Holiday Inn 2009 Annual Report Download

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IHG Annual Report and Financial Statements 2009

Table of contents

  • Page 1
    IHG Annual Report and Financial Statements 2009

  • Page 2
    ..., Crowne Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, Staybridge Suites and Candlewood Suites. We manage the world's largest hotel loyalty programme, Priority Club Rewards, which has 48 million members worldwide. We have more guest rooms in our system than any other hotel company in the...

  • Page 3
    ... MANAGEMENT AND THEIR RESPONSIBILITIES Other members of the Executive Committee Page 38 Shareholder profiles Page 114 Independent auditor's report to the members Page 60 Directors' report Page 40 Notes to the parent company financial statements Page 109 Investor information Page 115 Corporate...

  • Page 4
    ...Operating profit before exceptional items∞ down Sustainable regional and central cost savings $50m ($95m of total savings) 68% of total rooms' revenue booked through IHG's of up from channels or by Priority Club Rewards members direct to hotel; 64% in 2008 6m new Priority Club Rewards members...

  • Page 5
    ... Shareholder Performance Reflecting the challenging conditions across the global hotel industry, our revenue decreased 19 per cent to $1.5 billion, with operating profit before exceptional items of $363 million, down 34 per cent. Despite this, the robustness of our core franchise and management fee...

  • Page 6
    ... our global system to support performance in our hotels. Rooms revenue booked through our reservations channels or by Priority Club Rewards members direct to hotel, rose four percentage points on last year to 68 per cent. We also introduced a number of initiatives to help owners keep operating costs...

  • Page 7
    ... and our 'system' is key to delivering this. Our system comprises our world class reservations centres, websites, global sales teams and Priority Club Rewards loyalty scheme and delivered 68 per cent of rooms revenue to our hotels in 2009. Reducing our corporate and regional cost base was crucial to...

  • Page 8
    ...and comfort at a good value price. 254 hotels 25,283 rooms 169 hotels (14,851 rooms) in development pipeline Priority Club Rewards It's easier. Enjoy. The world's first and largest hotel loyalty programme, Priority Club Rewards (PCR) offers members more ways to earn and redeem points than any other...

  • Page 9
    ...29 29 31 31 32 Business overview Market and competitive environment Business model Global operating system Business relationships Strategy Where we compete How we win Group performance Group results Total gross revenue Global hotel and room count Global pipeline The Americas Europe, Middle East and...

  • Page 10
    ...income growth and corporate profit growth are held back by, amongst other issues, tax increases and reduced access to credit. The Group's fee-based profit is partly protected from changes in hotel supply or demand due to its model of third-party ownership of hotels under IHG franchise and management...

  • Page 11
    ... supplies general manager as a minimum Third party Low/none Fee % of total revenue plus % of profit 622 Owned and leased IHG IHG IHG IHG global room count by ownership type at 31 December 2009 Franchised Managed Owned and leased BUSINESS REVIEW IHG continuing operating profit* by ownership type...

  • Page 12
    ...the hotel level as to what really makes a difference for guests. In support of our overall strategy there are now five key priorities - one 'Where we compete' and four 'How we win'. To help our hotels and corporate staff measure their efforts in achieving Great Hotels Guests Love, IHG provides clear...

  • Page 13
    ...guest. 6.9% 2007 0.9% 2008 (14.7)% • First 1,697 relaunched Holiday Inn and Holiday Inn Express hotels open around the world; and • industry-leading Priority Club Rewards (PCR) loyalty programme with 48 million members, contributing $5.6bn of global system rooms revenue. • Complete Holiday...

  • Page 14
    ... Financial Statements 2009 Business review continued Group performance Group results 12 months ended 31 December 2009 $m 2008 $m % change Revenue Americas EMEA Asia Pacific Central Operating profit Americas EMEA Asia Pacific Central Exceptional operating items Net financial expenses (Loss)/profit...

  • Page 15
    ... hotels and rooms where a contract has been signed and the appropriate fees paid. Terminations in the pipeline occur for a number of reasons such as withdrawal of financing and changes in local market conditions. IHG maintained a strong level of new signings despite the impact of the global...

