e20vf
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
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(Mark One) |
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REGISTRATION STATEMENT PURSUANT TO
SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
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or |
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2004 |
or |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 1-10409
InterContinental Hotels Group PLC
(Exact name of registrant as specified in its charter)
England and Wales
(Jurisdiction of incorporation or organization)
67 Alma Road,
Windsor, Berkshire SL4 3HD
(Address of principal executive offices)
Securities registered or to be registered pursuant to
Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
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American Depositary Shares |
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New York Stock Exchange |
Ordinary Shares of 112 pence each |
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New York Stock Exchange* |
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* |
Not for trading, but only in connection with the registration of
American Depositary Shares, pursuant to the requirements of the
Securities and Exchange Commission. |
Securities registered or to be registered pursuant to
Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close
of the period covered by the annual report:
Ordinary Shares of 112 pence
each 622,068,047
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject
to such filing requirements for the past
90 days: Yes þ No o
Indicate by check mark which financial statement item the
registrant has elected to follow:
Item 17 o Item 18 þ
TABLE OF CONTENTS
2
3
INTRODUCTION
As used in this document, except as the context otherwise
requires, the terms:
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board refers to the board of directors of
InterContinental Hotels Group PLC or, where appropriate, the
board of Six Continents PLC; |
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Britvic refers to Britannia Soft Drinks Limited; |
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Company refers to InterContinental Hotels Group PLC
or Six Continents PLC or their respective board of directors as
the context requires; |
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Group refers to InterContinental Hotels Group PLC
and its subsidiaries or Six Continents PLC and its subsidiaries
as the context requires; |
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Hotels or IHG Hotels refers to the
hotels business of Six Continents or InterContinental Hotels
Group PLC as the context requires; |
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IHG refers to InterContinental Hotels Group PLC or,
where appropriate, its board of directors; |
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MAB or Mitchells and Butlers refers to
Mitchells & Butlers plc; |
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ordinary share or share refers to the
ordinary shares of 28 pence each of Six Continents PLC or
the ordinary shares of £1 and after December 10, 2004,
112 pence each of InterContinental Hotels Group PLC; |
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Separation transaction or Separation
refers to the transaction that separated Six Continents
PLCs hotels and soft drinks businesses from its retail
business, completed on April 15, 2003. The Separation
resulted in two separately listed holding companies:
(i) Mitchells & Butlers plc, which is the holding
company of the retail business and Standard Commercial Property
Developments Limited; and (ii) InterContinental Hotels
Group PLC, which is the holding company for the hotels and soft
drinks businesses; |
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Six Continents refers to Six Continents PLC; |
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Soft Drinks and Britvic business refer
to the soft drinks business of InterContinental Hotels Group
PLC, which the Company has through its controlling interest in
Britvic; and |
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VAT refers to UK value added tax levied by HM
Customs & Excise on certain goods and services. |
References in this document to the Companies Act
mean the Companies Act 1985, as amended, of Great Britain;
references to the EU mean the European Union;
references in this document to UK refer to the
United Kingdom of Great Britain and Northern Ireland.
The Company publishes its Consolidated Financial Statements
expressed in UK pounds sterling. In this document, references to
US dollars, US$, $ or
¢ are to United States (US)
currency, references to euro or
are
to the euro, the currency of the European Economic and Monetary
Union and references to pounds sterling,
sterling, £, pence or
p are to UK currency. Solely for convenience, this
Annual Report on Form 20-F contains translations of certain
pound sterling amounts into US dollars at specified rates.
These translations should not be construed as representations
that the pound sterling amounts actually represent such
US dollar amounts or could be converted into
US dollars at the rates indicated. Unless otherwise
indicated, the translations of pounds sterling into
US dollars have been made at the rate of £1.00 =
$1.93, the noon buying rate in The City of New York for cable
transfers in pounds sterling as certified for customs purposes
by the Federal Reserve Bank of New York (the Noon Buying
Rate) on December 31, 2004. On April 25, 2005
the Noon Buying Rate was £1.00 = $1.91. For
information regarding rates of exchange between pounds sterling
and US dollars from fiscal 2000 to the present, see
Item 3. Key Information Exchange
Rates.
The Companys fiscal year ends on December 31. This
reflects a change from September 30, implemented following
Separation. The December 31 fiscal year end is in line with
the calendar accounting year ends of the majority of comparable
US and European hotel companies. IHG will continue to report on a
4
December 31 fiscal year end basis, as the Group believes
this facilitates more meaningful comparisons with other key
participants in the industry. References in this document to a
particular year are to the fiscal year unless otherwise
indicated. For example, references to the year ended
December 31, 2004 are shown as 2004 and references to the
fiscal period ended December 31, 2003 are shown as 2003 and
represent the 15 months from October 1, 2002 to
December 31, 2003, unless otherwise specified, references
to the fiscal year ended September 30, 2002 are shown as
2002 and references to other fiscal years are shown in a similar
manner.
The Companys Consolidated Financial Statements are
prepared on the basis of accounting principles generally
accepted in the United Kingdom (UK GAAP) which
differ from those generally accepted in the United States
(US GAAP). The significant differences
applicable to the Group are explained in Note 35 of Notes
to the Financial Statements.
During 2003, the Company changed its fiscal year end to
December 31 and thus its financial statements for the 2003
fiscal period are presented for the 15 months ended
December 31, 2003 as permitted by the Companies Act 1985.
In accordance with the transition period reporting requirements
of the US Securities and Exchange Commission
(SEC), an unaudited analysis of the financial
statements and notes thereto for the 15 month period
showing the three month period ended December 31, 2002 and
the 12 month period ended December 31, 2003 is
presented in Note 34 of Notes to the Financial Statements.
IHG believes that the reporting of profit and earnings measures
before exceptional items provides additional meaningful
information on underlying returns and trends to shareholders.
The Groups key performance indicators used in budgets,
monthly reporting, forecasts, long-term planning and incentive
plans for internal financial reporting focus primarily on profit
and earnings measures before exceptional items. For this
purpose, exceptional items comprises operating exceptional
items, exceptional tax and exceptional interest credits and
charges, in addition to those non-operating exceptional items
disclosed below operating profit as required by UK GAAP.
Throughout this document earnings per share is also calculated
excluding the effect of all exceptional items and the related
tax effect and is referred to as adjusted earnings per share.
The Company furnishes The Bank of New York, as Depositary, with
annual reports containing Consolidated Financial Statements and
an independent auditors opinion thereon. These Financial
Statements are prepared on the basis of UK GAAP. The annual
reports contain reconciliations to US GAAP of net income
and shareholders equity. The Company also furnishes the
Depositary with semi-annual reports prepared in conformity with
UK GAAP, which contain unaudited interim consolidated
financial information. Upon receipt thereof, the Depositary
mails all such reports to recorded holders of American
Depositary Receipts (ADRs) evidencing American
Depositary Shares (ADSs). The Company also furnishes
to the Depositary all notices of shareholders meetings and
other reports and communications that are made generally
available to shareholders of the Company. The Depositary makes
such notices, reports and communications available for
inspection by recorded holders of ADRs and mails to all recorded
holders of ADRs notices of shareholders meetings received
by the Depositary. The Company is not required to report
quarterly financial information. However, during 2004, the
Company reported interim financial information at June 30,
2004 in accordance with the Listing Rules of the UK Listing
Authority. In addition, it provided a trading update at
March 31, 2004 and at September 30, 2004 and intends
to continue to provide quarterly financial information during
fiscal 2005, although it has not made any decision with respect
to reporting quarterly financial information after 2005.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 20-F contains certain forward-looking statements
as defined in Section 21E of the Securities Exchange Act of
1934 with respect to the financial condition, results of
operations and business of the Group and certain of the plans
and objectives of the board of directors of InterContinental
Hotels Group PLC with respect thereto. These forward-looking
statements can be identified by the fact that they do not relate
only to historical or current facts. Forward-looking statements
often use such words as anticipate,
target, expect, estimate,
intend, plan, goal,
believe or other words of similar meanings. Such
statements in the Form 20-F include, but are not limited
to, statements under the following headings:
(i) Item 4. Information on the Company;
(ii) Item 5. Operating and Financial Review
and Prospects;
5
(iii) Item 8. Financial Information;
and (iv) Item 11. Quantitative and Qualitative
Disclosures About Market Risk. Specific risks faced by the
Company are described under Item 3. Key
Information Risk Factors commencing on
page 13. By their nature, forward-looking statements
involve risk and uncertainty, and the factors described in the
context of such forward-looking statements in this
Form 20-F could cause actual results and developments to
differ materially from those expressed in or implied by such
forward-looking statements. These factors include, among others,
the effect of political and economic developments, the risks
involved with the Groups reliance on brands and protection
of intellectual property rights and the reliance on consumer
perception of its brands, the ability to recruit and retain key
personnel, the risks involved with developing and employing new
technologies and systems, the Groups ability to purchase
adequate insurance, risks associated with funding the defined
benefits under its pension schemes, the future balance between
supply and demand for the Groups hotels, the risks
relating to identifying, securing and retaining management and
franchise agreements, events that adversely impact domestic or
international travel, including terrorist incidents and
epidemics such as Severe Acute Respiratory Syndrome
(SARS), increased use of intermediary reservation
channels, the lack of selected acquisition opportunities or the
effects of being unable to make disposals of hotel assets, the
risks of litigation, the risks of possible product
contamination, reliance on suppliers in the soft drinks
business, competition, and the effect of adverse weather
conditions on the demand in the soft drinks business.
6
PART I
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ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS |
Not applicable.
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ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
Not applicable.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Summary
The selected consolidated financial data set forth below for the
year ended December 31, 2004, the 15 months ended
December 31, 2003 including unaudited information for the
three months ended December 31, 2002 and 12 months
ended December 31, 2003, and the years ended
September 30, 2002, 2001 and 2000 are derived from
Consolidated Financial Statements of the Group, which have been
audited by its independent registered public accounting firm,
Ernst & Young LLP, restated where appropriate to accord
with the Groups current accounting policies and
presentation. The selected consolidated financial data set forth
below should be read in conjunction with, and are qualified in
their entirety by reference to, the Consolidated Financial
Statements and Notes thereto included elsewhere in this Annual
Report.
7
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Consolidated Profit and Loss Account Data |
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Three months | |
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12 months | |
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15 months | |
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Year ended | |
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ended | |
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ended | |
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ended | |
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Year ended | |
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December 31, | |
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December 31, | |
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December 31, | |
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December 31, | |
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September 30, | |
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2004(1)(2) | |
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2004(1) | |
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2002 | |
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2003 | |
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2003(1) | |
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2002(1) | |
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2001(1) | |
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2000(1) | |
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$ | |
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£ | |
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£ | |
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£ | |
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£ | |
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£ | |
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£ | |
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£ | |
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(in millions, except per share and ADS amounts) | |
Amounts in accordance with UK GAAP
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Turnover:
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Continuing operations
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4,011 |
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2,204 |
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529 |
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2,161 |
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2,690 |
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2,134 |
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2,473 |
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2,092 |
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Discontinued operations
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342 |
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451 |
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793 |
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1,481 |
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1,560 |
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3,066 |
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4,011 |
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2,204 |
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871 |
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2,612 |
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3,483 |
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3,615 |
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4,033 |
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5,158 |
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Total operating profit before operating exceptional items:
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Continuing operations
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603 |
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331 |
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60 |
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286 |
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346 |
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329 |
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|
486 |
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|
428 |
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Discontinued operations
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|
|
|
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|
|
52 |
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|
|
85 |
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|
|
137 |
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|
|
289 |
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|
|
306 |
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|
|
477 |
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|
|
|
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|
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|
|
|
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|
|
603 |
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|
|
331 |
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|
|
112 |
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|
|
371 |
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|
483 |
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|
|
618 |
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|
792 |
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|
905 |
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Operating exceptional items:
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Continuing operations
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(35 |
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(19 |
) |
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(51 |
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(51 |
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(77 |
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(43 |
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(35 |
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(19 |
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(51 |
) |
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(51 |
) |
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(77 |
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(43 |
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Total operating profit:
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Continuing operations
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|
568 |
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|
312 |
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|
60 |
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|
|
235 |
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|
295 |
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|
252 |
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|
|
443 |
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|
|
428 |
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Discontinued operations
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|
52 |
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|
|
85 |
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|
|
137 |
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|
|
289 |
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|
|
306 |
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|
|
477 |
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|
568 |
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|
312 |
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|
112 |
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|
|
320 |
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|
432 |
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|
541 |
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|
749 |
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|
905 |
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Non-operating exceptional items:
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Continuing operations
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|
(126 |
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|
(69 |
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|
(3 |
) |
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(167 |
) |
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(170 |
) |
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(2 |
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(2 |
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2 |
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Discontinued operations
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(43 |
) |
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(43 |
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55 |
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2 |
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1,294 |
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|
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|
(126 |
) |
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(69 |
) |
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(3 |
) |
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(210 |
) |
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(213 |
) |
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|
53 |
|
|
|
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1,296 |
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Profit on ordinary activities before interest
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442 |
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|
243 |
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|
109 |
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|
110 |
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|
219 |
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|
594 |
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|
749 |
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|
2,201 |
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Interest receivable
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|
128 |
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|
70 |
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|
27 |
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|
77 |
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|
104 |
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|
116 |
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|
|
165 |
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|
57 |
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Interest payable and similar charges
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|
|
(157 |
) |
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(86 |
) |
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|
(39 |
) |
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|
(112 |
) |
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|
(151 |
) |
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|
(176 |
) |
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|
(224 |
) |
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|
(209 |
) |
Premium on early settlement of debt
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(31 |
) |
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(17 |
) |
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(136 |
) |
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(136 |
) |
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Profit before taxation
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|
382 |
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|
210 |
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|
97 |
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|
(61 |
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|
36 |
|
|
|
534 |
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|
|
690 |
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|
2,049 |
|
Taxation
|
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|
213 |
|
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|
117 |
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(29 |
) |
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|
46 |
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|
17 |
|
|
|
(52 |
) |
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|
(223 |
) |
|
|
(342 |
) |
Minority equity interests
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|
(51 |
) |
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|
(28 |
) |
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(4 |
) |
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(30 |
) |
|
|
(34 |
) |
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|
(25 |
) |
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|
(24 |
) |
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|
(16 |
) |
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Earnings
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|
544 |
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|
299 |
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|
64 |
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(45 |
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|
19 |
|
|
|
457 |
|
|
|
443 |
|
|
|
1,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per ordinary share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
76.6 |
p |
|
|
42.1 |
p |
|
|
8.7 |
p |
|
|
(6.1 |
)p |
|
|
2.6 |
p |
|
|
62.5 |
p |
|
|
60.6 |
p |
|
|
228.5 |
p |
|
Diluted
|
|
|
75.7 |
p |
|
|
41.6 |
p |
|
|
8.7 |
p |
|
|
(6.1 |
)p |
|
|
2.6 |
p |
|
|
62.3 |
p |
|
|
60.2 |
p |
|
|
227.0 |
p |
|
Adjusted(3)
|
|
|
59.2 |
p |
|
|
32.5 |
p |
|
|
9.1 |
p |
|
|
30.0 |
p |
|
|
39.1 |
p |
|
|
49.5 |
p |
|
|
66.6 |
p |
|
|
68.8 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
157.1 |
p |
|
|
86.3 |
p |
|
|
|
|
|
|
21.2 |
p |
|
|
21.2 |
p |
|
|
41.7 |
p |
|
|
40.5 |
p |
|
|
39.3 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page 10.
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
2004(1)(2)(4) | |
|
2004(1)(4) | |
|
2002(4) | |
|
2003(4) | |
|
2003(1)(4) | |
|
2002(1) | |
|
2001(1) | |
|
2000(1) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
$ | |
|
£ | |
|
£ | |
|
£ | |
|
£ | |
|
£ | |
|
£ | |
|
£ | |
|
|
(in millions, except per share and ADS amounts) | |
Amounts in accordance with US GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before cumulative effect on prior years of change
in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
580 |
|
|
|
318 |
|
|
|
29 |
|
|
|
(5 |
) |
|
|
24 |
|
|
|
163 |
|
|
|
185 |
|
|
|
135 |
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
2 |
|
|
|
1 |
|
|
|
31 |
|
|
|
34 |
|
|
|
65 |
|
|
|
165 |
|
|
|
466 |
|
|
|
462 |
|
|
|
Surplus on disposal
|
|
|
38 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171 |
|
|
|
25 |
|
|
|
1,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total discontinued operations
|
|
|
40 |
|
|
|
22 |
|
|
|
31 |
|
|
|
34 |
|
|
|
65 |
|
|
|
336 |
|
|
|
491 |
|
|
|
1,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect on prior years of adoption of FAS 142
|
|
|
|
|
|
|
|
|
|
|
(712 |
) |
|
|
|
|
|
|
(712 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
620 |
|
|
|
340 |
|
|
|
(652 |
) |
|
|
29 |
|
|
|
(623 |
) |
|
|
499 |
|
|
|
676 |
|
|
|
1,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per ordinary share and American Depositary Share(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before cumulative effect on prior years of change
in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
81.8 |
¢ |
|
|
44.8 |
p |
|
|
4.0 |
p |
|
|
(0.6 |
)p |
|
|
3.3 |
p |
|
|
22.3 |
p |
|
|
25.3 |
p |
|
|
18.2 |
p |
|
Discontinued operations
|
|
|
5.6 |
¢ |
|
|
3.1 |
p |
|
|
4.2 |
p |
|
|
4.6 |
p |
|
|
8.9 |
p |
|
|
46.0 |
p |
|
|
67.1 |
p |
|
|
230.3 |
p |
Cumulative effect on prior years of adoption of FAS 142
|
|
|
|
|
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
87.4 |
¢ |
|
|
47.9 |
p |
|
|
(88.9 |
)p |
|
|
4.0 |
p |
|
|
(84.9 |
)p |
|
|
68.3 |
p |
|
|
92.4 |
p |
|
|
248.5 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before cumulative effect on prior years of change
in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
77.8 |
¢ |
|
|
42.6 |
p |
|
|
4.0 |
p |
|
|
(0.6 |
)p |
|
|
3.3 |
p |
|
|
22.2 |
p |
|
|
25.2 |
p |
|
|
18.1 |
p |
|
Discontinued operations
|
|
|
5.5 |
¢ |
|
|
3.1 |
p |
|
|
4.2 |
p |
|
|
4.6 |
p |
|
|
8.9 |
p |
|
|
45.8 |
p |
|
|
66.7 |
p |
|
|
228.8 |
p |
Cumulative effect on prior years of adoption of FAS 142
|
|
|
|
|
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
83.3 |
¢ |
|
|
45.7 |
p |
|
|
(88.9 |
)p |
|
|
4.0 |
p |
|
|
(84.9 |
)p |
|
|
68.0 |
p |
|
|
91.9 |
p |
|
|
246.9 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page 10.
9
|
|
|
Consolidated Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
September 30, | |
|
|
| |
|
| |
|
|
2004(2) | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
2000 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
$ | |
|
£ | |
|
£ | |
|
£ | |
|
£ | |
|
£ | |
|
|
(in millions) | |
Amounts in accordance with UK GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
274 |
|
|
|
142 |
|
|
|
158 |
|
|
|
173 |
|
|
|
174 |
|
|
|
189 |
|
Tangible assets
|
|
|
7,288 |
|
|
|
3,776 |
|
|
|
3,951 |
|
|
|
7,641 |
|
|
|
7,558 |
|
|
|
6,683 |
|
Investments
|
|
|
191 |
|
|
|
99 |
|
|
|
172 |
|
|
|
218 |
|
|
|
234 |
|
|
|
217 |
|
Current assets
|
|
|
1,461 |
|
|
|
757 |
|
|
|
999 |
|
|
|
1,022 |
|
|
|
1,107 |
|
|
|
1,684 |
|
Total assets
|
|
|
9,214 |
|
|
|
4,774 |
|
|
|
5,280 |
|
|
|
9,054 |
|
|
|
9,073 |
|
|
|
8,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities(6)
|
|
|
1,955 |
|
|
|
1,013 |
|
|
|
1,085 |
|
|
|
2,273 |
|
|
|
2,009 |
|
|
|
1,604 |
|
Long-term debt(6)
|
|
|
2,231 |
|
|
|
1,156 |
|
|
|
988 |
|
|
|
631 |
|
|
|
1,019 |
|
|
|
1,213 |
|
Share capital
|
|
|
1,345 |
|
|
|
697 |
|
|
|
739 |
|
|
|
734 |
|
|
|
734 |
|
|
|
745 |
|
Shareholders funds
|
|
|
3,816 |
|
|
|
1,977 |
|
|
|
2,554 |
|
|
|
5,335 |
|
|
|
5,153 |
|
|
|
5,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in accordance with US GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
2,644 |
|
|
|
1,370 |
|
|
|
1,587 |
|
|
|
2,702 |
|
|
|
2,902 |
|
|
|
2,960 |
|
Tangible assets
|
|
|
6,666 |
|
|
|
3,454 |
|
|
|
3,916 |
|
|
|
6,552 |
|
|
|
6,343 |
|
|
|
5,130 |
|
Investments
|
|
|
197 |
|
|
|
102 |
|
|
|
174 |
|
|
|
189 |
|
|
|
205 |
|
|
|
254 |
|
Current assets
|
|
|
2,017 |
|
|
|
1,045 |
|
|
|
978 |
|
|
|
983 |
|
|
|
1,209 |
|
|
|
1,796 |
|
Total assets
|
|
|
11,524 |
|
|
|
5,971 |
|
|
|
6,655 |
|
|
|
10,426 |
|
|
|
10,659 |
|
|
|
10,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities(6)
|
|
|
3,926 |
|
|
|
2,034 |
|
|
|
1,496 |
|
|
|
2,109 |
|
|
|
2,033 |
|
|
|
1,461 |
|
Long-term debt(6)
|
|
|
100 |
|
|
|
52 |
|
|
|
523 |
|
|
|
622 |
|
|
|
779 |
|
|
|
1,152 |
|
Share capital
|
|
|
1,345 |
|
|
|
697 |
|
|
|
739 |
|
|
|
243 |
|
|
|
242 |
|
|
|
246 |
|
Shareholders equity
|
|
|
5,398 |
|
|
|
2,797 |
|
|
|
3,380 |
|
|
|
6,221 |
|
|
|
6,381 |
|
|
|
6,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The results for 2002, 2001 and 2000 include 52 weeks
(Hotels 12 months). Fiscal 2003 reflects 15 months
trading for Hotels, Soft Drinks 64 weeks ended
December 20, 2003 and Mitchells and Butlers plc which
reflects 28 weeks ended April 12, 2003. For the year
2004, Hotels include 12 months and Soft drinks
53 weeks ended December 25, 2004. |
|
(2) |
US dollar amounts have been translated at the Noon Buying
Rate on December 31, 2004 of £1.00 = $1.93
solely for convenience. |
|
(3) |
Adjusted earnings per share are disclosed in order to show
performance undistorted by exceptional items. |
|
(4) |
Subsequent to the publication of the Groups UK Annual
Report and Financial Statements, the net income in accordance
with US GAAP for the year ended December 31, 2004,
reported therein, was determined to be understated in that
document by £8 million. Also, the split of net income
between continuing operations and discontinued operations as
reported therein, has been revised. There was no impact on the
UK GAAP results. |
|
(5) |
Each American Depositary Share represents one ordinary share. |
|
(6) |
Long-term debt under UK GAAP includes amounts supported by
long-term credit facilities, which are classified as current
liabilities under US GAAP. |
Dividends
InterContinental Hotels Group PLC paid an interim dividend of
4.3p per share on October 18, 2004 and a special interim
dividend of 72.0p per ordinary share on December 17, 2004.
The IHG board has proposed a final dividend of 10.0p per share,
payable on June 3, 2005, if approved by shareholders at the
Annual General
10
Meeting to be held on June 1, 2005, bringing the total IHG
dividend for the year ended December 31, 2004 to 14.3p per
share excluding the special interim dividend.
IHG intends to pursue a progressive dividend policy that is
appropriate to the strategies of the Group.
On May 3, 2005, the Board of IHG announced details of the
proposed return of approximately £1 billion to
shareholders. In order to implement the proposals, the board is
seeking shareholder approval at an Extraordinary General Meeting
convened for June 1, 2005 and the sanction of the High
Court of England and Wales to introduce a new listed parent
company of the Group, New InterContinental Hotels Group PLC
(New IHG) and to return funds to shareholders by way
of a scheme of arrangement (the Scheme). Shortly
after the Scheme becomes effective, it is proposed to seek a
further sanction of the Court to reduce the capital of New IHG.
It is intended that, subject to the Scheme becoming effective,
New IHG will, with effect from the date of admission to the
Official List of the UK Listing Authority, adopt the name
InterContinental Hotels Group PLC.
If the Scheme is implemented, Shareholders will receive
11 New Ordinary Shares and £1.65 in cash in exchange
for every 15 Existing Ordinary Share they currently hold.
After the reduction of capital, the share capital of New IHG
will be reduced, in order to create new distributable reserves
of approximately £2.7 billion, by decreasing the
nominal amount of each New Ordinary Share issued pursuant to the
Scheme from 625 pence to 10 pence.
Shareholders will still own the same proportion of New IHG,
subject to fractional entitlements, after the implementation of
the proposals as they held in IHG before the implementation of
the proposals. As all ordinary shareholdings in the Company will
be consolidated, shareholders percentage holdings in the
issued share capital of the Company will (save in respect of
fractional entitlements) remain unchanged.
The table below sets forth the amounts of interim, final and
total dividends on each ordinary share in respect of each fiscal
year indicated. Comparative dividends per share have been
restated using the aggregate of the weighted average number of
shares of InterContinental Hotels Group PLC and Six Continents
PLC, adjusted to equivalent shares of InterContinental Hotels
Group PLC. For the purposes of showing the dollar amounts per
ADS, such amounts are before deduction of UK withholding tax (as
described under Item 10. Additional
Information Taxation) and are translated into
US dollars per ADS at the Noon Buying Rate on each of the
respective UK payment dates. However, dividends paid in
US dollars by the Depositary may be based on a market
exchange rate other than the Noon Buying Rate.
Ordinary dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pence per ordinary share | |
|
$ per ADS | |
|
|
| |
|
| |
|
|
Interim | |
|
Final | |
|
Total | |
|
Interim | |
|
Final | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Year ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000(1)
|
|
|
11.92 |
|
|
|
27.37 |
|
|
|
39.29 |
|
|
|
0.178 |
|
|
|
0.402 |
|
|
|
0.580 |
|
2001(1)
|
|
|
12.27 |
|
|
|
28.20 |
|
|
|
40.47 |
|
|
|
0.177 |
|
|
|
0.406 |
|
|
|
0.583 |
|
2002(1)
|
|
|
12.58 |
|
|
|
29.14 |
|
|
|
41.72 |
|
|
|
0.205 |
|
|
|
0.474 |
|
|
|
0.679 |
|
Period ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Continents(1)
|
|
|
7.65 |
|
|
|
|
|
|
|
7.65 |
|
|
|
0.119 |
|
|
|
|
|
|
|
0.119 |
|
IHG
|
|
|
4.05 |
|
|
|
9.45 |
|
|
|
13.50 |
|
|
|
0.068 |
|
|
|
0.174 |
|
|
|
0.242 |
|
Year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IHG
|
|
|
4.30 |
|
|
|
10.00 |
|
|
|
14.30 |
|
|
|
0.077 |
|
|
|
0.191 |
(2) |
|
|
0.268 |
|
|
|
(1) |
Restated to reflect an equivalent number of shares in
InterContinental Hotels Group PLC. |
|
(2) |
The 2004 final dividend has been translated at the Noon Buying
Rate on April 25, 2005 of £1.00 = $1.91. |
11
Special Dividend
|
|
|
|
|
|
|
|
|
|
|
Pence per | |
|
|
|
|
ordinary share | |
|
$ per ADS | |
|
|
| |
|
| |
December 2004
|
|
|
72.00 |
|
|
|
1.39 |
|
Dividends will be paid in pounds sterling and exchange rate
fluctuations will affect the US dollar amount received by
holders of ADRs on conversion of such dividends. Moreover,
fluctuations in the exchange rates between pounds sterling and
the US dollar will affect the dollar equivalent of the
pounds sterling price of the ordinary shares on the London Stock
Exchange and, as a result, are likely to affect the market price
of ADSs which are evidenced by ADRs in the United States.
The following tables show, for the periods and dates indicated,
certain information regarding the exchange rate for pounds
sterling, based on the Noon Buying Rate for pounds sterling
expressed in US dollars per £1.00. The exchange rate
on April 25, 2005 was £1.00 = $1.91.
|
|
|
|
|
|
|
|
|
|
|
Months | |
|
Months | |
|
|
highest | |
|
lowest | |
Month |
|
exchange rate | |
|
exchange rate | |
|
|
| |
|
| |
October 2004
|
|
|
1.84 |
|
|
|
1.78 |
|
November 2004
|
|
|
1.91 |
|
|
|
1.83 |
|
December 2004
|
|
|
1.95 |
|
|
|
1.91 |
|
January 2005
|
|
|
1.91 |
|
|
|
1.86 |
|
February 2005
|
|
|
1.93 |
|
|
|
1.86 |
|
March 2005
|
|
|
1.93 |
|
|
|
1.87 |
|
April 2005 (through April 25, 2005)
|
|
|
1.92 |
|
|
|
1.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period | |
|
Average | |
|
|
|
|
|
|
end | |
|
rate(1) | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
Year ended September 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2000
|
|
|
1.48 |
|
|
|
1.55 |
|
|
|
1.68 |
|
|
|
1.40 |
|
2001
|
|
|
1.47 |
|
|
|
1.44 |
|
|
|
1.50 |
|
|
|
1.37 |
|
2002
|
|
|
1.56 |
|
|
|
1.48 |
|
|
|
1.58 |
|
|
|
1.41 |
|
Period ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
1.78 |
|
|
|
1.63 |
|
|
|
1.78 |
|
|
|
1.54 |
|
Year ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
1.93 |
|
|
|
1.84 |
|
|
|
1.95 |
|
|
|
1.75 |
|
|
|
(1) |
The average of the Noon Buying Rate on the last day of each full
month during the period. |
A significant portion of the Groups assets, liabilities
and revenues are denominated in currencies other than pounds
sterling, principally the US dollar and the euro. For a
discussion of the impact of exchange rate movements, see
Item 11. Quantitative and Qualitative
Disclosures About Market Risk.
12
RISK FACTORS
This section describes some of the risks that could materially
affect the Groups businesses. The factors below should be
considered in connection with any financial and forward-looking
information in this Form 20-F and the cautionary statements
contained on pages 5 and 6.
The risks below are not the only ones that the Group faces. Some
risks are not yet known to IHG and some that IHG does not
currently believe to be material could later turn out to be
material. All of these risks could materially affect the
Groups businesses, turnover, operating profit, earnings,
net assets and liquidity and/or capital resources.
General Risks
|
|
|
The Group is exposed to the risks of political and
economic developments |
The Group is exposed to the risks of global and regional adverse
political, economic and financial market developments, including
recession, inflation and currency fluctuation, that could lower
revenues and reduce income. A recession would adversely affect
room rates and/or occupancy levels and other income generating
activities resulting in deterioration of results of operations
and potentially affecting the value of properties in affected
economies.
Further, political or economic factors or regulatory action
could effectively prevent the Group from receiving profits from,
or from selling its investments in, certain countries, or
otherwise adversely affect operations. In addition, fluctuations
in currency exchange rates between the UK pound sterling,
the currency in which the Group reports its financial
statements, and the US dollar and other currencies in which the
Groups international operations or investments do
business, could adversely affect the Groups reported
earnings and the value of its business. Fluctuations of this
type have been experienced over the last two years with the
significant strengthening of the pound against the dollar.
|
|
|
The Group is reliant on the reputation of its brands, the
steps it takes to define and enforce brand standards and the
protection of its intellectual property rights |
An event that was to materially damage the reputation of one or
more of the Groups brands and/or failure to sustain the
appeal of the Groups brands to its customers could have an
adverse impact on the value of that brand and subsequent
revenues from that brand or business.
In addition, the value of the Groups brands is influenced
by a number of other factors including consumer preference and
perception, commoditisation (whereby the price/ quality becomes
relatively more important than brand identifications), failure
by the Hotels business or its franchisees to ensure compliance
with the significant regulations applicable to hotel operations,
or other factors affecting consumers willingness to
purchase goods and services, including any factor which
adversely affects the reputation of those brands.
In particular, the extent to which the Hotels business is able
to adequately define and enforce adherence to its operating,
quality and fire life safety standards, or the significant
regulations applicable to hotel operations, pursuant to its
management and franchise contracts, may further impact brand
reputation or customer perception, and therefore the value of
the hotel brands.
Given the importance of brand recognition to the Groups
businesses, the Group has invested considerable effort in
protecting its intellectual property, including by registration
of trademarks and domain names. If the Group is unable to
protect its intellectual property, any infringement or
misappropriation could materially harm its future financial
results and ability to develop its businesses.
|
|
|
The Group is dependent upon recruiting and retaining key
personnel and developing their skills |
In order to develop, support and market its products, the Group
must hire and retain highly skilled employees with particular
expertise. The implementation of the Groups strategic
business plans could be undermined by a failure to recruit or
retain key personnel, the unexpected loss of key senior
employees, failures in the Groups succession planning and
incentive plans, or a failure to invest in the development of key
13
skills. Additionally, unless skills are supported by a
sufficient infrastructure to enable knowledge and skills to be
passed on, the Group risks losing accumulated knowledge if key
employees leave the Group.
|
|
|
The Group is exposed to certain risks in relation to
technology and systems |
The Group is exposed to certain risks in relation to technology
and systems. To varying degrees the Group is reliant upon
certain technologies and systems (including Information
Technology systems) for the running of its business,
particularly those which are highly integrated with business
processes, and disruption to those technologies or systems could
adversely effect the efficiency of the business, notwithstanding
business continuity or disaster recovery processes.
The Group may have to make substantial additional investments in
new technologies or systems in order to remain competitive.
Failing to keep pace with developments in technologies or
systems may put the Group at a competitive disadvantage. The
technologies or systems that the Group chooses may not be
commercially successful, or the technology or system strategy
may not be sufficiently aligned to the needs of the business or
responsive to changes in business strategy. As a result, the
Group could lose customers, fail to attract new customers, incur
substantial costs or face other losses.
Additionally, failure to develop an appropriate e-commerce
strategy and select the right partners could erode the
Groups market share.
Further details in relation to the Hotels business are set out
below.
|
|
|
The Group may face difficulties insuring its
businesses |
Historically, the Group has maintained insurance at levels
determined by it to be appropriate in light of the cost of cover
and the risk profiles of the businesses in which it operates.
Following the effects of the September 11, 2001 terrorist
attacks and subsequent events, many companies faced increased
premiums for reduced cover as the insurance market hardened. A
repeat of incidents of this nature may result in the Group
experiencing significant increases in the cost of insuring its
business at an acceptable level, or in the Group being unable to
obtain cover for certain risks at a realistic price.
|
|
|
The Group is exposed to funding risks in relation to the
defined benefits under its pension plans |
The Group is required by law to maintain a minimum funding level
in relation to its ongoing obligation to provide current and
future pensions for the members of its pension plans who are
entitled to defined benefits. In addition, if any plan of the
Group is wound up, the Group could become statutorily liable to
make an immediate payment to the trustees to bring the funding
of these defined benefits to a level which is higher than this
minimum. The contributions payable by the Group must be set with
a view to making prudent provision for the benefits accruing
under the plans of the Group.
Some of the issues which could adversely affect the funding of
these defined benefits (and materially affect the Groups
funding obligations) include: (i) poor investment
performance of pension fund investments; (ii) long life
expectancy (which will make pensions payable for longer and
therefore more expensive to provide); (iii) adverse annuity
rates (which tend in particular to depend on prevailing interest
rates and life expectancy) as these will make it more expensive
to secure pensions with an insurance company; and
(iv) other events occurring which make past service
benefits more expensive than predicted in the actuarial
assumptions by reference to which the Groups past
contributions were assessed.
The trustees of the UK defined benefit plans can demand
increases to the contribution rates relating to the funding of
those pension plans, which would oblige the relevant members of
the Group to contribute extra amounts to such pension funds. The
trustees must consult the plans actuary and principal
employer before exercising this power. In practice, contribution
rates are agreed between the Group and the trustees on actuarial
advice, and are set for three year terms. The last such review
was as at March 31, 2004. As at April 25, 2005 (being
the latest practicable date prior to the publication of this
document), the Directors are
14
not aware of any circumstances that would cause the trustees to
deem it necessary to unilaterally increase the contribution
rates.
Risks relating to the Hotels business
|
|
|
The Hotels business is exposed to the risks of the hotel
industry supply and demand cycle |
The future operating results of the Hotels business could be
adversely affected by industry overcapacity (by number of rooms)
and weak demand or other differences between planning
assumptions and actual operating conditions. Reductions in room
rates and occupancy levels would adversely impact the results of
operations of the Hotels business.
|
|
|
The Hotels business is exposed to a variety of risks
related to identifying, securing and retaining management and
franchise agreements |
The Hotels business competes with other hotel companies for
management and franchise agreements. Competition may generally
reduce the number of suitable management, franchise and
investment opportunities offered to the Hotels business, and
increase the bargaining power of property owners seeking to
engage a manager or become a franchisee. There can be no
assurance that the Hotels business will be able to identify,
retain or add franchisees to the Hotels business system or to
secure management contracts. For example, the availability of
suitable sites, planning and other local regulations or the
availability of finance may all restrict the supply of suitable
hotel development opportunities under franchise or management
agreements. There are also risks that significant franchisees or
groups of franchisees may have interests that conflict, or are
not aligned, with those of the Hotels business. In connection
with entering into management or franchise agreements, the Group
may be required to make investments in or guarantee the
obligations of third parties or guarantee minimum income to
third parties. Changes in legislation or regulatory changes may
be implemented that have the effect of favouring franchisees
relative to brand owners.
|
|
|
The Hotels business is exposed to the risk of events that
adversely impact domestic or international travel |
The room rates and occupancy levels of the Hotels business could
be adversely impacted by events that reduce domestic or
international travel, such as actual or threatened acts of
terrorism or war, epidemics (such as SARS), travel-related
accidents, travel-related industrial action, increased
transportation and fuel costs and natural disasters resulting in
reduced worldwide travel or other local factors impacting
individual hotels.
Terrorist incidents such as the events of September 11,
2001 and the war in Iraq in 2003 significantly affected
international travel and consequently global demand for hotel
rooms. Further incidents or uncertainties of this type may have
an adverse impact on the Groups operations and financial
results. In addition, inadequate preparedness, contingency
planning or recovery capability in relation to a major incident
or crisis may prevent operational continuity and consequently
impact the value of the brand or the reputation of the Hotels
business.
|
|
|
The Hotels business is reliant upon its proprietary
reservation system and is exposed to the risk of failures in the
system and increased competition in reservation
infrastructure |
The value of the brands of the Hotels business is partly derived
from the ability to drive reservations through its proprietary
HolidexPlus reservation system, an electronic booking and
delivery channel directly linked to travel agents, hotels and
internet networks. Inadequate disaster recovery arrangements, or
inadequate continued investment in this technology, leading to
loss of key communications linkages, particularly in relation to
HolidexPlus, internet reservation channels and other key parts
of the IT infrastructure for a prolonged period, or permanently,
may result in significant business interruption and subsequent
impact on revenues.
The Hotels business is also exposed to the risk of competition
from third party intermediaries who provide reservation
infrastructure. In particular, any significant increase in the
use of these reservation channels in
15
preference to proprietary channels may impact the Hotels
business ability to control the supply, presentation and
price of its room inventory.
|
|
|
The Hotels business may experience a lack of selected
acquisition opportunities |
While the strategy of the Hotels business is to extend the hotel
network through activities that do not involve significant
capital, in some cases the Hotels business may consider it
appropriate to acquire new land or locations for the development
of new hotels. If the availability of suitable sites becomes
limited, this could adversely affect its results of operations.
|
|
|
The Hotels business may be unable to make disposals of
hotel assets |
The Hotels business has embarked upon a strategy of asset
disposals and, although it has made significant progress, there
can be no assurance that the Hotels business will be able to
complete any such further selected disposals on commercially
reasonable terms, within optimal timescales, or at all.
|
|
|
The Hotels business is exposed to the risk of
litigation |
The Hotels business could be at risk of litigation from its
guests, customers, joint venture partners, suppliers, employees,
regulatory authorities, franchisees and/or the owners of hotels
managed by it for breach of its contractual or other duties.
Claims filed in the United States may include requests for
punitive damages as well as compensatory damages.
Exposure to litigation may affect the reputation of the Hotels
business even though the monetary consequences are not
significant.
Risks relating to the Britvic business
|
|
|
The Britvic business is exposed to risks related to
possible product contamination |
The Britvic business, like all beverage producers, has been and
will continue to be vulnerable to accidental or malicious
contamination of its products or base raw materials. Any such
contamination could result in recall of the products of the
Britvic business, the Britvic business being unable to sell its
products, damage to brand image and/or civil or criminal
liability, which could have a material adverse effect on the
operations and financial performance of the Britvic business.
|
|
|
The Britvic business is reliant upon certain
suppliers |
Britvic is reliant upon fruit juice concentrates, sugar and
other fruit juice raw materials as necessary ingredients for
many of its products, as well as packaging and containers such
as cans and Polyethylene Terephthalate (PET) bottles. In the
event that the Britvic business is unable to obtain an adequate
supply of appropriate raw materials or packaging or fails to
negotiate the purchase of these materials on a reasonable
commercial basis, this could have a significant adverse impact
on the financial operations of the Britvic business.
|
|
|
The Britvic business is exposed to significant
competition |
The Britvic business operates in a highly competitive market
sector in which large competitors are active.
A change in the level of marketing undertaken by competitors or
in their pricing policies, the growth or strengthening of
existing retailers of beverage products, the introduction of new
competing brands or products or increased purchasing power
pressure from customers could have a material adverse effect on
the operations and financial performance of the Britvic
business. Conversely, competition law may regulate the ability
of the Britvic business to participate in industry consolidation
at a strategic level.
16
|
|
|
Adverse weather conditions could reduce demand for
Britvics products |
Demand for the Britvic business products may be affected
by weather conditions, especially in the summer months, when
unseasonably cool or wet weather can affect sales volumes and
therefore the results of the Britvic business operations
for the year.
|
|
ITEM 4. |
INFORMATION ON THE COMPANY |
SUMMARY
Group Overview
The principal activities of the Group are in hotels and resorts,
with worldwide interests through franchising, management,
ownership and leasing, and in the manufacture and distribution
of soft drinks in the United Kingdom.
On April 25, 2005, InterContinental Hotels Group PLC had a
market capitalization of £3.9 billion, and was
included in the list of FTSE 100 companies, a list of the
100 largest companies by market capitalization on the
London Stock exchange. Following the Separation in April 2003,
InterContinental Hotels Group PLC became the holding
company for the Group of which Six Continents PLC is the
principal subsidiary company. Six Continents PLC was formed
in 1967.
The Companys corporate headquarters are in the United
Kingdom, and the registered address is:
InterContinental Hotels Group PLC
67 Alma Road
Windsor
Berkshire SL4 3HD
Tel: +44 (0) 1753 410100
Internet address: www.ihgplc.com
InterContinental Hotels Group PLC was incorporated in Great
Britain on October 2, 2002 and registered in, and operates
under, the laws of England and Wales. Operations undertaken in
countries other than England and Wales are under the laws of
those countries in which they reside.
|
|
|
Group History and Recent Developments |
The Group, formerly known as Bass and, more recently, Six
Continents, was historically a conglomerate operating as, among
other things, a brewer, soft drinks manufacturer, hotelier,
leisure operator, and restaurant, pub and bar owner. In the last
several years, the Group underwent a major transformation in its
operations and organization, as a result of the Separation and a
number of significant disposals during this period, narrowing
the scope of its business.
On April 15, 2003, following shareholder and regulatory
approval, Six Continents PLC separated into two new listed
groups, InterContinental Hotels Group PLC comprising the
Hotels and Soft Drinks businesses and Mitchells &
Butlers plc comprising the Retail and Standard Commercial
Property Developments businesses.
|
|
|
Acquisitions and Dispositions |
Since the Separation, the Group has sold or announced the sale
of 121 hotels with proceeds of approximately
£1.75 billion and as of April 25, 2004 the Group
had on the market a further 25 hotels including 10 hotels
in Australia, New Zealand and Fiji announced on
April 4, 2005. The following are the more significant
portfolio transactions:
On July 1, 2003, the Group completed the sale of a
16 property Staybridge Suites portfolio to Hospitality
Properties Trust (HPT) for $185 million. The
Group entered into a contract with HPT for the ongoing
management of these hotels. In September 2003, HPT converted
14 other suite hotels to the Staybridge Suites brand under
IHG management.
17
In October 2003, the Group announced the acquisition of the
Candlewood Suites brand in the United States from Candlewood
Hotel Corporation for a consideration of $15 million and an
agreement to enter into a management contract with HPT to manage
76 Candlewood Suites properties. The transaction completed
on December 31, 2003.
On December 17, 2004, the Group announced the sale of 13
hotels, in the United States, Puerto Rico and Canada, to HPT.
The total consideration payable by HPT for the sales amounted to
$425 million, before transaction costs, equivalent to net
book value, of which $395 million was received upon the
main completion of the sale on February 16, 2005, with the
remaining $30 million to be received upon the completion of
the sale of the InterContinental hotel in Austin, expected to be
on or around June 1, 2005. The Group will continue to
manage the hotels (other than the InterContinental in Puerto
Rico) under a 25 year management contract with HPT. The
Group has two consecutive options to extend the contracts for
15 years each, giving a total potential contract length of
up to 55 years. The InterContinental in Puerto Rico has
been leased back to the Group under a 25 year lease with
two consecutive options to extend the lease for 15 years
each, giving a total potential lease length of up to
55 years.
On February 28, 2005, the Group announced the acquisition
by Strategic Hotel Capital, Inc. (SHC) of 85%
interests in two hotels in the United States. IHG received
approximately $287 million in cash before transaction
costs, based upon a total value for both hotels of
$303.5 million, $12 million in excess of net book
value. This transaction completed on April 1, 2005. IHG
will continue to manage these hotels under a 20 year
management contract with three options to extend for a further
10 years each.
On March 10, 2005, the Group announced the sale of 73
hotels in the United Kingdom to LGR Acquisition, a consortium
comprising Lehman Brothers Real Estate Partners, GIC Real Estate
and Realstar Asset Management. The agreed sale price was
£1 billion, £22 million below net book
value, and a provision for loss on disposal of operations has
been included in the financial statements. Receipt of
£40 million of the total proceeds will be deferred,
contingent upon certain pre-agreed performance targets being
reached. This transaction is expected to complete in the second
quarter of 2005 and is conditional upon obtaining European
Commission clearance. The Group will continue to manage 63 of
these hotels under a 20 year management contract with two
consecutive options to extend the contract for a further five
years each. The remaining ten hotels will be under a temporary
management agreement with the Group.
In March 2004 IHG announced an on-market share repurchase
program for £250 million. By December 20, 2004
the program was completed with, in total, 45.6 million
shares repurchased at an average price of 548 pence per
share.
In September 2004 IHG announced a further £750 million
return of funds to shareholders. This comprised a proposed
special dividend of approximately £500 million and a
further £250 million share repurchase program. On
December 17, 2004 £501 million was returned to
shareholders by way of a special dividend of 72.0 pence per
share. This special dividend was accompanied by a consolidation
of the Companys ordinary share capital on the basis of
25 new ordinary shares for every 28 existing ordinary
shares effective from December 13, 2004. The further
£250 million share repurchase program commenced on
December 20, 2004 and by December 31, 2004 a further
0.8 million shares had been repurchased at an average price
per share of 651 pence (total £5 million). By
April 25, 2005, a total of 20,259,275 shares had been
repurchased under the second repurchase program at an average
price per share of 632 pence per share (approximately
£128 million). This program is planned for completion
in 2005.
Information relating to the purchases of equity securities can
be found in Item 16E.
Following the announcement in March 2005 of the sale of
73 hotels in the United Kingdom, and subject (among other
things) to the completion of the sale of the 73 hotels, IHG
intends to return a further £1 billion to
shareholders. This will require a capital restructuring to
enable the release of funds arising from the receipt of disposal
proceeds. Subject to receipt of shareholder approval, completion
of disposal transactions and there
18
being no material adverse change in market conditions, it is
planned to complete the restructuring by the end of June 2005
and to return funds to shareholders as soon as practicable
thereafter.
Hotels owns a number of hotel brands including InterContinental,
Crowne Plaza, Holiday Inn, Holiday Inn Express (or Express by
Holiday Inn outside of the Americas) (Express),
Staybridge Suites and Candlewood Suites, which at
December 31, 2004 comprised 3,540 franchised, managed,
owned or leased hotels with approximately 534,000 guest
rooms in nearly 100 countries and territories.
IHG retains an interest in, manages and controls Britvic, one of
the two leading manufacturers of soft drinks by value and volume
in Great Britain. Britvic owns an extensive portfolio of
soft drinks brands that include Tango and Robinsons. It also has
the exclusive right to bottle and distribute the Pepsi and
7 UP brands in Great Britain until 2018. The Group,
and other shareholders in the Britvic business (Allied Domecq,
Whitbread and PepsiCo) have agreed, subject to market and other
conditions being satisfied, to consider an initial public
offering of Britvic between January 1, 2005 and
December 31, 2008.
SEGMENTAL INFORMATION
Geographic
Segmentation
The following table shows turnover and operating profit in
pounds sterling by geographical area and the percentage of each
geographical area, for the following periods: year ended
December 31, 2004, 15 months ended December 31,
2003 including unaudited information for the three months ended
December 31, 2002 and 12 months ended
December 31, 2003, and the year ended September 30,
2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(£ million) | |
|
|
|
|
Turnover(1)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
1,126 |
|
|
|
598 |
|
|
|
1,533 |
|
|
|
2,131 |
|
|
|
2,491 |
|
Rest of Europe, the Middle East and Africa
|
|
|
419 |
|
|
|
95 |
|
|
|
411 |
|
|
|
506 |
|
|
|
411 |
|
United States
|
|
|
423 |
|
|
|
117 |
|
|
|
454 |
|
|
|
571 |
|
|
|
476 |
|
Rest of Americas
|
|
|
102 |
|
|
|
27 |
|
|
|
100 |
|
|
|
127 |
|
|
|
108 |
|
Asia Pacific
|
|
|
134 |
|
|
|
34 |
|
|
|
114 |
|
|
|
148 |
|
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,204 |
|
|
|
871 |
|
|
|
2,612 |
|
|
|
3,483 |
|
|
|
3,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
118 |
|
|
|
70 |
|
|
|
197 |
|
|
|
267 |
|
|
|
397 |
|
Rest of Europe, the Middle East and Africa
|
|
|
57 |
|
|
|
8 |
|
|
|
30 |
|
|
|
38 |
|
|
|
60 |
|
United States
|
|
|
105 |
|
|
|
17 |
|
|
|
107 |
|
|
|
124 |
|
|
|
114 |
|
Rest of Americas
|
|
|
30 |
|
|
|
7 |
|
|
|
26 |
|
|
|
33 |
|
|
|
26 |
|
Asia Pacific
|
|
|
21 |
|
|
|
10 |
|
|
|
11 |
|
|
|
21 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
331 |
|
|
|
112 |
|
|
|
371 |
|
|
|
483 |
|
|
|
618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page 20.
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
Year | |
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
% | |
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
51.1 |
|
|
|
68.7 |
|
|
|
58.7 |
|
|
|
61.2 |
|
|
|
68.9 |
|
Rest of Europe, the Middle East and Africa
|
|
|
19.0 |
|
|
|
10.9 |
|
|
|
15.7 |
|
|
|
14.6 |
|
|
|
11.4 |
|
United States
|
|
|
19.2 |
|
|
|
13.4 |
|
|
|
17.4 |
|
|
|
16.4 |
|
|
|
13.2 |
|
Rest of Americas
|
|
|
4.6 |
|
|
|
3.1 |
|
|
|
3.8 |
|
|
|
3.6 |
|
|
|
3.0 |
|
Asia Pacific
|
|
|
6.1 |
|
|
|
3.9 |
|
|
|
4.4 |
|
|
|
4.2 |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
35.7 |
|
|
|
62.5 |
|
|
|
53.1 |
|
|
|
55.3 |
|
|
|
64.2 |
|
Rest of Europe, the Middle East and Africa
|
|
|
17.2 |
|
|
|
7.1 |
|
|
|
8.1 |
|
|
|
7.9 |
|
|
|
9.7 |
|
United States
|
|
|
31.7 |
|
|
|
15.2 |
|
|
|
28.8 |
|
|
|
25.7 |
|
|
|
18.5 |
|
Rest of Americas
|
|
|
9.1 |
|
|
|
6.3 |
|
|
|
7.0 |
|
|
|
6.8 |
|
|
|
4.2 |
|
Asia Pacific
|
|
|
6.3 |
|
|
|
8.9 |
|
|
|
3.0 |
|
|
|
4.3 |
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The results of overseas operations have been translated into
sterling at weighted average rates of exchange for the period.
In the case of the US dollar, the translation rates are
2004: £1 = $1.82; (2003: £1 =
$1.62 and 2002: £1 = $1.48). |
|
(2) |
Operating profit before exceptional items does not include
operating and non-operating exceptional items for all periods
presented. Operating exceptional items (charge unless otherwise
noted) by region are United Kingdom
(2004: £10 million; 2003: 15 months
£17 million, 12 months £17 million,
three months £nil million;
2002: £24 million), Rest of Europe, the Middle
East and Africa (2004: £11 million;
2003 15 months £24 million, 12 months
£24 million, three months £nil million;
2002: £nil million), the United States
(2004: credit of £6 million;
2003 15 months £9 million, 12 months
£9 million, three months £nil million;
2002: £39 million) and Asia Pacific
(2004: £4 million; 2003: 15 months
£1 million, 12 months £1 million,
three months £nil million;
2002: £14 million). |
|
(3) |
Amounts are reported by origin. See Note 2 of Notes to the
Financial Statements for details by destination, for which the
amounts are not significantly different. |
20
The following table shows turnover and operating profit by
activity and the percentage contribution of each activity for
the following periods: year ended December 31, 2004,
15 months ended December 31, 2003 including unaudited
information for the three months ended December 31, 2002
and 12 months ended December 31, 2003, and the year
ended September 30, 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
495 |
|
|
|
136 |
|
|
|
525 |
|
|
|
661 |
|
|
|
570 |
|
EMEA
|
|
|
829 |
|
|
|
203 |
|
|
|
807 |
|
|
|
1,010 |
|
|
|
794 |
|
Asia Pacific
|
|
|
134 |
|
|
|
34 |
|
|
|
114 |
|
|
|
148 |
|
|
|
128 |
|
Central(3)
|
|
|
40 |
|
|
|
10 |
|
|
|
41 |
|
|
|
51 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
1,498 |
|
|
|
383 |
|
|
|
1,487 |
|
|
|
1,870 |
|
|
|
1,532 |
|
Soft Drinks
|
|
|
706 |
|
|
|
146 |
|
|
|
674 |
|
|
|
820 |
|
|
|
602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
2,204 |
|
|
|
529 |
|
|
|
2,161 |
|
|
|
2,690 |
|
|
|
2,134 |
|
Discontinued operations
|
|
|
|
|
|
|
342 |
|
|
|
451 |
|
|
|
793 |
|
|
|
1,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,204 |
|
|
|
871 |
|
|
|
2,612 |
|
|
|
3,483 |
|
|
|
3,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
163 |
|
|
|
34 |
|
|
|
161 |
|
|
|
195 |
|
|
|
173 |
|
EMEA
|
|
|
119 |
|
|
|
22 |
|
|
|
92 |
|
|
|
114 |
|
|
|
125 |
|
Asia Pacific
|
|
|
21 |
|
|
|
10 |
|
|
|
12 |
|
|
|
22 |
|
|
|
23 |
|
Central (3)
|
|
|
(52 |
) |
|
|
(18 |
) |
|
|
(62 |
) |
|
|
(80 |
) |
|
|
(55 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
251 |
|
|
|
48 |
|
|
|
203 |
|
|
|
251 |
|
|
|
266 |
|
Soft Drinks
|
|
|
80 |
|
|
|
12 |
|
|
|
83 |
|
|
|
95 |
|
|
|
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
331 |
|
|
|
60 |
|
|
|
286 |
|
|
|
346 |
|
|
|
329 |
|
Discontinued operations
|
|
|
|
|
|
|
52 |
|
|
|
85 |
|
|
|
137 |
|
|
|
289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
331 |
|
|
|
112 |
|
|
|
371 |
|
|
|
483 |
|
|
|
618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page 22.
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(%) | |
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
22.5 |
|
|
|
25.7 |
|
|
|
24.3 |
|
|
|
24.6 |
|
|
|
26.7 |
|
EMEA
|
|
|
37.6 |
|
|
|
38.4 |
|
|
|
37.3 |
|
|
|
37.5 |
|
|
|
37.2 |
|
Asia Pacific
|
|
|
6.1 |
|
|
|
6.4 |
|
|
|
5.3 |
|
|
|
5.5 |
|
|
|
6.0 |
|
Central (3)
|
|
|
1.8 |
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
68.0 |
|
|
|
72.4 |
|
|
|
68.8 |
|
|
|
69.5 |
|
|
|
71.8 |
|
Soft Drinks
|
|
|
32.0 |
|
|
|
27.6 |
|
|
|
31.2 |
|
|
|
30.5 |
|
|
|
28.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
49.2 |
|
|
|
56.6 |
|
|
|
56.3 |
|
|
|
56.3 |
|
|
|
52.6 |
|
EMEA
|
|
|
36.0 |
|
|
|
36.7 |
|
|
|
32.2 |
|
|
|
32.9 |
|
|
|
38.0 |
|
Asia Pacific
|
|
|
6.3 |
|
|
|
16.7 |
|
|
|
4.2 |
|
|
|
6.4 |
|
|
|
7.0 |
|
Central (3)
|
|
|
(15.7 |
) |
|
|
(30.0 |
) |
|
|
(21.7 |
) |
|
|
(23.1 |
) |
|
|
(16.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
75.8 |
|
|
|
80.0 |
|
|
|
71.0 |
|
|
|
72.5 |
|
|
|
80.9 |
|
Soft Drinks
|
|
|
24.2 |
|
|
|
20.0 |
|
|
|
29.0 |
|
|
|
27.5 |
|
|
|
19.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The results of overseas operations have been translated into
sterling at weighted average rates of exchange for the period.
In the case of the US dollar, the translation rates are
2004: £1 = $1.82; (2003: £1 =
$1.62 and 2002: £1 = $1.48). |
|
(2) |
Operating profit before exceptional items does not include
operating and non-operating exceptional items for all periods
presented. Operating exceptional items by business segment are
the Americas (2004: £14 million;
2003: 15 months £9 million, 12 months
£9 million, three months £nil million;
2002: £39 million), EMEA
(2004: £19 million; 2003: 15 months
£41 million, 12 months £41 million,
three months £nil million;
2002: £24 million), and Asia Pacific
(2004: £4 million; 2003: 15 months
£1 million, 12 months £1 million,
three months £nil million;
2002: £14 million). |
|
(3) |
Central relates to global functions. Turnover relates to Holidex
fee income. |
22
HOTELS
InterContinental Hotels Group is an international hotel business
which owns a portfolio of well-recognized and respected hotel
brands, including InterContinental, Crowne Plaza, Holiday Inn,
Holiday Inn Express (Express by Holiday Inn outside the
Americas), Staybridge Suites and Candlewood Suites, with 3,540
franchised, managed, owned and leased hotels and approximately
534,000 guest rooms across nearly 100 countries and
territories as at December 31, 2004. Approximately 93% of
the Groups rooms are operated under managed and franchised
models.
Strategy
The Groups objective under its strategy is to become the
worlds leading hotel brand owner, using its proven track
record in hotel management and franchising to grow its portfolio
of hospitality brands predominantly under a managed and
franchised model. This has involved the disposal to date of a
large part of the owned and leased estate (by net book value), a
process which is currently ongoing. Key to the implementation of
this strategy are the following priorities:
|
|
|
|
|
to strengthen the core business through focus on brand
differentiation and system delivery; |
|
|
|
to grow the managed and franchised fee income business in key
markets; |
|
|
|
to develop the organisation and its people; |
|
|
|
to continue the asset disposal program; and |
|
|
|
to return funds to shareholders. |
23
Segmental Results
The following table shows turnover and operating profit in
pounds sterling of IHG Hotels business by activity and the
percentage contribution of each activity for the following
periods: year ended December 31, 2004, 15 months ended
December 31, 2003 including unaudited information for the
three months ended December 31, 2002 and 12 months
ended December 31, 2003, and the year ended
September 30, 2002. The proportions of turnover and
operating profit attributable to owned and leased, managed and
franchised hotels will change in 2005 to reflect the pending
completion of hotel sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover by activity(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
269 |
|
|
|
80 |
|
|
|
296 |
|
|
|
376 |
|
|
|
314 |
|
|
|
Managed
|
|
|
30 |
|
|
|
8 |
|
|
|
28 |
|
|
|
36 |
|
|
|
38 |
|
|
|
Franchised
|
|
|
196 |
|
|
|
48 |
|
|
|
201 |
|
|
|
249 |
|
|
|
218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
495 |
|
|
|
136 |
|
|
|
525 |
|
|
|
661 |
|
|
|
570 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
759 |
|
|
|
187 |
|
|
|
746 |
|
|
|
933 |
|
|
|
736 |
|
|
|
Managed
|
|
|
43 |
|
|
|
10 |
|
|
|
38 |
|
|
|
48 |
|
|
|
36 |
|
|
|
Franchised
|
|
|
27 |
|
|
|
6 |
|
|
|
23 |
|
|
|
29 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
829 |
|
|
|
203 |
|
|
|
807 |
|
|
|
1,010 |
|
|
|
794 |
|
|
Asia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
110 |
|
|
|
28 |
|
|
|
95 |
|
|
|
123 |
|
|
|
103 |
|
|
|
Managed
|
|
|
21 |
|
|
|
5 |
|
|
|
15 |
|
|
|
20 |
|
|
|
20 |
|
|
|
Franchised
|
|
|
3 |
|
|
|
1 |
|
|
|
4 |
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134 |
|
|
|
34 |
|
|
|
114 |
|
|
|
148 |
|
|
|
128 |
|
|
Central(4)
|
|
|
40 |
|
|
|
10 |
|
|
|
41 |
|
|
|
51 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,498 |
|
|
|
383 |
|
|
|
1,487 |
|
|
|
1,870 |
|
|
|
1,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items by activity(1)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
22 |
|
|
|
3 |
|
|
|
20 |
|
|
|
23 |
|
|
|
24 |
|
|
|
Managed
|
|
|
6 |
|
|
|
1 |
|
|
|
4 |
|
|
|
5 |
|
|
|
10 |
|
|
|
Franchised
|
|
|
167 |
|
|
|
41 |
|
|
|
172 |
|
|
|
213 |
|
|
|
177 |
|
|
|
Regional overheads
|
|
|
(32 |
) |
|
|
(11 |
) |
|
|
(35 |
) |
|
|
(46 |
) |
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163 |
|
|
|
34 |
|
|
|
161 |
|
|
|
195 |
|
|
|
173 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
97 |
|
|
|
20 |
|
|
|
77 |
|
|
|
97 |
|
|
|
124 |
|
|
|
Managed
|
|
|
24 |
|
|
|
5 |
|
|
|
19 |
|
|
|
24 |
|
|
|
20 |
|
|
|
Franchised
|
|
|
21 |
|
|
|
5 |
|
|
|
18 |
|
|
|
23 |
|
|
|
11 |
|
|
|
Regional overheads
|
|
|
(23 |
) |
|
|
(8 |
) |
|
|
(22 |
) |
|
|
(30 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119 |
|
|
|
22 |
|
|
|
92 |
|
|
|
114 |
|
|
|
125 |
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
16 |
|
|
|
7 |
|
|
|
11 |
|
|
|
18 |
|
|
|
15 |
|
|
|
Managed
|
|
|
14 |
|
|
|
6 |
|
|
|
8 |
|
|
|
14 |
|
|
|
14 |
|
|
|
Franchised
|
|
|
2 |
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
5 |
|
|
|
Regional overheads
|
|
|
(11 |
) |
|
|
(3 |
) |
|
|
(11 |
) |
|
|
(14 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
10 |
|
|
|
12 |
|
|
|
22 |
|
|
|
23 |
|
|
Central(4)
|
|
|
(52 |
) |
|
|
(18 |
) |
|
|
(62 |
) |
|
|
(80 |
) |
|
|
(55 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
251 |
|
|
|
48 |
|
|
|
203 |
|
|
|
251 |
|
|
|
266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page 25.
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(%) | |
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
18.0 |
|
|
|
20.9 |
|
|
|
19.9 |
|
|
|
20.1 |
|
|
|
20.5 |
|
|
|
Managed
|
|
|
2.0 |
|
|
|
2.1 |
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
2.5 |
|
|
|
Franchised
|
|
|
13.1 |
|
|
|
12.5 |
|
|
|
13.5 |
|
|
|
13.3 |
|
|
|
14.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33.1 |
|
|
|
35.5 |
|
|
|
35.3 |
|
|
|
35.3 |
|
|
|
37.2 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
50.7 |
|
|
|
48.8 |
|
|
|
50.1 |
|
|
|
49.8 |
|
|
|
48.2 |
|
|
|
Managed
|
|
|
2.9 |
|
|
|
2.6 |
|
|
|
2.6 |
|
|
|
2.6 |
|
|
|
2.3 |
|
|
|
Franchised
|
|
|
1.8 |
|
|
|
1.6 |
|
|
|
1.5 |
|
|
|
1.6 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55.4 |
|
|
|
53.0 |
|
|
|
54.2 |
|
|
|
54.0 |
|
|
|
51.9 |
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
7.3 |
|
|
|
7.3 |
|
|
|
6.4 |
|
|
|
6.6 |
|
|
|
6.7 |
|
|
|
Managed
|
|
|
1.4 |
|
|
|
1.3 |
|
|
|
1.0 |
|
|
|
1.1 |
|
|
|
1.3 |
|
|
|
Franchised
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.9 |
|
|
|
8.9 |
|
|
|
7.7 |
|
|
|
8.0 |
|
|
|
8.3 |
|
|
Central (4)
|
|
|
2.6 |
|
|
|
2.6 |
|
|
|
2.8 |
|
|
|
2.7 |
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
8.8 |
|
|
|
6.3 |
|
|
|
9.9 |
|
|
|
9.2 |
|
|
|
9.0 |
|
|
|
Managed
|
|
|
2.4 |
|
|
|
2.1 |
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
3.8 |
|
|
|
Franchised
|
|
|
66.5 |
|
|
|
85.4 |
|
|
|
84.5 |
|
|
|
84.8 |
|
|
|
66.6 |
|
|
|
Regional overheads
|
|
|
(12.7 |
) |
|
|
(22.9 |
) |
|
|
(17.2 |
) |
|
|
(18.3 |
) |
|
|
(14.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65.0 |
|
|
|
70.9 |
|
|
|
79.2 |
|
|
|
77.7 |
|
|
|
65.1 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
38.6 |
|
|
|
41.7 |
|
|
|
37.9 |
|
|
|
38.6 |
|
|
|
46.6 |
|
|
|
Managed
|
|
|
9.6 |
|
|
|
10.4 |
|
|
|
9.4 |
|
|
|
9.6 |
|
|
|
7.5 |
|
|
|
Franchised
|
|
|
8.4 |
|
|
|
10.4 |
|
|
|
8.9 |
|
|
|
9.2 |
|
|
|
4.1 |
|
|
|
Regional overheads
|
|
|
(9.2 |
) |
|
|
(16.7 |
) |
|
|
(10.8 |
) |
|
|
(12.0 |
) |
|
|
(11.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47.4 |
|
|
|
45.8 |
|
|
|
45.4 |
|
|
|
45.4 |
|
|
|
46.9 |
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
6.4 |
|
|
|
14.6 |
|
|
|
5.4 |
|
|
|
7.2 |
|
|
|
5.6 |
|
|
|
Managed
|
|
|
5.6 |
|
|
|
12.5 |
|
|
|
3.9 |
|
|
|
5.6 |
|
|
|
5.3 |
|
|
|
Franchised
|
|
|
0.8 |
|
|
|
|
|
|
|
2.0 |
|
|
|
1.6 |
|
|
|
1.9 |
|
|
|
Regional overheads
|
|
|
(4.4 |
) |
|
|
(6.3 |
) |
|
|
(5.4 |
) |
|
|
(5.6 |
) |
|
|
(4.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.4 |
|
|
|
20.8 |
|
|
|
5.9 |
|
|
|
8.8 |
|
|
|
8.7 |
|
|
Central (4)
|
|
|
(20.8 |
) |
|
|
(37.5 |
) |
|
|
(30.5 |
) |
|
|
(31.9 |
) |
|
|
(20.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The results of overseas operations have been translated into
sterling at weighted average rates of exchange for the period.
