1st Quarter Results
InterContinental Hotels Group PLC
07 May 2008
7 May 2008
InterContinental Hotels Group PLC
First Quarter Results to 31 March 2008
Headlines
• 5,267 net rooms added in the quarter. System size up 6% year on year,
taking the total to 590,361 rooms (3,983 hotels).
• Global constant currency RevPAR growth of 3.5%; impacted by Easter timing.
• Total gross revenue* from all hotels in IHG's system of £2.2bn, up 10% at
constant currency.
• Continuing revenue up 15% from £196m to £226m, up 14% at constant currency.
Excluding £7m liquidated damages relating to one Americas development
project leaving the pipeline, continuing revenues up 10% at constant
currency.
• Continuing operating profit up 38% from £45m to £62m, up 40% at constant
currency. Excluding £7m liquidated damages, continuing operating profit up
24% at constant currency.
• Adjusted continuing earnings per share ("EPS") up 47% to 11.6p. Adjusted
total EPS of 12.0p. Basic total EPS of 10.6p.
• 19,678 rooms signed, taking the pipeline to 231,553 rooms (1,720 hotels),
equal to 39% of IHG's existing system size.
*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 good performance in the
first quarter of 2008. Growth in revenue per available room (RevPAR) of 3.5%
was solid given the adverse impact of the timing of Easter. We increased the
number of rooms in our system by over 5,200, more than twice the increase in the
first quarter of 2007. We signed over 150 hotels into our development pipeline
which now stands at over 1,700 hotels, giving good visibility on future
openings.
"We continue to focus on strengthening our brands. The response from our owner
community to the Holiday Inn relaunch has been very encouraging and we now have
21 hotels operating with some or all of the elements of the new brand standards
and identity ahead of our full roll out which begins in the summer.
"Even in a less certain economic environment our broad market coverage, record
pipeline, strong brands and resilient fee based business model position us well
for continued growth."
Rooms - strong signings and openings
• In the quarter 19,678 rooms were signed. The growth of the InterContinental
brand continued with five hotels signed, including three in the Americas,
taking the total pipeline of hotels to 62. IHG signed its first Hotel
Indigo outside the US in London which is due to open in Paddington in the
third quarter, and its second Staybridge Suites hotel in the Middle East.
This takes the pipeline of Staybridge Suites hotels outside the Americas
region to 10. The first Staybridge Suites hotel in the UK will open in
June in Liverpool.
• 11,113 rooms were added to the system and 5,846 rooms were removed, in line
with our strategy of driving quality growth, giving net room additions of
5,267.
• The pipeline now stands at 1,720 hotels (231,553 rooms). The pipeline of
Holiday Inn brand family hotels increased by 23 and now stands at 1,100
hotels (129,232 rooms).
Americas: solid performance
Revenue performance
RevPAR increased 2.3%, driven by rate, with RevPAR growth of 4.6% in the first
two months of the year and a 1.2% decline in March due to the timing of Easter.
Continuing revenue grew 14% from $201m to $230m, driven by 11% growth in
revenues from owned and leased hotels and 16% growth in managed and franchised
revenues. Excluding the impact of $13m liquidated damages, continuing revenues
grew 8%.
Operating profit performance
Operating profit from continuing operations increased 20% to $112m. Excluding
the impact of $13m liquidated damages, continuing operating profit grew 6%.
Continuing owned and leased hotel profit increased by $3m to $7m driven by
ongoing improvement in trading at the InterContinental Boston, which opened in
November 2006 and 10% RevPAR growth at the InterContinental New York. Managed
hotel profit increased $12m to $23m including the liquidated damages, and
franchised hotel profit increased $4m to $97m.
EMEA: strong performance in the Middle East
Revenue performance
RevPAR increased 5.9%, driven by rate, with RevPAR growth of 9.1% in the first
two months and 0.8% in March. The Middle East continued to perform strongly,
growing RevPAR by 20.2%. Continental Europe grew RevPAR by 5.7%, including a
12.3% increase in France. In the UK, Holiday Inn and Holiday Inn Express
outperformed their market segment recording RevPAR growth of 1.5%. Continuing
revenues increased 18% driven by 29% growth in managed and franchised revenues.
Operating profit performance
Operating profit from continuing operations increased £8m to £15m. The
contribution from continuing owned and leased hotels increased by £4m to £2m,
driven by RevPAR growth of 11.9% at the InterContinental Paris Le Grand and
continued improvement in trading at the InterContinental London Park Lane
following the completion of its refurbishment in June 2007. Managed hotel profit
increased by 38% from £8m to £11m reflecting the increase in number of hotels
under management and strong growth in the Middle East. Franchised hotel profit
increased from £6m to £7m reflecting 3.8% RevPAR growth and 9.1% net rooms
growth.