  • Page 16
    ... our core business and cash flow-generating capability by focusing primarily on our substantial midscale franchise business and profitable brand extensions and adjacencies. 2010 priorities • Complete the roll-out of Holiday Inn repositioning; • cascade Great Hotels Guests Love to the hotel level...

  • Page 17
    ...BUSINESS REVIEW Americas pipeline Hotels At 31 December 2009 Change over 2008 2009 Rooms Change over 2008 Analysed by brand InterContinental 6 Crowne Plaza 33 Holiday Inn 216 Holiday Inn Express 486 Staybridge Suites 116 Candlewood Suites 169 Hotel Indigo 47 Total 1,073 Analysed by ownership type...

  • Page 18
    ... achieve scale in key geographic areas. 2010 priorities • Execute growth strategies in agreed scale markets and key gateway cities; • complete the roll-out of Holiday Inn repositioning; • cascade Great Hotels Guests Love to the hotel level; and • leverage scale through sharing best practice...

  • Page 19
    ... Holiday Inn Express, which together accounted for 65% of the region's hotel openings, and by Crowne Plaza, which achieved net rooms growth of 7% over 2008. By ownership type, net movement during the year included the conversion of 13 managed hotels in Spain to franchise contracts. BUSINESS REVIEW...

  • Page 20
    ...2010 priorities • Complete the roll-out of Holiday Inn repositioning; • cascade Great Hotels Guests Love to the hotel level; and • focus on key profit-generating hotels and cities around the region. Asia Pacific results 12 months ended 31 December 2009 $m 2008 $m % change Revenue Franchised...

  • Page 21
    ...'s strategic markets. BUSINESS REVIEW Asia Pacific pipeline Hotels At 31 December 2009 Change over 2008 2009 Rooms Change over 2008 Analysed by brand InterContinental 34 Crowne Plaza 72 Holiday Inn 77 Holiday Inn Express 28 Hotel Indigo 2 Total 213 Analysed by ownership type Franchised 2 Managed...

  • Page 22
    ... Hotels operated under IHG brands are, pursuant to terms within their contracts, subject to cash assessments for the provision of brand marketing, reservations systems and the Priority Club loyalty programme. These assessments, typically based upon room revenue, are pooled for the collective benefit...

  • Page 23
    ...up from £5.62 on 31 December 2008. The market capitalisation of the Group at the year end was £2.6bn. Capital structure and liquidity management 2009 $m 2008 $m Net debt at 31 December Borrowings Sterling* US dollar* Euro Other Cash* Net debt Average debt levels * Including the impact of currency...

  • Page 24
    ... Annual Report and Financial Statements 2009 Business review continued Our people IHG directly employed an average of 7,556 people worldwide during 2009 whose costs are borne by the Group. When the whole IHG estate is taken into account (including staff working in the franchised and managed hotels...

  • Page 25
    ...respected business schools such as Cornell University in the US. Room to be involved Great emphasis is placed on employee communication, particularly on matters relating to the Group's business and its performance. Communication channels include global management conferences, team meetings, informal...

  • Page 26
    ... right things for the business. Room to grow To meet the demands of our growth and to deliver Great Hotels Guests Love, IHG continues to focus on developing talent. During 2009, we again conducted our annual review of the Group's 1,300 corporate managers and hotel general managers to identify skills...

  • Page 27
    ... job opportunities. Ensuring health and safety Providing and supporting a safe and secure environment for our guests, employees and visitors is paramount and IHG applies high standards of health and safety across the Group. Our Global Risk Management team evaluates policies and procedures, operating...

  • Page 28
    ... strategy and being more proactive in our CR communications, making them more relevant for specific stakeholder groups. For instance, we held a Green Day for employees at our UK head office, which we plan to follow up with a CR section in our online Leaders Lounge and a green forum to provide staff...

  • Page 29
    ... in corporate governance across a range of areas, including community, environment and people issues. BUSINESS REVIEW Through Green Engage, our online sustainability tool, we are working to deliver real emissions cuts through new and better ways to design, build and run our hotels. Launched...