In the case of the US dollar, the translation rates are 2004:
£1 = $1.82; (2003: £1 = $1.62 and 2002:
£1 = $1.48). |
|
(2) |
Amounts are reported by origin. |
|
(3) |
Operating profit before exceptional items excludes
profits/(losses) on sale of fixed assets and operations and
other exceptional items. |
|
(4) |
Central relates to global functions. Turnover relates to Holidex
fee income. |
25
The following table shows turnover and operating profit in US
dollars of the IHG Hotels business by activity and the
percentage contribution of each activity for the following
periods: year ended December 31, 2004, 15 months ended
December 31, 2003 including unaudited information for the
three months ended December 31, 2002 and 12 months
ended December 31, 2003, and the year ended
September 30, 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
($ million) | |
Turnover(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
490 |
|
|
|
127 |
|
|
|
481 |
|
|
|
608 |
|
|
|
463 |
|
|
|
Managed
|
|
|
55 |
|
|
|
12 |
|
|
|
46 |
|
|
|
58 |
|
|
|
57 |
|
|
|
Franchised
|
|
|
357 |
|
|
|
75 |
|
|
|
327 |
|
|
|
402 |
|
|
|
322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
902 |
|
|
|
214 |
|
|
|
854 |
|
|
|
1,068 |
|
|
|
842 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
1,383 |
|
|
|
290 |
|
|
|
1,213 |
|
|
|
1,503 |
|
|
|
1,088 |
|
|
|
Managed
|
|
|
78 |
|
|
|
15 |
|
|
|
62 |
|
|
|
77 |
|
|
|
53 |
|
|
|
Franchised
|
|
|
50 |
|
|
|
9 |
|
|
|
37 |
|
|
|
46 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,511 |
|
|
|
314 |
|
|
|
1,312 |
|
|
|
1,626 |
|
|
|
1,177 |
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
201 |
|
|
|
44 |
|
|
|
154 |
|
|
|
198 |
|
|
|
152 |
|
|
|
Managed
|
|
|
38 |
|
|
|
8 |
|
|
|
26 |
|
|
|
34 |
|
|
|
29 |
|
|
|
Franchised
|
|
|
5 |
|
|
|
2 |
|
|
|
5 |
|
|
|
7 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244 |
|
|
|
54 |
|
|
|
185 |
|
|
|
239 |
|
|
|
186 |
|
|
Central(3)
|
|
|
74 |
|
|
|
16 |
|
|
|
66 |
|
|
|
82 |
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,731 |
|
|
|
598 |
|
|
|
2,417 |
|
|
|
3,015 |
|
|
|
2,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
39 |
|
|
|
6 |
|
|
|
32 |
|
|
|
38 |
|
|
|
36 |
|
|
|
Managed
|
|
|
12 |
|
|
|
2 |
|
|
|
7 |
|
|
|
9 |
|
|
|
15 |
|
|
|
Franchised
|
|
|
304 |
|
|
|
63 |
|
|
|
279 |
|
|
|
342 |
|
|
|
262 |
|
|
|
Regional overheads
|
|
|
(59 |
) |
|
|
(18 |
) |
|
|
(56 |
) |
|
|
(74 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
296 |
|
|
|
53 |
|
|
|
262 |
|
|
|
315 |
|
|
|
257 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
177 |
|
|
|
31 |
|
|
|
125 |
|
|
|
156 |
|
|
|
184 |
|
|
|
Managed
|
|
|
43 |
|
|
|
8 |
|
|
|
31 |
|
|
|
39 |
|
|
|
29 |
|
|
|
Franchised
|
|
|
38 |
|
|
|
7 |
|
|
|
29 |
|
|
|
36 |
|
|
|
17 |
|
|
|
Regional overheads
|
|
|
(42 |
) |
|
|
(12 |
) |
|
|
(36 |
) |
|
|
(48 |
) |
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216 |
|
|
|
34 |
|
|
|
149 |
|
|
|
183 |
|
|
|
187 |
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
31 |
|
|
|
9 |
|
|
|
18 |
|
|
|
27 |
|
|
|
24 |
|
|
|
Managed
|
|
|
25 |
|
|
|
10 |
|
|
|
15 |
|
|
|
25 |
|
|
|
19 |
|
|
|
Franchised
|
|
|
3 |
|
|
|
1 |
|
|
|
4 |
|
|
|
5 |
|
|
|
5 |
|
|
|
Regional overheads
|
|
|
(20 |
) |
|
|
(4 |
) |
|
|
(18 |
) |
|
|
(22 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
16 |
|
|
|
19 |
|
|
|
35 |
|
|
|
32 |
|
|
Central(3)
|
|
|
(93 |
) |
|
|
(28 |
) |
|
|
(100 |
) |
|
|
(128 |
) |
|
|
(82 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
458 |
|
|
|
75 |
|
|
|
330 |
|
|
|
405 |
|
|
|
394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page 27.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(%) | |
Turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
17.9 |
|
|
|
21.2 |
|
|
|
19.9 |
|
|
|
20.2 |
|
|
|
20.5 |
|
|
|
Managed
|
|
|
2.0 |
|
|
|
2.0 |
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
2.5 |
|
|
|
Franchised
|
|
|
13.1 |
|
|
|
12.5 |
|
|
|
13.5 |
|
|
|
13.3 |
|
|
|
14.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33.0 |
|
|
|
35.7 |
|
|
|
35.3 |
|
|
|
35.4 |
|
|
|
37.2 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
50.6 |
|
|
|
48.6 |
|
|
|
50.2 |
|
|
|
49.9 |
|
|
|
48.1 |
|
|
|
Managed
|
|
|
2.9 |
|
|
|
2.5 |
|
|
|
2.6 |
|
|
|
2.6 |
|
|
|
2.3 |
|
|
|
Franchised
|
|
|
1.8 |
|
|
|
1.5 |
|
|
|
1.5 |
|
|
|
1.5 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55.3 |
|
|
|
52.6 |
|
|
|
54.3 |
|
|
|
54.0 |
|
|
|
52.0 |
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
7.4 |
|
|
|
7.4 |
|
|
|
6.4 |
|
|
|
6.6 |
|
|
|
6.7 |
|
|
|
Managed
|
|
|
1.4 |
|
|
|
1.3 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.3 |
|
|
|
Franchised
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.0 |
|
|
|
9.0 |
|
|
|
7.7 |
|
|
|
7.9 |
|
|
|
8.2 |
|
|
Central (3)
|
|
|
2.7 |
|
|
|
2.7 |
|
|
|
2.7 |
|
|
|
2.7 |
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
8.5 |
|
|
|
8.0 |
|
|
|
9.7 |
|
|
|
9.4 |
|
|
|
9.1 |
|
|
|
Managed
|
|
|
2.6 |
|
|
|
2.7 |
|
|
|
2.1 |
|
|
|
2.2 |
|
|
|
3.8 |
|
|
|
Franchised
|
|
|
66.4 |
|
|
|
84.0 |
|
|
|
84.5 |
|
|
|
84.4 |
|
|
|
66.5 |
|
|
|
Regional overheads
|
|
|
(12.9 |
) |
|
|
(24.0 |
) |
|
|
(17.0 |
) |
|
|
(18.3 |
) |
|
|
(14.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64.6 |
|
|
|
70.7 |
|
|
|
79.3 |
|
|
|
77.7 |
|
|
|
65.2 |
|
|
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
38.6 |
|
|
|
41.3 |
|
|
|
37.9 |
|
|
|
38.5 |
|
|
|
46.7 |
|
|
|
Managed
|
|
|
9.4 |
|
|
|
10.7 |
|
|
|
9.4 |
|
|
|
9.6 |
|
|
|
7.4 |
|
|
|
Franchised
|
|
|
8.3 |
|
|
|
9.3 |
|
|
|
8.8 |
|
|
|
8.9 |
|
|
|
4.3 |
|
|
|
Regional overheads
|
|
|
(9.2 |
) |
|
|
(16.0 |
) |
|
|
(10.9 |
) |
|
|
(11.9 |
) |
|
|
(10.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47.1 |
|
|
|
45.3 |
|
|
|
45.2 |
|
|
|
45.1 |
|
|
|
47.5 |
|
|
Asia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
6.7 |
|
|
|
12.0 |
|
|
|
5.5 |
|
|
|
6.7 |
|
|
|
6.1 |
|
|
|
Managed
|
|
|
5.5 |
|
|
|
13.3 |
|
|
|
4.6 |
|
|
|
6.2 |
|
|
|
4.8 |
|
|
|
Franchised
|
|
|
0.7 |
|
|
|
1.3 |
|
|
|
1.2 |
|
|
|
1.2 |
|
|
|
1.3 |
|
|
|
Regional overheads
|
|
|
(4.4 |
) |
|
|
(5.3 |
) |
|
|
(5.5 |
) |
|
|
(5.4 |
) |
|
|
(4.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.5 |
|
|
|
21.3 |
|
|
|
5.8 |
|
|
|
8.7 |
|
|
|
8.1 |
|
|
Central (3)
|
|
|
(20.2 |
) |
|
|
(37.3 |
) |
|
|
(30.3 |
) |
|
|
(31.5 |
) |
|
|
(20.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts are reported by origin. |
|
(2) |
Operating profit before exceptional items excludes profits/
(losses) on sale of fixed assets and operations and other
exceptional items. |
|
(3) |
Central relates to global functions. Turnover relates to Holidex
fee income. |
27
Operations
|
|
|
Ownership/ Management Model |
The Group currently operates its hotels business through three
distinct business models which offer different growth, return,
risk and reward opportunities. The models are summarized as
follows:
franchised, where Group companies neither own nor manage
the hotel, but license the use of a Group brand and provide
access to reservation systems, loyalty schemes, and know-how.
The Group derives revenues from a brand royalty or licensing
fee, based on a percentage of room revenue. At the end of 2004,
396,829 (74%) of the Groups rooms were franchised, with
86% of rooms in the Americas operating under this model.
managed, where in addition to licensing the use of a
Group brand, a Group company manages the hotel for third party
owners. The Group derives revenues from base and incentive
management fees, and provides the system infrastructure
necessary for the hotel to operate. Management contract fees are
linked to total hotel revenue and may have an additional
incentive fee linked to profitability and/or cash flow. The
terms of these agreements vary, but are often long term (for
example, 10 years or more). The Group companys
responsibilities under the management agreement typically
include hiring, training and supervising the managers and
employees that operate the hotels under the relevant brand
standards. The Group company prepares annual budgets for the
hotels that it manages, and the property owners are responsible
for funding periodic maintenance and repair on a basis to be
allocated by the Group company. In order to gain access to
central reservation systems, global and regional brand marketing
and brand standards and procedures the owners are typically
required to make a further contribution. In certain cases,
property owners may require performance targets, with
consequences for management fees and sometimes the contract
itself (including on occasion, the right of termination) if
those targets are not met. At the end of 2004, 98,953 (19%) of
the Groups rooms were operated under management contracts.
owned and leased, where a Group company both owns (or
leases) and operates the hotel and, in the case of ownership,
takes all the benefits and risks associated with ownership. The
Group has been selling a significant proportion of its owned and
leased portfolio and in future expects to only own hotels where
it is considered strategically important to do so. Rooms owned
or leased by the Group at the end of 2004 totaled 38,420,
representing 7% of the Groups rooms.
In addition, the Group also makes equity investments in hotel
ownership entities, where its equity investment is less than
100% and it participates in a share of the benefits and risks of
ownership. A management contract is generally entered into as
well as the equity investment.
The following table shows the number of hotels and rooms owned,
managed or franchised by IHG at December 31, 2004,
December 31, 2003 and September 30, 2002.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management | |
|
|
|
|
|
|
|
|
|
|
|
|
contracts and joint | |
|
|
|
|
|
|
Owned or leased | |
|
ventures | |
|
Franchised | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
|
No. of | |
|
No. of | |
|
No. of | |
|
No. of | |
|
No. of | |
|
No. of | |
|
No. of | |
|
No. of | |
|
|
hotels | |
|
rooms | |
|
hotels | |
|
rooms | |
|
hotels | |
|
rooms | |
|
hotels | |
|
rooms | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
2004
|
|
|
166 |
|
|
|
38,420 |
|
|
|
403 |
|
|
|
98,953 |
|
|
|
2,971 |
|
|
|
396,829 |
|
|
|
3,540 |
|
|
|
534,202 |
|
2003
|
|
|
171 |
|
|
|
39,459 |
|
|
|
423 |
|
|
|
103,440 |
|
|
|
2,926 |
|
|
|
393,419 |
|
|
|
3,520 |
|
|
|
536,318 |
|
2002
|
|
|
190 |
|
|
|
42,642 |
|
|
|
314 |
|
|
|
86,761 |
|
|
|
2,821 |
|
|
|
386,122 |
|
|
|
3,325 |
|
|
|
515,525 |
|
The Group sets quality and service standards for all of its
hotel brands (including those operated under management contract
or franchise arrangements) and operates a customer satisfaction
and hotel quality measurement system to ensure those standards
are met or exceeded. The quality measurement system includes an
assessment of both physical property and customer service
standards.
28
The Group uses a global revenue delivery system for
reservations, e-commerce, IT, internet and its loyalty scheme
(Priority Club Rewards) which is paid for by assessments from
each hotel in the Group. The elements of the global system
include:
Priority Club Rewards: The Group operates the largest
loyalty program in the hotel industry, with 23.7 million
members at December 31, 2004, a growth of about 23% over
the previous year. It has alliances with 35 airlines which
enable members to collect frequent flyer miles. IHG also has
alliances with external partners such as car hire companies and
credit card companies, which provide exposure and access to
IHGs system. In 2004, Priority Club Rewards launched a
Japanese language website adding to the already available
English, Chinese, French, German and Spanish website versions.
Revenue generated from Priority Club Rewards members was 18%
higher than in 2003 and represented 30% of total IHG system room
revenue.
Central Reservation System Technology: The Group operates
the HolidexPlus and Holidex central reservation systems. The
HolidexPlus and Holidex systems receive reservation requests
entered on terminals located at most of its reservation centers,
as well as from global distribution systems operated by a number
of major corporations and travel agents. Where local hotel
systems allow, the HolidexPlus and the Holidex systems
immediately confirm reservations or indicate alternative
accommodation available within IHGs network. Confirmations
are transmitted electronically to the hotel for which the
reservation is made.
Reservation Call Centers: The Group operates 13
reservation centers around the world which enable it to sell in
local languages in many countries and offer a high quality
service to customers.
Internet: The Group introduced electronic hotel
reservations in 1995. The Internet continues to be an important
communications, branding and distribution channel for the
Groups sales. During fiscal 2004, internet channel
bookings represented $1.4 billion of IHG system room
revenue, an increased revenue growth of 44% over 2003.
Approximately 13% of total IHG system room revenue is sold via
the internet through various branded websites, such as
www.intercontinental.com and www.holiday-inn.com, as well as
certified third parties. IHG made progress in 2004 in
establishing standards for working with third-party
intermediaries on-line travel
distributors who sell or re-sell IHG hotel rooms via
their internet sites. Under the standards, certified
distributors are required to respect IHGs trademarks,
ensure reservations are guaranteed through an automated and
common confirmation process, and clearly present fees to
customers. By the end of 2004, IHG had certified over
200 third party distributors including Travelocity,
Travelocity Business, and Priceline. About 80% of IHG system
room revenue booked on the web is now booked directly through
the Groups own brand sites.
The Group estimates that, during 2004, these reservation systems
(which include company reservation centers, global distribution
systems and internet reservations) delivered around 38% of IHG
system room revenue.
IHG targets its sales and marketing expenditure in each region
on driving revenue and brand awareness or, in the case of sales
investments, targeting segments such as corporate accounts,
travel agencies and meeting organizers. The majority of
IHGs sales and marketing expenditure is funded by
contractual fees paid by most hotels in the system and totaled
over $400 million in 2004.
The strategic goals for the global system as a whole include:
|
|
|
|
|
adding further locations and improving guest satisfaction for
its brands; |
|
|
|
continuing the focus on enrolments in Priority Club Rewards and
increasing share of the total hotel spend to establish Priority
Club Rewards as the number one program in the industry; |
|
|
|
making the direct channels the best available; and |
|
|
|
improving pricing structure. |
29
The Groups portfolio includes six established and diverse
brands and one new brand (Hotel Indigo). These brands cover
several market segments and in the case of InterContinental,
Crowne Plaza, Holiday Inn and Express, operate internationally.
Staybridge Suites operates in the Americas and has recently been
launched in the United Kingdom. Candlewood Suites operates
exclusively in the United States.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
|
| |
Brands |
|
Room numbers | |
|
Hotels | |
|
|
| |
|
| |
InterContinental
|
|
|
44,516 |
|
|
|
132 |
|
Crowne Plaza
|
|
|
61,627 |
|
|
|
215 |
|
Holiday Inn
|
|
|
278,787 |
|
|
|
1,484 |
|
Express
|
|
|
126,035 |
|
|
|
1,512 |
|
Staybridge Suites
|
|
|
9,189 |
|
|
|
79 |
|
Candlewood Suites
|
|
|
12,407 |
|
|
|
109 |
|
Other(1)
|
|
|
1,641 |
|
|
|
9 |
|
|
|
|
|
|
|
|
Total
|
|
|
534,202 |
|
|
|
3,540 |
|
|
|
|
|
|
|
|
|
|
(1) |
Other comprises one Hotel Indigo, seven other branded hotels
under management and one under franchise. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas | |
|
Americas | |
|
EMEA | |
|
EMEA | |
|
|
|
|
total | |
|
O & L | |
|
total | |
|
O & L | |
|
Asia Pacific | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Average room rate $(1)
|
|
|
129.83 |
|
|
|
168.66 |
|
|
|
154.12 |
|
|
|
211.21 |
|
|
|
137.63 |
|
Room numbers(2)
|
|
|
15,088 |
|
|
|
4,489 |
|
|
|
20,292 |
|
|
|
4,483 |
|
|
|
9,136 |
|
|
|
(1) |
For the year ended December 31, 2004; quoted at constant
US$ exchange rate. Owned and leased average room rate is for
comparable hotels. |
|
(2) |
As at December 31, 2004. |
InterContinental is IHGs global premium hotel brand. The
brand is targeted at both business and leisure guests.
InterContinental hotels are generally situated in prime
locations in major cities and key resorts around the world.
There were 132 InterContinental hotels in more than
60 countries and territories which represented 8% of all of
IHG hotel rooms as at December 31, 2004.
InterContinental hotels are principally owned, leased or managed
by the Group. The brand is one of the top international premium
hotel brands based on room numbers and has more than
50 years of heritage in the segment. IHGs competition
includes international luxury chains (for example Four Seasons
and Ritz Carlton) and upper upscale chains (for example,
Marriott, Hilton, Hyatt and Westin).
During 2004, four new InterContinental hotels were added to
the portfolio, Buckhead, Atlanta (United States), Cairo (Egypt),
Makkah (Saudi Arabia) and Kigali (Rwanda). After dispositions
there was a net loss of three in the total number of
InterContinental hotels. The Group expects to open an
InterContinental hotel in Boston in 2006, along with other
properties in Beijing and Seattle.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas | |
|
Americas | |
|
EMEA | |
|
EMEA | |
|
|
|
|
total | |
|
O & L | |
|
total | |
|
O & L | |
|
Asia Pacific | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Average room rate $(1)
|
|
|
96.24 |
|
|
|
107.73 |
|
|
|
118.48 |
|
|
|
122.29 |
|
|
|
81.07 |
|
Room numbers(2)
|
|
|
33,645 |
|
|
|
2,284 |
|
|
|
15,747 |
|
|
|
3,879 |
|
|
|
12,235 |
|
30
|
|
(1) |
For the year ended December 31, 2004; quoted at constant
US$ exchange rate. Owned and leased average room rate is for
comparable hotels. |
|
(2) |
As at December 31, 2004. |
Crowne Plaza is IHGs global upscale hotel brand which had
grown to 215 hotels worldwide by December 31, 2004.
The brand is targeted at the business guest, with a particular
focus on meetings and related services. The upscale Crowne Plaza
hotels provide the high level of comfort, amenities, services,
facilities and meeting space expected of a full service hotel.
Crowne Plaza represented 12% of IHG Hotels hotel rooms as
at December 31, 2004.
Nearly 60% of the upscale Crowne Plaza hotels and resorts are
franchised hotels. As at December 31, 2004, 54% of Crowne
Plaza brand properties were in the Americas. The key competitors
in this segment include Sheraton, Marriott, Hilton, Double-Tree,
Wyndham and Radisson.
During 2004, 15 Crowne Plaza hotels were added to the
portfolio while two left the portfolio, resulting in a net
increase of 13 hotels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas | |
|
Americas | |
|
EMEA | |
|
EMEA | |
|
|
|
|
total | |
|
O&L | |
|
total | |
|
O&L | |
|
Asia Pacific | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Average room rate $(1)
|
|
|
79.85 |
|
|
|
78.56 |
|
|
|
95.49 |
|
|
|
111.89 |
|
|
|
63.22 |
|
Room numbers(2)
|
|
|
205,500 |
|
|
|
2,577 |
|
|
|
53,568 |
|
|
|
15,735 |
|
|
|
19,719 |
|
|
|
(1) |
For the year ended December 31, 2004; quoted at constant
US$ exchange rate. Owned and leased average room rate is for
comparable hotels. |
|
(2) |
As at December 31, 2004. |
Holiday Inn is IHGs midscale full service brand. Holiday
Inn International was acquired in 1988 with the remaining North
American business of Holiday Inn being acquired in 1990. The
Holiday Inn brand is targeted at the mid-market guest and is the
Groups largest global hotel brand based on room numbers.
IHG seeks to offer, through its Holiday Inn brand, good value
for money with appropriate standards of products and services.
There were 1,484 Holiday Inn hotels located in more than 70
countries and territories which represented 52% of all
IHGs hotel rooms as at December 31, 2004. The brand
is predominantly franchised. As at December 31, 2004, 72%
of the Holiday Inn branded hotels were located in the Americas.
During 2004, the Group sold the following hotels in individual
transactions: in the United States, the Holiday Inn South Bend
Indiana, in the United Kingdom, the Holiday Inn Sheffield West,
the Holiday Inn Teesside, Holiday Inn Crawley and the Holiday
Inn Preston and in Australia, the Holiday Inn Newcastle and the
Holiday Inn Adelaide. These sales were part of the
86 hotels that left the portfolio, which also included a
number of removals due to IHG initiated action against
non-performing owners or poor quality hotels. With
41 hotels added to the portfolio, the net movement during
2004 was a decrease of 45 hotels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas | |
|
EMEA | |
|
EMEA | |
|
|
|
|
total | |
|
total | |
|
O&L | |
|
Asia Pacific | |
|
|
| |
|
| |
|
| |
|
| |
Average room rate $(1)
|
|
|
75.53 |
|
|
|
89.83 |
|
|
|
75.15 |
|
|
|
61.72 |
|
Room numbers(2)
|
|
|
109,882 |
|
|
|
15,921 |
|
|
|
1,473 |
|
|
|
232 |
|
|
|
(1) |
For the year ended December 31, 2004; quoted at constant
US$ conversion rate. Owned and leased average room rate is for
comparable hotels. |
|
(2) |
As at December 31, 2004. |
Express is the Groups midscale limited service hotel
brand. IHG recognized the need for a brand in this category in
the early 1990s and subsequently developed Express to extend the
reach of the Holiday Inn brand
31
and enter the midscale limited service market. The brand has
grown rapidly and aims to provide the room quality of midscale
hotels without the associated full range of facilities. The
brand is targeted at the value-conscious guest.
There were 1,512 Express hotels worldwide, which represented 24%
of IHGs hotel rooms as at December 31, 2004. Express
is one of the largest brands in the US midscale limited
service sector based on room numbers, and approximately 90% of
the Express branded rooms are located in the Americas. Express
hotels are almost entirely franchised. Express also has a solid
and growing brand presence in the UK market where it faces
competition from a variety of local market brands and
independent hotels.
During 2004, 114 new Holiday Inn Express hotels were added to
the portfolio, while 57 hotels were removed from the portfolio,
resulting in a net gain of 57 hotels. A further 200 franchise
agreements were signed adding to the system pipeline.
|
|
|
|
|
|
|
Americas | |
|
|
total | |
|
|
| |
Average room rate $(1)
|
|
|
87.20 |
|
Room numbers(2)
|
|
|
9,189 |
|
|
|
(1) |
For the year ended December 31, 2004; quoted at constant
US$ exchange rate. |
|
(2) |
As at December 31, 2004. |
Staybridge Suites is IHGs organically developed extended
stay brand and offers self-catering services and amenities
designed specifically for those on extended travel. The rooms
offer more space than the typical hotel room, offering studios
and one and two bedroom suites, with cooking facilities
available in each suite. As at December 31, 2004, there
were 79 Staybridge Suites hotels, all of which are
presently located in the Americas, which represented 2% of all
IHGs hotel rooms. The first Staybridge Suites hotel was
opened in 1998, with the seventy fifth Staybridge Suites hotel
following in June 2004, demonstrating the fastest roll out of
75 properties in the extended stay segment, and making
Staybridge Suites one of the fastest growing brands in its
segment. Staybridge Suites operations are divided approximately
equally between franchised and managed models. The primary
competitors include Residence Inn, Homewood, Summerfield and
Hawthorne.
During 2004, eight hotels were added to the portfolio with no
removals.
On April 6, 2005 the Group announced the launch of
Staybridge Suites in the United Kingdom. The first two hotels
are expected to open in late 2006.
|
|
|
|
|
|
|
Total | |
|
|
| |
Average room rate $(1)
|
|
|
58.06 |
|
Room numbers(2)
|
|
|
12,407 |
|
|
|
(1) |
For the year ended December 31, 2004; quoted at constant
US$ exchange rate. |
|
(2) |
As at December 31, 2004. |
The Candlewood Suites brand was acquired on December 31,
2003. Candlewood Suites is an extended stay brand which
complements Staybridge Suites positioning. Candlewood
Suites is an established brand of purpose built hotels with 109
properties on average approximately five years old. The major
owner of Candlewood Suites properties is HPT and the Group
manages all 76 of HPTs Candlewood properties under a
20 year agreement. At the end of 2004, Candlewood Suites
represented 2% of all of the Groups rooms.
In April 2004, the Group launched its seventh brand, Hotel
Indigo, which is designed to appeal to aspirational midscale
hotel guests who are wishing to trade up. The first Hotel Indigo
opened in Atlanta, Georgia in the United States in October 2004.
32
Although it has worldwide hotel operations, the Group is most
dependent on the Americas for operating profit, reflecting the
structure of the branded global hotel market. In terms of its
overall hotel level operating profit before central overheads
and exceptional items, the Americas represented 54%, EMEA
represented 39% and the Asia Pacific region represented 7% in
the 12 months ended December 2004.
The geographical analysis, split by number of rooms and
operating profit, is set out in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas | |
|
EMEA | |
|
Asia Pacific | |
|
|
| |
|
| |
|
| |
|
|
(% of Total) | |
Room numbers(1)
|
|
|
72 |
|
|
|
20 |
|
|
|
8 |
|
Hotel level operating profit (before central overheads and
exceptional items(2)
|
|
|
54 |
|
|
|
39 |
|
|
|
7 |
|
|
|
(1) |
As at December 31, 2004. |
|
(2) |
For the year ended December 31, 2004. |
The following table shows information concerning the
geographical locations of IHGs hotels as at
December 31, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management | |
|
|
|
|
|
|
|
|
|
|
|
|
contract and joint | |
|
|
|
|
|
|
Owned or leased | |
|
ventures | |
|
Franchised | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
7 |
|
|
|
3,523 |
|
|
|
5 |
|
|
|
1,819 |
|
|
|
1 |
|
|
|
150 |
|
|
|
13 |
|
|
|
5,492 |
|
|
Crowne Plaza
|
|
|
5 |
|
|
|
1,991 |
|
|
|
16 |
|
|
|
5,942 |
|
|
|
73 |
|
|
|
20,643 |
|
|
|
94 |
|
|
|
28,576 |
|
|
Holiday Inn
|
|
|
6 |
|
|
|
1,453 |
|
|
|
50 |
|
|
|
15,446 |
|
|
|
882 |
|
|
|
165,860 |
|
|
|
938 |
|
|
|
182,759 |
|
|
Express
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
362 |
|
|
|
1,296 |
|
|
|
103,029 |
|
|
|
1,298 |
|
|
|
103,391 |
|
|
Staybridge
|
|
|
3 |
|
|
|
372 |
|
|
|
35 |
|
|
|
4,227 |
|
|
|
39 |
|
|
|
4,255 |
|
|
|
77 |
|
|
|
8,854 |
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
9,189 |
|
|
|
33 |
|
|
|
3,218 |
|
|
|
109 |
|
|
|
12,407 |
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21 |
|
|
|
7,339 |
|
|
|
188 |
|
|
|
37,601 |
|
|
|
2,324 |
|
|
|
297,155 |
|
|
|
2,533 |
|
|
|
342,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
3 |
|
|
|
966 |
|
|
|
11 |
|
|
|
3,556 |
|
|
|
17 |
|
|
|
5,074 |
|
|
|
31 |
|
|
|
9,596 |
|
|
Crowne Plaza
|
|
|
1 |
|
|
|
293 |
|
|
|
2 |
|
|
|
357 |
|
|
|
19 |
|
|
|
4,419 |
|
|
|
22 |
|
|
|
5,069 |
|
|
Holiday Inn
|
|
|
2 |
|
|
|
1,124 |
|
|
|
3 |
|
|
|
1,599 |
|
|
|
131 |
|
|
|
20,018 |
|
|
|
136 |
|
|
|
22,741 |
|
|
Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
6,491 |
|
|
|
59 |
|
|
|
6,491 |
|
|
Staybridge
|
|
|
1 |
|
|
|
120 |
|
|
|
1 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
335 |
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7 |
|
|
|
2,503 |
|
|
|
17 |
|
|
|
5,727 |
|
|
|
226 |
|
|
|
36,002 |
|
|
|
250 |
|
|
|
44,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management | |
|
|
|
|
|
|
|
|
|
|
|
|
contract and joint | |
|
|
|
|
|
|
Owned or leased | |
|
ventures | |
|
Franchised | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
10 |
|
|
|
4,489 |
|
|
|
16 |
|
|
|
5,375 |
|
|
|
18 |
|
|
|
5,224 |
|
|
|
44 |
|
|
|
15,088 |
|
|
Crowne Plaza
|
|
|
6 |
|
|
|
2,284 |
|
|
|
18 |
|
|
|
6,299 |
|
|
|
92 |
|
|
|
25,062 |
|
|
|
116 |
|
|
|
33,645 |
|
|
Holiday Inn
|
|
|
8 |
|
|
|
2,577 |
|
|
|
53 |
|
|
|
17,045 |
|
|
|
1,013 |
|
|
|
185,878 |
|
|
|
1,074 |
|
|
|
205,500 |
|
|
Express
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
362 |
|
|
|
1,355 |
|
|
|
109,520 |
|
|
|
1,357 |
|
|
|
109,882 |
|
|
Staybridge
|
|
|
4 |
|
|
|
492 |
|
|
|
36 |
|
|
|
4,442 |
|
|
|
39 |
|
|
|
4,255 |
|
|
|
79 |
|
|
|
9,189 |
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
9,189 |
|
|
|
33 |
|
|
|
3,218 |
|
|
|
109 |
|
|
|
12,407 |
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28 |
|
|
|
9,842 |
|
|
|
205 |
|
|
|
43,328 |
|
|
|
2,550 |
|
|
|
333,157 |
|
|
|
2,783 |
|
|
|
386,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
2 |
|
|
|
646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
646 |
|
|
Crowne Plaza
|
|
|
5 |
|
|
|
1,413 |
|
|
|
2 |
|
|
|
399 |
|
|
|
4 |
|
|
|
879 |
|
|
|
11 |
|
|
|
2,691 |
|
|
Holiday Inn
|
|
|
72 |
|
|
|
12,109 |
|
|
|
3 |
|
|
|
431 |
|
|
|
22 |
|
|
|
2,881 |
|
|
|
97 |
|
|
|
15,421 |
|
|
Express
|
|
|
1 |
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
98 |
|
|
|
9,987 |
|
|
|
99 |
|
|
|
10,107 |
|
|
Staybridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
80 |
|
|
|
14,288 |
|
|
|
5 |
|
|
|
830 |
|
|
|
124 |
|
|
|
13,747 |
|
|
|
209 |
|
|
|
28,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
10 |
|
|
|
3,837 |
|
|
|
13 |
|
|
|
4,488 |
|
|
|
7 |
|
|
|
2,149 |
|
|
|
30 |
|
|
|
10,474 |
|
|
Crowne Plaza
|
|
|
10 |
|
|
|
2,466 |
|
|
|
6 |
|
|
|
1,665 |
|
|
|
21 |
|
|
|
4,669 |
|
|
|
37 |
|
|
|
8,800 |
|
|
Holiday Inn
|
|
|
16 |
|
|
|
3,626 |
|
|
|
8 |
|
|
|
1,595 |
|
|
|
186 |
|
|
|
28,941 |
|
|
|
210 |
|
|
|
34,162 |
|
|
Express
|
|
|
10 |
|
|
|
1,353 |
|
|
|
8 |
|
|
|
821 |
|
|
|
35 |
|
|
|
3,428 |
|
|
|
53 |
|
|
|
5,602 |
|
|
Staybridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
222 |
|
|
|
1 |
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
46 |
|
|
|
11,282 |
|
|
|
35 |
|
|
|
8,569 |
|
|
|
250 |
|
|
|
39,409 |
|
|
|
331 |
|
|
|
59,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Middle East and Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
9,172 |
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
9,172 |
|
|
Crowne Plaza
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
3,045 |
|
|
|
4 |
|
|
|
1,211 |
|
|
|
15 |
|
|
|
4,256 |
|
|
Holiday Inn
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
3,305 |
|
|
|
4 |
|
|
|
680 |
|
|
|
22 |
|
|
|
3,985 |
|
|
Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
212 |
|
|
|
1 |
|
|
|
212 |
|
|
Staybridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
15,522 |
|
|
|
9 |
|
|
|
2,103 |
|
|
|
68 |
|
|
|
17,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management | |
|
|
|
|
|
|
|
|
|
|
|
|
contract and joint | |
|
|
|
|
|
|
Owned or leased | |
|
ventures | |
|
Franchised | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
Hotels | |
|
Rooms | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Total EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
12 |
|
|
|
4,483 |
|
|
|
43 |
|
|
|
13,660 |
|
|
|
7 |
|
|
|
2,149 |
|
|
|
62 |
|
|
|
20,292 |
|
|
Crowne Plaza
|
|
|
15 |
|
|
|
3,879 |
|
|
|
19 |
|
|
|
5,109 |
|
|
|
29 |
|
|
|
6,759 |
|
|
|
63 |
|
|
|
15,747 |
|
|
Holiday Inn
|
|
|
88 |
|
|
|
15,735 |
|
|
|
29 |
|
|
|
5,331 |
|
|
|
212 |
|
|
|
32,502 |
|
|
|
329 |
|
|
|
53,568 |
|
|
Express
|
|
|
11 |
|
|
|
1,473 |
|
|
|
8 |
|
|
|
821 |
|
|
|
134 |
|
|
|
13,627 |
|
|
|
153 |
|
|
|
15,921 |
|
|
Staybridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
222 |
|
|
|
1 |
|
|
|
222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total EMEA
|
|
|
126 |
|
|
|
25,570 |
|
|
|
99 |
|
|
|
24,921 |
|
|
|
383 |
|
|
|
55,259 |
|
|
|
608 |
|
|
|
105,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Far East and Australasia (Asia Pacific)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
2 |
|
|
|
729 |
|
|
|
17 |
|
|
|
6,090 |
|
|
|
7 |
|
|
|
2,317 |
|
|
|
26 |
|
|
|
9,136 |
|
|
Crowne Plaza
|
|
|
3 |
|
|
|
698 |
|
|
|
27 |
|
|
|
9,706 |
|
|
|
6 |
|
|
|
1,831 |
|
|
|
36 |
|
|
|
12,235 |
|
|
Holiday Inn
|
|
|
7 |
|
|
|
1,581 |
|
|
|
50 |
|
|
|
14,010 |
|
|
|
24 |
|
|
|
4,128 |
|
|
|
81 |
|
|
|
19,719 |
|
|
Express
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
95 |
|
|
|
1 |
|
|
|
137 |
|
|
|
2 |
|
|
|
232 |
|
|
Staybridge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
803 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12 |
|
|
|
3,008 |
|
|
|
99 |
|
|
|
30,704 |
|
|
|
38 |
|
|
|
8,413 |
|
|
|
149 |
|
|
|
42,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
24 |
|
|
|
9,701 |
|
|
|
76 |
|
|
|
25,125 |
|
|
|
32 |
|
|
|
9,690 |
|
|
|
132 |
|
|
|
44,516 |
|
|
Crowne Plaza
|
|
|
24 |
|
|
|
6,861 |
|
|
|
64 |
|
|
|
21,114 |
|
|
|
127 |
|
|
|
33,652 |
|
|
|
215 |
|
|
|
61,627 |
|
|
Holiday Inn
|
|
|
103 |
|
|
|
19,893 |
|
|
|
132 |
|
|
|
36,386 |
|
|
|
1,249 |
|
|
|
222,508 |
|
|
|
1,484 |
|
|
|
278,787 |
|
|
Express
|
|
|
11 |
|
|
|
1,473 |
|
|
|
11 |
|
|
|
1,278 |
|
|
|
1,490 |
|
|
|
123,284 |
|
|
|
1,512 |
|
|
|
126,035 |
|
|
Staybridge
|
|
|
4 |
|
|
|
492 |
|
|
|
36 |
|
|
|
4,442 |
|
|
|
39 |
|
|
|
4,255 |
|
|
|
79 |
|
|
|
9,189 |
|
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
9,189 |
|
|
|
33 |
|
|
|
3,218 |
|
|
|
109 |
|
|
|
12,407 |
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
1,419 |
|
|
|
1 |
|
|
|
222 |
|
|
|
9 |
|
|
|
1,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
166 |
|
|
|
38,420 |
|
|
|
403 |
|
|
|
98,953 |
|
|
|
2,971 |
|
|
|
396,829 |
|
|
|
3,540 |
|
|
|
534,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
In the Americas, the largest proportion of rooms is operated
under the franchise business model primarily in the midscale
segment (Holiday Inn and Express). Similarly, in the upscale
segment, Crowne Plaza is predominantly franchised, whereas the
InterContinental brand currently has a bias toward ownership and
management. With 2,783 hotels, the Americas represented the bulk
of hotels and approximately 54% of Hotels operating profit
before central costs and exceptional items during the year ended
December 31, 2004. The key profit producing region is the
United States, although IHG is also represented in each of Latin
America, Canada, Mexico and the Caribbean.
Comprising 608 hotels at the end of 2004, EMEA represented
approximately 39% of Hotels operating profit before central
costs and exceptional items during the year ended
December 31, 2004. The key profit producing regions are the
United Kingdom and the main continental European gateway cities
such as Paris and Frankfurt.
Asia Pacific represented 8% of Hotels rooms and 7% of Hotels
operating profit before central costs and exceptional items
during the year ended December 31, 2004. IHG has a strong
and growing presence in Asia Pacific, comprising 149 hotels in
total. Currently Greater China is expected to generate
significant growth in the hotel and tourism industry over the
next decade. The Group believes that the region represents a
good source of growth due to the current low penetration of
brands offering the opportunity for IHGs brands to build
strong positions in key markets.
At December 31, 2004, IHG had formally approved franchise
applications for 587 hotels with 59,809 rooms, though the hotels
had yet to enter the system. In addition, IHG had signed
management contracts on a further 84 hotels (22,418 rooms), and
these are expected to enter the system over the next two years.
In addition, two owned and leased hotels, with 670 rooms, are
also due to enter the system. Approximately 20% of the rooms at
December 31, 2004 in the pipeline were in the
InterContinental and Crowne Plaza brands.
There are no assurances that all of these hotels will open or
enter the system. The construction, conversion and development
of hotels is dependent upon a number of factors, including
meeting brand standards, obtaining the necessary permits
relating to construction and operation, the cost of
constructing, converting and equipping such hotels and the
ability to obtain suitable financing at acceptable interest
rates. The supply of capital for hotel development in the United
States and major economies may not continue at previous levels
and consequently the system pipeline could decrease.
Although the performance of individual hotels and geographic
markets might be highly seasonal due to a variety of factors
such as the tourist trade and local economic conditions, the
geographical spread of IHGs hotels in almost 100 countries
and territories and the relative stability of the income stream
from management and franchising activities diminish the effect
of seasonality on the results of the Group.
The Groups hotels compete with a wide range of facilities
offering various types of lodging options and related services
to the public. The competition includes several large and
moderate sized hotel chains offering upper, mid and lower priced
accommodation and also includes independent hotels in each of
these market segments, particularly outside of North America
where the lodging industry is much more fragmented. Major hotel
chains which compete with the Group include Marriott
International, Inc., Starwood Hotels & Resorts
36
Worldwide, Inc., Choice Hotel International, Best Western
International, Hilton Hotels Corporation, Hilton Group plc,
Cendant Corporation, Four Seasons Hotels Inc. and Accor SA.
The Group considers Revenue per Available Room
(RevPAR) to be a meaningful indicator of performance
because it measures the period-over-period change in room
revenues for comparable properties. RevPAR is calculated by
dividing room revenue by total room nights available for a given
period. RevPAR may not be comparable to similarly titled
measures, such as revenues.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned & leased | |
|
|
|
|
|
|
comparable | |
|
Managed | |
|
Franchised | |
|
|
| |
|
| |
|
| |
|
|
|
|
Change vs | |
|
|
|
Change vs | |
|
|
|
Change vs | |
|
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
69.5 |
% |
|
|
2.0 |
% |
|
|
56.3 |
% |
|
|
7.8 |
% |
|
|
58.0 |
% |
|
|
5.7 |
% |
|
|
Average daily rate
|
|
$ |
168.66 |
|
|
|
5.1 |
% |
|
$ |
119.77 |
|
|
|
3.2 |
% |
|
$ |
101.97 |
|
|
|
5.1 |
% |
|
|
RevPAR
|
|
$ |
117.15 |
|
|
|
8.1 |
% |
|
$ |
67.40 |
|
|
|
19.7 |
% |
|
$ |
59.15 |
|
|
|
5.3 |
% |
|
Crowne Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
74.4 |
% |
|
|
1.1 |
% |
|
|
67.4 |
% |
|
|
7.5 |
% |
|
|
62.3 |
% |
|
|
1.8 |
% |
|
|
Average daily rate
|
|
$ |
107.73 |
|
|
|
5.3 |
% |
|
$ |
107.77 |
|
|
|
5.3 |
% |
|
$ |
91.28 |
|
|
|
1.5 |
% |
|
|
RevPAR
|
|
$ |
80.19 |
|
|
|
6.9 |
% |
|
$ |
72.63 |
|
|
|
18.6 |
% |
|
$ |
56.90 |
|
|
|
4.5 |
% |
|
Holiday Inn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
67.6 |
% |
|
|
(0.3 |
%) |
|
|
63.3 |
% |
|
|
0.6 |
% |
|
|
60.2 |
% |
|
|
1.5 |
% |
|
|
Average daily rate
|
|
$ |
78.56 |
|
|
|
6.0 |
% |
|
$ |
76.57 |
|
|
|
0.9 |
% |
|
$ |
80.21 |
|
|
|
2.4 |
% |
|
|
RevPAR
|
|
$ |
53.12 |
|
|
|
5.6 |
% |
|
$ |
48.43 |
|
|
|
1.8 |
% |
|
$ |
48.25 |
|
|
|
5.0 |
% |
|
Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
|
|
|
|
|
|
|
|
63.9 |
% |
|
|
7.0 |
% |
|
|
64.5 |
% |
|
|
2.0 |
% |
|
|
Average daily rate
|
|
|
|
|
|
|
|
|
|
$ |
87.95 |
|
|
|
4.8 |
% |
|
$ |
75.48 |
|
|
|
3.8 |
% |
|
|
RevPAR
|
|
|
|
|
|
|
|
|
|
$ |
56.22 |
|
|
|
17.7 |
% |
|
$ |
48.67 |
|
|
|
7.1 |
% |
|
Staybridge Suites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
72.0 |
% |
|
|
1.1 |
% |
|
|
73.4 |
% |
|
|
6.7 |
% |
|
|
70.6 |
% |
|
|
4.6 |
% |
|
|
Average daily rate
|
|
$ |
89.73 |
|
|
|
4.6 |
% |
|
$ |
87.17 |
|
|
|
2.7 |
% |
|
$ |
86.90 |
|
|
|
4.1 |
% |
|
|
RevPAR
|
|
$ |
64.64 |
|
|
|
6.3 |
% |
|
$ |
63.95 |
|
|
|
13.0 |
% |
|
$ |
61.36 |
|
|
|
11.3 |
% |
|
Candlewood
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
|
|
|
|
|
|
|
|
71.4 |
% |
|
|
|
|
|
|
68.5 |
% |
|
|
|
|
|
|
Average daily rate
|
|
|
|
|
|
|
|
|
|
$ |
55.87 |
|
|
|
|
|
|
$ |
63.92 |
|
|
|
|
|
|
|
RevPAR
|
|
|
|
|
|
|
|
|
|
$ |
39.86 |
|
|
|
|
|
|
$ |
43.80 |
|
|
|
|
|
|
Indigo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
|
|
|
|
|
|
|
|
16.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily rate
|
|
|
|
|
|
|
|
|
|
$ |
103.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RevPAR
|
|
|
|
|
|
|
|
|
|
$ |
17.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased statistics are for comparable hotels, and
include only those hotels in our system as of December 31,
2004 and owned and leased by the Group since January 1,
2003.
The comparison with 2003 is at constant US$ exchange rates.
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned & leased | |
|
|
|
|
|
|
comparable | |
|
Managed | |
|
Franchised | |
|
|
| |
|
| |
|
| |
|
|
|
|
Change vs | |
|
|
|
Change vs | |
|
|
|
Change vs | |
|
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
66.8 |
% |
|
|
2.3 |
% |
|
|
60.5 |
% |
|
|
3.9 |
% |
|
|
58.2 |
% |
|
|
(2.8 |
%) |
|
|
Average daily rate
|
|
$ |
211.21 |
|
|
|
(2.4 |
%) |
|
$ |
128.00 |
|
|
|
(2.7 |
%) |
|
$ |
127.92 |
|
|
|
8.7 |
% |
|
|
RevPAR
|
|
$ |
141.14 |
|
|
|
1.0 |
% |
|
$ |
77.41 |
|
|
|
4.0 |
% |
|
$ |
74.50 |
|
|
|
3.8 |
% |
|
Crown Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
73.1 |
% |
|
|
2.9 |
% |
|
|
70.9 |
% |
|
|
3.9 |
% |
|
|
61.5 |
% |
|
|
2.2 |
% |
|
|
Average daily rate
|
|
$ |
122.29 |
|
|
|
0.6 |
% |
|
$ |
111.18 |
|
|
|
4.3 |
% |
|
$ |
121.40 |
|
|
|
(0.1 |
%) |
|
|
RevPAR
|
|
$ |
89.41 |
|
|
|
4.9 |
% |
|
$ |
78.88 |
|
|
|
10.4 |
% |
|
$ |
74.62 |
|
|
|
3.6 |
% |
|
Holiday Inn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
70.3 |
% |
|
|
1.4 |
% |
|
|
60.9 |
% |
|
|
5.2 |
% |
|
|
64.3 |
% |
|
|
1.2 |
% |
|
|
Average daily rate
|
|
$ |
111.89 |
|
|
|
4.1 |
% |
|
$ |
66.31 |
|
|
|
(1.2 |
%) |
|
$ |
92.23 |
|
|
|
3.6 |
% |
|
|
RevPAR
|
|
$ |
78.68 |
|
|
|
6.2 |
% |
|
$ |
40.42 |
|
|
|
7.9 |
% |
|
$ |
59.30 |
|
|
|
5.6 |
% |
|
Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
63.2 |
% |
|
|
2.3 |
% |
|
|
42.7 |
% |
|
|
(1.0 |
%) |
|
|
68.1 |
% |
|
|
5.3 |
% |
|
|
Average daily rate
|
|
$ |
75.15 |
|
|
|
2.4 |
% |
|
$ |
74.01 |
|
|
|
0.8 |
% |
|
$ |
91.54 |
|
|
|
0.8 |
% |
|
|
RevPAR
|
|
$ |
47.47 |
|
|
|
6.3 |
% |
|
$ |
31.62 |
|
|
|
(1.6 |
%) |
|
$ |
62.31 |
|
|
|
9.3 |
% |
Owned and leased statistics are for comparable hotels, and
include only those hotels in our system as of December 31,
2004 and owned and leased by the Group since January 1,
2003.
The comparison with 2003 is at constant US$ exchange rates.
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned & leased | |
|
|
|
|
|
|
comparable | |
|
Managed | |
|
Franchised | |
|
|
| |
|
| |
|
| |
|
|
|
|
Change vs | |
|
|
|
Change vs | |
|
|
|
Change vs | |
|
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
73.8 |
% |
|
|
19.2 |
% |
|
|
71.2 |
% |
|
|
11.6% |
|
|
|
62.1 |
% |
|
|
(5.8% |
) |
|
|
Average daily rate
|
|
$ |
198.49 |
|
|
|
8.6 |
% |
|
$ |
134.39 |
|
|
|
(1.3% |
) |
|
$ |
123.65 |
|
|
|
(5.2% |
) |
|
|
RevPAR
|
|
$ |
146.57 |
|
|
|
46.7 |
% |
|
$ |
95.64 |
|
|
|
18.0% |
|
|
$ |
76.77 |
|
|
|
(13.2% |
) |
|
Crowne Plaza
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
85.1 |
% |
|
|
5.0 |
% |
|
|
70.5 |
% |
|
|
10.2% |
|
|
|
73.9 |
% |
|
|
1.4% |
|
|
|
Average daily rate
|
|
$ |
112.75 |
|
|
|
2.4 |
% |
|
$ |
74.88 |
|
|
|
5.5% |
|
|
$ |
92.67 |
|
|
|
(1.0% |
) |
|
|
RevPAR
|
|
$ |
95.91 |
|
|
|
8.9 |
% |
|
$ |
52.82 |
|
|
|
23.3% |
|
|
$ |
68.46 |
|
|
|
0.9% |
|
|
Holiday Inn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
81.1 |
% |
|
|
1.8 |
% |
|
|
75.0 |
% |
|
|
10.0% |
|
|
|
69.7 |
% |
|
|
4.8% |
|
|
|
Average daily rate
|
|
$ |
86.87 |
|
|
|
0.9 |
% |
|
$ |
61.22 |
|
|
|
7.7% |
|
|
$ |
59.99 |
|
|
|
1.0% |
|
|
|
RevPAR
|
|
$ |
70.48 |
|
|
|
3.2 |
% |
|
$ |
45.89 |
|
|
|
24.3% |
|
|
$ |
41.81 |
|
|
|
8.5% |
|
|
Express
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
|
|
|
|
|
|
|
|
57.5 |
% |
|
|
(1.9% |
) |
|
|
65.7 |
% |
|
|
2.5% |
|
|
|
Average daily rate
|
|
|
|
|
|
|
|
|
|
$ |
69.72 |
|
|
|
0.6% |
|
|
$ |
56.87 |
|
|
|
(0.2% |
) |
|
|
RevPAR
|
|
|
|
|
|
|
|
|
|
$ |
40.10 |
|
|
|
(2.6% |
) |
|
$ |
37.39 |
|
|
|
3.7% |
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
|
|
|
|
|
|
|
|
70.3 |
% |
|
|
5.8% |
|
|
|
78.8 |
% |
|
|
3.8% |
|
|
|
Average daily rate
|
|
|
|
|
|
|
|
|
|
$ |
69.71 |
|
|
|
2.4% |
|
|
$ |
58.46 |
|
|
|
3.5% |
|
|
|
RevPAR
|
|
|
|
|
|
|
|
|
|
$ |
49.03 |
|
|
|
11.6% |
|
|
$ |
46.07 |
|
|
|
8.7% |
|
Owned and leased statistics are for comparable hotels, and
include only those hotels in our system as of December 31,
2004 and owned and leased by the Group since January 1,
2003.
The comparison with 2003 is at constant US$ exchange rates.
Both in the United Kingdom and internationally, the Groups
hotel operations are subject to regulation, including zoning and
similar land use laws as well as regulations that influence or
determine wages, prices, interest rates, construction procedures
and costs.
SOFT DRINKS
The Group holds an interest in, manages and controls Britvic,
which is one of the two leading manufacturers of soft drinks, by
value and volume, in Great Britain. Following the signing of the
Exclusive Bottling Agreement (EBA) on March 10,
2004 on broadly similar terms as the original agreement, the
ownership of Britvic is now split between the Group (47.5%),
Allied Domecq PLC and Whitbread PLC (each with 23.75%) and
PepsiCo Inc. (5%). The Group continues to consolidate the
results of Britvic as it continues to exercise dominant
influence on the management of the company. Under the EBA,
Britvic holds the exclusive right to distribute the Pepsi and
7UP brands in Great Britain until 2018 with a five year
extension if Britvic becomes a listed company.
IHG and Britvics other shareholders have agreed, subject
to market and other conditions being satisfied, to consider an
initial public offering of Britvic, between 2005 and 2008.
39
|
|
|
Britvics Business and Brands |
Britvic operates primarily in the United Kingdom (approximately
3.3% of revenues are from exports). Britvic distributes its
products via a variety of outlets in the United Kingdom,
including grocery stores and gas stations, (together the
Take-Home Channel) and restaurants, pubs, clubs and
other licensed premises (known as the On-Premise
Channel). Britvic has an extensive and balanced portfolio of
soft drink brands including Robinsons, Tango, Fruit Shoot,
Pepsi, 7 UP, Britvic juices, R Whites, Amé,
J2O, Purdeys and Aqua Libra.
Soft Drinks continued to invest in its key brands and in new
product innovation. During 2004, Britvic acquired the Ben
Shaws water business, further increasing Britvics
presence in the UKs expanding water market and providing
additional capacity.
Britvic generated operating profits before exceptional items of
£80 million on revenues of £706 million in
the year ended December 2004. This compares to operating profits
before exceptional items of £83 million on revenues of
£674 million in the 12 months ended December 2003.
Britvics objective is to deliver continued revenue and
profit growth by increasing its market share in both the stills
and carbonated categories of the soft drinks market through
developing both existing and new product and packaging formats,
whilst continuing to drive further efficiencies and enhance
employee performance.
Britvics brands compete with many multi-national, national
and regional producers and private label suppliers.
Britvics main competitor in the United Kingdom is
Coca-Cola Enterprises (whose brands include Coca-Cola, Fanta,
Sprite, Dr Pepper, Schweppes and Lilt), which is the
overall soft drinks market leader (in terms of market share).
Britvic also faces significant competition from GlaxoSmithKline
(Lucozade and Ribena), AG Barr (Irn-Bru and Orangina),
Proctor & Gamble (Sunny Delight) and Tropicana UK
Limited (fruit juices), which are each strong within specific
sectors of the market. A number of smaller manufacturers
dominate their individual sector and their combined influence is
becoming more important. A significant example of this would be
Red Bull (a leading energy drink).
|
|
|
Production and Distribution |
At December 31, 2004, Britvic had six production plants
which produced over 1.4 billion liters of soft drinks
during fiscal 2004 and operated 12 retail distribution
depots as well as a national distribution center for supplying
the Take-Home and On-Premise channels.
The success of Britvics brands depends upon their quality
and value for money and on brand marketing. Over the past three
fiscal periods, Britvic spent an average of approximately 20% of
gross revenues on brand advertising, promotional and other
related expenditure.
Britvics products are available in a wide variety of
outlets in the United Kingdom, including grocery stores,
supermarkets, gas stations, other non-licensed premises,
off-licenses and restaurants, pubs, clubs and other licensed
premises.
Britvic has approximately 47,000 dispense units installed in
pubs and other trade outlets, including catering establishments.
These installations produce mainly carbonated soft drinks from
concentrates supplied by Britvic. It also supplies over 20,000
vending machines which dispense a range of soft drinks in both
cans and plastic bottles. Britvic also has approximately 33,000
chiller cabinets installed in retail outlets.
40
Fruit juice concentrates and other fruit raw materials, which
are important ingredients for many of Britvics products,
are obtained from various sources worldwide. One of the
principal raw materials used by Britvic is sugar. Adequate
supplies of bulk sugar are available for the foreseeable future,
although Britvic is obliged to purchase its sugar requirements
in the EU market, where prices are considerably higher than in
other markets.
Due to the nature of the markets in which Britvic operates, a
high proportion of sales are accounted for by major customers in
both the Take-Home and Licensed On-Premise sectors. Consumer
demand for Britvics brands supports trading relationships
with the Take-Home sector, while major On-Premise customers
usually contract for soft drinks on an exclusive basis for
periods of between two and five years. Britvic is well
represented within both sectors, without over-reliance of any
one, or group of, customers.
The volume of sales in the soft drinks business may be affected
by weather and is seasonal, peaking in the summer months and at
the time of holiday occasions, such as Christmas.
The Food Safety Act 1990 effectively raised the quality
standards demanded in the soft drinks industry. The Britvic
Group has actively participated in the industry discussion
processes which, it is believed, will ultimately result in
legislation governing soft drinks products sold in the EU market.
TRADEMARKS
Group companies own a substantial number of service brands and
product brands and the Group believes that its significant
trademarks are protected in all material respects in the markets
in which it currently operates.
ORGANIZATIONAL STRUCTURE
|
|
|
Principal operating subsidiary undertakings |
As of December 31, 2004 InterContinental Hotels Group PLC
was the beneficial owner of all (unless specified) of the equity
share capital, either itself or through subsidiary undertakings,
of the following companies. Unless stated otherwise, companies
are incorporated in Great Britain, registered in England and
Wales and operate principally within the United Kingdom.
Six Continents PLC (note a)
InterContinental Hotels Limited
InterContinental Hotels Group Operating Corporation
(incorporated and operates principally in the United States)
InterContinental Hotels Group Services Company
InterContinental Hotels Group (UK) Limited
Holiday Inn Limited
41
|
|
|
Britannia Soft Drinks Limited (47.5% Six Continents Investments
Limited, 23.75% Whitbread PLC, 23.75% Allied Domecq PLC, 5%
PepsiCo Inc.) (note b) |
Britvic Soft Drinks Limited (100% Britannia Soft Drinks Limited)
Robinsons Soft Drinks Limited (100% Britannia Soft Drinks
Limited)
|
|
a |
Shares held directly by InterContinental Hotels Group PLC. |
|
b |
Under UK GAAP and US GAAP the Group exercises control over
Britannia Soft Drinks Limited, which is, accordingly, treated as
a subsidiary undertaking. |
|
c |
A list of subsidiary companies as of December 31, 2004 is
filed as Exhibit 8 to this Annual Report. |
PROPERTY, PLANTS AND EQUIPMENT
Group companies own and lease properties throughout the world.
The table below analyzes the net book value of land and
buildings at December 31, 2004 by division and geographic
segment. Approximately 71% of the properties by value were
directly owned, with 22% held under leases having a term of
50 years or longer. These numbers will significantly change
in 2005 to reflect upcoming hotel sales as well as those
currently in progress.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of Europe, | |
|
|
|
|
|
|
Net book value of land and buildings |
|
United | |
|
the Middle East | |
|
|
|
|
|
|
as at December 31, 2004 |
|
Kingdom | |
|
and Africa | |
|
United States | |
|
Rest of World | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Hotels
|
|
|
945 |
|
|
|
901 |
|
|
|
529 |
|
|
|
257 |
|
|
|
2,632 |
|
Soft Drinks
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,012 |
|
|
|
901 |
|
|
|
529 |
|
|
|
257 |
|
|
|
2,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group properties include hotels and soft drinks production
facilities. Approximately 69% of Hotels property values relate
to the top 20 owned and leased hotels (in terms of value) of a
total of 168 hotels, with an individual net book value range of
£39 million to £204 million.
Property has been written down in the year ended
December 31, 2004 by £48 million following an
impairment review of the hotel estate. The impairment has been
measured by reference to the value of income-generating units,
using either the higher of value in use or estimated recoverable
amount. The discount rate used for value in use calculations was
8.0% to 10.5%.
ENVIRONMENT
IHG is committed to all its operating companies having a
responsibility to act in a way that respects the environment in
which they operate. The Groups hotels operate in nearly
100 countries and territories and its strong presence in the US
and EU markets mean that it is affected by and is familiar with
highly developed environmental laws and controls. IHG regularly
considers environmental matters and seeks to embed good practice
into its business strategies and operations. IHG was awarded
membership of both the FTSE4Good Index Series and the Dow Jones
Sustainability Indices in 2004.
Group companies incur expenditure on technical advice, services
and equipment in addressing the environmental laws and
regulations enacted in the countries in which they operate. In
2004, such expenditure was not material in the context of their
financial results.
It is not possible to forecast the overall Group expenditure to
comply with environmental laws and regulations; this reflects
the difficulty in assessing the risk of environmental accidents
and the changing nature of laws and regulations. IHG expects,
however, that it should be in a position to control such
expenditure so that, although it may be considerable, it will be
unlikely to have a material adverse effect on the Groups
financial position or results of operations.
42
|
|
ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
INTRODUCTION
As at December 31, 2004 the Group operated hotels in nearly
100 countries and territories and operated, managed and
franchised seven separate brand names and had 3,540 hotels with
approximately 534,000 rooms. The Group owns a significant
interest in Britvic, one of the two leading manufacturers of
soft drinks in Great Britain (measured by value and volume)
which over the past five years has built a portfolio of brands
addressing all sectors of the soft drinks market. The Group
continued to follow the clear strategy established on
Separation. The key priorities of this strategy are: 1) to
strengthen the core business through focus on brand
differentiation and system delivery; 2) to grow the managed
and franchised fee-income business in key markets; 3) to
develop the organization and its people; 4) to continue the
asset disposal program; and 5) to return funds to
shareholders.
|
|
|
Asset Disposals and Capital Return |
During 2004, IHG continued the asset disposal program commenced
in 2003. Including transactions that have been announced post
year end, IHG has sold or announced the sale of 121 hotels with
proceeds of approximately £1.75 billion and has on the
market a further 25 hotels.
IHG engaged in a program to return funds to shareholders. During
2004 IHG completed an on-market share repurchase program for
£250 million and announced a further
£250 million repurchase program commencing in December
2004. On December 17, 2004 a special dividend of
£501 million was paid to shareholders. Following the
announcement in March 2005 of the sale of 73 hotels in the
United Kingdom, and subject (among other things) to completion
of the sale of the 73 hotels, IHG intends to return a further
£1 billion to shareholders.
In the Hotels business all regions reported revenue and profit
growth in US dollar terms as the hotel industry showed some
recovery from the impact of global insecurity, SARS and
depressed travel experienced in 2003 and, with respect to
operations in the United Kingdom and Europe, as the US dollar
continued to depreciate significantly in relation to the
sterling and the euro. The relative strength of sterling against
the US dollar (weighted average US dollar exchange rate to
sterling for the year was $1.82 against $1.62 for 2003)
converted a 13.0% growth in Hotels turnover expressed in US
dollars to a 0.7% growth when expressed in sterling. Soft Drinks
turnover increased by 4.7% despite the summer of 2004
experiencing poorer weather than the very favorable summer
conditions of 2003. This growth was boosted by 2004 including an
extra weeks trading.
The performance of the Hotels business is evaluated primarily on
a regional basis. The regional operations are split by similar
projects or services: franchise agreement, management contract,
and owned and leased operations. All three income types are
affected by occupancy and room rates achieved by hotels, our
ability to manage costs and the change in the number of
available rooms through acquisition, development and
disposition. Results are also impacted by economic conditions
and capacity. The Groups segmental results are shown
before allocation of central costs, interest expense, interest
income and income taxes.
The Group believes the period-over-period movement in revenue
per available room (RevPAR) to be a meaningful
indicator for the performance of the Hotels business. In the
Soft Drinks business, the Group believes a meaningful indicator
for performance to be the movement in on-premise and take-home
volumes.
There has been no material change in the broad trend of current
trading since March 10, 2005 and the outlook for the full
financial year remains in line with managements
expectation.
The Group has seen encouraging performance in the US. The key
midscale brands, Express and Holiday Inn, are showing rate
growth. Crowne Plaza RevPAR is growing strongly, driven by
strong performance in the meeting segment and the
InterContinental brand is delivering strong results in key
cities (e.g. New York).
43
The UK, and particularly London, is showing strong RevPAR
growth, driven by the corporate segment. The Group is seeing
continued weakness in some Continental European markets (e.g.
France and Benelux) but Germany is showing some positive signs.
The Groups business in the Middle East continues to
deliver positive results, while the InterContinental Hong Kong
had a good start to the year with double-digit RevPAR growth and
mainland China also performed strongly. The Soft Drinks business
started positively with volume increases over the previous year,
and several initiatives planned with the intention of increasing
profit and tightly controlling costs.
CRITICAL ACCOUNTING POLICIES UNDER UK GAAP AND US GAAP
The preparation of the Companys consolidated financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts
of revenues and costs and expense during the reporting periods.
On an ongoing basis, management evaluates its estimates and
judgments, including those relating to revenue recognition, bad
debts, inventories, investments, property, plant and equipment,
goodwill and intangible assets, income taxes, financing
operations, frequent guest program liability, self-insurance
claims payable, restructuring costs, retirement benefits and
contingencies and litigation.
Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying value of
assets and liabilities that are not readily available from other
sources. Actual results may differ from these estimates under
different assumptions and conditions.
The Groups critical accounting policies are set out below.
|
|
|
Tangible and Intangible Assets |
|
|
(i) |
Goodwill and other Intangible assets |
Purchased goodwill and intangible assets are capitalized as
intangible assets and amortized over their anticipated life.
Under UK GAAP, prior to October 1, 1998, goodwill
arising on acquisitions was written off directly to reserves.
Since October 1, 1998, acquired goodwill has been
capitalized and amortized over a period not exceeding
20 years. On disposal of a business, the profit or loss on
disposal is determined after incorporating the attributable
amount of any purchased goodwill, including any previously
written off to reserves. Under US GAAP, goodwill arising on
acquisitions prior to July 1, 2001 was capitalized and
amortized over its estimated useful life, not exceeding
40 years. For the purposes of US GAAP, the Group
adopted Financial Accounting Standard (FAS) 142
Goodwill and Other Intangible Assets on
October 1, 2002 and from that date, goodwill including that
which arose in the period from July 1, 2001 to
October 1, 2002 is not amortized but reviewed annually for
impairment.
Under US GAAP, separately identified intangible assets
arising on acquisitions are capitalized and amortized over their
useful lives. Under UK GAAP, these assets are included
within goodwill.
The Company uses a discounted cash flow model to test indefinite
life intangibles for impairment on an annual basis. The
discounted cash flow model requires assumptions about the timing
and amount of net cash inflows, economic projections, cost of
capital and terminal values. Each of these can significantly
affect the value of indefinite life intangibles.
The Company tests identified intangible assets with defined
useful lives by comparing the carrying value to the sum of
undiscounted cash flows expected to be generated by the asset.
|
|
(ii) |
Impairment of fixed assets |
Under UK GAAP and US GAAP the carrying value of both
tangible and finite lived intangible fixed assets are assessed
for indicators of impairment. The Company evaluates the carrying
value of its long-lived
44
assets based on its plans, at the time, for such assets and such
qualitative factors as future development in the surrounding
area, status of expected local competition and projected capital
expenditure plans. Changes to the Companys plans,
including decisions to dispose of or change the intended use of
an asset, can have a material impact on the carrying value of
the asset.
In circumstances where indicators of impairment exist, under
UK GAAP, the carrying value of an income-generating unit
(IGU) is assessed by reference to the greater of
value in use, which is defined as the present value of
discounted cashflows, and net realizable value. The outcome of
such an assessment is subjective, and the result sensitive to
the assumed future cashflows to be generated by the assets and
discount rates applied in calculating the value in use, both of
which will be dependent on the type of asset and its location.
Any impairment arising on an income-generating unit, other than
an impairment which represents a consumption of economic
benefits, is eliminated against any specific revaluation reserve
relating to the impaired assets in that income-generating unit
with any excess being charged to the profit and loss account.
Under US GAAP, the assessment of an IGUs carrying
value is by reference in the first instance to undiscounted
cashflows. To the extent that undiscounted cashflows do not
support carrying value, the fair value of assets must be
calculated and the difference to the current carrying value
charged to the profit and loss account.
During 2004, under UK GAAP, the Company recorded an
impairment of its tangible fixed assets of
£48 million, all of which relates to Hotels and
represents 1% of the total carrying value of tangible fixed
assets. This was recorded as a £28 million charge
against operating profit and £20 million reversing
previous revaluation gains. For the purposes of US GAAP,
the Company recorded an impairment of its tangible fixed assets
of £18 million.
Under UK GAAP and US GAAP the Group reviews its fixed
asset investments on an annual basis by comparing the carrying
value to current market value in cases where the investment is
traded on a public exchange. During 2004, the Group recorded
provisions against fixed asset investments reflecting the
directors view that the value of the investment is
equivalent to market value at December 31, 2004.
Under UK GAAP, the Group recognizes a profit on disposal of
fixed assets provided substantially all the risks and rewards of
ownership have been transferred. For US GAAP, the Group accounts
for sales of real estate in accordance with FAS 66
Accounting for Sales of Real Estate. If there is
significant continuing involvement with the property, any gain
on sale is deferred and is recognized over the life of the
long-term management contract retained on the property. The
deferral of pre-tax gains on such sales totaled £nil in
2004, £12 million in 2003 and £nil in 2002.
Under UK GAAP, the Group provides for deferred taxation in
respect of timing differences, subject to certain exceptions,
between the recognition of gains and losses in the financial
statements and for tax purposes. Under US GAAP, the Group
provides for deferred taxation in accordance with FAS
No. 109, Accounting for Income Taxes. For both
UK and US GAAP the Group estimates deferred tax assets and
liabilities based on current tax laws and rates, and in certain
cases, business plans. Changes in these estimates may affect the
amount of deferred tax liabilities or the valuation of deferred
tax assets. Accruals for tax contingencies require judgements on
the expected outcome of tax exposures. Deferred tax assets are
not recognized unless their realization is considered more
likely than not.
Priority Club Rewards enables members to earn points, funded
through hotel assessments, during each stay at an
InterContinental Hotels Group hotel and redeem the points at a
later date for free accommodation or other benefits. The future
redemption liability is included in creditors less than, and
greater than, one year in the consolidated balance sheets in the
Consolidated Financial Statements and is estimated using
actuarial
45
methods based on statistical formulas that project timing of
future point redemption based on historical levels to give
eventual redemption rates and points values.
The Group is subject to various legal proceedings and claims,
the outcomes of which are subject to significant uncertainty.
Under both UK and US GAAP accruals are recorded for loss
contingencies when a loss is probable and the amount can be
reasonably estimated.
OPERATING RESULTS
The following discussion and analysis is based on the
Consolidated Financial Statements of the Group, which are
prepared in accordance with UK GAAP. The principal
differences between UK GAAP and US GAAP as they relate
to the Group are discussed in Note 35 of Notes to the
Financial Statements.
The financial statements have been prepared using accounting
policies unchanged from the previous year.
