ihg201102156k.htm
 
 
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington DC 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 AND 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
For 15 February 2011
 
InterContinental Hotels Group PLC
(Registrant's name)
 
 
Broadwater Park, Denham, Buckinghamshire, UB9 5HJ, United Kingdom
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
 
Form 20-F           Form 40-F
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
 
Yes           No
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable
 
 
 

 
 


 
 

 

InterContinental Hotels Group PLC
Preliminary Results for the year to 31 December 2010
 
 
Brand delivery and scale advantage driving strong financial performance
in an improving market
 
Financial summaryº
2010
2009
                                                                                             % Change YoY
Actual
CER²
Revenue
$1,628m
$1,538m
6%
6%
Operating profit
$444m
$363m
22%
22%
Total adjusted EPS
98.6¢
102.8¢
(4)%
 
Total basic EPS¹
101.7¢
74.7¢
36%
 
Total dividend per share
48.0¢
41.4¢
16%
 
Net debt
$743m
$1,092m³
   
 
Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC, said:
"2010 was an excellent year for IHG. After a slow start to the year, the industry staged the sharpest recovery in its history, exceeding all expectations. By focusing on our brands and using our scale, we delivered 6% growth in revenue per available room (RevPAR).  We signed more rooms into our pipeline than in 2009 and despite the planned exceptional number of removals to drive up quality, we grew the number of rooms in our system, led by a 12% increase in China.
"The $1bn Holiday Inn relaunch is almost complete, delivering RevPAR outperformance and improved guest satisfaction. We are now working with our hotel owners to refresh Crowne Plaza, already the fourth largest upscale hotel brand in the world, and one with great future potential.
"Our focus on efficiency has increased fee-based margins 1.1 percentage points.  In line with our asset light strategy we have started the initial marketing for sale of the InterContinental New York Barclay today.
"The 21% growth in the final dividend reflects our confidence in IHG's prospects.  Our priority is to increase market share and improve margins in an industry set for strong growth over the next few years."
 
Driving Market Share
Total gross revenue* from hotels in IHG's system of $18.7bn, up 11%.
2010 global RevPAR growth of 6.2%, with 8.0% in the fourth quarter.
Total system size of 647,161 rooms (4,437 hotels), up 0.1% year on year.
 
-
35,744 rooms (259 hotels) added, with 35,262 rooms (260 hotels) removed.
 
-
Signings of 55,598 rooms (319 hotels), up on 2009 levels in all regions.  Total pipeline of 204,859 rooms (1,275 hotels); half outside the Americas; 75,000 rooms currently under construction.
 
-
2011 net system growth is expected to be modest as remaining Holiday Inn relaunch exits are completed.
 
-
Post 2011, robust pipeline should drive medium term net system growth of 3% - 5% per annum.
Holiday Inn relaunch is substantially complete with refreshed hotels performing strongly.
 
-
3,002 hotels now operating under the new standards (91% of the estate). RevPAR growth for hotels relaunched for more than one year was c.6% points higher than non-relaunched hotels in the US and c.5% points higher globally.
Strong system delivery.
 
-
Record enrolments in Priority Club Rewards (PCR) took total membership to 56m (2009: 48m).
 
-
68% of rooms revenue delivered through IHG's Channels or by PCR members direct to hotel (2009: 68%).
 
Growing Margins
Continued focus on costs.
 
-
Regional and central costs broadly in line with 2009 excluding the impact of performance based incentives.
Sustainable efficiencies drive fee-based margins* up 1.1%pts to 35.7%.
 
-
At constant currency, and reflecting the current trading outlook, total 2011 regional and central costs expected to be in the region of $250m to $260m compared to $258m in 2010.
 
Current trading update
January global RevPAR up 8.4%.  Americas 8.2%; EMEA 7.0%; and Asia Pacific 10.9%.
$10m liquidated damages receipt in Americas managed revenue and operating profit in first quarter 2011.
Initial estimate of impact on 2011 from unrest in Egypt of $3m.
º All figures are before exceptional items unless otherwise noted.  See appendices 3 and 4 for analysis of financial headlines
¹ After exceptional items
² CER = constant exchange rates
³Restated for a change in presentation
* See appendix 6 for definition
Regional Highlights
Americas - strong brands drive new deals
RevPAR increased 4.9%; 7.7% in the fourth quarter when rate was up 1.4%. US RevPAR was up 4.3% in 2010, with 7.5% growth in the fourth quarter. 2010 RevPAR grew 8.1% at InterContinental New York Barclay.
Revenue increased 5% (4% at CER) to $807m and operating profit increased 28% (27% at CER) to $369m.  After adjusting for the owned hotel disposals and the charge for priority guarantee shortfalls in 2009, revenue was up 7% and operating profit up 10%.  Franchise royalties drove much of this growth, up 11%.  This was offset by a 1% reduction in total system size due to exits associated with the Holiday Inn relaunch and a $10m increase in regional costs, including $4m in relation to our self-insured healthcare benefit plan.
During 2010 the InterContinental Times Square and the first Staybridge Suites opened in New York, taking IHG's room count in the city to 6,570.  We re-entered the important Hawaii market with the Holiday Inn Beachcomber Resort in Waikiki Beach and formed an InterContinental Alliance with Las Vegas Sands Corp to bring the 6,874 all suite Venetian and Palazzo resorts into the system. The wider benefits of the Holiday Inn relaunch were clear, with full service Holiday Inn signings up on 2009.
We have formed a strategic relationship with Summit Hotel Properties, Inc. (Summit), a US hotel real estate investment trust focused on premium-branded select service hotels in the upscale and midscale without food and beverage sectors.  In connection with Summit's initial public offering, which closed on 14 February 2011, IHG purchased 1,274,000 shares of Summit common stock, representing approximately 4.7%, for a purchase price of $11.6m.  Of Summit's 65 properties seven already carry IHG's brands, and under a sourcing agreement we have also entered into with them, Summit will provide IHG an exclusive right for a period of five years, of first offer to franchise or manage any unbranded hotel bought by them which they want to brand.
         
 
EMEA - increase in signings
RevPAR increased 6.1%, with 6.5% growth in the fourth quarter. Germany was the strongest of our major markets with RevPAR growth of 18.4% in 2010.  Mixed trading conditions in the Middle East resulted in RevPAR down 1.0% for the year. 2010 RevPAR grew 15.0% at InterContinental London Park Lane and 11.5% at InterContinental Paris Le Grand.
Revenue increased 4% (8% at CER) to $414m and operating profit decreased 2% (2% growth at CER) to $125m. Excluding the impact of a $3m liquidated damages receipt in 2009, revenue was up 5% (8% at CER) and operating profit up 1% (5% at CER).  Much of this was driven by the owned and leased hotels, where positive RevPAR combined with strong cost control drove good profit growth. Managed profits were down by $3m to $62m, due to a combination of the unfavourable trading environment across much of the Middle East and a $3m provision for total estimated net future cash outflows expected under a guarantee in relation to one hotel.  Franchised profits declined $1m to $59m, but excluding the $3m liquidated damages receipt in 2009 and at constant currency, profits increased 7% driven by RevPAR growth of 7.6%.
We signed 58 new deals in the year, up 11 on 2009.  These included eight Hotel Indigo contracts in key locations such as Lisbon, Madrid and Berlin. We also signed six Crowne Plaza hotels including the strategic markets of Istanbul, St. Petersburg and Amsterdam. Signings across Europe as a whole were very strong, particularly in Germany and France where we signed nine and six hotels respectively. Key openings included the Hotel Indigo Tower Hill, London, Staybridge Suites St. Petersburg and Holiday Inn Berlin International Airport.
 
