Full Year Results to 31.12.07
InterContinental Hotels Group PLC
19 February 2008
19 February 2008
InterContinental Hotels Group PLC
Full Year Results to 31 December 2007
Headlines
• System size increase of 5%, 28,848 net rooms, taking total to 585,094 (3,949
hotels).
• Global constant currency RevPAR growth of 7%.
• Total gross revenue* from all hotels in IHG's system of $18bn, up 14% in
constant currency.
• Continuing revenue up 12% from £786m to £883m, up 20% at constant currency.
• Continuing operating profit up 19% from £200m to £237m, up 30% at constant
currency.
• Operating profit including discontinued operations up 6% from £231m to £245m.
• Adjusted continuing earnings per share up 23% from 38.0p to 46.9p. Total
basic earnings per share of 72.2p.
• Final dividend up 12% to 14.9p. Total dividend of 20.6p, up 12%. £3.5bn
returned to shareholders since March
2004.
• 2007 signings up 22% to 125,533 rooms (873 hotels). Fourth quarter signings
of 41,908 rooms, taking pipeline to 225,872.
• January 2008 global constant currency RevPAR growth of 5.4%.
*See appendix 5 for definition. All figures and movements unless otherwise
noted are at actual exchange rates and before exceptional items. See appendix 3
for analysis of financial headlines. Constant exchange rate comparatives shown
in appendix 4.
Commenting on the results and trading, Andrew Cosslett, Chief Executive of
InterContinental Hotels Group PLC said:
"IHG delivered a strong performance in 2007 reporting continuing revenue growth
of 20% in constant currency. The number of rooms in our system grew by a record
5% and global RevPAR increased 7%, with all our brands out-performing in their
major markets across the world. We signed almost 900 hotels into our development
pipeline during the year, more than three times the number signed in 2003, our
first year as an independent company.
"We are continuing to strengthen our brands, and to expand their geographic
reach. The 2005 relaunch of the InterContinental brand is now delivering major
benefits, with significant RevPAR outperformance and a further 33 new hotels
signed in the year. During the year we announced the relaunch of our biggest
brand, Holiday Inn, and the response from our owner community has been very
positive. Following continued success in the US, Hotel Indigo and Staybridge
Suites will be opening in the UK in 2008, and we have plans for their wider
geographic roll-out.
"We have the biggest development pipeline in the industry and this will deliver
another high level of hotel openings in 2008. With our broadly based portfolio
of brands and our resilient fee based business model we are positioned well for
future growth in what is now a less predictable economic environment."
Rooms - record signings and openings
• 125,533 rooms were signed in 2007, with excellent growth across all brands
and all regions. In Greater China, where we are the largest non-domestic
hotel operator, 70 hotels, 25,590 rooms, were signed in the year. In the
Middle East 19 hotels, 5,307 rooms, were signed, doubling the pipeline in
that region. 33 InterContinental hotels were signed, and in January 2008 IHG
signed a 40 year agreement to manage an InterContinental branded hotel in
the Times Square area of New York which is expected to open in mid 2010.
• 52,846 rooms were added to the system including 3,542 rooms (15 hotels)
through the IHG ANA joint venture. In line with our strategy of driving
quality growth 23,998 rooms were exited, giving net room additions of 28,848
rooms. IHG has now added 47,419 rooms towards its three year target of
adding 50,000 to 60,000 net rooms by the end of 2008.
• The pipeline of hotels now stands at 1,674 (225,872 rooms). The global
pipeline of Holiday Inn brand family hotels grew by 204 hotels (26,793 rooms)
to 1,077 hotels (127,087 rooms), and represents a 30% share of future
pipeline supply in the US midscale segment. The InterContinental pipeline
stands at a record 62 hotels, representing 39% of its current rooms open.
Strengthening Operating System
Strong revenue delivery to hotel owners through reservation channels and loyalty
programme, Priority Club Rewards:
• $6.8bn of rooms revenue booked through IHG's reservation channels, up 19%
and representing 45% of total rooms revenue.
• $5.2bn of rooms revenue from Priority Club Rewards members, up 16% and
representing 35% of total rooms revenue.
• Internet revenues increased from 16% to 17% of total rooms revenue, 85% from
IHG's own websites.
Disposals and returns of funds
In 2007 disposal proceeds of £106m were received. This included the sale of
IHG's 33.3% interest in Crowne Plaza London The City for £19m, the disposal of
Crowne Plaza Santiago for £11m and Holiday Inn Disney, Paris for £14m, and the
sale of IHG's 74.11% interest in the InterContinental Montreal for £17m.
In 2007 £709m was paid to shareholders by way of a special dividend with
associated share consolidation and 7.7m shares were repurchased at a cost of
£81m. This leaves £100m of a previously announced £150m share buyback programme
to be completed and takes the total returned to shareholders since March 2004 to
£3.5bn. There were 295m shares outstanding at the end of December, 291m after
the deduction of shares in the ESOP and 299m on a fully diluted basis.
IHG's net debt at the period end was £825m including the $200m (£100m) finance
lease on the InterContinental Boston.
Americas: strong revenue and profit growth
Revenue performance
RevPAR increased 6.1% with rate generating all of the increase.
InterContinental, Crowne Plaza, Holiday Inn and Holiday Inn Express each
outperformed their market segments, with RevPAR up 10.1%, 7.5%, 4.9% and 6.7%
respectively. In line with the industry, RevPAR growth moderated in the fourth
quarter as a result of slight occupancy declines. Continuing revenue grew 16%
from $778m to $902m driven by 34% growth in revenues from owned and leased
hotels and 10% growth in managed and franchised revenues.
Operating profit performance
Operating profit from continuing operations increased 11% from $395m to $440m.
Continuing owned and leased hotels profit increased from $22m to $40m, driven by
14% RevPAR growth at the InterContinental New York and an $11m increased
contribution from the InterContinental Boston which opened in November 2006.
While managed hotels revenues grew strongly, up 9%, after the impact of
increased revenue investment to support new signings and openings and $6m of
charges not related to underlying trading, profit fell $9m to $41m. Franchised
hotels profit increased 11% to $425m reflecting RevPAR growth of 5.8% and net
rooms growth of 4.0%.
EMEA: strong RevPAR and profit growth
Revenue performance
RevPAR increased 8.6%, driven by increased occupancy and 6.3% rate growth. The
Middle East continued to perform strongly, raising RevPAR by 19.6%. Continental
Europe grew RevPAR by 7.6%, with strong increases in France of 10.3% but slower
growth in Germany due to the year on year impact of the football 2006 World Cup.
In the UK, Holiday Inn and Holiday Inn Express outperformed their market
segment with RevPAR growth of 6.3%.
Operating profit performance
Operating profit from continuing operations increased 81% from £37m to £67m.
Continuing owned and leased hotel operations improved £21m to £17m. The
InterContinental London Park Lane contributed £14m of the improvement following
the completion of its refurbishment at the end of June 2007. The performance of
the InterContinental Paris Le Grand continued to strengthen with a 14% RevPAR
increase and improved profit margins. Managed hotels profit increased 16% from
£37m to £43m benefiting from retained management contracts on assets sold in
2006. Franchised hotels profit increased 21% from £24m to £29m reflecting
RevPAR growth of 7% and net rooms growth of 10%.
Asia Pacific: strong revenue and profit growth with growing contribution from
China and Japan
Revenue performance
RevPAR increased 8.9%, mainly driven by rate. All brands performed strongly
with InterContinental up 11.1%, Crowne Plaza up 6.5%, Holiday Inn up 8.7% and
Holiday Inn Express up 11.0%. Greater China RevPAR increased 7.0%, driven by
rate increases. Continuing revenues grew 27% from $204m to $260m, driven by 52%
growth in managed revenues and the doubling of franchised revenues.
