Holiday Inn 2015 Annual Report Download - page 158

Group information
Capital expenditure
• Capital expenditure in 2015 totalled $264 million (excluding the
$438m acquisition of Kimpton and a $22m loan to an associate which
was repaid in the year) compared with $271 million in 2014 and
$269 million in 2013.
• At 31 December 2015, capital committed (being contracts placed
for expenditure on property, plant and equipment, and intangible
assets not provided for in the Group Financial Statements)
totalled $76 million.
• The Group has also committed to invest in a number of its
associates, with an estimated outstanding commitment of
$45 million, based on current forecasts.
Risk factors
The Group is subject to a variety of inherent risks that may have
an adverse impact on its business operations, financial condition,
turnover, profits, brands and reputation. This section describes the
main risks that could materially affect the Group’s business. The risks
below are not the only ones that the Group faces. Some risks are not
yet known to the Group and some that the Group does not currently
believe to be material could later turn out to be material.
The risk factors should also be considered in connection
with any financial and forward-looking information in this Annual
Report and Form 20-F and the cautionary statements regarding
forward-looking statements on page 180.
The Group is exposed to the risks of political and economic
developments
The Group is exposed to political, economic and financial market
developments such as recession, inflation and availability of credit and
currency fluctuations that could lower revenues and reduce income.
The outlook for 2016 may worsen due to uncertainty in Greater China
and the Eurozone, the impact of declining commodity prices on
economies dependent on such exports, and continued unrest in parts
of the Middle East and Africa. The interconnected nature of economies
suggests any of these or other events could trigger a recession that
reduces leisure and business travel to and from affected countries and
adversely affects room rates and/or occupancy levels and other
income-generating activities. The owners or potential owners of hotels
franchised or managed by the Group face similar risks that could
adversely impact their solvency and the Group’s ability to secure and
retain franchise or management agreements. Specifically, the Group
is most exposed to the US market and, increasingly, to Greater China.
Accordingly, the Group is particularly susceptible to adverse changes
in these economies as well as changes in their currencies. In addition
to trading conditions, the economic outlook also affects the availability
of capital to current and potential owners, which could impact existing
operations and the health of the pipeline.
History and developments
The Company was incorporated and registered in England and Wales
with registered number 5134420 on 21 May 2004 as a limited company
under the Companies Act 1985 with the name Hackremco (No. 2154)
Limited. In 2004/05, as part of a scheme of arrangement to facilitate
the return of capital to shareholders, the following structural changes
were made to the Group: (i) on 24 March 2005, Hackremco (No. 2154)
Limited changed its name to New InterContinental Hotels Group
Limited; (ii) on 27 April 2005, New InterContinental Hotels Group
Limited re-registered as a public limited company and changed its
name to New InterContinental Hotels Group PLC; and (iii) on 27 June
2005, New InterContinental Hotels Group PLC changed its name to
InterContinental Hotels Group PLC and became the holding company
of the Group.
The Group, formerly known as Bass and, more recently, Six Continents,
was historically a conglomerate operating as, among other things,
a brewer, soft drinks manufacturer, hotelier, leisure operator, and
restaurant, pub and bar owner. In the last several years, the Group has
undergone a major transformation in its operations and organisation,
as a result of the separation (as discussed below) and a number of
significant disposals during this period, which has narrowed the
scope of its business.
On 15 April 2003, following shareholder and regulatory approval,
Six Continents PLC (as it then was) separated into two new listed
groups, InterContinental Hotels Group PLC (as it then was),
comprising the hotels and soft drinks businesses, and Mitchells
& Butlers plc, comprising the retail and standard commercial
property developments business.
The Group disposed of its interests in the soft drinks business by
way of an initial public offering of Britvic (Britannia Soft Drinks Limited
for the period up to 18 November 2005, and thereafter, Britannia
SD Holdings Limited (renamed Britvic plc on 21 November 2005),
which became the holding company of the Britvic Group on
18 November 2005), a manufacturer and distributor of soft drinks
in the UK, in December 2005.
Following separation, the Group has undertaken an asset-disposal
programme, realising, by the end of 2015, proceeds of $7.9 billion.
This programme has significantly reduced the capital requirements
of the Group whilst largely retaining the hotels in the IHG System.
A small number of hotels have been sold since the end of 2014,
the most significant of which are set out below.
Recent acquisitions and divestitures
• The Group agreed to sell InterContinental Paris – Le Grand on
7 December 2014 for €330 million, and the transaction was
completed on 20 May 2015.
• The Group agreed to acquire Kimpton Hotels & Restaurants
on 15 December 2014, and the transaction was completed
on 16 January 2015 for $430 million (before working capital
adjustments and cash acquired).
• The Group agreed to sell InterContinental Hong Kong on 10 July
2015 for $938 million, and the transaction was completed on
30 September 2015.
• The Group also divested a number of investments for total proceeds
of $17 million in 2015.
156 IHG Annual Report and Form 20-F 2015