Holiday Inn 2015 Annual Report Download - page 50

Performance continued
Sources of liquidity
The Group successfully refinanced its bank debt in March 2015, putting
in place a $1.275bn revolving syndicated bank facility which matures
in March 2020 (the Syndicated Facility), with two one-year extension
options exercisable in 2016 and 2017. The Group also put in place a
$75m revolving bilateral facility (the Bilateral facility) in October 2015
which also matures in March 2020 and has two one-year extension
options exercisable in 2016 and 2017. The facilities were undrawn at
31 December 2015.
The Syndicated and Bilateral facilities contain the same terms and two
financial covenants; interest cover; and net debt divided by earnings
before interest, tax, depreciation and amortisation (EBITDA). 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.
In August 2015, the Group issued £300m of public bonds at a 3.750%
coupon rate, the lowest funding rate the Group has achieved in the
sterling bond market. The bonds are repayable in 2025, extending
the maturity profile of the Group’s debt. This is in addition to £250m
of public bonds which are repayable on 9 December 2016 and £400m
of public bonds which are repayable on 28 November 2022.
Additional funding is provided by the 99-year finance lease (of which
90 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.
Net debt of $529m (2014: $1,533m) is analysed by currency as follows.
2015
$m
2014
$m
Borrowings
Sterling 1,405 1,028
US dollar 253 557
Euros 4103
Other 47
Cash and cash equivalents
Sterling (619) (21)
US dollar (460) (54)
Euros (15) (25)
Canadian dollar (8) (14)
Chinese renminbi (4) (8)
Other (31) (40)
Net debt 529 1,533
Average debt level 1,420 1,322
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 75% of
its revenues in the form of franchise, management or similar fees, with
almost 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 57.5¢
(40.3p). With the interim dividend per ordinary share of 27.5¢ (17.7p),
the full-year dividend per ordinary share for 2015 will total 85.0¢
(58.0p), an increase of 10.4% over 2014.
In February 2016, the Board proposed a $1.5bn return of funds to
shareholders by way of a special dividend and share consolidation.
Earnings per ordinary share
Basic earnings per ordinary share increased by 228.5% to 520.0¢
from 158.3¢ in 2014. Adjusted earnings per ordinary share increased
by 10.5% to 174.9¢ from 158.3¢ in 2014.
Share price and market capitalisation
The IHG share price closed at £26.58 on 31 December 2015, up from
£25.95 on 31 December 2014. The market capitalisation of the Group
at the year end was £6.3bn.
Liquidity and capital resources
48 IHG Annual Report and Form 20-F 2015