Operating profit performance
Operating profit from continuing operations grew 21% from $52m to $63m. Owned
and leased hotels operating profit increased 16% to $36m. Managed hotels profit
grew 18% to $46m. The contribution from the increasing number of hotels under
IHG management was partly offset by the previously disclosed integration and
ongoing costs associated with the ANA joint venture in Japan and continued
infrastructure investment in China. Franchised hotels profit increased 20% to
$6m driven by RevPAR growth of 15% and net room count growth of 13%, offset by
the impact of higher costs associated with the ANA joint venture in Japan.
Overheads, Tax and Exceptional items
Total regional overheads increased £4m to £68m. Central overheads were flat at
£81m.
The effective tax rate for 2007 is 22%; the underlying rate before the impact of
prior year items is 36%. As previously disclosed the effective tax rate will be
volatile in the immediate future and trend upwards over time. The effective tax
rate in 2008 is expected to be in the mid to high 20's.
In 2007 IHG announced its intention to make a non-recurring revenue investment
of up to £30m to accelerate implementation of the global relaunch of the Holiday
Inn brands, which will be treated as an exceptional item in 2008. IHG expects to
generate a strong return on this investment through RevPAR increases on
completion of the relaunch.
Appendix 1: Asset disposal programme detail
Number of owned Proceeds Net book value
hotels
Disposed since April 2003 181 £3.0bn £2.9bn
Remaining hotels 18 £0.9bn
For a full list please visit www.ihg.com/Investors
Appendix 2: Rooms
Americas EMEA Asia Pacific Total
Openings 31,744 7,956 13,146 52,846
Removals (17,794) (4,996) (1,208) (23,998)
Net openings 13,950 2,960 11,938 28,848
Signings 75,279 19,153 31,101 125,533
Appendix 3: Financial headlines
Twelve months to 31 Dec £m Total Americas EMEA Asia Pacific Central
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
Franchised operating profit 244 235 212 208 29 24 3 3
Managed operating profit 87 85 21 27 43 37 23 21
Continuing owned and leased 55 25 20 12 17 (4) 18 17
operating profit
Regional overheads (68) (64) (33) (32) (22) (20) (13) (12)
Continuing operating profit pre 318 281 220 215 67 37 31 29
central overheads
Central overheads (81) (81) - - - - - - (81) (81)
Continuing operating profit 237 200 220 215 67 37 31 29
Discontinued owned and leased 8 31 8 6 0 25 0 0
operating profit
Total operating profit 245 231 228 221 67 62 31 29
Appendix 4: Constant currency continuing operating profits before exceptional
items.
Americas EMEA Asia Pacific Total***
Actual Constant Actual Constant Actual Constant Actual Constant
currency* currency** currency* currency** currency* Currency** currency* currency**
Growth 2% 11% 81% 86% 7% 21% 19% 30%
Exchange rates USD:GBP EUR:GBP
2007 2.01 1.46
2006 1.84 1.47
* Sterling actual currency
** Translated at constant 2006 exchange rates
*** After Central Overheads
Appendix 5: Definition of total gross revenue
Total gross revenue is defined as total room revenue from franchised hotels and
total hotel revenue from managed, owned and leased hotels. It is not revenue
attributable to IHG, as it is derived mainly from hotels owned by third parties.
The metric is highlighted as an indicator of the scale and reach of IHG's
brands.
Appendix 6: Investor information for 2007 final dividend
Ex-dividend Date: 26 March 2008
Record Date: 28 March 2008
Payment Date: 6 June 2008
Dividend payment: Ordinary shares 14.9p per share: ADRs 29.2c per ADR
For further information, please contact:
Investor Relations (Paul Edgecliffe-Johnson; Heather Wood): +44 (0) 1753 410 176
Media Affairs (Leslie McGibbon; Claire Williams): +44 (0) 1753 410 425
+44 (0) 7808 094 471
High resolution images to accompany this announcement are available for the
media to download free of charge from www.vismedia.co.uk . This includes profile
shots of the key executives.
Presentation for Analysts and Shareholders
A presentation with Andrew Cosslett (Chief Executive) and Richard Solomons
(Finance Director) will commence at 9.30am (London time) on 19 February at the
Crowne Plaza, The City, 19 New Bridge Street, London, EC24V 6DB. There will be
an opportunity to ask questions. The presentation will conclude at
approximately 10.30am (London time).
There will be a live audio webcast of the results presentation on the web
address www.ihg.com/prelims08 . The archived webcast of the presentation is
expected to be on this website later on the day of the results and will remain
on it for the foreseeable future. There will also be a live dial-in facility
International dial-in 020 7863 6164
US Q&A conference call
There will also be a conference call, primarily for US investors and analysts,
at 9.00am (Eastern Standard Time) on 19 February with Andrew Cosslett (Chief
Executive) and Richard Solomons (Finance Director). There will be an
opportunity to ask questions.
International dial-in +44 (0)1452 556 518
US Toll Free 1866 966 4782
Conference ID: 32546784
A recording of the conference call will also be available for 7 days. To access
this please dial the relevant number below and use the access number 32546784#
International dial-in +44 (0)1452 550 000
US Toll Free 1866 247 4222
Website
The full release and supplementary data will be available on our website from
7.00 am (London time) on Tuesday 19 February. The web address is
www.ihg.com/prelims08
Notes to Editors:
InterContinental Hotels Group PLC (IHG) of the United Kingdom (LON:IHG, NYSE:IHG
(ADRs)) is one of the world's largest hotel groups by number of rooms. IHG
owns, manages, leases or franchises, through various subsidiaries, over 3,900
hotels and more than 585,000 guest rooms in nearly 100 countries and territories
around the world. IHG owns a portfolio of well recognised and respected hotel
brands including InterContinental(R) Hotels & Resorts, Crowne Plaza(R) Hotels &
Resorts, Holiday Inn(R) Hotels and Resorts, Holiday Inn Express(R), Staybridge
Suites(R), Candlewood Suites(R) and Hotel Indigo(R), and also manages the
world's largest hotel loyalty programme, Priority Club(R) Rewards with over 37
million members worldwide.
The company pioneered the travel industry's first collaborative response to
environmental issues as founder of the International Hotels and Environment
Initiative (IHEI). The IHEI formed the foundations of the Tourism Partnership
launched by the International Business Leaders Forum in 2004, of which IHG is
still a member today. The environment and local communities remain at the heart
of IHG's global corporate responsibility focus.
IHG offers information and online reservations for all its hotel brands at
www.ihg.com and information for the Priority Club Rewards programme at
www.priorityclub.com. For the latest news from IHG, visit our online Press
Office at www.ihg.com/media
Cautionary note regarding forward-looking statements
This announcement contains certain forward-looking statements as defined under
US law (Section 21E of the Securities Exchange Act of 1934). These
forward-looking statements can be identified by the fact that they do not relate
to historical or current facts. Forward-looking statements often use words such
as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', '
believe' or other words of similar meaning. By their nature, forward-looking
statements are inherently predictive, speculative and involve risk and
uncertainty. There are a number of factors that could cause actual results and
developments to differ materially from those expressed in or implied by, such
forward-looking statements. Factors that could affect the business and the
financial results are described in 'Risk Factors' in the InterContinental Hotels
Group PLC Annual report on Form 20-F filed with the United States Securities and
Exchange Commission.
This business review (BR) provides a commentary on the performance of
InterContinental Hotels Group PLC (the Group or IHG) for the financial year
ended 31 December 2007.
