Holiday Inn 2007 Annual Report Download - page 23

BUSINESS REVIEW
Business review 21
BUSINESS REVIEW
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 audit. The treasury function
does not operate as a profit centre.
Medium and long-term borrowing requirements at 31 December
2007 were met through a £1.1bn Syndicated Bank Facility which
matures in November 2009. Short-term borrowing requirements
were principally met from drawings under committed and
uncommitted bilateral loan facilities. At the year end, the Group
had £377m of committed facilities available for drawing.
In the year, IHG paid a £709m special dividend, completed a third
£250m share buyback and commenced a £150m share buyback.
At the year end, £100m of this buyback was outstanding.
Since March 2004, IHG has returned £3.5bn to shareholders.
The Syndicated Bank Facility contains two financial covenants,
interest cover and net debt/earnings before interest, tax, depreciation
and amortisation. The Group is in compliance with both
covenants, neither of which is expected to represent a material
restriction on funding or investment policy in the foreseeable future.
Further information on the Group’s treasury management can be
found in note 21 on page 74 in the notes to the Group Financial
Statements 2007.
During 2007, IHG achieved further progress with its asset disposal
programme, including:
• the sale of the Crowne Plaza Santiago for $21m before
transaction costs, approximately $9m above net book value.
Under the agreement, IHG retained a 10 year franchise contract;
• the sale of its 74.11% share of the InterContinental Montreal
for £17m before transaction costs, approximately £5m above
book value. Under the agreement, IHG retained a 30 year
management contract on the hotel; and
• the sale of the Holiday Inn Disney, Paris for £14m before
transaction costs, approximately £2m above book value. Under
the agreement, IHG retained a five year franchise contract.
These transactions support IHG’s continued strategy of growing its
managed and franchised business whilst reducing asset ownership.
Since April 2003, 181 hotels with a net book value of £2.9bn have
been sold, generating aggregate proceeds of £3.0bn, of which 162
of these hotels remained in the IHG system through the successful
negotiation of either management or franchise agreements.
During 2007, IHG also divested a number of equity interests
of which proceeds totalled £57m, including a 33.3% interest in
the Crowne Plaza London The City for £19m and a 15% interest
in the InterContinental Chicago for £11m.
Asset disposal programme
Number Net book
of hotels Proceeds value
Disposed since April 2003 181 £3.0bn £2.9bn
Remaining owned and leased hotels 18 £0.9bn
Return of funds programme
Total Returned Still to
Timing return to date be returned
£501m special dividend Paid in December 2004 £501m £501m Nil
First £250m share buyback Completed in 2004 £250m £250m Nil
£996m capital return Paid in July 2005 £996m £996m Nil
Second £250m share buyback Completed in 2006 £250m £250m Nil
£497m special dividend Paid in June 2006 £497m £497m Nil
Third £250m share buyback Completed in 2007 £250m £250m Nil
£709m special dividend Paid in June 2007 £709m £709m Nil
£150m share buyback Under way £150m £50m £100m
Total £3,603m £3,503m £100m