The Group will be required to produce its first set of audited
financial statements in line with International Financial
Reporting Standards (IFRS) for the year ending
December 31, 2005. This will require an opening balance
sheet to be prepared under IFRS as at January 1, 2004, and
a full profit and loss account, balance sheet and cash flow
statement for the year ended December 31, 2004 for
comparative purposes. The transition to IFRS reporting will
result in a number of changes in presentation of reported
financial statements, notes thereto and accounting principles.
See International Financial Reporting Information
below.
For the year ended December 31, 2004 the results include
exceptional items totaling a net charge of
£99 million see year ended
December 31, 2004 compared to 15 months ended
December 31, 2003 Exceptional Items. For
the 15 months ended December 31, 2003 the results
include exceptional items totaling a net charge of
£400 million see 15 months
ended December 31, 2003 Compared to fiscal 2002
Exceptional Items below. Fiscal 2002 results include
exceptional items totaling a net charge of
£24 million. For the comparability for the periods
presented, some performance indicators in this Operating and
Financial Review and Prospects discussion have been calculated
after eliminating these exceptional items. Such indicators are
prefixed with adjusted. A reconciliation to the
amounts under UK GAAP including such exceptional items is
included in Note 9 of Notes to the Financial Statements.
46
|
|
|
Year ended December 2004 compared with 15 months
ended December 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
GROUP RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
1,498 |
|
|
|
383 |
|
|
|
1,487 |
|
|
|
1,870 |
|
|
Soft Drinks
|
|
|
706 |
|
|
|
146 |
|
|
|
674 |
|
|
|
820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover from continuing operations
|
|
|
2,204 |
|
|
|
529 |
|
|
|
2,161 |
|
|
|
2,690 |
|
Discontinued operations
|
|
|
|
|
|
|
342 |
|
|
|
451 |
|
|
|
793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total turnover
|
|
|
2,204 |
|
|
|
871 |
|
|
|
2,612 |
|
|
|
3,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before operating exceptional items from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
251 |
|
|
|
48 |
|
|
|
203 |
|
|
|
251 |
|
|
Soft Drinks
|
|
|
80 |
|
|
|
12 |
|
|
|
83 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit before operating exceptional items from
continuing operations
|
|
|
331 |
|
|
|
60 |
|
|
|
286 |
|
|
|
346 |
|
|
Operating exceptional item
|
|
|
(19 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit after operating exceptional items from
continuing operations
|
|
|
312 |
|
|
|
60 |
|
|
|
235 |
|
|
|
295 |
|
Discontinued operations
|
|
|
|
|
|
|
52 |
|
|
|
85 |
|
|
|
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit after operating exceptional items
|
|
|
312 |
|
|
|
112 |
|
|
|
320 |
|
|
|
432 |
|
Exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization
|
|
|
|
|
|
|
|
|
|
|
(67 |
) |
|
|
(67 |
) |
|
Separation costs
|
|
|
|
|
|
|
(3 |
) |
|
|
(48 |
) |
|
|
(51 |
) |
|
Provision for loss on disposal of operations
|
|
|
(74 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on disposal of tangible fixed assets
|
|
|
15 |
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
Provision against fixed asset investments
|
|
|
(10 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
(56 |
) |
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
(41 |
) |
|
|
(41 |
) |
|
Loss on disposal of tangible fixed assets
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before interest
|
|
|
243 |
|
|
|
109 |
|
|
|
110 |
|
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IHG turnover from continuing operations for the year ended
December 31, 2004 was £2,204 million
(£2,690 million for the 15 months ended
December 31, 2003). Excluding the effect of the longer
period ended December 31, 2003, the results reflected the
strengthening in economic conditions within the Hotels division
offset by the strength of the sterling against the US dollar.
Profit on ordinary activities before interest and exceptional
items from continuing operations for the year ended
December 31, 2004 was £331 million
(£346 million for the 15 months ended
December 31, 2003). Excluding the effect of the longer
period ended December 31, 2003, the results reflect the
hotel industry recovery from the impact of global insecurity,
SARS and depressed travel experienced in 2003.
47
Exceptional items for the year ended December 31, 2004
after tax totaled a net profit of £68 million and
included an operating exceptional charge of
£19 million and non-operating exceptional credits
totaling £87 million. Details of the exceptional items
are outlined under the heading Exceptional Items
below.
Group net cash flow for the year ended December 31, 2004
was an outflow of £338 million (outflow of
£22 million for the 15 months ended
December 31, 2003) mainly driven by the payment of
£600 million in dividends. Cash inflow from operations
for the year ended December 31, 2004 was
£515 million, compared with £795 million for
the 15 months ended December 31, 2003. Non-operating
outflows during the year ended December 31, 2004 included a
£17 million premium on the early settlement of debt.
These items were offset by a £230 million decrease in
expenditure on tangible fixed assets.
Basic earnings per share for the year ended December 31,
2004 was 42.1p (2.6p for the 15 months ended
December 31, 2003). Adjusted earnings per share, after
eliminating the effect of exceptional items, was 32.5p for the
year ended December 31, 2004 (39.1p for the 15 months
ended December 31, 2003). Dividends for the year ended
December 31, 2004 were 86.3p per share including a 72.0p
per share special dividend paid in December 2004. A
reconciliation of actual to adjusted earnings per share is set
out in Note 9 of Notes to the Financial Statements.
The Group reorganized its debt financing in the last quarter of
2004. As a result, the Groups public debt was repaid and
new bank facilities put in place.
In December 2004, the Group commenced a second
£250 million on-market share repurchase program. See
Liquidity and Capital Resources Sources of
Liquidity below.
Following a review of the hotel estate, tangible fixed assets
have been written down by £48 million;
£28 million has been charged as an operating
exceptional item and £20 million reverses previous
revaluation gains.
Other operating exceptional items included a charge of
£11 million related to the delivery of the further
restructuring of the Hotels business in conjunction with the
asset disposal program, and other operating income of
£20 million relating to the adjustment to market
valuation of the Groups investment in FelCor Lodging Trust
Inc.
Non-operating exceptional items included a profit of
£15 million realized on the sale of hotels, a
£74 million provision for loss on disposal of assets
in the Americas and the United Kingdom and a
£10 million provision against the value of certain
fixed asset investments.
Non-operating exceptional items also included a net exceptional
interest charge of £11 million. This related mainly to
refinancing costs, including the premium of
£17 million paid on the repurchase of the Groups
2010
600 million
Eurobonds, net of exceptional interest income which included
£14 million received on tax refunds.
The release of provisions relating to tax matters which were
settled during the year or in respect of which the relevant
statutory limitation period has expired, principally relating to
acquisitions (including provisions relating to pre-acquisition
periods) and disposals, intra-group financing, and, in 2004, the
recognition of a deferred tax asset of £83 million in
respect of capital losses and the current year exceptional items
has resulted in an exceptional tax credit of
£167 million.
Operating and non-operating exceptional items, together with
their related tax credits, have been excluded in the calculation
of adjusted earnings per share.
Prior year exceptional items have been restated on a basis
consistent with 2004. This comprises prior year adjustments
which are exceptional by reason of size or incidence.
48
In November 2004 the Group refinanced its existing bank facility
with a new £1.6 billion facility. The new facility
comprises a £1.1 billion five year tranche and a
£0.5 billion 364 day tranche with an option to
extend for one year. As part of this refinancing exercise the
Group repurchased its euro and sterling denominated bonds.
The net interest charge for the year (pre-exceptionals) was
£22 million compared to £47 million for the
15 months ended December 31, 2003. The reduction was
principally due to lower average debt levels and the weaker US
dollar.
The tax charge on ordinary activities excluding exceptional
items was 16% for 2004. The equivalent effective rate for the
IHG Group excluding MAB was 24% for the 15 months ended
December 31, 2003, following restatement in respect of
exceptional tax credits on a basis consistent with 2004. Net tax
paid in the year ended December 31, 2004 reflected tax
repayments received during the period and the impact of
exceptional costs.
Excluding the effect of exceptional items and prior year items,
the Groups tax rate for the year ended December 31,
2004 was 36%. The equivalent for the Group was 37% for the
15 months ended December 31, 2003. The difference from
the UK statutory rate of 30% arose primarily due to overseas
profits being taxed at rates higher than the UK statutory rate.
The tax rate for 2005 is expected to be materially higher
(around 30%) as the disposal program continues and a higher
proportion of profits are earned in the United States.
Basic earnings per share for the year was 42.1p. Adjusted
earnings per share, removing the distorting effect of
exceptional items, was 32.5p compared with 39.1p for the
15 months ended December 31, 2003.
The board has proposed a final dividend per share of 10.0p; with
the interim dividend of 4.3p, the normal dividend for the year
totaled 14.3p. A special dividend of 72.0p was paid in December
2004.
|
|
|
Cash flow and Capital Expenditure |
IHGs operating cash flow for 2004 was
£364 million compared with £547 million for
the 15 months ended December 31, 2003. Net capital
expenditure was £151 million, comprising
£257 million capital additions and
£106 million disposal proceeds, principally from the
sale of hotels. Major items of expenditure in 2004 included the
InterContinental Buckhead, Atlanta, refurbishment expenditure on
the Holiday Inn UK estate and refurbishment expenditure on the
InterContinental hotels in London, Cannes and Frankfurt.
Net interest paid was £41 million, and tax payments
totaled £35 million. Dividend payments totaled
£626 million including the special dividend paid in
December 2004. The repurchase of shares totaled
£257 million.
|
|
|
Highlights for the year ended December 31,
2004 |
The following is a discussion of the year ended
December 31, 2004 compared with the unaudited financial
information for the period of 12 months ended December 2003.
The results for the 15 months ended December 31, 2003
include discontinued operations of MAB for the period up until
Separation. Given the scale of the events surrounding the
Separation, the audited consolidated financial statements do not
readily facilitate an understanding of the continuing operations
of IHG on a stand alone basis. The Company has, therefore,
prepared unaudited financial information which shows the results
for the Group as if IHG had been independent and operating under
the financing and taxation structure put in place at the time of
the Separation for the 12 months ended December 31,
2003. This financial information
49
comprises the results of those businesses that form IHG
following the Separation. Because of the nature of this
financial information, it cannot give a complete picture of the
financial position of the Group. The information is provided as
guidance only and should not be viewed as a substitute for the
audited consolidated financial statements; it is not audited.
Significant changes were also made to the financing structure of
the Group as part of the Separation, making the Group results
difficult to compare year-on-year. The financial information
therefore represents the Group results as reported but after
excluding the results of MAB and after having been adjusted to
reflect the changes made to the financing and taxation structure
as part of the Separation, on the assumption that this structure
had been in place since October 1, 2001. The financial
information has been prepared using accounting policies
consistent with those used in the Group financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 months | |
|
|
|
|
Year ended | |
|
ended | |
|
|
|
|
December 31, | |
|
December 31, | |
|
|
|
|
2004 | |
|
2003* | |
|
Change | |
|
|
| |
|
| |
|
| |
|
|
|
|
% | |
|
|
(£ million) | |
|
|
Turnover:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
495 |
|
|
|
525 |
|
|
|
(5.7 |
) |
|
EMEA
|
|
|
829 |
|
|
|
807 |
|
|
|
2.7 |
|
|
Asia Pacific
|
|
|
134 |
|
|
|
114 |
|
|
|
17.5 |
|
|
Central
|
|
|
40 |
|
|
|
41 |
|
|
|
(2.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,498 |
|
|
|
1,487 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
163 |
|
|
|
161 |
|
|
|
1.2 |
|
|
EMEA
|
|
|
119 |
|
|
|
92 |
|
|
|
29.3 |
|
|
Asia Pacific
|
|
|
21 |
|
|
|
12 |
|
|
|
75.0 |
|
|
Central
|
|
|
(52 |
) |
|
|
(65 |
) |
|
|
(20.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
251 |
|
|
|
200 |
|
|
|
25.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Unaudited pro forma results. |
Turnover. Hotels turnover increased £11 million
(0.7%) from £1,487 million for the 12 months
ended December 31, 2003, to £1,498 million for
the year ended December 31, 2004. Hotels turnover increased
by 0.7% in sterling terms but this was impacted by the strength
of sterling against the US dollar. Expressed in
US dollars, turnover grew by over 13.0% with particularly
strong growth in the United Kingdom (where the appreciation of
sterling relative to the dollar benefitted results in US
dollars), the Middle East and Asia Pacific.
Operating profit. Hotels operating profit before
exceptional items for the year ended December 31, 2004 was
£251 million, up 25.5% (12 months ended
December 31, 2003 £200 million). Again, there was
significant overall growth in US dollar terms in Europe,
Middle East and Africa (EMEA) (up by 45%, assisted by the
strength of sterling and the euro) and Asia Pacific (up by 105%).
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 months | |
|
|
|
|
Year ended | |
|
ended | |
|
|
|
|
December 31, | |
|
December 31, | |
|
|
|
|
2004 | |
|
2003 | |
|
Change | |
|
|
| |
|
| |
|
| |
|
|
|
|
% | |
|
|
($ million) | |
|
|
Turnover:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
490 |
|
|
|
481 |
|
|
|
1.9 |
|
|
Managed
|
|
|
55 |
|
|
|
46 |
|
|
|
19.6 |
|
|
Franchised
|
|
|
357 |
|
|
|
327 |
|
|
|
9.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
902 |
|
|
|
854 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
39 |
|
|
|
32 |
|
|
|
21.9 |
|
|
Managed
|
|
|
12 |
|
|
|
7 |
|
|
|
71.4 |
|
|
Franchised
|
|
|
304 |
|
|
|
279 |
|
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
355 |
|
|
|
318 |
|
|
|
11.6 |
|
Regional overheads
|
|
|
(59 |
) |
|
|
(56 |
) |
|
|
5.4 |
|
|
|
|
|
|
|
|
|
|
|
Total $ million
|
|
|
296 |
|
|
|
262 |
|
|
|
13.0 |
|
|
|
|
|
|
|
|
|
|
|
Sterling equivalent £ million(i)
|
|
|
163 |
|
|
|
161 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
The results have been translated into pounds sterling at
weighted average rates of exchange for the year. The translation
rates are fiscal 2004: £1 = $1.82 (2003:
£1 = $1.62). |
Total Americas operating profit was $296 million, a 13.0%
increase on the pro forma operating profit for the
12 months ended December 31, 2003 of
$262 million. The weakness of the US dollar to
sterling meant that in sterling terms, Americas operating profit
was £163 million, 1.2% up on 2003.
The largest profit generating stream in the Americas is the
franchised business, with 2,550 hotels and 333,157 rooms.
Operating profit increased from $279 million in 2003 to
$304 million in 2004, a 9.0% increase. All brands posted
strong revenue per available room (RevPAR) growth over 2003,
with Holiday Inn 5.0% up, Holiday Inn Express 7.1% up, Crowne
Plaza 4.5% up and Staybridge Suites 11.3% up.
In the owned and leased estate, strong growth in trading
particularly at the InterContinental hotels in New York and
Chicago, resulted in operating profit growth of $7 million
to $39 million in 2004. Comparable owned and leased RevPAR
saw strong growth on 2003; InterContinental was up by 8.1%,
Crowne Plaza by 6.9% and Holiday Inn by 5.6%. In April 2004 the
InterContinental Central Park (New York) was sold, and in
November 2004 the InterContinental Buckhead, Atlanta, a newly
built hotel, was opened.
Managed operating profit increased from $7 million in 2003
to $12 million in 2004 with all brands experiencing strong
RevPAR growth on 2003. The manager-owner relationship with HPT
strengthened during the year as agreement was reached for HPT to
purchase a further 13 hotels from IHG with long-term contracts
for IHG to manage the hotels under IHG brands. Following
completion of this transaction, 119 hotels owned by HPT are
managed by IHG.
Americas regional overheads increased marginally, principally as
a result of specific strategic initiatives and bonus payments.
51
|
|
|
Europe, Middle East and Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year | |
|
12 months | |
|
|
|
|
ended | |
|
ended | |
|
|
|
|
December 31, | |
|
December 31, | |
|
|
|
|
2004 | |
|
2003 | |
|
Change | |
|
|
| |
|
| |
|
| |
|
|
|
|
% | |
|
|
(£ million) | |
|
|
Turnover:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
759 |
|
|
|
746 |
|
|
|
1.7 |
|
|
Managed
|
|
|
43 |
|
|
|
38 |
|
|
|
13.2 |
|
|
Franchised
|
|
|
27 |
|
|
|
23 |
|
|
|
17.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
829 |
|
|
|
807 |
|
|
|
2.7 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
97 |
|
|
|
77 |
|
|
|
26.0 |
|
|
Managed
|
|
|
24 |
|
|
|
19 |
|
|
|
26.3 |
|
|
Franchised
|
|
|
21 |
|
|
|
18 |
|
|
|
16.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142 |
|
|
|
114 |
|
|
|
24.6 |
|
Regional overheads
|
|
|
(23 |
) |
|
|
(22 |
) |
|
|
4.5 |
|
|
|
|
|
|
|
|
|
|
|
Total £ million
|
|
|
119 |
|
|
|
92 |
|
|
|
29.3 |
|
|
|
|
|
|
|
|
|
|
|
Dollar equivalent $ million(i)
|
|
|
216 |
|
|
|
149 |
|
|
|
45.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
The results have been translated into US dollars at weighted
average rates of exchange for the year. The translation rates
are fiscal 2004: $1 = £0.55 (2003: $1 = £0.62). |
Turnover for EMEA for 2004 was £829 million,
£22 million higher than for the 12 months ended
December 31, 2003. Owned and leased turnover grew by
£13 million despite the loss of £42 million
turnover compared to 2003 as a result of hotels being sold.
Trading conditions across the region varied; UK hotels
experienced strong growth in RevPAR throughout the year and the
performance in the Middle East and Africa business was strong.
Continental Europe was more mixed with Paris in particular
slower to recover from the adverse conditions in 2003.
In the owned and leased estate, RevPAR in the United Kingdom
Holiday Inn estate continued to grow over previous periods. For
the year Holiday Inn UK RevPAR was up by 8.0% over 2003. London
hotels in particular experienced strong growth in RevPAR over
2003 (up by 16.0%) as they were slower to recover than the UK
regional hotels which had seen some recovery from mid-2003.
Holiday Inn UK regional hotel RevPAR was up by 4.7%.
InterContinental owned and leased RevPAR on a comparable basis
was 1.0% up on 2003. InterContinental owned and leased turnover
and operating profit was boosted by a full years trading
from the InterContinental Le Grand Paris, which was closed
for refurbishment for part of 2003. Owned and leased operating
profit finished £20 million ahead of 2003 with the
InterContinental Le Grand Paris contributing
£12 million of the increase.
Managed operating profit in EMEA rose by £5 million to
£24 million. This was driven by hotels in the Middle
East where over half of EMEAs managed hotels are located.
Overall, Middle East managed RevPAR increased by 8.8% for
InterContinental, 8.8% for Crowne Plaza and 6.4% for Holiday
Inn. Liquidated damages of approximately £4 million
were received from the early termination of the management
contract for the InterContinental Barcelona.
Overall EMEA franchise RevPAR was 6.1% up on 2003 and there was
a net increase in system size of 13 hotels. As a result,
EMEA franchise operating profit was £3 million ahead
of 2003 at £21 million.
52
Total EMEA regional overheads increased by £1 million,
reflecting the benefits of the reorganisation partly offset by
bonus awards for 2004.
During the year, a number of UK hotels were sold, including the
Crowne Plaza Manchester Midland, Holiday Inn Teeside, Holiday
Inn Sheffield West, Holiday Inn Crawley and the Holiday Inn
Preston.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year | |
|
12 months | |
|
|
|
|
ended | |
|
ended | |
|
|
|
|
December 31, | |
|
December 31, | |
|
|
|
|
2004 | |
|
2003 | |
|
Change | |
|
|
| |
|
| |
|
| |
|
|
|
|
% | |
|
|
($ million) | |
|
|
Turnover:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
201 |
|
|
|
154 |
|
|
|
30.5 |
|
|
Managed
|
|
|
38 |
|
|
|
26 |
|
|
|
46.2 |
|
|
Franchised
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244 |
|
|
|
185 |
|
|
|
31.9 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned and leased
|
|
|
31 |
|
|
|
18 |
|
|
|
72.2 |
|
|
Managed
|
|
|
25 |
|
|
|
15 |
|
|
|
66.7 |
|
|
Franchised
|
|
|
3 |
|
|
|
4 |
|
|
|
(25.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
37 |
|
|
|
59.5 |
|
Regional overheads
|
|
|
(20 |
) |
|
|
(18 |
) |
|
|
11.1 |
|
|
|
|
|
|
|
|
|
|
|
Total $ million
|
|
|
39 |
|
|
|
19 |
|
|
|
105.3 |
|
|
|
|
|
|
|
|
|
|
|
Sterling equivalent £ million(i)
|
|
|
21 |
|
|
|
12 |
|
|
|
75.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
The results have been translated into pounds sterling at
weighted average rates of exchange for the year. The translation
rates are fiscal 2004: £1 = $1.82 (2003:
£1 = $1.62). |
Asia Pacifics results improved significantly in 2004 as
the region made a recovery from the negative impacts in 2003 of
the war in Iraq, SARS and the terrorist bombing in Bali.
Turnover grew by 32% to $244 million with a significant
increase in both owned and leased turnover (up by
$47 million) and managed turnover (up by $12 million).
The owned and leased estate operating profit grew by
$13 million to $31 million with a significant
contribution from the InterContinental Hong Kong. RevPAR at the
InterContinental Hong Kong increased by over 50% on 2003 and,
with high operational gearing, this led to a substantially
improved profit. In the last quarter of the year the hotel was
running at an occupancy of over 85% and RevPAR was up by 29%
over 2003. In total, owned and leased RevPAR across the region
was up by 47%.
Asia Pacific managed hotel RevPAR also increased in comparison
with 2003; InterContinental increased by 18%, Crowne Plaza by
23% and Holiday Inn by 24%. Operating profit increased by
$10 million to $25 million.
Asia Pacific regional overheads were $2 million higher than
2003, principally as a result of infrastructure costs to support
further planned expansion in Greater China. In addition to the
44 IHG hotels already open and operating in Greater China,
there are another 53 management agreements signed and under
negotiation which will increase IHGs presence and
leadership in the China hotel market.
53
In the year, the Holiday Inn Newcastle and the Holiday Inn
Adelaide were sold with proceeds being broadly in line with net
book value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year | |
|
12 months | |
|
|
|
|
ended | |
|
ended | |
|
|
|
|
December 31, | |
|
December 31, | |
|
|
|
|
2004 | |
|
2003 | |
|
Change | |
|
|
| |
|
| |
|
| |
|
|
|
|
% | |
|
|
(£ million) | |
|
|
Turnover
|
|
|
40 |
|
|
|
41 |
|
|
|
(2.4 |
) |
Gross central costs
|
|
|
(92 |
) |
|
|
(106 |
) |
|
|
(13.2 |
) |
|
|
|
|
|
|
|
|
|
|
Net central costs £ million
|
|
|
(52 |
) |
|
|
(65 |
) |
|
|
(20.0 |
) |
|
|
|
|
|
|
|
|
|
|
Dollar equivalent $ million(i)
|
|
|
(93 |
) |
|
|
(105 |
) |
|
|
(11.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
The results have been translated into US dollars at weighted
average rates of exchange for the year. The translation rates
are fiscal 2004: $1 = £0.55 (2003: $1 = £0.62). |
Central support function costs totaled £52 million in
2004, £13 million down on 2003. The reduction
primarily reflects the continued drive to reduce overhead costs.
US dollar denominated costs also benefited from being converted
at a weaker US dollar to sterling exchange rate.
Regional and central overheads were flat year on year reflecting
significant savings achieved given inflationary pressures, new
initiatives and the payment of bonuses in 2004. EMEA overheads
expressed in US dollars were 16.7% higher than 2003 primarily
due to the impact of exchange rates; in sterling, the increase
was 4.5%. Including regional costs charged directly to income
streams, total gross overheads were 2.0% below 2003 levels when
compared at constant exchange rates.
Operating cash flow for Hotels was £291 million compared
with £308 million for the 12 months ended
December 31, 2003. Net capital expenditure, net of disposal
proceeds, was £81 million against £45 million in 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year | |
|
12 months | |
|
|
|
|
ended | |
|
ended | |
|
|
|
|
December 31, | |
|
December 31, | |
|
|
|
|
2004(i) | |
|
2003(i) | |
|
Change | |
|
|
| |
|
| |
|
| |
|
|
|
|
% | |
|
|
(£ million) | |
|
|
Turnover
|
|
|
706 |
|
|
|
674 |
|
|
|
4.7 |
|
Operating profit before exceptional items
|
|
|
80 |
|
|
|
83 |
|
|
|
(3.6 |
) |
|
|
(i) |
2004 53 weeks 2003 52 weeks |
Soft Drinks continued to invest in its key brands and in new
product innovation. During 2004, Britvic acquired the Ben
Shaws water business, for £4 million, further
increasing Britvics presence in the UKs expanding
water market and providing additional capacity.
54
Soft Drinks turnover increased by 4.7% to
£706 million, a strong performance against a 2003
result that benefited from a particularly favorable summer.
Volume growth was 1.5% with strong growth in on-premise volume
up 7.3%, driven by carbonates, adult and fruit drinks, with
J2O and Fruit Shoot performing particularly well.
Soft Drinks increased its share of the take-home market although
volumes were lower as the market volume fell below 2003. Pepsi
achieved a take-home cola market share of 20%. Turnover growth
benefited from an extra weeks trading; 2004 included
53 weeks trading compared with 52 weeks in 2003.
Operating profit for Soft Drinks was £80 million,
£3 million down on 2003. Operating profit in 2003,
however, was boosted by an estimated £5 million from
the exceptionally good summer weather. Although 2004 operating
profit benefited from an extra weeks trading, incremental
costs associated with a move to a more stand-alone basis,
additional depreciation, increased pension costs and continued
investment both in brand support and infrastructure costs, left
profit £3 million down on last year.
Operating cash flow for Soft Drinks was £73 million
compared with £71 million for the 12 months ended
December 31, 2003. Net capital expenditure was
£70 million against £55 million in 2003 in
line with forecast, including the acquisition of Ben Shaws
water business and significant investment in systems and
business processes. Capital expenditure is expected to reduce to
approximately £50 million in 2005.
|
|
|
Highlights for the 12 months ended December 31,
2003 |
Turnover. Hotels turnover decreased £51 million
(3.3%) from £1,538 million for the year ended
December 31, 2002, to £1,487 million for the
12 months ended December 31, 2003. While revenue rose
£7 million (0.9%) in EMEA, the Americas and Asia
Pacific were negatively impacted by exchange rate movements. The
decline of the US dollar against sterling by 9.7% from the first
to fourth quarters resulted in sterling reported turnover in the
Americas finishing the 12 months down 7.7% and Asia Pacific
down 10.9%.
Operating profit. Hotels operating profit before
exceptional items for the year ended December 31, 2003 was
£200 million, down 16.3% (12 months ended
December 31, 2002 £239 million). Trading was
depressed in the first and second quarters by the threat and
then outbreak of the war in Iraq and the outbreak of SARS in
Asia and Canada. The weakening of the US dollar against sterling
had a negative impact in the second half of the year in the
Americas. In EMEA the owned and leased estate was negatively
impacted by the combined effects of pre-opening costs, hotels
opening towards the end of the period, and increased
depreciation charges associated with prior year refurbishments.
A reduction in overheads primarily driven from the
reorganization review helped to offset some of the profit
declines.
Operating profit before exceptional items for the Americas
region for the year ended December 31, 2003 of
$262 million, marginally ahead of 2002 ($260 million
12 months ended December 31, 2002). The weakening of
the US dollar against sterling had a negative impact in the
second half of the year on sterling reported results and the
Americas finished the 12 months ended December 31,
2003 with operating profit before exceptional items in sterling
of £161 million, down 7% from the 12 months ended
December 31, 2002. Total Americas overheads including
direct costs, were down 10%, with the separately disclosed
regional overheads down 3% reflecting implementation of
initiatives arising from the reorganization review.
RevPAR performance in the franchised estate finished the year
ended December 31, 2003 0.3% down from the prior year at
$46.61. The war in Iraq in the first half of the year
contributed to the decline. In the third and fourth quarters, as
a result of an improvement in domestic travel, the franchised
estate recorded 1.5% and 2.7% RevPAR growth respectively. All
brands recorded a stronger second half to the year, with
InterContinental, Express and Staybridge Suite franchises all
recording over 3.5% year-on-year growth for the second six
months.
55
RevPAR growth in the owned and managed estates followed a
similar trend with the second half of the year significantly up
on the first. The InterContinental owned estate, with its major
gateway city exposure, grew year-on-year in each quarter as
stability returned to the travel market. The InterContinental
hotels in Chicago, New York, San Francisco and Miami all
recorded strong growth in the second half of the year. In July
2003, IHG sold 16 Staybridge Suites to HPT for
$185 million, retaining management and branding.
Managed results include the full profit and loss account for
certain properties where IHG is responsible for the underlying
operations. Operating profit before exceptional items in the
managed estate fell due to RevPAR declines in the managed
InterContinental and Crowne Plaza estates in North and Latin
America, and the agreed payments made to HPT under our
management contract. In September, HPT converted 14 additional
suite hotels to IHGs Staybridge Suite brand and management.
|
|
|
Europe, Middle East and Africa |
The managed and franchised estate in EMEA opened 40 hotels with
over 6,500 rooms. Of these hotels, 78% were new build. As at
December 31, 2003, there were a further 96 hotels with over
18,000 rooms signed and under development.
Turnover in EMEA totaled £807 million for the
12 months ended December 31, 2003, an increase of
£7 million on 2002. Owned and leased turnover grew by
£7 million with the reopening during the year of the
refurbished InterContinental Le Grand Paris, and the opening of
the newly built Crowne Plaza Brussels Airport, Holiday Inn Paris
Disney, and three Express hotels in Germany. EMEA operating
profit before exceptional items totaled £92 million
for the 12 months ended December 31, 2003. The
conversion of revenue to operating profit was depressed by the
owned and leased estate, where the combined effects of
pre-opening costs, hotels opening towards the end of the period,
and increased depreciation charges associated with prior year
refurbishment, all negatively impacted costs. Regional overheads
fell £8 million to £22 million for the
12 months ended December 31, 2003
(£30 million for the 12 months ended
December 31, 2002) as a result of the reorganization
initiatives.
RevPAR in the region for the 12 months ended
December 31, 2003 was 0.7% lower than the prior
12 months at $56.36. The trend in the first half of the
year was similar to that experienced in the Americas, with
trading primarily depressed by the threat and then outbreak of
the war in Iraq. In the second half of the year the UK market
showed signs of recovery, although the picture was less clear in
Europe, with both the German and French markets experiencing
mixed trading conditions.
The Holiday Inn UK estate recorded five consecutive months of
RevPAR growth to finish the year up 2.3%, primarily driven by
increased occupancy. The UK regions, with their domestic focus,
recovered earlier than London and recorded seven consecutive
months of growth. In London, December 2003 trading was
particularly strong with the majority of the owned estate
recording double digit RevPAR growth to end the month up 12.3%.
Across EMEA the InterContinental estate finished the year with
an overall RevPAR decline of 5.7%. While the owned
InterContinental estate finished down 8.0% due to its exposure
to the main European gateways, the managed Middle East estate
traded more positively with the comparable Middle East estate
recording RevPAR growth of 2.7%.
Crowne Plaza finished the 12 months with RevPAR growth of
3.3% due to growth in the managed and franchised estates of
11.1% and 3.2% respectively. This performance was helped by the
Middle East estate which finished the 12 months ended
December 31, 2003 up 29.5%.
Franchise turnover fell due to a fall in RevPAR and exchange
rate movements, offset by growth in system size. Franchise
profits grew primarily due to savings in franchise overheads
realized as part of the organizational review.
During the year the InterContinental Le Grand Paris reopened
after a full refurbishment to position the property at the top
of the Paris market. The Holiday Inn Paris Disney opened, giving
representation at one of
56
Europes leading family leisure destinations and the Crowne
Plaza Brussels Airport opened at the end of the year, giving the
brand another defining asset at a major European airport.
System growth continued in the region with a net increase of
over 3,000 rooms operated under management agreements.
Highlights of the new openings were five new InterContinental
hotels in Thailand, Australia and India, and four Holiday Inns
in Greater China. The new Holiday Inns in China brought the
system size to 44 hotels. There are also 18 management
agreements signed, but under development, which will extend
IHGs leadership in the key Greater China market.
Turnover in Asia Pacific for the 12 months ended
December 31, 2003 was $185 million, down
$7 million (4%) from the 12 months ended
December 31, 2002. In addition to the impact of the war in
Iraq, trading in Asia Pacific was depressed by the Bali bombing
and the SARS outbreak.
Trading at the InterContinental Hong Kong fell sharply in March
2003 in connection with the outbreak of SARS, but recovery
commenced in the third and fourth quarters. The opening of the
award-winning Spoon restaurant in the InterContinental Hong Kong
in October lifted non-rooms revenue. In Australia, the Rugby
World Cup gave trading a boost in the second half of the year.
Initiatives to increase revenue within the region included the
roll-out of local websites for China, Australia and New Zealand,
and the opening of a Central Reservations Office based in
Guangzhou, The Peoples Republic Of China, supporting calls
in Cantonese and Mandarin. The addition during the year of Air
China as a Priority Club Rewards partner further strengthened
our travel alliances in the region.
Central overheads principally comprise the costs of global
functions that were centralized following the reorganization
review, reduced by Holidex fee income. The reduction in gross
central costs from £121 million for the year ended
December 31, 2002 to £106 million for 2003,
primarily reflects savings driven from the reorganization review.
Following the Separation, the Group undertook a detailed review
of its owned and leased portfolio to identify opportunities to
lower capital intensity. The Groups strategy is that it
will, in general, only own assets if they have strategic value
or generate superior returns. The Group has now developed plans
for each owned asset taking into account a wide range of
different criteria, including where relevant the state of the
local market and readiness of the asset to be sold. It is
currently estimated that the disposal program will involve the
further sale of assets with a net book value of between
£800 million and £1 billion. The scale and
complexity of the program means that it will take some
considerable time to complete and is subject to there being no
significant adverse changes in market conditions.
In the 12 months ended December 31, 2003 the Group
completed sales of fixed assets with proceeds of
£254 million with an overall gain on sale of
£4 million. The Group is in active negotiations on
further sales and has a pipeline of disposals.
In July 2003, the Group completed the sale of a 16 property
Staybridge Suites portfolio to HPT, one of the largest US hotel
real estate investment trusts, for $185 million. Investment
had been made into the Staybridge Suites portfolio by the Group
to enable rapid entry to the important US extended stay market.
The disposal to HPT achieved a reduction in capital employed
within the business while retaining management and branding of
the hotels.
The Groups strategic relationship with HPT expanded
further with the conversion in September 2003 of 14 further HPT
owned hotels to the Staybridge Suites brand.
57
The sale of the InterContinental London May Fair for
£115 million was completed in September 2003. With an
alternative property in London, and with this property in need
of refurbishment, IHG took the opportunity to reduce capital
intensity in the business at a favorable price in excess of
£400,000 per room.
In October 2003, IHG announced the acquisition of the Candlewood
Suites brand in the US for $15 million from Candlewood
Hotel Corporation. This brands positioning in the midscale
extended stay segment will complement Staybridges upscale
positioning. Candlewood Suites is an established brand of
purpose built hotels with 109 properties on average less than
five years old. The major owner of Candlewood properties is HPT,
which owned 64 properties at the time of announcement and which,
in a related transaction, purchased an additional 12 properties.
IHG will manage all 76 of HPTs properties under 20-year
agreements, with options to extend. The transaction concluded on
December 31, 2003.
Soft Drinks grew its market share in a number of key segments in
which it operates. In addition to a strong investment program in
its key brands, Soft Drinks is also committed to an active new
product development program, which has recently brought
additional success to the business through its J2O
and Fruit Shoot brands. While this investment is driving top
line revenue growth, Soft Drinks is also focused on effective
cost and asset management to deliver an even higher level of
earnings and return on capital employed growth.
Turnover. As a result of favorable summer trading
conditions the overall UK soft drinks market grew 8%. Soft
Drinks turnover of £674 million was up 10% on the
previous year. In the 12 months ended December 31,
2003, Soft Drinks grew its share of the carbonates market with
Tango having an outstanding year, with volumes up 14%. Both
Pepsi and 7UP performed well with volumes up 3% and 6%,
respectively. Following good performance in 2002, Robinsons
continued to grow with sales excluding Fruit Shoot up a further
4% in 2003. Investment was made in further capacity to support
the success of Fruit Shoot and J2O, with both brands
leading their respective market segments with volume growth in
2003 of 54% and 95%, respectively.
Operating profit. The business continued its focus on
effective cost control, which along with the increase in
turnover, contributed to an overall operating profit before
exceptional items increase of 22% to £83 million for
the 12 months ended December 31, 2003.
Operating cash flow for the 12 months ended
December 31, 2003 was £71 million. Capital
expenditure of £55 million for the 12 months
ended December 31, 2003 was driven by expansionary
investment in additional Fruit Shoot and J2O production
capacity, together with significant investment in a business
transformation program. This, in addition to implementing new IT
infrastructure, will significantly enhance operating efficiency.
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Discontinued Operations Mitchells and
Butlers |
The audited Group results for the 15 months ended
December 31, 2003 includes MAB operations for the
28 weeks from October 1, 2002 until the Separation on
April 15, 2003. For the year ended September 30, 2002
MAB results are included for the full fiscal year.
For the 28 weeks until Separation, turnover from MAB
operations was £793 million, up 0.9% from the
comparable period in the prior year (£786 million in
the 28 weeks ended April 13, 2002). Underlying the
0.9% rise in turnover was a 1.0% fall in drink sales and a 2.7%
rise in food sales. These comparisons were adversely affected by
the timing of the important Easter trading period, which fell
after the 28 week period in 2003 but within the 2002
trading period. MAB turnover for the year ended
September 30, 2002 was £1,481 million.
MAB operating profit before exceptional items for the
28 weeks prior to the Separation was £137 million
(£146 million in the 28 weeks ended
April 13, 2002). Gross operating margins were maintained
despite the different Easter period, higher employment and
property costs arising from regulatory changes, and an
58
increase in the pension charge. The reduction in operating
profit was largely due to higher depreciation costs. MAB
operating profit for the year ended September 30, 2002 was
£289 million.
Operating cash flow generated by MAB was £152 million
for the 28 weeks prior to the Separation
(£72 million in the 28 weeks ended April 13,
2002). The improvement over the 28 weeks ended
April 13, 2002 was attributable to a £64 million
reduction in net capital expenditure and a favourable movement
in working capital of £17 million. MAB operating cash
flow for the year ended September 30, 2002 was
£145 million.
LIQUIDITY AND CAPITAL RESOURCES
IHGs policy is to maintain sufficient financial resources
to meet its medium term funding requirements. In 2004 the Group
refinanced its syndicated bank facility with a new
£1.6 billion facility which gave the Group greater
financial flexibility at a lower cost. As a result of the cost
effective funding obtained from the bank market the Group
repurchased the outstanding £18 million of its 2007
Notes, and made a tender offer to repurchase its
600 million
4.75% 2010 Notes. The repurchase of the Groups public debt
was completed in January 2005.
At December 31, 2004 gross debt (including currency swaps)
amounted to £1,538 million comprising
£799 million euro borrowings, £335 million
of US dollar borrowings, £247 million of sterling
borrowings, £69 million of Hong Kong dollar borrowings
and the remainder denominated in a variety of other currencies.
At December 31, 2004 committed bank facilities amounted to
£1,697 million and uncommitted facilities of
£64 million, and of these committed facilities
£542 million were unutilized.
The Group also held short term deposits and investments
(including currency swaps) at December 31, 2004 amounting
to £422 million. Credit risk on treasury transactions
is minimised by operating a policy on investment of surplus
funds that generally restricts counterparties to those with an A
credit rating or better or those providing adequate security.
Limits are also set on the amounts invested with individual
counterparties. Most of the Groups surplus funds are held
in the United Kingdom or United States and there are no material
funds where repatriation is restricted as a result of foreign
exchange regulations.
The Group is in compliance with its financial covenants in its
loan documentation none of which represent a material
restriction on funding or investment policy in the foreseeable
future.
Details of exchange and interest rate risk and financial
instruments are disclosed in Item 11. Quantitative
and Qualitative Disclosures about Market Risk.
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Cash From Operating Activities |
Cash flow from operating activities is the principal source of
cash used to fund the ongoing operating expenses, interest
payments, maintenance capital expenditure and dividend payments
of the Group. The Group believes that the requirements of its
existing business and future investment can be met from cash
generated internally, disposition of assets and businesses and
external finance expected to be available to it.
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Cash Used for Investing Activities |
In March 2004 IHG announced an on-market share repurchase
program for £250 million. By December 20, 2004
the program was completed with, in total, 45.6 million
shares repurchased at an average price of 548p per share.
In September 2004 IHG announced a further £750 million
return of funds to shareholders. A special dividend of
£501 million was paid to shareholders on
December 17, 2004, followed by an associated share
consolidation. A further £250 million share repurchase
program commenced in December 2004, and by December 31,
2004 a further 0.8 million shares had been repurchased at
an average price per share of 651 pence (total
£5 million). By April 25, 2005, a total of
20,259,275 shares had been repurchased under the
59
second repurchase program at an average price per share of
632 pence per share (approximately £128 million).
Following the announcement of the sale of 73 hotels in the
United Kingdom, IHG intends to return a further
£1 billion to shareholders. This will require a
capital restructuring to enable the release of funds arising
from the receipt of disposal proceeds. Subject to receipt of
shareholder approval, completion of disposal transactions and
there being no material adverse change in market conditions, it
is planned to complete the restructuring by the end of June 2005
and to return funds to shareholders as soon as practicable
thereafter.
As of December 31, 2004, the Group had committed
contractual capital expenditure of £53 million. Contracts
for expenditure on fixed assets are not authorized by the
directors on an annual basis, as divisional capital expenditure
is controlled by cash flow budgets. Authorization of major
projects occurs shortly before contracts are placed.
The Group intends to invest approximately £300 million
in capital expenditure in 2005. This level of capital
expenditure is reviewed regularly during the year and may be
increased or decreased in the light of prevailing economic and
market conditions and other financial considerations.
The Company had the following contractual obligations
outstanding as of December 31, 2004:
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Total amounts | |
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Less than | |
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After | |
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committed | |
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1 year | |
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1-3 years | |
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3-5 years | |
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5 years | |
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| |
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| |
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| |
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| |
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| |
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(£ million) | |
Long-term debt
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1,199 |
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|
43 |
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|
|
41 |
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|
|
1,111 |
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|
4 |
|
Operating lease obligations
|
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|
1,106 |
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|
|
55 |
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|
|
98 |
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|
|
69 |
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|
884 |
|
Other long-term obligations(i)
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|
62 |
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|
|
30 |
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|
|
32 |
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Capital contracts placed
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53 |
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53 |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,420 |
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|
|
186 |
|
|
|
171 |
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|
|
1,180 |
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|
|
888 |
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(i) |
Other long-term obligations includes credit balances on currency
swaps, interest rate swaps, forward contracts and pension
obligations. |
The Company may provide performance guarantees to third-party
owners to secure management contracts. The maximum exposure
under such guarantees is £115 million. It is the view
of the directors that, other than to the extent that liabilities
have been provided for in the Consolidated Financial Statements,
such guarantees are not expected to result in financial loss to
the Group.
As of December 31, 2004, the Group had outstanding letters
of credit of £33 million mainly relating to
self-insurance programs.
The Group may guarantee loans made to facilitate third-party
ownership of hotels in which the Group has an equity interest
and also a management contract. As of December 31, 2004,
the Group was a guarantor of loans which could amount to a
maximum of £15 million.
The Group has given warranties in respect of the disposal of
certain of its former subsidiaries. The Company believes that,
other than to the extent that liabilities have been provided for
in the Consolidated Financial Statements, such warranties are
not expected to result in financial loss to the Group.
IHG operates three main schemes; the InterContinental Hotels UK
Pension Plan, the Britvic Pension Plan, and the US based
InterContinental Hotels Pension Plan.
The InterContinental Hotels UK Pension Plan and the Britvic
Pension Plan were both established with effect from
April 1, 2003. On a Financial Report Standard (FRS) 17
Retirement Benefits basis, at
60
December 31, 2004 the Plans had a deficit of
£20 million and £108 million, respectively.
In October 2004, £51 million was paid into the
InterContinental Hotels UK Pension Plan, while
£1 million was paid into the Britvic Pension Plan in
January 2004. The defined benefits sections of both these Plans
are generally closed to new members. In 2005, the Group expects
to make projected regular contributions to the two UK principal
plans of £17 million and additional contributions of
£40 million to the Britvic Pension Plan.
The US based InterContinental Hotels Plan is closed to new
members and pensionable service no longer accrues for current
employee members. On an FRS 17 basis, at December 31,
2004 the Plan had a deficit of $19 million.
The InterContinental Hotels Group will be exposed to the funding
risks in relation to the defined benefit sections of the
InterContinental Hotels and Britvic Plans and the
InterContinental Hotels Pension Plan, as explained in
Item 3. Key Information Risk
Factors.
Details of exchange and interest rate risk and financial
instruments are disclosed in Item 11. Quantitative
and Qualitative Disclosures about Market Risk.
INTERNATIONAL FINANCIAL REPORTING INFORMATION
The Group will be required to produce its first set of audited
financial statements in line with International Financial
Reporting Standards for the year ending December 31, 2005.
Historically, the Group financial statements have been prepared
in accordance with UK GAAP. The following explanatory notes and
reconciliations describe the differences between IFRS and UK
GAAP reporting for the financial year 2004 as well as for the
IFRS opening balance sheet at January 1, 2004.
The effects of the transition are explained on the following
pages which include balance sheet reconciliations at the date of
transition, January 1, 2004, and at December 31, 2004
and a reconciliation of the profit and loss account for the year
ended December 31, 2004.
The financial information is prepared in accordance with
International Financial Reporting Standards (IFRS).
The financial information is prepared on a historical cost
basis, except for certain items of property, plant and equipment
held at deemed cost under the transitional rules of IFRS.
The principle IFRS accounting policies of the Group are set out
below.
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First Time Adoption of IFRS |
The Group has adopted IFRS from January 1, 2004 (date
of transition) with the exception of IAS 32
Financial Instruments: Disclosure and Presentation
and IAS 39 Financial Instruments: Recognition and
Measurement, which are adopted with effect from
January 1, 2005 in accordance with the requirements of IFRS
1 First-time Adoption of International Financial Reporting
Standards.
In accordance with IFRS 1, the Group is entitled to a number of
voluntary and mandatory exemptions from full restatement, which
have been adopted as follows:
Business combinations The basis of accounting for
pre-transition combinations under UK GAAP has not been
revisited. The initial carrying amount of assets and liabilities
acquired in such business combinations is deemed to be
equivalent to cost.
Property, plant and equipment The Group has elected to
retain UK GAAP carrying values of freehold and leasehold hotels
including revaluations as deemed cost at transition.
Employee benefits The cumulative actuarial gains and
losses on defined benefit pension schemes and similar post
retirement benefits at transition date have been recognised in
full in equity.
61
Foreign currencies The Group has elected not to recognize
separately cumulative foreign exchange movements up to the
transition date, and from January 1, 2004 onwards, to
recognize foreign exchange differences on the retranslation of
foreign subsidiaries in a separate reserve within equity.
Share-based payments IFRS 2 Share-based
Payment has been applied to all grants of equity
instruments after November 7, 2002 that had not vested at
January 1, 2005.
The Group has adopted the transitional requirements of IFRS 5
Non-current Assets Held for Sale and Discontinued
Operations and IFRS 2 Share-based Payment from
January 1, 2004.
The Group financial statements comprise the financial statements
of the Company and entities controlled by the Company.
The results of those businesses acquired or disposed of are
consolidated for the period during which they were under the
Groups control.
An associate is an entity over which the Group has the ability
to exercise significant influence, but not control, through
participation in the financial and operating policy decisions of
the entity.
Associates are accounted for using the equity method, unless the
investment is held for sale (see below). Using the equity
method, the Groups investment is recorded at cost adjusted
by the Groups share of post acquisition profits and losses.
Assets and liabilities are classified as held for sale when
their carrying amount will be recovered principally through a
sale transaction, rather than continuing use, and a sale is
highly probable.
Assets designated as held for sale are held at the lower of
carrying amount at designation and fair value less costs to sell.
Depreciation is not charged against tangible assets classified
as held for sale.
Transactions in foreign currencies are recorded at the exchange
rates ruling on the dates of the transactions. Assets and
liabilities denominated in foreign currencies are translated
into sterling at the relevant rates of exchange ruling at the
balance sheet date.
The results of foreign operations are translated into sterling
at weighted average rates of exchange for the period.
Exchange differences arising from the retranslation of opening
net assets and the net result for the year denominated in
foreign currencies are transferred to the Groups
translation reserve within equity. Other exchange differences
are taken to the profit and loss account.
Goodwill arising on the acquisition of a foreign entity is
treated as an asset of that foreign operation and is translated
into sterling at the relevant closing rate.
The Group has adopted both IAS 32 Financial
Instruments: Disclosure and Presentation and IAS 39
Financial Instruments: Recognition and Measurement
from January 1, 2005.
62
Under the transition rules of IFRS 1, IAS 32 and IAS 39 are
not applied to comparative balances; in 2005, comparative
balances will be presented on the existing UK GAAP basis.
Trade debtors Trade debtors are recorded at their
original amount less an allowance for any doubtful accounts.
An allowance for doubtful accounts is made when collection of
the full amount is no longer considered probable.
Investments On adoption of IAS 39 non current
investments are classified as available for sale and held at
fair value. Gains and losses from fair value changes are
recognized within equity. Impairment losses are recognized
within the profit and loss account.
Until January 1, 2005, such investments were recorded in
accordance with UK GAAP at cost less any provision for
impairment.
Trade creditors Under both IAS 39 and UK GAAP, trade
creditors are non interest bearing and are stated at their
nominal value.
Bank and other borrowings Under both IAS 39 (subject
to the hedging policies outlined below) and UK GAAP, borrowings
are stated at proceeds received plus any unamortized issue costs.
Under IAS 39 and UK GAAP, finance charges including issue
costs are charged to the profit and loss account using an
effective interest rate method. Finance costs not settled in the
period are included within the outstanding loan balance.
Derivative financial instruments and hedging Under IFRS,
non hedging derivatives and other treasury instruments are
carried on the balance sheet at fair value. Movements in fair
value are recognized in the profit and loss account.
Derivatives designated as hedging instruments are accounted for
in line with the nature of the hedging arrangement.
Documentation outlining the measurement and effectiveness of a
hedging arrangement is maintained throughout the life of the
hedge relationship. Any ineffective element of a hedge
arrangement is recognized in the profit and loss account.
Goodwill arises on consolidation as the excess of the cost of
acquisition over the fair value at the date of acquisition of
assets acquired of a subsidiary, associate or jointly controlled
entity.
Goodwill is recognized as an asset and tested annually for
impairment. Goodwill is not amortized.
Negative goodwill is recognized immediately in the profit and
loss account.
Goodwill arising on acquisitions prior to September 30,
1998 was eliminated against shareholders funds under UK
GAAP; it has not been reinstated. On disposal of a business, any
such goodwill relating to the business will not be taken into
account in determining the profit or loss on disposal.
Acquired through a business combination On acquisition of
an entity, intangible assets which are separately identifiable
and arise from a legal or contractual right are recognized at
fair value and amortized on a straight line basis over a period
appropriate to the type of asset.
Other intangible assets Amounts paid to hotel owners to
secure management contracts and franchise agreements are
capitalized and amortized over the shorter of the contracted
period and 10 years.
Internally generated development costs are capitalized when
forecast related revenues exceed attributable forecast
development costs.
63
In the circumstance of a hotel or other asset being sold to a
purchaser who then enters into a management or franchise
contract with the Group, this is accounted for as an exchange of
assets and the profit or loss on disposal is determined by
comparing the net book value of the asset sold to the total
consideration received, which includes an estimate of the fair
value of the contract.
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Property, Plant and Equipment |
Freehold and leasehold land and buildings are stated at cost,
except as allowed under the IFRS 1 transition rules, less
depreciation and any impairment.
All other fixed assets are stated at cost less depreciation and
impairment. Borrowing costs are not capitalized. Repairs and
maintenance costs are expensed as incurred.
Under the transition rules of IFRS 1, the Group has elected
to use previous UK GAAP carrying values, including revaluations,
as deemed cost at transition.
Freehold land is not depreciated. All other tangible fixed
assets are depreciated to a residual value over their estimated
useful lives, namely:
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Freehold buildings
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50 years |
Leasehold buildings
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lesser of unexpired term of lease and 50 years |
Fixtures, fittings and equipment
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3-25 years |
Plant and machinery
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4-20 years |
All depreciation and amortization is charged on a straight line
basis.
At each balance sheet date the Group reviews all assets to
determine if there are any indicators of impairment. If
indicators of impairment exist then the recoverable amount of an
asset or cash generating unit (CGU) is estimated.
Where individual assets do not generate cash flows independent
from other assets, the Group reviews the carrying value and
recoverable amount of a CGU. This is the smallest group of
assets where independent cash flows are produced.
Intangible assets with an indefinite life and goodwill are
tested for impairment at least annually by comparing carrying
values with recoverable amounts.
If the recoverable amount of an asset or CGU is less than its
carrying amount, the difference is recognized in the profit and
loss account as an impairment loss.
Deferred tax assets and liabilities are recognized in respect of
all temporary differences between the tax base and carrying
value of assets and liabilities. Those temporary differences
recognized include accelerated capital allowances, unrelieved
tax losses, unremitted profits from overseas where the Group
does not control remittance, gains rolled over into replacement
assets, gains on previously revalued properties and other
short-term temporary differences.
Deferred tax assets are recognized to the extent that it is
regarded as probable that the deductible temporary differences
can be utilized. The recoverability of all deferred tax assets
is reassessed at each balance sheet date.
Deferred tax is calculated at the tax rates that are expected to
apply in the periods in which the asset or liability will be
settled.
64
Operating lease rentals are charged to the profit and loss
account on a straight line basis over the term of the lease.
Defined contribution plans Payments to defined
contribution schemes are charged to the profit and loss account
as they fall due.
Defined benefit plans Any excess or shortfall of scheme
assets, measured at fair value, over scheme liabilities,
measured using the projected unit credit method, is recognized
in the balance sheet.
Actuarial gains and losses are recognized in reserves in the
year in which they arise.
Past service cost is recognized immediately when the related
benefits have vested. When benefits are not fully vested, these
costs are recognized on a straight line basis over the remaining
vesting period.
Actuarial valuations are normally carried out every three years.
The Group is self insured for various levels of general
liability, workers compensation and employee medical and
dental coverage. Insurance reserves include projected
settlements for known and incurred but not reported claims.
Projected settlements are estimated based on historical trends
and actuarial data.
Stocks are stated at the lower of cost and net realizable value.
Cost includes direct purchase costs and other overheads incurred
in bringing these stocks to their present location and
condition. Cost is determined by a first-in, first-out method.
Net realizable value represents estimated selling price less
marketing and selling costs.
Revenue is derived from the following sources: owned and leased
properties; management fees; franchise fees; sale of soft drinks
and other revenues which are ancillary to the Groups
operations.
Generally, revenue represents sales (excluding VAT and similar
taxes) of goods and services, net of discounts, provided in the
normal course of business and recognized when services have been
rendered. The following is a description of the composition of
revenues of the Group.
Owned and leased revenue derived from hotel
operations, including the rental of rooms and food and beverage
sales from a worldwide network of owned and leased hotels
operated under the Groups brand names. Revenue is
recognized when rooms are occupied and food and beverage is sold.
Management fees earned from hotels managed by the
Group, usually under long-term contracts with the hotel owner.
Management fees include a base fee, which is generally a
percentage of hotel revenue, and an incentive fee, which is
generally based on the hotels profitability. Revenue is
recognized in accordance with the contract.
Franchise fees received in connection with the
franchise of the Groups brand names, usually under
long-term contracts with the hotel owner. The Group charges
franchise royalty fees as a percentage of room revenue. Revenue
is recognized when earned.
Soft Drinks sales (excluding VAT and similar taxes)
of goods and services, net of discounts, provided in the normal
course of business. Revenue is recognized when sales are made.
65
The hotel loyalty program, Priority Club Rewards, enables
members to earn points, funded through hotel assessments, during
each stay at an InterContinental Hotels Group hotel and redeem
points at a later date for free accommodation or other benefits.
The future redemption liability is included in creditors less
than, and greater than, one year and is estimated using
actuarial methods which estimate eventual redemption rates and
points values.
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
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Cash and Cash Equivalents |
Cash comprises cash in hand and demand deposits.
Cash equivalents are short-term highly liquid investments with a
maturity of less than 90 days that are readily convertible
to known amounts of cash and subject to insignificant risk of
changes in value.
Bank overdrafts repayable on demand are a component of cash
equivalents.
In accordance with the transitional provisions of IFRS 2
Share-based Payment the Group has elected to apply
IFRS 2 to grants, options and other equity instruments granted
after November 7, 2002 not vested at January 1, 2004.
The Group issues equity settled share-based payments to certain
employees through incentive schemes and a Save As You Earn
scheme. The fair value of these share-based payments is expensed
on a straight line basis over the vesting period of the equity
instrument, based on the Groups best estimate of the
number of shares that will vest.
Fair value is based on option pricing models and the terms and
conditions of the option schemes.
Dividends of £81 million (2003 £86 million) were
proposed before the balance sheet date.
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Accounting policy differences between UK GAAP and
IFRS |
The Group financial statements are prepared in accordance with
accounting principles generally accepted in the United Kingdom
(UK GAAP) which differ from IFRS. The significant differences,
as they apply to the Group, are summarized below.
Assets held for sale Under UK GAAP there is no held for
sale definition and no reclassification is required.
Under IFRS, assets are classified as held for sale when their
value will be recovered through a sale transaction rather than
continuing use, and management consider a sale to be highly
probable.
Assets classified as held for sale are held at the lower of
their carrying value and fair value less costs to sell. No
depreciation or amortization is charged on assets held for sale.
Discontinued operations Under UK GAAP, operations are
classified as discontinued when the sale or termination of
operations is completed before the earlier of three months after
year end or approval of the financial statements. In addition,
the operations concerned must have a material effect on the
nature and focus
66
of operations resulting in either a withdrawal from a particular
class of business or geographical market or a material reduction
in turnover in a continuing market.
Under IFRS, the results of operations arising from assets
classified as held for sale are classified as discontinued
operations when the results relate to a separate line of
business, or geographical area of operations, or where there is
a coordinated plan to dispose of a separate line of business or
geographical area of operations.
Discontinued operations are shown as a separate figure, net of
tax, on the face of the profit and loss account.
Goodwill Under UK GAAP, goodwill is amortized over
20 years and tested for impairment annually.
Under IFRS, goodwill is subject to annual impairment testing and
is not amortized.
Impairment Under UK GAAP, impairment is measured for an
income-generating unit when indicators of impairment exist. All
assets are reviewed for indicators of impairment at the balance
sheet date.
Under IFRS, all assets are reviewed for evidence of the
existence of impairment indicators at each reporting date.
Assets with an indefinite life (such as goodwill) are subject to
impairment testing at least annually.
Pension costs Under UK GAAP, the Group provides for the
cost of retirement benefits based upon a consistent percentage
of employees pensionable pay as recommended by independent
qualified actuaries. Variations in regular pension costs are
amortized over the average expected service life of current
employees on a straight line basis. Scheme assets and
liabilities are not recognized on the Groups balance sheet.
Under IFRS, the cost of providing defined benefit retirement
benefits is recognized over the service life of scheme members.
This cost is calculated by an independent qualified actuary,
based on estimates of long-term rates of return on scheme assets
and discount rates on scheme liabilities.
Any excess or deficit of scheme assets over scheme liabilities
is recorded as an asset or liability, respectively, in the
Groups balance sheet to the extent that it does not relate
to unrecognized actuarial gains and losses.
Each year the scheme net assets or liabilities are adjusted for
actuarial gains and losses which are recognized directly in
reserves.
Share-based payment Under IFRS, the fair value of all
share-based payments is expensed over the vesting period of the
related equity instruments, based on the Groups best
estimate of the number of shares that will vest.
Fair value is determined by an option pricing model applied to
all share-based payments granted after November 7, 2002.
Deferred taxation Under UK GAAP, deferred tax is provided
on all timing differences, subject to certain exceptions.
Accordingly, deferred tax is not provided on revaluation gains
and gains rolled over into replacement assets unless there
exists a binding agreement for sale, nor on unremitted earnings
of investments except to the extent of accrued dividends or
where there exists a binding agreement to distribute earnings.
Under IFRS, deferred tax is recognized on all temporary
differences between the tax base and carrying value of assets
and liabilities, including those arising from revaluation of
assets, on gains rolled over into replacement assets and on
unremitted earnings of investments where the Group does not
control the timing of distributions.
In addition, IFRS requires the tax base of assets and
liabilities to be determined by managements current
intended use and the intended manner of realization of the asset
or liability.
Cash and cash equivalents Under UK GAAP, there is no
equivalent definition.
67
Under IFRS, cash equivalents are defined as short-term highly
liquid investments with a maturity of less than 90 days
that are readily convertible into a known amount of cash.
Dividends Under UK GAAP, dividends are recognized in the
period in which they are declared.
Under IFRS, dividends are recognized as an appropriation of
reserves in the period in which they are approved.
|
|
|
Reconciliation of earnings under UK GAAP to IFRS for the year
ended December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
profit | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before | |
|
|
|
|
|
|
|
|
|
|
|
Earnings | |
|
|
|
|
exceptional | |
|
|
|
|
|
Exceptional | |
|
Profit | |
|
Minority | |
|
available for | |
|
|
Turnover | |
|
items | |
|
Interest | |
|
Tax | |
|
items | |
|
after tax | |
|
interest | |
|
shareholders | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
As reported under UK GAAP
|
|
|
2,204 |
|
|
|
331 |
|
|
|
(22 |
) |
|
|
(50 |
) |
|
|
68 |
|
|
|
327 |
|
|
|
(28 |
) |
|
|
299 |
|
Remove goodwill amortization
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
9 |
|
|
|
(1 |
) |
|
|
8 |
|
Pension accounting adjustments
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
(4 |
) |
|
|
2 |
|
|
|
(2 |
) |
Share-based payment adjustments
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
Impairment of previously revalued assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
Depreciation adjustment of held for sale assets
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
10 |
|
Adjustment to provision for loss on disposal of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74 |
|
|
|
74 |
|
|
|
|
|
|
|
74 |
|
Tax adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
6 |
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under IFRS
|
|
|
2,204 |
|
|
|
346 |
|
|
|
(22 |
) |
|
|
(56 |
) |
|
|
142 |
|
|
|
410 |
|
|
|
(27 |
) |
|
|
383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
1,602 |
|
|
|
228 |
|
|
|
(22 |
) |
|
|
(18 |
) |
|
|
118 |
|
|
|
306 |
|
|
|
(27 |
) |
|
|
279 |
|
Discontinued operations
|
|
|
602 |
|
|
|
118 |
|
|
|
|
|
|
|
(38 |
) |
|
|
24 |
|
|
|
104 |
|
|
|
|
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK GAAP | |
|
IFRS | |
|
|
| |
|
| |
|
|
(£ million except per | |
|
|
ordinary share | |
|
|
amounts) | |
Net debt
|
|
|
(1,116 |
) |
|
|
(1,116 |
) |
Basic earnings per ordinary share
|
|
|
42.1 |
p |
|
|
53.9 |
p |
68
|
|
|
Reconciliation of basic EPS to adjusted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pence per | |
|
|
|
|
ordinary | |
|
|
£ million | |
|
share | |
|
|
| |
|
| |
Basic EPS under IFRS
|
|
|
383 |
|
|
|
53.9p |
|
Exceptional items:
|
|
|
|
|
|
|
|
|
|
Impairment of tangible fixed assets
|
|
|
48 |
|
|
|
6.7p |
|
|
Administrative expense
|
|
|
11 |
|
|
|
1.5p |
|
|
Other operating income
|
|
|
(20 |
) |
|
|
(2.8p |
) |
|
Profit on disposal of fixed assets
|
|
|
(15 |
) |
|
|
(2.1p |
) |
|
Provision against fixed asset investments
|
|
|
10 |
|
|
|
1.4p |
|
|
Interest receivable
|
|
|
(22 |
) |
|
|
(3.1p |
) |
|
Interest payable
|
|
|
16 |
|
|
|
2.3p |
|
|
Premium on early settlement of debt
|
|
|
17 |
|
|
|
2.4p |
|
|
Tax credit on above items
|
|
|
(20 |
) |
|
|
(2.8p |
) |
|
Exceptional tax credit
|
|
|
(167 |
) |
|
|
(23.5p |
) |
|
|
|
|
|
|
|
|
|
|
(142 |
) |
|
|
(20.0p |
) |
|
|
|
|
|
|
|
Adjusted EPS under IFRS
|
|
|
241 |
|
|
|
33.9p |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of UK GAAP balance sheet to IFRS balance sheet
at January 1, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current | |
|
Current | |
|
Current | |
|
Non current | |
|
Minority | |
|
|
|
|
|
|
assets | |
|
assets | |
|
liabilities | |
|
liabilities | |
|
interests | |
|
Net assets | |
|
Equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
As reported under UK GAAP
|
|
|
4,281 |
|
|
|
999 |
|
|
|
(1,085 |
) |
|
|
(1,478 |
) |
|
|
(163 |
) |
|
|
2,554 |
|
|
|
(2,554 |
) |
Reclassify proposed dividends
|
|
|
|
|
|
|
|
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
86 |
|
|
|
(86 |
) |
Pension accounting adjustments
|
|
|
|
|
|
|
(47 |
) |
|
|
|
|
|
|
(131 |
) |
|
|
57 |
|
|
|
(121 |
) |
|
|
121 |
|
Deferred tax adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(163 |
) |
|
|
(17 |
) |
|
|
(180 |
) |
|
|
180 |
|
Reclassifications
|
|
|
30 |
|
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under IFRS at January 1, 2004
|
|
|
4,311 |
|
|
|
922 |
|
|
|
(999 |
) |
|
|
(1,772 |
) |
|
|
(123 |
) |
|
|
2,339 |
|
|
|
(2,339 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of UK GAAP balance sheet to IFRS balance sheet
at December 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non current | |
|
Current | |
|
Current | |
|
Non current | |
|
Minority | |
|
|
|
|
|
|
assets | |
|
assets | |
|
liabilities | |
|
liabilities | |
|
interests | |
|
Net assets | |
|
Equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
As reported under UK GAAP
|
|
|
4,017 |
|
|
|
757 |
|
|
|
(1,013 |
) |
|
|
(1,634 |
) |
|
|
(150 |
) |
|
|
1,977 |
|
|
|
(1,977 |
) |
Reclassify proposed dividends
|
|
|
|
|
|
|
|
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
81 |
|
|
|
(81 |
) |
Remove goodwill amortisation
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
9 |
|
|
|
(9 |
) |
Pension accounting adjustments
|
|
|
|
|
|
|
(110 |
) |
|
|
|
|
|
|
(125 |
) |
|
|
75 |
|
|
|
(160 |
) |
|
|
160 |
|
Deferred tax adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(134 |
) |
|
|
(22 |
) |
|
|
(156 |
) |
|
|
156 |
|
Reclassify assets as held for sale
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
74 |
|
|
|
|
|
|
|
89 |
|
|
|
(89 |
) |
Reclassifications
|
|
|
31 |
|
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under IFRS at December 31, 2004
|
|
|
4,073 |
|
|
|
616 |
|
|
|
(932 |
) |
|
|
(1,819 |
) |
|
|
(98 |
) |
|
|
1,840 |
|
|
|
(1,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
ITEM 6. |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
DIRECTORS AND SENIOR MANAGEMENT
Overall strategic direction of the Group is provided by the
board of directors, comprising executive and non-executive
directors, and by members of the executive committee.
The directors and officers of InterContinental Hotels Group PLC
as at April 25, 2005 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initially | |
|
Date of next | |
|
|
|
|
appointed to | |
|
reappointment | |
Name |
|
Title |
|
the board | |
|
by shareholders | |
|
|
|
|
| |
|
| |
Andrew Cosslett
|
|
Director and Chief Executive |
|
|
2005 |
|
|
|
2005 |
|
Richard Hartman
|
|
Director and Managing Director, EMEA |
|
|
2003 |
|
|
|
2005 |
|
David Kappler(1)
|
|
Director and Senior Independent Director |
|
|
2004 |
|
|
|
2005 |
|
Ralph Kugler(1)
|
|
Director |
|
|
2003 |
|
|
|
2005 |
|
Robert C. Larson(1)
|
|
Director |
|
|
2003 |
|
|
|
2005 |
|
Stevan Porter
|
|
Director and President, the Americas |
|
|
2003 |
|
|
|
2006* |
|
David Prosser(1)
|
|
Director |
|
|
2003 |
|
|
|
2006* |
|
Richard Solomons
|
|
Director and Finance Director
Chairman of Britvic |
|
|
2003 |
|
|
|
2005 |
|
Sir Howard Stringer(1)
|
|
Director |
|
|
2003 |
|
|
|
2006* |
|
David Webster(1)
|
|
Chairman |
|
|
2003 |
|
|
|
2006* |
|
|
|
* |
One third of the directors are required to retire by rotation at
each Annual General Meeting. Three of the four directors
asterisked will be required to retire and/or stand for
re-election at the Annual General Meeting to be held in 2006. |
|
|
(1) |
Non-executive director. |
|
|
|
|
|
|
|
Name |
|
Title |
|
Initially appointed | |
|
|
|
|
| |
Peter Gowers
|
|
Executive Vice President, Global Brand Services |
|
|
2003 |
|
A. Patrick Imbardelli
|
|
Managing Director, Asia Pacific |
|
|
2003 |
|
Jim Larson
|
|
Executive Vice President, Human Resources |
|
|
2003 |
|
Richard Winter
|
|
Executive Vice President, Corporate Services, Group Company
Secretary and General Counsel |
|
|
2003 |
|
|
|
|
Former Directors and Officers |
Richard North served as director and Chief Executive of the
Company from Separation in April 2003 until
September 30, 2004.