  • Page 30
    ... to help inform future hotel design and operation. • Our InterContinental brand partnered with the National Geographic Centre for Sustainable Destinations to develop a responsible tourism strategy; • became a member of the UN Global Compact and are committed to aligning our operations, culture...

  • Page 31
    ...and gives access to the core business agenda. BUSINESS REVIEW Monitor REVIEW RISK PROCESS IDENTIFY & PRIORITISE RISK GROWTH REPORT ON PROFIT GOVERNANCE CONTINUITY AND CULTURE QUANTIFY RISKS Risk Management: The Global Risk Management function focuses on driving action to support the strategy and...

  • Page 32
    ... to train senior management teams using worst case scenarios. Over the years a number of serious incidents have been managed in line with these plans. EXECUTIVE COMMITTEE MAJOR RISK REVIEW GROUP RISK REGISTER GLOBAL RISK WORKING GROUP REGIONS FUNCTIONS BUSINESS UNIT RISK REGISTERS In 2009...

  • Page 33
    .... The long-term strategic goals are aligned with the IHG core purpose Great Hotels Guests Love and include three key elements: • safety and security of guests, employees and other third parties; • brand strength supported by operational excellence in risk management at all hotels and corporate...

  • Page 34
    ... other hotel companies may generally reduce the number of suitable franchise, management and investment opportunities offered to the Group and increase the bargaining power of property owners seeking to become a franchisee or engage a manager. The terms of new franchise or management agreements may...

  • Page 35
    ... HolidexPlus reservations system, a central repository of all hotel room inventories linked electronically to multiple sales channels including IHG-owned Internet websites, third-party Internet intermediaries and travel agents, call centres and hotels. Lack of resilience in operational availability...

  • Page 36
    ... use customer information for marketing or promotional purposes. Compliance with these regulations in each jurisdiction in which the Group operates may require changes in marketing strategies and associated processes which could increase operating costs or reduce the success with which products and...

  • Page 37
    ...Term Incentive Plan Performance graph Shareholding policy Total compensation Policy regarding pensions Non-Executive Directors' pay Service contracts Audited information on Directors' emoluments In this section we present our Board and senior management team, our governance processes and procedures...

  • Page 38
    ... Director of Hudson Highland Group Inc., a US human resources company. Age 62. Richard Solomons Chief Financial Officer and Head of Commercial Development†Qualified as a chartered accountant in 1985, followed by seven years in investment banking, based in London and New York. Joined the Group...

  • Page 39
    ... Group in February 2006 from Starwood Hotels & Resorts International where he held the position of Executive Vice President & Chief Technology Officer. Responsible for global technology, including IT systems and information management throughout the Group. Age 49. The Board of Directors and members...

  • Page 40
    ...May 2009. The share buyback authority remains in force until the Annual General Meeting in 2010, and a resolution to renew the authority will be put to shareholders at that Meeting. Activities of the Group The principal activities of the Group are in hotels and resorts, with franchising, management...

  • Page 41
    ...at the Annual General Meeting. THE BOARD, SENIOR MANAGEMENT AND THEIR RESPONSIBILITIES Employees IHG directly employed an average of 7,556 people worldwide during 2009, whose costs are borne by the Group. When the whole IHG estate is taken into account (including staff working in the franchised and...

  • Page 42
    ..., available at www.frc.org.uk, and considers that the Company has complied with the Combined Code's requirements throughout the year ended 31 December 2009. As InterContinental Hotels Group PLC's shares are also listed on the New York Stock Exchange (NYSE), the Company is subject to the rules of the...

  • Page 43
    ... time signed new letters of appointment effective from that date. The dates shown above represent the original dates of appointment of each of the Directors to the Group's parent company. Current Directors' biographical details are set out on page 36 of this Annual Report. These include their main...

  • Page 44
    ... Committee of the World Travel & Tourism Council and a member of the President's Committee of the CBI. Neither of these positions is remunerated. Performance evaluations of the Board and the Directors were undertaken for 2009. An independent third-party facilitator assists in the performance...

  • Page 45
    ... for succession planning and assists in identifying and developing the role of the Senior Independent Director. It meets at least twice a year. The Committee met three times during 2009: these meetings were attended by the Chairman and all the Non-Executive Directors. Corporate Responsibility...

