Holiday Inn 2014 Annual Report Download - page 52

Liquidity and capital resources
Sources of liquidity
The Group is financed by a $1.07bn syndicated bank facility which
expires in November 2016 (the Syndicated Facility), £250m of public
bonds which are repayable on 9 December 2016 and £400m of public
bonds which are repayable on 28 November 2022. $361m was drawn
under the $1.07bn Syndicated Facility at the year end. The bonds are
issued under the Group’s £750m Medium Term Notes programme.
Short-term borrowing requirements are met from drawings under
bilateral bank facilities. Additional funding is provided by the 99-year
finance lease (of which 91 years remain) on InterContinental Boston
and other uncommitted bank facilities (see note 21 to the Group
Financial Statements). In the Group’s opinion, the available facilities
are sufficient for the Group’s present liquidity requirements.
The Syndicated Facility contains two financial covenants;
interest cover and net debt divided by earnings before interest,
tax, depreciation and amortisation. The Group is in compliance
with all of the financial covenants in its loan documents, none
of which is expected to present a material restriction on funding
in the near future.
Net debt of $1,533m (2013 $1,153m) is analysed by currency
as follows:
2014
$m
20131
$m
Borrowings
Sterling 1,028 671
US dollar 557 709
Euros 103 11
Other 710
Cash and cash equivalents
Sterling (21) (87)
US dollar (54) (40)
Euros (25) (15)
Canadian dollar (14) (25)
Chinese renminbi (8) (15)
Other (40) (66)
Net debt21,533 1,153
Average debt levels 1,322 985
1
Restated for the adoption of ‘Offsetting Financial Assets and Financial
Liabilities’ (Amendments to IAS 32), see page 107.
2 Including the impact of currency derivatives.
Borrowings included bank overdrafts of $107m (2013 $114m)
which were matched by an equivalent amount of cash and cash
equivalents under the Group’s cash pooling arrangements.
Under these arrangements, each pool contains a number of bank
accounts with the same financial institution and the Group pays
interest on net overdraft balances within each pool. The cash
pools are used for day-to-day cash management purposes and
are managed daily as closely as possible to a zero balance on
a net basis for each pool. Overseas subsidiaries are typically in
a cash positive position, with the most significant balances in
the US and Canada, and the matching overdrafts are held by
the Group’s central treasury company in the UK.
IHG pursues a tax strategy that is consistent with its business
strategy and its overall business conduct principles. This strategy
seeks to ensure full compliance with all tax filing, payment and
reporting obligations on the basis of communicative and transparent
relationships with tax authorities. Policies and procedures related
to tax risk management are subject to regular review and update
and are approved by the Board.
Tax liabilities or refunds may differ from those anticipated,
in particular as a result of changes in tax law, changes in the
interpretation of tax law, or clarification of uncertainties in the
application of tax law. Procedures to minimise risk include the
preparation of thorough tax risk assessments for all transactions
carrying tax risk and, where appropriate, material tax uncertainties
are discussed and resolved with tax authorities in advance.
IHG’s contribution to the jurisdictions in which it operates includes
asignificant contribution in the form of taxes borne and collected,
including taxes on its revenues and profits and in respect of the
employment its business generates.
IHG earns approximately 70% of its revenues in the form of
franchise, management or similar fees, with 85% of IHG branded
hotels being franchised. In jurisdictions in which IHG does
franchise business, the prevailing tax law will generally provide
for IHG to be taxed in the form of local withholding taxes based on
a percentage of fees rather than based on profits. Costs to support
the franchise business are normally incurred regionally or globally
and therefore profits for an individual franchise jurisdiction cannot
be separately determined.
Dividends
The Board has proposed a final dividend per ordinary share of
52¢ (33.8p). With the interim dividend per ordinary share of 25¢
(14.8p), the full-year dividend per ordinary share for 2014 will
total 77¢ (48.6p), an increase of 10.0% over 2013.
On 2 May 2014, the Group announced a $750m return to
shareholders by way of special dividend and share consolidation.
The dividend was paid to shareholders on 14 July 2014.
Under the $500m share buyback programme announced on
7 August 2012, which commenced on 12 November 2012 and
completed on 29 May 2014, a total of 17.3m shares have been
repurchased for total consideration of $500m.
Earnings per ordinary share
Basic earnings per ordinary share increased by 12.3% to
158.3¢ from 140.9¢ in 2013. Adjusted earnings per ordinary
share remained unchanged at 158.3¢.
Share price and market capitalisation
The IHG share price closed at £25.95 on 31 December 2014,
up from £20.13 on 31 December 2013. The market capitalisation
of the Group at the year end was £6.4bn.
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IHG Annual Report and Form 20-F 2014
Performance continued