1March 2003

Roger CarrRoger Carr

Chairman

2

Agenda

Introduction Roger Carr (Chairman)

Financial Results Karim Naffah (FD)

Actions and Priorities Tim Clarke (CEO)

Q&A

3

Business Highlights

Independent future with twin goals…

Improved capital efficiency

Accelerated profitable growth

Rebalance business culture

From margin emphasis to driving growth

4

Karim NaffahKarim Naffah

Finance Director

5

Financial Highlights

Turnover £793m - up 1%

EBITDA £191m - flat

Operating Profit £137m - down 6%

EPS 8.6p - down 0.7p*

Net Operating Cashflow £152m** - up £80m

*On a proforma basis**Before interest, tax and dividends

6

Operating Performance

H1 03 H1 02£m £m

TurnoverPubs & Bars 466 465 + 0.2%Restaurants 323 321 + 0.6%Other 4 0

793 786 + 0.9%

Operating ProfitPubs & Bars 91 101 - 9.9%Restaurants 45 45Other 1 0

137 146 - 6.2%

-

7

Proforma – Key Assumptions

As if separation had occurred on 1st October 2001

No adjustments to operating profit

Debt position worked backwards from cashflow

Interest based on terms of current facilities

Taxation reflects increased interest charge

All one-off items relating to separation excluded

Number of shares constant at 734 million

8

9

Proforma P&L

H1 03 H1 02 FY 02£m £m £m

Operating Profit 137 146 287*

Interest (44) (46) (86)

PBT 93 100 201

Tax (30) (32) (65)

63 68 136

EPS 8.6p 9.3p 18.5p

* After £2m exceptional costs on disposal of fixed assets

10

Key Operating Statistics

Food sales up 2.7%

Food mix 29.4% - up 0.6% points

Outlet staff costs - 23.5% of sales

Year to date employee productivity up 5%

Food and drink prices up 2% in first half

expected to be flat for the year as a whole

Cost savings of £5m in second half

11

Managed Estate Segmentation

Note: Excludes Hollywood Bowl and AlexExcludes Innkeepers Lodges associated with other outlets

Other Locals401

Foodled

Drinksled

Local PubsLocal Pubs

City Centre

High StPubs & Bars

High StPubs & Bars RestaurantsRestaurants

PubRestaurants

PubRestaurants

Residential

Ember Inns146

Sizzling114

Scream91

Arena59

Harvester148

Vintage Inns200

Toby 71

24 Express by Holiday Inn

O’Neill’s88

44Goose

Edwards

36

28Flares

51

15

All Bar One

Browns

Other High St357

32Metropolitan Professionals

56 7

Classics Nicholsons

24Innkeepers Fayre

96

Other Pub Restaurants

12

Uninvested Like-for-Like Sales

32 weeks to 10 May

Total company - 3.7%

Pubs & Bars - 4.3%

Restaurants - 2.8%

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High Street

Pub Restaurants

Restaurants

Locals

City Centre

Foodled

Drinksled

Residential

Performance by Segment

Inc. ROI* - 15%Total sales + 0.7%

AWT £10.6k

Inc. ROI* - 13%Total sales + 1.7%

AWT £17.8k

Inc. ROI* - 10%Total sales - 2.8%

AWT £22.9k

Inc. ROI* - 13%Total sales - 0.6%

AWT £12.8k

* MAT to H1 FY2003 on cumulative £0.9bn expansionary investment.Note: Excludes Hollywood Bowl and Alex

14

High Street

Pub Restaurants

Restaurants

Locals

City Centre

Foodled

Drinksled

Residential

Expansionary Capital - First Half

£13m £16m

£0m£6m

Note: Excludes Hollywood Bowl and Alex

15* Unleveraged tax rate (including capital allowances)

Strong Cash Returns

10%10%

12 months to 12 April 2003 £m

EBIT 280

Depreciation/Amortisation 95

EBITDA 375

Cash Tax (at 23% of EBIT)* (65)