  • Page 46
    ... 2010, two Directors fall into this category. Therefore, Ralph Kugler and David Webster will retire by rotation and offer themselves for re-election at the Annual General Meeting. The Notice of Annual General Meeting, sent to shareholders at the same time as this Report, provides further information...

  • Page 47
    ... the Group's technology strategy and related risks; • consideration of the Group's treasury objectives and policies; • a review of changes to the Group's policy on delegation of authority; • a review of the funding position and governance of the Group's main pension plan; • periodic reports...

  • Page 48
    ... Remuneration policy and structure Base salary and benefits Annual Bonus Plan Long Term Incentive Plan Performance graph Shareholding policy Total compensation Policy regarding pensions Non-Executive Directors' pay Service contracts Audited information on Directors' emoluments This report sets...

  • Page 49
    ...operation of the remuneration policy and emerging market practices. In 2009, the Committee met four times and discussed, amongst others, the following matters: Meeting 12 February 2009 Agenda items discussed • 2008 Annual Performance Review • 2008 Annual Bonus Plan awards • 2006/2008 Long Term...

  • Page 50
    ...of the Group To align short-term and long-term reward with returns to shareholders To drive and reward delivery of sustained long-term EPS and TSR performance, aligned with the interests of shareholders To provide a competitive level of benefits, providing short-term protection and long-term savings...

  • Page 51
    ... rating and key performance objectives (KPOs) linked to the corporate strategy: Individual Performance Measures for OPR Financial returns Our people Guest experience Example KPOs • Total gross revenue and system contribution revenue • Annual employee engagement scores • Relaunch of Holiday Inn...

  • Page 52
    50 IHG Annual Report and Financial Statements 2009 Remuneration report continued 5 Long Term Incentive Plan (LTIP) Each year, specific quantitative targets against individual performance measures are set for each Executive Director and Executive Committee member, as relevant to their role. ...

  • Page 53
    ... World Hotels index 250 200 150 100 50 0 31 Dec 2004 31 Dec 2005 31 Dec 2006 FTSE 100 - Total Shareholder Return Index 31 Dec 2007 Dow Jones World Hotels - Total Shareholder Return Index 31 Dec 2008 31 Dec 2009 Source: Datastream InterContinental Hotels Group PLC - Total Shareholder Return...

  • Page 54
    ...IHG Annual Report and Financial Statements 2009 Remuneration report continued 7 Shareholding policy Share ownership The Committee believes that share ownership by Executive Directors and senior executives strengthens the link between the individual's personal interests and those of the shareholders...

  • Page 55
    ... in the InterContinental Hotels Group International Savings and Retirement Plan or other local plans. 10 Non-Executive Directors' pay policy and structure Non-Executive Directors are paid a fee which is approved by the Board, having taken account of the fees paid in other companies of a similar...

  • Page 56
    ... four times pensionable salary; • pensions payable in the event of ill health; and • spouses', partners' and dependants' pensions on death. When benefits would otherwise exceed a member's lifetime allowance under the post-April 2006 pensions regime, these benefits are limited in the IC Plan, but...

  • Page 57
    ... 1 Jan 2009 to 31 Dec 2009 Value based on share price of Planned 893p at vesting 31 Dec 2009 date £ THE BOARD, SENIOR MANAGEMENT AND THEIR RESPONSIBILITIES Directors Andrew Cosslett Award date Market price per share at award Vesting date Market price per share at vesting ABP Value at awards...

  • Page 58
    ... all-employee Sharesave Plan. Ordinary shares under option Options held at 1 Jan 2009 Lapsed during the year Exercised during the year Share price on date of exercise Options held at 31 Dec 2009 Weighted average option price Option price Directors Andrew Cosslett Total Richard Solomons Total 157...

  • Page 59
    ... 18 Cash and cash equivalents 19 Trade and other payables 20 Provisions 21 Loans and other borrowings 22 Financial risk management policies 23 Financial instruments 24 Net debt 25 Retirement benefits 26 Deferred tax 27 Share-based payments 28 Issued share capital and reserves 29 Operating leases...