Asia Pacific: further growth across all brands
Revenue performance
RevPAR increased 5.1%, driven by rate, with RevPAR growth of 6.1% in the first
two months and 3.4% in March. InterContinental and Holiday Inn brand performance
were strongest with 7.3% and 9.4% RevPAR growth respectively. Greater China
RevPAR increased 3.2%, driven by both occupancy and rate growth. Continuing
revenues increased 16% to $72m.
Operating profit performance
Operating profit from continuing operations increased 31% to $17m. Owned and
leased hotel operating profit increased $2m to $10m driven by RevPAR growth of
9.2% at the InterContinental Hong Kong after completion of its rolling
refurbishment at the end of 2007. Managed hotel profit increased $5m to $14m
driven by the contribution from the increasing number of hotels under IHG
management in the region.
Overheads, Tax and Exceptional items
In the first quarter aggregated regional overheads increased £1m to £17m and
central costs increased £1m to £18m.
Based on the position at the end of the quarter the tax charge on profit from
continuing and discontinued operations, excluding the impact of exceptional
items, has been calculated using an estimated effective annual tax rate of 29%
(Q1 2007: 28%). As previously disclosed, the effective tax rate in 2008 is
expected to be in the mid to high 20s and then will trend upwards over time.
As previously announced IHG will make a non-recurring revenue investment of £30m
to accelerate implementation of the global relaunch of the Holiday Inn brands,
which will be treated as an exceptional item. £3m has been charged in the
period.
Disposals and returns of funds
IHG's net debt at the period end was £845m, including the $200m (£101m) finance
lease on the InterContinental Boston.
1.6m shares were repurchased under IHG's buyback programme during the first
quarter, at a cost of £13m, leaving £87m of the current buyback programme to be
completed.
After the period end, IHG sold its 17% interest in the Crowne Plaza Amsterdam
City Centre for €18m (£14m) including a € 6m (£5m) agreed settlement for the
previous management contract and €2m (£1m) repayment of existing loans. IHG
will continue to manage the hotel under a new 40 year management contract
including renewals.
Appendix 1: Asset disposal programme
Number of hotels Proceeds Net book value
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 7,456 2,434 1,223 11,113
Removals (4,536) (636) (674) (5,846)
Net room additions 2,920 1,798 549 5,267
Signings 15,060 1,659 2,959 19,678
Appendix 3: Financial headlines
Three months to 31 Mar £m Total Americas EMEA Asia Pacific Central
2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
Franchised operating profit 57 55 49 48 7 6 1 1
Managed operating profit 29 19 11 6 11 8 7 5
Continuing owned and leased 11 4 4 2 2 (2) 5 4
operating profit
Regional overheads (17) (16) (8) (8) (5) (5) (4) (3)
Continuing operating profit pre 80 62 56 48 15 7 9 7
central overheads
Central overheads (18) (17) - - - - - - (18) (17)
Continuing operating profit 62 45 56 48 15 7 9 7 (18) (17)
Discontinued owned and leased 2 1 2 1 - - - -
operating profit
Total operating profit 64 46 58 49 15 7 9 7 (18) (17)
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 17% 19% 114% 114% 29% 29% 38% 40%
Exchange rates USD:GBP EUR:GBP
Q1 2008 1.98 1.32
Q1 2007 1.95 1.49
* Sterling actual currency.
** Translated at constant 2007 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.
For further information, please contact:
Investor Relations (Heather Wood; Catherine Dolton): +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.
UK Q&A Conference Call:
A conference call with Andrew Cosslett (Chief Executive) and Richard Solomons
(Finance Director) will commence at 9.30 am (London time) on 7 May. There will
be an opportunity to ask questions.
International dial-in: +44 (0)1452 556 518
UK Free Call: 0800 694 8084
Conference ID: 43988921
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 43988921#
International dial-in: +44 (0)1452 55 00 00
UK Free Call: 0845 245 5205
US Q&A conference call:
There will also be a conference call, primarily for US investors and analysts,
at 10.00am (Eastern Standard Time) on 7 May 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: 43989314
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 43989314#
International dial-in: +44 (0)1452 55 00 00
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 Wednesday 7 May The web address is www.ihg.com/Q1
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 3,980
hotels and more than 590,000 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.