Asia Pacific - strong profit growth
RevPAR increased 12.4%, with 11.5% growth in the fourth quarter.  Greater China was our strongest market with RevPAR up 25.8% for the year, including 55.9% in Shanghai which was boosted by the World Expo which took place between May and October.  Asia Australasia RevPAR grew 5.6% and at InterContinental Hong Kong RevPAR was up 15.3%.
Revenue increased 24% (20% at CER) to $303m and operating profit increased 71% (67% at CER) to $89m.  This was predominantly driven by RevPAR growth; the contribution from new managed rooms (2010: 9% growth; 2009: 10% growth) and a $4m benefit to managed operating profit due to the collection of bad debts which had previously been provided for.
We continue to build on our leading position in Greater China with 48,527 rooms (145 hotels) open (a 12% increase year on year) and 50,236 rooms (147 hotels) in the pipeline.  We opened 24 hotels in 17 cities across China, including Asia Pacific's first Hotel Indigo on the Bund and the InterContinental at the Expo site, both in Shanghai.  In Asia Australasia, we signed six hotels in India, taking our pipeline there to 10,073 rooms. In Thailand we signed two new Holiday Inn resorts in the prime beachfront locations of Cam Ranh Bay and Phu Quoc, and we signed the Crowne Plaza Lumpini Park in Bangkok which opened in December.
 
Interest, tax and cash flow
 
The interest charge for the period increased $8m to $62m as the impact of lower levels of average net debt was offset by a higher average cost of debt following the issuance of a seven year £250m bond in 2009.
The effective tax rate for 2010 is 26% (2009: 5%).  The 2011 tax rate is expected to be in the high 20s.
Free cash flow of $432m (2009: $377m) due to excellent profit conversion and tight control over maintenance capital expenditure.
 
Appendix 1: RevPAR Movement Summary
 
                              January 2011
                     Full Year 2010
        Q4'10
RevPAR
Rate
Occ.
RevPAR
Rate
Occ.
RevPAR
Rate
Occ.
Group
8.4%
2.0%
3.1%pts
6.2%
(0.2)%
3.8%pts
8.0%
2.4%
3.1%pts
Americas
8.2%
1.2%
3.3%pts
4.9%
(1.0)%
3.4%pts
7.7%
1.4%
3.3%pts
EMEA
7.0%
1.7%
2.7%pts
6.1%
0.5%
3.6%pts
6.5%
2.5%
2.5%pts
Asia Pacific
10.9%
6.5%
2.4%pts
12.4%
2.5%
6.0%pts
11.5%
7.0%
2.9%pts
                     
 
Appendix 2: Full Year System & Pipeline Summary (rooms)
 
System
Pipeline
Openings
Removals
Net
Total
YoY%
Signings
Total
Group
35,744
(35,262)
482
647,161
-
55,598
204,859
Americas
20,980
(26,959)
(5,979)
439,375
(1)%
30,223
102,509
EMEA
5,767
(5,211)
556
120,852
-
9,303
31,435
Asia Pacific
8,997
(3,092)
5,905
86,934
7%
16,072
70,915
 
Appendix 3: Fourth quarter financial headlines
Operating Profit $m
                                                                   Total
Americas
EMEA
Asia Pacific
Central
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
Franchised
108
98
91
83
14
14
3
1
-
-
Managed
46
7
6
(19)
17
17
23
9
-
-
Owned & leased
32
29
5
4
12
11
15
14
-
-
Regional overheads
(35)
(26)
(17)
(11)
(11)
(9)
(7)
(6)
-
-
Operating profit pre central overheads
151
108
85
57
32
33
34
18
-
-
Central overheads
(41)
(48)
-
-
-
-
-
-
(41)
(48)
Group Operating profit
110
60
85
57
32
33
34
18
(41)
(48)
 
Appendix 4: Full year financial headlines
Operating Profit $m
                                                                 Total
Americas
EMEA
Asia Pacific
Central
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
Franchised
458
429
392
364
59
60
7
5
-
-
Managed
156
69
21
(40)
62
65
73
44
-
-
Owned & leased
88
74
13
11
40
33
35
30
-
-
Regional overheads
(119)
(105)
(57)
(47)
(36)
(31)
(26)
(27)
-
-
Operating profit pre central overheads
583
467
369
288
125
127
89
52
-
-
Central overheads
(139)
(104)
-
-
-
-
-
-
(139)
(104)
Group Operating profit
444
363
369
288
125
127
89
52
(139)
(104)
 
Appendix 5: Constant exchange rate (CER) operating profit movement before exceptional items
 
                Total***
                      Americas
           EMEA
Asia Pacific
Actual currency*
CER**
Actual currency*
CER**
Actual currency*
CER**
Actual currency*
CER**
Growth/ (decline)
22%
22%
28%
27%
(2)%
2%
71%
67%
Exchange rates:
 
GBP:USD
EUR:USD
* US dollar actual currency
2010
0.65
0.76
** Translated at constant 2009 exchange rates
2009
0.64
0.72
*** After central overheads
                       
 
Appendix 6: Definitions
Total gross revenue: 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.
Fee based margins: adjusted for owned and leased hotels, managed leases, individually significant liquidated damages payments, HPT guarantee payments and excludes the benefit in 2009 of non-sustainable incentive compensation cost savings.
 
Appendix 7: Investor Information for 2010 final dividend
Ex-dividend date:
23 March 2011
Record date:
25 March 2011
Payment date:
3 June 2011
Dividend payment:
Ordinary shares = 22.0 pence  per share
ADRs = 35.2 cents per ADR
 
For further information, please contact:
Investor Relations (Heather Wood; Catherine Dolton):
+44 (0)1895 512176
 
Media Affairs (Leslie McGibbon, Giles Deards):
+44 (0) 7808 094 471
+44 (0) 7753 949301
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 (Chief Financial Officer and Head of Commercial Development) will commence at 9.30am (London time) on 15 February at Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ.  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/prelims11.  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:
+44 (0)20 7138 0816
Passcode:
8564080
US conference call and Q&A:
There will also be a conference call, primarily for US investors and analysts, at 9.00am (Eastern Standard Time) on 15 February with Andrew Cosslett (Chief Executive) and Richard Solomons (Chief Financial Officer and Head of Commercial Development).  There will be an opportunity to ask questions.
International dial-in:
+44 (0)20 7108 6370
Standard US dial-in:
+ 1 517 345 9004
US Toll Free:
866 692 5726
Conference ID:
HOTEL
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 2524#.
International dial-in:
+44 (0)20 7108 6225
Standard US dial-in:
+1 203 369 4702
US Toll Free:
866 850 6506
Website:
The full release and supplementary data will be available on our website from 7.00 am (London time) on 15 February. The web address is www.ihg.com/prelims11. To watch a video of Richard Solomons reviewing our results visit our YouTube channel at www.youtube.com/ihgplc.
Notes to Editors:
InterContinental Hotels Group (IHG) [LON:IHG, NYSE:IHG (ADRs)] is the world's largest hotel group by number of rooms.  IHG franchises, leases, manages or owns, through various subsidiaries, over 4,400 hotels and more than 640,000 guest rooms in 100 countries and territories around the world.  The Group owns a portfolio of well recognised and respected hotel brands including InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites® and also manages the world's largest hotel loyalty programme, Priority Club® Rewards with 56 million members worldwide.
IHG has almost 1,300 hotels in its development pipeline, which is expected to create 160,000 jobs worldwide over the next few years.
InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales.
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 our latest news visit www.ihg.com/media, Twitter www.twitter.com/ihgplc or YouTube www.youtube.com/ihgplc.
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 2010.
 
GROUP PERFORMANCE
 
 
                  12 months ended 31 December
 
2010
2009
%
Group results
$m
$m
change
       
Revenue
     
 
Americas
807
772
4.5
 
EMEA
414
397
4.3
 
Asia Pacific
303
245
23.7
 
Central
104
124
(16.1)
   
____
____
_____
 
1,628
1,538
5.9
 
____
____
_____
Operating profit
     
 
Americas
369
288
28.1
 
EMEA
125
127
(1.6)
 
Asia Pacific
89
52
71.2
 
Central
(139)
(104)
(33.7)
   
____
____
_____
Operating profit before exceptional items
444
363
22.3
       
Exceptional operating items
15
(373)
n/m
 
___
___
____
 
459
(10)
n/m
       
Net financial expenses
(62)
(54)
(14.8)
 
___
___
____
Profit/(loss) before tax
397
(64)
n/m
 
___
___
____
       
Earnings per ordinary share
     
 
Basic
101.7¢
74.7¢
36.1
 
Adjusted
98.6¢
102.8¢
(4.1)
 
 n/m - non meaningful
 
Group results
Revenue increased by 5.9% to $1,628m and operating profit before exceptional items increased by 22.3% to $444m during the 12 months ended 31 December 2010.
 