  • Page 60
    ... profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the Annual Report, including the Directors' report, and the Group financial statements include a fair review of the development and performance of the business and the position of the Company...

  • Page 61
    ... Hotels Group PLC for the year ended 31 December 2009 which comprise the Group income statement, the Group statement of comprehensive income, the Group statement of changes in equity, the Group statement of financial position, the Group statement of cash flows, accounting policies and the related...

  • Page 62
    ...items (note 5) $m 2008 For the year ended 31 December 2009 Note 2 Total $m Total $m Revenue Cost of sales Administrative expenses Other operating income and expenses Depreciation and amortisation Impairment Operating (loss)/profit Financial income Financial expenses (Loss)/profit before tax Tax...

  • Page 63
    ... comprehensive income Available-for-sale financial assets: Gains/(losses) on valuation Losses/(gains) reclassified to income on impairment/disposal Cash flow hedges: Losses arising during the year Reclassified to financial expenses Defined benefit pension plans: Actuarial losses, net of related tax...

  • Page 64
    ... At 1 January 2008 Total comprehensive income for the year Issue of ordinary shares Repurchase of shares Transfer to capital redemption reserve Purchase of own shares by employee share trusts Release of own shares by employee share trusts Equity-settled share-based cost Tax related to share schemes...

  • Page 65
    ... benefit obligations Trade and other payables Deferred tax payable Total non-current liabilities Liabilities classified as held for sale Total liabilities Net assets EQUITY Equity share capital Capital redemption reserve Shares held by employee share trusts Other reserves Unrealised gains and losses...

  • Page 66
    ...Equity-settled share-based cost, net of payments Other items Operating cash flow before movements in working capital Decrease in trade and other receivables Increase in trade and other payables Retirement benefit contributions, net of cost Cash flows relating to exceptional operating items Cash flow...

  • Page 67
    ...Borrowing Costs', Amendment to IFRS 2 'Share-based Payment: Vesting Conditions and Cancellations', Amendment to IFRS 7 'Financial Instruments: Disclosures', IFRS 8 'Operating Segments', International Financial Reporting Interpretations Committee Interpretation (IFRIC) 13 'Customer Loyalty Programmes...

  • Page 68
    ...operating policy decisions of the entity. Associates are accounted for using the equity method unless the associate is classified as held for sale. Under the equity method, the Group's investment is recorded at cost adjusted by the Group's share of post-acquisition profits and losses. When the Group...

  • Page 69
    Accounting policies 67 Inventories Inventories are stated at the lower of cost and net realisable value. Trade receivables Trade receivables are recorded at their original amount less provision for impairment. It is the Group's policy to provide for 100% of the previous month's aged receivables ...

  • Page 70
    ... the agreement. 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 hotel's profitability or cash...

  • Page 71
    ... of financial position. Retirement and other post-employment benefits - the cost of defined benefit pension plans and other post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on...

  • Page 72
    ... functions include costs of global functions, including technology, sales and marketing, finance, human resources and corporate services; revenue arises principally from technology fee income. Central liabilities include the loyalty programme liability and the cumulative short-term System Fund...

  • Page 73
    Notes to the Group financial statements 71 2 Segmental information continued Year ended 31 December 2009 Americas $m EMEA $m Asia Pacific $m Central $m Group $m Revenue Franchised Managed Owned and leased Central Total revenue* 437 110 225 - 772 Americas $m 83 119 195 - 397 EMEA $m 11 105 129 ...

  • Page 74
    ...$80m relating to cost of sales. Reconciliation of capital expenditure Capital expenditure per management reporting Timing differences Capital expenditure per the financial statements Comprising additions to: Property, plant and equipment Intangible assets Investment in associates Americas $m EMEA...

  • Page 75
    ... Total revenue* 495 168 300 - 963 Americas $m 110 168 240 - 518 EMEA $m 18 113 159 - 290 Asia Pacific $m - - - 126 126 Central $m 623 449 699 126 1,897 Group $m Segmental result Franchised Managed Owned and leased Regional and central Reportable segments' operating profit Exceptional operating...