Group Performance
12 months ended 31 December
2007 2006 %
Group Results £m £m change
Revenue:
Americas 450 422 6.6
EMEA 245 198 23.7
Asia Pacific 130 111 17.1
Central 58 55 5.5
____ ____ _____
Continuing operations 883 786 12.3
Discontinued operations 40 174 (77.0)
____ ____ _____
923 960 (3.9)
____ ____ _____
Operating profit:
Americas 220 215 2.3
EMEA 67 37 81.1
Asia Pacific 31 29 6.9
Central (81) (81) -
____ ____ _____
Continuing operations 237 200 18.5
Discontinued operations 8 31 (74.2)
____ ____ _____
Operating profit before exceptional items 245 231 6.1
Exceptional operating items 30 27 11.1
___ ____ ____
Operating profit 275 258 6.6
Net financial expenses (45) (11) (309.1)
___ ____ ____
Profit before tax* 230 247 (6.9)
___ ____ ____
Analysed as:
Continuing operations 222 216 2.8
Discontinued operations 8 31 (74.2)
____ ____ ____
Earnings per ordinary share:
Basic 72.2p 104.1p (30.6)
Adjusted 48.4p 42.9p 12.8
Adjusted - continuing operations 46.9p 38.0p 23.4
* Profit before tax includes the results of discontinued operations.
Group Results
Revenue from continuing operations increased by 12.3% to £883m and continuing
operating profit increased by 18.5% to £237m during the 12 months ended 31
December 2007. The growth was driven by strong underlying RevPAR gains across
all regions, hotel expansion in key markets and profit uplift from owned and
leased assets. Furthermore, strong revenue conversion led to a 1.4 percentage
point increase in continuing operating profit margins to 26.8%.
Including discontinued operations, total revenue decreased by 3.9% to £923m
whilst operating profit before exceptional items increased by 6.1% to £245m,
reflecting the year-on-year impact of asset disposals. Discontinued operations
represent the results from operations that have been sold, or are held for sale,
and where there is a coordinated plan to dispose of the operations under IHG's
asset disposal programme. In this Business Review, discontinued operations
include owned and leased hotels in the US, the UK and Continental Europe that
have been sold or placed on the market from 1 January 2006.
As the weighted average US dollar exchange rate to sterling has weakened during
2007 (2007 $2.01:£1, 2006 $1.84:£1), growth rates for results expressed in US
dollars are higher than those in sterling. Continuing operating profit before
exceptional items was $474m, ahead of 2006 by 29.2%. Including discontinued
operations, operating profit before exceptional items was $491m, 15.8% higher
than 2006. Translated at constant currency, applying 2006 exchange rates,
continuing revenue increased by 19.6% and continuing operating profit increased
by 30.0%.
12 months ended 31 December
2007 2006 %
Total Gross Revenues $bn $bn change
InterContinental 3.7 3.0 23.3
Crowne Plaza 2.8 2.3 21.7
Holiday Inn 6.7 6.3 6.3
Holiday Inn Express 3.5 3.0 16.7
Other brands 1.1 0.6 83.3
____ ____ ____
Total 17.8 15.2 17.1
____ ____ ____
Total Gross Revenues
One measure of overall IHG hotel system performance is the growth in total gross
revenue, defined as total room revenue from franchised hotels and total hotel
revenue from managed, owned and leased hotels. Total gross revenue is not
revenue attributable to IHG, as it is derived mainly from hotels owned by third
parties.
Total gross revenue increased by 17.1% from $15.2bn in 2006 to $17.8bn in 2007,
with strong growth levels achieved across IHG's key brands reflecting hotel
performance and room growth. Translated at constant currency, total gross
revenue increased by 14.5%.
Hotels Rooms
Global hotel and room count Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 149 1 50,762 1,163
Crowne Plaza 299 24 83,170 7,538
Holiday Inn 1,381 (14) 256,699 (3,771)
Holiday Inn Express 1,808 122 156,531 12,949
Staybridge Suites 122 25 13,466 2,513
Candlewood Suites 158 28 16,825 2,676
Hotel Indigo 11 5 1,501 608
Other 21 17 6,140 5,172
____ ____ ______ _____
Total 3,949 208 585,094 28,848
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 18 (7) 6,396 (2,064)
Managed 539 27 134,883 9,669
Franchised 3,392 188 443,815 21,243
____ ____ ______ _____
Total 3,949 208 585,094 28,848
____ ____ ______ _____
Global Hotel and Room Count
During 2007, the IHG global system (the number of hotels and rooms which are
owned, leased, managed or franchised by the Group) increased by 208 hotels
(28,848 rooms or 5.2%) to 3,949 hotels (585,094 rooms). The record growth level
was driven, in particular, by continued expansion in the US, the UK, China and
Japan, resulting in openings of 366 hotels (52,846 rooms).
Holiday Inn Express represented 58.7% of the net hotel growth, demonstrating
strong market demand in the midscale, limited service sector. The extended stay
portfolio, comprising Staybridge Suites and Candlewood Suites hotels, expanded
by 53 hotels (5,189 rooms), indicating owner confidence in this sector. The net
decline in the Holiday Inn hotel and room count (14 hotels and 3,771 rooms)
primarily reflects IHG's continued strategy to reinvigorate the Holiday Inn
brand through the removal of lower quality, non-brand conforming hotels in the
US. This strategy is further supported by the worldwide brand relaunch of the
Holiday Inn brand family, announced in October 2007, which entails the
consistent delivery of best in class service and physical quality in all Holiday
Inn and Holiday Inn Express hotels.
Hotels Rooms
Global pipeline Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 62 26 20,013 6,802
Crowne Plaza 118 58 36,362 19,249
Holiday Inn 365 66 56,945 12,171
Holiday Inn Express 712 138 70,142 14,622
Staybridge Suites 157 37 17,150 4,545
Candlewood Suites 207 79 18,605 6,882
Hotel Indigo 52 28 6,565 3,520
Other 1 1 90 90
____ ____ ______ _____
Total 1,674 433 225,872 67,881
____ ____ ______ _____
Analysed by ownership type:
Managed 247 108 71,814 30,166
Franchised 1,427 325 154,058 37,715
____ ____ ______ _____
Total 1,674 433 225,872 67,881
____ ____ ______ _____
Hotels Rooms
Global pipeline signings Change Change
at 31 December 2007 over 2006 2007 over 2006
Total 873 156 125,533 22,759
Global Pipeline
At the end of 2007, the IHG pipeline (contracts signed for hotels and rooms yet
to enter the IHG global system) totalled 1,674 hotels (225,872 rooms). In the
year, record room signings across all regions of 125,533 rooms led to pipeline
growth of 67,881 rooms (or 43.0%). This level of growth demonstrates strong
demand for IHG brands across all regions and represents a key driver of future
profitability.
THE AMERICAS
12 months ended 31 December
2007 2006 %
Americas Results $m $m change
Revenue:
Owned and leased 257 192 33.9
Managed 156 143 9.1
Franchised 489 443 10.4
____ ____ _____
Continuing operations 902 778 15.9
Discontinued operations* 62 74 (16.2)
____ ____ _____
Total $m 964 852 13.1
____ ____ _____
Sterling equivalent £m 481 463 3.9
____ ____ _____
Operating profit before exceptional items:
Owned and leased 40 22 81.8
Managed 41 50 (18.0)
Franchised 425 382 11.3
____ ____ _____
506 454 11.5
Regional overheads (66) (59) (11.9)
____ ____ _____
Continuing operations 440 395 11.4
Discontinued operations* 16 12 33.3
____ ____ _____
Total $m 456 407 12.0
____ ____ _____
Sterling equivalent £m 228 221 3.2
_____ ____ _____
* Discontinued operations are all owned and leased.
12 months ended
31 December
Americas Comparable RevPAR movement on previous year 2007
Owned and leased:
InterContinental 10.6%
Managed:
InterContinental 10.8%
Crowne Plaza 7.2%
Holiday Inn 7.7%
Staybridge Suites 2.0%
Candlewood Suites 3.4%
Franchised:
Crowne Plaza 7.6%
Holiday Inn 4.7%
Holiday Inn Express 6.7%
Americas Results
Revenue and operating profit from continuing operations increased by 15.9% to
$902m and 11.4% to $440m respectively. Discontinued operations include the
results of hotels sold during 2006 and 2007, together with two hotels currently
on the market for disposal. Including discontinued operations, revenue
increased by 13.1% whilst operating profit increased by 12.0%.
