Annual report and summary financial statements 2006 

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Operating and financial review

Significant developments

Figure 3

Asset disposal programme detail Number of hotels Proceeds Net book value
Disposed since April 2003 174 3.0bn 2.9bn
Remaining owned and leased hotels 25 1.0bn

Figure 4

Return of funds programme Timing Total return Returned to date Still to be returned
501m special dividend Paid December 2004 501m 501m Nil
First 250m share buyback Completed in 2004 250m 250m Nil
996m capital return Paid July 2005 996m 996m Nil
Second 250m share buyback Completed in 2006 250m 250m Nil
497m special dividend Paid June 2006 497m 497m Nil
Third 250m share buyback Under way 250m 219m 31m
700m special dividend Quarter 2 2007 700m 700m
150m share buyback Yet to commence 150m 150m
Total   £3,594m £2,713m £881m

Investment with All Nippon Airways (ANA)

In December 2006, IHG invested £10m for a 75% stake in a hotel joint venture with ANA, IHG ANA Hotels Group Japan LLC (IHG ANA), increasing IHG’s portfolio in Japan from 12 hotels (3,686 rooms) to 25 hotels (8,623 rooms). As part of the transaction, ANA has signed 15 year management contracts with IHG ANA for its 13 owned and leased hotels (4,937 rooms).

Key owned and leased assets

In November 2006, IHG reopened the InterContinental London Park Lane following the substantial completion of a major refurbishment and opened the newly built InterContinental Boston.

Asset disposal programme

During 2006, IHG achieved further progress with its asset disposal programme, including:

  • the sale of 24 hotels in Continental Europe to a subsidiary of Westbridge Hospitality Fund LP for £240m, before transaction costs. IHG retained a 15 year franchise contract on each of the hotels; and
  • the sale of seven European InterContinental hotels to Morgan Stanley Real Estate Funds (MSREF) for £440m, before transaction costs. IHG retained a 30 year management contract on each of the hotels, with two 10 year renewals at IHG’s discretion. The long-term contracts ensure continued representation of the InterContinental brand in key European markets.

These transactions support IHG’s continued strategy of growing its managed and franchised business whilst reducing asset ownership. Since April 2003, 174 hotels with a net book value of £2.9bn have been sold, generating aggregate proceeds of £3.0bn. Of these 174 hotels, 156 have remained in the IHG system through either franchise or management agreements.

Return of funds programme

In the year, IHG paid a £497m special dividend, completed a second £250m share buyback and substantially completed a third £250m share buyback. Since March 2004, IHG has returned £2.7bn to shareholders.

On 20 February 2007, a further £850m return of funds was announced, comprising a £700m special dividend with share consolidation and a £150m share buyback.

Management and organisation

In 2006, there were no significant changes to the management and organisation of the Group. During the year, the Group focused on realising benefits from the prior year global realignment of functions, including Finance, Human Resources and Information Technology.

The following announcements relating to members of the Executive Committee were made during 2006:

  • the appointment of Tom Conophy in January 2006 as Chief Information Officer (CIO), a new position created to develop the global technology strategy across IHG’s brands, leveraged by his 25 years of experience in the Information Technology (IT) industry; and
  • the retirement of Richard Hartman, President, EMEA, effective from September 2007.

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