Holiday Inn 2009 Annual Report Download - page 5

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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 model has proved itself, with strong underlying margin performance.
Adjusted earnings per share decreased just 15 per cent from 120.9 cents to
102.8 cents due to a lower interest charge and substantially reduced tax rate. This
was as a result of certain prior year tax contingencies, primarily as a result of the
final resolution of various tax audits. We had a $373 million exceptional charge in
the year. This included $197 million of non-cash impairments reflecting the ongoing
poor trading environment; a $91 million onerous management contract provision
in the US; $19 million in relation to the Holiday Inn relaunch; and $43 million of
reorganisation costs.
The Board is recommending that the final dividend for 2009 is maintained at
29.2 cents per share, giving a full-year dividend of 41.4 cents per share, flat on 2008.
This converts to a sterling full-year dividend of 26.0 pence, broadly flat compared
with 2008.
Board
I am pleased to welcome Graham Allan to IHG as a Non-Executive Director.
Graham joined the Board on 1 January 2010 and is the President of Yum! Restaurants
International, a subsidiary of Yum! Brands, Inc., which operates quick service
restaurant brands including KFC, Pizza Hut and Taco Bell in over 100 countries
worldwide. Graham brings a wealth of brand management, marketing and franchising
experience, which will be of significant benefit to IHG.
Financial position and shareholder returns
Our careful control over cash has enabled us to reduce our overall net debt position
by $0.2 billion to $1.1 billion, an excellent achievement considering the challenging
trading environment during the year. In December 2009, we issued a seven-year
£250 million bond which was swapped into US dollars and used to reduce the term
loan which matures in November 2010 from $500 million to $85 million. Last year
we refinanced our $1.6 billion syndicated loan facility which matures in May 2013. In
order to preserve cash and maintain the strength of our balance sheet, the remaining
£30 million of the share buyback programme was deferred in 2008; consequently,
no returns above normal dividends were made to shareholders in 2009. Total funds
returned since March 2004 amount to more than £3.5 billion.
Outlook
2009 was a challenging year for the whole hotel market. We have taken decisive
actions to minimise the impact on our business, having achieved a $50 million
sustainable reduction in regional and central costs, representing a saving of
over 15 per cent, whilst opening a record 439 hotels and driving forward with the
Holiday Inn relaunch.
On behalf of the Board, I should like to thank everyone in IHG for their unstinting
efforts in a difficult year and their commitment to the future success of our business.
The trading environment will continue to be tough in 2010 but I remain confident
that our global scale, fee-based business model, powerful system and proven
management team position us well to benefit from the upturn when it comes.
David Webster
Chairman
Headlines and Chairman’s statement 3
Dear Shareholder
“During 2009, strong
management actions
have helped to mitigate
the impact of the difficult
trading environment on
IHG’s results, enabling
us to outperform the
competition and deliver
on our priorities.”
David Webster
Chairman
Chairman’s statement
OVERVIEW