     -                       (0.3)
Net addition to shareholders' funds                                                   190.6                       12.5
Opening shareholders' funds (originally £460.0m before deducting prior              
year adjustment of £2.3m)                                                             457.7                      445.2
Closing shareholders' funds                                                           648.3                      457.7

Group balance sheet
                                                                                       2004                       2003
as at 2 October 2004                                                                     £m                         £m
Fixed assets
Intangible assets                                                                     109.1                      108.7
Tangible assets                                                                     1,182.3                      889.9
Investments                                                                            21.2                       24.8
                                                                                    1,312.6                    1,023.4
Current assets
Stocks                                                                                 13.5                       12.5
Debtors                                                                                45.0                       37.2
Cash at bank and in hand                                                               16.2                       11.9
                                                                                       74.7                       61.6
Creditors - amounts falling due within one year                                      (138.7)                    (183.2)
Net current liabilities                                                               (64.0)                    (121.6)

Total assets less current liabilities                                               1,248.6                      901.8
Creditors - amounts falling due after more than one year                             (583.1)                    (428.1)
Provisions for liabilities and charges                                                (17.2)                     (16.0)
                                                                                      648.3                      457.7
Capital and reserves
Equity share capital                                                                   21.4                       21.5
Non-equity share capital                                                                0.1                        0.1
Called up share capital                                                                21.5                       21.6
Share premium account                                                                 209.9                      207.1
Revaluation reserve                                                                   321.9                      153.4
Capital redemption reserve                                                              6.0                        5.7
Profit and loss account                                                                89.0                       69.9
Shareholders' funds including non-equity interests of £0.1m (2003: £0.1m)             648.3                      457.7
Capital employed                                                                      648.3                      457.7

The comparative balance sheet has been restated as explained in note 9.

1.  Segmental analysis

                                                           2004                                     2003

                                                          Operating                               Operating
                                                      profit before                           profit before        Net
                                                       goodwill and        Net                 goodwill and     assets
                                             Turnover  exceptionals     assets       Turnover  exceptionals   restated
                                                   £m            £m         £m             £m            £m         £m
Pathfinder Pubs
    Continuing operations                       261.8          56.4      498.4          252.4          53.0      415.6
    Acquisition of Wizard Inns                   13.4           2.0       84.6              -             -          -
    Total                                       275.2          58.4      583.0          252.4          53.0      415.6
The Union Pub Company                           118.2          50.9      452.8          115.8          49.0      345.5
WDB Brands                                      120.3          21.4       84.8          122.3          21.3       83.6
Central costs                                       -         (17.8)      24.2              -         (15.1)      16.6
                                                513.7         112.9    1,144.8          490.5         108.2      861.3
Goodwill and exceptionals                           -         (12.0)     109.1              -         (11.7)     108.7
Debt, tax and dividends                             -             -     (605.6)             -             -     (512.3)
                                                513.7         100.9      648.3          490.5          96.5      457.7

The net revaluation gain of £169.5m detailed in note 6, comprises a gain of
£76.8m in Pathfinder Pubs, £78.0m in The Union Pub Company, £7.0m in WDB Brands
and £7.7m in the Central unlicensed property estate.

                                                       2004                                      2003

                                           Operating                                 Operating
                                        profit after      Goodwill                profit after      Goodwill
                                        goodwill and           and   Goodwill     goodwill and           and  Goodwill
                                        exceptionals  exceptionals      asset     exceptionals  exceptionals     asset
                                                  £m            £m         £m               £m            £m        £m
Pathfinder Pubs
    Continuing operations                       48.4           8.0       31.1             50.6           2.4      33.9
    Acquisition of Wizard Inns                   0.8           1.2        9.0                -             -         -
    Total                                       49.2           9.2       40.1             50.6           2.4      33.9
The Union Pub Company                           51.3          (0.4)      22.1             47.0           2.0      23.7
WDB Brands                                      21.3           0.1        6.0             16.1           5.2       7.5
Central Costs                                  (20.9)          3.1       40.9            (17.2)          2.1      43.6
                                               100.9          12.0      109.1             96.5          11.7     108.7

2.  Goodwill and exceptionals

                                                                                                 2004             2003
                                                                                                   £m               £m
Trading expenses:
Goodwill amortisation                                                                             7.0              6.9