  • Page 76
    ... cost of sales. Central liabilities include the loyalty programme liability and the cumulative short-term System Fund surplus which were allocated to the geographical segments prior to the adoption of IFRS 8. Reconciliation of capital expenditure Capital expenditure per management reporting Timing...

  • Page 77
    ... continued Geographical information Revenue United Kingdom United States Rest of World Total revenue per Group income statement Year ended 31 December 2009 $m Year ended 31 December 2008 $m 125 678 735 1,538 173 819 905 1,897 For the purposes of the above table, hotel revenue is determined...

  • Page 78
    ... emoluments 2009 $m 2008 $m Staff Costs: Wages and salaries Social security costs Pension and other post-retirement benefits: Defined benefit plans (note 25) Defined contribution plans 441 45 12 26 524 2009 549 55 8 30 642 2008 Average number of employees, including part-time employees: Americas...

  • Page 79
    ...: Cost of sales: Onerous management contracts Administrative expenses: Holiday Inn brand relaunch Reorganisation and related costs Enhanced pension transfer Other operating income and expenses: Gain on sale of associate investments Gain on sale of other financial assets Loss on disposal of hotels...

  • Page 80
    ...interest rate method. Included within interest expense is $2m (2008 $12m) payable to the Priority Club Rewards loyalty programme relating to interest on the accumulated balance of cash received in advance of the redemption of points awarded. 7 Tax Note 2009 $m 2008 $m Income tax UK corporation tax...

  • Page 81
    ...fully with its worldwide corporate income tax filing, payment and reporting obligations, whilst managing its tax affairs within acceptable risk parameters in order to minimise its worldwide liabilities in the best interests of its shareholders. The Group adopts a policy of open co-operation with tax...

  • Page 82
    ... average number of ordinary shares is calculated as: Basic weighted average number of ordinary shares Dilutive potential ordinary shares - employee share options 285 10 295 2009 Continuing operations Total Continuing operations 287 9 296 2008 Total Adjusted earnings per ordinary share Profit...

  • Page 83
    ...European hotel. Estimated future cash flows were discounted at pre-tax rates of 14.0% and 12.5% respectively. These charges are included within impairment on the face of the Group income statement. The carrying value of land and buildings held under finance leases at 31 December 2009 was $187m (2008...

  • Page 84
    ...-down discounted at a pre-tax rate of 12.5%. The valuation adjustments are included within impairment on the face of the Group income statement. The results of two of these reclassified hotels, which, prior to 30 June 2009, were presented as discontinued operations, are now reported as continuing...

  • Page 85
    ... operations continued 2009 $m 2008 $m Net assets of hotels sold Property, plant and equipment Cash and cash equivalents Group's share of net assets disposed of Consideration Current year disposals: Cash consideration, net of costs paid Net assets disposed of Prior year disposals: Provision release...

  • Page 86
    ... long-term growth rates for the relevant markets. Pre-tax discount rates are used to discount the cash flows based on the Group's weighted average cost of capital adjusted to reflect the risks specific to the business model and territory of the CGU being tested. Americas goodwill Americas managed...

  • Page 87
    ...the financial information of the associates: 2009 $m 2008 $m Share of associates' statement of financial position Current assets Non-current assets Current liabilities Non-current liabilities Net assets Share of associates' revenue and profit Revenue Net loss Related party transactions Revenue from...

  • Page 88
    ... Hong Kong dollars and $18m (2008 $13m) in other currencies. Unlisted equity shares are mainly investments in entities that own hotels which the Group manages. The fair value of unlisted equity shares has been estimated using valuation guidelines issued by the British Venture Capital Association and...

  • Page 89
    ...on payment terms of up to 30 days. The fair value of trade and other receivables approximates their carrying value. The maximum exposure to credit risk for trade and other receivables, excluding prepayments, at the end of the reporting period by geographic region is: 2009 $m 2008 $m Americas Europe...

  • Page 90
    ...financial position at fair value. Fair value is estimated using discounted future cash flows taking into consideration interest and exchange rates prevailing on the last day of the reporting period. 20 Provisions 2009 $m 2008 $m Onerous management contracts 65 - The onerous management contracts...