The 2010 results reflect a return to RevPAR growth in a recovering market, with an overall RevPAR increase of 6.2% led by occupancy. Fourth quarter comparable RevPAR increased 8.0% against 2009, including a 2.4% increase in average daily rate. Over the full year average daily rate grew for the InterContinental and Holiday Inn brands by 1.3% and 0.5% respectively.
 
The $1bn roll-out of the Holiday Inn brand family relaunch is substantially complete, enabling the consistent delivery of best in class service and physical quality in all Holiday Inn and Holiday Inn Express hotels.  By 31 December 2010, 2,956 hotels were converted globally under the relaunch programme, representing 89% of the total estate. The required improvement in quality standards contributed to the removal of a total of 35,262 rooms from the system during 2010. In spite of this necessary reduction, the closing global system size was 647,161 rooms, in line with 2009 levels.
 
The ongoing focus on efficiency across the Group largely sustained underlying cost reductions achieved in 2009. Regional and central overheads increased by $49m, from $209m in 2009 to $258m in 2010, driven by incremental performance based incentive costs of $47m and charges of $4m relating to a self-insured healthcare benefit plan.
 
Primarily as a result of these actions taken across the Group to improve efficiencies, operating profit margin was 35.7%, up 1.1 percentage points on 2009, after adjusting for owned and leased hotels, Americas managed leases, significant liquidated damages received in 2009, an onerous contract provision established in 2009 and non-payment of performance based incentive costs in 2009.
 
In 2010 the InterContinental Buckhead, Atlanta and the Holiday Inn Lexington were sold, with proceeds used to reduce net debt. These disposals result in a reduction in owned and leased revenue and operating profit of $19m and $4m respectively compared to 2009.
 
The average US dollar exchange rate to sterling strengthened during 2010 (2010 $1=£0.65, 2009 $1=£0.64). Translated at constant currency, applying 2009 exchange rates, revenue increased by 6.0% and operating profit increased by 22.3%.
 
Profit before tax increased by $461m from a loss of $64m in 2009 to a profit of $397m.  Adjusted earnings per ordinary share decreased by 4.1% to 98.6¢ as a result of the particularly low tax rate of 5% in 2009, compared to 26% in 2010.
  
 
                12 months ended 31 December
 
2010
2009
%
Total gross revenue
$bn
$bn
change
       
InterContinental
4.2
3.8
10.5
Crowne Plaza
3.5
3.0
16.7
Holiday Inn
5.8
5.4
7.4
Holiday Inn Express
4.0
3.6
11.1
Staybridge Suites
0.5
0.4
25.0
Candlewood Suites
0.4
0.3
33.3
Other brands
0.3
0.3
-
 
____
____
____
Total
18.7
16.8
11.3
 
____
____
____
 
Total gross revenue
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 11.3% from $16.8bn in 2009 to $18.7bn in 2010. All brands grew total gross revenue, with most brands growing by more than 10% compared to 2009.
 
 
Hotels
Rooms
Global hotel and room count
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
171
5
58,429
2,308
 
Crowne Plaza
388
22
106,155
5,161
 
Holiday Inn
1,241
(78)
227,225
(13,343)
 
Holiday Inn Express
2,075
6
191,228
3,221
 
Staybridge Suites
188
6
20,762
877
 
Candlewood Suites
288
34
28,253
2,970
 
Hotel Indigo
38
5
4,548
518
 
Holiday Inn Club Vacations
6
-
2,892
-
 
Other
42
(1)
7,669
(1,230)
   
____
____
______
_____
Total
4,437
(1)
647,161
482
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
3,783
(16)
479,320
(4,221)
 
Managed
639
17
162,711
5,424
 
Owned and leased
15
(2)
5,130
(721)
   
____
____
______
_____
Total
4,437
(1)
647,161
482
   
____
____
______
_____
 
 
 
Global hotel and room count
During 2010, the IHG global system (the number of hotels and rooms which are franchised, managed, owned or leased by the Group) remained in line with 2009 at 4,437 hotels (647,161 rooms). Openings of 259 hotels (35,744 rooms) were driven, in particular, by continued expansion in the US and China and offset the removal of 260 hotels (35,262 rooms). 
 
In Asia Pacific, demand for upscale brands (InterContinental, Crowne Plaza and Hotel Indigo) contributed 65% of total room openings in the region.
 
The Holiday Inn brand family relaunch is substantially complete with 2,956 hotels (89% of the total Holiday Inn brand family) open under the updated signage and brand standards as at 31 December 2010. During 2010, the removal of non brand conforming hotels contributed to the total removal of 247 Holiday Inn and Holiday Inn Express hotels (30,892 rooms). 
 
 
Hotels
Rooms
Global pipeline
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
60
(3)
19,374
(799)
 
Crowne Plaza
123
(6)
38,994
439
 
Holiday Inn
313
(25)
57,505
(1,503)
 
Holiday Inn Express
494
(69)
53,219
(4,537)
 
Staybridge Suites
101
(22)
10,760
(2,600)
 
Candlewood Suites
120
(49)
10,506
(4,345)
 
Hotel Indigo
62
9
7,627
967
 
Other
2
2
6,874
6,874
   
____
____
______
_____
Total
1,275
(163)
204,859
(5,504)
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
970
(188)
113,940
(12,446)
 
Managed
305
25
90,919
6,942
   
____
____
______
_____
Total
1,275
(163)
204,859
(5,504)
   
____
____
______
_____
 
 
Hotels
Rooms
Global pipeline signings
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Total
319
(26)
55,598
2,707
 
____
____
_____
______
 
 
Global pipeline
At the end of 2010, the pipeline totalled 1,275 hotels (204,859 rooms). The IHG pipeline represents hotels and rooms where a contract has been signed and the appropriate fees paid. 
 
Signings of 319 hotels (55,598 rooms) represent an increase in rooms signed from 2009 levels. Demonstrating the continued demand for IHG brands globally, 50% of the rooms pipeline is now outside the Americas region. There were 25 hotel signings (3,025 rooms) for Hotel Indigo as it gains real momentum in Europe and Asia Pacific where, together, 12 hotels (1,456 rooms) were signed. IHG also entered into an InterContinental Alliance relationship with the Las Vegas Sands Corp to bring the 6,874 all-suite Venetian and Palazzo Resorts into the system in 2011.
 
During 2010, the opening of 35,744 rooms contributed to a net pipeline decline of 5,504 rooms. Terminations from the pipeline in 2010 totalled 25,358 rooms, down 21% from 2009. Terminations occur for a number of reasons such as the withdrawal of financing and changes in local market conditions.
 
 
 
 
THE AMERICAS
 
 
        12 months ended 31 December
 
2010
2009
%
Americas Results
$m
$m
change
       
Revenue
     
 
Franchised
465
437
6.4
 
Managed
119
110
8.2
 
Owned and leased
223
225
(0.9)
 
____
____
_____
Total
 
807
772
4.5
 
____
____
_____
Operating profit before exceptional items
     
 
Franchised
392
364
7.7
 
Managed
21
(40)
152.5
 
Owned and leased
13
11
18.2
   
____
____
_____
 
426
335
27.2
Regional overheads
(57)
(47)
(21.3)
 
____
____
_____
Total
 
369
288
28.1
 
____
____
_____
           
 
 
 
 
Americas Comparable RevPAR movement on previous year
12 months ended
31 December
2010
   
Franchised
 
 
Crowne Plaza
4.5%
 
Holiday Inn
4.1%
 
Holiday Inn Express
4.4%
 
All brands
4.5%
Managed
 
 
InterContinental
10.2%
 
Crowne Plaza
6.2%
 
Holiday Inn
7.1%
 
Staybridge Suites
6.3%
 
Candlewood Suites
3.7%
 
All brands
7.5%
Owned and leased
 
 
InterContinental
8.7%
 
Americas results
Revenue and operating profit before exceptional items increased by $35m to $807m (4.5%) and $81m to $369m (28.1%) respectively.
 