Andrew Cosslett
Andrew Cosslett was appointed Chief Executive in February 2005.
He joined the Group from Cadbury Schweppes plc where he was most
recently President, Europe, Middle East and Africa. During
his career at Cadbury Schweppes he held a variety of senior
regional management and marketing roles in the UK and Asia
Pacific. He has over 11 years previous experience in brand
marketing with Unilever. He is also non-executive Chairman of
Duchy Originals Limited. Aged 50.
70
Peter Gowers
Peter Gowers has previous international experience in management
consultancy based in London and Singapore. He joined the Group
in 1999 and was appointed Executive Vice President, Global Brand
Services in January 2003. He is responsible for Group strategy,
worldwide marketing and distribution, reservations and loyalty
programs. Aged 32.
Richard Hartman
Richard Hartman has over 38 years experience in the
hotel industry including 30 years with Sheraton. He joined
the Group in 1999 as Managing Director, Asia Pacific.
Subsequently, as Managing Director, Europe, Middle
East & Africa, he was appointed an executive director
in April 2003. He is responsible for the business of all the
Hotel brands and properties in the EMEA region. Aged 59.
A. Patrick Imbardelli
A. Patrick Imbardelli has over 23 years experience in
the hotel industry including 12 years with Southern Pacific
Hotels Corporation. He joined the Group in 2000 and was
appointed Managing Director, Asia Pacific in January 2003. He is
responsible for the business of all the Hotel brands and
properties in the Asia Pacific region. Aged 44.
David Kappler
David Kappler was appointed a director and Senior Independent
Director in June 2004. He is non-executive Chairman of Premier
Foods plc and a non-executive director of Shire Pharmaceuticals
Group plc and HMV Group plc. A qualified accountant and formerly
Chief Financial Officer of Cadbury Schweppes plc until April
2004, he also served as a non-executive director of Camelot
Group plc. He is Chairman of the Audit Committee. Aged 58.
Ralph Kugler
Ralph Kugler was appointed a director in April 2003. He is
President, Unilever Home and Personal Care, and has been
nominated to join the Board of Unilever in May 2005. He has held
a variety of senior positions globally for Unilever and has
experience of regional management in Asia, Latin America and
Europe (including as President of Unilever Latin America and,
more recently, President of Unilever Europe, Home and Personal
Care) with over 25 years involvement in brand
marketing. Aged 49.
Jim Larson
Jim Larson has over 25 years experience in human
resources, most recently with the Kellogg Company. He joined the
Group in 2002 as Executive Vice President, Human Resources. He
is responsible for global reward strategy and implementation,
talent management and leadership development. Aged 52.
Robert C. Larson
Robert C. Larson was appointed a director in April 2003. He is
Managing Director of Lazard Frères & Co LLC,
Chairman of Lazard Frères Real Estate Investors, LLC and
non-executive Chairman of United Dominion Realty Trust Inc. He
served as a non-executive director of Six Continents PLC
(formerly Bass PLC) from 1996 until April 2003. Aged 70.
Stevan Porter
Stevan Porter spent 13 years with Hilton Corporation in a
variety of senior management positions. He joined the Group in
2001 as Chief Operating Officer, the Americas. Subsequently, as
President, the Americas, he was appointed an executive director
in April 2003. He is responsible for the business of all the
Hotel brands and properties in the Americas region. Aged 50.
71
David Prosser
David Prosser is a qualified actuary with 40 years
experience in financial services. Appointed a director in April
2003, he is Group Chief Executive of Legal & General
Group Plc. He is Chairman of the Financial Services Skills
Council and a director of the Royal Automobile Club Limited and
of Epsom Downs Racecourse Limited. He served as Senior
Independent Director from January to June 2004. He is Chairman
of the Remuneration Committee. Aged 61.
Richard Solomons
Richard Solomons qualified as a chartered accountant in 1985,
followed by seven years in investment banking, based in London
and New York. He joined the Group in 1992 and held a variety of
senior finance and operational roles. He was appointed Finance
Director of the Hotels business in October 2002 in anticipation
of the Companys listing in April 2003. He is responsible
for finance and asset management, tax, treasury and central
shared services. He is also Chairman of Britvic. Aged 43.
Sir Howard Stringer
Sir Howard Stringer has over 35 years experience in
the media and entertainment industries. He was appointed a
director in April 2003. He is a director of Sony Corporation and
Chairman and Chief Executive Officer of Sony Corporation of
America and has been nominated to be Group Chairman and Chief
Executive Officer of Sony Corporation. He served as a
non-executive director of Six Continents PLC from 2002 until
April 2003. Aged 63.
David Webster
David Webster was appointed Deputy Chairman and Senior
Independent Director of InterContinental Hotels Group on the
Separation of Six Continents PLC in April 2003. He was appointed
non-executive Chairman on 1 January 2004. He is also
non-executive Chairman of Makinson Cowell Limited, a capital
markets advisory firm. He was formerly Chairman of Safeway plc
and a non-executive director of Reed Elsevier PLC. He is
chairman of the Nomination Committee. Aged 60.
Richard Winter
Richard Winter, a solicitor, qualified in 1973 and has
20 years commercial law experience in private
practice. He joined the Group in 1994 as Director of Group
Legal. He is now responsible for corporate governance, risk
management, internal audit, data privacy, company secretariat,
Group legal services and corporate social responsibility.
Aged 56.
COMPENSATION
In fiscal 2004, the aggregate compensation (including pension
contributions, bonus and awards under the long term incentive
plans) of the directors and officers of the Company was
£5,191,000. The aggregate amount set aside or accrued by
the Company in fiscal 2004 to provide pension retirement or
similar benefits for those individuals was £243,000. An
amount of nil was charged in fiscal 2004 in respect of bonuses
payable to them under performance related cash bonus schemes and
long term incentive plans.
Note 4 of Notes to the Financial Statements sets out the
individual compensation of the directors. The following are
details of the Companys principal share schemes, in which
the directors of the Company participated during the period.
|
|
|
Former Six Continents Share Schemes |
Under the terms of the Separation of Six Continents PLC in 2003,
holders of options under the Six Continents Executive Share
Option Schemes were given the opportunity to exchange their Six
Continents options for equivalent value new options over IHG
shares. During fiscal 2004, 7,429,736 such options were
exercised, leaving a total of 12,568,562 such options
outstanding at prices ranging from 308.48p to 593.29p.
72
Under the terms of the Six Continents Special Deferred Incentive
Plan 59,217 IHG shares were transferred to employees in 2004,
reflecting entitlements existing prior to the Separation.
|
|
|
Share Plans established on Separation |
|
|
|
Executive Share Option Plan |
The Remuneration Committee, consisting solely of non-executive
directors, may select employees, including executive directors,
of the Group, for the grant of options to acquire ordinary
shares in the Company. The option price will not be less than
the market value of an ordinary share, or the nominal value if
higher. The market value will be the quoted price on the
business day preceding the date of grant, or the average of the
middle market quoted prices on the three consecutive dealing
days immediately preceding the date of grant. The International
Schedule to the Scheme extends it to executives outside the
United Kingdom. Grants of options under the Executive Share
Option Plan are normally made annually and except in exceptional
circumstances, will not, in any year, exceed three times annual
salary for executive directors. A performance condition has to
be met before options can be exercised. The performance
condition is set by the Remuneration Committee.
In April 2004, options were granted to 180 employees over
6,951,420 IHG shares at 494.17p per share. In April 2005,
options were granted to 58 employees over 2,104,570 IHG shares
at 619.83p per share. For options granted in 2004 and 2005, the
Companys adjusted earnings per share over the three-year
performance periods ending December 31, 2006 and
December 31, 2007 must increase by at least nine percentage
points over the increase in the UK Retail Prices Index for the
same period for any of the award to vest. Options granted in
2004 are exercisable between 2007 and 2014 and options granted
in 2005 are exercisable between 2008 and 2015, subject to the
achievement of the performance condition.
As of April 25, 2005, 27,633,433 IHG shares were subject to
options under the Executive Share Option Plan.
|
|
|
Short Term Deferred Incentive Plan |
The IHG Short Term Deferred Incentive Plan (the
STDIP) enables eligible employees, including
executive directors, to receive all or part of their bonus in
the form of IHG shares together with, in certain cases, a
matching grant of free shares. The bonus and matching shares are
deferred and released in equal amounts at the end of each of the
three years following deferral. Participation in the STDIP is at
the discretion of the IHG directors. The number of shares is
calculated by dividing a specific percentage of the
participants salary by the average share price for a
period of days prior to the date on which the shares are
granted. As of April 25 2005, conditional rights over
804,165 IHG Shares had been awarded to participants under the
Plan.
|
|
|
Performance Restricted Share Plan |
The Performance Restricted Share Plan allows executive directors
and eligible employees to receive share awards, subject to the
satisfaction of a performance condition, set by the Remuneration
Committee, which is normally measured over a three year period.
Awards are normally made annually and, except in exceptional
circumstances, will not exceed three times annual salary for
executive directors. In determining the level of awards within
this maximum limit, the Committee takes into account the level
of Executive Share Options already granted to the same person.
As of April 25, 2005 conditional rights over 5,914,246 IHG
shares had been awarded to employees under the plan. The plan
provides for the grant of nil cost options to
participants as an alternative to share awards. As of
April 25, 2005, no such nil cost options had been granted.
The Sharesave Plan is a savings plan whereby employees contract
to save a fixed amount each month with a Savings Institution for
3 or 5 years. At the end of the savings term, employees are
given the option to purchase shares at a price set before
savings began. The Sharesave Plan is available to all UK
employees (including executive directors) employed by
participating Group companies provided they have been
73
employed for at least one year. The Plan provides for the grant
of options to subscribe for ordinary shares at the higher of
nominal value and not less than 80% of the middle market
quotations of the ordinary shares on the three dealing days
immediately following an announcement of results. As of
April 25, 2005, 1,209,633 IHG shares were subject to
options under the Sharesave Plan at a subscription price of
420.5p, exercisable up to the year 2009.
|
|
|
Options and Ordinary Shares held by Directors |
Details of the directors interests in the Companys
shares are set out below and in Note 4 of Notes to the
Financial Statements.
BOARD PRACTICES
The executive directors have service agreements with the Company.
Prior to the Separation of Six Continents PLC Richard Hartman,
Richard North, Stevan Porter and Richard Solomons entered into
service agreements with a notice period of 12 months.
Following the year end, Andrew Cosslett entered into a service
agreement with an initial notice period of 24 months,
reducing month-by-month to 12 months after the initial
12 month period. All new appointments are intended to have
12 month notice periods. However, on occasion, to complete
an external recruitment successfully, a longer initial period
reducing to 12 months may be used, following guidance in
the Combined Code.
David Webster took over as interim Chief Executive on
September 15, 2004 following announcement that Richard
North would resign as a director of the Company on
September 30, 2004. David Websters remuneration in
his capacity as interim Chief Executive was exclusive of his
remuneration in his capacity as non-executive Chairman of the
Company, which is the subject to six months notice.
Non-executive directors, Ralph Kugler, Robert C. Larson, David
Prosser and Sir Howard Stringer signed letters of appointment
effective from the listing of IHG. David Kappler signed a letter
of appointment effective from June 21, 2004. All
non-executive directors appointments are subject to
re-election at the Annual General Meeting at which they may
retire by rotation.
See Note 4 of the Notes to the Financial Statements for
details of directors service contracts.
No provisions for compensation for termination following change
of control, or for liquidated damages of any kind, are included
in the current directors contracts. In the event of any
early termination of an executive directors contract the
policy is to seek to minimize any liability.
Upon retirement, and under certain other specified circumstances
on termination of his employment, a director will become
eligible to receive benefit from his participation in a Company
pension plan. See Note 4 of Notes to the Financial
Statements for details of directors pension entitlements
at December 31, 2004.
This Committee is chaired by the Chief Executive, Andrew
Cosslett. It consists of the executive directors and senior
executives from the Group and the regions and usually meets
monthly. Its role is to consider and manage a range of important
strategic and business issues facing the Group. It is
responsible for monitoring the performance of the regional
Hotels business and the Britvic business and is authorised to
approve capital and revenue investment within levels agreed by
the board.
The Audit Committee is chaired by David Kappler, who has
significant recent and relevant financial experience and is the
committees financial expert. He took over the role of
Chairman of the Committee from
74
David Webster following his appointment to the board as Senior
Independent Director on June 21, 2004. During 2004, the
Audit Committee consisted of all the non-executive directors,
excluding the Chairman of the Company. Since January 1,
2005, the membership of the Audit Committee has consisted of
David Kappler, Ralph Kugler and David Prosser and is scheduled
to meet at least four times a year.
The Audit Committee assists the board in observing its
responsibilities in relation to the integrity of the
Groups financial statements and associated announcements,
the adequacy of internal control and risk management systems and
the appointment and work of the internal and external auditors.
The role of the Audit Committee, including the powers and
responsibilities delegated by the board, is summarised below and
in full in its terms of reference, a copy of which is available
on the Companys website or in writing on request.
The Committees Chairman and financial expert, David
Kappler, is a chartered management accountant and until April
2004 was Chief Financial Officer of Cadbury Schweppes plc. He
also chairs the Audit Committees of two other UK public limited
companies.
The Committees principal responsibilities are to:
|
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|
|
review the Companys public statements on internal control
and corporate governance compliance prior to their consideration
by the board; |
|
|
|
review the Companys processes for detecting and addressing
fraud, misconduct and control weaknesses and to consider the
Companys response to any such occurrence, including
overseeing the process enabling the anonymous submission of
concerns; |
|
|
|
review reports from management, internal audit and external
audit concerning the effectiveness of internal control,
financial reporting and risk management processes; |
|
|
|
review with management and the external auditor any financial
statements required under UK or US legislation before submission
to the board; |
|
|
|
establish, review and maintain the role and effectiveness of the
Internal Audit function, including overseeing the appointment of
the Head of Internal Audit; |
|
|
|
assume responsibility for the appointment, compensation,
resignation, dismissal and the overseeing of the external
auditor, including review of the external audit, its cost and
effectiveness; |
|
|
|
pre-approve non-audit work to be carried out by the external
auditor and the fees to be paid for that work along with the
monitoring of the external auditors independence; and |
|
|
|
adopt and oversee a specific Code of Ethics for the senior
financial officers, which is consistent with the Companys
overall Guidelines for Proper Business Conduct. |
To ensure that the independence and objectivity of the external
auditor is not compromised, the Audit Committee has introduced a
policy whereby all proposals for the provision of non-audit
services by the external auditor must be pre-approved by the
Audit Committee or its delegated member. At all times, the
overriding consideration is to ensure that the provision of
non-audit services does not impact the external auditors
independence and objectivity.
Disclosure Committee
The Disclosure Committee, chaired by the Groups Financial
Controller, and comprising the Company Secretary and other
senior executives, reports to the Chief Executive and the
Finance Director, and to the Audit Committee. Its duties include
ensuring that information required to be disclosed in reports
pursuant to UK and US accounting, statutory or listing
requirements, fairly represent the Groups position in all
material respects.
Remuneration
Committee
The Remuneration Committee, chaired by David Prosser, consists
of all the non-executive directors, excluding the Chairman of
the Company (Ralph Kugler, Robert C. Larson, David Prosser
and Sir Howard
75
Stringer), and meets at least three times a year. The Committee
advises the board on overall remuneration policy. The Committee
also determines, on behalf of the board, and with the benefit of
advice from external consultants and members of the Human
Resources department, the remuneration packages of the executive
directors and other members of the Executive Committee. No
member of the Committee has any personal financial interest,
other than as a shareholder, in the matters to be decided by the
Committee.
Nomination Committee
The Nomination Committees quorum comprises any three
non-executive directors although, where possible, all
non-executive directors are present. It is chaired by the
Chairman of the Company and is responsible for nominating, for
the approval of the board, candidates for appointment to the
board and, also for succession planning. The Committee generally
engages external consultants to advise on candidates for board
appointments and did so in connection with the appointments of
Messrs Kappler and Cosslett. The Committee also assists the
board in identifying and developing the role of the Senior
Independent Director.
A description of the significant ways in which the
Companys actual corporate governance practices differ from
the New York Stock Exchange corporate governance requirements
followed by U.S. companies can be found on the
Companys website at www.ihgplc.com.
EMPLOYEES
The Group employed an average of 29,659 people worldwide in
the year ended December 31, 2004. Of these, approximately
94% were employed on a full-time basis and 6% were employed on a
part-time basis.
The table below analyzes the distribution of the average number
of employees for the last three fiscal periods by division and
by geographic region.
|
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|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rest of Europe, | |
|
|
|
|
|
|
|
|
|
|
the Middle East | |
|
|
|
|
|
|
|
|
United Kingdom | |
|
and Africa | |
|
United States | |
|
Rest of World | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
9,676 |
|
|
|
6,601 |
|
|
|
8,241 |
|
|
|
2,317 |
|
|
|
26,835 |
|
Soft drinks
|
|
|
2,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group
|
|
|
12,500 |
|
|
|
6,601 |
|
|
|
8,241 |
|
|
|
2,317 |
|
|
|
29,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
11,174 |
|
|
|
5,585 |
|
|
|
5,704 |
|
|
|
4,648 |
|
|
|
27,111 |
|
Soft drinks
|
|
|
2,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group
|
|
|
13,872 |
|
|
|
5,585 |
|
|
|
5,704 |
|
|
|
4,684 |
|
|
|
29,809 |
|
Discontinued operations
|
|
|
15,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,886 |
|
|
|
5,585 |
|
|
|
5,704 |
|
|
|
4,648 |
|
|
|
44,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels
|
|
|
11,872 |
|
|
|
5,622 |
|
|
|
5,944 |
|
|
|
4,947 |
|
|
|
28,385 |
|
Soft drinks
|
|
|
2,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group
|
|
|
14,509 |
|
|
|
5,622 |
|
|
|
5,944 |
|
|
|
4,947 |
|
|
|
31,022 |
|
Discontinued operations
|
|
|
36,710 |
|
|
|
2,037 |
|
|
|
|
|
|
|
|
|
|
|
38,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,219 |
|
|
|
7,659 |
|
|
|
5,944 |
|
|
|
4,947 |
|
|
|
69,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under EU law, many employees of Group companies are now
covered by the Working Time Regulations which came into force in
the United Kingdom on October 1, 1998. These regulations
implemented the European Working Time Directive and parts of the
Young Workers Directive, and lay down rights and
76
protections for employees in areas such as maximum working
hours, minimum rest time, minimum days off and paid leave.
In the United Kingdom there is in place a national minimum wage
under the National Minimum Wage Act. At December 31, 2004,
the minimum wage for individuals between 18 and under the age of
22 was £4.10 per hour and £4.85 per hour for
individuals age 22 and above. This particularly impacts
businesses in the hospitality and retailing sectors. Compliance
with the National Minimum Wage Act is being monitored by the Low
Pay Commission, an independent statutory body established by the
UK Government.
Less than 5% of the Groups UK employees are covered
by collective bargaining agreements with trade unions.
Continual attention is paid to the external market in order to
ensure that terms of employment are appropriate. The Group
believes the Group companies will be able to conduct their
relationships with trade unions and employees in a satisfactory
manner.
SHARE OWNERSHIP
The interests of the directors and officers in the shares of the
Company at April 25, 2005 were as follows:
|
|
|
|
|
|
|
Ordinary | |
|
|
shares of | |
|
|
112p | |
|
|
| |
Directors
|
|
|
|
|
Andrew Cosslett
|
|
|
10,000 |
|
Richard Hartman
|
|
|
95,615 |
|
David Kappler
|
|
|
2,602 |
|
Ralph Kugler
|
|
|
892 |
|
Robert C. Larson
|
|
|
10,714 |
|
Stevan Porter
|
|
|
88,077 |
|
David Prosser
|
|
|
4,464 |
|
Richard Solomons
|
|
|
55,009 |
|
Sir Howard Stringer
|
|
|
7,566 |
|
David Webster
|
|
|
13,395 |
|
|
Officers
|
|
|
|
|
Peter Gowers
|
|
|
(Nil) |
|
A. Patrick Imbardelli
|
|
|
52,202 |
|
Jim Larson
|
|
|
38,877 |
|
Richard Winter
|
|
|
8,159 |
|
The above shareholdings are all beneficial interests. The
percentage of ordinary share capital owned by each of the
directors is negligible.
On April 25, 2005, the executive directors technical
interest in unallocated InterContinental Hotels Group PLC
ordinary shares held by the Trustees of the ESOP was
2,831,979 shares.
The directors interests in options to subscribe for shares
as at the year end in InterContinental Hotels Group PLC as at
December 31, 2005 are set out in Note 4 of Notes to
the Financial Statements.
The directors do not have different voting rights from other
shareholders of the Company.
77
|
|
ITEM 7. |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
MAJOR SHAREHOLDERS
As far as is known to management, InterContinental Hotels
Group PLC is not directly or indirectly owned or controlled
by another corporation or by any government. Under the
provisions of Section 198 of the Companies Act,
InterContinental Hotels has been advised of the following
interests in its shares, being greater than 3% of its issued
share capital as at April 25, 2005.
|
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|
|
|
|
April 2005 | |
|
April 2004 | |
|
December 2002 | |
|
|
| |
|
| |
|
| |
|
|
Number of | |
|
Percent | |
|
Number of | |
|
Percent | |
|
Number of | |
|
Percent | |
Identity of person or group |
|
shares/ADSs | |
|
of class | |
|
shares/ADSs | |
|
of class | |
|
shares/ADSs | |
|
of class | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Lloyds TSB Group Plc
|
|
|
26,773,575 |
|
|
|
4.44% |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
|
Legal & General Group Plc
|
|
|
24,233,225 |
(2) |
|
|
4.02% |
|
|
|
29,924,045 |
|
|
|
4.10% |
|
|
|
24,176,81 |
|
|
|
3.10% |
|
Barclays PLC
|
|
|
20,246,584 |
|
|
|
3.36% |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
|
AXA SA
|
|
|
18,121,201 |
|
|
|
3.00% |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
|
Dodge & Cox Funds
|
|
|
(1) |
|
|
|
(1) |
|
|
|
25,106,594 |
|
|
|
3.40% |
|
|
|
(1) |
|
|
|
(1) |
|
|
|
(1) |
No notification of an above 3% shareholding received. |
|
(2) |
The number of shares stated to be beneficially held by
Legal & General Group Plc (and its subsidiaries)
is derived from the number of shares notified to the Company by
Legal & General Group Plc, as adjusted to take
account of a subsequent 25 for 28 share consolidation. |
The Companys major shareholders do not have different
voting rights from other shareholders of the Company. The
Company does not know of any arrangements the operation of which
may result in a change in its control.
As of April 25, 2005, 29,548,420 ADSs equivalent to
29,548,420 ordinary shares, or approximately 5% of the total
ordinary shares in issue, were outstanding and were held by
1,425 holders. Since certain ordinary shares are registered
in the names of nominees, the number of shareholders of record
may not be representative of the number of beneficial owners.
As of April 25, 2005, there were a total of 81,566 record
holders of ordinary shares, of whom 216 had registered addresses
in the United States and held a total of 256,987 ordinary shares
(0.04% of the total issued).
RELATED PARTY TRANSACTIONS
Other than as herein described, the Company has entered into no
related party transactions or loans.
Pursuant to an agreement dated February 12, 2003,
Thomas R Oliver, a former director of Six Continents, was
contracted to provide consultancy services to the Group. This
agreement ended in March 2005. (See Note 4 of Notes to
the Financial Statements).
During part of fiscal 2003, MAB was part of the Six Continents
Group, and as a result the agreements entered into in connection
with the Separation were with a related party at that time.
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Summary of Main Agreements Relating to the
Separation |
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Share Purchase Agreement to effect the MAB Transfer (the
MAB Transfer SPA) |
Under the MAB Transfer SPA, which was entered into between MAB
and Six Continents PLC after MAB became the holding company of
the Six Continents Group, Six Continents PLC transferred at book
value the whole of the issued share capital of various Retail
companies, namely Six Continents Retail Limited and Six
Continents Retail Germany GmbH and their respective subsidiaries
and subsidiary undertakings, and Six Continents Property
Developments Limited to MAB (the MAB Transfer).
Under the MAB Transfer SPA, Six Continents PLC gave no
warranties (other than as to ownership of the shares in the
companies being transferred) and agreed to give certain limited
indemnities to MAB. These indemnities were given to protect MAB
against liabilities which it may incur and which relate
exclusively or
78
predominantly to InterContinental Hotels Group entities. In
addition, Six Continents PLC indemnified MAB in respect of 50%
of certain contingent liabilities which do not relate
exclusively or predominantly to either MAB or InterContinental
Hotels Group entities. These shared liabilities relate primarily
to businesses which have been disposed of by the Six Continents
Group or its subsidiaries in the past and where warranties or
indemnities were given to third parties.
The MAB Transfer SPA also contained provisions relating to the
allocation of tax liabilities and the conduct of the tax affairs
of MAB and InterContinental Hotels Group relating to periods
beginning before the reorganization was effected.
Following the MAB Transfer, an agreement was entered into
between MAB and IHG PLC under which MAB agreed to transfer on
the Separation date the whole of the issued share capital of Six
Continents PLC (which at that point only owned the hotels
business and soft drinks business) to IHG in consideration for
which IHG allotted and issued IHG shares to the holders of MAB
shares (the Separation Agreement). Each shareholder
on the register of members of MAB, immediately before the
transfer of the Six Continents PLC shares, received one IHG
share for every MAB share held at that time. The holders of MAB
ADSs on the ADR register maintained by the Depositary received
one IHG ADS for every MAB ADS. A shareholder or ADR holder of
MAB was not required to make any payment for the IHG shares or
ADSs. The Separation did not affect the number of issued MAB
shares or MAB ADSs.
All IHG shares received by MAB shareholders (including the
Depositary) in connection with the Separation were credited as
fully paid.
Under the Separation Agreement, MAB agreed to give certain
limited indemnities to IHG. These indemnities were given to
protect IHG against liabilities which it may incur but which
relate exclusively or predominantly to Retail or SCPD. In
addition, MAB indemnified IHG in respect of 50% of certain
contingent liabilities which do not relate exclusively or
predominantly to the Retail business and SCPD or to the hotels
business and soft drinks business. These shared contingent
liabilities relate primarily to businesses which have been
disposed of by the Six Continents Group or its subsidiaries in
the past and where warranties and indemnities were given.
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Relationship with Mitchells & Butlers plc |
Following the Separation, MAB and IHG each operate as separate
listed companies. There are no cross-directorships between MAB
and IHG. The Transitional Services Agreement put in place on
Separation contains certain obligations, which expired as of
December 31, 2003. Certain other obligations are
continuing. Neither the expired, nor the residual continuing
obligations, are believed to be material.
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Franchise Agreement for Express by Holiday Inn |
Prior to Separation, a franchise agreement on arms length
terms was entered into between a Group company (the
Licensor) and an MAB Group company (the
Licensee), pursuant to which the Licensor granted
the Licensee the right to operate Express by Holiday Inn hotels
operated by the Licensee. This license includes the rights to
use the reservations and other systems of the Licensor, the
trademarks and service marks and such other elements as
designated from time to time by the Licensor, designed to
identify Express by Holiday Inn hotels. In return,
the Licensee pays a royalty to the Licensor, which is a
pre-determined percentage of room revenues together with certain
other fees as specified in the agreement. Each hotel has its own
license agreement, which is typically for a ten-year period from
the date of opening.
On February 7, 2003, Britvic Soft Drinks Limited and the
MAB Group extended the terms of an existing Britvic Soft Drinks
Limited supply agreement for five years from that date. Under
the agreement, the MAB
79
Group has a minimum purchase obligation for Britvic soft drinks
across its estate which is well within the MAB Groups
actual usage levels.
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ITEM 8. |
FINANCIAL INFORMATION |
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
See Item 18. Financial Statements.
Group companies have extensive operations in the United Kingdom,
as well as internationally, and are involved in a number of
legal proceedings incidental to those operations. It is the
Companys view that the outcome of such proceedings, either
individually or in the aggregate, is not likely to have a
material effect on the results of the Groups operations or
its financial position.
See Item 3. Key Information
Dividends.
SIGNIFICANT CHANGES
None.
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ITEM 9. |
THE OFFER AND LISTING |
The principal trading market for the Companys ordinary
shares is the London Stock Exchange on which Six Continents
shares were traded since its incorporation in 1967 until
Separation in 2003 and on which InterContinental Hotels Group
shares have been traded since Separation. The ordinary shares
are also listed on the New York Stock Exchange trading in
the form of ADSs evidenced by ADRs. Each ADS represents one
ordinary share. InterContinental Hotels Group has a sponsored
ADR facility with The Bank of New York as Depositary.
The following tables show, for the fiscal periods indicated, the
reported high and low middle market quotations (which represent
an average of closing bid and ask prices) for the ordinary
shares on the London Stock Exchange, as derived from the Daily
Official List of the UK Listing Authority, and the highest
and lowest sales prices of the ADSs as reported on the New York
Stock Exchange composite tape.
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£ per | |
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Ordinary share | |
|
$ per ADS | |
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| |
|
| |
Year ended September 30 |
|
High | |
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Low | |
|
High | |
|
Low | |
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|
| |
|
| |
|
| |
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| |
2000
|
|
|
8.42 |
|
|
|
5.80 |
|
|
|
13.75 |
|
|
|
8.50 |
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2001
|
|
|
8.02 |
|
|
|
5.49 |
|
|
|
12.00 |
|
|
|
7.75 |
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2002
|
|
|
7.83 |
|
|
|
5.41 |
|
|
|
11.73 |
|
|
|
7.49 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ per | |
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|
|
|
Ordinary share | |
|
$ per ADS | |
|
|
| |
|
| |
15 months ended December 31 |
|
High | |
|
Low | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
2003 October 1 to April 11 Six Continents
|
|
|
6.35 |
|
|
|
4.61 |
|
|
|
10.08 |
|
|
|
7.49 |
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2003 April 15 to December 31 IHG
|
|
|
5.55 |
|
|
|
3.38 |
|
|
|
9.82 |
|
|
|
5.26 |
|
Year ended December 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
6.91 |
|
|
|
4.79 |
|
|
|
13.09 |
|
|
|
8.70 |
|
80
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ per | |
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|
|
|
ordinary share | |
|
$ per ADS | |
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|
| |
|
| |
15 months ended December 31 |
|
High | |
|
Low | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
|
5.90 |
|
|
|
4.61 |
|
|
|
9.23 |
|
|
|
7.49 |
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Second quarter
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|
|
6.35 |
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|
|
4.62 |
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|
|
10.08 |
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|
|
7.73 |
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Third quarter April 1 to April 11 Six Continents
|
|
|
6.18 |
|
|
|
5.92 |
|
|
|
9.74 |
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|
|
9.33 |
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Third quarter April 15 to June 30
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|
|
4.52 |
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|
|
3.38 |
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|
|
7.80 |
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|
|
5.26 |
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Fourth quarter
|
|
|
5.24 |
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|
|
4.39 |
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|
|
8.52 |
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|
|
7.13 |
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Final quarter
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|
5.55 |
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|
|
4.85 |
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|
|
9.82 |
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|
|
8.22 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ per | |
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|
|
|
Ordinary share | |
|
$ per ADS | |
|
|
| |
|
| |
Year ended December 31 |
|
High | |
|
Low | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
|
5.75 |
|
|
|
4.79 |
|
|
|
10.80 |
|
|
|
8.90 |
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Second quarter
|
|
|
5.82 |
|
|
|
4.87 |
|
|
|
10.78 |
|
|
|
8.70 |
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Third quarter
|
|
|
6.49 |
|
|
|
5.37 |
|
|
|
11.82 |
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|
|
9.88 |
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Fourth quarter
|
|
|
6.91 |
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|
|
6.45 |
|
|
|
13.09 |
|
|
|
11.80 |
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2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
|
6.97 |
|
|
|
6.17 |
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|
|
13.06 |
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|
|
11.65 |
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Second quarter (through April 25, 2005)
|
|
|
6.33 |
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|
|
6.23 |
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|
|
12.00 |
|
|
|
11.71 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ per | |
|
|
|
|
ordinary share | |
|
$ per ADS | |
|
|
| |
|
| |
Month ended |
|
High | |
|
Low | |
|
High | |
|
Low | |
|
|
| |
|
| |
|
| |
|
| |
October 2004
|
|
|
6.75 |
|
|
|
6.45 |
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|
|
12.59 |
|
|
|
11.80 |
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November 2004
|
|
|
6.91 |
|
|
|
6.56 |
|
|
|
12.98 |
|
|
|
12.35 |
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December 2004
|
|
|
6.72 |
|
|
|
6.47 |
|
|
|
13.09 |
|
|
|
12.61 |
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January 2005
|
|
|
6.79 |
|
|
|
6.43 |
|
|
|
12.98 |
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|
|
12.25 |
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February 2005
|
|
|
6.97 |
|
|
|
6.63 |
|
|
|
13.06 |
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|
|
12.66 |
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March 2005
|
|
|
6.77 |
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|
|
6.17 |
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|
|
13.06 |
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|
|
11.65 |
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April 2005 (through to April 25, 2005)
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|
|
6.42 |
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|
|
6.12 |
|
|
|
12.61 |
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|
|
12.31 |
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PLAN OF DISTRIBUTION
Not applicable.
SELLING SHAREHOLDERS
Not applicable.
DILUTION
Not applicable.
EXPENSES OF THE ISSUE
Not applicable.
81
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ITEM 10. |
ADDITIONAL INFORMATION |
MEMORANDUM AND ARTICLES OF ASSOCIATION
The following summarizes material rights of holders of the
Companys ordinary shares under the material provisions of
the Companys memorandum and articles of association and
English law. This summary is qualified in its entirety by
reference to the Companies Act and the Companys memorandum
and articles of association. The Companys memorandum and
articles of association were filed as an exhibit to the
Companys Registration Statement on Form S-8 (File
No. 1-10409) filed with the SEC on April 23, 2003.
The Companys shares may be held in certificated or
uncertificated form. No holder of the Companys shares will
be required to make additional contributions of capital in
respect of the Companys shares in the future.
In the following description, a shareholder is the
person registered in the Companys register of members as
the holder of the relevant share.
Principal Objects
The Company is incorporated under the name InterContinental
Hotels Group PLC and is registered in England and Wales with
registered number 4551528. The Companys memorandum of
association provides that its objects include to acquire certain
predecessor companies and carry on business as an investment
holding company, to carry on business of brewers and distillers,
licensed victuallers, to deal in commodities, to acquire and
operate breweries, hotels and restaurants, as well as to carry
on any other business which the Company may judge capable of
enhancing the value of the Companys property or rights.
The memorandum grants to the Company a range of corporate
capabilities to effect these objects.
Directors
Under the Companys articles of association, a director may
not vote in respect of any proposal in which he, or any person
connected with him, has any material interest other than by
virtue of his interests in securities of, or otherwise in or
through, the Company. This is subject to certain exceptions
relating to proposals (a) indemnifying him in respect of
obligations incurred on behalf of the Company,
(b) indemnifying a third party in respect of obligations of
the Company for which the director has assumed responsibility
under an indemnity or guarantee, (c) relating to an offer
of securities in which he will be interested as an underwriter,
(d) concerning another body corporate in which the director
is beneficially interested in less than one percent of the
issued shares of any class of shares of such a body corporate,
(e) relating to an employee benefit in which the director
will share equally with other employees and (f) relating to
liability insurance that the Company is empowered to purchase
for the benefit of directors of the Company in respect of
actions undertaken as directors (or officers) of the Company.
The directors are empowered to exercise all the powers of the
Company to borrow money, subject to the limitation that the
aggregate amount of all moneys borrowed by the Company and its
subsidiaries shall not exceed an amount equal to three times the
Companys share capital and aggregate reserves, unless
sanctioned by an ordinary resolution of the Company.
Any director attaining 70 years of age shall retire at the
next Annual General Meeting. Such a director may be reappointed
but shall retire (and be eligible for reappointment) at the next
Annual General Meeting.
Directors are not required to hold any shares of the Company by
way of qualification.
Rights Attaching to
Shares
Under English law, dividends are payable on the Companys
ordinary shares only out of profits available for distribution,
as determined in accordance with accounting principles generally
accepted in the United Kingdom and by the Companies Act. Holders
of the Companys ordinary shares are entitled to receive
such dividends as may be declared by the shareholders in general
meeting, rateably according to the amounts paid up on such
shares, provided that the dividend cannot exceed the amount
recommended by the directors.
82
The Companys board of directors may pay shareholders such
interim dividends as appear to them to be justified by the
Companys financial position. If authorized by an ordinary
resolution of the shareholders, the board of directors may also
direct payment of a dividend in whole or in part by the
distribution of specific assets (and in particular of paid up
shares or debentures of any other company).
Any dividend unclaimed after six years from the date the
dividend was declared, or became due for payment, will be
forfeited and will revert to the Company.
Voting Rights
Voting at any general meeting of shareholders is by a show of
hands unless a poll, which is a written vote, is duly demanded.
On a show of hands, every shareholder who is present in person
or by proxy at a general meeting has one vote regardless of the
number of shares held. On a poll, every shareholder who is
present in person or by proxy has one vote for every
112 pence in nominal amount of the shares held by that
shareholder. A poll may be demanded by any of the following:
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the chairman of the meeting; |
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at least five shareholders entitled to vote at the meeting; |
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any shareholder or shareholders representing in the aggregate
not less than one-tenth of the total voting rights of all
shareholders entitled to vote at the meeting; or |
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any shareholder or shareholders holding shares conferring a
right to vote at the meeting on which there have been paid-up
sums in the aggregate equal to not less than one-tenth of the
total sum paid up on all the shares conferring that right. |
A proxy form will be treated as giving the proxy the authority
to demand a poll, or to join others in demanding one.
The necessary quorum for a general meeting is three persons
carrying a right to vote upon the business to be transacted,
whether present in person or by proxy.
Matters are transacted at general meetings of the Company by the
proposing and passing of resolutions, of which there are three
kinds:
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an ordinary resolution, which includes resolutions for the
election of directors, the approval of financial statements, the
cumulative annual payment of dividends, the appointment of
auditors, the increase of authorized share capital or the grant
of authority to allot shares; |
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a special resolution, which includes resolutions amending the
Companys memorandum and articles of association,
disapplying statutory pre-emption rights or changing the
Companys name; and |
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an extraordinary resolution, which includes resolutions
modifying the rights of any class of the Companys shares
at a meeting of the holders of such class or relating to certain
matters concerning the Companys winding up. |
An ordinary resolution requires the affirmative vote of a
majority of the votes of those persons voting at a meeting at
which there is a quorum.
Special and extraordinary resolutions require the affirmative
vote of not less than three-fourths of the persons voting at a
meeting at which there is a quorum.
In the case of an equality of votes, whether on a show of hands
or on a poll, the chairman of the meeting is entitled to cast
the deciding vote in addition to any other vote he may have.
Annual General Meetings must be convened upon advance written
notice of 21 days. Other meetings must be convened upon
advance written notice of 21 days for the passing of a
special resolution and 14 days for any other resolution,
depending on the nature of the business to be transacted. The
days of delivery or receipt of the notice are not included. The
notice must specify the nature of the business to be transacted.
The
83
board of directors may if they choose make arrangements for
shareholders who are unable to attend the place of the meeting
to participate at other places.
Variation of Rights
If, at any time, the Companys share capital is divided
into different classes of shares, the rights attached to any
class may be varied, subject to the provisions of the Companies
Act, with the consent in writing of holders of three-fourths in
value of the shares of that class or upon the adoption of an
extraordinary resolution passed at a separate meeting of the
holders of the shares of that class. At every such separate
meeting, all of the provisions of the articles of association
relating to proceedings at a general meeting apply, except that
the quorum is to be the number of persons (which must be two or
more) who hold or represent by proxy not less than one-third in
nominal value of the issued shares of the class.
Rights in a
Winding-up
Except as the Companys shareholders have agreed or may
otherwise agree, upon the Companys winding up, the balance
of assets available for distribution:
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after the payment of all creditors including certain
preferential creditors, whether statutorily preferred creditors
or normal creditors; and |
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subject to any special rights attaching to any class of shares; |
is to be distributed among the holders of ordinary shares
according to the amounts paid-up on the shares held by them.
This distribution is generally to be made in cash. A liquidator
may, however, upon the adoption of an extraordinary resolution
of the shareholders, divide among the shareholders the whole or
any part of the Companys assets in kind.
Limitations on Voting and
Shareholding
There are no limitations imposed by English law or the
Companys memorandum or articles of association on the
right of non-residents or foreign persons to hold or vote the
Companys ordinary shares or ADSs, other than the
limitations that would generally apply to all of the
Companys shareholders.
MATERIAL CONTRACTS
The Separation agreements summarized in Item 7. Major
Shareholders and Related Party Transactions Related
Party Transactions Summary of Main Agreements
Relating to the Separation are material contracts of the
Group. In addition, the following contracts have been entered
into otherwise than in the course of ordinary business by
members of the Group either (i) in the two years
immediately preceding the date of this document in the case of
contracts which are or may be material or (ii) which
contain provisions under which any Group member has any
obligation or entitlement which is material to the Group as at
the date of this document. To the extent that these agreements
include representations, warranties and indemnities, such
provisions are considered standard in an agreement of that
nature, save to the extent identified below.
Disposal of Bass
Brewers
The disposal agreement for Bass Brewers, including the business
and assets of Bass Beers Worldwide, and Six Continents 80%
shareholding in Praszke Pivovary, was entered into on
June 14, 2000 between Six Continents and certain of its
subsidiaries and Interbrew and certain of its subsidiaries. The
transaction completed on August 22, 2000. Pursuant to the
disposal agreement, certain subsidiaries of Interbrew acquired
Bass Brewers from Six Continents subsidiaries. Both Six
Continents and Interbrew guaranteed certain of their respective
subsidiaries obligations under the disposal agreement.
The consideration for the sale of Bass Brewers was
£2,300 million, comprising £1,426 million
for the shares and assets and £874 million by way of
repayment by Bass Brewers of net intra group debt owed to the
84
Company (or members of the Group). An adjustment in respect of
net assets was agreed on November 3, 2000. This involved a
payment of £24 million from Interbrew to Six
Continents. In fiscal 2002 a further payment of
£9 million was received in respect of the finalization
of completion account adjustments.
Under the disposal agreement, subsidiaries of Six Continents
gave to Interbrew subsidiaries certain warranties and
indemnities in relation to the shares and assets that were the
subject of the disposal. In addition, Six Continents provided an
indemnity in relation to the liabilities of Bass Holdings
Limited (the holding company of Bass Brewers) arising out of
that company having carried on the business of operation and
management of licensed and unlicensed outlets as carried on by
Six Continents Retail Limited, and other non-brewing businesses.
MAB has indemnified the Group against claims relating to certain
of these indemnities.
In connection with the disposal agreement, the parties entered
into certain ancillary agreements on completion of the disposal
which included: a soft drink supply agreement under which Six
Continents PLC agreed to sell, or to procure the sale of, soft
drinks to Bass Brewers for a term of five years; and ancillary
intellectual property agreements governing the use of the Bass
name and certain trademarks following the completion of the
disposal.
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Britvic Joint Venture Agreements |
Britvic, Bass Public Limited Company (now Six Continents PLC),
Whitbread and Company PLC, Allied-Lyons PLC and Allied
Breweries Limited entered into a joint venture agreement
dated February 10, 1986 under which Allieds soft
drinks business was acquired by Britvic (which at that time
comprised the former soft drinks business of Six Continents and
Whitbread and Company PLC in an existing joint venture) in
exchange for which Allied received shares in Britvic. This
agreement governs the relations of Six Continents,
Whitbread and Allied as shareholders of Britvic.
InterContinental Hotels Group PLC became a party to this
agreement (and Six Continents was released from its obligations)
on March 10, 2004.
On November 9, 2004, InterContinental Hotels Group PLC
signed a new £1,600 million bank facility agreement
with The Bank of Tokyo-Mitsubishi, Ltd., Barclays Capital,
Citigroup Global Markets Limited, HSBC Bank plc,
J.P. Morgan plc, Lloyds TSB Bank plc, The Royal Bank
of Scotland plc, SG Corporate & Investment
Banking (the corporate and investment banking division of
Société Generale) and WestLB AG, London Branch,
all acting as mandated lead arrangers and underwriters and HSBC
Bank plc as agent bank.
The facilities are split into a £1.1 billion 5 year
revolving credit facility and a £500 million 364 day
revolving credit facility, the latter having a one year
term-out option.
The interest margin payable on borrowings under the IHG Facility
Agreement is linked to IHGs consolidated net debt to
consolidated EBITDA ratio; initially the margin was set at
LIBOR + 0.375% p.a. The margin can vary between
LIBOR + 0.325% and LIBOR + 0.60% depending on the
level of the ratio.
As part of this refinancing the Group repurchased its euro and
sterling denominated bonds.
Britvic and InterContinental Hotels Group PLC, Allied Domecq
PLC, Whitbread Group PLC (the Britvic Original
Shareholders) and PepsiCo Inc. (together with the Britvic
Original Shareholders the Britvic Shareholders)
entered into the Britvic IPO Agreement dated April 22, 2005
providing for PepsiCos rights as a minority shareholder of
Britvic and the terms on which the parties would agree to
proceed with an initial public offering of Britvic. The parties
have agreed, subject, amongst other things, to market
conditions, to consider an initial public offering of Britvic
prior to December 31, 2008.
The Britvic IPO Agreement also sets out the Britvic
Shareholders rights to acquire and dispose of Britvic
ordinary shares on and following any initial public offering.
85
If a Britvic initial public offering has occurred, the Britvic
IPO Agreement terminates upon the earlier of (a) the date
on which each of the Britvic Original Shareholders has decreased
its shareholding in Britvic to 3 per cent or (b) the
third anniversary of the date of the listing of Britvic (or, if
later, December 31, 2008). If no Britvic initial public
offering has occurred, the Britvic IPO Agreement shall terminate
upon the earlier of December 31, 2008 or the date upon
which the Britvic board of directors decides not to proceed with
an initial public offering.
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|
|
Disposal to Hospitality Properties Trust (2003) |
On July 1, 2003, IHG Resources entered into a Purchase and
Sale Agreement with HPT IHG Properties Trust (HPT
IHG), pursuant to which HPT IHG purchased from
InterContinental Hotels Group Resources, Inc (IHG
Resources), 16 Staybridge Suites hotels situated in
the United States for US$185 million. The Group continues
to manage those hotels.
Under the Purchase and Sale Agreement, IHG Resources has given
certain customary warranties to HPT IHG.
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|
Disposal to Hospitality Properties Trust (2004) |
On December 17, 2004, BHR Texas L.P., InterContinental
Hotels Group Resources, Inc., Crowne Plaza LAX, LLC, Crowne
Plaza Hilton Head Holding Company, Holiday Pacific Partners
Limited Partnership, 220 Bloor Street Hotel Inc. and
Staybridge Markham, Inc. (together, the Vendors)
entered into a Purchase and Sale Agreement (as amended and
restated on February 9, 2005) with HPT IHG
2 Properties Trust (HPT IHG-2), pursuant to
which HPT IHG-2 purchased from the Vendors 12 hotels
situated in the United States and Canada. On the same date, Six
Continents International Holdings B.V. (SIH),
entered into a Stock Purchase Agreement (as amended and restated
on February 9, 2005) with HPT IHG-2, pursuant to which HPT
IHG-2 purchased from SIH all of the shares in Crowne Plaza
(Puerto Rico) Inc., which is the owner of a hotel in Puerto
Rico. The total consideration payable by HPT IHG-2 for the sales
amounted to US$425 million, before transaction costs,
equivalent to net book value (of which US$395 million was
received upon the main completion of the sale on
February 16, 2005, with the remaining US$30 million to
be received upon the completion of the sale of the
InterContinental hotel in Austin, expected to be on or around
June 1, 2005). The Group will continue to manage the hotels.
Under the Purchase and Sale Agreement and Stock Purchase
Agreement, the Vendors have given certain customary warranties
and indemnities to HPT IHG-2.
In connection with the disposals referred to above, IHG has
agreed to guarantee certain amounts payable to HPT IHG and HPT
IHG-2 in relation to the managed hotels sold by the Group to HPT
IHG and HPT IHG-2. The guarantee is for a maximum amount of
US$125 million and requires amounts to be paid by IHG to
HPT IHG and/or HPT IHG-2 (and/or their designated affiliate)
irrespective of the revenue generated by the relevant hotels.
The guarantee may be terminated if certain financial tests are
met.
A Share Purchase Agreement (the SPA) was entered
into on March 10, 2005 between Six Continents, IHC London
(Holdings) Limited (IHC Holdings) and LGR
Acquisition and LGR Holdings Limited (LGR). Pursuant
to the SPA, Six Continents and IHC Holdings (the
Sellers) have agreed to sell all of the issued
ordinary share capital of Six Continents Hotels & Holidays
Limited, Holiday Inn Limited, NAS Cobalt No. 2 Limited and
London Forum Hotel Limited respectively (together, the LGR
Shares) to LGR and to transfer to LGR certain contractual
rights to the extent they relate to the hotels LGR will
indirectly acquire under the SPA (the LGR Hotels)
and which remain to be completed or performed, or remain in
force, after completion of the sale of the Shares to LGR under
the SPA.
The agreed sale price for the LGR Shares was
£1 billion. Receipt of £40 million of the
total proceeds has been deferred, contingent upon certain
pre-agreed performance targets being reached. Completion of the
SPA
86
is conditional upon the receipt of European Commission
clearance. Following completion, the Group will continue to
manage the LGR Hotels.
Under the SPA, the Sellers gave certain warranties in relation
to the assets disposed of and LGR gave certain warranties in
relation to its authority to enter into the SPA and its capacity
to perform its obligations under the SPA. Certain indemnities
were also given by the Sellers.
EXCHANGE CONTROLS
There are no restrictions on dividend payments to
US citizens.
Although there are currently no UK foreign exchange control
restrictions on the export or import of the capital or the
payment of dividends on the ordinary shares or the ADSs, from
time to time English law imposes restrictions on the payment of
dividends to persons resident (or treated as so resident) in or
governments of (or persons exercising public functions in)
certain countries (each of the foregoing, a Prohibited
Person).
There are no restrictions under the articles of association or
under English law that limit the right of non-resident or
foreign owners to hold or vote the ordinary shares. However,
under current English law, ordinary shares or ADSs may not be
owned by a Prohibited Person. In addition, the Companys
articles of association contain certain limitations on the
voting and other rights of any holder of ordinary shares, whose
holding may, in the opinion of the directors, result in the loss
or failure to secure the reinstatement of any license or
franchise from any US governmental agency held by Six
Continents Hotels Inc or any subsidiary thereof.
TAXATION
This section provides a summary of the material US federal
income tax and UK tax consequences to US holders, as
defined below, of owning and disposing of ordinary shares or
ADSs of the Company. This section addresses only the tax
position of a US holder who holds ordinary shares or ADSs
as capital assets. This section does not, however, discuss the
tax consequences of members of special classes of holders
subject to special rules and holders that, directly or
indirectly, hold 10% or more of the Companys voting stock.
This section does not generally deal with the position of a
US holder who is resident or ordinarily resident in the
United Kingdom for UK tax purposes or who is subject to
UK taxation on capital gains or income by virtue of
carrying on a trade, profession or vocation in the United
Kingdom.
A US holder is a beneficial owner of shares or ADSs that is
for US federal income tax purposes (i) a citizen or
resident of the US, (ii) a US domestic corporation,
(iii) an estate whose income is subject to US federal
income tax regardless of its source, or (iv) a trust if a
US court can exercise primary supervision over the
trusts administration and one or more United States
persons are authorized to control all substantial decisions of
the trust.
This section is based on the Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed
regulations, published rulings and court decisions, and on
UK tax laws and published practice of the UK Inland
Revenue, all as currently in effect, and on the Double Taxation
Convention between the United States and the United Kingdom that
was ratified in March 2003 (the Treaty). These laws
are subject to change, possibly on a retroactive basis.
This section is further based in part upon the representations
of the Depositary and assumes that each obligation in the
Company ADR Deposit Agreement and any related agreement will be
performed in accordance with its terms. For US federal income
tax purposes, a holder of ADRs evidencing ADSs will be treated
as the owner of the shares represented by those ADRs. Generally,
exchanges of ordinary shares for ADRs, and ADRs for ordinary
shares, will not be subject to US federal income tax or
UK taxation on capital gains.
The US Treasury has previously expressed concerns that parties
to whom ADRs are released may be taking actions that are
inconsistent with the claiming of foreign tax credits for US
holders of ADRs. Such actions would also be inconsistent with
the claiming of the reduced rate of tax, described below, for
qualified
87
dividend income. Accordingly, the analysis of the availability
of the reduced rate of tax for qualified dividend income
described below could be affected by actions taken by parties to
whom the ADRs are pre-released.
Investors should consult their own tax advisor regarding the
US federal, state and local, the UK and other tax consequences
of owning and disposing of shares and ADSs in their particular
circumstances, and in particular whether they are eligible for
the benefits of the Treaty.
Under current UK tax law, the Company will not be required
to withhold tax at source from dividend payments it makes.
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|
|
United States Federal Income Taxation |
Subject to the passive foreign investment company
(PFIC) rules discussed below, a US holder is
subject to US federal income taxation on the gross amount of any
dividend paid by the Company out of its current or accumulated
earnings and profits (as determined for US federal income tax
purposes). Subject to applicable limitations and the discussion
above regarding concerns expressed by the US Treasury, dividends
paid to a non-corporate US holder in taxable years beginning
before January 1, 2009 that constitute qualified dividend
income will be taxable to the holder at a maximum tax rate of
15%. The Company expects that dividends paid by the Company with
respect to the shares or ADSs will constitute qualified dividend
income.
Dividends must be included in income when the US holder, in
the case of shares, or the Depositary, in the case of ADSs,
actually or constructively receives the dividend, and will not
be eligible for the dividends-received deduction generally
allowed to US corporations in respect of dividends received
from other US corporations. For foreign tax credit
limitation purposes, dividends will be income from sources
outside the United States.
The amount of the dividend distribution will be the
US dollar value of the pound sterling payments made,
determined at the spot pound sterling/ US dollar rate on
the date the dividend distribution is includible in income,
regardless of whether the payment is in fact converted into US
dollars. Generally, any gain or loss resulting from currency
exchange fluctuations during the period from the date the
dividend payment is includible in income to the date the payment
is converted into US dollars will be treated as ordinary income
or loss and, for foreign tax credit limitation purposes, from
sources within the United States.
Distributions in excess of the Companys current or
accumulated earnings and profits, as determined for US federal
income tax purposes, will be treated as a return of capital to
the extent of the US holders basis in the shares or
ADSs and thereafter as capital gain. Because the Company has not
historically maintained, and does not currently maintain, the
worldwide Groups books in accordance with US tax
principles, the Company does not expect to be in a position to
determine whether any distribution will be in excess of the
Companys current or accumulated earnings and profits as
computed for US federal income tax purposes. As a result, the
Company expects that amounts distributed will be reported to the
Internal Revenue Service as a dividend.
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|
|
Taxation of Capital Gains |
A US holder who is not resident or ordinarily resident for
United Kingdom tax purposes in the United Kingdom will not be
liable for UK taxation on capital gains realised or accrued on
the sale or other disposal of ADSs or ordinary shares unless, at
the time of the sale or other disposal, the US holder carries on
a trade, profession or vocation in the United Kingdom through a
branch, agency or permanent establishment and such ADSs or
ordinary shares are or have been used, held or acquired for the
purposes of such trade, profession or vocation.
A US holder of ADSs or ordinary shares who is an individual and
who, broadly, has temporarily ceased to be resident or
ordinarily resident in the UK for UK tax purposes for a period
of less than five years of
88
assessment and who disposes of ordinary shares or ADSs during
that period may also be liable to UK tax on capital gains
(subject to any available exemption or relief), notwithstanding
the fact that such US holder was not resident or ordinarily
resident in the United Kingdom at the time of the sale or other
disposal. As described below, a US holder will be liable to US
federal income tax on such gains.
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|
|
United States Federal Income Taxation |
Subject to the PFIC rules discussed below, a US holder that
sells or otherwise disposes of shares or ADSs will recognize a
capital gain or loss for US federal income tax purposes equal to
the difference between the US dollar value of the amount
realized and its tax basis, determined in US dollars, in the
shares or ADSs. Generally, capital gain of a non-corporate US
holder that is recognized before January 1, 2009 is taxed
at a maximum rate of 15% where the holder has a holding period
greater than one year. The gain or loss will generally be income
or loss from sources within the United States for foreign tax
credit limitation purposes. The deductibility of losses is
subject to limitations.
The Company believes that the Company shares and ADSs will not
be treated as stock of a PFIC for US federal income tax
purposes for its 2004 taxable year. However this conclusion is
an annual factual determination and thus may be subject to
change. If the Company were to be treated as a PFIC, unless a US
holder elects to be taxed annually on a mark-to-market basis
with respect to the Company shares or ADSs, gain realized on the
sale or other disposition of Company shares or ADSs would in
general not be treated as capital gain. Instead, gain would be
treated as if the US holder had realized such gain ratably over
the holding period for the Company shares or ADSs and, to the
extent allocated to the taxable year of the sale or other
exchange and to any year before the Company became a PFIC, would
be taxed as ordinary income. The amount allocated to each other
taxable year would be taxed at the highest tax rate in effect
for each such year to which the gain was allocated, together
with an interest charge in respect of the tax attributable to
each such year. In addition, similar rules would apply to any
excess distribution received on the Company shares
or ADSs (generally, the excess of any distribution received on
the Company shares or ADSs during the taxable year over 125% of
the average amount of distributions received during a specified
prior period), and the preferential rate for qualified
dividend income would not apply.
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|
|
Additional Tax Considerations |
|
|
|
United Kingdom Inheritance Tax |
An individual who is domiciled in the United States (for the
purposes of the Estate and Gift Tax Convention) and is not a UK
national as defined in the Convention will not be subject to UK
inheritance tax in respect of ADSs on the individuals
death or on a transfer of the ADSs during their lifetime,
provided that any applicable US federal gift or estate tax is
paid, unless the ADSs are part of the business property of a UK
permanent establishment or pertain to a UK fixed base of an
individual used for the performance of independent personal
services. Where the ADSs have been placed in trust by a settlor,
they may be subject to UK inheritance tax unless, when the trust
was created, the settlor was domiciled in the United States and
was not a UK national. Where ADSs are subject to both UK
inheritance tax and to US federal gift or estate tax, the Estate
and Gift Tax Convention generally provides for either a credit
against US federal tax liabilities for UK inheritance tax paid
or for a credit against UK inheritance tax liabilities for US
federal tax paid as the case may be.
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|
|
United Kingdom Stamp Duty and Stamp Duty Reserve Tax
(SDRT) |
The transfer of ordinary shares will generally be liable to
stamp duty at the rate of 0.5% of the amount or value of the
consideration given (rounded up to the nearest £5). An
unconditional agreement to transfer ordinary shares will
generally be subject to SDRT at 0.5% of the agreed
consideration. However, if within the period of six years of the
date of such agreement becoming unconditional an instrument of
transfer is executed
89
pursuant to the agreement and duly stamped, any liability to
SDRT will usually be repaid, if already paid, or cancelled. The
liability to pay stamp duty or SDRT is generally satisfied by
the purchaser or transferee.
No stamp duty or SDRT will generally arise on a transfer of
ordinary shares into CREST, unless such transfer is made for a
consideration in money or moneys worth, in which case a
liability to SDRT will arise, usually at the rate of 0.5% of the
value of the consideration.
A transfer of ordinary shares effected on a paperless basis
within CREST will generally be subject to SDRT at the rate of
0.5% of the value of the consideration.
Stamp duty, or SDRT, is generally payable upon the transfer or
issue of ordinary shares to, or to a nominee or, in some cases,
agent of, a person whose business is or includes issuing
depositary receipts or the provision of clearance services. For
these purposes, the current rate of stamp duty and SDRT is
usually 1.5% (rounded up, in the case of stamp duty, to the
nearest £5). The rate is applied, in each case, to the
amount or value of the consideration or, in some circumstances,
to the value or the issue price of the ordinary shares. In
accordance with the terms of the deposit agreement, any tax or
duty payable on deposits of ordinary shares by the depositary or
by the custodian of the depositary will be charged to the party
to whom ADSs are delivered against such deposits.
Provided that the instrument of transfer is not executed in the
United Kingdom and remains at all subsequent times outside the
United Kingdom, no stamp duty should be payable on the transfer
of ADSs. An agreement to transfer ADSs in the form of depositary
receipts will not give rise to a liability to SDRT.
DOCUMENTS ON DISPLAY
It is possible to read and copy documents referred to in this
annual report on Form 20-F that have been filed with the
SEC at the SECs public reference room located at
450 Fifth Street, NW, Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms and their copy charges. The
Companys SEC filings since May 22, 2002 are also
publicly available through the SECs website located at
http://www.sec.gov.
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|
ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK |
Exchange and Interest Rate Risk, and Financial Instruments
The Groups treasury policy is to manage financial risks
that arise in relation to underlying business needs. The
activities of the treasury function are carried out in
accordance with board approved policies and are subject to
regular internal audit. The treasury function does not operate
as a profit center. Treasury activities include money market
investments, spot and forward foreign exchange instruments,
currency options, currency swaps, interest rate swaps and
options, and forward rate agreements.
One of the primary objectives of the Groups treasury risk
management policy is to protect the financial covenant ratios in
the loan documentation against the adverse impact of movements
in interest rates and foreign exchange rates.
Movements in foreign exchange rates, particularly in the US
dollar and the euro, can affect the Groups reported net
income, net assets and interest cover. To hedge this translation
exposure as far as is reasonably practical, borrowings are taken
out in foreign currencies (either directly or via currency
swaps) which broadly match those in which the Groups major
net assets are denominated.
Foreign exchange transaction exposure is managed by the forward
purchase or sale of foreign currencies or the use of currency
options. Most significant exposures of the Group are in
currencies that are freely convertible.
Interest rate exposure is managed within parameters that
stipulate that fixed rate borrowings should normally account for
no less than 25%, and no more than 75%, of net borrowings for
each major currency. This is achieved through the use of
interest rate swaps and options, and forward rate agreements.
90
At December 31, 2004 27% of borrowings in major currencies
were at fixed rates and 73% were at variable rates. Based on the
period end net debt position, and given the underlying maturity
profile of investments, borrowings and hedging instruments at
that date, a one percentage point rise in US dollar interest
rates or a similar rise in euro rates would increase the net
interest charge by approximately £2 million and
£6 million respectively.
At December 31, 2003, 59% of borrowings in major currencies
were at fixed rates and 41% were at variable rates. Based on the
December 31, 2003 net debt position and given the
underlying maturity profile of investments, borrowings and
hedging instruments at that date, a one percentage point rise in
US dollar interest rates or a similar rise in euro interest
rates, would increase the net interest charge by approximately
£4 million in each case.
Quantitative Information about Market Risk
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Interest Rate Sensitivity |
The tables below provide information about the Groups
derivative and other financial instruments that are sensitive to
changes in interest rates, including interest rate swaps and
debt obligations. For long-term debt obligations (excluding debt
due entirely within one year), the table presents principal cash
flows and related weighted average interest rates by expected
maturity dates. For interest rate swaps and forward rate
agreements, the table presents notional amounts and weighted
average interest rates by expected maturity dates. Weighted
average variable rates are based on rates set at the balance
sheet date. The actual currencies of the instruments are
indicated in parentheses.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to mature before December 31 | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
2005 | |
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
Thereafter | |
|
Total | |
|
Fair value(i) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million, except percentages) | |
Long-Term Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate (US dollar)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
0.5 |
|
|
|
0.8 |
|
Average dollar interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.0 |
% |
|
|
11.0 |
% |
|
|
|
|
Fixed Rate (£)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.8 |
|
|
|
2.8 |
|
|
|
2.2 |
|
Average interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate (euro)
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
31.3 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
32.6 |
|
|
|
33.3 |
|
Average interest rate
|
|
|
7.0 |
% |
|
|
6.9 |
% |
|
|
6.3 |
% |
|
|
7.8 |
% |
|
|
|
|
|
|
|
|
|
|
6.4 |
% |
|
|
|
|
Variable Rate (various currencies)
|
|
|
10.1 |
|
|
|
1.8 |
|
|
|
1.8 |
|
|
|
10.9 |
|
|
|
1,099.6 |
|
|
|
1.2 |
|
|
|
1,125.4 |
|
|
|
1,125.4 |
|
Average interest rate
|
|
|
2.7 |
% |
|
|
3.9 |
% |
|
|
3.9 |
% |
|
|
6.4 |
% |
|
|
3.1 |
% |
|
|
3.0 |
% |
|
|
3.2 |
% |
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to mature before December 31 | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
2005 | |
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
Thereafter | |
|
Total | |
|
Fair value(i) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(local currency million, except percentages) | |
Interest Rate Swaps and Forward rate agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal (US dollar)
|
|
|
|
|
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200 |
|
|
|
(4 |
) |
Fixed rate payable
|
|
|
|
|
|
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5 |
% |
|
|
|
|
Variable rate receivable
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
Principal (euro)
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215 |
|
|
|
(1 |
) |
Fixed rate payable
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.9 |
% |
|
|
|
|
Variable rate receivable
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
Principal (Australian dollar)
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 |
|
|
|
|
|
Fixed rate payable
|
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
% |
|
|
|
|
Variable rate receivable
|
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
% |
|
|
|
|
Principal (Hong Kong dollar)
|
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 |
|
|
|
(1 |
) |
Fixed rate payable
|
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.5 |
% |
|
|
|
|
Variable rate receivable
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0 |
% |
|
|
|
|
|
|
(i) |
Represents the net present value of the expected cash flows
discounted at current market rates of interest. |
|
|
|
Exchange Risk Sensitivity |
The following information provides details of the Groups
derivative and other financial instruments by currency presented
in sterling equivalents. The tables above provide details of
non-sterling denominated long-term debt obligations which are
subject to foreign currency exchange rates movements while the
table below presents amounts and weighted average rates of
foreign currency forward exchange contracts held at
December 31, 2004. All forward exchange agreements mature
within one year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receive for $ | |
|
Receive for £ | |
|
|
| |
|
| |
|
|
|
|
Average | |
|
|
|
Average | |
|
|
Contract | |
|
contractual | |
|
Contract | |
|
contractual | |
|
|
amount | |
|
exchange rate | |
|
amount | |
|
exchange rate | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
|
|
|
(£ million) | |
|
|
Sterling
|
|
|
177.8 |
|
|
|
1.83 |
|
|
|
|
|
|
|
|
|
US dollar
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
|
|
1.88 |
|
Euro
|
|
|
|
|
|
|
|
|
|
|
21.7 |
|
|
|
1.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
177.8 |
|
|
|
|
|
|
|
25.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of forward contracts
|
|
|
8.4 |
|
|
|
|
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As part of the strategy to provide a currency hedge against
currency net assets, the Group enters into currency swap
agreements. A swap agreement has the effect of depositing cash
surplus to immediate requirements and borrowing currencies which
are required.
The Group had the following currency swap agreements at
December 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
Deposited | |
|
Borrowed | |
|
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
|
(million) | |
Sterling to US dollar
|
|
£ |
52 |
|
|
$ |
100 |
|
Sterling to euro
|
|
£ |
239 |
|
|
|
350 |
|
Sterling to Australian dollar
|
|
£ |
48 |
|
|
A$ |
120 |
|
92
|
|
ITEM 12. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES |
Not applicable.
PART II
|
|
ITEM 13. |
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
None.
|
|
ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS |
None.
|
|
ITEM 15. |
CONTROLS AND PROCEDURES |
As at the end of the period covered by this report, the Company
carried out an evaluation under the supervision and with the
participation of the Companys management, including the
Chief Executive and Finance Director, of the effectiveness of
the design and operation of the disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c)).
These are defined as those controls and procedures designed to
ensure that information required to be disclosed in report filed
under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the specified periods.
Based on that evaluation, the Chief Executive and Finance
Director concluded that the Companys controls and
procedures were effective.
There have been no significant changes in the Companys
internal controls over financial reporting that occurred during
the period covered by this Form 20-F that have materially
affected, or are reasonably likely to materially affect, the
Groups internal control over financial reporting.
ITEM 16A. AUDIT
COMMITTEE FINANCIAL EXPERT
The Senior Independent Director David Kappler, who has
significant recent and relevant financial experience is the
Audit Committee Financial Expert as defined under
the regulations of the US Securities and Exchange Commission.
ITEM 16B. CODE OF
ETHICS
The board has agreed the adoption of a specific Code of Ethics
for Senior Financial Officers, consistent with the
Companys existing Guidelines for Proper Business Conduct.
This Code of Ethics has been signed by the Chief Executive and
the Finance Director of the Company and by the Group Financial
Controller and regional financial heads. The Company has
published its Code of Ethics for Senior Financial Officers on
its website.
93
ITEM 16C. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Fees for professional services provided by Ernst &
Young LLP, the Groups independent auditors in each of the
last two fiscal periods in each of the following categories are:
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
Year ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Audit fees
|
|
|
3.8 |
|
|
|
2.8 |
|
Audit related fees
|
|
|
1.6 |
|
|
|
7.2 |
|
Tax fees
|
|
|
0.5 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
Total
|
|
|
5.9 |
|
|
|
11.2 |
|
|
|
|
|
|
|
|
Audit related fees include £nil (2003
£6.3 million) in relation to the Separation and bid
defense. These costs have been charged to exceptional items (see
Note 5 of Notes to the Financial Statements). Other audit
related fees principally comprise accounting consultations,
completion accounts and non-statutory reporting. Tax fees
principally relate to tax compliance and tax advice services.
The Audit Committee has a process to ensure that any non-audit
services do not compromise the independence and objectivity of
the external auditors, and that relevant UK and US professional
and regulatory requirements are met. A number of criteria are
applied when deciding whether pre-approval for such services
should be given. These include the nature of the service, the
level of fees, and the practicality of appointing an alternative
provider, having regard to the skills and experience required to
supply the service effectively. Cumulative fees for audit and
non-audit services are presented to the Audit Committee on a
quarterly basis for review. The Audit Committee is responsible
for monitoring adherence to the pre-approval policy.
|
|
ITEM 16D. |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES |
Not applicable.