  • Page 91
    ... with Board approved policies and are subject to regular audit. The treasury function does not operate as a profit centre. The treasury function seeks to reduce the financial risk of the Group and manages liquidity to meet all foreseeable cash needs. Treasury activities include money market...

  • Page 92
    ... debt, issued share capital and reserves. The structure is managed to minimise the Group's cost of capital, to provide ongoing returns to shareholders and to service debt obligations, whilst maintaining maximum operational flexibility. Surplus cash is either reinvested in the business, used to repay...

  • Page 93
    ... Interest rate swaps are expected to affect profit or loss in the same periods that the cash flows are expected to occur. Fair values The table below compares carrying amounts and fair values of the Group's financial assets and liabilities. 2009 Carrying value $m Fair value $m Carrying value $m 2008...

  • Page 94
    ...in the income statement (see note 5) also includes $4m of losses reclassified from equity. 68 11 (10) 69 The Level 3 equity securities relate to investments in unlisted shares which are valued by applying an average price-earnings (P/E) ratio for a competitor group to the earnings generated by the...

  • Page 95
    ... expenses, are: Pension plans UK 2009 $m 2008 $m 2009 $m US and other 2008 $m Post-employment benefits 2009 $m 2008 $m 2009 $m GROUP FINANCIAL STATEMENTS Total 2008 $m Current service cost Interest cost on benefit obligation Expected return on plan assets Operating profit before exceptional items...

  • Page 96
    ... Group statement of comprehensive income are: Pension plans UK 2009 $m 2008 $m 2009 $m US and other 2008 $m Post-employment benefits 2009 $m 2008 $m 2009 $m Total 2008 $m Actual return on plan assets Less: expected return on plan assets Other actuarial (losses)/gains Total actuarial (losses)/gains...

  • Page 97
    ... to market conditions, particularly equity values. Changes in assumptions used for determining retirement benefit costs and obligations may have a material impact on the income statement and the statement of financial position. The main assumptions are the discount rate, the rate of inflation...

  • Page 98
    ... the Group financial statements continued 25 Retirement benefits continued Pension plans UK US and other 2009 $m 2008 $m Post-employment benefits 2009 $m 2008 $m 2009 $m Total 2008 $m 2009 $m 2008 $m Movement in benefit obligation Benefit obligation at beginning of year Current service cost Members...

  • Page 99
    ...Retirement benefits continued The combined assets of the principal plans and expected rate of return are: 2009 Long-term rate of return expected % Long-term rate of return expected % 2008 Value $m Value $m UK pension plans Liability matching investment funds Equities Bonds Cash Other Total market...

  • Page 100
    ...profits arising or on the outcome of EU case law and legislative developments. At 31 December 2009, the Group has not provided deferred tax in relation to temporary differences associated with post-acquisition undistributed earnings of subsidiaries as the Group is in a position to control the timing...

  • Page 101
    ... exceed three times salary for Executive Directors and four times salary in the case of other eligible employees. During the year, conditional rights over 5,754,548 (2008 5,060,509) shares were awarded to employees under the plan. The plan provides for the grant of 'nil cost options' to participants...

  • Page 102
    ...2009 and 2008, the Group used separate option pricing models and assumptions for each plan. The following tables set forth information about how the fair value of each option grant is calculated: Annual Bonus Plan Long Term Incentive Plan 2009 Valuation model Binomial Weighted average share price...

  • Page 103
    ... Fair value of awards granted during the year 2009 2008 Weighted average remaining contract life (years) At 31 December 2009 At 31 December 2008 The above awards do not vest until the performance and service conditions have been met. Sharesave Plan Number of shares thousands Range of option prices...

  • Page 104
    ... Annual General Meeting held on 30 May 2008. The Company deferred its £150m share repurchase programme in November 2008 in order to preserve cash and maintain the strength of the Group's financial position. No shares were repurchased in 2009. The authority given to the Company at the Annual General...

  • Page 105
    ...12 In limited cases, the Group may provide performance guarantees to third-party owners to secure management contracts. The maximum outstanding exposure under such guarantees is $106m (2008 $249m). Payments under any such guarantees are charged to the income statement as incurred. From time to time...