The region achieved healthy RevPAR growth across all ownership types and RevPAR
premiums to the US market segments for hotels operating under InterContinental,
Crowne Plaza, Holiday Inn and Holiday Inn Express brands. During the fourth
quarter, consistent with the US market, the region was impacted by a marginal
softening in RevPAR growth due to a slight decline in occupancy levels.
Continuing owned and leased revenue increased by 33.9% to $257m and operating
profit increased by 81.8% to $40m. Positive underlying trading was driven by
RevPAR growth of 9.7%, led by the InterContinental brand with growth of 10.6%.
The results were favourably impacted by trading performance at the
InterContinental Boston which became fully operational during the first half of
the year (year-on-year profit increase of $11m) and trading at the
InterContinental New York where robust market conditions lifted average
occupancy levels to over 90%.
Managed revenues increased by 9.1% to $156m during the year, driven by strong
RevPAR growth, particularly in Latin America where rate-led RevPAR growth
exceeded 20%. Robust brand performance resulted in RevPAR growth premiums,
compared to respective US market segments, for InterContinental, Crowne Plaza
and Holiday Inn. Growth in the extended stay segment was impacted by an
increase in market supply. Managed revenues included $86m (2006 $80m) from
properties that are structured, for legal reasons, as operating leases but with
the same characteristics as management contracts.
Managed operating profit decreased by 18.0% to $41m, including $6m (2006 $9m)
from managed properties held as operating leases. The decline in profit
principally reflects increased revenue investment to support growth in contract
signings, the impact of fewer hotels under management contracts following the
restructuring of the FelCor agreement in 2006, foreign exchange losses in Latin
America and lower ancillary revenues together with higher costs at one of the
hotels held as an operating lease. These items reduced operating profit margins
in the managed estate by 8.7 percentage points to 26.3% and reduced continuing
operating profit margins in the region by 2.0 percentage points to 48.8%.
Franchised revenue and operating profit increased by 10.4% to $489m and 11.3% to
$425m respectively, compared to 2006. The increase was driven by RevPAR growth
of 5.8%, net room count growth of 4.0% and fees associated with growth in
signings.
Regional overheads were affected positively in 2006 by lower claims in the
Group-funded employee healthcare programme. Excluding this, regional overheads
were in line with the prior period.
Hotels Rooms
Americas hotel and room count Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 50 1 16,624 99
Crowne Plaza 172 17 47,893 5,289
Holiday Inn 952 (35) 177,999 (8,068)
Holiday Inn Express 1,615 109 134,551 10,833
Staybridge Suites 122 25 13,466 2,513
Candlewood Suites 158 28 16,825 2,676
Hotel Indigo 11 5 1,501 608
____ ____ ______ _____
Total 3,080 150 408,859 13,950
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 11 (2) 4,029 (650)
Managed 193 4 39,696 439
Franchised 2,876 148 365,134 14,161
____ ____ ______ _____
Total 3,080 150 408,859 13,950
____ ____ ______ _____
Americas Hotel and Room Count
The Americas hotel and room count grew by 150 hotels (13,950 rooms) to 3,080
hotels (408,859 rooms). The growth includes openings of 274 hotels (31,744
rooms) led by continued demand for Holiday Inn Express of 156 hotels (13,908
rooms). Franchised hotels contributed over 98% of net growth, reflecting
sustained demand for the franchised model. Net growth also included removals of
124 hotels (17,794 rooms), of which Holiday Inn hotels represented 54.0% (69.2%
of rooms).
Hotels Rooms
Americas pipeline Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 8 2 3,722 787
Crowne Plaza 37 13 9,036 3,197
Holiday Inn 265 53 33,029 6,463
Holiday Inn Express 614 111 54,279 10,729
Staybridge Suites 147 32 15,921 3,894
Candlewood Suites 207 79 18,605 6,882
Hotel Indigo 52 28 6,565 3,520
____ ____ ______ _____
Total 1,330 318 141,157 35,472
____ ____ ______ _____
Analysed by ownership type:
Managed 21 7 4,961 1,251
Franchised 1,309 311 136,196 34,221
____ ____ ______ _____
Total 1,330 318 141,157 35,472
____ ____ ______ _____
Americas Pipeline
The Americas pipeline continued to achieve high growth levels and totalled 1,330
hotels (141,157 rooms) at 31 December 2007. During the year, 75,279 room
signings were completed, compared with 61,673 room signings in 2006. These
signing levels outpaced the prior year as demand for Holiday Inn and Holiday Inn
Express continued to accelerate. Furthermore, the extended stay brands,
Staybridge Suites and Candlewood Suites, contributed 24.3% of the region's room
signings.
EUROPE, MIDDLE EAST AND AFRICA (EMEA)
12 months ended 31 December
2007 2006 %
EMEA Results £m £m change
Revenue:
Owned and leased 121 92 31.5
Managed 84 71 18.3
Franchised 40 35 14.3
____ ____ _____
Continuing operations 245 198 23.7
Discontinued operations* 9 133 (93.2)
____ ____ _____
Total £m 254 331 (23.3)
____ ____ ____
Dollar equivalent $m 509 608 (16.3)
____ ____ _____
Operating profit before exceptional items:
Owned and leased 17 (4) 525.0
Managed 43 37 16.2
Franchised 29 24 20.8
____ ____ _____
89 57 56.1
Regional overheads (22) (20) (10.0)
____ ____ _____
Continuing operations 67 37 81.1
Discontinued operations* - 25 -
____ ____ _____
Total £m 67 62 8.1
____ ____ _____
Dollar equivalent $m 135 114 18.4
____ ____ _____
* Discontinued operations are all owned and leased.
12 months ended
31 December
EMEA comparable RevPAR movement on previous year 2007
Owned and leased:
InterContinental 14.0%
All ownership types:
UK 6.2%
Continental Europe 7.6%
Middle East 19.6%
EMEA Results
Revenue and operating profit from continuing operations increased by 23.7% to
£245m and 81.1% to £67m respectively. Including discontinued operations,
revenue decreased by 23.3% whilst operating profit increased by 8.1%, reflecting
the impact of hotels sold and converted to management and franchise contracts
over the past two years.
During the year, the region achieved RevPAR growth of 8.6% driven by substantial
gains across all brands and ownership types. From a regional perspective,
RevPAR levels benefited from the positive market conditions in the Middle East,
France and the UK. The region's continuing operating profit margins increased
by 8.6 percentage points to 27.3% as a result of improved revenue conversion in
the owned and leased portfolio and increased scalability in the franchised
operations.
In the owned and leased estate, continuing revenue increased by 31.5% to £121m
as a result of trading at the InterContinental London Park Lane which became
fully operational during the first half of 2007, together with strong rate-led
RevPAR growth at the InterContinental Paris Le Grand. Effective revenue
conversion led to an increase in continuing operating profit of £21m to £17m,
including operating profit growth of £14m at the InterContinental London Park
Lane.
EMEA managed revenues increased by 18.3% to £84m and operating profit increased
by 16.2% to £43m. The growth was driven by management contracts negotiated in
2006 as part of the hotel disposal programme in Europe and strong underlying
trading in markets such as the Middle East, the UK, Spain and Russia.
Franchised revenue and operating profit increased by 14.3% to £40m and 20.8% to
£29m respectively. The growth was principally driven by RevPAR gains and room
count expansion in the UK and Continental Europe.
Hotels Rooms
EMEA hotel and room count Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 62 (4) 20,012 (1,411)
Crowne Plaza 72 4 17,326 886
Holiday Inn 335 18 52,842 2,214
Holiday Inn Express 182 10 19,380 1,271
____ ____ ______ _____
Total 651 28 109,560 2,960
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 5 (5) 1,674 (1,414)
Managed 171 (3) 39,073 (1,602)
Franchised 475 36 68,813 5,976
____ ____ ______ _____
Total 651 28 109,560 2,960
____ ____ ______ _____
EMEA Hotel and Room Count
During 2007, EMEA hotel and room count increased by 28 hotels (2,960 rooms) to
651 hotels (109,560 rooms). The net growth included the opening of 55 hotels
(7,956 rooms) and the removal of 27 hotels (4,996 rooms). System growth was led
by openings in the UK of 22 hotels (2,522 rooms). Holiday Inn was the largest
contributor of room openings, adding over 50% of the region's total.
