ihg201402186k.htm
 
 
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington DC 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 AND 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
For 18 February 2014
 
 
InterContinental Hotels Group PLC
(Registrant's name)
 
 
Broadwater Park, Denham, Buckinghamshire, UB9 5HJ, United Kingdom
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
 
Form 20-F           Form 40-F
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
 
Yes           No
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable
 
 


 
 
EXHIBIT INDEX
 
     
           
99.1
  Final Results      
 
 
 
     
           
 





Exhibit No: 99.1
 


InterContinental Hotels Group PLC
Preliminary Results for the year to 31 December 2013
 
 
Strong progress in our 10th anniversary year driven by focus on high quality growth

Financial summary1
2013
20122
 
% Change YoY
Actual
CER4
Underlying5
Revenue
$1,903m
$1,835m
4%
4%
4%
Fee revenue
$1,176m
$1,135m
4%
4%
-
Operating profit
$668m
$605m
10%
10%
8%
Adjusted basic EPS
158.3¢
139.0¢
14%
-
-
Basic EPS3
140.9¢
187.1¢
(25)%
-
-
Total dividend per share
70.0¢
64.0¢
9%
-
-
Net debt
$1,153m
$1,074m
-
-
-

 
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
 
"2013 marked IHG’s tenth anniversary as a standalone company, and was another year of strong performance.  We delivered good underlying growth in revenues and profits, further reduced the capital intensity of the business and continued to generate high returns.
Over the last 12 months we entered into agreements to dispose of three owned InterContinental hotels, with total gross proceeds of almost $830m.  This includes InterContinental Mark Hopkins, San Francisco which we have announced today.  At the same time we are continuing to invest behind our award-winning brands and technology platforms to meet changing consumer behaviours and sustain our industry-leading position.
We opened 237 hotels and signed a further 444 hotels into our pipeline, the highest number for five years, thereby reinforcing our already strong brand distribution platform and with it the promise of further high quality growth.
 
Our decision to increase our ordinary dividend by 9% reflects our confidence in our proven strategy to deliver high quality growth.  Our preferred portfolio of brands, brought to life by talented people and best in class delivery systems, will enable us to continue to drive out-performance in an industry which has compelling long term prospects.  Looking into 2014, although economic conditions in some markets remain uncertain, forward bookings data is encouraging and we are confident that we will deliver another year of growth.”
 
Delivering high quality, sustainable growth
 
$21.6bn of total gross revenue from hotels in IHG’s system, up 2% (3% CER)
 
Global comparable RevPAR growth of 3.8%, with rate up 1.8% and occupancy up 1.3%pts
   
     -
Americas 4.3% (US 4.2%); Europe 1.7%; AMEA 6.1%; Greater China 1.0%.
   
     -
Q4 global comparable RevPAR growth of 4.4%: Americas 4.0%; Europe 4.9%; AMEA 6.4%; Greater China 2.4%.
 
    System size of 687k rooms (4,697 hotels)
   
    -
Net growth of 1.6%, 2.3% excluding 17 hotel removals for which significant liquidated damages totalling $46m were received.
   
    -
 
    -
35k rooms (237 hotels) opened6, 25k rooms removed (142 hotels).  20k room openings and 18k room removals for the Holiday Inn brand family reflects our continued commitment to improving the quality of our largest brand.
65k rooms (444 hotels) signed6, up 22% year on year.
   
    -
    -
Pipeline of 180k rooms (1,120 hotels) with over 45% under construction.
5% global industry supply, 12% active industry pipeline; well positioned to deliver sustainable high quality growth.
 
   Building preferred brands
   
    -
    -
Clear focus on the needs of target guests has driven increased guest satisfaction across each brand globally.
Good momentum for our new brands with 21 HUALUXE Hotels & Resorts and 5 EVEN Hotels in the pipeline.
   
    -
 
IHG Rewards Club relaunch, including free internet for all members (an industry first), has driven a 10%pt increase in awareness of IHG as a brand family.
 
   Growing margins
   
    -
Group fee margin of 43.2%, up 1.3%pts2, with scale benefits and cost efficiencies more than offsetting increased investment for future growth.  Continued focus on sustainable fee margin progression over the medium term.
    Capital Expenditure
 
Growth capital expenditure of $129m includes our first three owned EVEN Hotels, and was more than funded by $444m net cash proceeds from disposals.  Maintenance capital expenditure of $140m.
In 2014 we expect to remain at the top end of our previously guided $250m-350m capital expenditure range due to increased investment in brands and technology platforms.  IHG’s 20% share of InterContinental New York Barclay’s c.$175m refurbishment cost will be in addition to this.
    Progress on asset disposals
InterContinental London Park Lane disposal completed on 1 May with up to 60 year management contract.
Disposal of 80% interest in InterContinental New York Barclay agreed with a c.$175m refurbishment, repositioning and extension of the hotel and up to 50 year management contract. Deal completion expected in Q1’14.
InterContinental Mark Hopkins, San Francisco disposal announced today for gross cash proceeds of $120m.
 