Franchised revenue increased by $28m to $465m (6.4%) and operating profit by $28m to $392m (7.7%). Royalties growth was driven by RevPAR gains across all brands and by 4.5% in total. While year end system size was lower than opening system size, the weighting of removals towards the end of the year meant that daily rooms available actually grew in 2010 from 2009 levels, further boosting royalty growth. Non royalty revenues and profits remained flat on 2009, as real estate financing for new activity remained constrained.
 
Managed revenue increased by $9m to $119m (8.2%) in line with the RevPAR growth of 7.5%. Operating profit increased by $61m to $21m from a $40m loss in 2009. The prior year loss included a charge for priority guarantee shortfalls relating to a portfolio of hotels. A provision for onerous contracts was established on 31 December 2009 and further payments made during 2010 were charged against this provision. Excluding the effect of the provision, managed operating profit increased by $3m, driven by RevPAR growth of 23.3% in Latin America.
 
Results from managed operations included revenues of $71m (2009 $71m) and operating profit of $1m (2009 nil) from properties that are structured, for legal reasons, as operating leases but with the same characteristics as management contracts. 
 
Owned and leased revenue declined by $2m to $223m (0.9%) and operating profit increased by $2m to $13m (18.2%). Improving trading conditions led to RevPAR growth of 6.4%, including 8.1% at the InterContinental New York. The disposal of the InterContinental Buckhead, Atlanta in July 2010 and its subsequent conversion to a management contract resulted in reductions of $15m in revenue and $4m in operating profit when compared to 2009. The Holiday Inn Lexington was also sold in March 2010, which has led to a $4m reduction in revenue and no reduction in operating profit compared to last year. Excluding the impact of these two disposals, owned and leased revenue grew by $17m (9.0%) and operating profit by $6m (150.0%).
 
Regional overheads increased by $10m (21.3%) during the year, from $47m to $57m. The increase comes primarily from performance based incentives and $4m from increased claims in a self-insured healthcare benefit plan.
 
 
 
Hotels
Rooms
Americas hotel and room count
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
56
1
19,120
621
 
Crowne Plaza
209
7
57,073
1,383
 
Holiday Inn
812
(72)
144,683
(13,518)
 
Holiday Inn Express
1,847
1
159,867
1,583
 
Staybridge Suites
183
5
20,014
694
 
Candlewood Suites
288
34
28,253
2,970
 
Hotel Indigo
35
3
4,254
288
 
Holiday Inn Club Vacations
6
-
2,892
-
 
Other brands
22
-
3,219
-
   
____
____
______
_____
Total
3,458
(21)
439,375
(5,979)
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
3,230
(15)
392,536
(5,468)
 
Managed
219
(4)
43,848
210
 
Owned and leased
9
(2)
2,991
(721)
   
____
____
______
_____
Total
3,458
(21)
439,375
(5,979)
   
____
____
______
_____
 
Americas hotel and room count
The Americas hotel and room count in the year decreased by 21 hotels (5,979 rooms) to 3,458 hotels (439,375 rooms). Openings of 194 hotels (20,980 rooms) included key openings of the InterContinental Times Square and the first Staybridge Suites in New York, taking IHG's room count in the city to 6,570. The Holiday Inn brand family generated openings of 137 hotels (13,446 rooms) and IHG's extended-stay brands, Staybridge Suites and Candlewood Suites, achieved openings of 41 hotels (3,862 rooms). Removals of 215 hotels (26,959 rooms) were mainly from Holiday Inn and Holiday Inn Express hotels.
 
 
 
 
 
Hotels
Rooms
Americas pipeline
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
5
(1)
1,340
(700)
 
Crowne Plaza
27
(6)
5,669
(1,293)
 
Holiday Inn
187
(29)
25,260
(2,682)
 
Holiday Inn Express
407
(79)
37,011
(6,427)
 
Staybridge Suites
96
(20)
10,116
(2,392)
 
Candlewood Suites
120
(49)
10,506
(4,345)
 
Hotel Indigo
46
(1)
5,733
(254)
 
Other
2
2
6,874
6,874
   
____
____
______
_____
Total
890
(183)
102,509
(11,219)
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
878
(185)
100,072
(11,036)
 
Managed
12
2
2,437
(183)
   
____
____
______
_____
Total
890
(183)
102,509
(11,219)
   
____
____
______
_____
 
Americas pipeline
The Americas pipeline totalled 890 hotels (102,509 rooms) as at 31 December 2010. Overall signings of 30,223 rooms were flat on 2009 as slow real estate and construction activity continued into 2010. Notable signings included the InterContinental Alliance established with the Las Vegas Sands Corp, and the re-entry to the Hawaii market with the Holiday Inn Beachcomber Resort in Waikiki Beach.
 
 
 
 
 
EUROPE, MIDDLE EAST AND AFRICA (EMEA)
 
 
          12 months ended 31 December
 
2010
2009
%
EMEA results
$m
$m
change
       
Revenue
     
 
Franchised
81
83
(2.4)
 
Managed
130
119
9.2
 
Owned and leased
203
195
4.1
 
____
____
_____
Total
 
414
397
4.3
 
____
____
_____
Operating profit before exceptional items
     
 
Franchised
59
60
(1.7)
 
Managed
62
65
(4.6)
 
Owned and leased
40
33
21.2
   
____
____
_____
 
161
158
1.9
Regional overheads
(36)
(31)
(16.1)
 
____
____
_____
Total
 
125
127
(1.6)
 
____
____
_____
           
 
 
 
 
EMEA comparable RevPAR movement on previous year
12 months ended
31 December
2010
   
Franchised
 
 
All brands
7.6%
Managed
 
 
All brands
3.3%
Owned and leased
 
 
InterContinental
11.4%
All ownership types
 
 
UK
3.8%
 
Continental Europe
10.1%
 
Middle East
(1.0)%
 
 
EMEA results
Revenue increased by $17m to $414m (4.3%) and operating profit before exceptional items decreased by $2m to $125m (1.6%). At constant currency, revenue increased by $30m (7.6%) and operating profit before exceptional items increased by $3m (2.4%). Excluding $3m of liquidated damages received in 2009, revenue at constant currency increased by 8.4% and operating profit by 4.8%.
 
Franchised revenue and operating profit decreased by $2m to $81m (2.4%) and $1m to $59m (1.7%) respectively. At constant currency, revenue increased by 1.2% and operating profit increased by 1.7% respectively.  Excluding the impact of $3m in liquidated damages received in 2009, revenue and operating profit at constant currency increased by 5.0% and 7.0% respectively. The underlying increase was driven by RevPAR growth of 7.6% across the franchised estate. Revenues associated with new signings, relicensing and terminations decreased compared to 2009 as real estate activity remained slow.
 
EMEA managed revenue increased by $11m to $130m (9.2%) and operating profit decreased by $3m to $62m (4.6%). At constant currency, revenue increased by 10.9% while operating profit declined by 3.1%. Positive RevPAR growth in key European cities and markets, including growth of 14.8% in IHG's managed properties in Germany, was offset by unfavourable trading across much of the Middle East where RevPAR declined overall by 0.7%.  At the year end, a provision of $3m was made for future estimated cash outflows relating to guarantee obligations for one hotel.
 
In the owned and leased estate, revenue increased by $8m to $203m (4.1%) and operating profit increased by $7m to $40m (21.2%), or at constant currency by 8.2% and 27.3% respectively. RevPAR growth of 11.9% benefited from average daily rate growth of 6.5% across the year. The InterContinental London Park Lane and InterContinental Paris Le Grand delivered strong year-on-year RevPAR growth of 15.0% and 11.5% respectively. Margins improved in both these hotels as the focus remained on cost control.
 
Regional overheads increased by $5m to $36m (16.1%), mainly attributable to performance based incentive costs.
 