Cash Return 310

Average Net Operating Assets 3449

Accumulated Depreciation 250

Revaluations (746)

Goodwill written off 50

Cash Capital Employed 3003

CROCCE £m

280

(65)

215

3449

(746)

50

2753

8%8%

NOPAT

16

Net Cashflow

H1 03 H1 02£m £m

EBITDA 191 192

Working capital movement 22 5

Capital Expenditure (80) (146)

Disposal proceeds 19 21

Net Operating Cashflow 152 72 + 80

17

Proforma Balance Sheet*

At H1 03£m

Net Operating Assets £3.5bnNet Debt* £1.3bn

Market Cap Gearing** 82%

Debt / EBITDA*** 3.5x

* Post de-merger and £0.7bn return of capital** Share price 219.5 pence as of close 21 May 2003*** Last 12 months

18

Re-Financing Update

Securitisation of UK pubs and restaurants

Further enhance efficiency of balance sheet

Release surplus funds for shareholders

Reduce weighted average cost of capital

19

Securitisation Plan

Major transaction in its own right

Significant work now underwayFinal due diligence

Documentation

Legal structuring

Expect to execute during the Autumn

Raise sufficient proceeds to refinance existing debt and return at least £400m to shareholders

Subject to capital market conditions

20

Criteria on Terms

Equity-based Strategy

EPS growth

Further value creation

Asset appreciation

Dividend Policy

9.5 pence per share in 2004

Progressive thereafter

Equity-based Strategy

EPS growth

Further value creation

Asset appreciation

Dividend Policy

9.5 pence per share in 2004

Progressive thereafter

Sufficient capex

Flexibility to churn

Ability to release capital

Cashflow test

Sufficient capex

Flexibility to churn

Ability to release capital

Cashflow test

Reconcile higher gearing with sufficient corporate flexibility

21

Summary

Solid performance

Defending high returns

Driving strong cash generation

Refinancing plan in place to release surplus funds for shareholders

22

Tim ClarkeTim Clarke

Chief Executive

23

Value Creating Operating Actions

Driving profitable sales growth

Developing and evolving the brands and formats

Disciplined capital allocation programme

Raising productivity and reducing costs

Driving strong cash returns, earnings growthand freehold property appreciation

24

Driving Profitable Sales Growth

Trading conditions changed in the second half of calendar year 2002:

Shift in business priorities and culture

Combining brand and asset development with organic sales growth

From margin defence to sales generation

Optimal balance of volumes, mix and margins

Emphasis on cash gross profit vs % gross margin

Productivity and cost gains to offset fixed cost pressures

25

Competitive Pricing Dynamics

High Street overcapacity/central London weak demand

Defending profit through tactical activity

Recent price stabilisation

Overall industry real price increases vs. off-trade

On-trade beer + 3% p.a.

Off-trade beer - 2% p.a.

Restaurants + 4% p.a.

Food (shops & catering) unchanged

Residential share gain strategy

sources ONS [and Nielsen]

26

Driving Sales Growth

1st half: controlled promotional trials and evaluation

Initially in c.100 outlets

Increased consumer price sensitivity to brand premium pricing

Indiscriminate discounting unviable

Variations across product categories and time slots

Extended activity now in implementation: c.1,000 outlets

Extended product ranges

Price reductions

Promotional marketing

27

Driving Sales Growth

Brands and channels selected by competitive dynamicsCentral London

High Street

Community drinks

Family dining

Key Areas of Promotional Activity

28

Pricing, Volume and Margins

Average retail price change of combined food and drink basket:

Oct 02 vs Oct 01 + 4.7%

April 03 vs April 02 + 0.4%

Est. Sept 03 vs Sept 02 - 1% to - 2%

Positive impact on cash gross profit trend

Gross margin impact mitigated by:

Shift to higher margin lagers & soft drinks

Purchasing cost gains

29

Improving Like-for-Like Sales Trends

Uninvested Like for Likes

8 weeks to 23 Nov - 4.5%

8 weeks to 18 Jan - 3.3%

8 weeks to 15 March - 3.9%

8 Weeks to 10 May - 3.1%

30

6 of the Best (London)

Successful promotion in Town Bars adapted for LondonCarling / Carlsberg, Smirnoff Double and Mixer, Stella, Reef, Becks, WineAll at £1.99Trial results…

Volume up

Positive gross profits

Volume up

Positive gross profits

31

Harvester Early Bird

Re-launched in February…From opening time to 6.30pm, Monday to Friday, 5.00pm Saturday1/3 off almost the entire menuAccompanied by radio advertising

Results to-date encouraging…Food volume up by 9.5%Drink volume up by 9.2%

32

Service, Sales Training and Incentives

Service – “Quality is” programmeProduct knowledge

Serve standards

Partnership with key suppliers

SellingBar floor service

Table service up-selling and techniques to add extra sales (e.g. Coffees, puddings)

Motivation and IncentivesMystery Customer scores

Incentives linked to sales

Cultural change from order takers to sales people

33

Evolution & Development –City Centre & LondonStrategy of Differentiation or Value

Specialist Continental lagers & alesEnhanced wine offerFast Lunch menuEvolution of light bites offerMusic & lighting zoning

Young professionals in affluent suburbs of larger citiesIndividual, re-branding – a good ‘local pub’Interesting range on menuLow capital cost

34

Strategy to Grow Sales & DistributionStrategy to Grow Sales & Distribution

Evolution and Development –Residential

Now 146 outlets

Average sales uplifts of 61%

Growing appeal to sociable regulars

Cask ales & premium lagers

Widening appeal to females

Design and menu enhancement

35

Evolution and Development –ResidentialStrategy to Grow Sales & DistributionStrategy to Grow Sales & Distribution

REDUCING CAPITAL INTENSITY

Ember & Toby

Evolution of template: 40%+ reductions in capital costs

Identify customer key points of value

Maximise ratio of trading to back of house space

Minimisation of structural work

Rationalisation of kitchen specs

Allows fit to a wider variety of sites

36

Evolution and Development –ResidentialStrategy to Grow Sales & DistributionStrategy to Grow Sales & Distribution

Development and roll-out of a scale community pub food brand

Introduction of three plate sizes & healthier menu options

114 sites open: potential for over 200

37

Disciplined Capital Allocation –H1 Development

Conversions Acquisitions

Number of projects opened 70 8

Average investment £234k £2.0m

Incremental ROI 16% 11%

38

Disciplined Capital Allocation Future Development

FY 2003

Pipeline of 500 conversions at start of year

135 conversions

14 acquisitions

£19m disposal proceeds in H1, similar level in H2

FY 2004 – FY 2006

Balance of pipeline developed

Average conversion capex £250k

15-20 acquisitions p.a.

>80% residential

On-going programme of opportunistic site disposals

39

Aggressive Management of Cost Base

Continued improvement in staff productivity: + 6% in Q2

Ongoing renegotiation of non-tied supply contracts

6% reduction achieved on 24% of COGS renegotiated in H1

Support cost rationalisation

Delivered £10m annualised savings, £5m this year

40

Near Term Outlook

Improvement in trading seen in Q2 continued into May

Residential segments with food most resilient

High Street over-capacity

Uncertainty as to prospects for London recovery

Regulatory cost pressures

Impact of marketing, range, pricing, promotional actions

Cautious on UK consumer spending but confident of resilience of M and B model

41

Medium Term Outlook

Integrated economics of food and drink

Take share in eating out/drinking out market versus

Low amenity, small, beer dependent pubs

Restaurants lacking drinks’ profitability

Licensing Reform positives

Proven systems, purchasing and overhead scale

Well placed to add value through consolidation

42

Summary

Key strategic priorities

Driving sales growth

Efficiency on capital and costs

Implementing optimal financial structure

43

Q & AQ & A