“In 2008 we exceeded by over 35% our three-year target to add 50,000-60,000 net rooms. Continuing operating profit* increased by 13% to $535m, despite the sharp economic downturn in the fourth quarter, and our RevPAR outperformed the industry in each of our key markets and segments around the world.”
Richard Solomons
Finance Director
This Summary Financial Statement provides a commentary on the performance of the Group for the financial year ended 31 December 2008.
Group and regional trading
Revenue from continuing operations increased by 4.7% to $1,854m and continuing operating profit* increased by 12.9% to $535m during the 12 months ended 31 December 2008.
The growth in revenues was driven by RevPAR gains in EMEA and Asia Pacific, continued expansion in China and the Middle East and the first full year of trading at the re-opened InterContinental London Park Lane. Growth was achieved in all regions in the first three quarters of the year. However, the worldwide financial crisis had a significant impact on the results for the final quarter. In the fourth quarter, RevPAR declined sharply across the Group falling by 6.5% globally, although IHG’s brands continued to outperform their segments in all key markets.
Included in these results is $33m of liquidated damages. Excluding these, revenue and operating profit* from continuing operations increased by 2.8% and 5.9% respectively.
During 2008, the IHG global system increased by 237 hotels (34,757 rooms; 5.9%) to 4,186 hotels (619,851 rooms). Openings of 430 hotels (59,353 rooms) reflected, in particular, continued expansion in the US, the UK, the Middle East and China.
At the end of 2008, the IHG pipeline totalled 1,775 hotels (245,085 rooms). In the year, room signings of 98,886 rooms led to pipeline growth of 19,213 rooms. While signings were below the record level of 2007, the level of signings and pipeline growth demonstrates strong demand for IHG brands across all regions and represents a key driver of future profitability.
In the Americas, revenue and operating profit* from continuing operations increased by 2.0% to $920m and 2.5% to $451m respectively. As a result of sharp falls in occupancy, RevPAR declined across all ownership types in the fourth quarter. In the full year, the region achieved RevPAR growth across the owned and managed estates. However, RevPAR declined marginally across the franchised portfolio. In the US, for comparable hotels, all brands achieved premiums in RevPAR growth relative to their applicable market segment.
Continuing owned and leased revenue remained flat on 2007 at $257m but operating profit increased by 2.5% to $41m, driven by RevPAR growth of 0.8%, and a strong performance from the InterContinental Mark Hopkins, San Francisco.
The managed results benefited from the receipt of $13m in liquidated damages. Excluding this, revenue decreased by 0.6% to $155m and operating profit fell by $3m to $38m. Growth remained strong in the Latin America region, where rate-led RevPAR growth exceeded 15%. Offsetting this was a fall in revenues from hotels in the US, driven by RevPAR declines in the fourth quarter.
The franchised results in the Americas benefited from increased royalty fees as a result of net room count growth of 4.6%. However, fees associated with signings and conversions declined as a result of lower real estate activity, due to the adverse impact of the global financial crisis, and lower liquidated damages collected on hotels exiting the system.
In EMEA, revenue and operating profit* from continuing operations increased by 5.3% to $518m and 27.6% to $171m respectively. During the year, the region achieved RevPAR growth of 3.6% driven by gains across all brands operated under managed and franchise contracts.
In the owned and leased estate, continuing revenue decreased by 1.6% to $240m. However, strong revenue conversion at the InterContinental London Park Lane contributed to the continuing operating profit increase of $12m to $45m.
EMEA managed revenue increased by 0.6% to $168m and operating profit increased by 9.2% to $95m, driven by the receipt of $9m in liquidated damages. Strong growth in the Middle East continued through the addition of new rooms and strong RevPAR growth of 20.2%.
Franchised revenue and operating profit increased by 35.8% to $110m and 29.3% to $75m respectively, driven by room count expansion and RevPAR growth in Continental Europe and the receipt of $7m of liquidated damages. In Asia Pacific, revenue and operating profit* increased by 11.5% to $290m and 7.9% to $68m respectively. The region achieved strong RevPAR growth across all brands and continued its strategic expansion in China.
In the owned and leased estate, revenue and operating profit increased by 9.7% to $159m and 19.4% to $43m respectively, as RevPAR growth continued at the InterContinental Hong Kong despite a slowdown during the fourth quarter.
Managed revenue increased by 14.1% to $113m as a result of increased room count in Greater China, comparable RevPAR growth of 10.7% in Beijing boosted by the Olympics, RevPAR growth of 9.9% in South East Asia and the contribution from the joint venture with All Nippon Airways (ANA). Operating profit increased by 19.6% to $55m as revenue gains were partially offset by continued infrastructure investment in China and Southern Asia.