1 All figures are before exceptional items unless otherwise noted. 2 2012 restated for adoption of IAS 19R.
3 After exceptional items.
4 CER =constant exchange rates.
5 At CER & excluding owned asset disposals, results from managed lease hotels & significant liquidated damages
 
6 Openings & signings include 4k rooms on US Army bases in H1 2013  
 
See appendix 3 for financial headlines and appendix 5 for definitions
 

 
Americas – Good performance driven by solid RevPAR growth
Comparable RevPAR increased 4.3%, with 2.6% rate growth; fourth quarter RevPAR increased 4.0%.  US RevPAR was up 4.2%, with 3.0% growth in the fourth quarter, despite weaker trading conditions in October during the US government shut down.
Reported revenue increased 9% (10% at CER) to $916m and operating profit increased 13% (13% at CER) to $550m.  On an underlying5 basis, revenue and operating profit were both up 7%. This was driven predominantly by the franchise business where royalties were up 5% and fees associated with the initial franchising, relicensing and termination of hotels increased $6m. This was partly offset by an $8m decrease in fees received due to the hotels that exited in Q1 for which $31m of liquidated damages were received. Owned profits increased 25%, driven by RevPAR growth of 10.0% and 9.0% respectively at our InterContinental hotels in Boston and San Francisco.
We opened 20k6 rooms (173 hotels), including 12k rooms for the Holiday Inn brand family. Removals of 18k rooms (112 hotels) resulted from our on-going focus on high quality growth and included 2.5k rooms (8 hotels) related to the significant liquidated damages receipt in Q1. We signed 34k6 rooms (305 hotels) up 33% year on year.  Signings included four hotels for the new EVEN Hotels brand, with the first of these due to open H1 2014, and 21k rooms for the Holiday Inn brand family.
2014:
In the first half of 2014 we expect to receive one $4m significant liquidated damages payment in our Americas franchise business.  In 2013 the owned operating profit from the InterContinental New York Barclay was $14m and was $6m from InterContinental Mark Hopkins, San Francisco.  The refurbishment of InterContinental New York Barclay is expected to have a $5m negative impact on Americas managed operating profit in 2014.
 
Europe – Solid growth led by priority markets
Comparable RevPAR increased 1.7% led by a 1.5%pt increase in occupancy. In the first nine months RevPAR grew 0.7%, then accelerated sharply in the fourth quarter to 4.9%. RevPAR growth was resilient in our priority markets, despite tough comparatives, with an increase of 3.0% in the UK and 0.8% in Germany. In France RevPAR grew 2.6%, with 5.3% growth at our owned InterContinental hotel in Paris.
Reported revenue decreased 8% (10% at CER) to $400m and operating profit decreased 6% (8% at CER) to $105m.  On an underlying5 basis, revenue increased 3% and operating profit increased 10%, driven by a 7% increase in franchise royalty fees and a $3m property tax recovery at InterContinental Paris Le Grand.
Openings of 4k rooms (21 hotels) included two iconic InterContinental hotels, one in Marseille, France and the other in Davos, Switzerland.  We also opened three new properties for the Hotel Indigo brand, in prime locations in Tel Aviv, Barcelona and Dusseldorf.  We signed 8k rooms (50 hotels) of which seven hotels were in London, including InterContinental London The O2, our third hotel for the InterContinental brand in the city. We also signed seven hotels under multiple development agreements in Germany and Russia, covering several of our brands.
2014:
Our flagship owned InterContinental Paris Le Grand will commence an $8m refurbishment programme to enhance the historic Salon Opera ballroom and c.15% of the guest rooms; this is expected to have a $5m negative profit impact in 2014.
 
AMEA –  Strong trading in key markets with increasing developing markets contribution
Comparable RevPAR increased 6.1%, with 6.4% growth in the fourth quarter. Strong trading in South East Asia and Japan led the performance with RevPAR up 9.9% and 9.6% respectively. Trading was solid in Australasia, up 4.5% and the Middle East, up 2.9%, despite geopolitical unrest continuing to impact our business in Egypt and Lebanon. An increasing mix of new rooms opening in developing markets means that total RevPAR grew 2.8%.
Reported revenue increased 6% (12% CER) to $230m and operating profit decreased 2% (increased 1% at CER) to $86m, including one $6m significant liquidated damages receipt in the second half.  On an underlying5 basis, revenue was down 3% and operating profit down 8%. This reflects good underlying growth in our continuing managed business offset by a $10m fee reduction; $6m from long standing contracts renewed onto standard market terms, as previously disclosed, and $4m from some older hotels that we have removed from the system.
We opened 4k rooms (20 hotels) including five hotels in India and two hotels in Indonesia as well as our first InterContinental hotels in Osaka, Japan and Lagos, Nigeria, both flagships for the brand in those countries. We signed 9k rooms (36 hotels) in the region, 75% of which were for the Holiday Inn brand family and included a 1.2k room Holiday Inn in Makkah.  We also signed an iconic InterContinental hotel in Sydney which is expected to open in the second half of 2014 following a comprehensive refurbishment.
2014:
Given the favourable long-term outlook in several of our markets in AMEA, there are a number of significant refurbishment programmes scheduled to take place in 2014 which we expect to have a $4m negative impact on IHG’s fee income in the year.
 
5 At CER and excluding: owned asset disposals, results from managed lease hotels and significant liquidated damages
6  Openings and signings both include 4k rooms on US Army bases in H1 2013.