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the three months ended 31 March 2008
3 months ended 31 March 2008 3 months ended 31 March 2007
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note 8) Total items (note 8) Total
£m £m £m £m £m £m
Continuing operations
Revenue (note 3) 226 - 226 196 - 196
Cost of sales (104) - (104) (98) - (98)
Administrative expenses (47) (4) (51) (40) - (40)
Other operating income and expenses 1 - 1 1 16 17
____ ____ ____ ____ ____ ____
76 (4) 72 59 16 75
Depreciation and amortisation (14) (1) (15) (14) - (14)
_____ _____ ____ _____ _____ ____
Operating profit (note 4) 62 (5) 57 45 16 61
Financial income 2 - 2 3 - 3
Financial expenses (17) - (17) (8) - (8)
____ ____ ____ ____ ____ ____
Profit before tax 47 (5) 42 40 16 56
Tax (note 9) (13) 1 (12) (12) 2 (10)
____ ____ ____ ____ ____ ____
Profit for the period from continuing
operations
34 (4) 30 28 18 46
Profit for the period from
discontinued operations (note 10)
1 - 1 1 - 1
____ ____ ____ ____ ____ ____
Profit for the period attributable to
the equity holders of the parent
35 (4) 31 29 18 47
==== ==== ==== ==== ==== ====
Earnings per ordinary share
(note 11):
Continuing operations:
Basic 10.3p 13.0p
Diluted 10.2p 12.6p
Adjusted 11.6p 7.9p
Adjusted diluted 11.5p 7.7p
Total operations:
Basic 10.6p 13.3p
Diluted 10.5p 12.9p
Adjusted 12.0p 8.2p
Adjusted diluted 11.9p 7.9p
==== ==== ==== ====
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the three months ended 31 March 2008
2008 2007
3 months 3 months
ended 31 March ended 31 March
£m £m
Income and expense recognised directly in equity
Gains/(losses) on valuation of available-for-sale assets 3 (4)
Actuarial (losses)/gains on defined benefit pension plans (4) 11
Exchange differences on retranslation of foreign operations 10 1
____ ____
9 8
____ ____
Transfers to the income statement
On disposal of available-for-sale assets - (4)
____ ____
- (4)
____ ____
Tax
Tax on items above taken directly to or transferred from equity 2 -
Tax related to share schemes recognised directly in equity (2) 3
____ ____
- 3
____ ____
Net income recognised directly in equity 9 7
Profit for the period 31 47
____ ____
Total recognised income and expense for the period attributable
to the equity holders of the parent
40 54
==== ====
INTERCONTINENTAL HOTELS GROUP PLC
GROUP CASH FLOW STATEMENT
For the three months ended 31 March 2008
2008 2007
3 months 3 months
ended 31 March ended 31 March
£m £m
Profit for the period 31 47
Adjustments for:
Net financial expenses 15 5
Income tax charge 13 10
Exceptional operating items before depreciation 4 (16)
Depreciation and amortisation 15 15
Equity settled share-based cost, net of payments 1 (1)
_____ _____
Operating cash flow before movements in working capital 79 60
Increase in net working capital (27) (25)
Retirement benefit contributions, net of cost (11) (10)
Cash flows relating to exceptional operating items (3) -
_____ _____
Cash flow from operations 38 25
Interest paid (16) (6)
Interest received 2 4
Tax paid (3) (2)
_____ _____
Net cash from operating activities 21 21
_____ _____
Cash flow from investing activities
Purchases of property, plant and equipment (9) (18)
Purchase of intangible assets (5) (3)
Purchases of associates and other financial assets - (9)
Disposal of assets, net of costs - (5)
Proceeds from associates and other financial assets 4 22
_____ _____
Net cash from investing activities (10) (13)
_____ _____
Cash flow from financing activities
Proceeds from the issue of share capital 1 3
Purchase of own shares (13) (25)
Purchase of own shares by employee share trusts - (43)
Proceeds on release of own shares by employee share trusts - 1
Increase in borrowings 38 55
_____ _____
Net cash from financing activities 26 (9)
