Holiday Inn 2009 Annual Report Download - page 23

Business review 21
Taxation
The effective rate of tax on the combined profit from continuing and
discontinued operations, excluding the impact of exceptional items,
was 5% (2008 23%). The rate is particularly low in 2009 due to the
impact of prior year items relative to a lower level of profit than in
2008. By excluding the impact of prior year items, which are
included wholly within continuing operations, the equivalent tax
rate would be 42% (2008 39%). This rate is higher than the UK
statutory rate of 28% due mainly to certain overseas profits
(particularly in the US) being subject to statutory rates higher
than the UK statutory rate, unrelieved foreign taxes and
disallowable expenses.
Taxation within exceptional items totalled a credit of $287m
(2008 $42m) in respect of continuing operations. This represented
the release of exceptional provisions relating to tax matters
which were settled during the year, or in respect of which the
statutory limitation period had expired, together with tax relief
on exceptional costs.
Net tax paid in 2009 totalled $2m (2008 $2m) including $1m (2008
$3m) in respect of disposals. Tax paid is lower than the current
period income tax charge, primarily due to the receipt of refunds in
respect of prior years, together with provisions for tax for which no
payment of tax has currently been made.
Earnings per ordinary share
Basic earnings per ordinary share in 2009 was 74.7¢, compared
with 91.3¢ in 2008. Adjusted earnings per ordinary share was
102.8¢, against 120.9¢ in 2008.
Dividends
The Board has proposed a final dividend per ordinary share of
29.2¢ (18.7p). With the interim dividend per ordinary share of 12.2¢
(7.3p), the full-year dividend per ordinary share for 2009 will total
41.4¢ (26.0p).
Share price and market capitalisation
The IHG share price closed at £8.93 on 31 December 2009, up from
£5.62 on 31 December 2008. The market capitalisation of the Group
at the year end was £2.6bn.
Capital structure and liquidity management
2009 2008
Net debt at 31 December $m $m
Borrowings
Sterling* –152
US dollar* 866 889
Euro 216 224
Other 53 90
Cash* (53) (82)
Net debt 1,082 1,273
Average debt levels 1,231 1,498
* Including the impact of currency derivatives.
2009 2008
Facilities at 31 December $m $m
Committed 1,693 2,107
Uncommitted 25 25
Total 1,718 2,132
Interest risk profile of gross debt 2009 2008
for major currencies at 31 December %%
At fixed rates 90 53
At variable rates 10 47
In response to the challenging economic environment the Group
continued its focus on cash management during 2009. In the year,
$432m of cash was generated from operating activities, with the
other key elements of the cash flow being:
• proceeds from the disposal of hotels and investments of
$35m; and
• capital expenditure of $148m, including $65m to purchase the
Hotel Indigo San Diego.
The Group is mainly funded by a $1.7bn syndicated bank facility,
of which $1.6bn matures in May 2013 and an $85m term loan
that matures in November 2010.
In December 2009, the Group issued a seven-year £250m public
bond, at a coupon of 6%, which was initially priced at 99.465% of
face value. The £250m was immediately swapped into US dollar
debt using currency swaps and the proceeds were used to reduce
the term loan which matures in November 2010 from $500m to
$85m. Additional funding is provided by a finance lease on the
InterContinental Boston.
Net debt at 31 December 2009 decreased by $191m to $1,082m
and, in the table above, included $204m in respect of the finance
lease commitment for the InterContinental Boston and $415m
in respect of currency swaps related to the sterling bond.
Further information on the Group’s treasury management can
be found in note 22 on pages 89 and 90 in the notes to the Group
financial statements 2009.
BUSINESS REVIEW
Other financial information continued