Holiday Inn 2003 Annual Report Download - page 11

capital of £17m. MAB operating cash flow for the 12 months
ended 30 September 2002 was £145m.
EXCEPTIONAL ITEMS
Following a review of the hotel estate, tangible fixed assets
have been written down by £73m. £51m has been charged as
an operating exceptional item and £22m reverses previous
revaluation gains.
Provisions against fixed asset investments primarily comprises
a charge for diminution in the value of the Group’s interest in
FelCor Lodging Trust Inc, a US hotel real estate investment
trust. This charge reflects the directors’ view that the value
of the investment is equivalent to market value at
31 December 2003.
A charge of £67m was incurred, related to the delivery of the
fundamental reorganisation in Hotels.
The Group incurred £228m of non-operating exceptional costs
before tax associated with the Separation. The total cost of the
Separation was £124m. Of this figure, £4m was charged in
2002 and £28m related to bank facility fees that will be
amortised to profit over the period of the facility. IHG’s share of
the non-facility fee element of costs is £51m, and of the facility
fees is approximately £13m. A premium of £136m was paid on
the repayment of the Group’s EMTN loans and £250m 103⁄8per
cent debenture in January and February 2003, respectively.
These operating and non-operating exceptional items, together
with their related tax credits, have been excluded in the
calculation of adjusted earnings per share.
INTEREST
During the 15 months ended 31 December 2003, the majority
of the Group’s debt funding was refinanced. This involved the
repayment of most of the existing debt, establishment of new
debt facilities and a euro bond issue.
The net interest charge for the 15 months to 31 December
2003 was £47m compared to £60m for the 12 months to
30 September 2002. The reduction in the interest charge was
principally due to a weaker US dollar, lower average interest
rates and lower average debt levels.
The pro forma interest charge for the 12 months to
31 December 2003 was £39m.
TAXATION
Excluding the impact of exceptionals items, the Group’s tax
charge for the 15 months to 31 December 2003 represents
an effective rate of 10.8%, compared with 28.1% for the
12 months to 30 September 2002. The equivalent effective rate
excluding MAB was 3.3% for the 15 months to 31 December
2003 compared with 24.6% for the 12 months to 30 September
2002. The rates have been substantially reduced in 2003 due
to the impact of provision releases relating to tax matters which
have been settled during the year or in respect of which the
relevant statutory limitation period has expired.
Excluding the effect of exceptional items and prior year items,
the Group’s tax rate for the 15 months to 31 December 2003
was 35.9% (35.8% for the 12 months ended 30 September
2002). The equivalent rate excluding MAB was 36.5% for the
15 months to 31 December 2003 and for the 12 months to
30 September 2002 38.4%. The difference from the UK
statutory rate of 30.0% arose primarily due to overseas profits
being taxed at rates higher than the UK statutory rate.
CAPITAL EXPENDITURE AND CASH FLOW
The Group’s operating cash flow for the 15 months ended
31 December 2003 increased by £340m to £547m (£207m for
the 12 months ended 30 September 2002). Group net capital
expenditure was down £265m to £248m; including £265m of
proceeds from the sale of tangible fixed assets for the
15 months ended 31 December 2003 (£134m for the
12 months ended 30 September 2002).
Net interest paid fell £32m to £30m for the 15 months ended
31 December 2003, down from £62m for the 12 months ended
30 September 2002.
The reduction in tax paid of £127m reflects, principally, tax
repayments received during the year and the impact of
exceptional costs.
EARNINGS AND DIVIDEND
Earnings per share has 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.
The comparatives have been restated accordingly. For the
15 months ended 31 December 2003, earnings available
for shareholders totalled £19m, compared with £457m for the
12 months ended 30 September 2002. The equivalent earnings
per share were 2.6p and 62.5p respectively.
Earnings per share for the 15 months ended 31 December
2003 and the 12 months ended 30 September 2002 have been
adjusted to eliminate the distorting effect of exceptional items,
with the result that adjusted earnings per share were 48.4p
and 51.4p respectively. The 2002 number has been restated to
exclude all exceptional items.
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