Greater China – scale and premium position drove resilient performance despite challenging conditions
Comparable RevPAR increased 1.0% with 2.4% growth in the fourth quarter. IHG’s scale and strength in the region drove significant outperformance compared to the industry throughout 2013. This reflects the resilience of our business despite the ongoing industry-wide challenges, including the impact of the China-Japan territorial island dispute, natural disasters in some regions and the slower macroeconomic conditions. An increasing mix of new rooms openings in developing markets means that total RevPAR was down 1.3% in 2013.
Reported revenue increased 3% (3% CER) to $236m and operating profit was up 1% (2% CER) to $82m. Managed profit was flat at $51m, reflecting 12% net room growth offset by the challenging trading conditions and our increased investment to drive future growth. Operating profit at our owned InterContinental hotel in Hong Kong increased by 4% with strong profit conversion and an 11% increase in food & beverage profits, despite flat RevPAR growth principally due to reduced Japanese business.
We opened 8k rooms in the year in Greater China, taking our system size in the region up 11% to 69k rooms (208 hotels), our 8th consecutive year of double digit room growth.  Almost 90% of our signings in the year were outside primary cities, reflecting the alignment of our development strategy to future industry growth drivers.  Openings included six hotels each for our InterContinental and Crowne Plaza brands, and two for Hotel Indigo, including the first for the brand in Hong Kong. Almost half of our 15k room signings were for the Holiday Inn brand family. 2k rooms signed for HUALUXE Hotels & Resorts in the year taking the pipeline for this brand to 21 hotels (7k rooms).
 

Sources and uses of cash – strong free cash flow generation
Cash generation: Free cash flow of $502m up 11% year on year (2012: $454m).  $444m net cash inflow from asset disposals.
Ordinary dividend: up 9% to 70 cents, 11% compound annual growth since 2003.
Good progress with return of funds to shareholders: $355m special dividend without share consolidation paid in October 2013. The $500m share buyback programme is 78% complete with 13.9m shares repurchased to date for $390m, with 9.8m shares repurchased during 2013 for $283m.
 
Interest, debt, tax, pension and exceptional items
Interest: 2013 charge of $73m (2012: $54m) reflects the increase in average net debt year on year, and the issuance of a £400m bond in November 2012.
Net debt: $1,153m at the end of the period (including the $215m finance lease on the InterContinental Boston). This is up $79m on the 2012 position of $1,074m as a result of the return of funds to shareholders in the year partly offset by the cash inflow from the disposal of the InterContinental London Park Lane.
Tax: Effective rate for 2013 is 29% (2012: 27%).  2014 tax rate expected to be in low 30s, as previously guided.
Pension: In August 2013 the trustees of IHG’s UK pension plan completed a buy-in of the Group’s UK funded defined benefit obligations with the insurer Rothesay Life as an initial step towards the full buy-out of the liabilities. As part of IHG’s wider strategy to de-risk the balance sheet, this move removes the need for any further cash contributions by IHG in respect of these obligations.
Exceptional operating items: Net exceptional credit before tax of $5m (2012: $4m net charge).  This includes an exceptional accounting charge of $147m related to the UK pension plan buy-in and a net credit of $166m related to the gain on disposal of the InterContinental London Park Lane.
Adoption of IAS 19 (Revised) Employee Benefits: adoption of this new accounting policy from 1 January 2013 has resulted in an additional $9m charge to operating profit for 2012, as reflected in the restated 2012 accounts.
   
 
 
 
Appendix 1: RevPAR Movement Summary
 
Full Year 2013
Q4 2013
RevPAR
Rate
Occ.
RevPAR
Rate
Occ.
Group
3.8%
1.8%
1.3pts
4.4%
1.8%
1.6pts
Americas
4.3%
2.6%
1.1pts
4.0%
2.1%
1.1pts
Europe
1.7%
(0.4)%
1.5pts
4.9%
1.1%
2.5pts
AMEA
6.1%
3.0%
2.1pts
6.4%
3.9%
1.8pts
G. China
1.0%
(1.7)%
1.6pts
2.4%
(2.4)%
3.0pts

Appendix 2: Full Year System & Pipeline Summary (rooms)
 
System
Pipeline
Openings
Removals
Net
Total
YoY%
Signings
Total
Group
35,467
(24,576)
10,891
686,873
1.6%
65,461
180,461
Americas
19,775
(17,968)
1,807
451,424
0.4%
33,884
76,018
Europe
3,528
(3,489)
39
102,066
0.0%
7,542
17,779
AMEA
4,495
(2,394)
2,101
64,838
3.3%
8,687
32,074
G. China
7,669
(725)
6,944
68,545
11.3%
15,348
54,590

Appendix 3: Full Year financial headlines
 
Operating Profit $m
    Total
Americas
Europe
AMEA
G. China
Central
2013
20121
2013
2012
2013
20121
2013
2012
2013
2012
2013
2012
Franchised
595
547
499
466
79
65
12
12
5
4
-
-
Managed
247
221
74
48
30
32
92
90
51
51
-
-
Owned & leased
111
125
30
24
30
50
4
6
47
45
-
-
Regional overheads
(130)
(126)
(53)
(52)
(34)
(35)
(22)
(20)
(21)
(19)
-
-
Profit pre central overheads
823
767
550
486
105
112
86
88
82
81
-
-
Central overheads
(155)
(162)
-
-
-
-
-
-
-
-
(155)
(162)
Group Operating profit
668
605
550
486
105
112
86
88
82
81
(155)
(162)
1 2012 restated for the adoption on IAS 19R
 
   

Appendix 4: Constant exchange rate (CER) and underlying operating profit movement before exceptional items
 