Hotels Rooms
EMEA pipeline Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 24 14 5,960 3,411
Crowne Plaza 25 10 6,298 2,631
Holiday Inn 51 (3) 9,546 1,728
Holiday Inn Express 76 17 9,766 2,321
Staybridge Suites 10 5 1,229 651
Other 1 1 90 90
____ ____ ______ _____
Total 187 44 32,889 10,832
____ ____ ______ _____
Analysed by ownership type:
Managed 70 31 15,203 7,514
Franchised 117 13 17,686 3,318
____ ____ ______ _____
Total 187 44 32,889 10,832
____ ____ ______ _____
EMEA Pipeline
The pipeline in EMEA increased by 44 hotels (10,832 rooms) to 187 hotels (32,889
rooms). The growth includes a record level of 19,153 room signings, driven by
exceptional demand in the Middle East, particularly the United Arab Emirates and
Saudi Arabia. Across the region sustained demand for the Holiday Inn brand led
to 6,004 room signings during the year whilst the region also experienced a
significant increase in room signings for the InterContinental and Crowne Plaza
brands. The EMEA pipeline includes 10 Staybridge Suites hotels (1,229 rooms), of
which the first hotels are expected to open in the UK and the Middle East during
2008.
ASIA PACIFIC
12 months ended 31 December
2007 2006 %
Asia Pacific Results $m $m change
Revenue:
Owned and leased 145 131 10.7
Managed 99 65 52.3
Franchised 16 8 100.0
____ ____ _____
Total $m 260 204 27.5
____ ____ _____
Sterling equivalent £m 130 111 17.1
____ ____ _____
Operating profit before exceptional items:
Owned and leased 36 31 16.1
Managed 46 39 17.9
Franchised 6 5 20.0
____ ____ _____
88 75 17.3
Regional overheads (25) (23) (8.7)
____ ____ _____
Total $m 63 52 21.2
____ ____ _____
Sterling equivalent £m 31 29 6.9
____ ____ _____
12 months ended
Asia Pacific comparable RevPAR movement on previous year 31 December
2007
Owned and leased:
InterContinental 7.3%
All ownership types:
Greater China 7.0%
Asia Pacific Results
Asia Pacific revenue increased by 27.5% to $260m whilst operating profit
increased by 21.2% to $63m.
The region achieved strong RevPAR growth across all brands and ownership types
and continued its strategic expansion in China and Japan. Strong growth in
total profit was achieved; however, revenue conversion was impacted by continued
investment to support expansion, resulting in a 1.3 percentage point reduction
in operating profit margins to 24.2%.
In the owned and leased estate, revenue increased by 10.7% to $145m due to the
combined impact of strong room and food and beverage trading at the
InterContinental Hong Kong, despite the impact of renovation works throughout a
significant part of the year. The hotel's revenue growth combined with profit
margin gains drove the estate's operating profit growth of 16.1% to $36m.
Managed revenues increased by 52.3% to $99m as a result of the full year
contribution from the hotels which joined the system in 2006 as part of the IHG
ANA joint venture in Japan, continued organic expansion in China and solid
RevPAR growth across Southern Asia and Australia. Operating profit increased by
17.9% to $46m as revenue gains were offset by integration and ongoing costs
associated with the ANA joint venture and continued infrastructure investment in
China.
Franchised revenues doubled from $8m to $16m, primarily driven by hotels in the
IHG ANA joint venture. Similar to the managed operations, growth in
profitability was impacted by ANA integration and ongoing costs.
Regional overheads increased by $2m to $25m primarily as a result of investment
in technology and corporate infrastructure in China and Japan and included the
favourable impact of a legal settlement.
Hotels Rooms
Asia Pacific hotel and room count Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 37 4 14,126 2,475
Crowne Plaza 55 3 17,951 1,363
Holiday Inn 94 3 25,858 2,083
Holiday Inn Express 11 3 2,600 845
Other 21 17 6,140 5,172
____ ____ ______ _____
Total 218 30 66,675 11,938
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 2 - 693 -
Managed 175 26 56,114 10,832
Franchised 41 4 9,868 1,106
____ ____ ______ _____
Total 218 30 66,675 11,938
____ ____ ______ _____
Asia Hotel and Room Count
Asia Pacific hotel and room count increased by 30 hotels (11,938 rooms) to 218
hotels (66,675 rooms). The net growth included 16 hotels (7,827 rooms) in
Greater China reflecting continued expansion in one of IHG's strategic markets,
together with 15 hotels (3,542 rooms) in Japan that joined the system as part of
the IHG ANA joint venture.
Hotels Rooms
Asia Pacific pipeline Change Change
at 31 December 2007 over 2006 2007 over 2006
Analysed by brand:
InterContinental 30 10 10,331 2,604
Crowne Plaza 56 35 21,028 13,421
Holiday Inn 49 16 14,370 3,980
Holiday Inn Express 22 10 6,097 1,572
____ ____ ______ _____
Total 157 71 51,826 21,577
____ ____ ______ _____
Analysed by ownership type:
Managed 156 70 51,650 21,401
Franchised 1 1 176 176
____ ____ ______ _____
Total 157 71 51,826 21,577
____ ____ ______ _____
Asia Pacific Pipeline
The pipeline in Asia Pacific increased by 71 hotels (21,577 rooms) to 157 hotels
(51,826 rooms). Demand in the Greater China market continued throughout the
year and represented 82.3% of the region's room signings. From a brand
perspective, Crowne Plaza attracted significant interest, contributing over half
of the total room signings.
Central
12 months ended 31 December
2007 2006 %
Central Results £m £m change
Revenue 58 55 5.5
Gross central costs (139) (136) (2.2)
____ ____ _____
Net central costs £m (81) (81) -
____ ____ _____
Dollar equivalent $m (163) (149) (9.4)
_____ ____ _____
Central Results
During 2007, net central costs were flat on 2006 but increased in line with
inflation when translated at constant currency exchange rates.
OTHER FINANCIAL INFORMATION
Exceptional operating items
Exceptional operating items of £30m include an £18m gain on the sale of
financial assets and an £11m gain on the sale of associate investments.
Exceptional operating items are treated as exceptional items by reason of their
size or nature and are excluded from the calculation of adjusted earnings per
share in order to provide a more meaningful comparison of performance.
Net financial expenses
Net financial expenses increased from £11m in 2006 to £45m in 2007, as a result
of higher debt levels following payment of the £709m special dividend in June
2007.
Financing costs included £10m (2006 £10m) of interest costs associated with
Priority Club Rewards where interest is charged on the accumulated balance of
cash received in advance of the redemption points awarded. Financing costs in
2007 also included £9m (2006 £4m) in respect of the InterContinental Boston
finance lease.
Taxation
The effective rate of tax on profit before tax, excluding the impact of
exceptional items, was 22% (2006 24%). By also excluding the impact of prior
year items, which are included wholly within continuing operations, the
equivalent tax rate would be 36% (2006 36%). This rate is higher than the UK
statutory rate of 30% due mainly to certain overseas profits (particularly in
the US) being subject to statutory rates higher than the UK statutory rate and
disallowable expenses.
Taxation within exceptional items totalled a credit of £30m (2006 £94m credit)
in respect of continuing operations. This represented, primarily, the release of
exceptional provisions relating to tax matters which were settled during the
year, or in respect of which the statutory limitation period had expired. In
2006, taxation exceptional items, in addition to such provision releases,
included £12m for the recognition of a deferred tax asset in respect of tax
losses.