Hotels
Rooms
EMEA hotel and room count
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
64
(1)
20,111
(475)
 
Crowne Plaza
98
5
22,941
784
 
Holiday Inn
325
(8)
52,945
(427)
 
Holiday Inn Express
198
1
23,706
447
 
Staybridge Suites
5
1
748
183
 
Hotel Indigo
2
1
110
46
 
Other
2
-
291
(2)
   
____
____
______
_____
Total
694
(1)
120,852
556
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
523
3
79,950
1,734
 
Managed
167
(4)
39,456
(1,178)
 
Owned and leased
4
-
1,446
 
   
____
____
______
_____
Total
694
(1)
120,852
556
   
____
____
______
_____
 
EMEA hotel and room count
During 2010, EMEA system size decreased by one hotel (a net increase of 556 rooms) to 694 hotels (120,852 rooms). Activity included openings of 33 hotels (5,767 rooms) and removals of 34 hotels (5,211 rooms). The net decrease of seven Holiday Inn and Holiday Inn Express hotels comprised 25 openings and 32 removals.
 
Hotels
Rooms
EMEA pipeline 
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
24
1
6,469
369
 
Crowne Plaza
25
1
7,599
958
 
Holiday Inn
41
(4)
9,128
(1,301)
 
Holiday Inn Express
47
(2)
6,523
(565)
 
Staybridge Suites
5
(2)
644
(208)
 
Hotel Indigo
11
7
1,072
721
   
____
____
______
_____
Total
153
1
31,435
(26)
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
90
(3)
13,542
(1,410)
 
Managed
63
4
17,893
1,384
   
____
____
______
_____
Total
153
1
31,435
(26)
   
____
____
______
_____
 
 
EMEA pipeline
The pipeline in EMEA increased by one hotel (a net decrease of 26 rooms) to 153 hotels (31,435 rooms). There were 9,303 room signings in 2010, with continued demand for IHG brands in the UK and Germany. Demand was particularly strong in the midscale segment which represented 61% of room signings.  There were eight signings for IHG's lifestyle brand, Hotel Indigo, including four in the UK and entry into new markets in Lisbon, Madrid and Berlin. There were also six Crowne Plaza signings including the strategic markets of Istanbul, St Petersburg and Amsterdam.
 
 
 
ASIA PACIFIC
 
 
     12 months ended 31 December
 
2010
2009
%
Asia Pacific results
$m
$m
change
       
Revenue
     
 
Franchised
12
11
9.1
 
Managed
155
105
47.6
 
Owned and leased
136
129
5.4
   
____
____
_____
Total
 
303
245
23.7
 
____
____
_____
Operating profit before exceptional items
     
 
Franchised
7
5
40.0
 
Managed
73
44
65.9
 
Owned and leased
35
30
16.7
   
____
____
_____
 
115
79
45.6
Regional overheads
(26)
(27)
3.7
 
____
____
_____
Total
 
89
52
71.2
 
____
____
_____
           
 
 
 
Asia Pacific comparable RevPAR movement on previous year
12 months ended
31 December
2010
   
Managed - all brands
 
 
Asia Pacific
13.4%
 
Greater China
26.7%
Owned and leased
 
 
InterContinental
15.3%
All ownership types
 
 
Greater China
25.8%
 
 
Asia Pacific results
Asia Pacific revenue and operating profit before exceptional items increased by $58m to $303m (23.7%) and by $37m to $89m (71.2%) respectively.
 
Continued strong economic growth in the region was given a further boost by the World Expo held in Shanghai from May to October 2010. Resulting RevPAR growth in key Chinese cities was exceptional, with Shanghai and Beijing growing 55.9% and 29.9% respectively.
 
Franchised revenue increased by $1m to $12m (9.1%) and operating profit grew by $2m to $7m (40.0%).
 
Managed revenue increased by $50m to $155m (47.6%) and operating profit increased by $29m to $73m (65.9%). In addition to strong comparable RevPAR performance, there was a positive contribution from recently opened hotels, with a 9% room increase in the size of the Asia Pacific managed estate during the year following a 10% increase in 2009, and a $4m operating profit benefit due to the collection of old or previously provided for debts.
 
In the owned and leased estate, revenue increased by $7m to $136m (5.4%) and operating profit by $5m to $35m (16.7%). These results were driven by the InterContinental Hong Kong, where RevPAR increased 15.3% during the year.
 
Regional overheads decreased by $1m to $26m (3.7%), with an increase in performance based incentive costs offset by the effect of the 2009 restructuring.
 
 
 
 
 
Hotels
Rooms
Asia Pacific hotel and room count
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
51
5
19,198
2,162
 
Crowne Plaza
81
10
26,141
2,994
 
Holiday Inn
104
2
29,597
602
 
Holiday Inn Express
30
4
7,655
1,191
 
Hotel Indigo
1
1
184
184
 
Other
18
(1)
4,159
(1,228)
   
____
____
______
_____
Total
285
21
86,934
5,905
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
30
(4)
6,834
(487)
 
Managed
253
25
79,407
6,392
 
Owned and leased
2
-
693
-
   
____
____
______
_____
Total
285
21
86,934
5,905
   
____
____
______
_____
 
Asia Pacific hotel and room count
Asia Pacific hotel and room count increased by 21 hotels (5,905 rooms) to 285 hotels (86,934 rooms).  Openings of 32 hotels (8,997 rooms) were partially offset by the removal of 11 hotels (3,092 rooms). The growth was driven by 24 hotel openings in 17 cities across Greater China (7,253 rooms), seven hotels (1,477 rooms) more than in 2009. This included key hotel openings in Shanghai of the InterContinental at the Expo site and the Hotel Indigo on the Bund, the first opening for this brand in Asia Pacific. Across the region 65% of rooms opened were in upscale brands (InterContinental, Crowne Plaza and Hotel Indigo).
 
 
 
Hotels
Rooms
Asia Pacific pipeline
at 31 December
 
2010
Change
over 2009
 
2010
Change
over 2009
         
Analysed by brand
       
 
InterContinental
31
(3)
11,565
(468)
 
Crowne Plaza
71
(1)
25,726
774
 
Holiday Inn
85
8
23,117
2,480
 
Holiday Inn Express
40
12
9,685
2,455
 
Hotel Indigo
5
3
822
500
   
____
____
______
_____
Total
232
19
70,915
5,741
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
2
-
326
-
 
Managed
230
19
70,589
5,741
   
____
____
______
_____
Total
232
19
70,915
5,741
   
____
____
______
_____
 
Asia Pacific pipeline
The pipeline in Asia Pacific increased by 19 hotels (5,741 rooms) to 232 hotels (70,915 rooms). Pipeline growth was evenly balanced between the Greater China market (nine hotels, 3,128 rooms) and Asia Australasia (10 hotels, 2,613 rooms) including six hotel signings in India taking its total pipeline to 10,073 rooms.
 
Across the region there were 18 Holiday Inn Express signings, more than double the number for this brand in 2009 indicating the potential for midscale growth in the region. In Thailand two new Holiday Inn resorts were signed in the prime beachfront locations of Cam Ranh Bay and Phu Quoc. There were also 12 Crowne Plaza signings, including the Crowne Plaza Lumpini Park in Bangkok.
 
 

CENTRAL
 
     12 months ended 31 December
 
2010
2009
%
Central results
$m
$m
change
       
Revenue
104
124
(16.1)
Gross central costs
(243)
(228)
(6.6)
 
____
____
_____
Net central costs
 
(139)
(104)
(33.7)
 
_____
____
_____
         
 
Central Results
During 2010, net central costs increased by $35m from $104m to $139m (33.7%). The movement was primarily driven by an increase in performance based incentive costs where no payments were made on some plans in 2009. At constant currency, net central costs increased by $36m (34.6%).
 
 
 
SYSTEM FUND
 
     12 months ended 31 December
 
2010
2009
%
System Fund results
$m
$m
change
       
Assessment fees and contributions received from hotels
944
875
7.9
Proceeds from sale of Priority Club Rewards points
106
133
(20.3)
 
____
____
_____
   
1,050
1,008
4.2
 
_____
____
_____
         
 
In the year to 31 December 2010, System Fund income increased by 8.0% to $1.1bn primarily as a result of growth in hotel room revenues and marketing programmes.  Sale of Priority Club Rewards points declined due to the impact of a special promotional programme in 2009.
 