Total***
Americas
Europe
AMEA
G. China
Reported
Actual*
CER**
Actual*
CER**
Actual*
CER**
Actual*
CER**
Actual*
CER**
Growth/ (decline)
10%
10%
13%
13%
(6)%
(8)%
(2)%
1%
1%
2%
           
Underlying****
Growth/ (decline)
Total***
Americas
Europe
AMEA
G. China
8%
7%
10%
(8)%
2%
Exchange rates:
GBP:USD
EUR:USD
* US dollar actual currency
   
2013
0.64
0.75
** Translated at constant 2012 exchange rates
   
2012
0.63
0.78
*** After central overheads
   
     
**** At CER and excluding: owned asset disposals, results from managed lease hotels and significant liquidated damages (see below for definitions)

Appendix 5: Definitions
Total gross revenue: total room revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties. The metric is highlighted as an indicator of the scale and reach of IHG’s brands.
Owned asset disposals: InterContinental London was sold on 1 May 2013. It accounted for $89m revenue and $33m profit in 2012 and $22m revenue and $8m profit in 2013 as an owned hotel.
Significant liquidated damages: total $46m in 2013 ($31m Americas managed in Q1, $9m Europe franchised in Q2, $6m AMEA managed in Q4) and $3m 2012 (Americas managed in Q4).
Comparable RevPAR: Revenue per available room for hotels that have traded for a full 12 months in both years, reported at CER.
Total RevPAR: Revenue per available room including results from hotels that have opened or exited in either year, reported at CER.
Fee revenue: Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages.
Fee margin: adjusted for owned and leased hotels, managed leases and significant liquidated damages receipts.
Managed lease hotels: properties structured for legal reasons as operating leases but with the same characteristics as management contracts
Americas: Revenue 2013 $34m; 2012 $34m; EBIT 2013 nil, 2012 nil. Europe:  Revenue 2013 $89m; 2012 $80m; EBIT 2013 $2m, 2012 $2m. AMEA: Revenue 2013 $21m; 2012 nil; EBIT 2013 $1m, 2012 nil.

Appendix 6: Investor Information for 2013 final dividend
Ex-dividend date:
19 March 2014
Record date:
21 March 2014
Payment date:
9 May 2014
Dividend payment:
Ordinary shares = 28.1 pence  per share
ADRs = 47.0 cents per ADR

 
For further information, please contact:
Investor Relations (Catherine Dolton; Isabel Green):
+44 (0)1895 512176
 
Media Relations (Yasmin Diamond; Zoe Bird):
+44 (0)1895 512008
 
Presentation for Analysts and Shareholders:
A presentation with Richard Solomons, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will commence at 9:30am UK time on 18 February at Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ.  There will be an opportunity to ask questions.  The presentation will conclude at approx. 10.30am.
There will be a live audio webcast of the results presentation on the web address www.ihg.com/prelims14.  The archived webcast of the presentation is expected to be on this website later on the day of the results and will remain on it for the foreseeable future.  There will also be a live dial-in facility:
UK toll:
UK toll free:
US toll:
Passcode
+44 (0)20 3003 2666
0808 109 0700
+1 212 999 6659
Hotel
A replay of the conference call will also be available following the event – details are below.
Replay
Pin
+44 (0)20 8196 1998
8855942
US conference call and Q&A:
There will also be a conference call, primarily for US investors and analysts, at 9.00am Eastern Standard Time on 18 February with Richard Solomons, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer. There will be an opportunity to ask questions.
UK toll:
US toll:
US toll free:
Passcode
+44 (0)20 3003 2666
+1 212 999 6659
+1 866 966 5335
Hotel
A replay of the conference call will also be available following the event – details are below.
Replay
Pin
+44 (0)20 8196 1998
5245113
Website:
The full release and supplementary data will be available on our website from 7.00 am (London time) on 18 February. The web address is www.ihg.com/prelims14.
 
Notes to Editors:
IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of nine hotel brands, including InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites®, Candlewood Suites®, EVEN™ Hotels and HUALUXE™ Hotels & Resorts.
IHG manages IHG® Rewards Club, the world’s first and largest hotel loyalty programme with over 77 million members worldwide. The programme was relaunched in July 2013, offering enhanced benefits for members including free internet across all hotels, globally.
IHG franchises, leases, manages or owns 4,700 hotels and 687,000 guest rooms in nearly 100 countries and territories. With more than 1,100 hotels in its development pipeline, IHG expects to recruit around 90,000 people into additional roles across its estate over the next few years.
InterContinental Hotels Group PLC is the Group’s holding company and is incorporated in Great Britain and registered in England and Wales.
Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our latest news, visit: www.ihg.com/media, www.twitter.com/ihg, www.facebook.com/ihg or www.youtube.com/ihgplc.
 
Cautionary note regarding forward-looking statements:
This announcement contains certain forward-looking statements as defined under US law (Section 21E of the Securities Exchange Act of 1934).  These forward-looking statements can be identified by the fact that they do not relate to historical or current facts.  Forward-looking statements often use words such as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning.  By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty.  There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by, such forward-looking statements.  Factors that could affect the business and the financial results are described in ‘Risk Factors’ in the InterContinental Hotels Group PLC Annual report on Form 20-F filed with the United States Securities and Exchange Commission.

 
This Business Review provides a commentary on the performance of InterContinental Hotels Group PLC (the Group or IHG) for the financial year ended 31 December 2013.