Franchised revenues increased from $16m to $18m driven by the receipt of $4m of liquidated damages. Excluding this receipt, operating profit declined by $2m, primarily as a result of reduced fee income in India due to the removal of non-brand compliant hotels.
After a further $5m of the previously announced $10m investment to support the launch of the ANA Crowne Plaza brand in Japan and the non-recurrence of a $2m favourable legal settlement in 2007, Asia Pacific regional overheads increased by $6m to $38m to support the rapid growth in the region.
During 2008, net central costs reduced by 4.9% from $163m to $155m, as a result of the receipt of a favourable $3m insurance settlement and the impact of weaker sterling.
Exceptional operating items, interest and taxation
Exceptional operating costs of $132m consisted of $35m in relation to the Holiday Inn relaunch, $19m of cost savings-related severance costs, $96m of non-cash asset impairment reflecting the poorer trading environment expected in 2009 and other items including gains on asset sales, which netted to an $18m credit.
Net financial expenses increased from $90m in 2007 to $101m in 2008. Average net debt levels in 2008 were higher than 2007, primarily as a result of the payment of the special dividend of £709m in June 2007. Net debt levels remained stable in the first half of 2008, reducing slightly in the second half of the year.
The effective rate of tax on the combined operating profit* from continuing and discontinued operations was 23% (2007 22%).
Earnings per share, dividends, treasury
Basic earnings per share in 2008 was 91.3¢, compared with 144.7¢ in 2007. Adjusted earnings per share was 120.9¢, against 97.2¢ in 2007. Adjusted continuing earnings per share was 117.8¢, 25.6% up on last year.
The Board has proposed a final dividend per share of 29.2¢ (20.2p). With the interim dividend per share of 12.2¢ (6.4p), the full-year dividend per share for 2008 will total 41.4¢ (26.6p).
In response to the challenging economic environment the Group increased its focus on cash management during 2008. In the year, $641m of cash was generated from operating activities, an increase of $176m on 2007. Overall, net debt decreased by $386m to $1,273m.
Return of funds
During the year, IHG returned $139m to shareholders through share buybacks, taking the total returned since March 2004 to more than £3.5bn. As part of the focus on cash management the remaining £30m of IHG’s fourth £150m share buyback programme has been deferred.
* Before exceptional items.
This Summary Financial Statement was approved by the Board on 16 February 2009 and signed on its behalf by Richard Solomons. It does not contain sufficient information to provide as complete an understanding of the Group’s results and state of affairs as that provided in the Annual Report and Financial Statements 2008. That report may be obtained, free of charge, by writing to IHG or the Company’s Registrar, Equiniti). The auditors have issued an unqualified report on the financial statements containing no statement under Section 237(2) or 237(3) of the Companies Act 1985.
Information concerning Directors’ emoluments is shown in the Summary remuneration report.
Independent auditors' statement to the members of InterContinental Hotels Group PLC
We have examined the Group’s Summary Financial Statement for the year ended 31 December 2008 which comprises the Group income statement, Group cash flow statement and Group balance sheet. This report is made solely to the Company’s members, as a body, in accordance with Section 251 of the Companies Act 1985. To the fullest extent required by the law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The Directors are responsible for preparing the Annual Review and Summary Financial Statement, in accordance with applicable law. Our responsibility is to report to you our opinion on the consistency of the Summary Financial Statement within the Annual Review and Summary Financial Statement with the full financial statements, Directors’ Report and Directors’ Remuneration Report, and its compliance with the relevant requirements of Section 251 of the Companies Act 1985 and the regulations made thereunder. We also read the other information contained in the Annual Review and Summary Financial Statement and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Summary Financial Statement.
Basis of audit opinion
We conducted our examination in accordance with Bulletin 1999/6 ‘The Auditors’ Statement on the Summary Financial Statement’ issued by the Auditing Practices Board. Our report on the Company’s full annual financial statements describes the basis of our audit opinion on those financial statements and the Directors’ Remuneration Report.
Opinion
In our opinion the Summary Financial Statement is consistent with the full financial statements, Directors’ Report and Directors’ Remuneration Report of InterContinental Hotels Group PLC for the year ended 31 December 2008 and complies with the applicable requirements of Section 251 of the Companies Act 1985, and regulations made thereunder.
The maintenance and integrity of the IHG PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Ernst & Young LLP Registered Auditor London, 16 February 2009.