Goodwill impairment following fixed asset disposals                                               1.7              1.6
Impairment of fixed assets following revaluation                                                  2.2                -
Termination of supplier contract                                                                    -              3.2
Costs of reorganisation of Wizard Inns                                                            1.1                -
                                                                                                 12.0             11.7
(Profit)/loss on fixed asset disposals                                                           (4.5)             1.8
                                                                                                  7.5             13.5

3.  Taxation
                                                                                                 2004             2003
                                                                                                   £m               £m
The charge to the profit and loss account comprises:
Current tax:
   Corporation tax on profits for the period                                                     22.0             21.2
   Adjustment in respect of prior periods                                                        (0.6)            (1.0)
                                                                                                 21.4             20.2
Deferred tax                                                                                      0.4              0.9
                                                                                                 21.8             21.1

4.  Dividends
                                                                                                 2004             2003
                                                                                                   £m               £m
Ordinary shares
Interim paid 12.00p per share net (2003: 10.90p)                                                  8.7              7.9
Final proposed 23.32p per share net (2003: 21.20p)                                               16.9             15.4
Total dividends on ordinary shares 35.32p per share net (2003: 32.10p)                           25.6             23.3

5.      Earnings per share

Basic earnings per share is calculated by dividing the profit after tax by the
weighted average number of shares in issue during the period, excluding those
held in the Employee Share Ownership Plan (ESOP).

Diluted earnings per share is calculated by adjusting the basic earnings per
share to assume the notional exercise of the weighted average number of ordinary
share options outstanding during the period.  The effect of the dilutive options
is to increase the weighted average number of shares by 0.8 million (2003: 0.7

Supplementary earnings per share figures are presented to exclude the effects of
goodwill and exceptionals.

                                                      2004                                       2003

                                                      Weighted                                   Weighted
                                                       average                                    average
                                                     number of    Per share                     number of    Per share
                                         Earnings       shares       amount         Earnings       shares       amount
                                               £m            m            p               £m            m            p

Basic earnings per share                     48.4         72.6         66.7             38.5         72.7         53.0
Diluted earnings per share                   48.4         73.4         65.9             38.5         73.4         52.5
Supplementary earnings per share
Basic earnings per share before              55.0         72.6         75.8             50.1         72.7         68.9
goodwill and exceptionals
Diluted earnings per share before            55.0         73.4         74.9             50.1         73.4         68.3
goodwill and exceptionals

6.      Estate revaluation

At 2 October 2004, 75% of the Group estate was revalued by independent chartered
surveyors.  This has been reflected in the accounts as follows:
Exceptional items
Revaluation loss - charged as an impairment                                                                      (13.9)
Reversal of past impairment loss                                                                                  11.7
Net profit and loss account charge                                                                                (2.2)
Revaluation reserve
Unrealised revaluation surplus                                                                                   181.1
Reversal of past revaluation surplus                                                                              (9.4)
Net revaluation surplus taken to revaluation reserve                                                             171.7

Net increase in shareholders' funds/fixed assets                                                                 169.5

7.  Reconciliation of operating profit to net cash inflow from operating

                                                                                                 2004             2003
                                                                                                   £m               £m

Total operating profit                                                                          100.9             96.5
Goodwill amortisation                                                                             7.0              6.9
Income from fixed asset investments                                                              (0.4)            (0.5)
Depreciation charge                                                                              32.9             30.3
Decrease in pension cost provision                                                               (1.5)            (0.1)
(Increase)/decrease in stocks                                                                    (0.5)             0.5
Increase in debtors                                                                              (3.3)            (3.0)
Increase/(decrease) in creditors                                                                  9.3             (1.3)
Exceptional operating charges with no cash impact                                                 4.0              1.6
Net cash inflow from operating activities                                                       148.4            130.9

8.  Analysis of net debt

                                                                        2004     Cash flow         flow         2003
                                                                          £m            £m           £m           £m
Cash at bank and in hand                                                16.2           4.3            -         11.9
Bank overdraft                                                          (4.1)          1.9            -         (6.0)
                                                                        12.1           6.2            -          5.9
Debt due within one year
Loan stock                                                              (0.1)            -            -         (0.1)
Bank loans                                                               0.4          59.2         (0.2)       (58.6)
Finance leases                                                          (0.1)            -         (0.1)           -
                                                                         0.2          59.2         (0.3)       (58.7)
Debt due after one year
Bank loans                                                            (354.4)       (156.5)           -       (197.9)
Finance leases                                                          (0.2)            -         (0.2)           -
Debenture loans                                                       (218.1)            -         (0.1)      (218.0)
                                                                      (572.7)       (156.5)        (0.3)      (415.9)
                                                                      (560.4)        (91.1)        (0.6)      (468.7)

Bank loans due within one year represents unamortised issue costs expected to be
charged in 2005.