  • Page 106
    ... operation of the Funds: 2009 $m 2008 $m Assessment fees received from hotels* Key elements of Funds' expenditure:* Marketing Priority Club Payroll costs Net surplus for the year Cumulative short-term net surplus Loyalty programme liability Interest payable to the Funds * Not included in the Group...

  • Page 107
    ... Parent company financial statements Parent company balance sheet Notes to the parent company financial statements 1 Accounting policies 2 Employees and Directors 3 Investments 4 Debtors 5 Creditors 6 Share capital 7 Movements in reserves 8 Reconciliation of movements in shareholders' funds 9 Profit...

  • Page 108
    ... Total assets less current liabilities Creditors: amounts falling due after one year Net assets Capital and reserves Called up share capital Share premium account Capital redemption reserve Share-based payment reserve Profit and loss account Equity shareholders' funds Signed on behalf of the Board...

  • Page 109
    ... subsidiaries. 2 Employees and Directors 2009 2008 Average number of employees (Non-Executive Directors) 6 2009 £m 7 2008 £m Staff costs 1 1 Detailed information on the emoluments, pensions, option holdings and shareholdings for each Director is shown in the Remuneration Report on pages 46...

  • Page 110
    ... to subscribe for ordinary shares At 31 December 2008 Exercised* Lapsed or cancelled At 31 December 2009 Option exercise price per ordinary share (pence) Final exercise date * The weighted average option price was 496.2p for shares exercised under the Executive Share Option Plan and 420.5p for...

  • Page 111
    ... and Remuneration Report in accordance with applicable United Kingdom law and United Kingdom Generally Accepted Accounting Practice (UK GAAP). The Directors are required to prepare Company financial statements for each financial year which present fairly the financial position of the Company and the...

  • Page 112
    ...London 15 February 2010 Opinion on financial statements In our opinion the parent company financial statements: • give a true and fair view of the state of the Company's affairs as at 31 December 2009; • have been properly prepared in accordance with United Kingdom Generally Accepted Accounting...

  • Page 113
    ... of terms used in the Annual Report and Financial Statements 2009 and some analyses of our share ownership at the end of 2009. We also provide a range of information designed to be helpful to shareholders and contact details for the Company and for a number of service providers. USEFUL INFORMATION...

  • Page 114
    ... rate streams (or vice versa) on a notional principal. a contract to operate a hotel on behalf of the hotel owner. the value attributed to a listed company by multiplying its share price by the number of shares in issue. hotels in the three/four star category (eg Holiday Inn, Holiday Inn Express...

  • Page 115
    ... profiles Shareholder profile as at 31 December 2009 by type Number of shareholders Percentage of total shareholders Ordinary shares Percentage of issued share capital Category of holdings Private individuals Nominee companies Limited and public limited companies Other corporate bodies Pension...

  • Page 116
    ...'s change of address and for information on a range of shareholder services please contact the Company's Registrar, Equiniti, on 0871 384 2132†(UK callers) or +44 121 415 7034 (non-UK callers). American Depositary Receipts (ADRs) The Company's shares are listed on the New York Stock Exchange in...

  • Page 117
    ... the Financial Times Cityline Service, telephone 09058 171690 (calls charged at 75p per minute from a BT landline). Further details of the share price may be found on the Company's website www.ihgplc.com/investors under shareholder centre/share price. Share price 2009: InterContinental Hotels Group...

  • Page 118
    ... 1895 512 101 www.ihg.com For general information about the Group's business please contact the Corporate Affairs department at the above address. For all other enquiries please contact the Company Secretariat at the above address or email [email protected] Registrar Equiniti Aspect House...

  • Page 119
    ... related to information security; and the risks associated with funding the defined benefits under its pension plans. The main factors that could affect the business and financial results are described in the Business Review of the Annual Report and Financial Statements 2009 and also in any Annual...

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    InterContinental Hotels Group PLC Broadwater Park, Denham Buckinghamshire UB9 5HR United Kingdom Telephone +44 (0) 1895 512 000 Fax +44 (0) 1895 512 101 make a booking at www.ihg.com