_____ _____
Net movement in cash and cash equivalents in the period 37 (1)
Cash and cash equivalents at beginning of the period 52 179
Exchange rate effects - -
_____ _____
Cash and cash equivalents at end of the period 89 178
===== =====
INTERCONTINENTAL HOTELS GROUP PLC
GROUP BALANCE SHEET
31 March 2008
2008 2007 2007
31 March 31 March 31 December
£m £m £m
ASSETS
Property, plant and equipment 983 950 962
Goodwill 113 110 110
Intangible assets 173 161 167
Investment in associates 34 32 33
Retirement benefit assets 43 - 32
Other financial assets 86 100 93
_____ _____ _____
Total non-current assets 1,432 1,353 1,397
_____ _____ _____
Inventories 3 3 3
Trade and other receivables 253 248 235
Current tax receivable 48 12 54
Cash and cash equivalents 89 178 52
Other financial assets 18 7 9
_____ _____ _____
Total current assets 411 448 353
Non-current assets classified as held for sale 58 92 57
______ ______ ______
Total assets 1,901 1,893 1,807
===== ===== =====
LIABILITIES
Loans and other borrowings (8) (5) (8)
Trade and other payables (381) (381) (390)
Current tax payable (219) (224) (212)
_____ _____ _____
Total current liabilities (608) (610) (610)
_____ _____ _____
Loans and other borrowings (926) (365) (869)
Retirement benefit obligations (60) (50) (55)
Trade and other payables (141) (111) (139)
Deferred tax payable (85) (77) (82)
_____ _____ _____
Total non-current liabilities (1,212) (603) (1,145)
Liabilities classified as held for sale (3) (5) (3)
_____ _____ _____
Total liabilities (1,823) (1,218) (1,758)
===== ===== =====
Net assets (note 14) 78 675 49
===== ===== =====
EQUITY
Equity share capital 82 69 81
Capital redemption reserve 5 4 5
Shares held by employee share trusts (15) (40) (41)
Other reserves (1,528) (1,528) (1,528)
Unrealised gains and losses reserve 22 19 19
Currency translation reserve 17 (3) 6
Retained earnings 1,492 2,146 1,504
______ ______ ______
IHG shareholders' equity (note 15) 75 667 46
Minority equity interest 3 8 3
______ ______ ______
Total equity 78 675 49
===== ===== =====
INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These interim financial statements have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting' using,
on a consistent basis, the accounting policies set out in the 2007
InterContinental Hotels Group PLC (the Group or IHG) Annual Report and
Financial Statements.
These interim financial statements are unaudited and do not constitute
statutory accounts of the Group within the meaning of Section 240 of the
Companies Act 1985. The auditors have carried out a review of the
financial information in accordance with the guidance contained in ISRE
2410 (UK and Ireland) 'Review of Interim Financial Information Performed
by the Independent Auditor of the Entity' issued by the Auditing
Practices Board.
The financial information for the year ended 31 December 2007 has been
extracted from the Group's published financial statements for that year
which contain an unqualified audit report and which have been
filed with the Registrar of Companies.
2. Exchange rates
The results of overseas 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 for the three months ended 31
March is £1= $1.98 (2007 3 months, £1 = $1.95). In the case of the euro,
the translation rate for the three months ended 31 March is £1 = €1.32
(2007 3 months, £1 = €1.49).
Foreign currency denominated assets and liabilities have been translated
into sterling at the rates of exchange on the last day of the period.
In the case of the US dollar, the translation rate is £1=$1.99
(2007 31 March £1 = $1.96; 31 December £1 = $2.01). In the case of the
euro, the translation rate is £1 = €1.26 (2007 31 March £1 = €1.47;
31 December £1= €1.36).
Revenue
3.