94
|
|
ITEM 16E. |
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS |
|
|
|
|
|
|
|
|
|
Total number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares purchased |
|
|
Maximum number |
|
|
|
|
|
Total |
|
|
|
|
|
as part |
|
|
of shares that may |
|
|
|
|
|
number of |
|
|
Average |
|
|
of publicly |
|
|
yet be purchased |
|
|
|
|
|
shares |
|
|
price paid |
|
|
announced plans or |
|
|
under the plans or |
|
|
Period of fiscal year |
|
|
purchased |
|
|
per share |
|
|
programs |
|
|
programs |
|
|
|
|
|
|
|
|
(£) |
|
|
|
|
|
|
|
|
Month 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month 3 (03.11.04 - 03.31.04) |
|
|
|
10,490,000 |
|
|
|
|
4.97 |
|
|
|
|
10,490,000 |
|
|
|
|
99,605,835 |
|
|
|
Month 4 (04.01.04 - 04.26.04) |
|
|
|
9,760,000 |
|
|
|
|
5.11 |
|
|
|
|
9,760,000 |
|
|
|
|
89,845,835 |
|
|
|
Month 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month 6 (06.02.04 - 06.25.04) |
|
|
|
6,620,000 |
|
|
|
|
5.36 |
|
|
|
|
6,620,000 |
|
|
|
|
99,297,695 |
|
|
|
Month 7 (07.13.04 07.30.04) |
|
|
|
6,236,000 |
|
|
|
|
5.76 |
|
|
|
|
6,236,000 |
|
|
|
|
93,061,695 |
|
|
|
Month 8 (08.02.04 08.06.04) |
|
|
|
6,730,000 |
|
|
|
|
5.81 |
|
|
|
|
6,730,000 |
|
|
|
|
86,331,695 |
|
|
|
Month 9 (09.13.04 09.30.04) |
|
|
|
2,250,000 |
|
|
|
|
6.29 |
|
|
|
|
2,250,000 |
|
|
|
|
84,081,695 |
|
|
|
Month 10 (10.01.04 10.22.04) |
|
|
|
1,800,000 |
|
|
|
|
6.61 |
|
|
|
|
1,800,000 |
|
|
|
|
82,281,695 |
|
|
|
Month 11 (11.30.04 only) |
|
|
|
150,000 |
|
|
|
|
6.68 |
|
|
|
|
150,000 |
|
|
|
|
82,131,695 |
|
|
|
Month 12 (12.01.04 12.03.04) |
|
|
|
599,981 |
|
|
|
|
6.71 |
|
|
|
|
599,981 |
|
|
|
|
81,531,714 |
|
|
|
Month 12 (12.17.04 12.23.04) |
|
|
|
1,750,000 |
|
|
|
|
6.50 |
|
|
|
|
1,750,000 |
|
|
|
|
91,439,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
46,385,981 |
|
|
|
|
|
|
|
|
|
46,385,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On March 11, 2004 the Company announced an on-market share
repurchase program for £250 million. By
December 20, 2004 the program was completed with, in total,
45.6 million shares repurchased at an average price of
548 pence per share.
On September 9, 2004, the Company announced a further
£250 million share repurchase program. By
December 31, 2004 a further 0.8 million shares had
been repurchased at an average price per share of 651 pence
(total £5 million). By April 25, 2005, a total of
20,259,275 million shares had been repurchased under the
second repurchase program at an average price per share of
632 pence per share (approximately £128 million).
During fiscal 2004, 5,062,409 ordinary shares were purchased by
the Companys Employee Share Ownership Trust at prices
ranging from £4.94 per share to £6.57 per share, for
the purpose of satisfying future share awards to employees.
PART III
|
|
ITEM 17. |
FINANCIAL STATEMENTS |
Not applicable.
95
|
|
ITEM 18. |
FINANCIAL STATEMENTS |
The following consolidated financial statements and related
schedule, together with the report thereon of Ernst &
Young LLP, are filed as part of this Annual Report:
|
|
|
|
|
|
|
Page | |
|
|
| |
|
|
|
F-1 |
|
Financial Statements
|
|
|
|
|
|
|
|
F-3 |
|
|
|
|
F-4 |
|
|
|
|
F-5 |
|
|
|
|
F-6 |
|
|
|
|
F-8 |
|
|
|
|
F-9 |
|
Schedule for the year ended December 31, 2004, the
15 months ended December 31, 2003 and the year ended
September 30, 2002
|
|
|
|
|
Schedule II Valuation and Qualifying Accounts
|
|
|
S-1 |
|
The following exhibits, other than Exhibits 13.1 and 13.2,
are filed as part of this Annual Report:
|
|
|
Exhibit 1 |
|
Memorandum and Articles of Association of IHG (incorporated by
reference to Exhibit 4 of InterContinental Hotels
Groups Registration Statement on S-8 (File
No. 1-10409) filed with the SEC on April 23, 2003) |
|
Exhibit 2(b)(i) |
|
Instruments defining the Rights of Holders of Long-Term Debt:
The total amount of long-term debt securities of the Group
authorized under any individual instrument, other than the
Amended and Restated Trust Deed dated September
21, 2000 relating to the Companys
2000 million
Debt Issuance Program originally constituted on October 9,
1998 (incorporated by reference to Exhibit 2 of Six
Continents PLCs Annual Report on Form 20-F (File
No. 1-10409), dated December 20, 2001), and the
Trust Deed dated September 24, 2003 relating to
the Companys
1,000 million
Debt Issuance Program and filed as Exhibit 2(b)(i) hereto
does not exceed 10% of the total assets of the Group on a
consolidated basis. The Company agrees to furnish copies of any
or all such instruments to the Securities and Exchange
Commission upon request |
|
Exhibit 4(a)(i) |
|
Agreement dated June 14, 2000 between the Company and the
others and Interbrew SA and others relating to the disposal of
Bass Brewers (incorporated by reference to Exhibit 4 of Six
Continents PLCs Annual Report on Form 20-F (File
No. 1-10409), dated December 21, 2000) |
|
Exhibit 4(a)(ii) |
|
£1,600 million Facility Agreement dated
November 9, 2004 among Bank of Tokyo-Mitsubishi, Ltd.,
Barclays Capital, Citigroup Global Markets Limited, HSBC Bank
plc, JP Morgan plc, Lloyds Bank plc, The Royal Bank of Scotland
plc, SG Corporate & Investment Banking and West LB AG |
|
Exhibit 4(a)(iii) |
|
Joint Venture Agreement, dated February 10, 1986, amongst
Britannia Soft Drinks Limited, InterContinental Hotels Group
PLC, Whitbread PLC, Allied Domecq PLC, Six Continents
Investments Limited, Whitbread Group PLC and Allied |
96
|
|
|
|
|
Domecq Overseas (Canada) Limited (incorporated by reference to
Exhibit 4(a)(iii) of InterContinental Hotels Group PLC
Annual Report on Form 20-F (File No. 1-10409), dated
April 8, 2004) |
|
Exhibit 4(a)(iv) |
|
Mitchells and Butlers Group Transfer Share Purchase Agreement,
dated April 15, 2003 (incorporated by reference to
Exhibit 4(a)(ii) of Mitchells and Butlers plcs
Registration Statement on Form 20-F (File
No. 1-31653), dated March 28, 2003) |
|
Exhibit 4(a)(v) |
|
Separation Agreement dated April 15, 2003 between IHG and
the Six Continents Group (incorporated by reference to
Exhibit 4(a)(i) of Mitchells & Butlers plcs
Registration Statement on Form 20-F (File
No. 1-31653), dated March 28, 2003) |
|
Exhibit 4(b)(i) |
|
Purchase and Sale Agreement dated July 1, 2003 between
InterContinental Hotels Group Resources Inc and HPT |
|
Exhibit 4(b)(ii) |
|
Amended and Restated Purchase and Sale Agreement dated
February 9, 2005 among BHR Texas L.P., InterContinental
Hotels Group Resources Inc, Crowne Plaza LAX, LLC, Crowne Plaza
Hilton Head Holding Company, Holiday Pacific Partners Limited
Partnership, Staybridge Markham and HPT |
|
Exhibit 4(b)(iii) |
|
Britvic IPO Agreement dated April 22, 2005 among Britannia
Soft Drinks Limited, InterContinental Hotels Group PLC,
Allied Domecq PLC, Whitbread Group PLC and
Pepsico Inc |
|
Exhibit 4(b)(iv) |
|
Share Purchase Agreement dated March 10, 2005 between IHC
London (Holdings) Limited, and LGR Acquisition and LGR Holdings
Limited |
|
Exhibit 4(b)(v) |
|
Amended and Restated Stock Purchase Agreement dated
February 9, 2005 between Six Continents International
Holdings, B.V. and HPT IHG-2 |
|
Exhibit 4(c)(i) |
|
Richard Hartmans service contract dated February 12,
2003 (incorporated by reference to Exhibit 4(c)(i) of
InterContinental Hotels Group PLC Annual Report on
Form 20-F (File No. 1-10409) dated April 8, 2004 |
|
Exhibit 4(c)(ii) |
|
Richard Norths service contract dated February 12,
2003 (incorporated by reference to Exhibit 4(c)(ii) of
InterContinental Hotels Group PLC Annual Report on
Form 20-F (File No. 1-10409) dated April 8, 2004 |
|
Exhibit 4(c)(iii) |
|
Stevan Porters service contract dated February 12,
2003 (incorporated by reference to Exhibit 4(c)(iii) of
InterContinental Hotels Group PLC Annual Report on
Form 20-F (File No. 1-10409) dated April 8, 2004 |
|
Exhibit 4(c)(iv) |
|
Richard Solomons service contract dated February 12,
2003 (incorporated by reference to Exhibit 4(c)(iv) of
InterContinental Hotels Group PLC Annual Report on
Form 20-F (File No. 1-10409) dated April 8, 2004 |
|
Exhibit 4(c)(v) |
|
Andrew Cossletts service contract dated December 13,
2004 |
|
Exhibit 4(c)(vi) |
|
Agreement, dated February 12, 2003, between Thomas R Oliver
and Six Continents Hotels Limited (incorporated by reference to
Exhibit 4(c)(iv) of Six Continents PLC Annual Report of
Form 20-F (File No. 1-10409) dated February 17,
2003) |
|
Exhibit 4(c)(vii) |
|
Consultancy Agreement, dated February 12, 2003, between
Thomas R Oliver and Six Continents Hotels Limited (incorporated
by reference to Exhibit 4(c)(v) of Six Continents PLC
Annual Report of Form 20-F (File No. 1-10409) dated
February 17, 2003) |
|
Exhibit 8 |
|
List of Subsidiaries |
|
Exhibit 12(a) |
|
Certification of Andrew Cosslett filed pursuant to 17 CFR
240.13a-14(a) |
97
|
|
|
Exhibit 12(b) |
|
Certification of Richard Solomons filed pursuant to 17 CFR
240.13a-14(a) |
|
Exhibit 13(a) |
|
Certification of Andrew Cosslett and Richard Solomons furnished
pursuant to 17 CFR 240.13a-14(b) and 18 U.S.C.1350 |
|
Exhibit 14(a) |
|
Consent of Ernst of Young LLP (included on page F-1) |
98
INTERCONTINENTAL HOTELS GROUP PLC
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
INTERCONTINENTAL HOTELS GROUP PLC
We have audited the accompanying consolidated balance sheets of
InterContinental Hotels Group PLC at December 31, 2004 and
2003, and the related consolidated profit and loss accounts and
consolidated statements of total recognized gains and losses,
changes in shareholders funds and cash flows for the year
ended December 31, 2004, the 15 months ended
December 31, 2003 and year ended September 30, 2002.
Our audits also included the financial statement schedule listed
in the Index at Item 18. These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with United Kingdom
auditing standards and the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit
of the Companys internal control over financial reporting.
Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of InterContinental Hotels Group
PLC at December 31, 2004 and 2003, and the consolidated
results of its operations and its consolidated cash flows for
the year ended December 31, 2004, the 15 months ended
December 31, 2003 and the year ended September 30,
2002 in conformity with accounting principles generally accepted
in the United Kingdom which differ in certain respects from
those generally accepted in the United States (see Note 35
of Notes to the Financial Statements). Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
London, England
March 9, 2005, except for
Note 33 Post balance sheet events, and
Note 35 Differences between United Kingdom
and United States Generally Accepted Accounting Principles
as to which the date is
May 3, 2005.
F-1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration
Statements (Form F-3 No. 333-108084 and Form S-8
Nos. 333-01572, 333-08336, 333-89508, 333-99785 and 333-104691)
of InterContinental Hotels Group PLC of the reference to our
name in Item 3. Key Information and our report
dated March 9, 2005, except for Note 33
Post balance sheet events and Note 35
Differences between United Kingdom and United States Generally
Accepted Accounting Principles, as to which the date is
May 3, 2005, on the consolidated financial statements and
schedule both included in the Annual Report (Form 20-F) of
InterContinental Hotels Group PLC for the year ended
December 31, 2004.
London, England
May 3, 2005
F-2
INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
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Year ended December 31, | |
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15 months ended December 31, | |
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Year ended September 30, | |
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2004 | |
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2003 | |
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2002 | |
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Before | |
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Before | |
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Before | |
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exceptional | |
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Exceptional | |
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exceptional | |
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Exceptional | |
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exceptional | |
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Exceptional | |
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items | |
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items | |
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items | |
|
items | |
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|
items | |
|
items | |
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Total | |
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restated(i) | |
|
restated(i) | |
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Total | |
|
restated(i) | |
|
restated(i) | |
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Total | |
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(£ million, except per ordinary share amounts) | |
Turnover (Note 2)
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2,204 |
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2,204 |
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3,483 |
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3,483 |
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3,615 |
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3,615 |
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Analyzed as:
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Continuing operations
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2,204 |
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2,204 |
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2,690 |
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2,690 |
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2,134 |
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2,134 |
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Discontinued operations
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793 |
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793 |
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1,481 |
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1,481 |
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Cost of sales
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(1,652 |
) |
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(28 |
) |
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|
(1,680 |
) |
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(2,717 |
) |
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(51 |
) |
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(2,768 |
) |
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(2,791 |
) |
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(77 |
) |
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(2,868 |
) |
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Gross operating profit
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552 |
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(28 |
) |
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524 |
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766 |
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(51 |
) |
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715 |
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824 |
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(77 |
) |
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747 |
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Administrative expenses
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(221 |
) |
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(11 |
) |
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(232 |
) |
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(283 |
) |
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(283 |
) |
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(206 |
) |
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(206 |
) |
Other operating income
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20 |
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20 |
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Operating profit (Note 2)
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331 |
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(19 |
) |
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|
312 |
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|
483 |
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(51 |
) |
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432 |
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|
618 |
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(77 |
) |
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|
541 |
|
Analyzed as:
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Continuing operations
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331 |
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(19 |
) |
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|
312 |
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|
346 |
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(51 |
) |
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295 |
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|
329 |
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(77 |
) |
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|
252 |
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Discontinued operations
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137 |
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137 |
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289 |
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289 |
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Non-operating exceptional items (Note 5)
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(69 |
) |
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(69 |
) |
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(213 |
) |
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(213 |
) |
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53 |
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|
53 |
|
Analyzed as:
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Continuing operations:
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Cost of fundamental reorganization
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(67 |
) |
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(67 |
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Separation costs
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(51 |
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(51 |
) |
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(4 |
) |
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(4 |
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Profit on disposal of fixed assets
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15 |
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15 |
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4 |
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4 |
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2 |
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2 |
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Provision for loss on disposal of operations
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(74 |
) |
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(74 |
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Provision against fixed asset investments
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(10 |
) |
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(10 |
) |
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(56 |
) |
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(56 |
) |
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Discontinued operations:
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Separation costs
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(41 |
) |
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(41 |
) |
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Loss on disposal of fixed assets
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(2 |
) |
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(2 |
) |
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(2 |
) |
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|
(2 |
) |
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Profit on disposal of operations
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|
57 |
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57 |
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Profit on ordinary activities before interest
(Note 2)
|
|
|
331 |
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|
(88 |
) |
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|
243 |
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|
483 |
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|
(264 |
) |
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|
219 |
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|
618 |
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|
(24 |
) |
|
|
594 |
|
Interest receivable
|
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|
48 |
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|
22 |
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|
70 |
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|
104 |
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|
104 |
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|
116 |
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|
116 |
|
Interest payable and similar charges (Note 6)
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|
(70 |
) |
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(16 |
) |
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(86 |
) |
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|
(151 |
) |
|
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|
(151 |
) |
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|
(176 |
) |
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|
(176 |
) |
Premium on early settlement of debt (Note 5)
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(17 |
) |
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(17 |
) |
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(136 |
) |
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(136 |
) |
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Profit on ordinary activities before taxation
|
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|
309 |
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|
|
(99 |
) |
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|
210 |
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|
436 |
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|
(400 |
) |
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|
36 |
|
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|
558 |
|
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|
(24 |
) |
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|
534 |
|
Tax on profit on ordinary activities (Note 7)
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|
(50 |
) |
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|
167 |
|
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|
117 |
|
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|
(115 |
) |
|
|
132 |
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|
17 |
|
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|
(171 |
) |
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|
119 |
|
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|
(52 |
) |
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Profit on ordinary activities after taxation
|
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|
259 |
|
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|
68 |
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|
327 |
|
|
|
321 |
|
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|
(268 |
) |
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|
53 |
|
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|
387 |
|
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|
95 |
|
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|
482 |
|
Minority equity interests
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|
(28 |
) |
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|
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|
(28 |
) |
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|
(34 |
) |
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|
(34 |
) |
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(25 |
) |
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|
(25 |
) |
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Earnings available for shareholders(ii)
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|
231 |
|
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|
68 |
|
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|
299 |
|
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|
287 |
|
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|
(268 |
) |
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|
19 |
|
|
|
362 |
|
|
|
95 |
|
|
|
457 |
|
Dividends on equity shares (Note 8)
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|
(592 |
) |
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|
(592 |
) |
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|
(156 |
) |
|
|
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|
|
|
(156 |
) |
|
|
(305 |
) |
|
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|
|
|
(305 |
) |
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Retained for reinvestment in the business
|
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|
(361 |
) |
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|
68 |
|
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|
(293 |
) |
|
|
131 |
|
|
|
(268 |
) |
|
|
(137 |
) |
|
|
57 |
|
|
|
95 |
|
|
|
152 |
|
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Earnings per ordinary share (Note 9)
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Basic
|
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|
32.5 |
p |
|
|
9.6 |
p |
|
|
42.1 |
p |
|
|
39.1 |
p |
|
|
(36.5 |
)p |
|
|
2.6 |
p |
|
|
49.5 |
p |
|
|
13.0 |
p |
|
|
62.5 |
p |
Diluted
|
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|
|
|
|
|
|
|
41.6 |
p |
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|
|
|
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|
2.6 |
p |
|
|
|
|
|
|
|
|
|
|
62.3 |
p |
|
|
(i) |
Restated to show exceptional tax credits on a basis consistent
with 2004, comprising prior year adjustments which are
exceptional by reason of their size or incidence. Also restated
to present the period ended December 31, 2003 and year
ended September 30, 2002 on a consistent basis with the
year ended December 31, 2004 (see Note 1 of the Notes
to the Financial Statements). |
|
|
(ii) |
A summary of the significant adjustments to earnings available
for shareholders (net income) that would be required had United
States generally accepted accounting principles been applied
instead of those generally accepted in the United Kingdom is set
out in Note 35 of Notes to the Financial Statements. |
The Notes to the Financial Statements are an integral part of
these Financial Statements.
F-3
INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND
LOSSES
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|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Earnings available for shareholders
|
|
|
299 |
|
|
|
19 |
|
|
|
457 |
|
|
|
|
|
|
|
|
|
|
|
Reversal of previous revaluation gains due to impairment
|
|
|
(20 |
) |
|
|
(22 |
) |
|
|
(36 |
) |
Exchange differences(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill eliminated (Note 26)
|
|
|
(110 |
) |
|
|
(139 |
) |
|
|
(98 |
) |
|
Other assets and liabilities
|
|
|
(21 |
) |
|
|
79 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
Other recognized gains and losses
|
|
|
(151 |
) |
|
|
(82 |
) |
|
|
(72 |
) |
|
|
|
|
|
|
|
|
|
|
Total recognized gains and losses for the period
|
|
|
148 |
|
|
|
(63 |
) |
|
|
385 |
|
Prior year adjustment on adoption of FRS 19
|
|
|
|
|
|
|
|
|
|
|
(264 |
) |
|
|
|
|
|
|
|
|
|
|
Total recognized gains since previous year end
|
|
|
148 |
|
|
|
(63 |
) |
|
|
121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Foreign currency denominated net assets, including goodwill
purchased prior to September 30, 1998 and eliminated
against Group reserves, and related foreign currency borrowings
and currency swaps, are translated at each balance sheet date
giving rise to exchange differences which are taken to Group
reserves as recognized gains and losses during the period. |
|
(ii) |
|
The statement of comprehensive income required under United
States generally accepted accounting principles is set out in
Note 35 of Notes to the Financial Statements. |
Note of historical cost Group profits and losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Reported profit on ordinary activities before taxation
|
|
|
210 |
|
|
|
36 |
|
|
|
534 |
|
Realization of revaluation gains of previous periods
|
|
|
3 |
|
|
|
16 |
|
|
|
3 |
|
Adjustment for previously recognized revaluation losses
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
Historical cost profit on ordinary activities before taxation
|
|
|
213 |
|
|
|
52 |
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
Historical cost (loss)/profit retained after taxation, minority
equity interests and dividends
|
|
|
(290 |
) |
|
|
(121 |
) |
|
|
118 |
|
|
|
|
|
|
|
|
|
|
|
The Notes to the Financial Statements are an integral part of
these Financial Statements.
F-4
INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Fixed assets
|
|
|
|
|
|
|
|
|
Intangible assets (Note 15)
|
|
|
142 |
|
|
|
158 |
|
Tangible assets (Note 16)
|
|
|
3,776 |
|
|
|
3,951 |
|
Investments (Note 17)
|
|
|
99 |
|
|
|
172 |
|
|
|
|
|
|
|
|
|
|
|
4,017 |
|
|
|
4,281 |
|
Current assets
|
|
|
|
|
|
|
|
|
Stocks (Note 18)
|
|
|
42 |
|
|
|
44 |
|
Debtors (Note 19)
|
|
|
556 |
|
|
|
523 |
|
Analyzed as:
|
|
|
|
|
|
|
|
|
|
Amounts falling due within one year
|
|
|
419 |
|
|
|
447 |
|
|
Amounts falling due after one year
|
|
|
137 |
|
|
|
76 |
|
Investments (Note 20)
|
|
|
116 |
|
|
|
377 |
|
Cash at bank and in hand
|
|
|
43 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
757 |
|
|
|
999 |
|
Creditors: amounts falling due within one year
(Note 21)
|
|
|
(1,013 |
) |
|
|
(1,085 |
) |
|
|
|
|
|
|
|
Net current liabilities
|
|
|
(256 |
) |
|
|
(86 |
) |
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
3,761 |
|
|
|
4,195 |
|
Creditors: amounts falling due after one year
(Note 22)
|
|
|
(1,252 |
) |
|
|
(1,085 |
) |
Provisions for liabilities and charges (Note 23)
|
|
|
(382 |
) |
|
|
(393 |
) |
Analyzed as:
|
|
|
|
|
|
|
|
|
|
Deferred taxation
|
|
|
(248 |
) |
|
|
(314 |
) |
|
Other provisions
|
|
|
(134 |
) |
|
|
(79 |
) |
Minority equity interests
|
|
|
(150 |
) |
|
|
(163 |
) |
|
|
|
|
|
|
|
Net assets (Note 2)
|
|
|
1,977 |
|
|
|
2,554 |
|
|
|
|
|
|
|
|
Capital and reserves
|
|
|
|
|
|
|
|
|
Equity share capital
|
|
|
697 |
|
|
|
739 |
|
Share premium account
|
|
|
26 |
|
|
|
14 |
|
Revaluation reserve
|
|
|
233 |
|
|
|
258 |
|
Capital redemption reserve
|
|
|
46 |
|
|
|
|
|
Merger reserve
|
|
|
1,164 |
|
|
|
1,164 |
|
Other reserves
|
|
|
(22 |
) |
|
|
(11 |
) |
Profit and loss account
|
|
|
(167 |
) |
|
|
390 |
|
|
|
|
|
|
|
|
Equity shareholders funds(i)
|
|
|
1,977 |
|
|
|
2,554 |
|
|
|
|
|
|
|
|
|
|
(i) |
A summary of the significant adjustments to shareholders
funds that would be required had United States generally
accepted accounting principles been applied instead of those
generally accepted in the United Kingdom is set out in
Note 35 of Notes to the Financial Statements. |
The Notes to the Financial Statements are an integral part of
these Financial Statements.
F-5
INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS
FUNDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital | |
|
Retained earnings and other reserves | |
|
|
| |
|
| |
|
|
Number of | |
|
|
|
Share | |
|
|
|
Capital | |
|
|
|
|
ordinary | |
|
Ordinary | |
|
premium | |
|
Revaluation | |
|
redemption | |
|
Merger | |
|
Other | |
|
Profit | |
|
Total | |
|
|
shares | |
|
shares | |
|
account | |
|
reserve | |
|
reserve | |
|
reserve | |
|
reserve | |
|
and loss | |
|
shareholders | |
|
|
(i) | |
|
(i) | |
|
(ii) | |
|
(ii) | |
|
(ii) | |
|
(ii) | |
|
(iii) | |
|
account | |
|
funds | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
At October 1, 2001(iv)
|
|
|
866 |
|
|
|
242 |
|
|
|
799 |
|
|
|
1,025 |
|
|
|
853 |
|
|
|
|
|
|
|
(32 |
) |
|
|
2,266 |
|
|
|
5,153 |
|
Goodwill (Note 26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98 |
|
|
|
98 |
|
Exchange adjustments on: assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(161 |
) |
|
|
(164 |
) |
|
borrowings and currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128 |
|
|
|
128 |
|
Allotment of ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option schemes(v)
|
|
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
3 |
|
Revaluation surplus realized on disposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
Transfer of previously recognized revaluation losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
|
|
Reversal of previous revaluation gains due to impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36 |
) |
Allocation of shares in employee share trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Retained income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2002(iv)
|
|
|
867 |
|
|
|
243 |
|
|
|
802 |
|
|
|
1,020 |
|
|
|
853 |
|
|
|
|
|
|
|
(31 |
) |
|
|
2,448 |
|
|
|
5,335 |
|
Separation of MAB:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets of MAB eliminated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(743 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,034 |
) |
|
|
(2,777 |
) |
|
Transfer to merger reserve
|
|
|
(133 |
) |
|
|
491 |
|
|
|
(802 |
) |
|
|
|
|
|
|
(853 |
) |
|
|
1,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
MAB goodwill eliminated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
50 |
|
Minority interest on transfer of pension prepayment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
(7 |
) |
Reduction of shares in employee share trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
(5 |
) |
|
|
8 |
|
Allotment of ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option schemes(v)
|
|
|
5 |
|
|
|
5 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
18 |
|
|
Allocation of shares in employee share trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
7 |
|
Goodwill (Note 26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139 |
|
|
|
139 |
|
Revaluation surplus realized on disposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
|
Reversal of previous revaluation gains due to impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22 |
) |
Exchange adjustments on: assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(142 |
) |
|
|
(123 |
) |
|
borrowings and currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
63 |
|
Retained loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(137 |
) |
|
|
(137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003(iv)
|
|
|
739 |
|
|
|
739 |
|
|
|
14 |
|
|
|
258 |
|
|
|
|
|
|
|
1,164 |
|
|
|
(11 |
) |
|
|
390 |
|
|
|
2,554 |
|
Goodwill (Note 26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|
|
110 |
|
Premium on allotment of ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option schemes(v)
|
|
|
4 |
|
|
|
4 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
Share capital consolidation
|
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of ordinary shares
|
|
|
(46 |
) |
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(211 |
) |
|
|
(257 |
) |
Transfer to capital redemption reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
(46 |
) |
|
|
|
|
Purchase of own shares by employee share trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33 |
) |
|
|
|
|
|
|
(33 |
) |
Release of own shares by employee share trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
(6 |
) |
|
|
16 |
|
Credit in respect of employee share schemes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
15 |
|
Revaluation surplus realized on disposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
Reversal of previous revaluation gains due to impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20 |
) |
Exchange adjustments on: assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73 |
) |
|
|
(75 |
) |
|
borrowings and currency swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56 |
) |
|
|
(56 |
) |
Retained loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(293 |
) |
|
|
(293 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004(iv)
|
|
|
622 |
|
|
|
697 |
|
|
|
26 |
|
|
|
233 |
|
|
|
46 |
|
|
|
1,164 |
|
|
|
(22 |
) |
|
|
(167 |
) |
|
|
1,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
At September 30, 2002 the authorized share capital of Six
Continents PLC was £1,149 million, comprising
1,073 million ordinary shares of 28p each and
889 million cumulative preference shares of 95.5p each. |
F-6
|
|
|
InterContinental Hotels Group PLC (IHG) was
incorporated in Great Britain and registered in England and
Wales with registered number 4551528 on October 2, 2002 as
a public limited company under the Companies Act 1985 with the
name Hackplimco (No. 112) plc, and changed its name to
InterContinental Hotels Group PLC on January 17, 2003. |
|
|
On incorporation, the Company had an authorized share capital of
£50,000, divided into 50,000 ordinary shares of £1
each, of which two ordinary shares were allotted, called up and
fully paid. On February 6, 2003, the authorized share
capital was increased to £10,000,050,000 by the creation of
9,999,950,000 additional ordinary shares of £1 each and one
redeemable preference share of £50,000. The redeemable
preference share so created was allotted and treated as paid up
in full on this date. |
|
|
On April 15, 2003, the Separation of Six Continents PLC was
completed and the entire issued share capital of Six Continents
PLC was transferred to InterContinental Hotels Group PLC at fair
market value, in exchange for the issue of 734 million
fully paid ordinary shares of £1 each, which were admitted
to the Official List of the UK Listing Authority and admitted to
trading on the London Stock Exchange on that date. In accordance
with the merger relief provisions of Sections 131 and 133
of the Companies Act 1985, the 734 million shares are
recorded only at nominal value. |
|
|
The redeemable preference share which was redeemed at par value
and cancelled on June 5, 2003, did not carry any right to
receive dividends nor to participate in the profits of IHG, was
replaced in accordance with the Companys Articles of
Association by £50,000 ordinary shares of £1 each. |
|
|
During 2004, the Company undertook to return funds of up to
£500 million to shareholders by way of two consecutive
£250 million share repurchase programs, the second of
which commenced in December 2004. During the year, 46,385,981
ordinary shares were repurchased and canceled under the
authorities granted by shareholders at general meetings held
during 2003 and 2004. |
|
|
The aggregate consideration in respect of ordinary shares issued
in respect of option schemes during the period was
£16 million (2003 £18 million, 2002
£3 million). |
|
|
At an Extraordinary General Meeting on December 10, 2004,
shareholders approved a share capital consolidation on the basis
of 25 new ordinary shares for every 28 existing ordinary shares
except for the 50,000 £1 ordinary shares created on
June 5, 2003. |
|
|
At the Extraordinary General Meeting held on December 10,
2004 authority was given to the Company to purchase up to 14.99%
of its own shares until the next Annual General Meeting, which
will be held on June 1, 2005. |
|
|
At December 31, 2004, the authorized share capital was
£10,000,049,999, comprising 8,928,571,428 ordinary shares
of 112 pence each and 50,000 ordinary shares of £1. |
|
|
(ii) |
The share premium account, capital redemption reserve,
revaluation reserve and merger reserve are not distributable. |
|
(iii) |
The other reserve comprises £21.8 million (2003
£10.5 million) in respect of 3.1 million (2003
2.2 million) InterContinental Hotels Group PLC ordinary
shares held by employee share trusts, with a market value at
December 31, 2004 of £20 million (2003
£12 million). |
|
(iv) |
Retained earnings and other reserves at December 31, 2004
were decreased by cumulative exchange adjustments of
£84 million (2003 £63 million, 2002
£142 million and £200 million at
October 1, 2001). |
|
(v) |
Includes transfer of £ nil million (2003
£1 million, 2002 £1 million) from the profit
and loss account in respect of shares issued to the qualifying
employee share ownership trust. |
The Notes to the Financial Statements are an integral part of
these Financial Statements.
F-7
INTERCONTINENTAL HOTELS GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating activities (Note 10)
|
|
|
515 |
|
|
|
795 |
|
|
|
720 |
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
(91 |
) |
|
|
(141 |
) |
|
|
(186 |
) |
Costs associated with new facilities
|
|
|
(5 |
) |
|
|
(20 |
) |
|
|
|
|
Premium on early settlement of debt
|
|
|
(17 |
) |
|
|
(136 |
) |
|
|
|
|
Dividends paid to minority shareholders
|
|
|
(26 |
) |
|
|
(22 |
) |
|
|
(13 |
) |
Interest received
|
|
|
72 |
|
|
|
111 |
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
Returns on investments and servicing of finance
|
|
|
(67 |
) |
|
|
(208 |
) |
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
UK corporation tax (paid)/received
|
|
|
(4 |
) |
|
|
25 |
|
|
|
(96 |
) |
Overseas corporate tax paid
|
|
|
(31 |
) |
|
|
(21 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
Taxation
|
|
|
(35 |
) |
|
|
4 |
|
|
|
(123 |
) |
|
|
|
|
|
|
|
|
|
|
Paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible fixed assets
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
Tangible fixed assets
|
|
|
(245 |
) |
|
|
(475 |
) |
|
|
(648 |
) |
|
Fixed asset investments
|
|
|
(12 |
) |
|
|
(37 |
) |
|
|
(14 |
) |
Received:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible fixed assets
|
|
|
101 |
|
|
|
265 |
|
|
|
134 |
|
|
Fixed asset investments
|
|
|
5 |
|
|
|
9 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure and financial investment
|
|
|
(151 |
) |
|
|
(248 |
) |
|
|
(513 |
) |
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
(24 |
) |
Disposals
|
|
|
|
|
|
|
|
|
|
|
9 |
|
Separation costs
|
|
|
|
|
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions and disposals
|
|
|
|
|
|
|
(66 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
Equity dividends
|
|
|
(600 |
) |
|
|
(299 |
) |
|
|
(299 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flow
|
|
|
(338 |
) |
|
|
(22 |
) |
|
|
(305 |
) |
Management of liquid resources (Note 14)
|
|
|
320 |
|
|
|
(129 |
) |
|
|
232 |
|
Financing (Note 14)
|
|
|
|
|
|
|
206 |
|
|
|
63 |
|
|
|
|
|
|
|
|
|
|
|
Movement in cash and overdrafts
|
|
|
(18 |
) |
|
|
55 |
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
The significant differences between the cash flow statement
presented above and that required under United States generally
accepted accounting principles are described in Note 35 of
Notes to the Financial Statements.
The Notes to the Financial Statements are an integral part of
these Financial Statements.
F-8
|
|
Note 1 |
Accounting Policies |
The consolidated Group profit and loss account has been prepared
by reference to Format 1 as set out in Schedule 4 to
the Companies Act 1985. This is considered more appropriate to
the Group post Separation than the format used in previous
years. Prior year amounts have been restated on a consistent
basis.
The financial statements of InterContinental Hotels Group are
prepared under the historical cost convention as modified by the
revaluation of certain tangible fixed assets. They have been
drawn up to comply with applicable United Kingdom accounting
standards.
The financial statements comprise the financial statements of
the parent company and its subsidiary undertakings (together,
the Group). The results of those businesses acquired
or disposed of are consolidated for the period during which they
were under the Groups dominant influence.
During 2003, the Company changed its fiscal year end to
December 31 and thus its financial statements for the prior
fiscal period are presented for the 15 months ended
December 31, 2003 as permitted by the Companies Act 1985.
In accordance with the transition period reporting requirements
of the US Securities and Exchange Commission, an unaudited
analysis of the financial statements and notes thereto for this
15 month period showing the three month period ended
December 31, 2002 and the 12 month period ended
December 31, 2003 is presented in Note 34 of Notes to
the Financial Statements.
Transactions in foreign currencies are recorded at the exchange
rates ruling on the dates of the transactions, adjusted for the
effects of any hedging arrangements. Assets and liabilities
denominated in foreign currencies are translated into sterling
at the relevant rates of exchange ruling at the balance sheet
date.
The results of overseas operations are translated into sterling
at weighted average rates of exchange for the period. Exchange
differences arising from the retranslation of opening net assets
(including any goodwill previously eliminated against
shareholders funds) denominated in foreign currencies and
foreign currency borrowings and currency swap agreements used to
hedge those assets are taken directly to shareholders
funds. All other exchange differences are taken to the profit
and loss account.
Net interest arising on interest rate swap agreements is taken
to the profit and loss account.
Premiums payable on interest rate agreements are charged to the
profit and loss account over the term of the relevant agreements.
Currency swap agreements are retranslated at exchange rates
ruling at the balance sheet date with the net amount being
included in either current asset investments or borrowings.
Interest payable or receivable arising from currency swap
agreements is taken to the profit and loss account on a gross
basis over the term of the relevant agreements.
Gains or losses arising on forward exchange contracts are taken
to the profit and loss account in line with the transactions
they are hedging.
F-9
|
|
|
Fixed assets and depreciation |
Goodwill
Any excess of purchase consideration for an acquired business
over the fair value attributed to its separately identifiable
assets and liabilities represents goodwill. Goodwill is
capitalized as an intangible asset. Goodwill arising on
acquisitions prior to September 30, 1998 was eliminated
against shareholders funds. To the extent that goodwill
denominated in foreign currencies continues to have value, it is
translated into sterling at each balance sheet date and any
movements are accounted for as set out under foreign
currencies above. On disposal of a business, any goodwill
relating to the business and previously eliminated against
shareholders funds, is taken into account in determining
the gain or loss on disposal.
Other intangible assets
On acquisition of a business, no value is attributed to other
intangible assets which cannot be separately identified and
reliably measured. No value is attributed to internally
generated intangible assets.
Tangible assets
Freehold and leasehold land and buildings are stated at cost, or
valuation, less depreciation. All other fixed assets are stated
at cost less depreciation. Repairs and maintenance costs are
expensed as incurred.
When implementing FRS 15 Tangible Fixed Assets in
the year ended September 30, 2000, the Group did not adopt
a policy of revaluing properties. The transitional rules of FRS
15 were applied so that the carrying values of properties
include an element resulting from previous valuations.
Revaluation
Surpluses or deficits arising from previous professional
valuations of properties, realized on the disposal of an asset,
are transferred from the revaluation reserve to the profit and
loss account reserve.
Impairment
Any impairment arising on an income-generating unit, other than
an impairment which represents a consumption of economic
benefits, is eliminated against any specific revaluation reserve
relating to the impaired assets in that income-generating unit
with any excess being charged to the profit and loss account.
Depreciation and
amortization
Goodwill and other intangible assets are amortized over their
estimated useful lives, generally 20 years.
Freehold land is not depreciated. All other tangible fixed
assets are depreciated to a residual value over their estimated
useful lives, namely:
|
|
|
Freehold buildings
|
|
50 years |
Leasehold buildings
|
|
Lesser of unexpired term of lease and 50 years |
Fixtures, fittings and equipment
|
|
3-25 years |
Plant and machinery
|
|
4-20 years |
All depreciation and amortization is charged on a straight-line
basis.
Investments
Fixed asset investments are stated at cost less any provision
for diminution in value.
Deferred tax assets and liabilities are recognized, subject to
certain exceptions, in respect of all material timing
differences between the recognition of gains and losses in the
financial statements and for tax purposes.
F-10
Those timing differences recognized include accelerated capital
allowances, unrelieved tax losses and short-term timing
differences. Timing differences not recognized include those
relating to the revaluation of fixed assets in the absence of a
commitment to sell the assets, the gain on sale of assets rolled
into replacement assets and the distribution of profits from
overseas subsidiaries in the absence of any commitment by the
subsidiary to make the distribution.
Deferred tax assets are recognized to the extent that it is
regarded as more likely than not that they will be recovered.
Deferred tax is calculated on a non-discounted basis at the tax
rates that are expected to apply in the periods in which timing
differences reverse, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Operating lease rentals are charged to the profit and loss
account on a straight line basis over the term of the lease.
The Group continues to account for pensions in accordance with
SSAP 24 Accounting for pension costs. The
regular cost of providing pensions to current employees is
charged to the profit and loss account over the average expected
service life of those employees. Variations in regular pension
cost are amortized over the average expected service life of
current employees on a straight line basis.
Accumulated differences between the amount charged to the profit
and loss account and the payments made to the pension plans are
treated as either prepayments or other provisions for
liabilities and charges in the balance sheet.
The additional disclosures required by the transitional
arrangements of FRS 17 Retirement Benefits are given
in Note 4 to the financial statements.
The Group is self insured for various levels of general
liability, workers compensation and employee medical and
dental insurance coverage. Insurance liabilities include
projected settlements for known and incurred, but not reported
claims. Projected settlements are estimated based on historical
trends and actuarial data.
Stocks are stated at the lower of cost and net realizable value.
Trade debtors are recognized and carried at the original amount,
less an allowance for any doubtful accounts. An allowance for
doubtful accounts is made when collection of the full amount is
no longer probable.
Revenue is derived from the following sources: owned and leased
properties; management fees; franchise fees; sale of soft
drinks, and other revenues which are ancillary to the
Groups operations. Generally, revenue represents sales
(excluding VAT and similar taxes) of goods and services, net of
discounts, provided in the normal course of business and is
recognized when services have been rendered. The following is a
description of the composition of revenues of the Group.
F-11
Owned and leased derived from hotel operations,
including the rental of rooms and food and beverage sales from a
worldwide network of owned and leased hotels operated under the
Groups brand names. Revenue is recognized when rooms are
occupied and food and beverage is sold.
Management fees earned from hotels managed by the
Group, usually under long-term contracts with the hotel owner.
Management fees include a base fee, which is generally a
percentage of hotel revenue, and an incentive fee, which is
generally based on the hotels profitability. Revenue is
recognized in accordance with the contract.
Franchise fees received in connection with the
franchise of the Groups brand names, usually under
long-term contracts with the hotel owner. The Group charges
franchise royalty fees as a percentage of room revenue. Revenue
is recognized when earned.
Soft Drinks sales (excluding VAT and similar taxes)
of goods and services, net of discounts, provided in the normal
course of business. Revenue is recognized when sales are made.
The hotel loyalty program, Priority Club Rewards, enables
members to earn points, funded through hotel assessments, during
each stay at an InterContinental Hotels Group hotel and redeem
points at a later date for free accommodation or other benefits.
The future redemption liability is included in creditors less
than, and greater than, one year and is estimated using
actuarial methods which estimate eventual redemption rates and
points values.
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
|
|
Note 2 |
Segmental Analysis |
The results of overseas operations have been translated into
sterling at weighted average rates of exchange for the period.
In the case of the US dollar, the translation rate is
£1 = $1.82 (2003 £1 = $1.62,
2002 £1 = $1.48). In the case of the euro,
the translation rate is £1 =
1.47
(2003 £1 =
1.47,
2002 £1 =
1.60).
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 = $1.93
(2003 £1 = $1.78, 2002 £1 =
$1.56). In the case of the euro, the translation rate is
£1 = 1.41
(2003 £1 = 1.41,
2002 £1 =
1.59).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2004(i) | |
|
|
| |
|
|
|
|
Asia | |
|
|
|
Total | |
|
Soft | |
|
Total | |
|
|
Americas | |
|
EMEA | |
|
Pacific | |
|
Central | |
|
Hotels | |
|
Drinks | |
|
Group | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover
|
|
|
495 |
|
|
|
829 |
|
|
|
134 |
|
|
|
40 |
|
|
|
1,498 |
|
|
|
706 |
|
|
|
2,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
163 |
|
|
|
119 |
|
|
|
21 |
|
|
|
(52 |
) |
|
|
251 |
|
|
|
80 |
|
|
|
331 |
|
Operating exceptional items
|
|
|
(14 |
) |
|
|
(19 |
) |
|
|
(4 |
) |
|
|
18 |
|
|
|
(19 |
) |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
149 |
|
|
|
100 |
|
|
|
17 |
|
|
|
(34 |
) |
|
|
232 |
|
|
|
80 |
|
|
|
312 |
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loss on disposal of operations
|
|
|
(9 |
) |
|
|
(65 |
) |
|
|
|
|
|
|
|
|
|
|
(74 |
) |
|
|
|
|
|
|
(74 |
) |
|
(Loss)/ profit on disposal of fixed assets
|
|
|
(1 |
) |
|
|
14 |
|
|
|
2 |
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
15 |
|
|
Provision against fixed asset investments
|
|
|
8 |
|
|
|
(16 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before interest
|
|
|
147 |
|
|
|
33 |
|
|
|
17 |
|
|
|
(34 |
) |
|
|
163 |
|
|
|
80 |
|
|
|
243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page F-14.
F-12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months ended December 31, 2003(i) | |
|
|
| |
|
|
|
|
Asia | |
|
|
|
Total | |
|
Soft | |
|
|
|
Total | |
|
|
Americas | |
|
EMEA | |
|
Pacific | |
|
Central | |
|
Hotels | |
|
Drinks | |
|
Total | |
|
Discontinued(ii) | |
|
Group | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover
|
|
|
661 |
|
|
|
1,010 |
|
|
|
148 |
|
|
|
51 |
|
|
|
1,870 |
|
|
|
820 |
|
|
|
2,690 |
|
|
|
793 |
|
|
|
3,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
195 |
|
|
|
114 |
|
|
|
22 |
|
|
|
(80 |
) |
|
|
251 |
|
|
|
95 |
|
|
|
346 |
|
|
|
137 |
|
|
|
483 |
|
Operating exceptional items
|
|
|
(9 |
) |
|
|
(41 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
186 |
|
|
|
73 |
|
|
|
21 |
|
|
|
(80 |
) |
|
|
200 |
|
|
|
95 |
|
|
|
295 |
|
|
|
137 |
|
|
|
432 |
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization
|
|
|
(11 |
) |
|
|
(17 |
) |
|
|
(2 |
) |
|
|
(37 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(41 |
) |
|
|
(92 |
) |
|
Profit/(loss) on disposal of fixed assets
|
|
|
10 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
(2 |
) |
|
|
2 |
|
|
Provision against fixed asset investments
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
(47 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before interest
|
|
|
176 |
|
|
|
50 |
|
|
|
19 |
|
|
|
(215 |
) |
|
|
30 |
|
|
|
95 |
|
|
|
125 |
|
|
|
94 |
|
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30, 2002(i) | |
|
|
| |
|
|
|
|
Asia | |
|
|
|
Total | |
|
Soft | |
|
|
|
Total | |
|
|
Americas | |
|
EMEA | |
|
Pacific | |
|
Central | |
|
Hotels | |
|
Drinks | |
|
Total | |
|
Discontinued(ii) | |
|
Group | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover
|
|
|
570 |
|
|
|
794 |
|
|
|
128 |
|
|
|
40 |
|
|
|
1,532 |
|
|
|
602 |
|
|
|
2,134 |
|
|
|
1,481 |
|
|
|
3,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
173 |
|
|
|
125 |
|
|
|
23 |
|
|
|
(55 |
) |
|
|
266 |
|
|
|
63 |
|
|
|
329 |
|
|
|
289 |
|
|
|
618 |
|
Operating exceptional items
|
|
|
(39 |
) |
|
|
(24 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
(77 |
) |
|
|
|
|
|
|
(77 |
) |
|
|
|
|
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
134 |
|
|
|
101 |
|
|
|
9 |
|
|
|
(55 |
) |
|
|
189 |
|
|
|
63 |
|
|
|
252 |
|
|
|
289 |
|
|
|
541 |
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
(Loss)/profit on disposal of fixed assets
|
|
|
(7 |
) |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
Profit on disposal of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57 |
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before interest
|
|
|
127 |
|
|
|
110 |
|
|
|
9 |
|
|
|
(59 |
) |
|
|
187 |
|
|
|
63 |
|
|
|
250 |
|
|
|
344 |
|
|
|
594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
15 months | |
|
Year ended | |
|
|
December 31, | |
|
ended December 31, | |
|
September 30, | |
|
|
2004(i) | |
|
2003(i) | |
|
2002(i) | |
|
|
| |
|
| |
|
| |
|
|
By origin | |
|
By destination | |
|
By origin | |
|
By destination | |
|
By origin | |
|
By destination | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
United Kingdom
|
|
|
1,126 |
|
|
|
1,103 |
|
|
|
2,131 |
|
|
|
2,124 |
|
|
|
2,491 |
|
|
|
2,485 |
|
Rest of Europe, the Middle East and Africa
|
|
|
419 |
|
|
|
442 |
|
|
|
506 |
|
|
|
513 |
|
|
|
411 |
|
|
|
416 |
|
United States of America
|
|
|
423 |
|
|
|
423 |
|
|
|
571 |
|
|
|
571 |
|
|
|
476 |
|
|
|
476 |
|
Rest of Americas
|
|
|
102 |
|
|
|
102 |
|
|
|
127 |
|
|
|
127 |
|
|
|
108 |
|
|
|
108 |
|
Asia Pacific
|
|
|
134 |
|
|
|
134 |
|
|
|
148 |
|
|
|
148 |
|
|
|
129 |
|
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,204 |
|
|
|
2,204 |
|
|
|
3,483 |
|
|
|
3,483 |
|
|
|
3,615 |
|
|
|
3,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes on page F-14.
F-13
Profit on ordinary
activities before interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
15 months ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004(i) | |
|
2003(i) | |
|
2002(i) | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
United Kingdom
|
|
|
60 |
|
|
|
117 |
|
|
|
436 |
|
Rest of Europe, the Middle East and Africa
|
|
|
26 |
|
|
|
(7 |
) |
|
|
57 |
|
United States of America
|
|
|
110 |
|
|
|
63 |
|
|
|
78 |
|
Rest of Americas
|
|
|
30 |
|
|
|
28 |
|
|
|
16 |
|
Asia Pacific
|
|
|
17 |
|
|
|
18 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243 |
|
|
|
219 |
|
|
|
594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Other than for Soft Drinks which reflects the 53 weeks
ended December 25, 2004 (64 weeks ended December 20,
2003, 52 weeks ended September 30, 2002) and
Mitchells & Butlers plc which reflects the
28 weeks ended April 12, 2003 (2002 52 weeks). |
|
(ii) |
Discontinued operations relate to Mitchell & Butlers
plc for all periods presented and in 2002 also included a profit
on disposal of Bass Brewers of £57 million relating to
the finalization of completion accounts. |
Depreciation and
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
15 months ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Hotels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
36 |
|
|
|
54 |
|
|
|
46 |
|
|
Asia Pacific
|
|
|
15 |
|
|
|
16 |
|
|
|
11 |
|
|
EMEA
|
|
|
77 |
|
|
|
95 |
|
|
|
66 |
|
|
Central
|
|
|
22 |
|
|
|
30 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150 |
|
|
|
195 |
|
|
|
139 |
|
Soft Drinks
|
|
|
48 |
|
|
|
54 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
198 |
|
|
|
249 |
|
|
|
185 |
|
Discontinued operations
|
|
|
|
|
|
|
54 |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198 |
|
|
|
303 |
|
|
|
271 |
|
|
|
|
|
|
|
|
|
|
|
F-14
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
September 30, 2002 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Net | |
|
|
|
Net | |
|
|
|
Net | |
|
|
Total | |
|
operating | |
|
Total | |
|
operating | |
|
Total | |
|
operating | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Hotels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
1,073 |
|
|
|
765 |
|
|
|
1,146 |
|
|
|
859 |
|
|
|
1,458 |
|
|
|
1,134 |
|
|
EMEA
|
|
|
2,755 |
|
|
|
2,334 |
|
|
|
3,183 |
|
|
|
2,422 |
|
|
|
3,036 |
|
|
|
2,502 |
|
|
Asia Pacific
|
|
|
444 |
|
|
|
414 |
|
|
|
481 |
|
|
|
457 |
|
|
|
467 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,272 |
|
|
|
3,513 |
|
|
|
4,810 |
|
|
|
3,738 |
|
|
|
4,961 |
|
|
|
4,084 |
|
Soft Drinks
|
|
|
502 |
|
|
|
306 |
|
|
|
470 |
|
|
|
300 |
|
|
|
405 |
|
|
|
246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group PLC(i)
|
|
|
4,774 |
|
|
|
3,819 |
|
|
|
5,280 |
|
|
|
4,038 |
|
|
|
5,366 |
|
|
|
4,330 |
|
Discontinued operations(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,682 |
|
|
|
3,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,774 |
|
|
|
3,819 |
|
|
|
5,280 |
|
|
|
4,038 |
|
|
|
9,048 |
|
|
|
7,823 |
|
Non-operating assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current asset investments
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
377 |
|
|
|
|
|
|
|
218 |
|
|
Cash at bank and in hand
|
|
|
|
|
|
|
43 |
|
|
|
|
|
|
|
55 |
|
|
|
|
|
|
|
84 |
|
|
Corporate taxation
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
37 |
|
|
|
|
|
|
|
1 |
|
Non-operating liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
|
|
|
(1,199 |
) |
|
|
|
|
|
|
(1,001 |
) |
|
|
|
|
|
|
(1,479 |
) |
|
Proposed dividend of parent company
|
|
|
|
|
|
|
(62 |
) |
|
|
|
|
|
|
(70 |
) |
|
|
|
|
|
|
(213 |
) |
|
Proposed dividend for minority shareholders
|
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
Corporate taxation
|
|
|
|
|
|
|
(261 |
) |
|
|
|
|
|
|
(389 |
) |
|
|
|
|
|
|
(455 |
) |
|
Deferred taxation
|
|
|
|
|
|
|
(248 |
) |
|
|
|
|
|
|
(314 |
) |
|
|
|
|
|
|
(495 |
) |
|
Minority equity interests
|
|
|
|
|
|
|
(150 |
) |
|
|
|
|
|
|
(163 |
) |
|
|
|
|
|
|
(149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
4,774 |
|
|
|
1,977 |
|
|
|
5,280 |
|
|
|
2,554 |
|
|
|
9,048 |
|
|
|
5,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Kingdom
|
|
|
1,972 |
|
|
|
1,512 |
|
|
|
2,329 |
|
|
|
1,586 |
|
|
|
5,963 |
|
|
|
5,202 |
|
Rest of Europe, the Middle East and Africa
|
|
|
1,285 |
|
|
|
1,128 |
|
|
|
1,324 |
|
|
|
1,136 |
|
|
|
1,160 |
|
|
|
1,039 |
|
United States of America
|
|
|
958 |
|
|
|
667 |
|
|
|
1,020 |
|
|
|
751 |
|
|
|
1,328 |
|
|
|
1,013 |
|
Rest of Americas
|
|
|
115 |
|
|
|
98 |
|
|
|
126 |
|
|
|
108 |
|
|
|
130 |
|
|
|
121 |
|
Asia Pacific
|
|
|
444 |
|
|
|
414 |
|
|
|
481 |
|
|
|
457 |
|
|
|
467 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,774 |
|
|
|
3,819 |
|
|
|
5,280 |
|
|
|
4,038 |
|
|
|
9,048 |
|
|
|
7,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net non-operating liabilities
|
|
|
|
|
|
|
(1,842 |
) |
|
|
|
|
|
|
(1,484 |
) |
|
|
|
|
|
|
(2,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
|
|
|
|
1,977 |
|
|
|
|
|
|
|
2,554 |
|
|
|
|
|
|
|
5,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
InterContinental Hotels Group PLC comprises continuing
operations. Discontinued operations relate to
Mitchells & Butlers plc. |
F-15
|
|
Note 3 |
Operating Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
|
|
|
|
|
|
|
December 31, | |
|
|
|
|
2004 | |
|
15 months ended December 31, 2003 | |
|
|
| |
|
| |
|
|
Total | |
|
Continuing(i) | |
|
Discontinued(i) | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating profit is stated after charging:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs (Note 4)
|
|
|
659 |
|
|
|
815 |
|
|
|
198 |
|
|
|
1,013 |
|
Depreciation of tangible fixed assets
|
|
|
188 |
|
|
|
236 |
|
|
|
54 |
|
|
|
290 |
|
Impairment of tangible fixed assets
|
|
|
28 |
|
|
|
51 |
|
|
|
|
|
|
|
51 |
|
Amortization of goodwill
|
|
|
10 |
|
|
|
13 |
|
|
|
|
|
|
|
13 |
|
Hire of plant and machinery
|
|
|
14 |
|
|
|
18 |
|
|
|
17 |
|
|
|
35 |
|
Property rentals
|
|
|
53 |
|
|
|
65 |
|
|
|
24 |
|
|
|
89 |
|
Income from fixed asset investments
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
Operating exceptionals included above
|
|
|
28 |
|
|
|
51 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended September 30, 2002 | |
|
|
| |
|
|
Continuing(i) | |
|
Discontinued(i) | |
|
Total | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating profit is stated after charging:
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs (Note 4)
|
|
|
659 |
|
|
|
378 |
|
|
|
1,037 |
|
Depreciation of tangible fixed assets
|
|
|
175 |
|
|
|
86 |
|
|
|
261 |
|
Impairment of tangible fixed assets
|
|
|
77 |
|
|
|
|
|
|
|
77 |
|
Amortization of goodwill
|
|
|
9 |
|
|
|
1 |
|
|
|
10 |
|
Hire of plant and machinery
|
|
|
19 |
|
|
|
30 |
|
|
|
49 |
|
Property rentals
|
|
|
58 |
|
|
|
42 |
|
|
|
100 |
|
Income from fixed asset investments
|
|
|
(8 |
) |
|
|
|
|
|
|
(8 |
) |
Operating exceptionals included above
|
|
|
77 |
|
|
|
|
|
|
|
77 |
|
|
|
(i) |
Continuing operations comprises InterContinental Hotels Group
PLC. Discontinued operations relate to Mitchells &
Butlers plc for 2003 and 2002, and in 2002 also included a
profit on disposal of Bass Brewers of £57 million. |
|
|
|
Auditors remuneration paid to Ernst & Young
LLP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Audit fees
|
|
|
3.8 |
|
|
|
2.8 |
|
|
|
1.9 |
|
Audit related fees
|
|
|
1.6 |
|
|
|
7.2 |
|
|
|
3.2 |
|
Tax fees
|
|
|
0.5 |
|
|
|
1.2 |
|
|
|
1.2 |
|
Other fees
|
|
|
|
|
|
|
|
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.9 |
|
|
|
11.2 |
|
|
|
6.7 |
|
|
|
|
|
|
|
|
|
|
|
Audit related fees include £nil million (2003
£6.3 million, 2002 £1.7 million) in relation
to the Separation and bid defense. These costs have been charged
to exceptional items (see Note 5). Non-audit fees payable
for UK services were £1.1 million (2003
£6.6 million, 2002 £4.1 million).
F-16
The Audit Committee has a process to ensure that any non-audit
services do not compromise the independence and objectivity of
the external auditors, and that relevant UK and US professional
and regulatory requirements are met. A number of criteria are
applied when deciding whether pre-approval for such services
should be given. These include the nature of the service, the
level of fees, and the practicality of appointing an alternative
provider, having regard to the skills and experience required to
supply the service effectively. Cumulative fees for audit and
non-audit services are presented to the Audit Committee on a
quarterly basis for review. The Audit Committee is responsible
for monitoring adherence to the pre-approval policy.
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Wages and salaries
|
|
|
570 |
|
|
|
884 |
|
|
|
942 |
|
Social security costs
|
|
|
66 |
|
|
|
96 |
|
|
|
84 |
|
Pensions
|
|
|
23 |
|
|
|
33 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
659 |
|
|
|
1,013 |
|
|
|
1,037 |
|
|
|
|
|
|
|
|
|
|
|
Employee numbers
Average number of persons employed, including part-time
employees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(Number) | |
Hotels
|
|
|
26,835 |
|
|
|
27,111 |
|
|
|
28,385 |
|
Soft Drinks
|
|
|
2,824 |
|
|
|
2,698 |
|
|
|
2,637 |
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group PLC(i)
|
|
|
29,659 |
|
|
|
29,809 |
|
|
|
31,022 |
|
Discontinued operations(i)
|
|
|
|
|
|
|
15,014 |
|
|
|
38,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,659 |
|
|
|
44,823 |
|
|
|
69,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
InterContinental Hotels Group PLC relates to continuing
operations. Discontinued operations relate to
Mitchells & Butlers plc. |
Pensions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Regular cost
|
|
|
16 |
|
|
|
33 |
|
|
|
35 |
|
Variations from regular cost
|
|
|
(2 |
) |
|
|
(7 |
) |
|
|
(28 |
) |
Notional interest on prepayment
|
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
Pension cost in respect of the principal plans
|
|
|
11 |
|
|
|
22 |
|
|
|
4 |
|
Other plans
|
|
|
12 |
|
|
|
11 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
|
33 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
F-17
Retirement and death benefits are provided for eligible Group
employees in the United Kingdom principally by the
InterContinental Hotels UK Pension Plan which covers
approximately 1,700 employees and the Britvic Pension Plan which
covers approximately 2,400 employees. The plans are
predominantly defined benefit schemes for current members. For
new entrants, the plans provide defined contribution benefits.
The assets of the plans are held in self-administered trust
funds separate from the Groups assets. The Group also
maintains a US-based InterContinental Hotels Pension Plan. This
plan is now closed to new members and pensionable service no
longer accrues for current employee members. In addition, the
Group operates a number of minor pension schemes outside the
United Kingdom, the most significant of which is a defined
contribution scheme in the United States; there is no material
difference between the pension costs of, and contributions to,
these schemes.
On April 1, 2003, two new pension schemes were created for
InterContinental Hotels Group PLC in the UK when
Mitchells & Butlers Retail Limited became the
sponsoring employer for the Six Continents Pension Plan and the
Six Continents Executive Pension Plan. Approximately 30% of the
assets and liabilities of these plans was transferred to the new
InterContinental Hotels UK Pension Plan and the Britvic Pension
Plan, which were established with effect from April 1, 2003.
The Group continues to account for its defined benefit
obligations in accordance with SSAP 24. The pension costs
related to the two UK principal plans are assessed in accordance
with the advice of independent qualified actuaries using the
projected unit method. They reflect the March 31, 2004
actuarial valuations of the InterContinental Hotels UK
Pension Plan and the Britvic Pension Plan. The significant
assumptions in these valuations were that wages and salaries
increase on average by 4.3% per annum, the long-term return
on assets is 6.5% per annum, and pensions increase by
2.8% per annum. The average expected remaining service life
of current employees is 12 years.
At March 31, 2004, the market value of the combined assets
of the InterContinental Hotels UK Pension Plan was
£148 million and the Britvic Pension Plan was
£240 million and the value of the assets was
sufficient to cover 80% and 75%, respectively, of the benefits
that had accrued to members after allowing for expected
increases in earnings.
In the period to December 31, 2004, the Group made regular
contributions to the two UK principal plans of
£12 million (2003 £26 million, 2002
£18 million) and additional contributions of
£60 million (2003 £13 million, 2002
£15 million). The agreed employer contribution rates
to the defined benefit arrangements for the year to
December 31, 2005 are 15.6% for the staff section of the
InterContinental Hotels UK Pension Plan, 31.4% for the executive
section, 16.9% for the staff section of the Britvic Pension Plan
and 32.3% for the executive section.
Certain pension benefits and post retirement insurance
obligations are provided on an unfunded basis. Where assets are
not held with the specific purpose of matching the liabilities
of unfunded schemes, a provision is included within other
provisions for liabilities and charges. Liabilities are
generally assessed annually in accordance with the advice of
independent actuaries.
FRS 17 disclosures
The valuations used for FRS 17 disclosures are based on the
results of the actuarial valuations at March 31, 2004
updated by independent qualified actuaries to December 31,
2004. Scheme assets are stated at market value at
December 31, 2004 and the liabilities of the schemes have
been assessed as at the same date using the projected unit
method. As the principal plans are now closed as defined benefit
schemes, the current service cost as calculated under the
projected unit method will increase as members approach
retirement.
F-18
The principal assumptions used by the actuaries to determine the
liabilities on a FRS 17 basis were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
UK | |
|
US | |
|
UK | |
|
US | |
|
UK | |
|
US | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(%) | |
Wages and salaries increases
|
|
|
4.3 |
|
|
|
|
|
|
|
4.3 |
|
|
|
|
|
|
|
3.8 |
|
|
|
|
|
Pension increases
|
|
|
2.8 |
|
|
|
|
|
|
|
2.8 |
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
Discount rate
|
|
|
5.3 |
|
|
|
5.8 |
|
|
|
5.4 |
|
|
|
6.3 |
|
|
|
5.5 |
|
|
|
6.8 |
|
Inflation rate
|
|
|
2.8 |
|
|
|
|
|
|
|
2.8 |
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
The combined assets of the two principal schemes and expected
rate of return were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term rate | |
|
|
|
Long-term | |
|
|
|
Long-term | |
|
|
|
|
of return | |
|
|
|
rate of return | |
|
|
|
rate of return | |
|
|
|
|
expected at | |
|
Value at | |
|
expected at | |
|
Value at | |
|
expected at | |
|
Value at | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
September 30, | |
|
|
2004 | |
|
2004 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(%) | |
|
(£ million) | |
|
(%) | |
|
(£ million) | |
|
(%) | |
|
(£ million) | |
UK Schemes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities
|
|
|
8.0 |
|
|
|
272 |
|
|
|
8.0 |
|
|
|
238 |
|
|
|
8.0 |
|
|
|
507 |
|
Bonds
|
|
|
4.9 |
|
|
|
173 |
|
|
|
5.4 |
|
|
|
117 |
|
|
|
4.7 |
|
|
|
397 |
|
Other
|
|
|
8.0 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
8.0 |
|
|
|
92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market value of assets
|
|
|
|
|
|
|
472 |
|
|
|
|
|
|
|
355 |
|
|
|
|
|
|
|
996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term | |
|
|
|
Long-term | |
|
|
|
Long-term | |
|
|
|
|
rate of return | |
|
|
|
rate of return | |
|
|
|
rate of return | |
|
|
|
|
expected at | |
|
Value at | |
|
expected at | |
|
Value at | |
|
expected at | |
|
Value at | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
September 30, | |
|
|
2004 | |
|
2004 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(%) | |
|
(£ million) | |
|
(%) | |
|
(£ million) | |
|
(%) | |
|
(£ million) | |
US Schemes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities
|
|
|
9.6 |
|
|
|
34 |
|
|
|
9.2 |
|
|
|
29 |
|
|
|
11.2 |
|
|
|
27 |
|
Bonds
|
|
|
5.5 |
|
|
|
22 |
|
|
|
6.0 |
|
|
|
19 |
|
|
|
6.2 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total market value of assets
|
|
|
|
|
|
|
56 |
|
|
|
|
|
|
|
48 |
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, | |
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
UK | |
|
US | |
|
Total | |
|
UK | |
|
US | |
|
Total | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Total market value of assets
|
|
|
472 |
|
|
|
56 |
|
|
|
528 |
|
|
|
355 |
|
|
|
48 |
|
|
|
403 |
|
|
|
1,045 |
|
Present value of scheme liabilities
|
|
|
(600 |
) |
|
|
(100 |
) |
|
|
(700 |
) |
|
|
(477 |
) |
|
|
(102 |
) |
|
|
(579 |
) |
|
|
(1,415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit in the scheme
|
|
|
(128 |
) |
|
|
(44 |
) |
|
|
(172 |
) |
|
|
(122 |
) |
|
|
(54 |
) |
|
|
(176 |
) |
|
|
(370 |
) |
Related deferred tax asset
|
|
|
40 |
|
|
|
17 |
|
|
|
57 |
|
|
|
37 |
|
|
|
21 |
|
|
|
58 |
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension liability
|
|
|
(88 |
) |
|
|
(27 |
) |
|
|
(115 |
) |
|
|
(85 |
) |
|
|
(33 |
) |
|
|
(118 |
) |
|
|
(254 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
|
|
|
If FRS 17 had been recognized in the financial statements, the
effects would have been as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
15 months | |
|
Year ended | |
|
|
December 31, | |
|
ended December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
UK | |
|
US | |
|
Total | |
|
UK | |
|
US | |
|
Total | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating profit charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost
|
|
|
18 |
|
|
|
|
|
|
|
18 |
|
|
|
32 |
|
|
|
|
|
|
|
32 |
|
|
|
31 |
|
Past service cost
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profit charge
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
|
|
34 |
|
|
|
|
|
|
|
34 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on pension scheme assets
|
|
|
27 |
|
|
|
4 |
|
|
|
31 |
|
|
|
49 |
|
|
|
5 |
|
|
|
54 |
|
|
|
80 |
|
Interest on pension scheme liabilities
|
|
|
(27 |
) |
|
|
(6 |
) |
|
|
(33 |
) |
|
|
(53 |
) |
|
|
(8 |
) |
|
|
(61 |
) |
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (expense)/return
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(7 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items recognized in the Statement of Total Recognized Gains
and Losses (STRGL)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return less expected return on pension scheme assets
|
|
|
11 |
|
|
|
1 |
|
|
|
12 |
|
|
|
32 |
|
|
|
5 |
|
|
|
37 |
|
|
|
(182 |
) |
Experience gains and losses arising on the scheme liabilities
|
|
|
13 |
|
|
|
|
|
|
|
13 |
|
|
|
(17 |
) |
|
|
(1 |
) |
|
|
(18 |
) |
|
|
(23 |
) |
Changes in assumptions underlying the present value of the
scheme liabilities
|
|
|
(70 |
) |
|
|
(6 |
) |
|
|
(76 |
) |
|
|
(111 |
) |
|
|
(10 |
) |
|
|
(121 |
) |
|
|
(126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss recognized in the STRGL
|
|
|
(46 |
) |
|
|
(5 |
) |
|
|
(51 |
) |
|
|
(96 |
) |
|
|
(6 |
) |
|
|
(102 |
) |
|
|
(331 |
) |
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit transferred in respect of previous acquisitions
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange adjustments
|
|
|
|
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
(8 |
) |
|
|
(3 |
) |
Movement in deficit during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At start of period
|
|
|
(122 |
) |
|
|
(54 |
) |
|
|
(176 |
) |
|
|
(315 |
) |
|
|
(55 |
) |
|
|
(370 |
) |
|
|
(55 |
) |
Current service cost
|
|
|
(18 |
) |
|
|
|
|
|
|
(18 |
) |
|
|
(32 |
) |
|
|
|
|
|
|
(32 |
) |
|
|
(31 |
) |
Past service cost
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
Contributions
|
|
|
72 |
|
|
|
13 |
|
|
|
85 |
|
|
|
39 |
|
|
|
2 |
|
|
|
41 |
|
|
|
40 |
|
Finance income
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
|
|
(7 |
) |
|
|
4 |
|
Actuarial loss
|
|
|
(46 |
) |
|
|
(5 |
) |
|
|
(51 |
) |
|
|
(96 |
) |
|
|
(6 |
) |
|
|
(102 |
) |
|
|
(331 |
) |
Deficit transferred in respect of previous acquisitions(i)
|
|
|
(13 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation of MAB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288 |
|
|
|
|
|
|
|
288 |
|
|
|
|
|
Exchange adjustments
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
8 |
|
|
|
8 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of period
|
|
|
(128 |
) |
|
|
(44 |
) |
|
|
(172 |
) |
|
|
(122 |
) |
|
|
(54 |
) |
|
|
(176 |
) |
|
|
(370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Relates to the acquisition of Posthouse hotels in 2001. |
F-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
15 months | |
|
|
|
|
December 31, | |
|
ended December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
UK | |
|
US | |
|
Total | |
|
UK | |
|
US | |
|
Total | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
History of experience gains and losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference between the expected and actual return on scheme
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount (£ million)
|
|
|
11 |
|
|
|
1 |
|
|
|
12 |
|
|
|
32 |
|
|
|
5 |
|
|
|
37 |
|
|
|
(182 |
) |
|
Percentage of scheme assets
|
|
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
|
9 |
% |
|
|
10 |
% |
|
|
9 |
% |
|
|
(17 |
%) |
Experience gains and losses on scheme liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount (£ million)
|
|
|
13 |
|
|
|
|
|
|
|
13 |
|
|
|
(17 |
) |
|
|
(1 |
) |
|
|
(18 |
) |
|
|
(23 |
) |
|
Percentage of the present value of the scheme liabilities
|
|
|
2 |
% |
|
|
|
|
|
|
2 |
% |
|
|
(4 |
%) |
|
|
(1 |
%) |
|
|
(3 |
%) |
|
|
(2% |
) |
Total amount recognized in the STRGL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount (£ million)
|
|
|
(46 |
) |
|
|
(5 |
) |
|
|
(51 |
) |
|
|
(96 |
) |
|
|
(6 |
) |
|
|
(102 |
) |
|
|
(331 |
) |
|
Percentage of the present value of the scheme liabilities
|
|
|
(8 |
%) |
|
|
(5 |
%) |
|
|
(7 |
%) |
|
|
(20 |
%) |
|
|
(6 |
%) |
|
|
(18 |
%) |
|
|
(23 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
September 30, 2002 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Profit and | |
|
|
|
Profit and | |
|
|
|
Profit and | |
|
|
|
|
loss account | |
|
|
|
loss account | |
|
|
|
loss account | |
|
|
Net assets | |
|
reserve | |
|
Net assets | |
|
reserve | |
|
Net assets | |
|
reserve | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Group net assets and reserves reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
|
1,977 |
|
|
|
(167 |
) |
|
|
2,554 |
|
|
|
390 |
|
|
|
5,335 |
|
|
|
2,448 |
|
Less: SSAP 24 pension prepayment (net of tax
of £23 million (2003
£14 million, 2002 £26 million))
|
|
|
(87 |
) |
|
|
(87 |
) |
|
|
(33 |
) |
|
|
(33 |
) |
|
|
(62 |
) |
|
|
(62 |
) |
SSAP 24 pension provision (net of tax of £18 million
(2003
£16 million, 2002 £14 million))
|
|
|
31 |
|
|
|
31 |
|
|
|
30 |
|
|
|
30 |
|
|
|
25 |
|
|
|
25 |
|
FRS 17 net pension liability
|
|
|
(115 |
) |
|
|
(115 |
) |
|
|
(118 |
) |
|
|
(118 |
) |
|
|
(254 |
) |
|
|
(254 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restated for FRS 17
|
|
|
1,806 |
|
|
|
(338 |
) |
|
|
2,433 |
|
|
|
269 |
|
|
|
5,044 |
|
|
|
2,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policy on remuneration of executive directors and senior
executives |
The following policy has applied since Separation and will apply
in future years, subject to ongoing review.
|
|
|
Total level of remuneration |
The Committee aims to ensure that remuneration packages are
offered which:
|
|
|
|
|
attract high quality executives in an environment where
compensation levels are based on global market practice; |
|
|
|
provide appropriate retention strength against loss of key
executives; |
|
|
|
drive aligned focus and attention to key business initiatives
and appropriately reward their achievement; |
F-21
|
|
|
|
|
support equitable treatment between members of the same
executive team; and |
|
|
|
facilitate global assignments and relocation. |
The Committee is aware that, as a UK listed company, IHGs
incentive arrangements may be expected to recognize UK investor
guidelines. However, given the global nature of the Hotels
business, an appropriate balance needs to be drawn in the design
of relevant remuneration packages between domestic and
international expectations.