Group income statement
Download the Group income statement Excel (0.05Mb)
| For the year ended 31 December 2008 | 2008 | 2007 | |||||
|---|---|---|---|---|---|---|---|
| Before exceptional items $m |
Exceptional items $m |
Total $m |
Before exceptional items $m |
Exceptional items $m |
Total $m |
||
| Revenue | |||||||
| Americas | 920 | - | 920 | 902 | - | 902 | |
| EMEA | 518 | - | 518 | 492 | - | 492 | |
| Asia Pacific | 290 | - | 290 | 260 | - | 260 | |
| Central | 126 | - | 126 | 117 | - | 117 | |
| Continuing operations | 1,854 | - | 1,854 | 1,771 | - | 1,771 | |
| Discontinued operations | 43 | - | 43 | 79 | - | 79 | |
| 1,897 | - | 1,897 | 1,850 | - | 1,850 | ||
| Operating profit | |||||||
| Americas | 451 | (99) | 352 | 440 | 17 | 457 | |
| EMEA | 171 | (21) | 150 | 134 | 21 | 155 | |
| Asia Pacific | 68 | (2) | 66 | 63 | 17 | 80 | |
| Central | (155) | (10) | (165) | (163) | 5 | (158) | |
| Operating profit - continuing operations | 535 | (132) | 403 | 474 | 60 | 534 | |
| Net financial expenses | (101) | - | (101) | (90) | - | (90) | |
| Profit before tax - continuing operations | 434 | (132) | 302 | 384 | 60 | 444 | |
| Tax | (96) | 42 | (54) | (84) | 60 | (24) | |
| Profit after tax - continuing operations | 338 | (90) | 248 | 300 | 120 | 420 | |
| Profit for the year from discontinued operations | 9 | 5 | 14 | 11 | 32 | 43 | |
| Profit for the year attributable to equity holders of the parent | 347 | (85) | 262 | 311 | 152 | 463 | |
| Earnings per ordinary share (cents) | |||||||
| Basic - continuing operations | 86.4 | 131.3 | |||||
| Adjusted - continuing operations | 117.8 | 93.8 | |||||
| Basic - total operations | 91.3 | 144.7 | |||||
| Adjusted - total operations | 120.9 | 97.2 | |||||
| Dividend per share (cents) | |||||||
| Final - paid in respect of prior year | 29.2 | 25.9 | |||||
| Interim paid | 12.2 | 11.5 | |||||
| Special interim paid | - | 400.0 | |||||
| Final - proposed | 29.2 | 29.2 | |||||
Group cash flow statement
Download the Group cash flow statement Excel (0.03Mb)
| For the year ended 31 December 2008 | 2008 $m |
2007 $m |
|---|---|---|
| Cash flow from operations | 740 | 605 |
| Net interest paid | (100) | (66) |
| Tax received/(paid) on operating activities | 1 | (74) |
| Net cash from operating activities | 641 | 465 |
| Capital expenditure | (108) | (186) |
| Proceeds from disposal of operations, associates and other financial assets | 86 | 211 |
| Tax paid on disposals | (3) | (64) |
| Dividends paid | (118) | (1,524) |
| Purchase of own shares | (139) | (162) |
| (Decrease)/increase in borrowings | (316) | 1,108 |
| Other financing movements | (18) | (85) |
| Net movement in cash and cash equivalents in the year | 25 | (237) |
| Cash and cash equivalents at beginning of the year | 105 | 351 |
| Exchange rate effects | (48) | (9) |
| Cash and cash equivalents at end of the year | 82 | 105 |
Group balance sheet
Download the Group balance sheet Excel (0.05Mb)
| 31 December 2008 | 2008 $m |
2007* $m |
|---|---|---|
| * Restated for a $17m reclassification between retirement benefit assets and deferred tax payable. | ||
| ASSETS | ||
| Property, plant and equipment | 1,684 | 1,934 |
| Goodwill | 143 | 221 |
| Intangible assets | 302 | 335 |
| Investment in associates | 43 | 65 |
| Retirement benefit assets | 40 | 49 |
| Other financial assets | 152 | 188 |
| Total non-current assets | 2,364 | 2,792 |
| Inventories | 4 | 6 |
| Trade and other receivables | 412 | 472 |
| Current tax receivable | 36 | 109 |
| Cash and cash equivalents | 82 | 105 |
| Other financial assets | 10 | 18 |
| Total current assets | 544 | 710 |
| Non-current assets classified as held for sale | 210 | 115 |
| Total assets | 3,118 | 3,617 |
| LIABILITIES | ||
| Loans and other borrowings | (21) | (16) |
| Trade and other payables | (746) | (784) |
| Current tax payable | (374) | (426) |
| Total current liabilities | (1,141) | (1,226) |
| Loans and other borrowings | (1,334) | (1,748) |
| Retirement benefit obligations | (129) | (112) |
| Trade and other payables | (392) | (279) |
| Deferred tax payable | (117) | (148) |
| Total non-current liabilities | (1,972) | (2,287) |
| Liabilities classified as held for sale | (4) | (6) |
| Total liabilities | (3,117) | (3,519) |
| Net assets | 1 | 98 |
| IHG shareholders’ equity | (6) | 92 |
| Minority equity interest | 7 | 6 |
| Total equity | 1 | 98 |