GROUP PERFORMANCE
 
12 months ended 31 December
Group results
2013
20121
%
 
$m
$m
change
Revenue
     
 
Americas
916
837
9.4
 
Europe
400
436
(8.3)
 
AMEA
230
218
5.5
 
Greater China
236
230
2.6
 
Central
121
114
6.1
   
____
____
_____
 
1,903
1,835
3.7
 
____
____
____
Operating profit
     
 
Americas
550
486
13.2
 
Europe
105
112
(6.3)
 
AMEA
86
88
(2.3)
 
Greater China
82
81
1.2
 
Central
(155)
(162)
4.3
   
____
____
_____
Operating profit before exceptional items
668
605
10.4
Exceptional operating items
5
(4)
225.0
 
___
___
___
 
673
601
12.0
Net financial expenses
(73)
(54)
(35.2)
 
___
___
___
Profit before tax
600
547
9.7
 
___
___
___
Earnings per ordinary share
     
 
Basic
140.9¢
187.1¢
(24.7)
 
Adjusted
158.3¢
139.0¢
13.9
         
Average US dollar to sterling exchange rate
$1 : £0.64
$1 : £0.63
1.6

Revenue increased by $68m (3.7%) to $1,903m and operating profit before exceptional items increased by $63m (10.4%) to $668m during the 12 months ended 31 December 2013.

On 1 May 2013, IHG completed the disposal of its leasehold interest in the InterContinental London Park Lane for gross proceeds of $469m and entered into a 30-year management contract with three 10-year extension rights.

On an underlying basis, defined as Group results excluding those from the InterContinental London Park Lane whilst under IHG ownership, results from managed lease hotels, together with the benefit of $46m liquidated damages receipts in 2013 and a $3m liquidated damages receipt in 2012, revenue and operating profit increased by $68m (4.2%) and $44m (7.8%) respectively when translated at constant currency and applying 2012 exchange rates.

Fee revenue2 increased by 4.3%, with Group RevPAR growth of 3.8% over the period (including an increase in average daily rate of 1.8%) and IHG System size growth of 1.6% to 686,873 rooms.

At constant currency, net central overheads decreased from $162m to $157m in 2013 ($155m at actual currency), helped by continued tight cost control, as well as additional technology fee income.

Operating profit margin was 43.2%, up 1.3 percentage points on 2012, after adjusting for owned and leased hotels, managed leases and significant liquidated damages.

Profit before tax increased by $53m to $600m. Adjusted earnings per ordinary share increased by 13.9% to 158.3¢.
 

 
1 With effect from 1 January 2013 the Group has adopted IAS 19 (Revised) ‘Employee Benefits’ resulting in an additional charge to operating profit before exceptional items of $9m for the year ended 31 December 2012.
 
2 Fee revenue is defined as Group revenue excluding revenue from owned and leased hotels, managed leases and significant liquidated damages at constant currency.

 
12 months ended 31 December
 
2013
2012
%
Global total gross revenue
$bn
$bn
change
       
InterContinental
4.5
4.5
-
Crowne Plaza
4.0
4.0
-
Holiday Inn
6.2
6.3
(1.6)
Holiday Inn Express
5.2
4.8
8.3
Staybridge Suites
0.6
0.6
-
Candlewood Suites
0.6
0.5
20.0
Hotel Indigo
0.2
0.2
-
Other brands
0.3
0.3
-
 
____
____
____
Total
21.6
21.2
1.9
 
____
____
____

Total gross revenue
One measure of IHG System performance is the growth in total gross revenue, defined as total room revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. Total gross revenue is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties.

Total gross revenue increased by 1.9% (2.8% increase at constant currency) to $21.6bn. Total gross revenue for Holiday Inn decreased by $0.1bn (1.6%), primarily because the number of rooms open under the brand fell by 6,911, driven by the removal of 10,933 rooms in the US reflecting the Group’s ongoing focus on quality.

 
 
Hotels
Rooms
Global hotel and room count
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
178
8
60,103
2,789
 
Crowne Plaza
391
(1)
108,891
584
 
Holiday Inn*
1,216
(31)
224,577
(6,911)
 
Holiday Inn Express
2,258
66
214,597
8,966
 
Staybridge Suites
196
7
21,518
822
 
Candlewood Suites
312
13
29,778
1,103
 
Hotel Indigo
55
5
6,199
538
 
Other
91
28
21,210
3,000
   
____
____
______
_____
Total
4,697
95
686,873
10,891
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
3,977
43
502,187
1,395
 
Managed
711
53
180,724
9,726
 
Owned and leased
9
(1)
3,962
(230)
   
____
____
______
_____
Total
4,697
95
686,873
10,891
   
____
____
______
_____

 
* Includes 10 Holiday Inn Club Vacations (3,701 rooms) and 38 Holiday Inn Resort properties (8,818 rooms) (2012: 10 Holiday Inn Club Vacations (3,701 rooms) and 37 Holiday Inn Resort properties (8,806 rooms)).

Global hotel and room count
During 2013, the global IHG System (the number of hotels and rooms which are franchised, managed, owned or leased by the Group) increased by 95 hotels (10,891 rooms).

The Group continued to expand its global footprint, opening hotels in 33 different countries and territories. More than a third of 2013 openings were in developing markets, as classified by The World Bank, with 21% of the closing rooms balance located in these markets, representing an increase of two percentage points from 31 December 2012. Removals of 142 hotels (24,576 rooms) increased from the previous year (104 hotels, 16,288 rooms) reflecting the Group’s ongoing focus on improving the quality of the estate.