Net tax paid in 2007 totalled £69m (2006 £49m) including £32m (2006 £6m) in
respect of disposals.
Earnings per share
Basic earnings per share in 2007 were 72.2p, compared with 104.1p in 2006.
Adjusted earnings per share were 48.4p, against 42.9p in 2006. Adjusted
continuing earnings per share were 46.9p, 23.4% up on last year.
Dividends
The Board has proposed a final dividend per share of 14.9p; with the interim
dividend per share of 5.7p, the normal dividend per share for 2007 will total
20.6p.
Share price and market capitalisation
The IHG share price closed at 884.0p on 31 December 2007, down from 1262.0p on
31 December 2006. The market capitalisation of the Group at the year end was
£2.6bn.
Cash flow
The net movement in cash and cash equivalents in the 12 months to 31 December
2007 was an outflow of £131m. This included net cash inflows from operating
activities of £232m, net cash outflows from investing activities of £19m and net
cash outflows from financing activities of £344m.
Key components of investing and financing activities included:
• proceeds from the disposal of hotels and equity investments totalled
£106m;
• capital expenditure totalled £93m and included the completion of the
major refurbishment at the InterContinental London Park Lane and the
renovation works at the InterContinental Hong Kong;
• cash outflows associated with shareholder returns during the year
included a special dividend of £709m and share buybacks of £81m; and
• increased borrowings of £553m.
IHG's cash flow strategy has focused on reducing capital intensity and returning
surplus funds to shareholders. Capital investment in new projects will be made
where this creates value by accelerating the development of IHG's brands. Such
investment will be funded largely from the proceeds of hotel and minority
shareholding disposals, with the objective of subsequently recycling that
capital into other projects.
Capital structure and liquidity management
Net debt at 31 December 2007 was £825m and included £100m in respect of the
finance lease commitment for the InterContinental Boston.
2007 2006
Net debt at 31 December £m £m
Borrowings (including derivatives):
Sterling 275 102
US Dollar 439 282
Euro 121 101
Other 48 48
Cash (including derivatives) (58) (403)
____ ____
825 130
Excluding fair value of derivatives (net) - 4
____ ____
Net debt 825 134
____ ____
Average debt levels 536 92
____ ____
2007 2006
Facilities at 31 December £m £m
Committed 1,154 1,157
Uncommitted 25 39
____ ____
Total 1,179 1,196
____ ____
2007 2006
Interest risk profile of net debt for major currencies % %
(including derivatives) at 31 December
At fixed rates 45 57
At variable rates 55 43
Treasury policy is to manage financial risks that arise in relation to
underlying business needs. The activities of the treasury function are carried
out in accordance with Board approved policies and are subject to regular audit.
The treasury function does not operate as a profit centre.
Medium and long-term borrowing requirements at 31 December 2007 were met through
a £1.1bn Syndicated Bank Facility which matures in November 2009. Short-term
borrowing requirements were principally met from drawings under committed and
uncommitted bilateral loan facilities. At the year end, the Group had £377m of
committed facilities available for drawing.
The Syndicated Bank Facility contains two financial covenants, interest cover
and net debt/Earnings before Interest, Tax, Depreciation and Amortisation
(EBITDA). The Group is in compliance with both covenants, neither of which is
expected to represent a material restriction on funding or investment policy in
the foreseeable future.
Asset disposal programme
Number of hotels Proceeds Net book value
Disposed since April 2003 181 £3.0bn £2.9bn
Remaining owned and leased hotels 18 £0.9bn
During 2007, IHG achieved further progress with its asset disposal programme,
including:
• the sale of the Crowne Plaza Santiago for $21m before transaction costs,
approximately $9m above net book value. Under the agreement, IHG retained
a 10 year franchise contract;
• the sale of its 74.11% share of the InterContinental Montreal for £17m
before transaction costs, approximately £5m above book value. Under the
agreement, IHG retained a 30 year management contract on the hotel; and
• the sale of the Holiday Inn Disney, Paris for £14m before transaction
costs, approximately £2m above net book value. Under the agreement, IHG
retained a five year franchise contract.
These transactions support IHG's continued strategy of growing its managed and
franchised business whilst reducing asset ownership. Since April 2003, 181
hotels with a net book value of £2.9bn have been sold, generating aggregate
proceeds of £3.0bn, of which 162 of these hotels remained in the IHG system
through the successful negotiation of either management or franchise agreements.
During 2007, IHG also divested a number of equity interests of which proceeds
totalled £57m, and included a 33.3% interest in the Crowne Plaza London The City
for £19m and a 15% interest in the InterContinental Chicago for £11m.
Return of funds programme
Timing Total Returned to Still to be
return date returned
£501m special dividend Paid in December 2004 £501m £501m Nil
First £250m share buyback Completed in 2004 £250m £250m Nil
£996m capital return Paid in July 2005 £996m £996m Nil
Second £250m share buyback Completed in 2006 £250m £250m Nil
£497m special dividend Paid in June 2006 £497m £497m Nil
Third £250m share buyback Completed in 2007 £250m £250m Nil
£709m special dividend Paid in June 2007 £709m £709m Nil
£150m share buyback Under way £150m £50m £100m
______ _____ ____
Total £3,603m £3,503m £100m
______ _____ ____
In the year, IHG paid a £709m special dividend, completed a third £250m share
buyback and commenced a £150m share buyback. At the year end £100m of this
buyback was outstanding. Since March 2004, IHG has returned £3.5bn to
shareholders.
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the year ended 31 December 2007
Year ended 31 December 2007 Year ended 31 December 2006
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note 5) Total items (note 5) Total
£m £m £m £m £m £m
Continuing operations
Revenue (note 3) 883 - 883 786 - 786
Cost of sales (411) - (411) (355) - (355)
Administrative expenses (188) (7) (195) (180) - (180)
Other operating income and
expenses
8 38 46 4 27 31
_____ ____ ____ ____ ____ ____
292 31 323 255 27 282
Depreciation and amortisation (55) (1) (56) (55) - (55)
_____ ____ ____ ____ ____ ____
Operating profit (note 4) 237 30 267 200 27 227
Financial income 9 - 9 26 - 26
Financial expenses (54) - (54) (37) - (37)
_____ ____ ____ ____ ____ ____
Profit before tax 192 30 222 189 27 216
Tax (note 6) (42) 30 (12) (41) 94 53
_____ ____ ____ ____ ____ ____
Profit for the year from
continuing operations 150 60 210 148 121 269
Profit for the year from
discontinued operations
(note 7) 5 16 21 19 117 136
_____ ____ ____ ____ ____ ____
Profit for the year
attributable to the equity
holders of the parent 155 76 231 167 238 405
==== ==== ==== ==== ==== ====
Earnings per ordinary share
(note 8):
Continuing operations:
Basic 65.6p 69.1p
Diluted 63.8p 67.4p
Adjusted 46.9p 38.0p
Adjusted diluted 45.6p 37.1p
Total operations:
Basic 72.2p 104.1p
Diluted 70.2p 101.5p
Adjusted 48.4p 42.9p
Adjusted diluted 47.1p 41.8p
Dividends per ordinary share
(note 9):
Final paid 13.3p 10.7p
Special interim paid 200.0p 118.0p
Interim paid 5.7p 5.1p
Final proposed 14.9p 13.3p
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2007
2007 2006
£m £m
Income and expense recognised directly in equity
Gains on valuation of available-for-sale assets 4 16
(Losses)/gains on cash flow hedges (1) 1
Exchange differences on retranslation of foreign operations 10 (30)
Actuarial gains/(losses) on defined benefit pension plans 12 (2)
____ ____
25 (15)
____ ____
Transfers to the income statement
On cash flow hedges: interest payable (1) (1)
On disposal of foreign operations: gain on disposal of assets - 4
On disposal of available-for-sale assets: other operating income
and expenses (10) (14)
____ ____
(11) (11)