The Group has performance-related reward policies. These are
designed to provide the appropriate balance between fixed
remuneration and variable risk reward, which is
linked to the performance of both the Group and the individual.
Group performance-related measures are chosen carefully to
ensure a strong link between reward and true underlying
financial performance, and emphasis is placed on particular
areas requiring executive focus.
Individual performance is measured through an assessment of
comprehensive business unit deliverables, demonstrated
leadership behaviors, modeling the Group values and the
achievement of specific key performance objectives. At the
executive level, key performance objectives are linked directly
to the Groups strategic priorities. At a minimum, the
individual performance of the executive directors is assessed on
an annual basis.
The normal policy for executive directors is that, using
target or expected value calculations,
their performance-related incentives will equate to
approximately 70% of total annual remuneration (excluding
benefits).
The main components of remuneration are:
Basic
salary
The salary for each executive director is based on individual
performance and on information from independent professional
sources on the salary levels for similar jobs in groups of
comparable companies. Internal relativities and salary levels in
the wider employment market are also taken into account.
In addition, benefits are provided to executive directors in
accordance with the policy applying to other executives in their
geographic location.
Annual
performance bonus
Within the Short Term Deferred Incentive Plan, challenging
performance goals are set and these must be achieved before the
maximum bonus becomes payable. These goals include both personal
objectives and targets linked to the Groups financial
performance. For executive directors, the maximum bonus
opportunity is 100% of salary, with 30% linked to personal
objectives, 35% to adjusted earnings per share and 35% to
earnings before exceptional items, interest and taxation. The
bonus will normally be paid in IHG PLC shares and deferred.
Matching shares may also be awarded up to 0.5 times the deferred
amount. Such awards are conditional on the directors
continued employment with the Group until the release date. The
shares will normally be released in equal amounts at the end of
each of the three years following deferral.
The executive directors will be expected to hold all shares
earned from the Groups remuneration plans while the value
of their holding is less than twice their basic salary or three
times in the case of the Chief Executive.
Bonuses are not pensionable.
Executive
share options
The Committee believes that share ownership by executive
directors and senior executives strengthens the link between the
individuals personal interest and that of the
shareholders. Grants of options are normally
F-22
made annually and, except in exceptional circumstances, will
not, in any year, exceed three times annual salary for executive
directors.
A performance condition has to be met before options can be
exercised. The performance condition is set by the Committee.
For options granted in 2004, the Companys adjusted
earnings per share over the three-year period ending
December 31, 2006 must increase by at least nine percentage
points over the increase in the UK Retail Prices Index
(RPI) for the same period for one-third of the
options granted to vest; 12 percentage points over the
increase in RPI for the same period for two-thirds of the
options granted to vest; and 15 percentage points over the
increase in RPI for the same period for the full award to vest.
The options lapse if the performance condition is not met. This
remains a realistic but challenging condition in the current
economic climate. The achievement or otherwise of the
performance condition is assessed, based on the Groups
published results; such assessment is then reviewed by the
external auditor.
Executive directors were granted options on April 1, 2004
as shown in the table on pages F-28 and F-29.
Similar performance conditions have been applied to options
granted on April 1, 2005. It is intended that similar
conditions will apply in later years.
Executive share options are not pensionable.
Sharesave plan Executive directors are entitled to
participate in all-employee share schemes. Options granted under
the IHG Sharesave Plan are not subject to performance conditions
and are not pensionable.
Performance restricted shares The Performance Restricted
Share Plan allows executive directors and eligible employees to
receive share awards, subject to the satisfaction of a
performance condition, set by the Committee, which is normally
measured over a three-year period. Awards are normally made
annually and, except in exceptional circumstances, will not
exceed three times annual salary for executive directors. In
determining the level of awards within this maximum limit, the
Committee takes into account the level of executive share
options granted to the same person. The grant of awards is
restricted so that in each year the aggregate of (i) 20% of
the market value of the executive share options and
(ii) 33% of the market value of performance restricted
shares, will not exceed 130% of annual salary, taking the market
value in each case as at the date of grant.
For the 2004/06 cycle, performance will be measured by reference
to:
|
|
|
|
|
the increase in IHG PLC Total Shareholder Return
(TSR) over the performance period relative to 10
identified comparator companies; Accor, De Vere, Hilton Group,
Hilton Hotels Corp., Host Marriott, Marriott Hotels, Millennium
& Copthorne, NH Hotels, Sol Melia and Starwood Hotels; and |
|
|
|
the increase in IHG Return On Capital Employed
(ROCE) over the performance period. |
In respect of TSR performance, 10% of the award will be released
for the achievement of 6th place within the TSR group and 50% of
the award will be released for the achievement of 1st or 2nd
place. In respect of ROCE performance, 10% of the award will be
released for the achievement of 70% growth and 50% of the award
will be released for the achievement of 141.6% growth. Vesting
between all stated points will be on a straight line basis.
The awards lapse if the performance conditions are not met.
Implementation of the elements of the IHG strategy that can
significantly impact ROCE will be complete during the life of
existing Performance Restricted Share Plan cycles. The Committee
considers that it is now time to review this performance
measure. Benefits under the Performance Restricted Share Plan
are not pensionable.
F-23
|
|
|
Companies used for comparison |
In assessing levels of pay and benefits, IHG compares the
packages offered by different groups of comparator companies.
These groups are chosen having regard to participants:
|
|
|
|
|
size turnover, profits and the number of people
employed; |
|
|
|
diversity and complexity of businesses; |
|
|
|
geographical spread of businesses; |
|
|
|
industry type; and |
|
|
|
relevance as: |
|
|
|
a) a potential recruitment target |
|
|
b) a potential threat in respect of attracting IHG talent. |
External consultants are used to advise the Committee on the
structure and level of pay and benefits in IHGs markets.
|
|
|
Policy on external appointments |
The Company recognises that its directors may be invited to
become non-executive directors of other companies and that such
duties can broaden experience and knowledge, and benefit the
business. Executive directors are, therefore, allowed to accept
one non-executive appointment (excluding positions where the
director is appointed as the Companys representative),
subject to Board approval, as long as this is not likely to lead
to a conflict of interest, and to retain the fees received.
Richard North received £25,091 during the year for his
services as a non-executive director. David Webster received
£20,000 during the year for his services as a non-executive
director.
The Remuneration Committees policy is for executive
directors to have rolling contracts with a notice period of
12 months.
Prior to the Separation of Six Continents PLC Richard Hartman,
Richard North, Stevan Porter and Richard Solomons entered into
service agreements with a notice period of 12 months.
Following the year end, Andrew Cosslett entered into a service
agreement with an initial notice period of 24 months,
reducing month-by-month to 12 months after the initial
12 month period. All new appointments are intended to have
12 month notice periods. However, on occasion, to complete
an external recruitment successfully, a longer initial period
reducing to 12 months may be used, following guidance in
the Combined Code.
No provisions for compensation for termination following change
of control, or for liquidated damages of any kind, are included
in the current directors contracts. In the event of any
early termination of an executive directors contract the
policy is to seek to minimise any liability.
David Webster took over as interim Chief Executive on
September 15, 2004 following announcement that Richard
North would resign as a director of the Company on
September 30, 2004. David Websters remuneration in
his capacity as interim Chief Executive was exclusive of his
remuneration in his capacity as non-executive Chairman of the
Company, which is the subject of a letter of appointment, with
effect from January 1, 2004. David Websters
appointment as Chairman is subject to six months
notice.
Non-executive directors, Ralph Kugler, Robert C Larson, David
Prosser and Sir Howard Stringer signed letters of appointment
effective from the listing of IHG PLC. David Kappler signed a
letter of appointment effective from June 21, 2004. All
non-executive directors appointments are subject to
re-election at the Annual General Meeting at which they retire
by rotation.
F-24
|
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|
|
Contract | |
|
Unexpired term/ | |
Directors |
|
effective date | |
|
notice period | |
|
|
| |
|
| |
Andrew Cosslett
|
|
|
2.3.05 |
|
|
|
21 months |
|
Richard Hartman
|
|
|
4.15.03 |
|
|
|
12 months |
|
Stevan Porter
|
|
|
4.15.03 |
|
|
|
12 months |
|
Richard Solomons
|
|
|
4.15.03 |
|
|
|
12 months |
|
Richard North
|
|
|
4.15.03 |
|
|
|
Terminated |
|
Richard Norths service contract provided for a notice
period of 12 months. The severance arrangements which were
entered into following his resignation on September 30,
2004 provided for him to receive a payment of
one months basic salary in each month up to September
2005, subject to mitigation in the event of his taking up an
alternative appointment. Details of his entitlements in respect
of the Executive Share Option Plan, the Short Term Deferred
Incentive Plan, the Performance Restricted Share Plan, and
pension, are contained in the appropriate tables in the audited
part of this report.
Policy regarding pensions
UK-based executive directors and senior employees participate on
the same basis in the executive section of the InterContinental
Hotels UK Pension Plan and, if appropriate, the
InterContinental Executive Top-Up Scheme. Stevan Porter and
senior US-based executives participate in US retirement benefits
plans. Executives in other countries, who do not participate in
these plans, will participate in local plans, or the
InterContinental Hotels Group International Savings &
Retirement Plan.
Directors
Emoluments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total emoluments excluding pensions | |
|
|
|
|
|
|
|
|
| |
|
|
Basic | |
|
|
|
|
|
|
|
15 months | |
|
|
|
|
salaries | |
|
Performance | |
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
and fees | |
|
payments | |
|
Benefits | |
|
Dec 31, 2004 | |
|
Dec 31, 2003 | |
|
Sep 30, 2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ thousand) | |
Executive directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard North(1)
|
|
|
638 |
|
|
|
553 |
|
|
|
57 |
|
|
|
1,248 |
|
|
|
1,183 |
|
|
|
629 |
|
Richard Hartman
|
|
|
476 |
|
|
|
|
|
|
|
299 |
|
|
|
775 |
|
|
|
663 |
|
|
|
|
|
Stevan Porter(2)
|
|
|
360 |
|
|
|
|
|
|
|
8 |
|
|
|
368 |
|
|
|
510 |
|
|
|
|
|
Richard Solomons
|
|
|
372 |
|
|
|
|
|
|
|
28 |
|
|
|
400 |
|
|
|
497 |
|
|
|
|
|
David Webster(3)
|
|
|
148 |
|
|
|
|
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
|
|
Non-executive directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Kappler(4)
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
|
Ralph Kugler(5)
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
30 |
|
|
|
|
|
Robert C. Larson(6)
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
53 |
|
|
|
36 |
|
David Prosser(7)
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
35 |
|
|
|
|
|
Sir Howard Stringer(6)
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
53 |
|
|
|
13 |
|
David Webster(8)
|
|
|
275 |
|
|
|
|
|
|
|
1 |
|
|
|
276 |
|
|
|
57 |
|
|
|
|
|
Former directors(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,987 |
|
|
|
2,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,480 |
|
|
|
553 |
|
|
|
393 |
|
|
|
3,426 |
|
|
|
6,068 |
|
|
|
3,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Resigned as a director and as Chief Executive on
September 30, 2004 and ceased employment with the Group on
December 31, 2004. The emoluments shown are for the full
year. Richard Norths performance payment relates to his
participation in the Short Term Deferred Incentive Plan which,
in accordance with plan rules, must be paid in cash due to his
employment ending. He remains eligible to participate in the |
F-25
|
|
|
Short Term Deferred Incentive Plan for the 2005 performance
year. Any award will be made in cash and pro-rated to
September 30, 2005. |
|
(2) |
Emoluments for Stevan Porter include £10,731 that were
chargeable to UK income tax. |
|
(3) |
Fees paid to David Webster represent £41,667 per month
paid to him in his capacity as interim Chief Executive with
effect from September 15, 2004. |
|
(4) |
Became Senior Independent Director and Chairman of the Audit
Committee on June 21, 2004 for which a fixed fee of
£65,000 pa was paid. With effect from January 1, 2005,
David Kappler receives a total annual fee of £80,000. |
|
(5) |
All fees due to Ralph Kugler are paid to Unilever. With effect
from January 1, 2005, Ralph Kuglers fee as a
non-executive director is £50,000 pa. |
|
(6) |
Both Robert C. Larson and Sir Howard Stringer served
as non-executive directors of Six Continents PLC during the
period up to April 15, 2003 for which they each received a
fee of £23,000. With effect from January 1, 2005,
Robert C Larson and Sir Howard Stringer each receive
an annual fee of £50,000. |
|
(7) |
Fees paid to David Prosser included a £7,500 pa fee payable
to the Chairman of the Remuneration Committee in recognition of
the additional responsibilities of this role. With effect from
January 1, 2005, David Prosser receives a total annual fee
of £65,000. |
|
(8) |
Became non-executive Chairman on January 1, 2004 for which
a fixed fee of £275,000 pa was paid. With effect from
January 1, 2005, David Websters fee as non-executive
Chairman is £350,000 pa. |
|
(9) |
The total emoluments earned by former directors of both Six
Continents PLC and IHG PLC during the period October 1,
2002 to December 31, 2003 and the year October 1, 2001
to September 30, 2002 are shown. |
Figures for 2003 and 2002 represent emoluments earned during the
15 month period ended December 31, 2003 and the year
ended September 30, 2002 and include emoluments for those
directors who also served as directors of Six
Continents PLC. Performance payments include
bonus awards in cash in respect of participation in the Short
Term Deferred Incentive Plan (STDIP) but exclude bonus
awards in deferred shares and any matching shares (further
details of which are set out below under Long Term Reward).
Benefits incorporate all tax assessable
benefits arising from the individuals employment. For
Messrs Hartman, North and Solomons, this relates in the
main to the provision of a fully expensed company car and
private healthcare cover. In addition, Mr Hartman received
housing, child education and other expatriate benefits. For
Stevan Porter, benefits relate in the main to private healthcare
cover and financial counseling.
Thomas Oliver retired from Six Continents PLC on
March 31, 2003 and has not served as a director of
IHG PLC. However, he had an ongoing consultancy agreement
in respect of which he received fees of £136,677 during the
year. In addition, he had an ongoing healthcare benefit of
£9,919 during the year. These arrangements ended in March
2005. Sir Ian Prosser retired on December 31, 2003.
However, he had an ongoing healthcare benefit of £1,191
during the year.
Directors
pensions
The following information relates to the pension arrangements
provided for Richard Hartman, Richard North and Richard Solomons
under the executive section of the InterContinental
Hotels UK Pension Plan (the IC Plan) and
the unfunded InterContinental Executive Top-Up Scheme
(ICETUS).
The executive section of the IC Plan is a funded, Inland
Revenue approved, final salary, occupational pension scheme. The
main features applicable to the executive directors are: a
normal pension age of 60; pension accrual of 1/30th of final
pensionable salary for each year of pensionable service; life
assurance cover of four times pensionable salary; pensions
payable in the event of ill health; and spouses and
dependants pensions on death.
All plan benefits are subject to Inland Revenue limits. Where
such limitation is due to the earnings cap, ICETUS
is used to increase pension and death benefits to the level that
would otherwise have applied.
F-26
Stevan Porter has retirement benefits provided via the 401(k)
Retirement Plan for employees of Six Continents Hotels Inc.
(401(k)) and the Six Continents Hotels Inc. Deferred
Compensation Plan (DCP).
The 401(k) is a tax qualified plan providing benefits on a
defined contribution basis, with the member and the relevant
company both contributing. The DCP is a non-tax qualified plan,
providing benefits on a defined contribution basis, with the
member and the relevant company both contributing.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in | |
|
|
|
|
|
|
|
|
|
|
|
|
Transfer value of | |
|
transfer value | |
|
Increase in | |
|
Increase in | |
|
Accrued | |
|
|
|
|
Directors | |
|
accrued benefits | |
|
over the year | |
|
accrued | |
|
accrued | |
|
pension at | |
|
|
Age at | |
|
contributions | |
|
| |
|
less directors | |
|
pension | |
|
pension | |
|
Dec 31, 04 | |
Directors pension benefits |
|
Dec 31, 04 | |
|
(1) | |
|
Jan 1, 04 | |
|
Dec 31, 04 | |
|
contributions | |
|
(2) | |
|
(3) | |
|
(4)(5) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
£ | |
|
£ | |
|
£ | |
|
£ | |
|
£pa | |
|
£pa | |
|
£pa | |
Richard Hartman
|
|
|
58 |
|
|
|
15,200 |
|
|
|
652,200 |
|
|
|
1,189,800 |
|
|
|
522,400 |
|
|
|
24,800 |
|
|
|
23,700 |
|
|
|
63,200 |
|
Richard North
|
|
|
54 |
|
|
|
15,200 |
|
|
|
2,423,800 |
|
|
|
3,581,400 |
|
|
|
1,142,400 |
|
|
|
60,300 |
|
|
|
55,200 |
|
|
|
240,300 |
|
Richard Solomons
|
|
|
43 |
|
|
|
15,100 |
|
|
|
569,400 |
|
|
|
834,100 |
|
|
|
249,600 |
|
|
|
21,300 |
|
|
|
19,200 |
|
|
|
96,800 |
|
|
|
(1) |
Contributions paid in the year by the directors under the terms
of the plans. Richard Hartmans contributions exclude
£3,700 paid in 2004, but relating to 2003. |
|
|
(2) |
The absolute increase in accrued pension during the period. |
|
|
(3) |
The increase in accrued pension during the period excluding any
increase for inflation, on the basis that increases to accrued
pensions are applied at October 1. |
|
|
(4) |
Accrued pension is that which would be paid annually on
retirement at 60, based on service to December 31, 2004. |
|
|
(5) |
Richard North ceased pensionable service with the Group on
December 31, 2004 and his deferred pension at that date is
£240,300 pa, payable from his 60th birthday
(inclusive of an augmentation agreed as part of his severance
arrangements). |
The figures shown in the above tables relate to the final salary
plans only. For defined contribution plans, the contributions
made by and in respect of Stevan Porter during the year are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors | |
|
Company | |
|
|
contribution to | |
|
contribution to | |
|
|
| |
|
| |
|
|
DCP | |
|
401(k) | |
|
DCP | |
|
401(k) | |
|
|
| |
|
| |
|
| |
|
| |
|
|
£ | |
|
£ | |
|
£ | |
|
£ | |
Stevan Porter
|
|
|
19,000 |
|
|
|
7,100 |
|
|
|
56,800 |
|
|
|
5,700 |
|
Directors emoluments
Totals relating to employers pension contributions for
fiscal 2004, 2003 and 2002.
|
|
|
|
|
|
|
Employers pension | |
|
|
contributions | |
|
|
| |
|
|
(£ thousand) | |
Total 2004
|
|
|
141 |
|
Total 2003
|
|
|
430 |
|
Total 2002
|
|
|
374 |
|
The following additional information relates to directors
pensions under the UK plans.
Dependants
Pensions
On the death of a director before his normal retirement age, a
widows pension equal to one-third of his own pension is
payable; a childs pension of one-sixth of his pension is
payable for each of a maximum of two eligible children. On the
death of a director after payment of his pension commences, a
widows pension of two-thirds of the directors full
pension entitlement is payable; in addition, a childs
pension of one-sixth of his full pension entitlement is payable
for each of a maximum of two eligible children.
F-27
Early Retirement
Rights
After leaving the service of the relevant company, the director
has the right to draw his accrued pension at any time after his
50th birthday, subject to a discount for early payment.
Pension Increases
All pensions (in excess of Guaranteed Minimum Pensions) are
subject to contractual annual increases in line with the annual
rise in RPI, subject to a maximum of 5% per annum. In
addition, it is current policy to pay additional increases based
on two-thirds of any rise in RPI above 5% per annum.
Other Discretionary
Benefits
Other than the discretionary pension increases mentioned above,
there are no discretionary practices which are taken into
account in calculating transfer values on leaving service.
Performance Restricted Share
Plan (PRSP)
In 2004 there were three cycles in operation.
The awards made in respect of the PRSP cycles ending on
December 31, 2004, December 31, 2005 and
December 31, 2006 and the maximum pre-tax number of
ordinary shares due if performance targets are achieved in full
are:
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRSP shares | |
|
|
|
Market | |
|
|
|
|
|
Value based | |
|
|
PRSP | |
|
awarded during | |
|
|
|
price per | |
|
PRSP shares | |
|
Planned | |
|
on share price | |
|
|
shares held | |
|
the year ended | |
|
Award | |
|
share at | |
|
held at | |
|
vesting | |
|
of 647.50p at | |
|
|
at Jan 1, 04 | |
|
Dec 31, 04 | |
|
date | |
|
award | |
|
Dec 31, 04(1) | |
|
date | |
|
Dec 31, 04 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ | |
Richard Hartman
|
|
|
111,930 |
(2) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
111,930 |
|
|
|
3.11.05 |
|
|
|
724,747 |
|
|
|
|
167,900 |
(3) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
167,900 |
|
|
|
3.3.06 |
|
|
|
1,087,153 |
|
|
|
|
|
|
|
|
165,130 |
(4) |
|
|
6.24.04 |
|
|
|
549.5 |
p |
|
|
165,130 |
|
|
|
3.9.07 |
|
|
|
1,069,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444,960 |
|
|
|
|
|
|
|
2,881,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard North
|
|
|
188,760 |
(2) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
188,760 |
|
|
|
3.11.05 |
|
|
|
1,222,221 |
|
|
|
|
283,140 |
(3) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
259,545 |
(5) |
|
|
3.3.06 |
|
|
|
1,680,554 |
|
|
|
|
|
|
|
|
248,560 |
(4) |
|
|
6.24.04 |
|
|
|
549.5 |
p |
|
|
144,993 |
(5) |
|
|
3.9.07 |
|
|
|
938,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
593,298 |
|
|
|
|
|
|
|
3,841,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stevan Porter
|
|
|
113,810 |
(2) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
113,810 |
|
|
|
3.11.05 |
|
|
|
736,920 |
|
|
|
|
170,710 |
(3) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
170,710 |
|
|
|
3.3.06 |
|
|
|
1,105,347 |
|
|
|
|
|
|
|
|
142,290 |
(4) |
|
|
6.24.04 |
|
|
|
549.5 |
p |
|
|
142,290 |
|
|
|
3.9.07 |
|
|
|
921,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
426,810 |
|
|
|
|
|
|
|
2,763,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Ian Prosser
|
|
|
65,410 |
(2)(6) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
65,410 |
|
|
|
3.11.05 |
|
|
|
423,530 |
|
|
|
|
65,410 |
(3)(6) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
65,410 |
|
|
|
3.3.06 |
|
|
|
423,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,820 |
|
|
|
|
|
|
|
847,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Solomons
|
|
|
110,110 |
(2) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
110,110 |
|
|
|
3.11.05 |
|
|
|
712,962 |
|
|
|
|
165,160 |
(3) |
|
|
|
|
|
|
6.18.03 |
|
|
|
445 |
p |
|
|
165,160 |
|
|
|
3.3.06 |
|
|
|
1,069,411 |
|
|
|
|
|
|
|
|
144,990 |
(4) |
|
|
6.24.04 |
|
|
|
549.5 |
p |
|
|
144,990 |
|
|
|
3.9.07 |
|
|
|
938,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420,260 |
|
|
|
|
|
|
|
2,721,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,054,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
|
|
(1) |
In the case of Richard North, who resigned as a director of the
Company on September 30, 2004, the figures shown are as at
cessation of employment. |
|
(2) |
This transitional award is based on performance to
December 31, 2004 where the performance measure relates to
the Companys total shareholder return against a group of
11 other comparator companies. The number of shares released is
graded, according to where the Company finishes in the
comparator group, with 100% of the award being released for
first or second position and 20% of the award being released for
sixth place. The Company finished in fourth place and
accordingly 60% of the award vested on March 11, 2005, with
67,158; 113,256; 68,286; 39,246 and 66,066 shares released to
Messrs. Hartman, North, Porter, Prosser and Solomons
respectively. |
|
(3) |
This award is based on performance to December 31, 2005
where the performance measure relates to both the Companys
total shareholder return against a group of 11 other comparator
companies and growth in return on capital employed. |
|
(4) |
This award is based on performance to December 31, 2006
where the performance measure relates to both the Companys
total shareholder return against a group of 10 other comparator
companies and growth in return on capital employed. |
|
(5) |
Richard Norths awards were pro-rated to reflect his
contractual service during the applicable performance periods. |
|
(6) |
Sir Ian Prosser was a director of the Company until his
retirement on December 31, 2004. His awards were pro-rated
to reflect his actual service during the applicable performance
periods. |
F-29
Short Term Deferred
Incentive Plan (STDIP)
Messrs Hartman, Porter and Solomons participated in the STDIP
during the year ended December 31, 2004, and received an
award on March 16, 2005. The awards, inclusive of matching
shares, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price per | |
|
|
|
|
Award date | |
|
No of shares | |
|
share at award | |
|
Value on award | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(p) | |
|
(£) | |
Richard Hartman
|
|
|
03.16.05 |
|
|
|
88,341 |
|
|
|
653.67 |
|
|
|
577,459 |
|
Stevan Porter
|
|
|
03.16.05 |
|
|
|
80,934 |
|
|
|
653.67 |
|
|
|
529,041 |
|
Richard Solomons
|
|
|
03.16.05 |
|
|
|
87,061 |
|
|
|
653.67 |
|
|
|
569,092 |
|
The shares comprised in the awards will be released in equal
amounts on the first, second and third anniversary of the award
date and are conditional on the directors continued
employment within the Group until each release date.
Directors pre-tax interests during the year were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STDIP | |
|
|
|
|
|
|
|
|
|
|
|
Value based | |
|
|
STDIP | |
|
STDIP shares | |
|
|
|
Market | |
|
shares vested | |
|
|
|
Market | |
|
|
|
STDIP | |
|
|
|
on share | |
|
|
shares held | |
|
awarded during | |
|
|
|
price per | |
|
during the | |
|
|
|
price per | |
|
|
|
shares held | |
|
Planned | |
|
price of | |
|
|
at | |
|
the year ended | |
|
Award | |
|
share at | |
|
year ended | |
|
Vesting | |
|
share at | |
|
Value at | |
|
at | |
|
vesting | |
|
647.50p at | |
|
|
Jan 1, 04(1) | |
|
Dec 31, 04 | |
|
date | |
|
award | |
|
Dec 31, 04 | |
|
date | |
|
vesting(2) | |
|
vesting | |
|
Dec 31, 04 | |
|
date | |
|
Dec 31, 04 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ | |
|
|
|
|
|
£ | |
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard North
|
|
|
3,789 |
|
|
|
|
|
|
|
4.15.03 |
|
|
|
372 |
p |
|
|
3,789 |
|
|
|
6.2.04 |
|
|
|
529.5 |
p |
|
|
20,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Stevan Porter
|
|
|
55,428 |
|
|
|
|
|
|
|
12.18.01 |
|
|
|
434.3 |
p |
|
|
55,428 |
|
|
|
12.20.04 |
|
|
|
654.5 |
p |
|
|
362,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
IHG PLC shares provided at 372p per share in equal value
exchange for Six Continents PLC shares outstanding at 4.14.03
under the Six Continents Special Deferred Incentive Plan. |
|
(2) |
Award originally made in Six Continents PLC shares. The share
prices shown are the equivalent IHG PLC share prices, based on a
five day average immediately preceding the award date. |
Share Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
|
Options | |
|
Granted | |
|
Lapsed | |
|
Exercised | |
|
Options | |
|
average | |
|
|
|
|
held at | |
|
during | |
|
during | |
|
during | |
|
held at | |
|
option | |
|
Option | |
|
|
Jan 1, 04 | |
|
the year | |
|
the year | |
|
the year | |
|
Dec 31, 04(1) | |
|
price | |
|
price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(p) | |
|
(p) | |
Richard Hartman
|
|
|
615,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
414.88 |
|
|
|
|
|
|
|
|
|
|
|
|
218,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
494.17 |
|
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
364,388 |
|
|
|
398.98 |
|
|
|
|
|
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
469,634 |
|
|
|
464.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
615,072 |
|
|
|
218,950 |
|
|
|
|
|
|
|
|
|
|
|
834,022 |
|
|
|
435.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard North
|
|
|
1,125,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
412.69 |
|
|
|
|
|
|
|
|
|
|
|
|
394,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
494.17 |
|
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
712,017 |
|
|
|
398.05 |
|
|
|
|
|
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
807,991 |
|
|
|
465.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,125,168 |
|
|
|
394,840 |
|
|
|
|
|
|
|
|
|
|
|
1,520,008 |
|
|
|
433.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stevan Porter
|
|
|
433,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
426.22 |
|
|
|
|
|
|
|
|
|
|
|
|
225,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
494.17 |
|
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,176 |
|
|
|
409.36 |
|
|
|
|
|
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
480,143 |
|
|
|
464.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
433,059 |
|
|
|
225,260 |
|
|
|
|
|
|
|
|
|
|
|
658,319 |
|
|
|
449.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
|
Options | |
|
Granted | |
|
Lapsed | |
|
Exercised | |
|
Options | |
|
average | |
|
|
|
|
held at | |
|
during | |
|
during | |
|
during | |
|
held at | |
|
option | |
|
Option | |
|
|
Jan 1, 04 | |
|
the year | |
|
the year | |
|
the year | |
|
Dec 31, 04(1) | |
|
price | |
|
price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(p) | |
|
(p) | |
Richard Solomons
|
|
|
601,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400.55 |
|
|
|
|
|
|
|
|
|
|
|
|
230,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
494.17 |
|
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357,545 |
|
|
|
375.24 |
|
|
|
|
|
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
473,815 |
|
|
|
465.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
601,040 |
|
|
|
230,320 |
|
|
|
|
|
|
|
|
|
|
|
831,360 |
|
|
|
426.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
In the case of Richard North, who resigned as a director of the
Company on September 30, 2004, the figures shown are as at
cessation of employment. In accordance with plan rules, Richard
Norths unvested options will lapse three and a half years
from the date of cessation of employment. |
|
|
(A) |
Where options are exercisable and the market price per share at
December 31, 2004 was above the option price; and |
|
|
(B) |
Where options are not yet exercisable. A performance condition
has to be met before options can be exercised, in accordance
with the policy set out earlier. |
Rolled over options, all of which are shown in A
above, became exercisable on the Separation of Six Continents
PLC in April 2003 and will lapse on various dates up to October
2012. Rolled over options ceased to be subject to performance
conditions on Separation.
Share options under the IHG Executive Share Option Plan granted
in 2003 are exercisable between May 2006 and May 2013,
subject to the achievement of the performance condition. Share
options under the IHG Sharesave Plan granted in 2003 are
exercisable between March 2007 and March 2009.
Share options under the IHG Executive Share Option Plan were
granted on April 1, 2004 at an option price of 494.17p.
These options are exercisable between April 2007 and April 2014,
subject to the achievement of the performance condition.
Option prices range from 308.48p to 593.29p per IHG PLC
share. The closing market value share price on December 31,
2004 was 647.50p and the range during the year was 479.17p to
690.81p per share.
The gain on exercise by directors in aggregate was £nil in
the year ended December 31, 2004 (£69,491 in the
period ended December 31, 2003, £nil in the year ended
September 30, 2002).
Directors
Shareholdings
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
January 1, 2004 | |
|
|
InterContinental Hotels Group PLC | |
|
InterContinental Hotels Group PLC | |
|
|
ordinary shares of 112p | |
|
ordinary shares of £1(1)(2) | |
|
|
| |
|
| |
Executive directors
|
|
|
|
|
|
|
|
|
Richard Hartman
|
|
|
45,247 |
|
|
|
30,345 |
|
Stevan Porter
|
|
|
88,077 |
|
|
|
56,754 |
|
Richard Solomons
|
|
|
16,031 |
|
|
|
17,956 |
|
David Webster
|
|
|
13,395 |
|
|
|
824 |
|
Non-executive directors
|
|
|
|
|
|
|
|
|
David Kappler
|
|
|
2,602 |
|
|
|
2,915 |
|
Ralph Kugler
|
|
|
892 |
|
|
|
1,000 |
|
Robert C Larson(3)
|
|
|
10,714 |
|
|
|
9,805 |
|
David Prosser
|
|
|
4,464 |
|
|
|
5,000 |
|
Sir Howard Stringer
|
|
|
7,566 |
|
|
|
8,474 |
|
|
|
(1) |
Or date of appointment, if later. |
F-31
|
|
(2) |
These share interests were in InterContinental Hotels Group PLC
£1 ordinary shares prior to the share consolidation
effective from December 13, 2004. For every 28 existing
InterContinental Hotels Group PLC shares held on
December 10, 2004, shareholders received 25 new ordinary
shares of 112p each. |
|
(3) |
Held in the form of American Depositary Receipts. |
The above shareholdings are all beneficial interests and include
shares held by directors spouses and other connected
persons, and shares held on behalf of certain directors by the
Trustees of the Companys ESOP. None of the directors has a
beneficial interest in the shares of any subsidiary.
At December 31, 2004, the executive directors, as potential
beneficiaries under the Companys ESOP, were each
technically deemed to be interested in 3,057,649 unallocated IHG
PLC shares held by the Trustees of the ESOP.
The Companys Register of Directors Interests, which
is open to inspection at the Registered Office, contains full
details of directors shareholdings and share options.
|
|
Note 5 |
Exceptional Items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months ended December 31, 2003 | |
|
|
|
|
Year ended December 31, 2004 | |
|
| |
|
Year ended September 30, 2002 | |
|
|
| |
|
Continuing | |
|
|
|
| |
|
|
Continuing | |
|
Discontinued | |
|
|
|
operations(i) | |
|
Discontinued | |
|
Total | |
|
Continuing | |
|
Discontinued | |
|
|
|
|
operations(i) | |
|
operations(i) | |
|
Total | |
|
restated(ii) | |
|
operations(i) | |
|
restated(ii) | |
|
operations(i) | |
|
operations(i) | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales(iii)
|
|
|
(28 |
) |
|
|
|
|
|
|
(28 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(77 |
) |
|
|
|
|
|
|
(77 |
) |
|
Administrative expenses(iv)
|
|
|
(11 |
) |
|
|
|
|
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating income(v)
|
|
|
20 |
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating exceptional items
|
|
|
(19 |
) |
|
|
|
|
|
|
(19 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(77 |
) |
|
|
|
|
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization(vi)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs(vii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
(41 |
) |
|
|
(92 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
Profit/(loss) on disposal of fixed assets
|
|
|
15 |
|
|
|
|
|
|
|
15 |
|
|
|
4 |
|
|
|
(2 |
) |
|
|
2 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
|
|
|
(Loss)/profit on disposal of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels(viii)
|
|
|
(74 |
) |
|
|
|
|
|
|
(74 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bass Brewers(ix)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57 |
|
|
|
57 |
|
|
Provision against fixed asset investments(x)
|
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69 |
) |
|
|
|
|
|
|
(69 |
) |
|
|
(170 |
) |
|
|
(43 |
) |
|
|
(213 |
) |
|
|
(2 |
) |
|
|
55 |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total exceptional items before interest and taxation
|
|
|
(88 |
) |
|
|
|
|
|
|
(88 |
) |
|
|
(221 |
) |
|
|
(43 |
) |
|
|
(264 |
) |
|
|
(79 |
) |
|
|
55 |
|
|
|
(24 |
) |
Interest receivable(xi)
|
|
|
22 |
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payable(xii)
|
|
|
(16 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium on early settlement of debt(xiii)
|
|
|
(17 |
) |
|
|
|
|
|
|
(17 |
) |
|
|
(136 |
) |
|
|
|
|
|
|
(136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Tax credit/(charge) on above items
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
|
36 |
|
|
|
28 |
|
|
|
64 |
|
|
|
(10 |
) |
|
|
1 |
|
|
|
(9 |
) |
Exceptional tax credit(xiv)
|
|
|
161 |
|
|
|
|
|
|
|
161 |
|
|
|
68 |
|
|
|
|
|
|
|
68 |
|
|
|
14 |
|
|
|
114 |
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total exceptional items after interest and taxation
|
|
|
68 |
|
|
|
|
|
|
|
68 |
|
|
|
(253 |
) |
|
|
(15 |
) |
|
|
(268 |
) |
|
|
(75 |
) |
|
|
170 |
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
|
|
|
(i) |
|
Continuing operations comprise InterContinental Hotels Group
PLC. Discontinued operations relate to Mitchells &
Butlers plc for 2003 and 2002 and in 2002 also included profits
on disposal of Bass Brewers of £57 million, relating
to the finalization of completion accounts and an exceptional
tax credit representing the release of over provisions of tax in
relation to Bass Brewers and other businesses. |
|
(ii) |
|
Restated to show exceptional tax credits on a basis consistent
with 2004, comprising prior year adjustments which are
exceptional by reason of their size or incidence. |
|
(iii) |
|
Tangible fixed assets were written down by £48 million
(2003 £73 million, 2002 £113 million)
following an impairment review of the hotel estate.
£28 million (2003 £51 million, 2002
£77 million) was charged above as an operating
exceptional item and £20 million (2003
£22 million, 2002 £36 million) reversed
previous revaluation gains. |
|
(iv) |
|
Administrative expenses include a charge of
£11 million related to the delivery of the further
restructuring of the Hotels business in conjunction with the
asset disposal program. |
|
(v) |
|
Adjustment to market valuation of the Groups investment in
FelCor Lodging Trust Inc. |
|
(vi) |
|
Relates to a fundamental reorganization of the Hotels business.
The cost includes redundancy entitlements, property exit costs
and other implementation costs. |
|
(vii) |
|
Relates to costs incurred for the bid defense and Separation of
Six Continents PLC. |
|
(viii) |
|
Provision for the loss on disposal of 13 hotels in the Americas
and 73 hotels in the United Kingdom. |
|
(ix) |
|
Bass Brewers was disposed of in August 2000. The profit in 2002
comprises £9 million received in respect of the
finalization of completion account adjustments, together with
the release of disposal provisions no longer required of
£48 million. |
|
(x) |
|
Relates to a provision for the diminution in value of certain
fixed asset investments and reflects the directors view of
the fair value of the holdings. |
|
(xi) |
|
Mainly relates to interest received on exceptional tax refunds. |
|
(xii) |
|
Relates to costs of closing out swaps and costs related to
refinancing the Groups debt. |
|
(xiii) |
|
Relates to the premiums paid on the repurchase of the
Groups public debt. |
|
(xiv) |
|
Represents the release of provisions relating to tax matters
which have been settled or in respect of which the relevant
statutory limitation period has expired, principally relating to
acquisitions (including provisions relating to pre-acquisition
periods) and disposals, intra-group financing and, in 2004, the
recognition of a deferred tax asset of £83 million in
respect of capital losses. |
Note 6 Interest Payable and Similar
Charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Bank loans and overdrafts
|
|
|
16 |
|
|
|
38 |
|
|
|
21 |
|
Other
|
|
|
70 |
|
|
|
113 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86 |
|
|
|
151 |
|
|
|
176 |
|
|
|
|
|
|
|
|
|
|
|
F-33
Note 7 Tax on Profit on Ordinary Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months ended | |
|
Year ended | |
|
|
Year ended | |
|
December 31, 2003 | |
|
September 30, 2002 | |
|
|
December 31, 2004 | |
|
restated(i) | |
|
restated(i) | |
|
|
| |
|
| |
|
| |
|
|
Before | |
|
|
|
Before | |
|
|
|
Before | |
|
|
|
|
exceptional | |
|
|
|
exceptional | |
|
|
|
exceptional | |
|
|
|
|
items | |
|
Total | |
|
items | |
|
Total | |
|
items | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Tax charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK corporation tax at 30% (2003 30%, 2002 30%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
|
32 |
|
|
|
23 |
|
|
|
42 |
|
|
|
4 |
|
|
|
94 |
|
|
|
106 |
|
|
Prior years
|
|
|
(22 |
) |
|
|
(48 |
) |
|
|
(12 |
) |
|
|
(80 |
) |
|
|
(1 |
) |
|
|
(129 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
(25 |
) |
|
|
30 |
|
|
|
(76 |
) |
|
|
93 |
|
|
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
|
50 |
|
|
|
51 |
|
|
|
72 |
|
|
|
69 |
|
|
|
65 |
|
|
|
65 |
|
|
Prior years
|
|
|
(29 |
) |
|
|
(81 |
) |
|
|
(20 |
) |
|
|
(20 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
(30 |
) |
|
|
52 |
|
|
|
49 |
|
|
|
64 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax
|
|
|
31 |
|
|
|
(55 |
) |
|
|
82 |
|
|
|
(27 |
) |
|
|
157 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of timing differences
|
|
|
31 |
|
|
|
33 |
|
|
|
53 |
|
|
|
30 |
|
|
|
20 |
|
|
|
17 |
|
|
Adjustments to estimated recoverable deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
(11 |
) |
|
|
(11 |
) |
|
|
11 |
|
|
|
11 |
|
|
Prior years
|
|
|
(12 |
) |
|
|
(95 |
) |
|
|
(9 |
) |
|
|
(9 |
) |
|
|
(17 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax
|
|
|
19 |
|
|
|
(62 |
) |
|
|
33 |
|
|
|
10 |
|
|
|
14 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax on profit on ordinary activities
|
|
|
50 |
|
|
|
(117 |
) |
|
|
115 |
|
|
|
(17 |
) |
|
|
171 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Further analyzed as tax relating to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before exceptional items
|
|
|
50 |
|
|
|
50 |
|
|
|
115 |
|
|
|
115 |
|
|
|
171 |
|
|
|
171 |
|
|
Operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative expenses
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating exceptional items (Note 5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
Profit on disposal of fixed assets
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
Provision against fixed asset investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
10 |
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23 |
) |
|
|
|
|
|
|
9 |
|
|
Interest
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium on early settlement of debt
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total exceptional items
|
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(64 |
) |
|
|
|
|
|
|
9 |
|
|
Exceptional tax credit (Note 5)
|
|
|
|
|
|
|
(161 |
) |
|
|
|
|
|
|
(68 |
) |
|
|
|
|
|
|
(128 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax charge/ (credit)
|
|
|
50 |
|
|
|
(117 |
) |
|
|
115 |
|
|
|
(17 |
) |
|
|
171 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Restated to show exceptional tax credits on a basis consistent
with 2004. This comprises prior year adjustments which are
exceptional by reason of their size or incidence. |
F-34
|
|
|
Reconciliation of current tax rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
|
|
ended | |
|
Year ended | |
|
|
Year ended | |
|
December 31, | |
|
September 30, | |
|
|
December 31, | |
|
2003 | |
|
2002 | |
|
|
2004 | |
|
restated(i) | |
|
restated(i) | |
|
|
| |
|
| |
|
| |
|
|
(%) | |
UK corporation tax standard rate
|
|
|
30.0 |
|
|
|
30.0 |
|
|
|
30.0 |
|
Permanent differences
|
|
|
(0.3 |
) |
|
|
20.7 |
|
|
|
1.3 |
|
Capital allowances in excess of depreciation
|
|
|
(6.9 |
) |
|
|
(12.6 |
) |
|
|
(3.7 |
) |
Other timing differences
|
|
|
(7.4 |
) |
|
|
(104.2 |
) |
|
|
(1.3 |
) |
Net effect of different rates of tax in overseas businesses
|
|
|
9.2 |
|
|
|
46.1 |
|
|
|
3.1 |
|
Adjustment to tax charge in respect of prior years
|
|
|
(24.1 |
) |
|
|
(88.9 |
) |
|
|
(0.2 |
) |
Other
|
|
|
0.2 |
|
|
|
2.0 |
|
|
|
|
|
Exceptional items
|
|
|
(26.2 |
) |
|
|
32.2 |
|
|
|
(21.5 |
) |
|
|
|
|
|
|
|
|
|
|
Effective current tax rate
|
|
|
(25.5 |
) |
|
|
(74.7 |
) |
|
|
7.7 |
|
|
|
|
|
|
|
|
|
|
|
Effective current tax rate before exceptional items
|
|
|
10.1 |
|
|
|
18.8 |
|
|
|
28.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Restated to show exceptional tax credits on a basis consistent
with 2004, comprising prior year adjustments which are
exceptional by reason of their size or incidence. |
|
|
|
Reconciliation of overall tax rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
|
|
ended | |
|
Year ended | |
|
|
Year ended | |
|
December 31, | |
|
September 30, | |
|
|
December 31, | |
|
2003 | |
|
2002 | |
|
|
2004 | |
|
restated(i) | |
|
restated(i) | |
|
|
| |
|
| |
|
| |
|
|
(%) | |
UK corporation tax standard rate
|
|
|
30.0 |
|
|
|
30.0 |
|
|
|
30.0 |
|
Permanent differences
|
|
|
(0.4 |
) |
|
|
20.7 |
|
|
|
1.3 |
|
Net effect of different rates of tax in overseas businesses
|
|
|
9.2 |
|
|
|
46.1 |
|
|
|
4.0 |
|
Adjustment to tax charge in respect of prior years
|
|
|
(29.5 |
) |
|
|
(115.0 |
) |
|
|
(3.3 |
) |
Capital gains
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
0.2 |
|
|
|
4.6 |
|
|
|
(0.6 |
) |
Exceptional items
|
|
|
(65.0 |
) |
|
|
(33.4 |
) |
|
|
(21.7 |
) |
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
(55.5 |
) |
|
|
(47.0 |
) |
|
|
9.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Restated to show exceptional tax credits on a basis consistent
with 2004, comprising prior year adjustments which are
exceptional by reason of their size or incidence. |
Factors which may affect future tax charges The key
factors which may affect future tax charges are disposals of
assets, the availability of accelerated tax depreciation,
utilization of unrecognized losses, changes in tax legislation,
settlements with tax authorities and the proportion of profits
subjected to higher overseas tax rates.
F-35
Note 8 Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(pence per share) | |
|
(£ million) | |
Dividends on ordinary shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim Six Continents PLC
|
|
|
|
|
|
|
7.65 |
|
|
|
12.58 |
|
|
|
|
|
|
|
56 |
|
|
|
92 |
|
Proposed final Six Continents PLC
|
|
|
|
|
|
|
|
|
|
|
29.14 |
|
|
|
|
|
|
|
|
|
|
|
213 |
|
Interim InterContinental Hotels Group PLC
|
|
|
4.30 |
|
|
|
4.05 |
|
|
|
|
|
|
|
29 |
|
|
|
30 |
|
|
|
|
|
Special Interim Dividend Intercontinental Hotels Group PLC
|
|
|
72.00 |
|
|
|
|
|
|
|
|
|
|
|
501 |
|
|
|
|
|
|
|
|
|
Proposed final InterContinental Hotels Group PLC
|
|
|
10.00 |
|
|
|
9.45 |
|
|
|
|
|
|
|
62 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86.30 |
|
|
|
21.15 |
|
|
|
41.72 |
|
|
|
592 |
|
|
|
156 |
|
|
|
305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The proposed final IHG dividend is payable on the shares in
issue at April 1, 2005.
Note 9 Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the
earnings available for shareholders of £299 million
(2003 £19 million, 2002 £457 million) by
710 million (2003 733 million, 2002 731 million),
being the weighted average number of ordinary shares, excluding
investment in own shares, in issue during the period. The
weighted average number of shares in issue has been based on the
aggregate of the weighted average number of shares of
InterContinental Hotels Group PLC and Six Continents PLC
adjusted to equivalent shares of InterContinental Hotels Group
PLC. The comparatives have been restated accordingly.
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. The resulting
weighted average number of ordinary shares is 718 million
(2003 733 million, 2002 734 million).
On December 10, 2004, shareholders approved a share capital
consolidation on the basis of 25 new ordinary shares for every
28 existing ordinary shares, together with a special dividend of
72 pence per existing share. The overall effect of the
transaction was that of a share repurchase at fair value.
Therefore no adjustment has been made to comparative data.
Adjusted earnings per ordinary share is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
|
|
ended | |
|
Year ended | |
|
|
Year ended | |
|
December 31, | |
|
September 30, | |
|
|
December 31, | |
|
2003 | |
|
2002 | |
|
|
2004 | |
|
restated(i) | |
|
restated(i) | |
|
|
| |
|
| |
|
| |
|
|
(pence per ordinary share) | |
Basic earnings
|
|
|
42.1 |
|
|
|
2.6 |
|
|
|
62.5 |
|
Exceptional items, less tax thereon
|
|
|
13.1 |
|
|
|
45.8 |
|
|
|
4.5 |
|
Exceptional tax credit
|
|
|
(22.7 |
) |
|
|
(9.3 |
) |
|
|
(17.5 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
|
|
|
32.5 |
|
|
|
39.1 |
|
|
|
49.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Restated to show exceptional tax credits on a basis consistent
with 2004, comprising prior year adjustments which are
exceptional by reason of their size or incidence. |
F-36
Adjusted earnings per ordinary share is disclosed in order to
show performance undistorted by exceptional items.
Note 10 Cash flow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating profit before exceptional items
|
|
|
331 |
|
|
|
483 |
|
|
|
618 |
|
Depreciation and amortization
|
|
|
198 |
|
|
|
303 |
|
|
|
271 |
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, taxation, depreciation and
amortization and exceptional items
|
|
|
529 |
|
|
|
786 |
|
|
|
889 |
|
Other non-cash items
|
|
|
12 |
|
|
|
(2 |
) |
|
|
(4 |
) |
Decrease/(increase) in stocks
|
|
|
1 |
|
|
|
(1 |
) |
|
|
(1 |
) |
Increase in debtors
|
|
|
(11 |
) |
|
|
(10 |
) |
|
|
(92 |
) |
Increase/(decrease) in creditors
|
|
|
75 |
|
|
|
69 |
|
|
|
(37 |
) |
Special pension contributions
|
|
|
(71 |
) |
|
|
|
|
|
|
|
|
Provisions expended (Note 23)
|
|
|
(3 |
) |
|
|
(10 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
Operating activities before expenditure relating to exceptional
items
|
|
|
532 |
|
|
|
832 |
|
|
|
737 |
|
Cost of fundamental reorganization (Note 23)
|
|
|
(17 |
) |
|
|
(37 |
) |
|
|
|
|
Operating exceptional expenditure
|
|
|
|
|
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
515 |
|
|
|
795 |
|
|
|
720 |
|
Net capital expenditure (Note 12)
|
|
|
(151 |
) |
|
|
(248 |
) |
|
|
(513 |
) |
|
|
|
|
|
|
|
|
|
|
Operating cash flow (Note 13)
|
|
|
364 |
|
|
|
547 |
|
|
|
207 |
|
|
|
|
|
|
|
|
|
|
|
Note 11 Net debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquid | |
|
|
|
|
|
|
Cash and overdrafts | |
|
resources | |
|
Financing | |
|
|
|
|
| |
|
| |
|
| |
|
|
|
|
|
|
|
|
Other | |
|
Other | |
|
|
|
|
Cash at | |
|
|
|
Current | |
|
borrowings | |
|
borrowings | |
|
|
|
|
bank and | |
|
|
|
asset | |
|
due within | |
|
due after | |
|
|
|
|
in hand | |
|
Overdrafts | |
|
Total | |
|
investments | |
|
one year | |
|
one year | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
At October 1, 2001
|
|
|
67 |
|
|
|
(37 |
) |
|
|
30 |
|
|
|
366 |
|
|
|
(378 |
) |
|
|
(1,019 |
) |
|
|
(1,001 |
) |
Net cash flow
|
|
|
(276 |
) |
|
|
(29 |
) |
|
|
(305 |
)(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(305 |
) |
Management of liquid resources and financing
|
|
|
295 |
|
|
|
|
|
|
|
295 |
(i) |
|
|
(232 |
) |
|
|
(414 |
) |
|
|
354 |
|
|
|
3 |
|
Exchange adjustments
|
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
84 |
|
|
|
10 |
|
|
|
34 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2002
|
|
|
84 |
|
|
|
(66 |
) |
|
|
18 |
|
|
|
218 |
|
|
|
(782 |
) |
|
|
(631 |
) |
|
|
(1,177 |
) |
Net cash flow
|
|
|
(86 |
) |
|
|
64 |
|
|
|
(22 |
)(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22 |
) |
Management of liquid resources and financing
|
|
|
77 |
|
|
|
|
|
|
|
77 |
(i) |
|
|
129 |
|
|
|
758 |
|
|
|
(369 |
) |
|
|
595 |
|
Separation of MAB
|
|
|
(7 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
(7 |
) |
|
|
4 |
|
|
|
|
|
|
|
(10 |
) |
Exchange and other adjustments
|
|
|
(13 |
) |
|
|
(3 |
) |
|
|
(16 |
) |
|
|
37 |
|
|
|
12 |
|
|
|
12 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
55 |
|
|
|
(5 |
) |
|
|
50 |
|
|
|
377 |
|
|
|
(8 |
) |
|
|
(988 |
) |
|
|
(569 |
) |
Net cash flow
|
|
|
(332 |
) |
|
|
(6 |
) |
|
|
(338 |
)(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(338 |
) |
Management of liquid resources and financing
|
|
|
320 |
|
|
|
|
|
|
|
320 |
(i) |
|
|
(320 |
) |
|
|
(22 |
) |
|
|
(236 |
) |
|
|
(258 |
) |
Exchange and other adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17 |
) |
|
|
(2 |
) |
|
|
68 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
43 |
|
|
|
(11 |
) |
|
|
32 |
|
|
|
40 |
|
|
|
(32 |
) |
|
|
(1,156 |
) |
|
|
(1,116 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Represents a movement in cash and overdrafts of
£18 million outflow (2003 £55 million
inflow, 2002 £10 million outflow) (see Consolidated
Statement of Cash Flows). |
Currency swaps are included within current asset investments in
2003 and within other borrowings in 2004.
F-37
Note 12 Net capital expenditure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Hotels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
60 |
|
|
|
73 |
|
|
|
113 |
|
|
EMEA
|
|
|
95 |
|
|
|
237 |
|
|
|
209 |
|
|
Asia Pacific
|
|
|
20 |
|
|
|
43 |
|
|
|
12 |
|
|
Central
|
|
|
12 |
|
|
|
24 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187 |
|
|
|
377 |
|
|
|
369 |
|
Hotels disposal proceeds
|
|
|
(106 |
) |
|
|
(255 |
) |
|
|
(113 |
) |
|
|
|
|
|
|
|
|
|
|
Hotels net capital expenditure
|
|
|
81 |
|
|
|
122 |
|
|
|
256 |
|
Soft Drinks
|
|
|
70 |
|
|
|
65 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group PLC(i)
|
|
|
151 |
|
|
|
187 |
|
|
|
287 |
|
Discontinued operations(i)
|
|
|
|
|
|
|
61 |
|
|
|
226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151 |
|
|
|
248 |
|
|
|
513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
InterContinental Hotels Group PLC relates to continuing
operations. Discontinued operations relate to
Mitchells & Butlers plc. |
Note 13 Operating cash flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Hotels
|
|
|
291 |
|
|
|
336 |
|
|
|
(15 |
) |
Soft Drinks
|
|
|
73 |
|
|
|
59 |
|
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group PLC(i)
|
|
|
364 |
|
|
|
395 |
|
|
|
62 |
|
Discontinued operations(i)
|
|
|
|
|
|
|
152 |
|
|
|
145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
364 |
|
|
|
547 |
|
|
|
207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
InterContinental Hotels Group PLC relates to continuing
operations. Discontinued operations relate to
Mitchells & Butlers plc. |
F-38
Note 14 Management of liquid resources and
financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
New borrowings(i)
|
|
|
9,666 |
|
|
|
18,672 |
|
|
|
8,260 |
|
Other borrowings repaid(i)
|
|
|
(9,408 |
) |
|
|
(19,061 |
) |
|
|
(8,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
258 |
|
|
|
(389 |
) |
|
|
60 |
|
Debt assumed by MAB
|
|
|
|
|
|
|
577 |
|
|
|
|
|
Ordinary shares issued
|
|
|
16 |
|
|
|
18 |
|
|
|
3 |
|
Purchase of own shares
|
|
|
(257 |
) |
|
|
|
|
|
|
|
|
Purchase of own shares by employee share trusts
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
Proceeds on release of shares by employee share trusts
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
|
|
|
|
|
|
|
206 |
|
|
|
63 |
|
Movement in liquid resources(ii)
|
|
|
320 |
|
|
|
(129 |
) |
|
|
232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
320 |
|
|
|
77 |
|
|
|
295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Includes amounts rolled over under bank loan facilities. |
|
(ii) |
|
Liquid resources primarily comprise short-term deposits of less
than one year, short-term investments and, in 2003, currency
swaps. |
Note 15 Intangible fixed assets
|
|
|
|
|
|
|
|
Goodwill | |
|
|
| |
|
|
(£ million) | |
15 months ended December 31, 2003
|
|
|
|
|
Cost:
|
|
|
|
|
At October 1, 2002
|
|
|
197 |
|
|
Acquisitions
|
|
|
10 |
|
|
Separation of MAB
|
|
|
(15 |
) |
|
|
|
|
At December 31, 2003
|
|
|
192 |
|
|
|
|
|
Amortization:
|
|
|
|
|
At October 1, 2002
|
|
|
24 |
|
|
Provided
|
|
|
13 |
|
|
Separation of MAB
|
|
|
(3 |
) |
|
|
|
|
At December 31, 2003
|
|
|
34 |
|
|
|
|
|
|
Net book value at December 31, 2003
|
|
|
158 |
|
|
|
|
|
Year ended December 31, 2004
|
|
|
|
|
Cost:
|
|
|
|
|
At January 1, 2004
|
|
|
192 |
|
|
Exchange and other adjustments
|
|
|
(8 |
) |
|
|
|
|
At December 31, 2004
|
|
|
184 |
|
|
|
|
|
Amortization:
|
|
|
|
|
At January 1, 2004
|
|
|
34 |
|
|
Provided
|
|
|
10 |
|
|
Exchange adjustments
|
|
|
(2 |
) |
|
|
|
|
At December 31, 2004
|
|
|
42 |
|
|
|
|
|
|
Net book value at December 31, 2004
|
|
|
142 |
|
|
|
|
|
F-39
Note 16 Tangible fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soft | |
|
|
|
|
|
|
|
|
Hotels | |
|
Drinks | |
|
Total | |
|
Discontinued(i) | |
|
Total Group | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
15 months ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 1, 2002
|
|
|
4,362 |
|
|
|
408 |
|
|
|
4,770 |
|
|
|
3,722 |
|
|
|
8,492 |
|
|
Exchange and other adjustments
|
|
|
2 |
|
|
|
4 |
|
|
|
6 |
|
|
|
1 |
|
|
|
7 |
|
|
Additions
|
|
|
314 |
|
|
|
66 |
|
|
|
380 |
|
|
|
81 |
|
|
|
461 |
|
|
Disposals
|
|
|
(281 |
) |
|
|
(27 |
) |
|
|
(308 |
) |
|
|
(64 |
) |
|
|
(372 |
) |
|
Separation of MAB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,740 |
) |
|
|
(3,740 |
) |
|
Impairment
|
|
|
(22 |
) |
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
4,375 |
|
|
|
451 |
|
|
|
4,826 |
|
|
|
|
|
|
|
4,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 1, 2002
|
|
|
467 |
|
|
|
188 |
|
|
|
655 |
|
|
|
196 |
|
|
|
851 |
|
|
Exchange and other adjustments
|
|
|
(7 |
) |
|
|
1 |
|
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
Provided
|
|
|
186 |
|
|
|
50 |
|
|
|
236 |
|
|
|
54 |
|
|
|
290 |
|
|
On disposals
|
|
|
(37 |
) |
|
|
(24 |
) |
|
|
(61 |
) |
|
|
(40 |
) |
|
|
(101 |
) |
|
Separation of MAB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210 |
) |
|
|
(210 |
) |
|
Impairment
|
|
|
51 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
660 |
|
|
|
215 |
|
|
|
875 |
|
|
|
|
|
|
|
875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at December 31, 2003
|
|
|
3,715 |
|
|
|
236 |
|
|
|
3,951 |
|
|
|
|
|
|
|
3,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2004
|
|
|
4,375 |
|
|
|
451 |
|
|
|
4,826 |
|
|
|
|
|
|
|
4,826 |
|
|
Exchange and other adjustments
|
|
|
(95 |
) |
|
|
|
|
|
|
(95 |
) |
|
|
|
|
|
|
(95 |
) |
|
Additions
|
|
|
177 |
|
|
|
72 |
|
|
|
249 |
|
|
|
|
|
|
|
249 |
|
|
Disposals
|
|
|
(142 |
) |
|
|
(40 |
) |
|
|
(182 |
) |
|
|
|
|
|
|
(182 |
) |
|
Impairment
|
|
|
(20 |
) |
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
4,295 |
|
|
|
483 |
|
|
|
4,778 |
|
|
|
|
|
|
|
4,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2004
|
|
|
660 |
|
|
|
215 |
|
|
|
875 |
|
|
|
|
|
|
|
875 |
|
|
Exchange and other adjustments
|
|
|
(16 |
) |
|
|
|
|
|
|
(16 |
) |
|
|
|
|
|
|
(16 |
) |
|
Provided
|
|
|
144 |
|
|
|
44 |
|
|
|
188 |
|
|
|
|
|
|
|
188 |
|
|
On disposals
|
|
|
(35 |
) |
|
|
(38 |
) |
|
|
(73 |
) |
|
|
|
|
|
|
(73 |
) |
|
Impairment
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
781 |
|
|
|
221 |
|
|
|
1,002 |
|
|
|
|
|
|
|
1,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at December 31, 2004
|
|
|
3,514 |
|
|
|
262 |
|
|
|
3,776 |
|
|
|
|
|
|
|
3,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Discontinued operations relate to Mitchells & Butlers
plc. |
Tangible fixed assets have been written down in total by
£48 million (2003 £73 million, 2002
£113 million) following an impairment review of the
hotel estate. The impairment has been measured by reference to
the value of income-generating units, using either the higher of
value in use or estimated recoverable amount. The discount rate
used for value in use calculations ranged from 8.0% to 10.5%.
F-40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixtures, | |
|
|
|
|
|
|
Land | |
|
fittings | |
|
|
|
|
|
|
and | |
|
and | |
|
Plant and | |
|
|
|
|
buildings | |
|
equipment | |
|
machinery | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
15 months ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 1, 2002
|
|
|
5,906 |
|
|
|
2,450 |
|
|
|
136 |
|
|
|
8,492 |
|
|
Exchange and other adjustments
|
|
|
11 |
|
|
|
(8 |
) |
|
|
4 |
|
|
|
7 |
|
|
Additions
|
|
|
139 |
|
|
|
291 |
|
|
|
31 |
|
|
|
461 |
|
|
Disposals
|
|
|
(221 |
) |
|
|
(146 |
) |
|
|
(5 |
) |
|
|
(372 |
) |
|
Separation of MAB
|
|
|
(2,809 |
) |
|
|
(930 |
) |
|
|
(1 |
) |
|
|
(3,740 |
) |
|
Impairment
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
3,004 |
|
|
|
1,657 |
|
|
|
165 |
|
|
|
4,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 1, 2002
|
|
|
147 |
|
|
|
622 |
|
|
|
82 |
|
|
|
851 |
|
|
Exchange and other adjustments
|
|
|
3 |
|
|
|
(10 |
) |
|
|
1 |
|
|
|
(6 |
) |
|
Provided
|
|
|
28 |
|
|
|
243 |
|
|
|
19 |
|
|
|
290 |
|
|
On disposals
|
|
|
(13 |
) |
|
|
(83 |
) |
|
|
(5 |
) |
|
|
(101 |
) |
|
Separation of MAB
|
|
|
(48 |
) |
|
|
(162 |
) |
|
|
|
|
|
|
(210 |
) |
|
Impairment
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
168 |
|
|
|
610 |
|
|
|
97 |
|
|
|
875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at December 31, 2003
|
|
|
2,836 |
|
|
|
1,047 |
|
|
|
68 |
|
|
|
3,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2004
|
|
|
3,004 |
|
|
|
1,657 |
|
|
|
165 |
|
|
|
4,826 |
|
|
Exchange and other adjustments
|
|
|
(59 |
) |
|
|
(36 |
) |
|
|
|
|
|
|
(95 |
) |
|
Additions
|
|
|
50 |
|
|
|
172 |
|
|
|
27 |
|
|
|
249 |
|
|
Disposals
|
|
|
(83 |
) |
|
|
(89 |
) |
|
|
(10 |
) |
|
|
(182 |
) |
|
Impairment
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
2,892 |
|
|
|
1,704 |
|
|
|
182 |
|
|
|
4,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 1, 2004
|
|
|
168 |
|
|
|
610 |
|
|
|
97 |
|
|
|
875 |
|
|
Exchange and other adjustments
|
|
|
(6 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
(16 |
) |
|
Provided
|
|
|
14 |
|
|
|
156 |
|
|
|
18 |
|
|
|
188 |
|
|
On disposals
|
|
|
(11 |
) |
|
|
(52 |
) |
|
|
(10 |
) |
|
|
(73 |
) |
|
Impairment
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
193 |
|
|
|
704 |
|
|
|
105 |
|
|
|
1,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value at December 31, 2004
|
|
|
2,699 |
|
|
|
1,000 |
|
|
|
77 |
|
|
|
3,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
Cost or | |
|
|
|
Net book | |
|
Cost or | |
|
|
|
Net book | |
|
|
valuation | |
|
Depreciation | |
|
value | |
|
valuation | |
|
Depreciation | |
|
value | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Freehold
|
|
|
2,036 |
|
|
|
(130 |
) |
|
|
1,906 |
|
|
|
2,109 |
|
|
|
(107 |
) |
|
|
2,002 |
|
Leasehold: unexpired term of more than 50 years
|
|
|
636 |
|
|
|
(32 |
) |
|
|
604 |
|
|
|
825 |
|
|
|
(25 |
) |
|
|
800 |
|
|
unexpired term of 50 years or less
|
|
|
220 |
|
|
|
(31 |
) |
|
|
189 |
|
|
|
70 |
|
|
|
(36 |
) |
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,892 |
|
|
|
(193 |
) |
|
|
2,699 |
|
|
|
3,004 |
|
|
|
(168 |
) |
|
|
2,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation of properties comprises:
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
1999 valuation
|
|
|
1,517 |
|
|
|
1,567 |
|
1992 valuation
|
|
|
22 |
|
|
|
17 |
|
Cost
|
|
|
1,353 |
|
|
|
1,420 |
|
|
|
|
|
|
|
|
|
|
|
2,892 |
|
|
|
3,004 |
|
|
|
|
|
|
|
|
Properties, comprising land, buildings and certain fixtures,
fittings and equipment, are included above at cost or valuation,
less depreciation as required. The transitional rules of FRS 15
have been followed, permitting the carrying values of properties
as at October 1, 1999 to be retained.