Openings of 237 hotels (35,467 rooms) were 4.6% higher than in 2012. This included 115 hotel openings (12,448 rooms) in the Holiday Inn brand family in The Americas and 33 hotels (4,061 rooms) as part of the US government’s Privatisation of Army Lodgings (PAL) initiative. 23 hotels (7,669 rooms) were opened in Greater China across five brands in 2013, up 1.1% from last year, with the Europe and AMEA regions contributing openings of 21 hotels (3,528 rooms) and 20 hotels (4,495 rooms) respectively.

In May 2013, the Group completed the disposal of its leasehold interest in the InterContinental London Park Lane and on 19 December 2013, announced the disposal of an 80% interest in the InterContinental New York Barclay for gross proceeds of $240m, with IHG holding the remaining 20% interest. The transaction is expected to be completed in the first quarter of 2014. The Group has secured a 30-year management contract on the hotel, with two 10-year extension rights at IHG’s discretion.  In February 2014, the Group signed an agreement to sell the InterContinental Mark Hopkins San Francisco for $120m in cash and enter into a long-term management contract on the hotel.  The hotel had a net book value of $90m at 31 December 2013.
 

 
Hotels
Rooms
Global pipeline
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
51
3
16,860
1,147
 
Crowne Plaza
94
(4)
28,369
(2,814)
 
Holiday Inn*
264
21
50,241
5,253
 
Holiday Inn Express
473
21
54,744
2,984
 
Staybridge Suites
80
9
8,728
1,184
 
Candlewood Suites
80
2
6,914
172
 
Hotel Indigo
51
4
6,807
938
 
EVEN Hotels
5
4
880
650
 
HUALUXE
21
6
6,804
1,900
 
Other
1
1
114
17
   
____
____
______
_____
Total
1,120
67
180,461
11,431
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
778
34
86,785
3,884
 
Managed
339
30
93,176
7,047
 
Owned and Leased
3
3
500
500
   
____
____
______
_____
Total
1,120
67
180,461
11,431
   
____
____
______
_____

 
Hotels
Rooms
Global pipeline signings
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Total
444
88
65,461
11,649
   
____
____
______
_____

 
* Includes 1 Holiday Inn Club Vacations (120 rooms) and 14 Holiday Inn Resort properties (3,163 rooms) (2012: nil Holiday Inn Club Vacations (nil rooms) and 12 Holiday Inn Resort properties (2,390 rooms)).

Global pipeline
At the end of 2013, the global pipeline totalled 1,120 hotels (180,461 rooms), an increase of 67 hotels (11,431 rooms) on 31 December 2012. The IHG pipeline represents hotels where a contract has been signed and the appropriate fees paid.
 
The continued global demand for IHG brands is demonstrated by the Group signing hotels in 38 different countries and territories in 2013, 40% of which were in developing markets. 51% of the closing pipeline at 31 December 2013 was in developing markets, up by one percentage point compared to the previous year, including 30% in Greater China. More than 45% of the pipeline is under construction.
 
Excluding 35 hotels (4,118 rooms) signed as part of the US government’s PAL initiative, signings increased from 356 hotels (53,812 rooms) to 409 hotels (61,343 rooms) in 2013. This included 280 hotels (39,555 rooms) in the Holiday Inn brand family, up by 22.7% compared to 2012. More than half of this growth was contributed by Greater China, with signings increasing by 4,121 rooms to 7,343 rooms. The Greater China region signed a further 27 hotels (8,005 rooms) across other IHG brands, including the 1,002-room Holiday Inn Express Changbaishan, whilst the pipeline for HUALUXE Hotels & Resorts increased to 21 hotels (6,804 rooms). Four EVEN Hotels (644 rooms), of which three are owned and leased, were signed in The Americas, with the pipeline for this brand standing at five hotels (880 rooms) at the end of 2013. Active management out of the pipeline of deals that have become dormant or no longer viable reduced the pipeline by 18,563 rooms, compared to 31,344 rooms in 2012.


THE AMERICAS
 
12 months ended 31 December
 
2013
2012
%
Americas results
$m
$m
change
       
Revenue
     
 
Franchised
576
541
6.5
 
Managed
128
97
32.0
 
Owned and leased
212
199
6.5
 
____
____
____
Total
 
916
837
9.4
 
____
____
____
Operating profit before exceptional items
     
 
Franchised
499
466
7.1
 
Managed
74
48
54.2
 
Owned and leased
30
24
25.0
   
____
____
_____
 
603
538
12.1
Regional overheads
(53)
(52)
(1.9)
 
____
____
____
Total
 
550
486
13.2
 
____
____
____

 
 
Americas Comparable RevPAR movement on previous year
12 months ended
31 December
2013
   
Franchised
 
 
Crowne Plaza
4.8%
 
Holiday Inn
2.6%
 
Holiday Inn Express
3.4%
 
All brands
3.2%
Managed
 
 
InterContinental
12.6%
 
Crowne Plaza
13.9%
 
Holiday Inn
10.6%
 
Staybridge Suites
19.8%
 
Candlewood Suites
19.3%
 
All brands
13.9%
Owned and leased
 
 
All brands
6.0%

Americas results
In The Americas, the largest proportion of rooms is operated under the franchise business model (91% of rooms in The Americas operate under this model) primarily in the upper midscale segment (Holiday Inn brand family). Similarly, in the upscale segment, Crowne Plaza is predominantly franchised, whereas the majority of the InterContinental branded hotels are operated under franchise and management agreements. With 3,616 hotels (451,424 rooms), The Americas represented 66% of the Group’s room count and 67% of the Group’s operating profit before central overheads and exceptional operating items during the year ended 31 December  2013. The key profit producing region is the US, although the Group is also represented in each of Latin America, Canada, Mexico and the Caribbean.
 