____ ____
Tax
Tax on items above taken directly to or transferred from equity (3) 4
Tax related to share schemes recognised directly in equity (2) 26
____ ____
(5) 30
____ ____
Net income recognised directly in equity 9 4
Profit for the year 231 405
____ ____
Total recognised income and expense for the year attributable to
the equity holders of the parent 240 409
==== ====
INTERCONTINENTAL HOTELS GROUP PLC
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2007
2007 2006
£m £m
Profit for the year 231 405
Adjustments for:
Net financial expense 45 11
Income tax charge/(credit) 15 (41)
Exceptional operating items before depreciation (31) (27)
Gain on disposal of assets, net of tax (16) (117)
Depreciation and amortisation 58 64
Equity-settled share-based cost, net of payments 24 14
Other non-cash items (2) -
____ ____
Operating cash flow before movements in working capital 324 309
Increase in trade and other receivables (15) (31)
Increase in trade and other payables 26 10
Retirement benefit contributions, net of charge (33) -
____ ____
Cash flow from operations 302 288
Interest paid (42) (33)
Interest received 9 24
Tax paid on operating activities (37) (43)
____ ____
Net cash from operating activities 232 236
____ ____
Cash flow from investing activities
Purchases of property, plant and equipment (57) (87)
Purchases of intangible assets (20) (23)
Purchases of associates and other financial assets (16) (8)
Acquisition of subsidiary, net of cash acquired - (6)
Disposal of assets, net of costs and cash disposed of 49 620
Proceeds from associates and other financial assets 57 124
Tax paid on disposals (32) (6)
____ ____
Net cash from investing activities (19) 614
____ ____
Cash flow from financing activities
Proceeds from the issue of share capital 16 20
Purchase of own shares (81) (260)
Purchase of own shares by employee share trusts (69) (47)
Proceeds on release of own shares by employee share trusts 10 19
Dividends paid to shareholders (773) (561)
Dividends paid to minority interests - (1)
Increase/(decrease) in borrowings 553 (172)
____ ____
Net cash from financing activities (344) (1,002)
____ ____
Net movement in cash and cash equivalents in the year (131) (152)
Cash and cash equivalents at beginning of the year 179 324
Exchange rate effects 4 7
____ ____
Cash and cash equivalents at end of the year 52 179
==== ====
INTERCONTINENTAL HOTELS GROUP PLC
GROUP BALANCE SHEET
As at 31 December 2007
2007 2006
£m £m
ASSETS
Property, plant and equipment 962 997
Goodwill 110 109
Intangible assets 167 154
Investment in associates 33 32
Retirement benefit assets 32 -
Other financial assets 93 96
____ ____
Total non-current assets 1,397 1,388
____ ____
Inventories 3 3
Trade and other receivables 235 237
Current tax receivable 54 23
Cash and cash equivalents 52 179
Other financial assets 9 13
____ ____
Total current assets 353 455
Non-current assets classified as held for sale 57 50
____ ____
Total assets 1,807 1,893
==== ====
LIABILITIES
Loans and other borrowings (8) (10)
Trade and other payables (390) (402)
Current tax payable (212) (231)
____ ____
Total current liabilities (610) (643)
____ ____
Loans and other borrowings (869) (303)
Retirement benefit obligations (55) (71)
Trade and other payables (139) (109)
Deferred tax payable (82) (79)
____ ____
Total non-current liabilities (1,145) (562)
Liabilities classified as held for sale (3) (2)
____ ____
Total liabilities (1,758) (1,207)
==== ====
Net assets (note 12) 49 686
==== ====
EQUITY
Equity share capital 81 66
Capital redemption reserve 5 4
Shares held by employee share trusts (41) (17)
Other reserves (1,528) (1,528)
Unrealised gains and losses reserve 19 27
Currency translation reserve 6 (3)
Retained earnings 1,504 2,129
____ ____
IHG shareholders' equity (note 13) 46 678
Minority equity interest 3 8
____ ____
Total equity 49 686
==== ====
INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The audited consolidated financial statements of InterContinental Hotels
Group PLC (IHG) for the year ended 31 December 2007 have been prepared in
accordance with International Financial Reporting Standards (IFRS) as
adopted by the European Union and as applied in accordance with the
provisions of the Companies Act 1985.
The Group has early adopted International Financial Reporting
Interpretations Committee 14 'IAS 19 - The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction' (IFRIC 14).
Under IFRIC 14, the Group has recognised retirement benefit assets of
£32m on the balance sheet at 31 December 2007. The Group has also adopted
International Financial Reporting Standard 7 'Financial instruments:
Disclosures' (IFRS 7) for the first time during the year. As IFRS 7 is a
disclosure standard only, there is no impact from the adoption of this
standard on the reported numbers in these preliminary financial
statements.
Amounts that have previously been disclosed as special items have now
been called exceptional items in accordance with market practice. There
has been no change to the Group's accounting policy for identifying these
items.
In all other respects, these preliminary financial statements have been
prepared on a consistent basis using the accounting policies set out in
the IHG Annual Report and Financial Statements for the year ended 31
December 2006.
2. Exchange rates
The results of foreign operations have been translated into sterling at
the weighted average rates of exchange for the period. In the case of the
US dollar, the translation rate is £1 = $2.01 (2006 £1=$1.84). In the
case of the Euro, the translation rate is £1=€1.46 (2006 £1=€1.47).
Foreign currency denominated assets and liabilities have been translated
into sterling at the rates of exchange on the balance sheet date. In the
case of the US dollar, the translation rate is £1=$2.01 (2006 £1=$1.96).
In the case of the Euro, the translation rate is £1=€1.36 (2006
£1=€1.49).
3. Revenue
2007 2006
£m £m
Continuing operations:
Americas 450 422
EMEA 245 198
Asia Pacific 130 111
Central 58 55
____ ____
883 786
Discontinued operations (note 7) 40 174
____ ____
923 960
==== ====
4. Operating profit
2007 2006
£m £m
Continuing operations:
Americas 220 215
EMEA 67 37
Asia Pacific 31 29
Central (81) (81)
____ ____
237 200
Exceptional operating items (note 5) 30 27
____ ____
267 227
Discontinued operations (note 7) 8 31
____ ____
275 258
==== ====
5. Exceptional items
2007 2006
£m £m
Exceptional operating items*
Gain on sale of associate investments** 11 -
Gain on sale of investment in FelCor Lodging Trust, Inc.** - 25
Gain on sale of other financial assets** 18 -
Reversal of previously recorded impairment** 3 2
Office reorganisations (a) (2) -
____ ____
30 27
==== ====
Tax*
Tax charge on exceptional operating items - (6)
Exceptional tax credit (b) 30 100
____ ____
30 94
==== ====
Gain on disposal of assets
Gain on disposal of assets 20 123
Tax charge (4) (6)
____ ____
16 117
==== ====
* Relates to continuing operations.
** Included within other operating income and expenses.
The above items are treated as exceptional by reason of their size or nature.
a. Profit on sale and leaseback of new head office less costs incurred to
date on the office move and closure of the Group's Aylesbury facility.
Costs will continue to be incurred during the first half of 2008. Costs
of £7m are included in administrative expenses and £1m in depreciation
and amortisation. Income of £6m is included in other operating income and
expenses.
b. The exceptional tax credit relates to the release of provisions which are
exceptional by reason of their size or nature relating to tax matters
which have been settled or in respect of which the relevant statutory
limitation period has expired, together with, in 2006, a credit in
respect of previously unrecognised losses.
6. Tax
The effective tax rate on the combined profit from continuing and
discontinued operations, excluding the impact of exceptional items
(note 5) is 22% (2006 24%).
By also excluding the effect of prior year items, the equivalent
effective tax rate is 36% (2006 36%). Prior year items have been treated
as relating wholly to continuing operations.