The most recent valuation of properties was undertaken in 1999
and covered all properties then owned by the Group other than
hotels acquired or constructed in that year and leasehold
properties having an unexpired term of 50 years or less.
This valuation was undertaken by external Chartered Surveyors
and internationally recognized valuers (Jones Lang LaSalle
Hotels) in accordance with the Appraisal and Valuation Manual of
the Royal Institution of Chartered Surveyors. The basis of
valuation was predominantly existing use value and had regard to
trading potential.
The comparable amounts under the historical cost convention for
properties would be:
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Cost
|
|
|
2,667 |
|
|
|
2,771 |
|
Depreciation
|
|
|
(205 |
) |
|
|
(177 |
) |
|
|
|
|
|
|
|
Net book value
|
|
|
2,462 |
|
|
|
2,594 |
|
|
|
|
|
|
|
|
F-42
Note 17 Fixed asset investments
|
|
|
|
|
|
|
|
Investments | |
|
|
and | |
|
|
advances | |
|
|
| |
|
|
(£ million) | |
15 months ended December 31, 2003
|
|
|
|
|
Cost:
|
|
|
|
|
At October 1, 2002
|
|
|
339 |
|
|
Exchange adjustments
|
|
|
(34 |
) |
|
Reclassifications
|
|
|
6 |
|
|
Additions
|
|
|
42 |
|
|
Disposals and repayments
|
|
|
(12 |
) |
|
|
|
|
At December 31, 2003
|
|
|
341 |
|
|
|
|
|
Provision for diminution in value:
|
|
|
|
|
At October 1, 2002
|
|
|
121 |
|
|
Exchange adjustments
|
|
|
(20 |
) |
|
Reclassifications
|
|
|
3 |
|
|
Provisions made(i)
|
|
|
65 |
|
|
|
|
|
At December 31, 2003
|
|
|
169 |
|
|
|
|
|
Net book value at December 31, 2003
|
|
|
172 |
|
|
|
|
|
Year ended December 31, 2004
|
|
|
|
|
Cost:
|
|
|
|
|
At January 1, 2004
|
|
|
341 |
|
|
Exchange and other adjustments
|
|
|
(13 |
) |
|
Reclassification to current asset investments(ii)
|
|
|
(195 |
) |
|
Additions
|
|
|
11 |
|
|
Disposals and repayments
|
|
|
(7 |
) |
|
|
|
|
At December 31, 2004
|
|
|
137 |
|
|
|
|
|
Provision for diminution in value:
|
|
|
|
|
At January 1, 2004
|
|
|
169 |
|
|
Exchange adjustments
|
|
|
(5 |
) |
|
Reclassification to current asset investments(ii)
|
|
|
(133 |
) |
|
Provisions made
|
|
|
13 |
|
|
Provisions written back
|
|
|
(6 |
) |
|
|
|
|
At December 31, 2004
|
|
|
38 |
|
|
|
|
|
Net book value at December 31, 2004
|
|
|
99 |
|
|
|
|
|
|
|
|
(i) |
|
Relates to a provision for diminution in value of the
Groups investment in FelCor Lodging Trust Inc. and other
fixed asset investments. |
|
(ii) |
|
Relates to the Groups investment in FelCor Lodging Trust
Inc. |
F-43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
Cost less | |
|
|
|
Cost less | |
|
|
|
|
amount | |
|
Market | |
|
amount | |
|
Market | |
|
|
written off | |
|
value | |
|
written off | |
|
value | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Listed investments(i)
|
|
|
1 |
|
|
|
4 |
|
|
|
64 |
|
|
|
66 |
|
Unlisted investments
|
|
|
98 |
|
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99 |
|
|
|
|
|
|
|
172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) All listed investments are listed on a recognized
investment exchange.
Note 18 Stocks
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Raw materials
|
|
|
9 |
|
|
|
9 |
|
Finished goods
|
|
|
23 |
|
|
|
21 |
|
Consumable stores
|
|
|
10 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
44 |
|
|
|
|
|
|
|
|
Note 19 Debtors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
|
|
After | |
|
|
|
After | |
|
|
Total | |
|
one year | |
|
Total | |
|
one year | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Trade debtors
|
|
|
322 |
|
|
|
|
|
|
|
316 |
|
|
|
|
|
Less: Provision for bad and doubtful debts
|
|
|
(37 |
) |
|
|
|
|
|
|
(39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285 |
|
|
|
|
|
|
|
277 |
|
|
|
|
|
Other debtors (net of provisions for bad and doubtful debts
£5 million (2003 £6 million))
|
|
|
100 |
|
|
|
25 |
|
|
|
104 |
|
|
|
17 |
|
Corporate taxation
|
|
|
14 |
|
|
|
|
|
|
|
37 |
|
|
|
7 |
|
Pension prepayment
|
|
|
110 |
|
|
|
110 |
|
|
|
47 |
|
|
|
47 |
|
Other prepayments
|
|
|
47 |
|
|
|
2 |
|
|
|
58 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
556 |
|
|
|
137 |
|
|
|
523 |
|
|
|
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 20 Current asset investments
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Equity investments
|
|
|
76 |
|
|
|
|
|
Other
|
|
|
40 |
|
|
|
377 |
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
377 |
|
|
|
|
|
|
|
|
F-44
Note 21 Creditors: amounts falling due
within one year
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Borrowings (Note 24)
|
|
|
43 |
|
|
|
13 |
|
Trade creditors
|
|
|
159 |
|
|
|
133 |
|
Corporate taxation
|
|
|
261 |
|
|
|
389 |
|
Other taxation and social security
|
|
|
50 |
|
|
|
46 |
|
Accrued charges
|
|
|
232 |
|
|
|
235 |
|
Proposed dividend of parent company
|
|
|
62 |
|
|
|
70 |
|
Proposed dividend for minority shareholders
|
|
|
19 |
|
|
|
16 |
|
Other creditors
|
|
|
187 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
1,013 |
|
|
|
1,085 |
|
|
|
|
|
|
|
|
Note 22 Creditors: amounts falling due after
one year
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Borrowings (Note 24)
|
|
|
1,156 |
|
|
|
988 |
|
Other creditors and deferred income
|
|
|
96 |
|
|
|
97 |
|
|
|
|
|
|
|
|
|
|
|
1,252 |
|
|
|
1,085 |
|
|
|
|
|
|
|
|
Note 23 Deferred taxation and other
provisions for liabilities and charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other provisions for liabilities and charges | |
|
|
|
|
| |
|
|
Deferred | |
|
|
|
Hotels | |
|
MAB | |
|
Onerous | |
|
|
|
|
taxation | |
|
Disposals(i) | |
|
reorganization(ii) | |
|
reorganization | |
|
contracts(iii) | |
|
Pensions(iv) | |
|
Other(v) | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
At October 1, 2002
|
|
|
495 |
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
12 |
|
|
|
39 |
|
|
|
9 |
|
|
|
71 |
|
Profit and loss account
|
|
|
10 |
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
(6 |
) |
|
|
6 |
|
|
|
(1 |
) |
|
|
66 |
|
Expenditure
|
|
|
|
|
|
|
|
|
|
|
(37 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
(47 |
) |
Exchange and other adjustments
|
|
|
(2 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
(6 |
) |
|
|
3 |
|
|
|
1 |
|
|
|
|
|
|
|
(5 |
) |
Separation of MAB
|
|
|
(189 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
314 |
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
5 |
|
|
|
46 |
|
|
|
1 |
|
|
|
79 |
|
Profit and loss account
|
|
|
(62 |
) |
|
|
74 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
8 |
|
|
|
(1 |
) |
|
|
80 |
|
Expenditure
|
|
|
|
|
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
(20 |
) |
Exchange and other adjustments
|
|
|
(4 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
248 |
|
|
|
74 |
|
|
|
8 |
|
|
|
|
|
|
|
3 |
|
|
|
49 |
|
|
|
|
|
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Relates to the disposal of 13 hotels in the Americas and 73
hotels in the United Kingdom. |
|
(ii) |
|
Relates to the Hotels reorganization charged as a non-operating
exceptional item in 2003 and is expected to be largely utilized
in the year to December 31, 2005. |
|
(iii) |
|
Primarily relates to onerous fixed lease contracts acquired with
the InterContinental hotels business and having expiry dates to
2008. |
|
(iv) |
|
Relates to unfunded postretirement benefit plans (see
Note 4). |
|
(v) |
|
Represents liabilities with varying expected utilization dates. |
F-45
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Analyzed as tax on timing differences related to:
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
252 |
|
|
|
252 |
|
Deferred gains on loan notes
|
|
|
122 |
|
|
|
123 |
|
Losses
|
|
|
(113 |
) |
|
|
(37 |
) |
Pension prepayment
|
|
|
23 |
|
|
|
14 |
|
Other
|
|
|
(36 |
) |
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
248 |
|
|
|
314 |
|
|
|
|
|
|
|
|
The deferred tax asset of £113 million (2003
£37 million) recognized in respect of losses includes
£89 million (2003 £6 million) of capital
losses available to be utilized against the realization of
capital gains which are recognized as a deferred tax liability
and £24 million (2003 £31 million) in
respect of revenue tax losses. Tax losses with a value of
£305 million (2003 £317 million), including
capital losses with a value of £98 million (2003
£112 million), have not been recognized as their use
is uncertain or not currently anticipated.
No provision has been made for deferred tax on the sale of
properties at their revalued amounts. The total amount
unprovided is estimated at £177 million (2003
£215 million).
No provision has been made for deferred tax on the sale of
properties where gains have been, or are expected to be,
deferred against expenditure on replacement assets for an
indefinite period until the sale of the replacement assets. The
total amount unprovided is estimated at £58 million
(2003 £52 million), of which £14 million is
expected to be rolled over into capital expenditure in periods
up to December 31, 2004. It is not anticipated that any
such tax will be payable in the foreseeable future.
Note 24 Borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
Within | |
|
After one | |
|
|
|
Within | |
|
After one | |
|
|
|
|
one year | |
|
year | |
|
Total | |
|
one year | |
|
year | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Secured bank loans and overdrafts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans(i)
|
|
|
2 |
|
|
|
49 |
|
|
|
51 |
|
|
|
3 |
|
|
|
57 |
|
|
|
60 |
|
Unsecured bank loans and overdrafts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans
|
|
|
12 |
|
|
|
1,104 |
|
|
|
1,116 |
|
|
|
5 |
|
|
|
489 |
|
|
|
494 |
|
|
Overdrafts
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bank loans and overdrafts
|
|
|
25 |
|
|
|
1,153 |
|
|
|
1,178 |
|
|
|
13 |
|
|
|
546 |
|
|
|
559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured other borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loan stock (ii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Unsecured other borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Guaranteed Notes 5.75% (£250 million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
18 |
|
|
2010 Guaranteed Notes 4.75%
(600 million)
|
|
|
18 |
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
420 |
|
|
|
420 |
|
|
Other loan stock
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other borrowings
|
|
|
18 |
|
|
|
3 |
|
|
|
21 |
|
|
|
|
|
|
|
442 |
|
|
|
442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
43 |
|
|
|
1,156 |
|
|
|
1,199 |
|
|
|
13 |
|
|
|
988 |
|
|
|
1,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Secured by way of mortgage over individual hotel properties. The
terms, rates of interest and currencies of these bank loans vary. |
|
(ii) |
|
Secured on the individual assets purchased by using such
borrowings. The terms, rates of interest and currencies of these
borrowings vary. |
F-46
The weighted average interest rate on overdrafts outstanding at
December 31, 2004 is 5.75% (December 31, 2003 4.75%).
Interest on all other borrowings is at variable rates unless
otherwise stated. Interest on the unsecured bank loans drawn at
December 31, 2004 is at a weighted average rate of 3.14%
(December 31, 2003 2.2%). All borrowings are redeemable at
par.
|
|
|
Analysis by year of repayment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
Bank | |
|
|
|
Bank | |
|
|
|
|
loans and | |
|
Other | |
|
|
|
loans and | |
|
Other | |
|
|
|
|
overdrafts | |
|
borrowings | |
|
Total | |
|
overdrafts | |
|
borrowings | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one year (Note 21)
|
|
|
25 |
|
|
|
18 |
|
|
|
43 |
|
|
|
13 |
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Between one and two years
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
42 |
|
|
|
|
|
|
|
42 |
|
Between two and three years
|
|
|
39 |
|
|
|
|
|
|
|
39 |
|
|
|
452 |
|
|
|
|
|
|
|
452 |
|
Between three and four years
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
|
|
33 |
|
|
|
18 |
|
|
|
51 |
|
Between four and five years
|
|
|
1,100 |
|
|
|
|
|
|
|
1,100 |
|
|
|
11 |
|
|
|
|
|
|
|
11 |
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By installment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
Other than by installment
|
|
|
1 |
|
|
|
3 |
|
|
|
4 |
|
|
|
5 |
|
|
|
424 |
|
|
|
429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due after more than one year (Note 22)
|
|
|
1,153 |
|
|
|
3 |
|
|
|
1,156 |
|
|
|
546 |
|
|
|
442 |
|
|
|
988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
1,178 |
|
|
|
21 |
|
|
|
1,199 |
|
|
|
559 |
|
|
|
442 |
|
|
|
1,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts repayable by installments, some of which fall due after
five years
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
|
|
22 |
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities committed by banks |
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Utilized
|
|
|
1,155 |
|
|
|
554 |
|
Unutilized
|
|
|
542 |
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
1,697 |
|
|
|
962 |
|
|
|
|
|
|
|
|
Unutilized facilities expire:
|
|
|
|
|
|
|
|
|
Within one year
|
|
|
40 |
|
|
|
|
|
After one year but before two years
|
|
|
500 |
|
|
|
36 |
|
After two years
|
|
|
2 |
|
|
|
372 |
|
|
|
|
|
|
|
|
|
|
|
542 |
|
|
|
408 |
|
|
|
|
|
|
|
|
F-47
Note 25 Financial Instruments
The following disclosures provide information regarding the
effect of financial instruments on the financial assets and
liabilities of the Group, other than short-term debtors and
creditors.
In order to manage interest rate risk, the Group enters into
interest rate swap, interest rate option and forward rate
agreements. At December 31, 2004 and December 31, 2003
notional principal balances and related interest rates under
interest rate swaps and forward rate agreements were:
|
|
|
Interest rate swaps and forward rate agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to mature before December 31, | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
2005 | |
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
Thereafter | |
|
Total | |
|
Fair value(i) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
At December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
$200m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$200m |
|
|
|
$(4)m |
|
|
Fixed rate payable
|
|
|
|
|
|
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
Principal
|
|
|
215m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
215m |
|
|
|
(1)m |
|
|
Fixed rate payable
|
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.9 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
Principal
|
|
|
A$60m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A$60m |
|
|
|
|
|
|
Fixed rate payable
|
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
% |
|
|
|
|
Principal
|
|
|
HK$300m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HK$300m |
|
|
|
HK$(1)m |
|
|
Fixed rate payable
|
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.5 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0 |
% |
|
|
|
|
|
|
(i) |
Represents the net present value of the expected cash flows
discounted at current market rates of interest. |
The principal indicates the extent of the use of the instrument,
but exposure is limited to the interest rate differential on the
principal. At December 31, 2004 the risk was approximately
equal to the fair value shown. The variable rates shown are
those prevailing on December 31, 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to mature before December 31, | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
2004 | |
|
2005 | |
|
2006 | |
|
2007 | |
|
2008 | |
|
Thereafter | |
|
Total | |
|
Fair value(i) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
At December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
$250m |
|
|
|
$600m |
|
|
|
$300m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1,150m |
|
|
|
$(44)m |
|
|
Fixed rate payable
|
|
|
5.7 |
% |
|
|
4.4 |
% |
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
1.2 |
% |
|
|
1.2 |
% |
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.2 |
% |
|
|
|
|
Principal
|
|
|
100m |
|
|
|
65m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165m |
|
|
|
(4)m |
|
|
Fixed rate payable
|
|
|
4.0 |
% |
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
2.2 |
% |
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
% |
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300m |
|
|
|
300m |
|
|
|
|
|
|
Variable rate payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.0 |
% |
|
|
3.0 |
% |
|
|
|
|
|
Fixed rate receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8 |
% |
|
|
4.8 |
% |
|
|
|
|
Principal
|
|
|
A$50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A$50m |
|
|
|
|
|
|
Fixed rate payable
|
|
|
4.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.5 |
% |
|
|
|
|
Principal
|
|
|
HK$370m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HK$370m |
|
|
|
HK$(17)m |
|
|
Fixed rate payable
|
|
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.2 |
% |
|
|
|
|
|
Variable rate receivable
|
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.4 |
% |
|
|
|
|
|
|
(i) |
Represents the net present value of the expected cash flows
discounted at current market rates of interest. |
F-48
The principal indicates the extent of the use of the instrument,
but exposure is limited to the interest rate differential on the
principal. At December 31, 2003 the risk was approximately
equal to the fair value shown. The variable rates shown are
those prevailing on December 31, 2003.
|
|
|
Interest rate option agreements |
At December 31, 2004 and December 31, 2003, the Group
had not entered into any interest rate option agreements.
At December 31, 2004 and December 31, 2003, the
interest rate profile of the Groups material financial
assets and liabilities, after taking account of the interest
rate swap agreements and currency swap agreements detailed
above, was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest at fixed rate | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Weighted | |
|
|
Currency | |
|
Principal | |
|
|
|
average | |
|
|
| |
|
| |
|
Weighted | |
|
period for | |
|
|
|
|
Swap | |
|
|
|
At variable | |
|
At fixed | |
|
average | |
|
which rate | |
|
|
Net debt | |
|
agreements | |
|
Total | |
|
rate(i) | |
|
rate | |
|
rate | |
|
is fixed | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
|
(%) | |
|
(years) | |
At December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current asset investments and cash at bank and in hand:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling
|
|
|
26 |
|
|
|
339 |
|
|
|
365 |
|
|
|
365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US dollar
|
|
|
29 |
|
|
|
|
|
|
|
29 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling
|
|
|
(247 |
) |
|
|
|
|
|
|
(247 |
) |
|
|
(244 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
5.0 |
|
|
US dollar
|
|
|
(283 |
) |
|
|
(52 |
) |
|
|
(335 |
) |
|
|
(231 |
) |
|
|
(104 |
) |
|
|
4.6 |
|
|
|
1.7 |
|
|
Euro
|
|
|
(560 |
) |
|
|
(239 |
) |
|
|
(799 |
) |
|
|
(596 |
) |
|
|
(203 |
) |
|
|
3.6 |
|
|
|
1.0 |
|
|
Hong Kong dollar
|
|
|
(69 |
) |
|
|
|
|
|
|
(69 |
) |
|
|
(49 |
) |
|
|
(20 |
) |
|
|
1.5 |
|
|
|
0.8 |
|
|
Other
|
|
|
(40 |
) |
|
|
(48 |
) |
|
|
(88 |
) |
|
|
(64 |
) |
|
|
(24 |
) |
|
|
5.4 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,116 |
) |
|
|
|
|
|
|
(1,116 |
) |
|
|
(762 |
) |
|
|
(354 |
) |
|
|
3.9 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current asset investments and cash at bank and in hand:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling
|
|
|
377 |
|
|
|
934 |
|
|
|
1,311 |
|
|
|
1,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US dollar
|
|
|
9 |
|
|
|
|
|
|
|
9 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
46 |
|
|
|
|
|
|
|
46 |
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sterling
|
|
|
(24 |
) |
|
|
|
|
|
|
(24 |
) |
|
|
(3 |
) |
|
|
(21 |
) |
|
|
5.0 |
|
|
|
4.1 |
|
|
US dollar
|
|
|
(337 |
) |
|
|
(615 |
) |
|
|
(952 |
) |
|
|
(301 |
) |
|
|
(651 |
) |
|
|
4.7 |
|
|
|
1.5 |
|
|
Euro
|
|
|
(514 |
) |
|
|
(258 |
) |
|
|
(772 |
) |
|
|
(403 |
) |
|
|
(369 |
) |
|
|
4.8 |
|
|
|
4.7 |
|
|
Hong Kong dollar
|
|
|
(84 |
) |
|
|
|
|
|
|
(84 |
) |
|
|
(57 |
) |
|
|
(27 |
) |
|
|
5.2 |
|
|
|
0.8 |
|
|
Other
|
|
|
(42 |
) |
|
|
(61 |
) |
|
|
(103 |
) |
|
|
(82 |
) |
|
|
(21 |
) |
|
|
4.7 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(569 |
) |
|
|
|
|
|
|
(569 |
) |
|
|
520 |
|
|
|
(1,089 |
) |
|
|
4.8 |
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Primarily based on the relevant inter-bank rate. |
At December 31, 2004, the Group had investments totaling
£175 million (2003 £172 million) on which no
interest is receivable and which do not have a maturity date.
These interests are denominated primarily in US dollars.
F-49
The Group had other creditors and deferred income, denominated
primarily in US dollars, due after one year of
£96 million at December 31, 2004 (2003
£97 million) on which no interest is payable.
In order to manage currency risk, the Group enters into
agreements for the forward purchase or sale of foreign
currencies as well as currency options. Foreign currency inflows
and outflows are also netted where practical. As virtually all
foreign exchange gains and losses are charged to the Statement
of total recognized Group gains and losses under the hedging
provisions of SSAP 20, no disclosure of the remaining
currency risks has been provided on the grounds of materiality.
At December 31, 2004, the Group had contracted to exchange
within one year the equivalent of £204 million (2003
£49 million) of various currencies.
The Group had entered into the following currency swap
agreements at December 31, 2004 and December 31, 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposited | |
|
Borrowed | |
|
|
| |
|
| |
|
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
Sterling to US dollar
|
|
|
£52m |
|
|
|
£639m |
|
|
|
$100m |
|
|
|
$1,097m |
|
Sterling to euro
|
|
|
£239m |
|
|
|
£250m |
|
|
|
350m |
|
|
|
364m |
|
Sterling to Australian dollar
|
|
|
£48m |
|
|
|
£42m |
|
|
|
A$120m |
|
|
|
A$100m |
|
Sterling to New Zealand dollar
|
|
|
|
|
|
|
£19m |
|
|
|
|
|
|
|
NZ$51m |
|
A liquidity analysis of the Groups borrowings is provided
in Note 24, along with details of the Groups material
unutilized committed borrowing facilities.
The liquidity analysis of the Groups other financial
liabilities is set out below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
December 31, | |
|
2003 | |
|
|
2004 | |
|
restated(i) | |
|
|
| |
|
| |
|
|
(£ million) | |
Other financial liabilities
|
|
|
|
|
|
|
|
|
Due:
|
|
|
|
|
|
|
|
|
|
between one and two years
|
|
|
26 |
|
|
|
36 |
|
|
between two and five years
|
|
|
33 |
|
|
|
40 |
|
|
after five years
|
|
|
89 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
148 |
|
|
|
148 |
|
|
|
|
|
|
|
|
|
|
(i) |
Restated to include certain provisions for liabilities and
charges on a basis consistent with 2004. |
F-50
The net book values and related fair values of the Groups
financial assets and liabilities are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2003 | |
|
|
December 31, 2004 | |
|
restated(i) | |
|
|
| |
|
| |
|
|
Net book | |
|
Fair | |
|
Net book | |
|
Fair | |
|
|
value | |
|
value | |
|
value | |
|
value | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Fixed asset investments
|
|
|
99 |
|
|
|
102 |
|
|
|
172 |
|
|
|
174 |
|
Current asset equity investments
|
|
|
76 |
|
|
|
76 |
|
|
|
|
|
|
|
|
|
Net debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and overdrafts
|
|
|
32 |
|
|
|
32 |
|
|
|
50 |
|
|
|
50 |
|
|
Current asset investments
|
|
|
40 |
|
|
|
40 |
|
|
|
361 |
|
|
|
361 |
|
|
Currency swap agreements
|
|
|
(9 |
) |
|
|
(9 |
) |
|
|
16 |
|
|
|
20 |
|
|
Other borrowings
|
|
|
(1,179 |
) |
|
|
(1,179 |
) |
|
|
(996 |
) |
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
(1,116 |
) |
|
|
(1,116 |
) |
|
|
(569 |
) |
|
|
(569 |
) |
Other financial liabilities
|
|
|
(148 |
) |
|
|
(148 |
) |
|
|
(148 |
) |
|
|
(148 |
) |
Interest rate swap agreements
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(29 |
) |
Forward exchange contracts
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,089 |
) |
|
|
(1,080 |
) |
|
|
(545 |
) |
|
|
(573 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Restated to include certain provisions for liabilities and
charges on a basis consistent with 2004. |
The fair values of listed fixed asset investments and borrowings
are based on market prices at the year end. Other assets and
liabilities have been fair valued by discounting expected future
cash flows to present value.
The Groups unrecognized gains and losses for the period on
derivative financial instruments are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains | |
|
Losses | |
|
Total | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Unrecognized at October 1, 2002
|
|
|
24 |
|
|
|
(45 |
) |
|
|
(21 |
) |
Recognized in the period
|
|
|
(2 |
) |
|
|
31 |
|
|
|
29 |
|
Arising in the period but not recognized
|
|
|
(18 |
) |
|
|
(16 |
) |
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
Unrecognized at December 31, 2003
|
|
|
4 |
|
|
|
(30 |
) |
|
|
(26 |
) |
Recognized in the year
|
|
|
(1 |
) |
|
|
21 |
|
|
|
20 |
|
Arising in the year but not recognized
|
|
|
6 |
|
|
|
6 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
Unrecognized at December 31, 2004
|
|
|
9 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
Expected to be recognized in the year ending December 31,
2005
|
|
|
9 |
|
|
|
(1 |
) |
|
|
8 |
|
Expected to be recognized thereafter
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
The Group is exposed to loss in the event of non-performance by
the counterparties to the above agreements but such
non-performance is not expected to occur.
F-51
Note 26 Goodwill eliminated
Goodwill purchased prior to September 30, 1998 and
eliminated against Group reserves is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of | |
|
|
|
|
|
|
goodwill | |
|
Exchange | |
|
|
|
|
eliminated | |
|
adjustments | |
|
Total | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Eliminated to October 1, 2002
|
|
|
2,403 |
|
|
|
122 |
|
|
|
2,525 |
|
|
Separation of MAB
|
|
|
(50 |
) |
|
|
|
|
|
|
(50 |
) |
|
Exchange adjustments
|
|
|
|
|
|
|
(139 |
) |
|
|
(139 |
) |
|
|
|
|
|
|
|
|
|
|
Eliminated to December 31, 2003
|
|
|
2,353 |
|
|
|
(17 |
) |
|
|
2,336 |
|
|
Exchange adjustments
|
|
|
|
|
|
|
(110 |
) |
|
|
(110 |
) |
|
|
|
|
|
|
|
|
|
|
Eliminated to December 31, 2004
|
|
|
2,353 |
|
|
|
(127 |
) |
|
|
2,226 |
|
|
|
|
|
|
|
|
|
|
|
Note 27 Major Acquisitions and Disposals
|
|
|
Year ended September 30, 2002 |
There were no major acquisitions or disposals in the year ended
September 30, 2002.
|
|
|
15 months ended December 31, 2003 |
|
|
|
|
|
|
|
£ million | |
Net assets disposed
|
|
|
|
|
Intangible assets
|
|
|
12 |
|
Tangible assets
|
|
|
3,530 |
|
Stocks
|
|
|
47 |
|
Debtors
|
|
|
140 |
|
Current asset investments
|
|
|
7 |
|
Cash at bank and in hand
|
|
|
7 |
|
Creditors: amounts falling due within one year
|
|
|
(244 |
) |
Provisions for liabilities and charges
|
|
|
(195 |
) |
Debt assumed by MAB
|
|
|
(577 |
) |
|
|
|
|
|
|
|
2,727 |
|
Goodwill previously eliminated against reserves
|
|
|
50 |
|
|
|
|
|
|
|
|
2,777 |
|
|
|
|
|
There were no major acquisitions in the 15 months ended
December 31, 2003.
|
|
|
Year ended December 31, 2004 |
There were no major acquisitions or disposals in the year ended
December 31, 2004.
Note 28 Share Options
|
|
|
Former Six Continents Share Schemes |
Under the terms of the Separation in 2003, holders of options
under the Six Continents Executive Share Option Schemes were
given the opportunity to exchange their Six Continents PLC
options for equivalent value new options over IHG PLC shares. As
a result of this exchange, 23,195,482 IHG PLC shares were put
under option at prices ranging from 295.33p to 593.29p. The
exchanged options were immediately exercisable
F-52
and are not subject to performance conditions. During 2004,
7,429,736 such options were exercised, leaving a total of
12,568,562 (2003, 19,998,299) such options outstanding at prices
ranging from 308.5p to 593.3p. The latest date that any rolled
over options may be exercised is October 2012.
Under the terms of the Six Continents Special Deferred Incentive
Plan 59,217 IHG shares were transferred to employees in 2004,
reflecting entitlements existing prior to Separation.
Options held under the Six Continents Savings Related Share
Option Schemes by eligible UK employees became exercisable for a
period of six months from April 11, 2003. Options exercised
during this period resulted in the issue of 1,659,515 IHG PLC
shares. The remainder of these options lapsed on
October 11, 2003.
|
|
|
New Share Plans established on Separation |
|
|
|
Short Term Deferred Incentive Plan |
The IHG Short Term Deferred Incentive Plan (the
STDIP) enables eligible employees, including
executive directors, to receive all or part of their bonus in
the form of IHG PLC shares together with, in certain cases, a
matching grant of free shares. The bonus and matching shares are
deferred and released in equal amounts at the end of each of the
three years following deferral. Participation in the STDIP is at
the discretion of the IHG directors. The number of shares is
calculated by dividing a specific percentage of the
participants salary by the average share price for a
period of days prior to the date on which the shares are
granted. A number of executives participated in the plan during
the period and conditional rights over 232,700 IHG Shares were
awarded to participants.
|
|
|
Performance Restricted Share Plan |
The Performance Restricted Share Plan allows executive directors
and eligible employees to receive share awards, subject to the
satisfaction of a performance condition, set by the Remuneration
Committee, normally measured over a three-year period. Awards
are normally made annually and, except in exceptional
circumstances, will not exceed three times salary for executive
directors. In determining the level of awards within this
maximum limit, the Remuneration Committee takes into account the
level of Executive Share Options already granted to the same
person. As of December 31, 2004 conditional rights over
2,665,390 IHG PLC shares had been awarded to employees under the
plan. The plan provides for the grant of nil cost
options to participants as an alternative to conditional
share awards.
|
|
|
Executive Share Option Plan |
The Remuneration Committee, consisting solely of non-executive
directors, may select employees, including executive directors,
of the Group, for the grant of options to acquire ordinary
shares in the Company. The option price will not be less than
the market value of an ordinary share, or the nominal value if
higher. The market value will be the quoted price on the
business day preceding the date of grant, or the average of the
middle market quoted prices on the three consecutive dealing
days immediately preceding the date of grant. The International
Schedule to the Scheme extends it to executives outside the
United Kingdom. Grants of options under the Executive Share
Option Plan are normally made annually and except in exceptional
circumstances, will not, in any year, exceed three times annual
salary for executive directors. A performance condition has to
be met before options can be exercised. The performance
condition is set by the Remuneration Committee.
In April 2004, options were granted to 180 employees over
6,951,420 IHG PLC shares at 494.17p per share, respectively. For
options granted in 2004 the Companys adjusted earnings per
share over the three-year performance period ending
December 31, 2006 must increase by at least nine percentage
points over the increase in the UK Retail Prices Index for the
same period for any of the award to vest. Options granted in
2004 are exercisable between 2007 and 2014, subject to
achievement of the performance condition.
F-53
The Sharesave Plan is a savings plan whereby employees contract
to save a fixed amount each month with a Savings Institution for
three or five years. At the end of the savings term, employees
are given the option to purchase shares at a price set before
savings began. The Sharesave Plan is available to all UK
employees (including executive directors) employed by
participating Group companies provided they have been employed
for at least one year. The plan provides for the grant of
options to subscribe for ordinary shares at the higher of
nominal value and not less than 80% of the middle market
quotations of the ordinary shares on the three dealing days
immediately following an announcement of results.
|
|
|
US Employee Stock Purchase Plan |
The US Employee Stock Purchase Plan will allow eligible
employees resident in the United States an opportunity to
acquire Company ADSs on advantageous terms. The plan, when
operational, will comply with Section 423 of the US
Internal Revenue Code of 1986. The option to purchase ADSs may
be offered only to employees of designated subsidiary companies.
The option price may not be less than the lesser of either 85%
of the fair market value of an ADS on the date of grant or 85%
of the fair market value of an ADS on the date of exercise.
Options granted under the plan must generally be exercised
within 27 months from the date of grant. The plan was not
operated during fiscal 2004 and at December 31, 2004 no
options had been granted under the plan.
In any ten-year period, not more than 10% of the issued ordinary
share capital of the Company may be allocated under all the
employee share plans operated by the Company. In addition, in
any ten-year period, not more than 5% of the issued ordinary
share capital may be allocated under the discretionary share
plans operated by the Company. These limits include rights to
ordinary shares issued in respect of options granted under the
former Six Continents Share Schemes referred to above. During
the year, IHG remained within its headroom limits for the issue
of new shares under share incentive schemes. As at
December 31, 2004, shares equivalent to 3.74% of ordinary
share capital had been allocated under discretionary schemes.
The following table sets forth awards and options granted during
2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short Term | |
|
|
|
|
|
|
|
|
Deferred | |
|
Performance | |
|
|
|
|
|
|
Incentive | |
|
Restricted Share | |
|
Executive Share | |
|
|
|
|
Plan | |
|
Plan | |
|
Option Plan | |
|
Sharesave Plan | |
|
|
| |
|
| |
|
| |
|
| |
Number of shares awarded
|
|
|
227,150 |
|
|
|
2,683,260 |
|
|
|
6,951,420 |
|
|
|
N/A |
|
F-54
In 2004, the Company used separate option pricing models and
assumptions for each plan. The following table sets forth
information about how the fair value of each option grant is
calculated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short Term | |
|
|
|
|
|
|
Deferred | |
|
Performance | |
|
|
|
|
Incentive | |
|
Restricted Share | |
|
Executive Share | |
|
|
Plan | |
|
Plan | |
|
Option Plan | |
|
|
| |
|
| |
|
| |
|
|
2004 | |
|
2004 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Valuation model
|
|
|
Binomial |
|
|
Monte Carlo Simulation and Binomial |
|
|
Binomial |
|
Weighted average share price
|
|
|
498.0 |
p |
|
|
550.0 |
p |
|
|
494.0 |
p |
Exercise price
|
|
|
|
|
|
|
|
|
|
|
494.0 |
p |
Expected dividend yield
|
|
|
3.74 |
% |
|
|
3.49 |
% |
|
|
3.81 |
% |
Risk free rate
|
|
|
|
|
|
|
|
|
|
|
4.73 |
% |
Volatility
|
|
|
|
|
|
|
|
|
|
|
31.33 |
% |
Term (years)(a)
|
|
|
2.8 |
|
|
|
3 |
|
|
|
6.5 |
|
Fair value per share
|
|
|
448.3 |
p |
|
|
125.1 |
p |
|
|
136.0 |
p |
|
|
(a) |
The expected term of the options is taken to the mid point
between vesting and lapse. |
Movements in the options outstanding under these schemes for the
year ended December 31, 2004 and the 15 months ended
December 31, 2003 and the year ended September 30,
2002 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Short Term Deferred | |
|
Performance Restricted | |
|
|
Incentive Plan | |
|
Share Plan | |
|
|
| |
|
| |
|
|
Number of Shares | |
|
Number of Shares | |
|
|
| |
|
| |
Outstanding at October 1, 2002
|
|
|
|
|
|
|
|
|
Awarded
|
|
|
107,222 |
|
|
|
5,445,310 |
|
Vested
|
|
|
|
|
|
|
|
|
Lapsed or canceled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2003
|
|
|
107,222 |
|
|
|
5,445,310 |
|
Granted
|
|
|
230,700 |
|
|
|
2,665,390 |
|
Vested
|
|
|
(46,816 |
) |
|
|
|
|
Lapsed or canceled
|
|
|
(50,000 |
) |
|
|
375,252 |
|
|
|
|
|
|
|
|
Outstanding at December 31, 2004
|
|
|
241,106 |
|
|
|
7,735,448 |
|
|
|
|
|
|
|
|
F-55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels | |
|
|
|
|
Group employee savings | |
|
InterContinental Hotels Group | |
|
|
share schemes | |
|
executive share option schemes | |
|
|
| |
|
| |
|
|
No. of | |
|
Range of | |
|
No. of | |
|
Range of | |
|
|
shares | |
|
option prices | |
|
shares | |
|
option prices | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(thousand) | |
|
(p) | |
|
(thousand) | |
|
(p) | |
Options outstanding at October 1, 2001
|
|
|
4,073 |
|
|
|
400.0-886.0 |
|
|
|
20,646 |
|
|
|
469.4-1,014.5 |
|
Granted
|
|
|
1,883 |
|
|
|
600.0-600.0 |
|
|
|
5,308 |
|
|
|
700.0-700.4 |
|
Exercised
|
|
|
(285 |
) |
|
|
400.0-734.0 |
|
|
|
(198 |
) |
|
|
505.0-746.0 |
|
Lapsed or canceled
|
|
|
(876 |
) |
|
|
400.0-886.0 |
|
|
|
(3,109 |
) |
|
|
469.4-1,014.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at September 30, 2002
|
|
|
4,795 |
|
|
|
470.0-886.0 |
|
|
|
22,647 |
|
|
|
505.0-1,014.5 |
|
Granted
|
|
|
|
|
|
|
|
|
|
|
658 |
|
|
|
527.5 |
|
Exercised
|
|
|
(31 |
) |
|
|
470.0-654.0 |
|
|
|
(24 |
) |
|
|
505.0-527.5 |
|
Lapsed or canceled
|
|
|
(969 |
) |
|
|
470.0-886.0 |
|
|
|
(163 |
) |
|
|
584.0-1,014.5 |
|
Transferred to MAB
|
|
|
|
|
|
|
|
|
|
|
(9,523 |
) |
|
|
505.0-1,014.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Six Continents PLC share options
|
|
|
3,795 |
|
|
|
470.0-886.0 |
|
|
|
13,595 |
|
|
|
505.0-1,014.5 |
|
Rolled over share options
|
|
|
2,694 |
|
|
|
|
|
|
|
9,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening InterContinental Hotels Group PLC share options
|
|
|
6,489 |
|
|
|
374.5-518.1 |
|
|
|
23,246 |
|
|
|
295.3-593.3 |
|
Granted
|
|
|
1,375 |
|
|
|
420.5 |
|
|
|
7,375 |
|
|
|
438.0-491.7 |
|
Exercised
|
|
|
(1,661 |
) |
|
|
374.5-518.1 |
|
|
|
(3,242 |
) |
|
|
295.3-466.7 |
|
Lapsed or canceled
|
|
|
(4,830 |
) |
|
|
374.5-518.1 |
|
|
|
(159 |
) |
|
|
438.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2003
|
|
|
1,373 |
|
|
|
420.5 |
|
|
|
27,220 |
|
|
|
295.3-593.3 |
|
Granted
|
|
|
|
|
|
|
|
|
|
|
6,951 |
|
|
|
494.2 |
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
(7,430 |
) |
|
|
295.3-593.3 |
|
Lapsed or canceled
|
|
|
(111 |
) |
|
|
420.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2004
|
|
|
1,262 |
|
|
|
420.5 |
|
|
|
26,741 |
|
|
|
308.5-593.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
12,569 |
|
|
|
308.5-593.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
19,998 |
|
|
|
295.3-593.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2002
|
|
|
384 |
|
|
|
470.0-734.0 |
|
|
|
4,052 |
|
|
|
505.0-1,014.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of options granted during the period ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2003
|
|
|
|
|
|
|
176.2 |
|
|
|
|
|
|
|
99.3 |
|
September 30, 2002
|
|
|
|
|
|
|
122.6 |
|
|
|
|
|
|
|
160.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average fair values of options granted were
estimated using the Black-Scholes option pricing model with the
following assumptions: dividend yield of 2003 3%,
(2002 5%), expected volatility of 2003 30%,
(2002 26%), risk free interest rate of 2003 5%,
(2002 5%) and expected life of 3 to 5 years (2002 3 to
5 years).
F-56
Movements in the options outstanding under the option schemes
for the year ended December 31, 2004, 15 month period
ended December 31, 2003 and the year ended
September 30, 2002, and the related weighted average option
prices are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels | |
|
InterContinental Hotels | |
|
|
Group employee savings | |
|
Group executive share | |
|
|
share schemes | |
|
option schemes | |
|
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
No. of | |
|
average | |
|
No. of | |
|
average | |
|
|
shares | |
|
option price | |
|
shares | |
|
option price | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(000) | |
|
(Pence) | |
|
(000) | |
|
(Pence) | |
Options outstanding at October 1, 2001
|
|
|
4,073 |
|
|
|
641.9 |
|
|
|
20,646 |
|
|
|
715.4 |
|
Granted
|
|
|
1,883 |
|
|
|
600.0 |
|
|
|
5,308 |
|
|
|
700.4 |
|
Exercised
|
|
|
(285 |
) |
|
|
474.7 |
|
|
|
(198 |
) |
|
|
600.3 |
|
Lapsed or canceled
|
|
|
(876 |
) |
|
|
673.9 |
|
|
|
(3,109 |
) |
|
|
720.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at September 30, 2002
|
|
|
4,795 |
|
|
|
629.5 |
|
|
|
22,647 |
|
|
|
707.7 |
|
Granted
|
|
|
|
|
|
|
|
|
|
|
658 |
|
|
|
527.5 |
|
Exercised
|
|
|
(31 |
) |
|
|
493.7 |
|
|
|
(24 |
) |
|
|
519.0 |
|
Lapsed or canceled
|
|
|
(969 |
) |
|
|
641.0 |
|
|
|
(163 |
) |
|
|
695.5 |
|
Transferred to MAB
|
|
|
|
|
|
|
|
|
|
|
(9,523 |
) |
|
|
712.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Six Continents PLC
|
|
|
3,795 |
|
|
|
627.7 |
|
|
|
13,595 |
|
|
|
695.8 |
|
Conversion into InterContinental Hotels Group PLC
share options
|
|
|
2,694 |
|
|
|
|
|
|
|
9,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rolled over InterContinental Hotels Group PLC share options
|
|
|
6,489 |
|
|
|
367.2 |
|
|
|
23,246 |
|
|
|
413.5 |
|
Granted
|
|
|
1,375 |
|
|
|
420.5 |
|
|
|
7,375 |
|
|
|
439.6 |
|
Exercised
|
|
|
(1,661 |
) |
|
|
364.8 |
|
|
|
(3,242 |
) |
|
|
375.7 |
|
Lapsed or canceled
|
|
|
(4,830 |
) |
|
|
368.0 |
|
|
|
(159 |
) |
|
|
433.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2003
|
|
|
1,373 |
|
|
|
420.5 |
|
|
|
27,220 |
|
|
|
424.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
6,951 |
|
|
|
494.2 |
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
(7,430 |
) |
|
|
408.2 |
|
Lapsed or canceled
|
|
|
(111 |
) |
|
|
420.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2004
|
|
|
1,262 |
|
|
|
420.5 |
|
|
|
26,741 |
|
|
|
447.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
12,569 |
|
|
|
426.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
19,998 |
|
|
|
419.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2002
|
|
|
384 |
|
|
|
665.9 |
|
|
|
4,052 |
|
|
|
848.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
Summarized information about options outstanding at
December 31, 2004 under the share option schemes is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding | |
|
|
|
|
| |
|
Options exercisable | |
|
|
|
|
Weighted | |
|
|
|
| |
|
|
|
|
average | |
|
Weighted | |
|
|
|
Weighted | |
|
|
Number | |
|
remaining | |
|
average | |
|
Number | |
|
average | |
Range of exercise prices (pence) |
|
outstanding | |
|
contract life | |
|
option price | |
|
exercisable | |
|
option price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(000) | |
|
(Years) | |
|
(Pence) | |
|
(000) | |
|
(Pence) | |
InterContinental Hotels Group employee savings share
schemes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420.5
|
|
|
1,262 |
|
|
|
2.8 |
|
|
|
420.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group executive share option
schemes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
308.5 to 353.8
|
|
|
2,801 |
|
|
|
5.3 |
|
|
|
343.3 |
|
|
|
2,801 |
|
|
|
343.3 |
|
353.9 to 498.0
|
|
|
23,333 |
|
|
|
9.8 |
|
|
|
440.3 |
|
|
|
9,161 |
|
|
|
440.9 |
|
498.1 to 593.3
|
|
|
607 |
|
|
|
3.3 |
|
|
|
593.3 |
|
|
|
607 |
|
|
|
593.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,741 |
|
|
|
7.3 |
|
|
|
319.1 |
|
|
|
12,569 |
|
|
|
426.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 29 Financial commitments
The Group has annual commitments under non cancelable operating
leases which expire as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
Properties | |
|
Other | |
|
Properties | |
|
Other | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Within one year
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
Between one and five years
|
|
|
11 |
|
|
|
5 |
|
|
|
10 |
|
|
|
5 |
|
After five years
|
|
|
35 |
|
|
|
1 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47 |
|
|
|
8 |
|
|
|
43 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments under non cancelable operating leases at
December 31, 2004 are as follows:
|
|
|
|
|
|
|
December 31, 2004 | |
|
|
| |
|
|
(£ million) | |
Due within one year
|
|
|
55 |
|
One to two years
|
|
|
51 |
|
Two to three years
|
|
|
47 |
|
Three to four years
|
|
|
38 |
|
Four to five years
|
|
|
31 |
|
Thereafter
|
|
|
884 |
|
|
|
|
|
|
|
|
1,106 |
|
|
|
|
|
There are a number of property and equipment leases used in the
Groups operations where, in addition to a specified
minimum rental, the leases provide for contingent rentals based
on percentages of revenue. The average remaining term of these
leases, which generally contain renewal options, is
approximately 12 years. No material restrictions or
guarantees exist in the Groups lease obligations.
F-58
Note 30 Contracts for expenditure on fixed
assets
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Contracts placed for expenditure on fixed assets not provided
for in the financial statements
|
|
|
53 |
|
|
|
63 |
|
|
|
|
|
|
|
|
Note 31 Contingencies
Contingent liabilities not provided for in the financial
statements relate to:
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Guarantees
|
|
|
9 |
|
|
|
11 |
|
|
|
|
|
|
|
|
In limited cases, the Group may provide performance guarantees
to third-party owners to secure management contracts. The
maximum exposure under such guarantees is
£115 million. It is the view of the directors that,
other than to the extent that liabilities have been provided for
in these financial statements, such guarantees are not expected
to result in financial loss to the Group.
As of December 31, 2004 the Group had outstanding letters
of credit of approximately £33 million mainly relating
to self-insurance programs.
The Group may guarantee loans made to facilitate third-party
ownership of hotels that the Group has an equity interest in and
manages. As of December 31, 2004 the Group was a guarantor
of loans which could reach a maximum of £15 million.
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.
Note 32 Companies Act 1985
These financial statements do not comprise the Companys
statutory accounts within the meaning of
Section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the year ended December 31, 2004,
15 month period December 31, 2003 and the year ended
September 30, 2002 have been delivered to the Registrar of
Companies for England and Wales. The auditors reports on
such accounts were unqualified.
Note 33 Post balance sheet events
On December 17, 2004, the Group announced the sale of
13 hotels, in the United States, Puerto Rico and Canada, to HPT.
The total consideration payable by HPT for the sales amounted to
$425 million, before transaction costs, equivalent to net
book value, of which $395 million was received upon the
main completion of the sale on February 16, 2005,
with the remaining $30 million to be received upon the
completion of the sale of the InterContinental hotel in Austin,
expected to be on or around June 1, 2005. The Group will
continue to manage the hotels (other than the InterContinental
in Puerto Rico) under a 25 year management contract with
HPT. The Group has two consecutive options to extend the
contracts for 15 years each, giving a total potential
contract length of up to 55 years. The InterContinental in
Puerto Rico has been leased back to the Group under a
25 year lease with two consecutive options to extend the
lease for 15 years each, giving a total potential lease
length of up to 55 years.
On February 28, 2005, IHG announced the acquisition by
Strategic Hotel Capital, Inc. of 85% interests in two hotels in
the United States. IHG will receive approximately
$287 million in cash before transaction costs, based upon a
total value for both hotels of $303.5 million,
$12 million in excess of net book value. This transaction
completed on April 1, 2005. IHG will continue to manage
these hotels under a 20 year management contract with three
options to extend for a further ten years each.
F-59
On March 10, 2005, IHG announced the sale of 73 hotels
in the United Kingdom. Proceeds totaled £1.0 billion
before transaction costs, £22 million below net book
value. This transaction is expected to complete in the second
quarter of 2005. IHG will continue to manage 63 of these hotels
under a 20 year management contract with two consecutive
options to extend the contract for a further five years each.
The remaining ten hotels will be under a temporary management
agreement with IHG.
Note 34 Fifteen months ended
December 31, 2003
As discussed in Note 1, during 2003 the Company changed its
fiscal year end to December 31 and thus its financial
statements for the prior fiscal period are presented for the
15 months ended December 31, 2003 as permitted by the
Companies Act 1985. In accordance with the transition period
reporting requirements of the US Securities and Exchange
Commission, an unaudited analysis of the financial statements
and notes thereto for this 15 month period showing the
three month period ended December 31, 2002 and the
12 month period ended December 31, 2003 is presented
below.
F-60
|
|
(a) |
Consolidated profit and loss account |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited three months ended | |
|
Unaudited 12 months ended | |
|
15 months ended | |
|
|
December 31, 2002(i) | |
|
December 31, 2003(i) | |
|
December 31, 2003(i) | |
|
|
| |
|
| |
|
| |
|
|
Before | |
|
|
|
Before | |
|
|
|
Before | |
|
|
|
|
exceptional | |
|
Exceptional | |
|
|
|
exceptional | |
|
Exceptional | |
|
|
|
exceptional | |
|
Exceptional | |
|
|
|
|
items | |
|
items | |
|
Total | |
|
items | |
|
items | |
|
Total | |
|
items | |
|
items | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million, except per ordinary share amounts) | |
Turnover
|
|
|
871 |
|
|
|
|
|
|
|
871 |
|
|
|
2,612 |
|
|
|
|
|
|
|
2,612 |
|
|
|
3,483 |
|
|
|
|
|
|
|
3,483 |
|
Analyzed as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
529 |
|
|
|
|
|
|
|
529 |
|
|
|
2,161 |
|
|
|
|
|
|
|
2,161 |
|
|
|
2,690 |
|
|
|
|
|
|
|
2,690 |
|
Discontinued operations
|
|
|
342 |
|
|
|
|
|
|
|
342 |
|
|
|
451 |
|
|
|
|
|
|
|
451 |
|
|
|
793 |
|
|
|
|
|
|
|
793 |
|
Cost of sales
|
|
|
(692 |
) |
|
|
|
|
|
|
(692 |
) |
|
|
(2,025 |
) |
|
|
(51 |
) |
|
|
(2,076 |
) |
|
|
(2,717 |
) |
|
|
(51 |
) |
|
|
(2,768 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross operating profit
|
|
|
179 |
|
|
|
|
|
|
|
179 |
|
|
|
587 |
|
|
|
(51 |
) |
|
|
536 |
|
|
|
766 |
|
|
|
(51 |
) |
|
|
715 |
|
Administrative expenses
|
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
(216 |
) |
|
|
|
|
|
|
(216 |
) |
|
|
(283 |
) |
|
|
|
|
|
|
(283 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
112 |
|
|
|
|
|
|
|
112 |
|
|
|
371 |
|
|
|
(51 |
) |
|
|
320 |
|
|
|
483 |
|
|
|
(51 |
) |
|
|
432 |
|
Analyzed as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
60 |
|
|
|
|
|
|
|
60 |
|
|
|
286 |
|
|
|
(51 |
) |
|
|
235 |
|
|
|
346 |
|
|
|
(51 |
) |
|
|
295 |
|
Discontinued operations
|
|
|
52 |
|
|
|
|
|
|
|
52 |
|
|
|
85 |
|
|
|
|
|
|
|
85 |
|
|
|
137 |
|
|
|
|
|
|
|
137 |
|
Non-operating exceptional items
|
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
(210 |
) |
|
|
(210 |
) |
|
|
|
|
|
|
(213 |
) |
|
|
(213 |
) |
Analyzed as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
(67 |
) |
|
Separation costs
|
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
(48 |
) |
|
|
(48 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(51 |
) |
|
Profit on disposal of fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
Provision against fixed asset investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
(167 |
) |
|
|
(167 |
) |
|
|
|
|
|
|
(170 |
) |
|
|
(170 |
) |
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41 |
) |
|
|
(41 |
) |
|
|
|
|
|
|
(41 |
) |
|
|
(41 |
) |
|
Loss on disposal of fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43 |
) |
|
|
(43 |
) |
|
|
|
|
|
|
(43 |
) |
|
|
(43 |
) |
Profit on ordinary activities before interest
|
|
|
112 |
|
|
|
(3 |
) |
|
|
109 |
|
|
|
371 |
|
|
|
(261 |
) |
|
|
110 |
|
|
|
483 |
|
|
|
(264 |
) |
|
|
219 |
|
Interest receivable
|
|
|
27 |
|
|
|
|
|
|
|
27 |
|
|
|
77 |
|
|
|
|
|
|
|
77 |
|
|
|
104 |
|
|
|
|
|
|
|
104 |
|
Interest payable and similar charges
|
|
|
(39 |
) |
|
|
|
|
|
|
(39 |
) |
|
|
(112 |
) |
|
|
|
|
|
|
(112 |
) |
|
|
(151 |
) |
|
|
|
|
|
|
(151 |
) |
Premium on early settlement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(136 |
) |
|
|
(136 |
) |
|
|
|
|
|
|
(136 |
) |
|
|
(136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/ (loss) on ordinary activities before taxation
|
|
|
100 |
|
|
|
(3 |
) |
|
|
97 |
|
|
|
336 |
|
|
|
(397 |
) |
|
|
(61 |
) |
|
|
436 |
|
|
|
(400 |
) |
|
|
36 |
|
Tax on profit/ (loss) on ordinary activities
|
|
|
(29 |
) |
|
|
|
|
|
|
(29 |
) |
|
|
(86 |
) |
|
|
132 |
|
|
|
46 |
|
|
|
(115 |
) |
|
|
132 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/ (loss) on ordinary activities after taxation
|
|
|
71 |
|
|
|
(3 |
) |
|
|
68 |
|
|
|
250 |
|
|
|
(265 |
) |
|
|
(15 |
) |
|
|
321 |
|
|
|
(268 |
) |
|
|
53 |
|
Minority equity interests
|
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
(30 |
) |
|
|
(34 |
) |
|
|
|
|
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available for shareholders
|
|
|
67 |
|
|
|
(3 |
) |
|
|
64 |
|
|
|
220 |
|
|
|
(265 |
) |
|
|
(45 |
) |
|
|
287 |
|
|
|
(268 |
) |
|
|
19 |
|
Dividends on equity shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(156 |
) |
|
|
|
|
|
|
(156 |
) |
|
|
(156 |
) |
|
|
|
|
|
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained for reinvestment in the business
|
|
|
67 |
|
|
|
(3 |
) |
|
|
64 |
|
|
|
64 |
|
|
|
(265 |
) |
|
|
(201 |
) |
|
|
131 |
|
|
|
(268 |
) |
|
|
(137 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
9.1 |
p |
|
|
(0.4 |
)p |
|
|
8.7 |
p |
|
|
30.0 |
p |
|
|
(36.1 |
)p |
|
|
(6.1 |
)p |
|
|
39.1 |
p |
|
|
(36.5 |
)p |
|
|
2.6 |
p |
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
8.7 |
p |
|
|
|
|
|
|
|
|
|
|
(6.1 |
)p |
|
|
|
|
|
|
|
|
|
|
2.6 |
p |
|
|
|
(i) |
|
Restated to show exceptional tax credits on a basis consistent
with 2004. This comprises prior year items which are exceptional
by their size or incidence. Also restated to present the period
ended December 31, 2003 on a consistent basis to the year
ended December 31, 2004. |
F-61
|
|
(b) |
Consolidated statement of total recognized gains and
losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Earnings available for shareholders
|
|
|
64 |
|
|
|
(45 |
) |
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
Reversal of previous revaluation gains due to impairment
|
|
|
|
|
|
|
(22 |
) |
|
|
(22 |
) |
Exchange differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill eliminated
|
|
|
|
|
|
|
(139 |
) |
|
|
(139 |
) |
|
Other assets and liabilities
|
|
|
9 |
|
|
|
70 |
|
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|
Other recognized gains and losses
|
|
|
9 |
|
|
|
(91 |
) |
|
|
(82 |
) |
|
|
|
|
|
|
|
|
|
|
Total recognized gains and losses for the period
|
|
|
73 |
|
|
|
(136 |
) |
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Note of historical cost Group profits and
losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Reported profit/ (loss) on ordinary activities before taxation
|
|
|
97 |
|
|
|
(61 |
) |
|
|
36 |
|
Realization of revaluation gains of previous periods
|
|
|
2 |
|
|
|
14 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
Historical cost profit/ (loss) on ordinary activities before
taxation
|
|
|
99 |
|
|
|
(47 |
) |
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
Historical cost profit/ (loss) retained after taxation, minority
equity interests and dividends
|
|
|
66 |
|
|
|
(187 |
) |
|
|
(121 |
) |
|
|
|
|
|
|
|
|
|
|
F-62
|
|
(d) |
Consolidated statement of cash flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating activities
|
|
|
164 |
|
|
|
631 |
|
|
|
795 |
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
(39 |
) |
|
|
(102 |
) |
|
|
(141 |
) |
Costs associated with new facilities
|
|
|
|
|
|
|
(20 |
) |
|
|
(20 |
) |
Premium on early settlement of debt
|
|
|
|
|
|
|
(136 |
) |
|
|
(136 |
) |
Dividends paid to minority shareholders
|
|
|
|
|
|
|
(22 |
) |
|
|
(22 |
) |
Interest received
|
|
|
35 |
|
|
|
76 |
|
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
Returns on investments and servicing of finance
|
|
|
(4 |
) |
|
|
(204 |
) |
|
|
(208 |
) |
|
|
|
|
|
|
|
|
|
|
UK corporation tax (paid)/ received
|
|
|
(14 |
) |
|
|
39 |
|
|
|
25 |
|
Overseas corporate tax paid
|
|
|
(14 |
) |
|
|
(7 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
Taxation
|
|
|
(28 |
) |
|
|
32 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
Paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible fixed assets
|
|
|
|
|
|
|
(10 |
) |
|
|
(10 |
) |
|
Tangible fixed assets
|
|
|
(127 |
) |
|
|
(348 |
) |
|
|
(475 |
) |
|
Fixed asset investments
|
|
|
(1 |
) |
|
|
(36 |
) |
|
|
(37 |
) |
Received:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible fixed assets
|
|
|
6 |
|
|
|
259 |
|
|
|
265 |
|
|
Fixed asset investments
|
|
|
2 |
|
|
|
7 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure and financial investment
|
|
|
(120 |
) |
|
|
(128 |
) |
|
|
(248 |
) |
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
|
(7 |
) |
|
|
(59 |
) |
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
Acquisitions and disposals
|
|
|
(7 |
) |
|
|
(59 |
) |
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
Equity dividends
|
|
|
|
|
|
|
(299 |
) |
|
|
(299 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flow
|
|
|
5 |
|
|
|
(27 |
) |
|
|
(22 |
) |
Management of liquid resources
|
|
|
43 |
|
|
|
(172 |
) |
|
|
(129 |
) |
Financing
|
|
|
15 |
|
|
|
191 |
|
|
|
206 |
|
|
|
|
|
|
|
|
|
|
|
Movement in cash and overdrafts
|
|
|
63 |
|
|
|
(8 |
) |
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2002 (unaudited) | |
|
|
| |
|
|
|
|
Total | |
|
|
|
Total | |
|
|
Americas | |
|
EMEA | |
|
Asia Pacific | |
|
Central | |
|
Hotels | |
|
Soft Drinks | |
|
Total | |
|
Discontinued | |
|
Group | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover
|
|
|
136 |
|
|
|
203 |
|
|
|
34 |
|
|
|
10 |
|
|
|
383 |
|
|
|
146 |
|
|
|
529 |
|
|
|
342 |
|
|
|
871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit after operating exceptional items
|
|
|
34 |
|
|
|
22 |
|
|
|
10 |
|
|
|
(18 |
) |
|
|
48 |
|
|
|
12 |
|
|
|
60 |
|
|
|
52 |
|
|
|
112 |
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before interest
|
|
|
34 |
|
|
|
22 |
|
|
|
10 |
|
|
|
(21 |
) |
|
|
45 |
|
|
|
12 |
|
|
|
57 |
|
|
|
52 |
|
|
|
109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 months ended December 31, 2003 (unaudited) | |
|
|
| |
|
|
|
|
Total | |
|
|
|
Total | |
|
|
Americas | |
|
EMEA | |
|
Asia Pacific | |
|
Central | |
|
Hotels | |
|
Soft Drinks | |
|
Total | |
|
Discontinued | |
|
Group | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover
|
|
|
525 |
|
|
|
807 |
|
|
|
114 |
|
|
|
41 |
|
|
|
1,487 |
|
|
|
674 |
|
|
|
2,161 |
|
|
|
451 |
|
|
|
2,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
161 |
|
|
|
92 |
|
|
|
12 |
|
|
|
(62 |
) |
|
|
203 |
|
|
|
83 |
|
|
|
286 |
|
|
|
85 |
|
|
|
371 |
|
Operating exceptional items
|
|
|
(9 |
) |
|
|
(41 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit after operating exceptional items
|
|
|
152 |
|
|
|
51 |
|
|
|
11 |
|
|
|
(62 |
) |
|
|
152 |
|
|
|
83 |
|
|
|
235 |
|
|
|
85 |
|
|
|
320 |
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization
|
|
|
(11 |
) |
|
|
(17 |
) |
|
|
(2 |
) |
|
|
(37 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48 |
) |
|
|
(48 |
) |
|
|
|
|
|
|
(48 |
) |
|
|
(41 |
) |
|
|
(89 |
) |
|
Profit/(loss) on disposal of fixed assets
|
|
|
10 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
(2 |
) |
|
|
2 |
|
|
Provision against fixed asset investment
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
(47 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/ (loss) on ordinary activities before interest
|
|
|
142 |
|
|
|
28 |
|
|
|
9 |
|
|
|
(194 |
) |
|
|
(15 |
) |
|
|
83 |
|
|
|
68 |
|
|
|
42 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15 months ended December 31, 2003 | |
|
|
| |
|
|
|
|
Total | |
|
|
|
Total | |
|
|
Americas | |
|
EMEA | |
|
Asia Pacific | |
|
Central | |
|
Hotels | |
|
Soft Drinks | |
|
Total | |
|
Discontinued | |
|
Group | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Turnover
|
|
|
661 |
|
|
|
1,010 |
|
|
|
148 |
|
|
|
51 |
|
|
|
1,870 |
|
|
|
820 |
|
|
|
2,690 |
|
|
|
793 |
|
|
|
3,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
195 |
|
|
|
114 |
|
|
|
22 |
|
|
|
(80 |
) |
|
|
251 |
|
|
|
95 |
|
|
|
346 |
|
|
|
137 |
|
|
|
483 |
|
Operating exceptional items
|
|
|
(9 |
) |
|
|
(41 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit after operating exceptional items
|
|
|
186 |
|
|
|
73 |
|
|
|
21 |
|
|
|
(80 |
) |
|
|
200 |
|
|
|
95 |
|
|
|
295 |
|
|
|
137 |
|
|
|
432 |
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization
|
|
|
(11 |
) |
|
|
(17 |
) |
|
|
(2 |
) |
|
|
(37 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
Separation costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(41 |
) |
|
|
(92 |
) |
|
Profit/(loss) on disposal of fixed assets
|
|
|
10 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
(2 |
) |
|
|
2 |
|
|
Provision against fixed asset investments
|
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
(47 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) on ordinary activities before interest
|
|
|
176 |
|
|
|
50 |
|
|
|
19 |
|
|
|
(215 |
) |
|
|
30 |
|
|
|
95 |
|
|
|
125 |
|
|
|
94 |
|
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover by geographic region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months ended | |
|
12 months ended | |
|
15 months ended | |
|
|
December 31, 2002 | |
|
December 31, 2003 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
| |
|
|
By | |
|
By | |
|
By | |
|
By | |
|
By | |
|
By | |
|
|
origin | |
|
destination | |
|
origin | |
|
destination | |
|
origin | |
|
destination | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
United Kingdom
|
|
|
598 |
|
|
|
598 |
|
|
|
1,533 |
|
|
|
1,526 |
|
|
|
2,131 |
|
|
|
2,124 |
|
Rest of Europe, the Middle East and Africa
|
|
|
95 |
|
|
|
95 |
|
|
|
411 |
|
|
|
418 |
|
|
|
506 |
|
|
|
513 |
|
United States of America
|
|
|
117 |
|
|
|
117 |
|
|
|
454 |
|
|
|
454 |
|
|
|
571 |
|
|
|
571 |
|
Rest of Americas
|
|
|
27 |
|
|
|
27 |
|
|
|
100 |
|
|
|
100 |
|
|
|
127 |
|
|
|
127 |
|
Asia Pacific
|
|
|
34 |
|
|
|
34 |
|
|
|
114 |
|
|
|
114 |
|
|
|
148 |
|
|
|
148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
871 |
|
|
|
871 |
|
|
|
2,612 |
|
|
|
2,612 |
|
|
|
3,483 |
|
|
|
3,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-64
|
|
|
Profit on ordinary activities before interest by geographic
region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
United Kingdom
|
|
|
67 |
|
|
|
50 |
|
|
|
117 |
|
Rest of Europe, the Middle East and Africa
|
|
|
8 |
|
|
|
(15 |
) |
|
|
(7 |
) |
United States of America
|
|
|
17 |
|
|
|
46 |
|
|
|
63 |
|
Rest of Americas
|
|
|
7 |
|
|
|
21 |
|
|
|
28 |
|
Asia Pacific
|
|
|
10 |
|
|
|
8 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109 |
|
|
|
110 |
|
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
(f) Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months ended | |
|
12 months ended | |
|
15 months ended | |
|
|
December 31, 2002 | |
|
December 31, 2003 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
| |
|
|
Continuing | |
|
Discontinued | |
|
Continuing | |
|
Discontinued | |
|
Continuing | |
|
Discontinued | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating profit is stated after charging:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff costs (see note (g))
|
|
|
173 |
|
|
|
89 |
|
|
|
642 |
|
|
|
109 |
|
|
|
815 |
|
|
|
198 |
|
Depreciation of tangible fixed assets
|
|
|
49 |
|
|
|
22 |
|
|
|
187 |
|
|
|
32 |
|
|
|
236 |
|
|
|
54 |
|
Impairment of tangible fixed assets
|
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
Amortization of goodwill
|
|
|
2 |
|
|
|
1 |
|
|
|
11 |
|
|
|
(1 |
) |
|
|
13 |
|
|
|
|
|
Hire of plant and machinery
|
|
|
4 |
|
|
|
8 |
|
|
|
14 |
|
|
|
9 |
|
|
|
18 |
|
|
|
17 |
|
Property rentals
|
|
|
14 |
|
|
|
10 |
|
|
|
51 |
|
|
|
14 |
|
|
|
65 |
|
|
|
24 |
|
Income from fixed asset investments
|
|
|
(1 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
Auditors remuneration paid to Ernst & Young
LLP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Audit fees
|
|
|
0.5 |
|
|
|
2.3 |
|
|
|
2.8 |
|
Audit related fees
|
|
|
3.4 |
|
|
|
3.8 |
|
|
|
7.2 |
|
Tax fees
|
|
|
0.3 |
|
|
|
0.9 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
|
|
7.0 |
|
|
|
11.2 |
|
|
|
|
|
|
|
|
|
|
|
F-65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Wages and salaries
|
|
|
231 |
|
|
|
653 |
|
|
|
884 |
|
Social security costs
|
|
|
22 |
|
|
|
74 |
|
|
|
96 |
|
Pensions
|
|
|
9 |
|
|
|
24 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
262 |
|
|
|
751 |
|
|
|
1,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Regular cost
|
|
|
9 |
|
|
|
24 |
|
|
|
33 |
|
Variations from regular cost
|
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(7 |
) |
Notional interest on prepayment
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
Pension cost in respect of the principal plans
|
|
|
6 |
|
|
|
16 |
|
|
|
22 |
|
Other plans
|
|
|
3 |
|
|
|
8 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
24 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
F-66
(h) Exceptional
items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited three months ended | |
|
Unaudited 12 months ended | |
|
15 months ended | |
|
|
December 31, 2002 | |
|
December 31, 2003 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
| |
|
|
Continuing | |
|
Discontinued | |
|
|
|
Continuing | |
|
Discontinued | |
|
|
|
Continuing | |
|
Discontinued | |
|
|
|
|
operations | |
|
operations | |
|
Total | |
|
operations | |
|
operations | |
|
Total | |
|
operations | |
|
operations | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hotels impairment charge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating exceptional items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of fundamental reorganization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
(67 |
) |
|
Separation costs
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
(48 |
) |
|
|
(41 |
) |
|
|
(89 |
) |
|
|
(51 |
) |
|
|
(41 |
) |
|
|
(92 |
) |
|
Profit/(loss) on disposal of fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
(2 |
) |
|
|
2 |
|
|
|
4 |
|
|
|
(2 |
) |
|
|
2 |
|
|
Provision against fixed asset investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
(167 |
) |
|
|
(43 |
) |
|
|
(210 |
) |
|
|
(170 |
) |
|
|
(43 |
) |
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total exceptional items before interest and taxation
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
(218 |
) |
|
|
(43 |
) |
|
|
(261 |
) |
|
|
(221 |
) |
|
|
(43 |
) |
|
|
(264 |
) |
Premium on early settlement of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(136 |
) |
|
|
|
|
|
|
(136 |
) |
|
|
(136 |
) |
|
|
|
|
|
|
(136 |
) |
Tax credit on above items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
28 |
|
|
|
64 |
|
|
|
36 |
|
|
|
28 |
|
|
|
64 |
|
Exceptional tax credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
68 |
|
|
|
68 |
|
|
|
|
|
|
|
68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total exceptional items after interest and taxation
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
(250 |
) |
|
|
(15 |
) |
|
|
(265 |
) |
|
|
(253 |
) |
|
|
(15 |
) |
|
|
(268 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Interest payable and similar charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans and overdrafts
|
|
|
9 |
|
|
|
29 |
|
|
|
38 |
|
|
Other
|
|
|
30 |
|
|
|
83 |
|
|
|
113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
112 |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
Interest receivable
|
|
|
27 |
|
|
|
77 |
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
|
F-67
(j) Tax on profit on
ordinary activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
Tax charge |
|
2002(i) | |
|
2003(i) | |
|
2003(i) | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
UK corporation tax at 30%:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
|
18 |
|
|
|
(14 |
) |
|
|
4 |
|
|
Prior years
|
|
|
(4 |
) |
|
|
(76 |
) |
|
|
(80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
(90 |
) |
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
Foreign tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
|
9 |
|
|
|
60 |
|
|
|
69 |
|
|
Prior years
|
|
|
(5 |
) |
|
|
(15 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
45 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
Total current tax
|
|
|
18 |
|
|
|
(45 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
Deferred tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of timing differences
|
|
|
11 |
|
|
|
19 |
|
|
|
30 |
|
|
Adjustments to estimated recoverable deferred tax assets
|
|
|
|
|
|
|
(11 |
) |
|
|
(11 |
) |
|
Prior years
|
|
|
|
|
|
|
(9 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
Total deferred tax
|
|
|
11 |
|
|
|
(1 |
) |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
Tax on profit on ordinary activities
|
|
|
29 |
|
|
|
(46 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
Further analyzed as tax relating to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before exceptional items
|
|
|
29 |
|
|
|
86 |
|
|
|
115 |
|
|
Exceptional items (see note (h)):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating
|
|
|
|
|
|
|
(64 |
) |
|
|
(64 |
) |
|
|
Exceptional tax credit
|
|
|
|
|
|
|
(68 |
) |
|
|
(68 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
(46 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
Footnotes on page F-69.