2008 2007
3 months 3 months
ended 31 March ended 31 March
£m £m
Continuing operations
Americas (note 5) 116 102
EMEA (note 6) 58 49
Asia Pacific (note 7) 36 32
Central 16 13
____ ____
226 196
Discontinued operations (note 10) 5 10
____ ____
231 206
==== ====
4. Operating profit
2008 2007
3 months 3 months
ended 31 March ended 31 March
£m £m
Continuing operations
Americas (note 5) 56 48
EMEA (note 6) 15 7
Asia Pacific (note 7) 9 7
Central (18) (17)
____ ____
62 45
Exceptional operating items (note 8) (5) 16
____ ___
57 61
Discontinued operations (note 10) 2 1
____ ___
59 62
==== ===
5. Americas
2008 2007
3 months 3 months
ended 31 March ended 31 March
$m $m
Revenue
Owned & leased 63 57
Managed 53 38
Franchised 114 106
____ ____
Continuing operations 230 201
Discontinued operations - Owned & leased 11 17
____ ____
Total $m 241 218
==== ====
Sterling equivalent £m
Continuing operations 116 102
Discontinued operations 5 9
____ ____
121 111
==== ====
Operating profit
Owned & leased 7 4
Managed 23 11
Franchised 97 93
Regional overheads (15) (15)
____ ____
Continuing operations 112 93
Discontinued operations - Owned & leased 3 2
____ ____
Total $m 115 95
==== ====
Sterling equivalent £m
Continuing operations 56 48
Discontinued operations 2 1
____ ____
58 49
==== ====
6. EMEA
2008 2007
3 months 3 months
ended 31 March ended 31 March
£m £m
Revenue
Owned & leased 27 25
Managed 20 16
Franchised 11 8
____ ____
Continuing operations 58 49
Discontinued operations - Owned & leased - 1
____ ____
Total 58 50
==== ====
Operating profit
Owned & leased 2 (2)
Managed 11 8
Franchised 7 6
Regional overheads (5) (5)
____ ____
Total - continuing operations 15 7
==== ====
7. Asia Pacific
2008 2007
3 months 3 months
ended 31 March ended 31 March
$m $m
Revenue
Owned & leased 40 36
Managed 28 22
Franchised 4 4
____ ____
Total $m 72 62
==== ====
Sterling equivalent £m 36 32
==== ====
Operating profit
Owned & leased 10 8
Managed 14 9
Franchised 2 2
Regional overheads (9) (6)
____ ____
Total $m 17 13
==== ====
Sterling equivalent £m 9 7
==== ====
All results relate to continuing operations.
8. Exceptional items
2008 2007
3 months 3 months
ended 31 March ended 31 March
£m £m
Exceptional operating items
Gain on sale of associate investment - 11
Gain on sale of other financial assets - 5
Office reorganisations (a) (2) -
Holiday Inn brand relaunch (b) (3) -
____ ____
(5) 16
==== ====
Tax
Tax on exceptional operating items 1 2
==== ====
All exceptional items relate to continuing operations.
a) Relates to further costs incurred on the relocation of the Group's head office and the closure of
its Aylesbury facility.
b) Relates to costs incurred in support of the worldwide relaunch of the Holiday Inn brand family
that was announced on 24 October 2007.
9. Tax
The tax charge on the combined profit from continuing and discontinued operations, excluding the impact of
exceptional items (note 8), has been calculated using an estimated effective annual tax rate of 29% (2007
28%), analysed as follows.
3 months ended 31 March 2008 3 months ended 31 March 2007
Profit Tax Tax Profit Tax Tax
£m £m rate £m £m rate
Before exceptional items:
Continuing operations 47 (13) 40 (12)
Discontinued operations 2 (1) 1 -
____ ____ ____ ____
49 (14) 29% 41 (12) 28%
Exceptional items:
Continuing operations (5) 1 16 2
____ ____ ____ ____
44 (13) 57 (10)
==== ==== ==== ====
Analysed as:
UK tax (2) (4)
Foreign tax (11) (6)
____ ____
(13) (10)
==== ====
By also excluding the effect of prior year items, the equivalent effective tax rate would be approximately
35% (2007 34%). Prior year items have been treated as relating wholly to continuing operations.
10. 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:
2008 2007
3 months 3 months
ended 31 March ended 31 March
£m £m
Revenue 5 10
Cost of sales (3) (8)
____ ____
2 2
Depreciation and amortisation - (1)
____ ____
Operating profit 2 1
Tax (1) -
____ ____
Profit for the period from discontinued operations 1 1
==== ====
2008 2007
3 months 3 months
ended 31 March ended 31 March
pence per share pence per share
Earnings per share from discontinued operations
Basic 0.3 0.3
Diluted 0.3 0.3
==== ====
The effect of discontinued operations on segment results is disclosed in notes 5 and 6.
11. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit for the period available for IHG
equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in
issue during the period.
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 period.
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.