Revenue and operating profit before exceptional items increased by $79m (9.4%) to $916m and by $64m (13.2%) to $550m respectively. On an underlying basis, revenue and operating profit increased by $52m (6.5%) and $36m (7.5%) respectively. Revenue and operating profit were adversely impacted by $8m lower fees on the exit of eight Holiday Inn hotels owned by FelCor Lodging Trust but were positively impacted by the benefit of a $31m liquidated damages receipt in 2013 in the managed business, compared to $3m in 2012.
 
The franchise business drove most of the growth in the region (excluding the liquidated damages in the managed estate). Franchised revenue increased by $35m (6.5%) to $576m. Royalties growth of 4.7% was driven by RevPAR growth of 3.2%, including 3.4% for Holiday Inn Express, together with a 0.7% increase in available rooms. Operating profit increased by $33m (7.1%) to $499m. Fees from initial franchising, relicensing and termination of hotels also increased by $6m compared to 2012.

Managed revenue increased by $31m (32.0%) to $128m and operating profit increased by $26m (54.2%) to $74m. Revenue and operating profit included $34m (2012 $34m) and $nil (2012 $nil) respectively from one managed lease property. Excluding results from this hotel, as well as the benefit of the $31m liquidated damages in 2013 and the $3m in 2012, revenue grew by $4m (6.7%) and operating profit decreased by $2m (4.4%) on a constant currency basis.

Owned and leased revenue increased by $13m (6.5%) to $212m and operating profit grew by $6m (25.0%) to $30m. The increase in revenue was driven by RevPAR growth of 6.0%.

 
Hotels
Rooms
Americas hotel and room count
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
51
(2)
17,453
(303)
 
Crowne Plaza
176
(7)
47,057
(1,673)
 
Holiday Inn*
786
(34)
138,830
(7,831)
 
Holiday Inn Express
1,985
54
174,431
6,033
 
Staybridge Suites
188
5
20,309
522
 
Candlewood Suites
312
13
29,778
1,103
 
Hotel Indigo
37
-
4,344
37
 
Other
81
32
19,222
3,919
   
____
____
______
_____
Total
3,616
61
451,424
1,807
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
3,394
40
408,875
1,026
 
Managed
217
21
40,147
564
 
Owned and leased
5
-
2,402
217
   
____
____
______
_____
Total
3,616
61
451,424
1,807
   
____
____
______
_____

 
* Includes 10 Holiday Inn Club Vacations (3,701 rooms) and 18 Holiday Inn Resort properties (4,438 rooms) (2012: 10 Holiday Inn Club Vacations (3,701 rooms) and 17 Holiday Inn Resort properties (4,240 rooms)).

Americas hotel and room count
The Americas System size increased by 61 hotels (1,807 rooms) to 3,616 hotels (451,424 rooms) during 2013. 173 hotels (19,775 rooms) opened in the year, compared to 148 hotels (16,618 rooms) in 2012 and included 33 hotels (4,061 rooms) as part of the US government’s PAL initiative. Openings included 115 hotels (12,448 rooms) in the Holiday Inn brand family, representing more than 60% of the regions openings. 19 hotels (1,705 rooms) opened as Staybridge Suites hotels and Candlewood Suites hotels, IHG’s extended-stay brands.

112 hotels (17,968 rooms) were removed from the Americas System in 2013, compared to 66 hotels (9,199 rooms) in 2012. More than 60% of 2013 removals were Holiday Inn hotels in the US (53 hotels, 10,933 rooms). 13 Crowne Plaza hotels (3,326 rooms) were removed in 2013, partly reflecting the impact of the Group’s Crowne Plaza repositioning programme. The increase in removals reflects the Group’s ongoing focus on improving the quality of the estate, particularly Holiday Inn.


 
Hotels
Rooms
Americas pipeline
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
6
2
1,437
512
 
Crowne Plaza
16
-
3,228
(509)
 
Holiday Inn*
139
-
19,344
517
 
Holiday Inn Express
358
13
33,488
1,100
 
Staybridge Suites
71
7
7,495
847
 
Candlewood Suites
80
2
6,914
172
 
Hotel Indigo
23
-
3,118
42
 
EVEN Hotels
5
4
880
650
 
Other
1
1
114
114
   
____
____
______
_____
Total
699
29
76,018
3,445
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
678
19
72,019
1,729
 
Managed
18
7
3,499
1,216
 
Owned and leased
3
3
500
500
   
____
____
______
_____
Total
699
29
76,018
3,445
   
____
____
______
_____

 
* Includes 1 Holiday Inn Club Vacations (120  rooms) and 5 Holiday Inn Resort properties (694 rooms) (2012: nil Holiday Inn Club Vacations (nil rooms) and 5 Holiday Inn Resort properties (640 rooms)).