F-68
Tax reconciliations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002(i) | |
|
2003(i) | |
|
2003(i) | |
|
|
| |
|
| |
|
| |
|
|
(%) | |
Reconciliation of current tax rate
|
|
|
|
|
|
|
|
|
|
|
|
|
UK corporation tax standard rate
|
|
|
30.0 |
|
|
|
30.0 |
|
|
|
30.0 |
|
Permanent differences
|
|
|
1.8 |
|
|
|
(9.5 |
) |
|
|
20.7 |
|
Capital allowances in excess of depreciation
|
|
|
(3.5 |
) |
|
|
1.9 |
|
|
|
(12.6 |
) |
Other timing differences
|
|
|
(4.2 |
) |
|
|
55.3 |
|
|
|
(104.2 |
) |
Net effect of different rates of tax in overseas businesses
|
|
|
2.6 |
|
|
|
(23.4 |
) |
|
|
46.1 |
|
Adjustment to tax charge in respect of prior years
|
|
|
(9.8 |
) |
|
|
37.3 |
|
|
|
(88.9 |
) |
Other
|
|
|
0.8 |
|
|
|
|
|
|
|
2.0 |
|
Exceptional items
|
|
|
1.0 |
|
|
|
(17.3 |
) |
|
|
32.2 |
|
|
|
|
|
|
|
|
|
|
|
Effective current tax rate
|
|
|
18.7 |
|
|
|
74.3 |
|
|
|
(74.7 |
) |
|
|
|
|
|
|
|
|
|
|
Reconciliation of overall tax rate
|
|
|
|
|
|
|
|
|
|
|
|
|
UK corporation tax standard rate
|
|
|
30.0 |
|
|
|
30.0 |
|
|
|
30.0 |
|
Permanent differences
|
|
|
1.8 |
|
|
|
(9.5 |
) |
|
|
20.7 |
|
Net effect of different rates of tax in overseas businesses
|
|
|
2.6 |
|
|
|
(23.4 |
) |
|
|
46.1 |
|
Adjustment to tax charge in respect of prior years
|
|
|
(6.1 |
) |
|
|
58.7 |
|
|
|
(115.0 |
) |
Other
|
|
|
0.8 |
|
|
|
(1.3 |
) |
|
|
4.6 |
|
Exceptional items
|
|
|
1.0 |
|
|
|
21.6 |
|
|
|
(33.4 |
) |
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
30.1 |
|
|
|
76.1 |
|
|
|
(47.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Restated to show exceptional tax credits on a basis consistent
with 2004. This comprises prior year items which are exceptional
by their size or incidence. |
Analysis of tax charge/(credit)
on continuing operations in accordance with US GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Current taxes
|
|
|
6 |
|
|
|
(54 |
) |
|
|
(48 |
) |
Deferred taxes
|
|
|
8 |
|
|
|
(6 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
(60 |
) |
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
F-69
Reconciliation of UK statutory
tax rate to US GAAP tax charge on income from continuing
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(%) | |
UK corporate tax standard rate
|
|
|
30.0 |
|
|
|
30.0 |
|
|
|
30.0 |
|
Permanent differences
|
|
|
3.0 |
|
|
|
8.0 |
|
|
|
(17.8 |
) |
Net effect of different rates of tax in overseas businesses
|
|
|
5.2 |
|
|
|
(37.1 |
) |
|
|
178.5 |
|
Adjustment to tax charge in respect of prior periods
|
|
|
(12.5 |
) |
|
|
124.6 |
|
|
|
(574.2 |
) |
Other
|
|
|
2.0 |
|
|
|
(1.5 |
) |
|
|
0.6 |
|
Exceptional items
|
|
|
2.1 |
|
|
|
33.9 |
|
|
|
(128.2 |
) |
|
|
|
|
|
|
|
|
|
|
Effective current tax rate on continuing operations
|
|
|
29.8 |
|
|
|
157.9 |
|
|
|
(511.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(k) Cash flow from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Operating profit before exceptional items
|
|
|
112 |
|
|
|
371 |
|
|
|
483 |
|
Depreciation and amortization
|
|
|
74 |
|
|
|
229 |
|
|
|
303 |
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, taxation, depreciation and
amortization and exceptional items
|
|
|
186 |
|
|
|
600 |
|
|
|
786 |
|
Other non-cash items
|
|
|
1 |
|
|
|
(3 |
) |
|
|
(2 |
) |
(Increase)/decrease in stocks
|
|
|
(13 |
) |
|
|
12 |
|
|
|
(1 |
) |
(Increase)/decrease in debtors
|
|
|
(18 |
) |
|
|
8 |
|
|
|
(10 |
) |
Increase in creditors
|
|
|
10 |
|
|
|
59 |
|
|
|
69 |
|
Provisions expended
|
|
|
(2 |
) |
|
|
(8 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
Operating activities before expenditure relating to exceptional
items
|
|
|
164 |
|
|
|
668 |
|
|
|
832 |
|
Cost of fundamental reorganization
|
|
|
|
|
|
|
(37 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
164 |
|
|
|
631 |
|
|
|
795 |
|
Net capital expenditure
|
|
|
(120 |
) |
|
|
(128 |
) |
|
|
(248 |
) |
|
|
|
|
|
|
|
|
|
|
Operating cash flow
|
|
|
44 |
|
|
|
503 |
|
|
|
547 |
|
|
|
|
|
|
|
|
|
|
|
F-70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
|
| |
|
|
|
|
Current | |
|
|
|
|
Cash and | |
|
asset | |
|
|
|
|
overdrafts | |
|
investments | |
|
Borrowings | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
At October 1, 2002
|
|
|
18 |
|
|
|
218 |
|
|
|
(1,413 |
) |
|
|
(1,177 |
) |
Net cash flow
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Management of liquid resources and financing
|
|
|
58 |
|
|
|
(43 |
) |
|
|
(15 |
) |
|
|
|
|
Exchange and other adjustments
|
|
|
|
|
|
|
20 |
|
|
|
10 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2002
|
|
|
81 |
|
|
|
195 |
|
|
|
(1,418 |
) |
|
|
(1,142 |
) |
Net cash flow
|
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
(27 |
) |
Management of liquid resources and financing
|
|
|
19 |
|
|
|
172 |
|
|
|
404 |
|
|
|
595 |
|
Separation of MAB
|
|
|
(7 |
) |
|
|
(7 |
) |
|
|
4 |
|
|
|
(10 |
) |
Exchange and other adjustments
|
|
|
(16 |
) |
|
|
17 |
|
|
|
14 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
50 |
|
|
|
377 |
|
|
|
(996 |
) |
|
|
(569 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(m) Management of
liquid resources and financing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
New borrowings
|
|
|
1,598 |
|
|
|
17,074 |
|
|
|
18,672 |
|
Other borrowings repaid
|
|
|
(1,583 |
) |
|
|
(17,478 |
) |
|
|
(19,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
(404 |
) |
|
|
(389 |
) |
Debt assumed by MAB
|
|
|
|
|
|
|
577 |
|
|
|
577 |
|
Ordinary shares issued by InterContinental Hotels Group PLC
|
|
|
|
|
|
|
18 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
Financing
|
|
|
15 |
|
|
|
191 |
|
|
|
206 |
|
Movement in liquid resources
|
|
|
43 |
|
|
|
(172 |
) |
|
|
(129 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
58 |
|
|
|
19 |
|
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
F-71
|
|
|
(n) Net capital expenditure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Hotels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
14 |
|
|
|
59 |
|
|
|
73 |
|
|
EMEA
|
|
|
54 |
|
|
|
183 |
|
|
|
237 |
|
|
Asia Pacific
|
|
|
4 |
|
|
|
39 |
|
|
|
43 |
|
|
Central
|
|
|
7 |
|
|
|
17 |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
298 |
|
|
|
377 |
|
Hotels disposal proceeds
|
|
|
(2 |
) |
|
|
(253 |
) |
|
|
(255 |
) |
|
|
|
|
|
|
|
|
|
|
Hotels net capital expenditure
|
|
|
77 |
|
|
|
45 |
|
|
|
122 |
|
Soft Drinks
|
|
|
10 |
|
|
|
55 |
|
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group PLC
|
|
|
87 |
|
|
|
100 |
|
|
|
187 |
|
Discontinued operations
|
|
|
33 |
|
|
|
28 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120 |
|
|
|
128 |
|
|
|
248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Hotels
|
|
|
28 |
|
|
|
308 |
|
|
|
336 |
|
Soft Drinks
|
|
|
(12 |
) |
|
|
71 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
InterContinental Hotels Group PLC
|
|
|
16 |
|
|
|
379 |
|
|
|
395 |
|
Discontinued operations
|
|
|
28 |
|
|
|
124 |
|
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
503 |
|
|
|
547 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share is calculated by dividing the
earnings available to shareholders of £64 million for
the three months ended December 31, 2002,
£45 million loss for the 12 months ended
December 31, 2003 and £19 million for the
15 months ended December 31, 2003, by
731 million, 733 million and 733 million
respectively, being the weighted average number of 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. The resultant
number of shares is 731 million for the three months ended
December 31, 2002, 733 million for the 12 months
ended December 31, 2003 and 733 million for the
15 months ended December 31, 2003.
F-72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK pension benefits | |
|
|
| |
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Service cost
|
|
|
8 |
|
|
|
24 |
|
|
|
32 |
|
Interest cost
|
|
|
18 |
|
|
|
35 |
|
|
|
53 |
|
Expected return on plan assets
|
|
|
(17 |
) |
|
|
(32 |
) |
|
|
(49 |
) |
Net amortization and deferral
|
|
|
5 |
|
|
|
9 |
|
|
|
14 |
|
Cost of contractual benefits recognized
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
|
14 |
|
|
|
38 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US pension benefits | |
|
|
| |
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Interest cost
|
|
|
2 |
|
|
|
5 |
|
|
|
7 |
|
Expected return on plan assets
|
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
Recognized net actuarial gain
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
|
1 |
|
|
|
3 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US pension benefits | |
|
|
| |
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
ended | |
|
ended | |
|
ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2002 | |
|
2003 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Interest cost
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 35 |
Differences between United Kingdom and United States
Generally Accepted Accounting Principles |
The Group financial statements are prepared in accordance with
accounting principles generally accepted in the United Kingdom
(UK GAAP) which differ from those generally accepted
in the United States (US GAAP). The significant
differences, as they apply to the Group, are summarized below.
This US GAAP information provides a reconciliation between
earnings available for shareholders under UK GAAP and net income
under US GAAP and between shareholders funds under UK GAAP
and shareholders equity under US GAAP, respectively.
During 2003, the Company changed its fiscal year to
December 31 and thus its financial statements are presented
for the 15 months ended December 31, 2003 as permitted
by the Companies Act 1985. In accordance with the transition
reporting period reporting requirements of the US Securities and
Exchange Commission, an unaudited analysis of the financial
statements and notes thereto for this 15 month period
showing the three-month period ended December 31, 2002 and
the 12 month period ended December 31, 2003 is
presented in Note 34. The unaudited analysis of the
significant adjustments for the purposes of US GAAP for the
15 month period is set out below.
F-73
Under UK GAAP, prior to October 1, 1998, goodwill arising
on acquisitions was eliminated against reserves. Since
October 1, 1998, acquired goodwill has been capitalized and
amortized over a period not exceeding 20 years. On disposal
of a business, the profit or loss on disposal is determined
after incorporating the attributable amount of any purchased
goodwill, including any previously written off to reserves.
Under US GAAP, goodwill arising on acquisitions prior to
July 1, 2001 would be capitalized and amortized over its
estimated useful life, not exceeding 40 years.
For the purposes of US GAAP, the Group adopted Statement of
Financial Accounting Standards (FAS) 142
Goodwill and Other Intangible Assets on
October 1, 2002 and from that date goodwill and indefinite
life intangible assets, including that which arose in the period
from July 1, 2001 would not be amortized but would be
reviewed annually for impairment.
Under US GAAP, separately identified definite life intangible
assets arising on acquisitions would be capitalized and
amortized over their useful lives. Under UK GAAP, these assets
are included within goodwill.
Under UK GAAP, where purchase consideration is contingent on a
future event, the cost of acquisition includes a reasonable
estimate of the amount expected to be payable in the future.
Under US GAAP, contingent consideration is not recognized until
the related contingencies are resolved.
Under UK GAAP, goodwill is reviewed for potential impairment
where there is an indicator that impairment may have occurred.
The impairment is measured by comparing the carrying value of
goodwill for each income-generating unit (IGU) with
the higher of net realizable value and value in use. Under
US GAAP, goodwill impairment reviews are also conducted
when an indicator of impairment exists, in addition to an annual
goodwill impairment test required by FAS 142. Any
impairment is measured by comparing the carrying value of each
reporting unit with its fair value. Where the carrying value,
including any separately identified intangible assets, is
greater than the fair value, the impairment loss is based on the
excess of the carrying value of goodwill over the implied fair
value of the goodwill. Where reporting units identified under US
GAAP differ from IGUs identified under UK GAAP, a reconciling
item may arise.
Prior to October 1, 1999, the Groups properties were
valued from time to time by professionally qualified external
valuers. Book values were adjusted to accord with the
valuations, except where a directors valuation was deemed
more appropriate. Under US GAAP, revaluations would not have
been permitted.
Depreciation is based on the book value of assets, including
revaluation where appropriate. Prior to October 1, 1999,
freehold pubs and hotels were not depreciated under UK GAAP, as
any charge would have been immaterial given that such properties
were maintained, as a matter of policy, by a program of repair
and maintenance such that their residual values were at least
equal to their book values. Following the introduction of
FRS 15, which was implemented by the Group with effect from
October 1, 1999, all properties are depreciated under UK
GAAP. There is now no difference between UK GAAP and US GAAP
with regard to depreciation policies.
Under UK GAAP, the impairment of tangible fixed assets is
measured by reference to discounted cash flows. Under US GAAP,
if the carrying value of assets is supported by undiscounted
cash flows, there is no impairment.
The Group recognizes a profit on disposal of fixed assets
provided substantially all the risks and rewards of ownership
have transferred. For the purposes of US GAAP, the Group would
account for sales of real estate in accordance with FAS 66
Accounting for Sales of Real Estate. If there is a
significant continuing involvement with the property, any gain
on sale is deferred and is recognised over the life of the
long-term management contract retained on the property. In
circumstances where a return of the buyers investment is
guaranteed, a sale is not recognized and the transaction would
be accounted for as a leasing arrangement.
F-74
Under UK GAAP there is no held for sale definition. Under US
GAAP, assets are classified as held for sale when the criteria
under FAS 144 Accounting for the impairment or
disposal of long-lived assets are met. Assets classified
as held for sale are recorded at the lower of carrying value or
estimated fair value, less estimated costs to sell. Depreciation
is no longer charged.
Fixed asset investments are stated at cost less any provision
for diminution in value. Under US GAAP, these investments are
recorded at market value and unrealized gains and losses are
reported in other comprehensive income except for other than
temporary losses which are recognized in the profit and loss
account.
The Group provides for the cost of retirement benefits based
upon consistent percentages of employees pensionable pay
as recommended by independent qualified actuaries. Under US
GAAP, the projected benefit obligation (pension liability) in
respect of the Groups principal pension plans would be
matched against the fair value of the plans assets and
would be adjusted to reflect any unrecognized obligations or
assets in determining the pension cost or credit for the year.
At December 31, 2004, the accumulated benefit obligations
exceeded the fair value of the plans assets. In these
circumstances, US GAAP would require the recognition of the
difference as a balance sheet liability and the elimination of
any amounts previously recognized as a prepaid pension cost. An
equal amount, but not exceeding the amount of unrecognized past
service cost, would be recognized as an intangible asset with
the balance reported in other comprehensive income.
The Group charges against earnings the cost of shares acquired
to settle awards under certain incentive schemes. The charge is
based on an apportionment of the cost of shares over the period
of the scheme. Prior to Separation, for the purposes of US GAAP,
the Group accounted for those plans under the recognition and
measurement provisions of Accounting Principles Board
(APB) Opinion 25 Accounting for Stock Issued
to Employees and related interpretations. Under
APB 25 these awards would be accounted for as variable
plans and the charge would be based on the intrinsic value of
the shares using the share price at the balance sheet date.
Effective from the date of Separation, the Group adopted the
preferable fair value recognition provisions of FAS 123
Accounting for Stock-Based Compensation. The Group
selected the modified prospective method of adoption described
in FAS 148 Accounting for Stock-Based
Compensation Transition and Disclosure.
Compensation costs recognized since Separation are the same as
those which would have been recognized had the fair value method
of FAS 123 been applied from its original effective date.
In accordance with the modified prospective method of adoption,
results for years prior to 2002 have not been restated.
The Group provides certain compensation arrangements in the
United States through a rabbi trust. Under UK GAAP, the net
deficit is recorded as a provision in the accounts and the net
change in the underlying value of the assets and liabilities is
recorded as a charge (or credit) to the profit and loss account.
Under US GAAP, the marketable securities held by the rabbi trust
would be accounted for in accordance with FAS 115
Accounting for certain investments in Debt and Equity
Securities. The trust is shown gross in the balance sheet.
The marketable securities held by the trust are recorded at
market value and unrealised gains and losses are reported in
other comprehensive income except for other than temporary which
are recognised in the profit and loss account.
F-75
|
|
|
Derivative instruments and hedging |
The Group enters into derivative instruments to limit its
exposure to interest rate and foreign exchange risk. Under UK
GAAP, these instruments are measured at cost and accounted for
as hedges, whereby gains and losses are deferred until the
underlying transaction occurs. Under US GAAP, all derivative
instruments (including those embedded in other contracts) are
recognized on the balance sheet at their fair values. Changes in
fair value would be recognized in net income unless specific
hedge criteria are met. If a derivative qualifies for hedge
accounting as defined under US GAAP, changes in fair value are
recognized periodically in net income or in shareholders
equity as a component of other comprehensive income depending on
whether the derivative qualifies as a fair value or cash flow
hedge. Substantially all derivatives held by the Group during
the year did not qualify for hedge accounting under US GAAP.
Under UK GAAP, a provision for loss on disposal is recorded for
the difference between the net asset value to be sold and the
expected proceeds. Under US GAAP, the provision would be
adjusted to remove the impact of revaluation adjustments and to
include the effect of fully providing for the difference between
the book and tax basis of assets and liabilities.
The Group provides for deferred taxation in respect of timing
differences, subject to certain exceptions, between the
recognition of gains and losses in the financial statements and
for tax purposes. Timing differences recognized, include
accelerated capital allowances, unrelieved tax losses and
short-term timing differences. Under US GAAP, deferred taxation
would be computed on all temporary differences between the tax
bases and book values of assets and liabilities which will
result in taxable or tax deductible amounts arising in future
years. Deferred taxation assets under UK GAAP and US GAAP are
recognized only to the extent that it is more likely than not
that they will be realized.
The Group gives guarantees in connection with obtaining
long-term management contracts. Under UK GAAP, a contingent
liability under such guarantees is not recognized unless it is
probable that it will result in a future loss to the Group. For
the purposes of US GAAP, under FASB Interpretation
(FIN) 45 Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Direct Guarantees of
Indebtedness of Others in the Year, at the inception of
guarantees issued after December 31, 2002, the Group would
record the fair value of the guarantee as an asset and a
liability, which are amortized over the life of the contract.
Under UK GAAP, operations are classified as discontinued when
the sale or termination of operations is completed by the
balance sheet date, or before approval of the financial
statements. In addition, the operations concerned must have a
material effect on the nature and focus of operations resulting
in either a withdrawal from a particular class of business or
geographic market or a material reduction in turnover in a
continuing market. Under US GAAP, operations are classified as
discontinued when they are classified as held for sale and when
the Group no longer believes it will have a significant
continuing involvement.
|
|
|
Classification of borrowings |
Under US GAAP the amounts shown as repayable after one year for
unsecured bank loans and overdrafts drawn under or supported by
bank facilities with maturities of up to five years and
amounting to £1,014 million (2003
£489 million) would be classified as current
liabilities.
F-76
Final ordinary dividends are provided for in the year in respect
of which they are proposed by the Board for approval by the
shareholders. Under US GAAP, dividends would not be provided for
until the year in which they are declared.
Reimbursements
Under UK GAAP, reimbursements of costs incurred on managed
hotel properties are not reflected in the profit and loss
accounts. These costs primarily relate to payroll costs where
the Group is the employer. Reimbursements are made based upon
costs incurred with no added margin. For purposes of
US GAAP, such reimbursements would be included in net sales
and operating expenses.
Certain exceptional items are shown on the face of the profit
and loss account statement after operating profit. Under US
GAAP, these items would be classified as operating profit or
expenses.
Exceptional items for the year ended December 31, 2004 and
the 15 and 12 months ended December 31, 2003 include
restructuring charges associated with the fundamental
reorganization within the Hotels business which is an expressly
permitted exceptional item in accordance with FRS 3 under
UK GAAP.
F-77
|
|
|
Net income/(loss) in accordance with US GAAP |
The significant adjustments required to convert earnings
available for shareholders in accordance with UK GAAP to net
income/ (loss) in accordance with US GAAP are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million, except per ADS amounts) | |
Earnings available for shareholders in accordance with UK
GAAP
|
|
|
299 |
|
|
|
64 |
|
|
|
(45 |
) |
|
|
19 |
|
|
|
457 |
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible fixed assets
|
|
|
7 |
|
|
|
(4 |
) |
|
|
(5 |
) |
|
|
(9 |
) |
|
|
(105 |
) |
|
Impairment of intangible fixed assets on adoption of FAS 142
|
|
|
|
|
|
|
(712 |
) |
|
|
|
|
|
|
(712 |
) |
|
|
|
|
|
Impairment of tangible fixed assets
|
|
|
10 |
|
|
|
|
|
|
|
45 |
|
|
|
45 |
|
|
|
77 |
|
|
Disposal of tangible fixed assets
|
|
|
5 |
|
|
|
3 |
|
|
|
5 |
|
|
|
8 |
|
|
|
6 |
|
|
Depreciation of tangible fixed assets
|
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
|
|
|
Deferred revenue
|
|
|
5 |
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
Gain on held for sale equity investment
|
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension costs
|
|
|
(15 |
) |
|
|
(9 |
) |
|
|
(14 |
) |
|
|
(23 |
) |
|
|
(21 |
) |
|
Staff costs
|
|
|
(2 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
(6 |
) |
|
|
|
|
|
Change in fair value of derivatives(i)
|
|
|
52 |
|
|
|
7 |
|
|
|
26 |
|
|
|
33 |
|
|
|
79 |
|
|
Provisions
|
|
|
69 |
|
|
|
(1 |
) |
|
|
3 |
|
|
|
2 |
|
|
|
|
|
|
Deferred taxation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on above adjustments
|
|
|
(3 |
) |
|
|
2 |
|
|
|
4 |
|
|
|
6 |
|
|
|
(4 |
) |
|
|
methodology
|
|
|
(59 |
) |
|
|
(2 |
) |
|
|
14 |
|
|
|
12 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37 |
|
|
|
(716 |
) |
|
|
71 |
|
|
|
(645 |
) |
|
|
39 |
|
|
Minority share of above adjustments
|
|
|
4 |
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
|
|
(716 |
) |
|
|
74 |
|
|
|
(642 |
) |
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) in accordance with US GAAP
|
|
|
340 |
|
|
|
(652 |
) |
|
|
29 |
|
|
|
(623 |
) |
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See page F-79 for footnotes.
F-78
The condensed consolidated income statement presented below
reflects the adjustments to attributable profit for the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million, except per ADS amounts) | |
Net sales
|
|
|
2,377 |
|
|
|
532 |
|
|
|
2,224 |
|
|
|
2,756 |
|
|
|
2,189 |
|
Operating and administrative expense
|
|
|
(2,055 |
) |
|
|
(483 |
) |
|
|
(2,104 |
) |
|
|
(2,587 |
) |
|
|
(1,900 |
) |
Interest expense, net
|
|
|
(33 |
) |
|
|
(2 |
) |
|
|
(158 |
) |
|
|
(160 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before income tax expense and minority interest
|
|
|
289 |
|
|
|
47 |
|
|
|
(38 |
) |
|
|
9 |
|
|
|
272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax credit/(expense)
|
|
|
53 |
|
|
|
(14 |
) |
|
|
60 |
|
|
|
46 |
|
|
|
(87 |
) |
Minority interest
|
|
|
(24 |
) |
|
|
(4 |
) |
|
|
(27 |
) |
|
|
(31 |
) |
|
|
(22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before cumulative effect on
prior years of change in accounting principle
|
|
|
318 |
|
|
|
29 |
|
|
|
(5 |
) |
|
|
24 |
|
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Result for period, net of tax(iv)(vi)
|
|
|
1 |
|
|
|
31 |
|
|
|
34 |
|
|
|
65 |
|
|
|
165 |
|
Surplus on disposal, net of tax(v)(vii)
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
31 |
|
|
|
34 |
|
|
|
65 |
|
|
|
336 |
|
Cumulative effect on prior years of adoption of FAS 142
|
|
|
|
|
|
|
(712 |
) |
|
|
|
|
|
|
(712 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
340 |
|
|
|
(652 |
) |
|
|
29 |
|
|
|
(623 |
) |
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per ordinary share and American Depositary
Share(ii) basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before cumulative effect on prior years of change
in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total continuing operations
|
|
|
44.8p |
|
|
|
4.0p |
|
|
|
(0.6 |
)p |
|
|
3.3p |
|
|
|
22.3p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total discontinued operations
|
|
|
3.1p |
|
|
|
4.2p |
|
|
|
4.6p |
|
|
|
8.9p |
|
|
|
46.0p |
|
Cumulative effect on prior years of adoption of FAS 142
|
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
47.9p |
|
|
|
(88.9 |
)p |
|
|
4.0p |
|
|
|
(84.9 |
)p |
|
|
68.3p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted(iii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) Before cumulative effect on prior years of change
in accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total continuing operations
|
|
|
42.6p |
|
|
|
4.0p |
|
|
|
(0.6 |
)p |
|
|
3.3p |
|
|
|
22.2p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total discontinued operations
|
|
|
3.1p |
|
|
|
4.2p |
|
|
|
4.6p |
|
|
|
8.9p |
|
|
|
45.8p |
|
Cumulative effect on prior years of adoption of FAS 142
|
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
(97.1 |
)p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
45.7p |
|
|
|
(88.9 |
)p |
|
|
4.0p |
|
|
|
(84.9 |
)p |
|
|
68.0p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
Comprises net gains in the fair value of derivatives that do not
qualify for hedge accounting of £50 million (2003
£28 million, 2002 £75 million) and net gains
reclassified from other comprehensive income of
£2 million (2003 £5 million, 2002
£4 million). |
|
(ii) |
Calculated by dividing net income/(loss) in accordance with US
GAAP of £340 million income (2003
£623 million loss, 2002 £499 million
income), by 710 million (2002 733 million, 2002
731 million) shares, being the weighted average number of
ordinary shares in issue during the period. Each American
Depositary Share represents one ordinary share. |
|
(iii) |
Calculated by adjusting basic net income/(loss) in accordance
with US GAAP of £329 million income to reflect both
the future compensation on share-based payments and the notional
exercise of the |
F-79
|
|
|
weighted average number of dilutive ordinary share options
outstanding during the period. The resulting weighted average
number of ordinary shares is 720 million (2003
733 million, 2002 734 million). |
|
(iv) |
Discontinued operations relate to 11 hotels in 2004, 2003 and
2002, Mitchells & Butlers plc for 2003 and 2002 and
Bass Brewers in fiscal 2002. |
|
(v) |
Relates to profit on disposal of Bass Brewers relating to the
finalization of completion accounts and the release of prior
over provisions for tax. |
|
(vi) |
Tax for the year ended December 31, 2004 of
£1 million (15 months ended December 31,
2003 of £11 million charge, 12 months ended
December 31, 2003 (unaudited) of £4 million
credit, three months ended December 31, 2002
(unaudited) of £15 million charge, year ended
September 30, 2002 of £76 million charge). |
|
(vii) |
Tax for the year ended December 31, 2004 of
£3 million credit (15 months ended
December 31, 2003 of £nil million, 12 months
ended December 31, 2003 (unaudited) of
£nil million, three months ended December 31,
2002 (unaudited) of £nil million, year ended
September 30, 2002 of £114 million credit). |
|
|
|
Comprehensive income/(loss) |
Comprehensive income under US GAAP is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Net income/(loss) in accordance with US GAAP
|
|
|
340 |
|
|
|
(652 |
) |
|
|
29 |
|
|
|
(623 |
) |
|
|
499 |
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to MAB of minimum pension liability on April 1,
2003, net of tax of £108 million
|
|
|
|
|
|
|
|
|
|
|
253 |
|
|
|
253 |
|
|
|
|
|
Minimum pension liability, net of tax of £1 million
(2003 £22 million, 2002 £108 million)
|
|
|
8 |
|
|
|
(37 |
) |
|
|
(14 |
) |
|
|
(51 |
) |
|
|
(253 |
) |
Change in valuation of marketable securities, net of tax of
£3 million (2003 and 2002 £nil million)
|
|
|
29 |
|
|
|
(9 |
) |
|
|
40 |
|
|
|
31 |
|
|
|
(1 |
) |
Change in fair value of derivatives, net of tax of
£nil million (2003 £1 million, 2002
£1 million)
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(3 |
) |
Currency translation differences
|
|
|
74 |
|
|
|
(21 |
) |
|
|
(99 |
) |
|
|
(120 |
) |
|
|
(107 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109 |
|
|
|
(68 |
) |
|
|
177 |
|
|
|
109 |
|
|
|
(364 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income/(loss) in accordance with US GAAP
|
|
|
449 |
|
|
|
(720 |
) |
|
|
206 |
|
|
|
(514 |
) |
|
|
135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-80
Movements in other comprehensive income amounts (net of related
tax) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum | |
|
Change in | |
|
Derivative | |
|
|
|
|
|
|
pension | |
|
valuation of | |
|
financial | |
|
Currency | |
|
|
|
|
liability | |
|
marketable | |
|
instruments | |
|
translation | |
|
|
|
|
adjustment | |
|
securities | |
|
gains/(losses) | |
|
differences | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
At October 1, 2001
|
|
|
|
|
|
|
(28 |
) |
|
|
11 |
|
|
|
237 |
|
|
|
220 |
|
Movement in the year
|
|
|
(253 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(107 |
) |
|
|
(364 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2002
|
|
|
(253 |
) |
|
|
(29 |
) |
|
|
8 |
|
|
|
130 |
|
|
|
(144 |
) |
Movement in the three months to
December 31, 2002 (unaudited)
|
|
|
(37 |
) |
|
|
(9 |
) |
|
|
(1 |
) |
|
|
(21 |
) |
|
|
(68 |
) |
Movement in the 12 months to
December 31, 2003 (unaudited)
|
|
|
239 |
|
|
|
40 |
|
|
|
(3 |
) |
|
|
(99 |
) |
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2003
|
|
|
(51 |
) |
|
|
2 |
|
|
|
4 |
|
|
|
10 |
|
|
|
(35 |
) |
Movement in the year
|
|
|
8 |
|
|
|
29 |
|
|
|
(2 |
) |
|
|
74 |
|
|
|
109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2004
|
|
|
(43 |
) |
|
|
31 |
|
|
|
2 |
|
|
|
84 |
|
|
|
74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-81
|
|
|
Shareholders equity in accordance with US
GAAP |
The significant adjustments required to convert
shareholders funds in accordance with UK GAAP to
shareholders equity in accordance with US GAAP are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Shareholders funds in accordance with UK GAAP
|
|
|
1,977 |
|
|
|
2,554 |
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Intangible fixed assets:
|
|
|
|
|
|
|
|
|
|
|
Cost: goodwill
|
|
|
781 |
|
|
|
837 |
|
|
|
other
|
|
|
689 |
|
|
|
843 |
|
|
|
Accumulated amortization
|
|
|
(245 |
) |
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
|
1,225 |
|
|
|
1,423 |
|
|
Intangible asset minimum pension liability
|
|
|
3 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
1,228 |
|
|
|
1,429 |
|
|
Tangible fixed assets:
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
(82 |
) |
|
|
(68 |
) |
|
|
Assets held for sale
|
|
|
(300 |
) |
|
|
|
|
|
|
Accumulated depreciation
|
|
|
60 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
(322 |
) |
|
|
(35 |
) |
|
Fixed asset investments:
|
|
|
|
|
|
|
|
|
|
|
Investments and advances
|
|
|
3 |
|
|
|
2 |
|
|
|
Assets held for sale
|
|
|
300 |
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Pension prepayment
|
|
|
(52 |
) |
|
|
(47 |
) |
|
|
Other debtors
|
|
|
22 |
|
|
|
22 |
|
|
|
Derivatives
|
|
|
9 |
|
|
|
4 |
|
|
Creditors: amounts falling due within one year:
|
|
|
|
|
|
|
|
|
|
|
Other creditors
|
|
|
5 |
|
|
|
(2 |
) |
|
|
Proposed dividend of parent company
|
|
|
62 |
|
|
|
70 |
|
|
|
Proposed dividend for minority shareholders
|
|
|
19 |
|
|
|
16 |
|
|
|
Derivatives
|
|
|
(1 |
) |
|
|
(6 |
) |
|
Creditors: amounts falling due after one year:
|
|
|
|
|
|
|
|
|
|
|
Other creditors
|
|
|
(99 |
) |
|
|
(114 |
) |
|
|
Derivatives
|
|
|
(2 |
) |
|
|
(24 |
) |
|
Provisions for liabilities and charges:
|
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
98 |
|
|
|
25 |
|
|
|
Accrued pension cost
|
|
|
(64 |
) |
|
|
(54 |
) |
|
|
Deferred taxation:
|
|
|
|
|
|
|
|
|
|
|
|
on above adjustments
|
|
|
(187 |
) |
|
|
(238 |
) |
|
|
|
methodology
|
|
|
(155 |
) |
|
|
(169 |
) |
|
|
|
|
|
|
|
|
|
|
864 |
|
|
|
879 |
|
|
Minority share of above adjustments
|
|
|
(45 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
|
819 |
|
|
|
826 |
|
|
|
|
|
|
|
|
Shareholders equity in accordance with US GAAP
|
|
|
2,796 |
|
|
|
3,380 |
|
|
|
|
|
|
|
|
F-82
|
|
|
Additional information required by US GAAP in respect of
earnings per share |
The following table sets forth the computation of basic and
diluted earnings per share from continuing operations under US
GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million, except per ADS amounts) | |
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per ordinary share and ADS
|
|
|
318 |
|
|
|
29 |
|
|
|
(5 |
) |
|
|
24 |
|
|
|
163 |
|
|
Deduct: FAS No. 123 compensation cost
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted earnings per ordinary share and ADS
|
|
|
307 |
|
|
|
29 |
|
|
|
(5 |
) |
|
|
24 |
|
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per ordinary share and ADS
|
|
|
710 |
|
|
|
733 |
|
|
|
733 |
|
|
|
733 |
|
|
|
731 |
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee options and restricted stock awards
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per ordinary share and ADS
|
|
|
720 |
|
|
|
733 |
|
|
|
733 |
|
|
|
733 |
|
|
|
734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share and ADS from continuing
operations
|
|
|
44.8p |
|
|
|
4.0 |
p |
|
|
(0.6 |
)p |
|
|
3.3 |
p |
|
|
22.3p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per ordinary share and ADS from continuing
operations
|
|
|
42.6p |
|
|
|
4.0 |
p |
|
|
(0.6 |
)p |
|
|
3.3 |
p |
|
|
22.2p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of cash flows |
The consolidated statement of cash flows prepared under UK GAAP
presents substantially the same information as that required
under US GAAP but may differ with regard to classification of
items within the statements and as regards the definition of
cash under UK GAAP and cash and cash equivalents under
US GAAP.
US GAAP requires that cash and cash equivalents include
short-term highly liquid investments but do not include bank
overdrafts. Under UK GAAP, cash flows are presented separately
for operating activities, dividends received from associates,
returns on investments and servicing of finance, taxation,
capital expenditure and financial investment, acquisitions,
equity dividends and management of liquid resources and
financing. US GAAP, however, require only three categories of
cash flow activity to be reported: operating, investing and
financing. Cash flows from taxation and returns on investments
and servicing of finance shown under UK GAAP would, with the
exception of dividends paid to minority shareholders, be
included as operating activities under US GAAP. The payment of
dividends would be included as a financing activity under US
GAAP. Under US GAAP, capitalized interest is treated as part of
the cost of the asset to which it relates and is thus included
as part of investing cash flows. Under UK GAAP all interest is
treated as part of returns on investments and servicing of
finance. Under US GAAP capital expenditure and financial
investment and acquisitions are reported within investing
activities.
F-83
The categories of cash flow activity under US GAAP can be
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Cash inflow from operating activities
|
|
|
439 |
|
|
|
132 |
|
|
|
481 |
|
|
|
613 |
|
|
|
535 |
|
Cash outflow on investing activities
|
|
|
(148 |
) |
|
|
(127 |
) |
|
|
(200 |
) |
|
|
(327 |
) |
|
|
(320 |
) |
Cash outflow from financing activities
|
|
|
(620 |
) |
|
|
(32 |
) |
|
|
(147 |
) |
|
|
(179 |
) |
|
|
(220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)/increase in cash and cash equivalents
|
|
|
(329 |
) |
|
|
(27 |
) |
|
|
134 |
|
|
|
107 |
|
|
|
(5 |
) |
Effect of foreign exchange rate changes
|
|
|
(17 |
) |
|
|
20 |
|
|
|
1 |
|
|
|
21 |
|
|
|
82 |
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At start of the fiscal year
|
|
|
429 |
|
|
|
301 |
|
|
|
294 |
|
|
|
301 |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the fiscal year
|
|
|
83 |
|
|
|
294 |
|
|
|
429 |
|
|
|
429 |
|
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information required by US GAAP in respect of
the Groups principal pension plans |
The pension cost for these plans computed in accordance with the
requirements of US GAAP comprises:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK pension benefits | |
|
US pension benefits | |
|
US postretirement benefits | |
|
|
| |
|
| |
|
| |
|
|
|
|
15 months | |
|
|
|
|
|
15 months | |
|
|
|
|
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
Year ended | |
|
ended | |
|
Year ended | |
|
Year ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Service cost
|
|
|
17 |
|
|
|
34 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
|
26 |
|
|
|
53 |
|
|
|
66 |
|
|
|
5 |
|
|
|
7 |
|
|
|
9 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Expected return on plan assets
|
|
|
(25 |
) |
|
|
(49 |
) |
|
|
(76 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization and deferral
|
|
|
7 |
|
|
|
14 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized net actuarial gain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
|
25 |
|
|
|
52 |
|
|
|
23 |
|
|
|
3 |
|
|
|
4 |
|
|
|
5 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The major assumptions used in computing the pension expense were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK pension benefits | |
|
US pension benefits | |
|
US postretirement benefits | |
|
|
| |
|
| |
|
| |
|
|
|
|
15 months | |
|
|
|
Year months | |
|
15 months | |
|
|
|
Year months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
Year ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
September 31, | |
|
December 31, | |
|
December 31, | |
|
September 31, | |
|
December 31, | |
|
December 31, | |
|
September 31, | |
|
|
2004 | |
|
2003 | |
|
2002 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Expected long-term rate of return on plan assets
|
|
|
6.90% |
|
|
|
6.90% |
|
|
|
7.00% |
|
|
|
8.00% |
|
|
|
8.00% |
|
|
|
9.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.30% |
|
|
|
5.40% |
|
|
|
5.50% |
|
|
|
5.75% |
|
|
|
6.30% |
|
|
|
6.80% |
|
|
|
5.75% |
|
|
|
6.30% |
|
|
|
6.80% |
|
Expected long-term rate of earnings increases
|
|
|
4.30% |
|
|
|
4.30% |
|
|
|
3.80% |
|
|
|
3.50% |
|
|
|
3.50% |
|
|
|
3.50% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The plans expected return on assets, as shown above, is
based on the Companys expectations of long-term average
rates of return to be achieved by the underlying investment
portfolios. In establishing this assumption, management
considers historical and expected returns for the asset classes
in which the plans are invested, as well as current economic and
capital market conditions.
F-84
The assumed health care cost trends rates for medical and dental
plans at December 31, 2004 and 2003 and September 30,
2002 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
Health care cost trend rate assumed for next year
|
|
|
9.5 |
% |
|
|
10.0 |
% |
|
|
7.5 |
% |
Rate that the cost trend rate gradually declines to
|
|
|
4.5 |
% |
|
|
4.5 |
% |
|
|
5.0 |
% |
Year that rate reaches the assumed ultimate rate
|
|
|
2014 |
|
|
|
2014 |
|
|
|
2007 |
|
A one-percentage point increase/ (decrease) in assumed health
care costs trend rate would increase/ (decrease) the accumulated
post employment benefit obligations as of December 31, 2004
and 2003, by £1 million, and would increase/
(decrease) the total of the service and interest cost components
of net post-employment health care cost for the period then
ended by approximately £nil million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK pensions benefits | |
|
US pensions benefits | |
|
US postretirement benefits | |
|
|
| |
|
| |
|
| |
|
|
Year ended | |
|
15 months ended | |
|
Year ended | |
|
15 months ended | |
|
Year ended | |
|
15 months ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
Change in benefit obligation |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Benefit obligation at beginning of period
|
|
|
477 |
|
|
|
1,311 |
|
|
|
90 |
|
|
|
95 |
|
|
|
12 |
|
|
|
9 |
|
|
Service cost
|
|
|
17 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members contributions
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
26 |
|
|
|
53 |
|
|
|
5 |
|
|
|
7 |
|
|
|
1 |
|
|
|
1 |
|
|
Benefits paid
|
|
|
(12 |
) |
|
|
(50 |
) |
|
|
(5 |
) |
|
|
(7 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
Age-related national insurance rebates
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bulk transfer to scheme
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss arising in the year
|
|
|
60 |
|
|
|
128 |
|
|
|
5 |
|
|
|
7 |
|
|
|
|
|
|
|
3 |
|
|
Separation of MAB
|
|
|
|
|
|
|
(1,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
(12 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
|
600 |
|
|
|
477 |
|
|
|
89 |
|
|
|
90 |
|
|
|
11 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-85
The following table sets forth movements in fair value of the
plan assets and the projected benefit obligation of the
principal plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK pensions benefits | |
|
US pensions benefits | |
|
US postretirement benefits | |
|
|
| |
|
| |
|
| |
|
|
Year ended | |
|
15 months ended | |
|
Year ended | |
|
15 months ended | |
|
Year ended | |
|
15 months ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
Changes in plan assets |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Fair value of plan assets at beginning of period
|
|
|
355 |
|
|
|
996 |
|
|
|
48 |
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
Contributions payable
|
|
|
72 |
|
|
|
45 |
|
|
|
11 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
Age-related national insurance rebates
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(12 |
) |
|
|
(50 |
) |
|
|
(5 |
) |
|
|
(7 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
Bulk Transfer to scheme
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on assets
|
|
|
38 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss on assets
|
|
|
|
|
|
|
81 |
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
Separation of MAB
|
|
|
|
|
|
|
(722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
|
472 |
|
|
|
355 |
|
|
|
55 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation (all vested)
|
|
|
519 |
|
|
|
409 |
|
|
|
87 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
|
472 |
|
|
|
355 |
|
|
|
55 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
(600 |
) |
|
|
(477 |
) |
|
|
(89 |
) |
|
|
(90 |
) |
|
|
(11 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net plan obligation
|
|
|
(128 |
) |
|
|
(122 |
) |
|
|
(34 |
) |
|
|
(42 |
) |
|
|
(11 |
) |
|
|
(12 |
) |
Unrecognized transitional asset, net of amortization
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized prior service cost
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net loss
|
|
|
199 |
|
|
|
142 |
|
|
|
23 |
|
|
|
20 |
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
|
76 |
|
|
|
24 |
|
|
|
(11 |
) |
|
|
(22 |
) |
|
|
(8 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts recognized in the balance sheet consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid pension cost
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued pension cost
|
|
|
(54 |
) |
|
|
(54 |
) |
|
|
(31 |
) |
|
|
(40 |
) |
|
|
(8 |
) |
|
|
(8 |
) |
Pension costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Intangible asset
|
|
|
3 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (before tax)
|
|
|
70 |
|
|
|
72 |
|
|
|
20 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
|
76 |
|
|
|
24 |
|
|
|
(11 |
) |
|
|
(22 |
) |
|
|
(8 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information required by US GAAP in respect of
Groups share options |
|
|
|
Accounting and disclosure of stock-based compensation |
FAS 123 Accounting for Stock-Based
Compensation, established accounting disclosure standards
for stock-based employee compensation plans. The statement gives
companies the option of continuing to account for such costs
under the intrinsic value accounting provisions set out in
Accounting Principles Board Opinion 25 Accounting for
Stock Issued to Employees (APB 25) and
related interpretations. Prior to Separation, for the purposes
of US GAAP, the Group accounted for those plans under the
recognition and measurement provisions of APB 25. Under
APB 25 these awards would be accounted for as variable
plans and the charge would be based on the intrinsic value of
the shares using the share price at the balance sheet date. Had
the Group chosen to account for such costs under FAS 123,
net (loss)/income for the 15 months ended December 31,
2003 would have been a loss of £631 million (2002
£497 million income), basic net income per
F-86
ordinary share and ADS would have been (86.1)p (2002 68.0p) and
diluted net income per ordinary share and ADS would have been
(86.1)p (2002 67.7p).
Effective from the date of Separation, the Group adopted the
fair value recognition provisions of FAS 123. The Group
selected the modified prospective method of adoption described
in FAS 148 Accounting for Stock-Based
Compensation Transition and Disclosure.
Compensation costs recognized since Separation is the same as
that which would have been recognized had the fair value method
of FAS 123 been applied from its original effective date.
Details of the fair values of stock awards in the year are given
in Note 28. Because options vest over several years and
additional options grants are expected, the effects of these
hypothetical calculations are not likely to be representative of
similar future calculations.
|
|
|
Concentrations of credit risk |
Potential concentrations of credit risk to the Group consist
principally of short-term cash investments, trade loans and
trade debtors.
The Group only deposits short-term cash surpluses with
counterparties with an A credit rating or better, or those
providing adequate security and, by policy, limits the amount of
credit exposure to any one bank or institution. Trade debtors in
the United Kingdom comprise a large, widespread customer base.
Trade debtors in the United States are widely dispersed and
include a significant amount of debtors due from
InterContinental Hotels franchisees.
At December 31, 2004, the Group did not consider there to
be any significant concentration of credit risk.
|
|
|
Fair values of financial instruments |
The following information is presented in compliance with the
requirements of US GAAP. The carrying amounts and fair values of
the material financial instruments of the Group are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
Carrying | |
|
Fair | |
|
Carrying | |
|
Fair | |
|
|
amount | |
|
value | |
|
amount | |
|
value | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
43 |
|
|
|
43 |
|
|
|
55 |
|
|
|
55 |
|
Current asset investments
|
|
|
116 |
|
|
|
116 |
|
|
|
377 |
|
|
|
381 |
|
Listed investments
|
|
|
1 |
|
|
|
4 |
|
|
|
64 |
|
|
|
66 |
|
Unlisted investments
|
|
|
98 |
|
|
|
98 |
|
|
|
108 |
|
|
|
108 |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan capital and noncurrent bank loans
|
|
|
(1,174 |
) |
|
|
(1,174 |
) |
|
|
(988 |
) |
|
|
(992 |
) |
|
Current bank loans and overdrafts
|
|
|
(25 |
) |
|
|
(25 |
) |
|
|
(13 |
) |
|
|
(13 |
) |
Off-balance sheet instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(29 |
) |
Foreign exchange contracts
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
(1 |
) |
The following methods and assumptions were used by the Group in
establishing its fair value disclosures for financial
instruments:
Cash: the carrying amount reported in the balance sheet
for cash at bank approximates to its fair value.
Current asset investments: the carrying amount reported
in the balance sheet for current asset investments approximates
their fair value.
F-87
Listed investments: these investments are valued based on
market prices.
Unlisted investments: the fair value of these investments
approximates their replacement cost.
Borrowings: the fair value of the Groups loan
capital and noncurrent bank loans (including short-term portion)
are estimated using quoted prices, or where such prices are not
available, discounted cash flow analyses, based on available
market rates of interest for similar types of arrangements and
maturities. The carrying amount of the bank loans and overdrafts
approximates their fair value.
Off-balance sheet instruments: the fair value of the
Groups interest rate swaps is based on discounted cash
flow analyses. The fair value of other instruments is based on
contracted and relevant exchange rates.
|
|
|
Additional information required by US GAAP in respect of
accounting for the impairment of fixed assets and fixed assets
to be disposed of |
A summary of the impairment charges that have been recognized
under US GAAP is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Assets to be disposed of
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
9 |
|
|
|
14 |
|
Assets to be held and used
|
|
|
18 |
|
|
|
|
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18 |
|
|
|
|
|
|
|
15 |
|
|
|
15 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disclosed as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges recognized under UK GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating exceptional impairment charges
|
|
|
28 |
|
|
|
|
|
|
|
51 |
|
|
|
51 |
|
|
|
77 |
|
|
Non-operating exceptional provision for loss on
disposal
|
|
|
74 |
|
|
|
|
|
|
|
9 |
|
|
|
9 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge for the year under UK GAAP
|
|
|
102 |
|
|
|
|
|
|
|
60 |
|
|
|
60 |
|
|
|
91 |
|
Less: Adjustment to impairment recognized under US GAAP
|
|
|
(84 |
) |
|
|
|
|
|
|
(45 |
) |
|
|
(45 |
) |
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge before cumulative effect of a change in accounting
principle
|
|
|
18 |
|
|
|
|
|
|
|
15 |
|
|
|
15 |
|
|
|
14 |
|
Add: Cumulative effect on adoption of FAS 142 under
US GAAP
|
|
|
|
|
|
|
712 |
|
|
|
|
|
|
|
712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
712 |
|
|
|
15 |
|
|
|
727 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged against:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets goodwill
|
|
|
|
|
|
|
712 |
|
|
|
|
|
|
|
712 |
|
|
|
|
|
Tangible assets
|
|
|
18 |
|
|
|
|
|
|
|
15 |
|
|
|
15 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
712 |
|
|
|
15 |
|
|
|
727 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The £712 million goodwill impairment charge recognized
as a result of the implementation of FAS 142 under US GAAP
includes £225 million in respect of Americas Hotels
owned and leased operations and £487 million in
respect of EMEA hotels owned and leased operations. The
FAS 142 impairment charges recorded in respect of these two
reporting units have arisen as a result of the present value of
projected cash flows of these reporting units being insufficient
to cover the carrying value of the net asset, including both pre
and post 1998 goodwill. Reporting units have been determined by
reference to the way IHG conducts business and reflects internal
management structures. FAS 142 does not provide
prescriptive guidance for the allocation
F-88
of goodwill hence for the purposes of the impairment review
trademark balances have been allocated to reporting units based
on historic revenue figures and goodwill has been allocated on
the basis of historic operating profit, which management
consider to be the most appropriate methodology.
The operating exceptional charge recognized under UK GAAP of
£28 million recognized in 2004, and
£51 million recognized in 2003, and
£77 million recognized in 2002 relate to various
hotels within Americas, EMEA and Asia Pacific, where it has been
necessary to make an impairment charge for the difference in
these hotels carrying values compared to the higher of
value in use or net realizable value.
With the exception of the impairment charge of
£18 million in 2004 and £6 million in 2003
in respect of short leasehold properties, the UK GAAP impairment
charge is reversed under US GAAP as the impairment test is first
performed using undiscounted cash flows and is therefore shown
as a reduction in the difference between the charge under UK
GAAP and US GAAP in the reconciliation to US GAAP accounting
principles.
|
|
|
Additional information required by US GAAP in respect of
accounting for intangible assets subject to amortization |
Other intangible assets subject to amortization consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
|
|
Accumulated | |
|
Net book | |
|
|
|
Accumulated | |
|
Net book | |
|
|
Cost | |
|
amortization | |
|
value | |
|
Cost | |
|
amortization | |
|
value | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Management & franchise contracts
|
|
|
307 |
|
|
|
(270 |
) |
|
|
37 |
|
|
|
326 |
|
|
|
(291 |
) |
|
|
35 |
|
Other
|
|
|
4 |
|
|
|
(1 |
) |
|
|
3 |
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311 |
|
|
|
(271 |
) |
|
|
40 |
|
|
|
330 |
|
|
|
(291 |
) |
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated aggregate amortization expense for each of the
next five years is £5 million, £5 million,
£5 million, £4 million and
£4 million. The weighted average remaining life of
intangible assets subject to amortization is 12 years.
|
|
|
Additional information required by US GAAP in respect of
accounting for intangible assets not subject to
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
Hotels | |
|
Soft drinks | |
|
Total | |
|
Hotels | |
|
Soft drinks | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Goodwill
|
|
|
840 |
|
|
|
124 |
|
|
|
964 |
|
|
|
907 |
|
|
|
122 |
|
|
|
1,029 |
|
Trademarks
|
|
|
474 |
|
|
|
|
|
|
|
474 |
|
|
|
513 |
|
|
|
|
|
|
|
513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,314 |
|
|
|
124 |
|
|
|
1,438 |
|
|
|
1,420 |
|
|
|
122 |
|
|
|
1,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional pro forma information required by US GAAP in
respect of FAS 142 |
FAS 142 requires that in the period of adoption, and until
all periods presented are accounted for in accordance with the
standard, a reconciliation of reported net income to the
adjusted net income should be disclosed along with adjusted
earnings per share, as if the standard had been adopted for each
period.
F-89
Net income/(loss) and, basic and diluted earnings per ordinary
share and ADS, adjusted to exclude amortization expense no
longer required due to the adoption of FAS 142, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited | |
|
Unaudited | |
|
|
|
|
|
|
|
|
three months | |
|
12 months | |
|
15 months | |
|
|
|
|
Year ended | |
|
ended | |
|
ended | |
|
ended | |
|
Year ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
September 30, | |
|
|
2004 | |
|
2002 | |
|
2003 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million, except per ADS amounts) | |
Net income/(loss) in accordance with US GAAP, as reported
|
|
|
340 |
|
|
|
(652 |
) |
|
|
29 |
|
|
|
(623 |
) |
|
|
499 |
|
|
Add back: goodwill amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69 |
|
|
|
trademarks amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
Pro forma net income/(loss) in accordance with US GAAP
|
|
|
340 |
|
|
|
(652 |
) |
|
|
29 |
|
|
|
(623 |
) |
|
|
581 |
|
Pro forma basic net income/(loss) per ordinary share and ADS
|
|
|
47.9p |
|
|
|
(88.9 |
)p |
|
|
4.0p |
|
|
|
(84.9 |
)p |
|
|
68.3p |
|
|
Add back: goodwill amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.4p |
|
|
|
trademarks amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8p |
|
Pro forma basic net income/(loss) per ordinary share and ADS
|
|
|
47.9p |
|
|
|
(88.9 |
)p |
|
|
4.0p |
|
|
|
(84.9 |
)p |
|
|
79.5p |
|
Pro forma diluted net income/(loss) per ordinary share and ADS
|
|
|
45.7p |
|
|
|
(88.9 |
)p |
|
|
4.0p |
|
|
|
(84.9 |
)p |
|
|
68.0p |
|
|
Add back: goodwill amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.4p |
|
|
|
trademarks amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8p |
|
Pro forma diluted net income/(loss) per ordinary share and ADS
|
|
|
45.7p |
|
|
|
(88.9 |
)p |
|
|
4.0p |
|
|
|
(84.9 |
)p |
|
|
79.2p |
|
|
|
|
Additional information required by US GAAP in respect of
taxation |
|
|
|
Analysis of tax (credit)/charge on continuing operations in
accordance with US GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
Year ended | |
|
Year ended | |
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
December 31, 2002 | |
|
|
| |
|
| |
|
| |
|
|
(£ million) | |
Current taxes
|
|
|
(60 |
) |
|
|
(48 |
) |
|
|
93 |
|
Deferred taxes
|
|
|
7 |
|
|
|
2 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(53 |
) |
|
|
(46 |
) |
|
|
87 |
|
|
|
|
|
|
|
|
|
|
|
F-90
|
|
|
Reconciliation of UK statutory tax rate to US GAAP tax
charge on income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended | |
|
Year ended | |
|
Year ended | |
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
December 31, 2002 | |
|
|
| |
|
| |
|
| |
|
|
(%) | |
UK corporate tax standard rate
|
|
|
30.0 |
|
|
|
30.0 |
|
|
|
30.0 |
|
Permanent differences
|
|
|
1.1 |
|
|
|
(17.8 |
) |
|
|
(4.0 |
) |
Net effect of different rates of tax in overseas business
|
|
|
6.7 |
|
|
|
178.5 |
|
|
|
5.0 |
|
Adjustment to tax charge in respect of prior periods
|
|
|
(20.4 |
) |
|
|
(574.2 |
) |
|
|
(5.6 |
) |
Other
|
|
|
(0.2 |
) |
|
|
0.6 |
|
|
|
(0.5 |
) |
Exceptional items
|
|
|
(35.5 |
) |
|
|
(128.2 |
) |
|
|
7.1 |
|
|
|
|
|
|
|
|
|
|
|
Effective current tax rate on continuing operations
|
|
|
(18.3 |
) |
|
|
(511.1 |
) |
|
|
32.0 |
|
|
|
|
|
|
|
|
|
|
|
Deferred
taxation in accordance with US GAAP
|
|
|
|
|
|
|
Deferred tax | |
|
|
| |
|
|
(£ million) | |
At September 30, 2002
|
|
|
862 |
|
Exchange and other adjustments
|
|
|
(36) |
|
Profit and loss account
|
|
|
(8) |
|
Separation of MAB
|
|
|
(97) |
|
|
|
|
|
At December 31, 2003
|
|
|
721 |
|
Exchange and other adjustments
|
|
|
(20) |
|
Profit and loss account
|
|
|
|
|
Adjustment to other intangible assets(1)
|
|
|
(110) |
|
|
|
|
|
At December 31, 2004
|
|
|
591 |
|
|
|
|
|
|
|
(1) |
In 2004, the adjustment to other intangible assets relates to
the recognition of pre-acquisition losses in respect of which a
valuation allowance had previously been made. |
F-91
The analysis of the deferred taxation liability required by US
GAAP is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
|
(£ million) | |
Deferred taxation liabilities:
|
|
|
|
|
|
|
|
|
|
Excess of book value over taxation value of fixed assets
|
|
|
590 |
|
|
|
667 |
|
|
Other temporary differences
|
|
|
197 |
|
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
787 |
|
|
|
855 |
|
|
|
|
|
|
|
|
Deferred taxation assets:
|
|
|
|
|
|
|
|
|
|
Taxation effect of losses carried forward
|
|
|
(113 |
) |
|
|
(37 |
) |
|
Taxation effect of pension cost liability
|
|
|
(6 |
) |
|
|
(13 |
) |
|
Other temporary differences
|
|
|
(77 |
) |
|
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
(196 |
) |
|
|
(134 |
) |
|
|
|
|
|
|
|
|
|
|
591 |
|
|
|
721 |
|
|
|
|
|
|
|
|
Of which:
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(45 |
) |
|
|
(4 |
) |
|
Noncurrent
|
|
|
636 |
|
|
|
725 |
|
|
|
|
|
|
|
|
|
|
|
591 |
|
|
|
721 |
|
|
|
|
|
|
|
|
The taxation effect of losses carried forward is stated net of a
valuation allowance of £305 million
(2003 £317 million).
On release, £16 million (2003 £16 million)
of the valuation allowance would be recognized in goodwill. A
reduction of £88 million has been made to the opening
valuation allowance in respect of a change in judgement
regarding the realizability of deferred tax assets. There are no
material expiration dates in respect of operating losses.
No deferred tax is provided in respect of temporary differences
relating to the unremitted earnings of certain overseas
subsidiaries and joint ventures on the basis that the
differences are permanent in nature. It is not practicable to
determine the amounts unprovided.
F-92
|
|
|
Additional information required under US GAAP in respect
of restructuring provisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IHG | |
|
MAB | |
|
|
| |
|
| |
|
|
Employee | |
|
Facilities | |
|
Other | |
|
IHG | |
|
MAB | |
|
Group | |
|
|
costs | |
|
costs | |
|
costs | |
|
total | |
|
reorganization | |
|
total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(£ million) | |
Balance at October 1, 2001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
9 |
|
Profit and loss account
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
11 |
|
Expenditure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
10 |
|
Exchange and other adjustments
|
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
(6 |
) |
|
|
(9 |
) |
Profit and loss account
|
|
|
30 |
|
|
|
13 |
|
|
|
15 |
|
|
|
58 |
|
|
|
|
|
|
|
58 |
|
Expenditure
|
|
|
(23 |
) |
|
|
(3 |
) |
|
|
(11 |
) |
|
|
(37 |
) |
|
|
(1 |
) |
|
|
(38 |
) |
Separation of MAB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2003
|
|
|
7 |
|
|
|
7 |
|
|
|
4 |
|
|
|
18 |
|
|
|
|
|
|
|
18 |
|
Expenditure
|
|
|
(7 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIN 46, Consolidation of Variable Interest
Entities (the Interpretation), was effective
for all enterprises with variable interest in variable interest
entities created after January 31, 2003. FIN 46(R), which
was revised in December 2003, was effective for all entities to
which the provisions of FIN 46 were not applied as of
December 24, 2003. We applied the provisions of FIN 46(R)
to all entities subject to the Interpretation as of
December 31, 2004. Under FIN 46(R), if an entity is
determined to be a variable interest entity (VIE),
it must be consolidated by the enterprise that absorbs the
majority of the entitys expected losses, receives a
majority of the entitys expected residual returns, or
both, the primary beneficiary.
The Groups evaluation of the provisions of FIN 46 as it
relates to its various forms of arrangements focused primarily
on a review of the key terms of its equity investment
agreements, management contracts and franchise agreements
against the criteria in FIN 46 to determine if any of these
arrangements qualify as VIEs. In general, a VIE represents a
structure used for business purposes that either does not have
equity investors with voting rights or that has equity investors
that do not provide sufficient financial resources for the
entity to support its activities. However, other contractual
arrangements could qualify an entity as a VIE and designate
which party to the contract is the primary beneficiary.
The Groups evaluation of its equity investments,
management contracts and franchise agreements identified one
management contract, due to the terms of performance guarantees,
and one equity investment, in which it has variable interests.
For those entities in which the Group holds a variable interest,
it determined that it was not the primary beneficiary and as
such was not required to consolidate the VIEs. The performance
guarantee associated with the management contracts with HPT does
not expose the Group to the majority of expected cash flow
variability and therefore those hotels have not been
consolidated. As of December 31, 2004, the maximum exposure
to loss on these contracts, consisting of future management fees
and the potential obligation to fund the performance guarantee,
totaled an aggregate amount of approximately
£63 million over the life of the contracts. The Group
also has one significant equity interest in an entity that is a
VIE. In November 2003, the Group purchased a one-third share of
an equity venture that owns the InterContinental Warsaw which is
managed by the Group. The equity investment in the VIE totaled
£13 million at December 31, 2004 and
£12 million at December 31, 2003
In June 2004, the Emerging Issues Task Force issued EITF Issue
No. 03-1 The Meaning of Other-Than-Temporary Impairment
and its Application to Certain Investments. This issue
sets forth
F-93
guidance with respect to the meaning of other-than-temporary
impairment and its application to debt and equity securities
within the scope of FAS No. 115 Accounting for Certain
Investments in Debt and Equity Securities (FAS No.
115) and equity securities that are not subject to the
scope of FAS No. 115 and not accounted for under the equity
method of accounting. The Task Force reached a consensus that
the EITF 03-1 application guidance should be used to
determine when an investment is considered impaired, whether
that impairment is other than temporary, and the measurement of
an impairment loss. There were no unrealized losses requiring
additional disclosures in the Groups December 2004
financial statements. The Group will continue to evaluate the
impact of EITF 03-1 on its financial position and results of
operations.
In November 2004, the FASB issued FAS 151 Inventory
Costs, an amendment of Accounting Research Bulletin No. 43,
Chapter 4. FAS 151 requires the abnormal amounts
of idle facility expense, freight, handling costs and wasted
materials (spoilage) be recorded as current period charges and
that the allocation of fixed production overheads to inventory
be based on the normal capacity of the production facilities.
FAS 151 is effective for our company on January 1,
2006. The Group does not believe that the adoption of
FAS 151 will have a material impact upon its financial
position and results of operations.
In December 2004, the FASB issued SFAS No. 123(R),
Share-Based Payment, a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation. Generally, the
approach in FAS 123(R) is similar to the approach described in
FAS 123. FAS 123(R) requires all share-based payments to
employees, including grants of share options, to be recognized
in the income statement based on their fair values. The Group
plans to adopt FAS 123(R) for the financial year ended December
2005.
In December 2004, the FASB issued SFAS No. 153 Exchanges
of Non-monetary Assets, an amendment of APB Opinion No. 29
which replaces the current exception from fair value measurement
of non-monetary exchanges of similar productive assets with a
general exception from fair value measurement for exchanges of
non-monetary assets that do not have commercial substance. SFAS
No. 153 shall be applied prospectively and is effective for
non-monetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. The adoption of SFAS
No. 153 cannot be predicted at this time because it will
depend on whether applicable non-monetary transactions take
place in the future.
F-94
INTERCONTINENTAL HOTELS GROUP PLC
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions | |
|
|
|
|
|
|
|
|
Balance at | |
|
charged to | |
|
|
|
|
|
Balance at | |
|
|
beginning | |
|
costs and | |
|
Exchange | |
|
|
|
end of | |
|
|
of period | |
|
expenses | |
|
differences | |
|
Deductions | |
|
period | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for bad and doubtful debts
|
|
|
45 |
|
|
|
20 |
|
|
|
(3 |
) |
|
|
(19 |
) |
|
|
43 |
|
15 months ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for bad and doubtful debts
|
|
|
55 |
|
|
|
9 |
|
|
|
(6 |
) |
|
|
(13 |
) |
|
|
45 |
|
|
Three months ended December 31, 2003 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for bad and doubtful debts
|
|
|
55 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
(5 |
) |
|
|
50 |
|
|
12 months ended December 31, 2003 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for bad and doubtful debts
|
|
|
50 |
|
|
|
7 |
|
|
|
(4 |
) |
|
|
(8 |
) |
|
|
45 |
|
Year ended September 30, 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for bad and doubtful debts
|
|
|
41 |
|
|
|
24 |
|
|
|
1 |
|
|
|
(9 |
) |
|
|
55 |
|
S-1
SIGNATURES
The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report
on its behalf.
|
|
|
INTERCONTINENTAL HOTELS GROUP PLC |
|
(Registrant) |
|
|
|
|
|
Name: Richard Solomons |
|
Title: Finance Director |
Date: 3rd May, 2005