2008 2007
3 months ended 3 months ended
31 March 31 March
Continuing Continuing
operations Total operations Total
Basic earnings per share
Profit available for equity holders (£m) 30 31 46 47
Basic weighted average number of ordinary shares
(millions)
292 292 354 354
Basic earnings per share (pence) 10.3 10.6 13.0 13.3
==== ===== ==== =====
Diluted earnings per share
Profit available for equity holders (£m) 30 31 46 47
Diluted weighted average number of ordinary shares
(millions) (see below)
295 295 365 365
Diluted earnings per share (pence) 10.2 10.5 12.6 12.9
==== ===== === ===
Adjusted earnings per share
Profit available for equity holders (£m) 30 31 46 47
Less adjusting items (note 8):
Exceptional operating items (£m) 5 5 (16) (16)
Tax (£m) (1) (1) (2) (2)
____ ____ ____ ____
Adjusted earnings (£m) 34 35 28 29
Basic weighted average number of ordinary shares
(millions)
292 292 354 354
Adjusted earnings per share (pence) 11.6 12.0 7.9 8.2
==== ==== ==== ====
Diluted weighted average number of ordinary shares
(millions)
295 295 365 365
Adjusted diluted earnings per share (pence) 11.5 11.9 7.7 7.9
==== ==== ==== ====
2008 2007
3 months 3 months
ended 31 March ended 31 March
millions millions
Diluted weighted average number of ordinary shares is
calculated as:
Basic weighted average number of ordinary shares 292 354
Dilutive potential ordinary shares - employee share options 3 11
____ ____
295 365
==== ====
12. Net debt
2008 2007 2007
31 March 31 March 31 December
£m £m £m
Cash and cash equivalents 89 178 52
Loans and other borrowings - current (8) (5) (8)
Loans and other borrowings - non-current (926) (365) (869)
____ ____ ____
Net debt (845) (192) (825)
==== ==== ====
Finance lease liability included above (101) (99) (100)
==== ==== ====
13. Movement in net debt
2008 2007 2007
3 months ended 3 months ended 12 months ended
31 March 31 March 31 December
£m £m £m
Net increase/(decrease) in cash and cash 37 (1) (131)
equivalents
Add back cash flows in respect of other
components of net debt:
Increase in borrowings (38) (55) (553)
____ ____ ____
Increase in net debt arising from cash flows (1) (56) (684)
Non-cash movements:
Finance lease liability (2) (2) (9)
Exchange and other adjustments (17) - 2
____ ____ ____
Increase in net debt (20) (58) (691)
Net debt at beginning of the period (825) (134) (134)
____ ____ ____
Net debt at end of the period (845) (192) (825)
==== ==== ====
14. Net assets
2008 2007 2007
31 March 31 March 31 December
£m £m £m
Americas 402 427 388
EMEA 420 375 376
Asia Pacific 274 283 267
Central 83 71 83
____ ____ ____
1,179 1,156 1,114
Net debt (845) (192) (825)
Unallocated assets and liabilities (256) (289) (240)
____ ____ ____
78 675 49
==== ==== ====
15. Statement of changes in IHG shareholders' equity
2008 2007 2007
3 months ended 3 months ended 12 months ended
31 March 31 March 31 December
£m £m £m
At beginning of period 46 678 678
Total recognised income and expense for the 40 54 240
period
Equity dividends paid - - (773)
Issue of ordinary shares 1 3 16
Purchase of own shares (13) (25) (81)
Movement in shares in employee share trusts (6) (47) (64)
Equity settled share-based cost 7 4 30
____ ____ ____
At end of the period 75 667 46
==== ==== ====
The proposed final dividend of 14.9 pence per share for the year ended
31 December 2007 is not recognised in these accounts as it remains
subject to approval at the Annual General Meeting to be held on 30 May
2008. If approved, the dividend will be paid on 6 June 2008 to
shareholders who were registered on 28 March 2008 at an expected total
cost of £44m.
16. Capital commitments and contingencies
At 31 March 2008 amounts contracted for but not provided for in the
financial statements for expenditure on property, plant and equipment
was £9m (2007 31 December £10m; 31 March £23m).
At 31 March 2008 the Group had contingent liabilities of £10m
(2007 31 December £5m; 31 March £5m), 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 £110m (2007 31 December £121m; 31 March £113m).
It is the view of the Directors that, other than to the extent that
liabilities have been provided for in these financials 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. 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.
17. 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 £30m which will be charged to the
income statement as an exceptional item during 2008, of which £3m has
been charged in the first quarter.
INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set of
financial statements in the interim financial report for the three
months ended 31 March 2008 which comprises the Group income statement,
Group statement of recognised income and expense, Group cash flow
statement, Group balance sheet and the related notes 1 to 17. We have
read the other information contained in the interim financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with guidance
contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' issued
by the Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The interim financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing
the interim financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this interim
financial report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted by the
European Union.
Scope of Review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' issued
by the Auditing Practices Board for use in the United Kingdom. A review
of interim financial information consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently does not enable
us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us
to believe that the condensed set of financial statements in the interim
financial report for the three months ended 31 March 2008 is not
prepared, in all material respects, in accordance with International
Accounting Standard 34 as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
Ernst & Young LLP
London
6 May 2008
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