Holiday Inn 2006 Annual Report Download - page 26

Directors’ report
The Directors present their report for the financial year ended
31 December 2006.
Activities of the Group
The principal activities of the Group are in hotels and resorts, with
franchising, management, ownership and leasing interests in over
3,700 establishments, with over 556,000 guest rooms in nearly 100
countries and territories around the world.
Business review and future developments
The Directors’ Report should be read in conjunction with the
Chairman’s Statement, the Chief Executive’s Review and the
Operating and Financial Review (OFR) on pages 2 to 19. These
provide information about the Group’s strategy, its businesses,
their financial performance during the year, the principal risks
and uncertainties facing the Group and likely developments.
Significant disposals during the year
During 2006, the Group substantially completed its hotels disposal
programme, with the sale of 31 hotels in Continental Europe,
details of which are provided in the OFR on page 8.
Return of shareholders’ funds and share consolidation
In April 2006 the Company completed a £250m share repurchase
programme and commenced a further £250m share repurchase
programme which is substantially complete. Additionally, £497m
was returned to shareholders on 22 June 2006 by way of a special
interim dividend of 118p per share. This special dividend was
accompanied by a consolidation of the Company’s ordinary share
capital on the basis of seven new ordinary shares for every eight
existing ordinary shares, effective from 12 June 2006. The nominal
value of the new shares is 113⁄7p per share.
Results and dividends
The profit on ordinary activities before taxation was £247m.
In addition to the special dividend referred to above, an interim
dividend of 5.1p per share was paid on 5 October 2006. The
Directors are recommending a final dividend of 13.3p per share
to be paid on 8 June 2007 to shareholders on the Register at close
of business on 23 March 2007. Total dividends relating to the year
are expected to amount to £562m.
Future returns of shareholders’ funds
The Directors intend to initiate a further £150m share repurchase
programme as soon as practicable and to return a further £700m
to shareholders during the second quarter of 2007 by way of a
special interim dividend and, subject to shareholder approval,
an accompanying share consolidation.
Share repurchases
During the year, 28,409,753 ordinary shares were purchased and
cancelled at a cost of £258,353,705 (excluding transaction costs)
under IHG’s planned share repurchase programmes. Of these,
11,122,753 were 10p shares in the capital of the Company,
purchased at an average price of 911p per share and 17,287,000
were 113⁄7p shares in the capital of the Company, purchased at
an average price of 908p per share.
Shares purchased and cancelled represented approximately 8%
of the issued share capital of the Company at the start of the year
and were purchased and cancelled under the authorities granted by
shareholders at an Extraordinary General Meeting held on 1 June 2005
and at the Annual and Extraordinary General Meetings held on
1 June 2006.
The share buyback authority remains in force until the Annual
General Meeting in 2007, and a resolution to renew the authority
will be put to shareholders at that Meeting.
Share plans
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 InterContinental
Hotels Group PLC shares. At 31 December 2006, 4,055,674 such
options were outstanding.
During 2006, 6,861,276 options granted in May and September 2003
under the IHG Executive Share Option Plan, vested in full. Of these,
4,775,316 had been exercised by 31 December 2006.
During 2006, conditional rights over 4,277,550 shares were awarded
to employees under the Performance Restricted Share Plan and
1,395,277 shares were released to employees under the Plan.
A number of employees participated in the Short Term Deferred
Incentive Plan during the year. Conditional rights over 606,573
shares were awarded to participants. 328,422 shares were released
under the Plan during the year. A number of participants are
eligible to receive an award in shares on 26 February 2007.
Following the disposal of IHG’s interest in the Britvic Group in
December 2005, no further awards over the Company’s shares
may now be made in respect of the Britvic Share Incentive Plan.
No options were granted under either the Executive Share Option
Plan or the Sharesave Plan during the year. Neither the Hotels
Group Share Incentive Plan nor the US Employee Stock Purchase
Plan was operated during the year.
During the year, no awards or grants over shares were made
that would be dilutive of the Company’s ordinary share capital.
All awards or grants under the Company’s share plans made
during 2006 are to be settled with shares purchased in the market.
Share capital
During the year, 4,509,058 new shares were issued under employee
share plans and, following the share capital consolidation, the
share capital at 31 December 2006 consisted of 356,116,049
ordinary shares of 113⁄7p each.
The Company did not utilise the authority given by shareholders at
the last Annual General Meeting, to allot shares for cash without
offering such shares to existing shareholders.
24 IHG Annual report and financial statements 2006