Holiday Inn 2012 Annual Report Download - page 75

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OVERVIEW BUSINESS REVIEW GOVERNANCE
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY
FINANCIAL STATEMENTS OTHER INFORMATION
Directors’ Remuneration Report 73
A – Share capital
Return of share capital
Background
In October 2012, the Company paid a special dividend to its shareholders. This was accompanied by a share consolidation in order to maintain
comparability (as far as possible) of the share price before and after the payment of the special dividend. In addition, the Company commenced
a share buyback programme in November 2012.
Implications for outstanding LTIP awards
LTIP award holders were not entitled to receive the special dividend. The effect of the share consolidation was broadly to preserve the value
of their awards (subject to normal market fluctuations), so no adjustment was necessary to the number of shares to which awards related.
With regard to the LTIP performance targets, consideration was given by the Committee as to whether awards needed to be adjusted
in relation to the EPS measure for the 2010/12 LTIP cycle, so that it remained economically equivalent to the target before the share
consolidation took place. It was concluded that the maximum award target would have been exceeded by a significant margin even taking
such adjustment into account and therefore no adjustment to the performance targets was required.
No adjustment was required to the TSR targets under the 2010/12, 2011/13 and 2012/14 LTIP cycles because the special dividend and share
consolidation did not result in IHG’s TSR being impacted (excluding any market fluctuations).
No adjustment was required to the net rooms or RevPAR targets as these did not relate to the share capital of the Company.
Implications for outstanding ABP deferred share awards
ABP award holders, other than Executive Directors and Executive Committee members, hold conditional awards and are not eligible to receive
dividends on their awards prior to vesting. They were similarly not entitled to receive the special dividend. The effect of the share consolidation
was broadly to preserve the value of their awards (subject to normal market fluctuations), so no adjustment was necessary to the number of
shares to which the awards related.
Executive Committee members hold forfeitable shares, rather than conditional awards (subject to one exception). Accordingly, they received
the special dividend and their share awards were subject to the share consolidation.
Kirk Kinsell holds one forfeitable share award and one conditional share award (upon which dividend equivalents are paid in order to ensure
economic parity with the rest of the Executive Committee). In order to achieve equality of treatment for Kirk Kinsell, his conditional award was
adjusted to place him in the same position as if he had held a forfeitable award, and therefore he received the special dividend and his share
award was subject to the share consolidation, in the same way as other Executive Committee members.
Implications for outstanding executive share options
IHG Executive Share Option Plan share option holders were not entitled to receive the special dividend. The effect of the share consolidation
was broadly to preserve the value of their awards (subject to normal market fluctuations), so no adjustment was made to the number of shares
to which the options related.
Share buyback programme
In relation to the share buyback programme, the effect on LTIP awards, ABP deferred shares and share options will be to broadly preserve
the value of those awards. No adjustments are required to LTIP performance targets for the same reasons as stated above.
Use of share capital in incentive plans
No awards or grants over shares were made during 2012 that would be dilutive of the Company’s ordinary share capital. Current policy is to
settle the majority of awards or grants under the Company’s share plans with shares purchased in the market. A number of options granted
up to 2005 are yet to be exercised and will be settled with the issue of new shares.
B – Performance graph
Throughout 2012, the Company was a member of the FTSE 100 index and, for remuneration purposes, used a TSR comparator group of the
DJGH index. Accordingly, the Committee has determined that these are the most appropriate market indices against which to test the Company’s
performance. The graph below shows the TSR performance of IHG from 31 December 2007 to 31 December 2012, assuming dividends are
reinvested, compared with the TSR performance achieved by the FTSE 100 index and the DJGH index. All indices are shown in sterling. Over the
five-year period, IHG’s TSR performance has increased by 139%. Over the last three years, it has significantly outperformed the FTSE 100 index
and the DJGH index.
TSR: InterContinental Hotels Group PLC v FTSE 100 and Dow Jones Global Hotels indices
250
200
150
100
50 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12
InterContinental Hotels
Group PLC
FTSE 100 index
DJGH index
4. Other matters
Source: Datastream