9.      Prior year adjustment - ESOP

The prior year adjustment relates to the adoption of UITF 38 'Accounting for
ESOP Trusts'.  This represents a change in presentation of investment in own
shares which is now deducted from the profit and loss account reserve.  In the
prior year, investment in own shares was included in fixed asset investments.

The effect of the change in accounting policy has been to reduce fixed asset
investments and reserves by £2.3m at 28 September 2003.  There has been no
effect on the reported results.  Cash inflows arising from the net sale of own
shares by the share trust have been reclassified from capital expenditure and
financial investment to financing.

10. Acquisition - Wizard Inns

On 14 June 2004, the Group acquired 100% of Wizard Inns (comprising Wizard Inns
Limited and its wholly owned subsidiary Osprey Inns Limited).  The acquisition
has been accounted for under acquisition accounting principles and is therefore
included in the consolidated balance sheet as at 2 October 2004.

                                                                        Fair value adjustments
                                                       Book value     Revaluations              Other       fair value
                                                               £m               £m                 £m               £m

Fixed assets                                                 63.6             23.8                  -             87.4
Stock                                                         0.5                -                  -              0.5
Debtors                                                       1.8                -                  -              1.8
Cash                                                          7.5                -                  -              7.5
Creditors                                                    (6.6)               -                  -             (6.6)
Loans                                                       (68.5)               -                  -            (68.5)
Provisions for liabilities and charges                       (0.1)            (1.5)               0.7             (0.9)
Net (liabilities)/assets acquired                            (1.8)            22.3                0.7             21.2
Goodwill                                                                                                           9.1
Cash consideration (including acquisition fees)                                                                   30.3

The attributed fair values are provisional.  Any further adjustments will be
included in next year's financial statements.  The revaluation adjustment in
respect of tangible fixed assets and provisions for liabilities and charges
reflects the valuation of the acquired pub estate as at 14 June 2004.  Pub
valuations reflecting onerous leases have been included in provisions.  The
valuation was carried out by independent chartered surveyors, on an existing use

No deferred tax has been recognised on the revaluation adjustment, as there are
no agreements to sell the assets concerned.  The other fair value adjustment
relates to deferred tax in respect of tax losses, which are available for offset
against future expected trading profits.

The net cash outflow in respect of the purchase of Wizard Inns was:                                                 £m
Acquisition of equity
Cash                                                                                                              30.3
Cash in hand of subsidiary                                                                                        (7.5)
Acquisition of debt
Immediate repayment of subsidiary's debt                                                                          68.5
Net cash outflow for acquisition                                                                                  91.3

The purchase agreement for Wizard Inns included the immediate repayment of its
loans, which were included in its balance sheet at the date of acquisition.  The
loan repayments have therefore been classified as part of the overall
consideration for the acquisition of Wizard Inns.


a.      The contents of this preliminary announcement, which do not 
constitute statutory accounts as defined in Section 240 of the Companies Act
1985, have been extracted from the audited statutory accounts of the Group for
the 53 weeks ended 2 October 2004 which will be filed with the Registrar of
Companies in due course.  The statutory accounts for the 52 weeks ended 27
September 2003 have been delivered to the Registrar of Companies.  The
independent auditors' report on these accounts are unqualified and do not
contain any statements under Section 237(2) or (3) of the Companies Act 1985.

b.      Subject to approval of the shareholders at the annual general meeting, 
the proposed final dividend of 23.32 pence per share will be paid on 31 January 
2005 to shareholders on the register at the close of business on 31 December 

c.      The annual report for the year ended 2 October 2004 will be posted 
to all shareholders in the week commencing 20 December 2004.  Copies will 
be obtainable from Hudson Sandler Limited (020 7796 4133) or from the
Company Secretary, The Wolverhampton & Dudley Breweries, PLC, Park Brewery, Bath
Road, Wolverhampton, WV1 4NY.

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