Holiday Inn 2006 Annual Report Download - page 10

Operating and financial review
Investment with All Nippon Airways (ANA)
In December 2006, IHG invested £10m for a 75% stake in a hotel
joint venture with ANA, IHG ANA Hotels Group Japan LLC
(IHG ANA), increasing IHG’s portfolio in Japan from 12 hotels
(3,686 rooms) to 25 hotels (8,623 rooms). As part of the transaction,
ANA has signed 15 year management contracts with IHG ANA for
its 13 owned and leased hotels (4,937 rooms).
Key owned and leased assets
In November 2006, IHG reopened the InterContinental London Park
Lane following the substantial completion of a major refurbishment
and opened the newly built InterContinental Boston.
Asset disposal programme
During 2006, IHG achieved further progress with its asset disposal
programme, including:
• the sale of 24 hotels in Continental Europe to a subsidiary of
Westbridge Hospitality Fund LP for £240m, before transaction
costs. IHG retained a 15 year franchise contract on each of the
hotels; and
• the sale of seven European InterContinental hotels to
Morgan Stanley Real Estate Funds (MSREF) for £440m,
before transaction costs. IHG retained a 30 year management
contract on each of the hotels, with two 10 year renewals at
IHG’s discretion. The long-term contracts ensure continued
representation of the InterContinental brand in key European
markets.
These transactions support IHG’s continued strategy of growing its
managed and franchised business whilst reducing asset ownership.
Since April 2003, 174 hotels with a net book value of £2.9bn have
been sold, generating aggregate proceeds of £3.0bn. Of these
174 hotels, 156 have remained in the IHG system through either
franchise or management agreements.
Return of funds programme
In the year, IHG paid a £497m special dividend, completed a second
£250m share buyback and substantially completed a third £250m
share buyback. Since March 2004, IHG has returned £2.7bn to
shareholders.
On 20 February 2007, a further £850m return of funds was
announced, comprising a £700m special dividend with share
consolidation and a £150m share buyback.
Management and organisation
In 2006, there were no significant changes to the management
and organisation of the Group. During the year, the Group focused
on realising benefits from the prior year global realignment of
functions, including Finance, Human Resources and Information
Technology.
The following announcements relating to members of the Executive
Committee were made during 2006:
• the appointment of Tom Conophy in January 2006 as Chief
Information Officer (CIO), a new position created to develop the
global technology strategy across IHG’s brands, leveraged by
his 25 years of experience in the Information Technology (IT)
industry; and
• the retirement of Richard Hartman, President, EMEA, effective
from September 2007.
8 IHG Annual report and financial statements 2006
Significant developments
Figure 3
Asset disposal programme detail Number of hotels Proceeds Net book value
Disposed since April 2003 174 £3.0bn £2.9bn
Remaining owned and leased hotels 25 – £1.0bn
Figure 4
Return of funds programme Timing Total return Returned to date Still to be returned
£501m special dividend Paid December 2004 £501m £501m Nil
First £250m share buyback Completed in 2004 £250m £250m Nil
£996m capital return Paid July 2005 £996m £996m Nil
Second £250m share buyback Completed in 2006 £250m £250m Nil
£497m special dividend Paid June 2006 £497m £497m Nil
Third £250m share buyback Under way £250m £219m £31m
£700m special dividend Quarter 2 2007 £700m – £700m
£150m share buyback Yet to commence £150m – £150m
Total £3,594m £2,713m £881m