In addition to management or franchise fees, hotels within the IHG system pay cash assessments and contributions which are collected by IHG for specific use within the System Fund (the Fund).  The Fund also receives proceeds from the sale of Priority Club Rewards points.  The Fund is managed for the benefit of hotels in the system with the objective of driving revenues for the hotels. The Fund is used to pay for marketing, the Priority Club Rewards loyalty programme and the global reservation system. The operation of the Fund does not result in a profit or loss for the Group and consequently the revenues and expenses of the Fund are not included in the Group Income Statement.
 

OTHER FINANCIAL INFORMATION
 
Exceptional operating items
Exceptional operating items of $15m consisted of gains of $35m from the disposal of assets, including $27m profit on the sale of the InterContinental Buckhead, Atlanta offset by an impairment charge of $7m, severance costs of $4m and costs of $9m to complete the Holiday Inn brand family relaunch.
 
Compared with the previous year, exceptional operating items were significantly lower as 2009 was impacted by difficult trading which resulted in exceptional costs of $373m, largely down to the recognition of impairment charges, an onerous contract provision and the cost of office closures.
 
Exceptional operating items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted earnings per ordinary share in order to provide a more meaningful comparison of performance.
 
Net financial expenses
Net financial expenses increased from $54m in 2009 to $62m in 2010, as the effect of the £250m 6% bond offset lower net debt levels and low interest rates. Average net debt levels in 2010 were lower than 2009 primarily as a result of improved trading, the disposal of the InterContinental Buckhead, Atlanta and a continuing focus on cash.
 
Financing costs included $2m (2009 $2m) 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 2010 also included $18m (2009 $18m) in respect of the InterContinental Boston finance lease.
 
Taxation
The effective rate of tax on the combined profit from continuing and discontinued operations, excluding the impact of exceptional items, was 26% (2009 5%). The rate was particularly low in 2009 due to the impact of prior year items relative to a lower level of profit than in 2010.  By excluding the impact of prior year items, which are included wholly within continuing operations, the equivalent tax rate would be 35% (2009 42%). This rate is higher than the UK statutory rate of 28% due mainly to certain overseas profits (particularly in the US) being subject to statutory rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.
 
Taxation within exceptional items totalled a charge of $8m (2009 credit of $287m) in respect of continuing operations. This represented 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, together with tax relief on exceptional costs, tax arising on disposals and also tax relating to an internal reorganisation in 2010.
 
Net tax paid in 2010 totalled $68m (2009 $2m) including $4m paid (2009 $1m) in respect of disposals. Tax paid is lower than the current period income tax charge, primarily due to the receipt of refunds in respect of prior years, together with provisions for tax for which no payment of tax has currently been made.
 
Earnings per ordinary share
Basic earnings per ordinary share in 2010 was 101.7¢, compared with 74.7¢ in 2009. Adjusted earnings per ordinary share was 98.6¢, against 102.8¢ in 2009.
 
Dividends
The Board has proposed a final dividend per ordinary share of 35.2¢ (22.0p). With the interim dividend per ordinary share of 12.8¢ (8.0p), the full-year dividend per ordinary share for 2010 will total 48.0¢ (30.0p).
 
Share price and market capitalisation
The IHG share price closed at £12.43 on 31 December 2010, up from £8.93 on 31 December 2009. The market capitalisation of the Group at the year end was £3.6bn.
 
 
Capital structure and liquidity management
 
In 2010 the Group continued its focus on cash management. During the year, $462m of cash was generated from operating activities, with the other key elements of the cash flow being:
 
·     
proceeds from the disposal of hotels and investments of $135m, including $105m from the sale of the InterContinental Buckhead, Atlanta on 1 July 2010; and
·     
capital expenditure of $95m including $23m for the purchase of the InterContinental San Francisco Mark Hopkins ground lease and $16m in relation to Global Technology projects.
 
The Group is mainly funded by a $1.6bn syndicated bank facility which matures in May 2013.
 
In December 2009, the Group issued a seven-year £250m public bond, at a coupon of 6%, which was initially priced at 99.465% of face value. The £250m was immediately swapped into US dollar debt using currency swaps and the proceeds were used to reduce the existing term loan from $500m to $85m. The term loan was completely paid down in September 2010.  Additional funding is provided by a finance lease on the InterContinental Boston.
 
Net debt at 31 December 2010 decreased by $349m to $743m and included $206m in respect of the finance lease commitment for the InterContinental Boston and $27m in respect of currency swaps related to the sterling bond.
 
 
 
2010
2009
Net debt* at 31 December
$m
$m
     
Borrowings:
   
 
US Dollar
715
863
 
Euro
100
216
 
Other
6
53
Cash
(78)
(40)
 
____
____
Net debt
743
1,092
 
____
____
     
Average debt levels
923
1,231
 
____
____
* Including the impact of currency derivatives.
 
2010
2009
Facilities at 31 December
$m
$m
     
Committed
1,605
1,693
Uncommitted
53
25
 
____
____
Total
1,658
1,718
 
____
____
 
 
Interest risk profile of gross debt for major currencies
at 31 December
2010
%
2009
%
     
At fixed rates
100
90
At variable rates
-
10
     
 

 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the year ended 31 December 2010
 
 
Year ended 31 December 2010
Year ended 31 December 2009
 
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
 
$m
$m
$m
$m
$m
$m
Continuing operations
           
             
Revenue (note 3)
1,628
-
1,628
1,538
-
1,538
Cost of sales
(753)
-
(753)
(769)
(91)
(860)
Administrative expenses
(331)
(13)
(344)
(303)
(83)
(386)
Other operating income and expenses
8
35
43
6
(2)
4
 
_____
____
____
_____
____
____
 
552
22
574
472
(176)
296
             
Depreciation and amortisation
(108)
-
(108)
(109)
-
(109)
Impairment
-
(7)
(7)
-
(197)
(197)
 
_____
____
____
_____
____
____
             
Operating profit/(loss) (note 3)
444
15
459
363
(373)
(10)
Financial income
2
-
2
3
-
3
Financial expenses
(64)
-
(64)
(57)
-
(57)
 
_____
____
____
_____
____
____
             
Profit/(loss) before tax (note 3)
382
15
397
309
(373)
(64)
             
Tax (note 5)
(98)
(8)
(106)
(15)
287
272
 
_____
____
____
_____
____
____
Profit for the year from continuing operations
 
284
 
7
 
291
 
294
 
(86)
 
208
             
Profit for the year from discontinued operations
 
-
 
2
 
2
 
-
 
6
 
6
 
_____
____
____
_____
____
____
Profit for the year
284
9
293
294
(80)
214
 
====
====
====
====
====
====
             
Attributable to:
           
 
Equity holders of the parent
284
9
293
293
(80)
213
 
Non-controlling interest
-
-
-
1
-
1
 
_____
____
____
_____
____
____
 
284
9
293
294
(80)
214
 
====
====
====
====
====
====
Earnings per ordinary share
(note 6)
           
Continuing operations:
           
 
Basic
   
101.0¢
   
72.6¢
 
Diluted
   
98.3¢
   
70.2¢
 
Adjusted
98.6¢
   
102.8¢
   
 
Adjusted diluted
95.9¢
   
99.3¢
   
Total operations:
           
 
Basic
   
101.7¢
   
74.7¢
 
Diluted
   
99.0¢
   
72.2¢
 
Adjusted
98.6¢
   
102.8¢
   
 
Adjusted diluted
95.9¢
   
99.3¢
   
 
====
 
====
====
 
====
 
 

INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2010
 
 
 
2010
Year ended
31 December
$m
2009
Year ended
 31 December
$m
     
Profit for the year
293
214
     
Other comprehensive income
   
Available-for-sale financial assets:
   
 
Gains on valuation
17
11
 
Losses reclassified to income on impairment/disposal
1
4
Cash flow hedges:
   
 
Losses arising during the year
(4)
(7)
 
Reclassified to financial expenses
6
11
Defined benefit pension plans:
   