2007 2007 2007 2006 2006 2006
Year ended 31 December Profit Tax Tax Profit Tax Tax
£m £m rate £m £m rate
Before exceptional items
Continuing operations 192 (42) 189 (41)
Discontinued operations 8 (3) 31 (12)
____ ____ ____ ____
200 (45) 22% 220 (53) 24%
Exceptional items
Continuing operations 30 30 27 94
Discontinued operations 20 (4) 123 (6)
____ ____ ____ ____
250 (19) 370 35
==== ==== ==== ====
Analysed as:
UK tax (3) 14
Foreign tax (16) 21
____ _____
(19) 35
==== ====
7. Discontinued operations
Discontinued operations are those relating to hotels sold or those
classified as held for sale as part of the asset disposal programme that
commenced in 2003. These disposals underpin IHG's strategy of growing
its managed and franchised business whilst reducing asset ownership.
The results of discontinued operations which have been included in the
consolidated income statement are as follows:
2007 2006
£m £m
Revenue 40 174
Cost of sales (30) (134)
____ ____
10 40
Depreciation and amortisation (2) (9)
____ ____
Operating profit 8 31
Tax (3) (12)
____ ____
Profit after tax 5 19
Gain on disposal of assets, net of tax (note 5) 16 117
____ ____
Profit for the year from discontinued operations 21 136
==== ====
2007 2006
pence per share pence per
share
Earnings per share from discontinued operations
Basic 6.6 35.0
Diluted 6.4 34.1
==== ====
2007 2006
£m £m
Cash flows attributable to discontinued operations
Operating profit before interest, depreciation and amortisation 10 40
Investing activities (1) (9)
Financing activities - (25)
____ ____
9 6
==== ====
The effect of discontinued operations on segmental results is shown in the Business Review.
8. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit
for the year available for IHG equity holders by the weighted average
number of ordinary shares, excluding investment in own shares, in issue
during the year.
Diluted earnings per ordinary share is calculated by adjusting basic
earnings per ordinary share to reflect the notional exercise of the
weighted average number of dilutive ordinary share options outstanding
during the year.
On 1 June 2007, shareholders approved a share capital consolidation on
the basis of 47 new ordinary shares for every 56 existing ordinary
shares, together with a special dividend of 200 pence per existing
ordinary share. The overall effect of the transaction was that of a share
repurchase at fair value, therefore no adjustment has been made to
comparative data.
Adjusted earnings per ordinary share is disclosed in order to show
performance undistorted by exceptional items, to give a more meaningful
comparison of the Group's performance.
2007 2007 2006 2006
Continuing Continuing
operations Total operations Total
Basic earnings per share
Profit available for equity holders (£m) 210 231 269 405
Basic weighted average number of ordinary
shares (millions) 320 320 389 389
Basic earnings per share (pence) 65.6 72.2 69.1 104.1
==== ==== ==== ====
Diluted earnings per share
Profit available for equity holders (£m) 210 231 269 405
Diluted weighted average number of ordinary
shares (millions) 329 329 399 399
Diluted earnings per share (pence) 63.8 70.2 67.4 101.5
==== ==== ==== ====
Adjusted earnings per share
Profit available for equity holders (£m) 210 231 269 405
Less adjusting items (note 5):
Exceptional operating items (£m) (30) (30) (27) (27)
Tax on exceptional operating items - - 6 6
(£m)
Exceptional tax credit (£m) (30) (30) (100) (100)
Gain on disposal of assets, net of tax - (16) - (117)
(£m)
____ ____ ____ ____
Adjusted earnings (£m) 150 155 148 167
Basic weighted average number of ordinary
shares (millions) 320 320 389 389
Adjusted earnings per share (pence) 46.9 48.4 38.0 42.9
==== ==== ==== ====
Diluted weighted average number of ordinary
shares (million) 329 329 399 399
Adjusted diluted earnings per share (pence) 45.6 47.1 37.1 41.8
==== ==== ==== ====
The diluted weighted average number of ordinary shares is calculated as: 2007 2006
millions millions
Basic weighted average number of ordinary shares 320 389
Dilutive potential ordinary shares - employee share options 9 10
____ ____
329 399
==== ====
9. Dividends per ordinary share
2007 pence 2006 pence 2007 2006
per share per share £m £m
Paid during the year:
Final (declared in previous year) 13.3 10.7 47 46
Interim 5.7 5.1 17 18
Special interim 200.0 118.0 709 497
____ ____ ___ ____
219.0 133.8 773 561
==== ==== === ===
Proposed for approval at the Annual
General Meeting (not recognised as a
liability at 31 December):
Final 14.9 13.3 44 47
==== ==== ==== ====
The proposed final dividend is payable on the shares in issue at 28 March 2008.
10. Net debt
2007 2006
£m £m
Cash and cash equivalents 52 179
Loans and other borrowings - current (8) (10)
Loans and other borrowings - non-current (869) (303)
____ ____
Net debt (825) (134)
==== ====
Finance lease liability included above (100) (97)
==== ====
11. Movement in net debt
2007 2006
£m £m
Net decrease in cash and cash equivalents (131) (152)
Add back cash flows in respect of other components of net debt:
(Increase)/decrease in borrowings (553) 172
____ ____
(Increase)/decrease in net debt arising from cash flows (684) 20
Non-cash movements:
Finance lease liability (9) (103)
Exchange and other adjustments 2 37
____ ____
Increase in net debt (691) (46)
Net debt at beginning of the year (134) (88)
____ ____
Net debt at end of the year (825) (134)
==== ====
12. Net assets
2007 2006
£m £m
Americas 388 390
EMEA 376 359
Asia Pacific 267 285
Central 83 73
____ ____
1,114 1,107
Net debt (825) (134)
Unallocated assets and liabilities (240) (287)
____ ____
49 686
==== ====
13. Statement of changes in IHG shareholders' equity
2007 2006
£m £m
At beginning of the year 678 1,084
Total recognised income and expense for the year 240 409
Equity dividends paid (note 9) (773) (561)
Issue of ordinary shares 16 20
Purchase of own shares (81) (260)
Movement in shares in employee share trusts (64) (32)
Equity settled share-based cost 30 18
____ ____
At end of the year 46 678
==== ====
14. Capital commitments and contingencies
At 31 December 2007, the amount contracted for but not provided for in
the financial statements for expenditure on property, plant and equipment
was £10m (2006 £24m).
At 31 December 2007, the Group had contingent liabilities of £5m (2006
£11m), mainly comprising guarantees given in the ordinary course of
business.
In limited cases, the Group may provide performance guarantees to
third-party owners to secure management contracts. The maximum exposure
under such guarantees is £121m (2006 £142m). It is the view of the
Directors that, other than to the extent that liabilities have been
provided for in these financial statements, such guarantees are not
expected to result in financial loss to the Group.
The Group has given warranties in respect of the disposal of certain of
its former subsidiaries and hotels. It is the view of the Directors that,
other than to the extent that liabilities have been provided for in
these financial statements, such warranties are not expected to result in
financial loss to the Group.
15. Other commitments
In March and June 2007, the Company made the first two payments of £10m
under the agreement to make special pension contributions of £40m to the
UK pension plan. A further payment of £10m was made on 31 January 2008
and the final £10m is scheduled for payment in 2009.
On 24 October 2007, the Group announced a worldwide relaunch of its
Holiday Inn brand family. In support of this relaunch, IHG will make a
non recurring revenue investment of up to £30m which it is anticipated
will be charged to the income statement as an exceptional item during
2008.
16. Group financial statements
The preliminary statement of results was approved by the Board on 18
February 2008. The preliminary statement does not represent the full
Group financial statements of InterContinental Hotels Group PLC and its
subsidiaries which will be delivered to the Registrar of Companies in due
course. The financial information for the year ended 31 December 2006 has
been extracted from the IHG Annual Report and Financial Statements for
that year as filed with the Registrar of Companies.
Auditors' review
The auditors, Ernst & Young LLP, have given an unqualified report under
Section 235 of the Companies Act 1985, as amended, in respect of the full
Group financial statements for both years referred to above.
This information is provided by RNS
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