 
Actuarial losses, net of related tax credit of $7m (2009 $1m)
(38)
(57)
 
Change in asset restriction on plans in surplus and liability in respect of funding commitments, net of related tax credit of $10m (2009 $nil)
 
(38)
 
21
Exchange differences on retranslation of foreign operations, including related tax credit of $1m (2009 $4m)
 
(4)
 
43
Tax related to pension contributions
7
-
 
____
____
Other comprehensive (loss)/income for the year
(53)
26
 
____
____
Total comprehensive income for the year attributable to equity holders of the parent
 
240
 
240
 
====
====
     
 
 
 
 
  
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2010
 
 
Year ended 31 December 2010
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
           
At beginning of the year
142
(2,649)
2,656
7
156
           
Total comprehensive income for the year
-
16
224
-
240
Issue of ordinary shares
19
-
-
-
19
Movement in shares in employee share trusts
 
-
 
(32)
 
(26)
 
-
 
(58)
Equity-settled share-based cost
-
-
33
-
33
Tax related to share schemes
-
-
22
-
22
Equity dividends paid
-
-
(121)
-
(121)
Exchange
(6)
6
-
-
-
 
____
____
____
____
____
At end of the year
155
(2,659)
2,788
7
291
 
====
====
====
====
====
 
 
Year ended 31 December 2009
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
           
At beginning of the year
118
(2,748)
2,624
7
1
           
Total comprehensive income for the year
-
63
177
-
240
Issue of ordinary shares
11
-
-
-
11
Movement in shares in employee share trusts
 
-
 
49
 
(61)
 
-
 
(12)
Equity-settled share-based cost
-
-
24
-
24
Tax related to share schemes
-
-
10
-
10
Equity dividends paid
-
-
(118)
-
(118)
Exchange
13
(13)
-
-
-
 
____
____
____
____
____
At end of the year
142
(2,649)
2,656
7
156
 
====
====
====
====
====
 
 
*
Other reserves comprise the capital redemption reserve, shares held by employee share trusts, other reserves, unrealised gains and losses reserve and currency translation reserve.



 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF FINANCIAL POSITION
31 December 2010
 
2010
31 December
2009
31 December
 
$m
$m
ASSETS
   
Property, plant and equipment
1,690
1,836
Goodwill
92
82
Intangible assets
266
274
Investment in associates
43
45
Retirement benefit assets
5
12
Other financial assets
135
130
Deferred tax assets
79
95
 
_____
_____
Total non-current assets
2,310
2,474
 
_____
_____
Inventories
4
4
Trade and other receivables
371
335
Current tax receivable
13
35
Cash and cash equivalents
78
40
Other financial assets
-
5
 
_____
_____
Total current assets
466
419
 
______
______
Total assets (note 3)
2,776
2,893
 
=====
=====
LIABILITIES
   
Loans and other borrowings
(18)
(106)
Derivative financial instruments
(6)
(7)
Trade and other payables
(722)
(668)
Provisions
(8)
(65)
Current tax payable
(167)
(194)
 
_____
_____
Total current liabilities
(921)
(1,040)
 
_____
_____
Loans and other borrowings
(776)
(1,016)
Derivative financial instruments
(38)
(13)
Retirement benefit obligations
(200)
(142)
Trade and other payables
(464)
(408)
Provisions
(2)
-
Deferred tax liabilities
(84)
(118)
 
_____
_____
Total non-current liabilities
(1,564)
(1,697)
 
_____
_____
Total liabilities
(2,485)
(2,737)
 
=====
=====
Net assets
291
156
 
=====
=====
EQUITY
   
Equity share capital
155
142
Capital redemption reserve
10
11
Shares held by employee share trusts
(35)
(4)
Other reserves
(2,894)
(2,900)
Unrealised gains and losses reserve
49
29
Currency translation reserve
211
215
Retained earnings
2,788
2,656
 
______
______
IHG shareholders' equity
284
149
Non-controlling interest
7
7
 
______
______
Total equity
291
156
 
=====
=====


INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 2010
 
2010
Year ended
31 December
2009
Year ended
31 December
 
$m
$m
 
Profit for the year
293
214
Adjustments for:
   
 
Net financial expenses
62
54
 
Income tax charge/(credit)
106
(272)
 
Depreciation and amortisation
108
109
 
Impairment
7
197
 
Other exceptional operating items
(22)
176
 
Gain on disposal of assets, net of tax
(2)
(6)
 
Equity-settled share-based cost, net of payments
26
14
 
Other items
1
1
 
_____
_____
Operating cash flow before movements in working capital
579
487
Net change in loyalty programme liability and System Fund surplus
10
42
Other changes in net working capital
96
17
Utilisation of provisions
(54)
-
Retirement benefit contributions, net of cost
(27)
(2)
Cash flows relating to exceptional operating items
(21)
(60)
 
_____
_____
Cash flow from operations
583
484
Interest paid
(59)
(53)
Interest received
2
2
Tax paid on operating activities
(64)
(1)
 
_____
_____
Net cash from operating activities
462
432
 
_____
_____
Cash flow from investing activities
   
Purchases of property, plant and equipment
(62)
(100)
Purchases of intangible assets
(29)
(33)
Investment in associates and other financial assets
(4)
(15)
Disposal of assets, net of costs and cash disposed of
107
20
Proceeds from associates and other financial assets
28
15
Tax paid on disposals
(4)
(1)
 
_____
_____
Net cash from investing activities
36
(114)
 
_____
_____
Cash flow from financing activities
   
Proceeds from the issue of share capital
19
11
Purchase of own shares by employee share trusts
(53)
(8)
Proceeds on release of own shares by employee share trusts
-
2
Dividends paid to shareholders
(121)
(118)
Issue of £250m 6% bonds
-
411
Decrease in other borrowings
(292)
(660)
 
_____
_____
Net cash from financing activities
(447)
(362)
 
_____
_____
     
Net movement in cash and cash equivalents in the year
51
(44)
Cash and cash equivalents at beginning of the year
40
82
Exchange rate effects
(13)
2
 
_____
_____
Cash and cash equivalents at end of the year
78
40
 
=====
=====


 
INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
 
 
1.
Basis of preparation
 
 
The audited consolidated financial statements of InterContinental Hotels Group PLC (the Group or IHG) for the year ended 31 December 2010 have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.
 
With effect from 1 January 2010, the Group has implemented a number of new accounting standards, amendments and interpretations, the most significant ones being IFRS 3 (Revised) 'Business Combinations' and IAS 27 (Revised) 'Consolidated and Separate Financial Statements'; their adoption has had no material impact on the financial statements and there has been no requirement to restate prior year comparatives.
 
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 2009.
 
 
2.
Exchange rates
 
 
The results of operations have been translated into US dollars at the average rates of exchange for the year. In the case of sterling, the translation rate is $1= £0.65 (2009 $1 = £0.64). In the case of the euro, the translation rate is $1 = €0.76 (2009 $1 = €0.72).
 
Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the year. In the case of sterling, the translation rate is $1=£0.64 (2009 $1 = £0.62). In the case of the euro, the translation rate is $1 = €0.75 (2009 $1 = €0.69).
 

 
3.
Segmental information
   
 
 
Revenue
   
   
2010
2009
   
$m
$m
       
 
Americas 
807
772
 
EMEA  
414
397
 
Asia Pacific
303
245
 
Central
104
124
   
____
____
 
Total revenue
1,628
1,538
   
====
====
       
 
All results relate to continuing operations.
 
 
Profit
2010
$m
2009
$m
       
 
Americas 
369
288
 
EMEA  
125
127
 
Asia Pacific
89
52
 
Central
(139)
(104)
   
____
____
 
Reportable segments' operating profit
444
363
 
Exceptional operating items (note 4)
15
(373)
   
____
____
 
Operating profit/(loss)
459
(10)
       
 
Financial income
2
3
 
Financial expenses
(64)
(57)
   
____
____
 
Profit/(loss) before tax
397
(64)
   
====
====
       
 
All results relate to continuing operations.
 
 
Assets
2010
$m
2009
$m
       
 
Americas
891
970
 
EMEA
856
926
 
Asia Pacific
665
631
 
Central
194
196
   
____
____
 
Segment assets
2,606
2,723
       
 
Unallocated assets:
   
 
Deferred tax assets
79
95
 
Current tax receivable
13
35
 
Cash and cash equivalents
78
40
   
____
____
 
Total assets
2,776
2,893
   
====
====

 
4.
Exceptional items
   
2010
$m
2009
$m
 
Continuing operations:
   
       
 
Exceptional operating items
   
   
Cost of sales:
   
   
Onerous management contracts (a)
-
(91)
         
   
Administrative expenses:
   
   
Holiday Inn brand relaunch (b)
(9)
(19)
   
Reorganisation and related costs (c)
(4)
(43)
   
Enhanced pension transfer (d)
-
(21)
     
____
____
     
(13)
(83)
   
Other operating income and expenses:
   
   
Gain on sale of other financial assets (e)
8
-
   
Gain/(loss) on disposal of hotels (f)
27
(2)
     
____
____
     
35
(2)
         
   
Impairment:
   
   
Property, plant and equipment (g)
(6)
(28)
   
Assets held for sale (h)
-
(45)
   
Goodwill (i)
-
(78)
   
Intangible assets (j)
-
(32)
   
Other financial assets (k)
(1)
(14)
     
____
____
     
(7)
(197)
     
____
____
   
15
(373)
   
====
====
 
Tax
   
 
Tax on exceptional operating items
(8)
112
 
Exceptional tax credit (l)
-
175
     
____
____
     
(8)
287
   
====
====
 
Discontinued operations:
   
 
Gain on disposal of assets (m):
   
 
Gain on disposal of hotels
-
2
 
Tax credit
2
4
   
____
____
   
2
6
   
====
====
 

 
4.
Exceptional items (continued)
 
 
These items are treated as exceptional by reason of their size or nature.
 
a)
An onerous contract provision of $65m was recognised at 31 December 2009 for the future net unavoidable costs under a performance guarantee related to certain management contracts with one US hotel owner. In addition to the provision, a deposit of $26m was written off as it is no longer considered recoverable under the terms of the same management contracts.
 
b)
Relates to costs incurred in support of the worldwide relaunch of the Holiday Inn brand family that was announced on 24 October 2007.
 
c)
Primarily relates to the closure of certain corporate offices together with severance costs arising from a review of the Group's cost base.
 
d)
Related to the payment of enhanced pension transfers to those deferred members of the InterContinental Hotels UK Pension Plan who had accepted an offer to receive the enhancement either as a cash lump sum or as an additional transfer value to an alternative pension plan provider.  The exceptional item in 2009 comprised the lump sum payments ($9m), the IAS 19 settlement loss arising on the pension transfers ($11m) and the costs of the arrangement ($1m).  The payments and transfers were made in January 2009.
 
e)
Relates to the gain on sale of an investment in the EMEA region.
 
f)
Includes a $27m gain on the sale of the InterContinental Buckhead, Atlanta on 1 July 2010.
 
g)
Relates to an impairment of one hotel in the Americas (2009: $20m related to a North American hotel and $8m related to a European hotel), arising from a review of estimated recoverable amounts taking into account the prevailing economic conditions. 
 
h)
Related to the valuation adjustments required at 30 September 2009 on the reclassification to property, plant and equipment of four North American hotels no longer meeting the 'held for sale' criteria of IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' as sales were not considered to be highly probable within the next 12 months.  The adjustments comprised $14m of depreciation not charged whilst held for sale and $31m of further write-downs to recoverable amounts, as required by IFRS 5.  
 
i)
Related to the Americas managed operations, reflecting the impact of the global economic downturn and, in particular, IHG's funding obligations under certain management contracts with one US hotel owner.
 
j)
Related to the capitalised value of management contracts and arose from revisions to expected fee income.  The impairment was recorded at 30 September 2009 and related to Americas managed operations.
 
k)
Relates to available-for-sale equity investments and arises as a result of significant and prolonged declines in their fair value below cost.
 
l)
Represents the release of provisions of $7m (2009 $175m) which are exceptional by reason of their size or nature relating to tax matters which had been settled or in respect of which the relevant statutory limitation period has expired, together with, in 2010, a $7m charge relating to an internal reorganisation.  This charge comprises the recognition of deferred tax assets of $24m for capital losses and other deductible amounts, offset by tax charges of $31m.
 
m)
In 2010, relates to tax refunded relating to the sale of a hotel in a prior year.  In 2009, related to tax arising on disposals together with the release of provisions no longer required in respect of hotels disposed of in prior years.
 
 
 
5.
Tax
 
 
The tax charge on the combined profit from continuing and discontinued operations, excluding the impact of exceptional items (note 4), has been calculated using a tax rate of 26% (2009 5%) analysed as follows.
 
   
2010
2010
2010
2009
2009
2009
 
Year ended 31 December
Profit
$m
Tax
$m
Tax
rate
Profit
$m
Tax
$m
Tax
rate
 
Before exceptional items
           
 
Continuing operations
382
(98)
26%
309
(15)
5%
               
 
Exceptional items
           
 
Continuing operations
15
(8)
 
(373)
287
 
 
Discontinued operations
-
2
 
2
4
 
   
____
____
 
____
____
 
   
397
(104)
 
(62)
276
 
   
====
====
 
====
====
 
 
Analysed as:
           
   
UK tax
 
34
   
9
 
   
Foreign tax
 
(138)
   
267
 
     
____
   
____
 
     
(104)
   
276
 
     
====
   
====
 
 
 
 
 
By also excluding the effect of prior year items, the equivalent effective tax rate for the year is 35% (2009 42%).  Prior year items, excluding exceptional items, have been treated as relating wholly to continuing operations.
 
 
 
 

 
6.
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.
 
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.
 
   
2010
2010
2009
2009
   
Continuing
operations
 
Total
Continuing
operations
 
Total
 
Basic earnings per ordinary share
       
 
Profit available for equity holders ($m)
291
293
207
213
 
Basic weighted average number of ordinary shares (millions)
 
288
 
288
 
285
 
285
 
Basic earnings per ordinary share (cents)
101.0
101.7
72.6
74.7
   
====
====
====
====
 
Diluted earnings per ordinary share
       
 
Profit available for equity holders ($m)
291
293
207
213
 
Diluted weighted average number of ordinary shares (millions)
 
296
 
296
 
295
 
295
 
Diluted earnings per ordinary share (cents)
98.3
99.0
70.2
72.2
   
====
====
====
====
 
Adjusted earnings per ordinary share
       
 
Profit available for equity holders ($m)
291
293
207
213
 
Adjusting items (note 4):
       
   
Exceptional operating items ($m)
(15)
(15)
373
373
   
Tax on exceptional operating items ($m)
8
8
(112)
(112)
   
Exceptional tax credit ($m)
-
-
(175)
(175)
   
Gain on disposal of assets, net of tax ($m)
-
(2)
-
(6)
   
____
____
____
____
 
Adjusted earnings ($m)
284
284
293
293
 
Basic weighted average number of ordinary shares (millions)
 
288
 
288
 
285
 
285
 
Adjusted earnings per ordinary share (cents)
98.6
98.6
102.8
102.8
   
====
====
====
====
 
Diluted weighted average number of ordinary shares (millions)
 
296
 
296
 
295
 
295
 
Adjusted diluted earnings per ordinary share (cents)
95.9
95.9
99.3
99.3
   
====
====
====
====
 
 
Earnings per ordinary share from discontinued operations
 
   
2010
cents per share
2009
cents per share
 
 
Basic
 
0.7
 
2.1
 
Diluted
0.7
2.0
   
====
====
 
 
The diluted weighted average number of ordinary shares is calculated as:
 
   
2010
millions
2009
millions
 
Basic weighted average number of ordinary shares
288
285
 
Dilutive potential ordinary shares - employee share options
8
10
   
____
____
   
296
295
   
====
====

 
7.
Dividends
   
2010
cents per share
2009
cents per share
2010
$m
2009
$m
 
Paid during the year:
       
 
Final (declared for previous year)