Americas pipeline
The Americas pipeline totalled 699 hotels (76,018 rooms) as at 31 December 2013, representing an increase of 29 hotels (3,445 rooms) over 31 December 2012. Strong signings of 305 hotels (33,884 rooms), demonstrating the continued demand for IHG brand hotels, were ahead of last year by 79 hotels (8,348 rooms) and included 35 hotels (4,118 rooms) signed as part of the US government’s PAL initiative. The majority of 2013 signings were within the Holiday Inn brand family (193 hotels, 20,544 rooms), up by 8.9% compared to 2012. Four more hotels (644 rooms) were added for the EVEN Hotels brand, taking the total pipeline to five hotels (880 rooms), with the first hotel for the brand expected to open in 2014. Staybridge Suites and Candlewood Suites, IHG’s extended stay hotel brands, also contributed signings of 57 hotels (5,406 rooms), up by 50.2% compared to 2012.
 
103 hotels (10,664 rooms) were terminated from the pipeline in 2013, significantly down from terminations in 2012 (183 hotels, 20,795 rooms).
 

EUROPE
 
12 months ended 31 December
 
2013
2012
%
Europe results
$m
$m
change
       
Revenue
     
 
Franchised
104
91
14.3
 
Managed
156
147
6.1
 
Owned and leased
140
198
(29.3)
 
____
____
 
Total
 
400
436
(8.3)
 
____
____
____
Operating profit before exceptional items
     
 
Franchised
79
65
21.5
 
Managed
30
32
(6.3)
 
Owned and leased
30
50
(40.0)
   
____
____
_____
 
139
147
(5.4)
Regional overheads
(34)
(35)
2.9
 
____
____
____
Total
 
105
112
(6.3)
 
____
____
____

 
 
Europe comparable RevPAR movement on previous year
12 months ended
31 December
2013
   
Franchised
 
 
All brands
1.5%
     
Managed
 
 
All brands
2.0%
     
Owned and leased
 
 
InterContinental
5.3%
     

Europe results
In Europe, the largest proportion of rooms is operated under the franchise business model primarily in the upper midscale segment (Holiday Inn and Holiday Inn Express). Similarly, in the upscale segment, Crowne Plaza is predominantly franchised whereas the majority of the InterContinental branded hotels are operated under management agreements. Comprising 629 hotels (102,066 rooms) at the end of 2013, Europe represented 15% of the Group’s room count and 13% of the Group’s operating profit before central overheads and exceptional operating items during the year ended 31 December 2013. Profits are primarily generated from hotels in the UK and Continental European gateway cities.

Revenue and operating profit before exceptional items decreased by $36m (8.3%) to $400m and by $7m (6.3%) to $105m respectively. On an underlying basis, revenue and operating profit increased by $9m (3.4%) and $8m (10.4%) respectively. Overall, RevPAR in Europe increased by 1.7%. The UK achieved RevPAR growth of 3.0%, with particularly strong performance in the final quarter of 2013 with RevPAR increasing 7.3%. RevPAR in Germany increased by 0.8% despite a weaker year-on-year trade fair calendar, whilst IHG hotels in the Commonwealth of Independent States (CIS) collectively achieved RevPAR growth of 2.7%.

Franchised revenue increased by $13m (14.3%) to $104m, whilst operating profit increased by $14m (21.5%) to $79m. Excluding the benefit of a $9m liquidated damages receipt in 2013, revenue and operating profit increased by $4m (4.4%) and $5m (7.7%) respectively. Growth was mainly driven by an increase in royalties of 7.0% (6.3% at constant currency) reflecting RevPAR growth of 1.5%, partly offset by a 0.2% decline in available rooms.

Managed revenue increased by $9m (6.1%) to $156m and operating profit decreased by $2m (6.3%) to $30m. Revenue and operating profit included $89m (2012 $80m) and $2m (2012 $2m) respectively from managed leases. Excluding properties operated under this arrangement and on a constant currency basis, revenue was flat and operating profit decreased by $1m (3.3%).

In the owned and leased estate, revenue decreased by $58m (29.3%) to $140m and operating profit decreased by $20m (40.0%) to $30m. At constant currency and excluding the impact of the disposal of the InterContinental London Park Lane, the


Group’s remaining owned hotel in Europe, the InterContinental Paris Le Grand, delivered a revenue increase of $5m (4.6%) with RevPAR growth of 5.3%. Operating profit increased by $4m (23.5%), benefitting from a one-off $3m property tax recovery in the year.
 
Hotels
Rooms
Europe hotel and room count
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
31
1
9,525
131
 
Crowne Plaza
83
(1)
19,522
(44)
 
Holiday Inn*
282
(6)
45,621
(989)
 
Holiday Inn Express
215
3
25,371
468
 
Staybridge Suites
5
1
784
179
 
Hotel Indigo
13
3
1,243
294
   
____
____
______
_____
Total
629
1
102,066
39
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
528
-
79,517
(382)
 
Managed
100
2
22,079
868
 
Owned and leased
1
(1)
470
(447)
   
____
____
______
_____
Total
629
1
102,066
39
   
____
____
______
_____

 
* Includes 2 Holiday Inn Resort properties (212 rooms) (2012: 3 Holiday Inn Resort properties (362 rooms)).

Europe hotel and room count
During 2013, Europe System size increased by one hotel (39 rooms) to 629 hotels (102,066 rooms). The Group opened 21 hotels (3,528 rooms) in Europe in 2013, compared to 39 hotels (5,477 rooms) in 2012. 2013 openings included two InterContinental hotels, the 194-room InterContinental Marseille - Hotel Dieu, the fourth for the brand in France, and the 216-room InterContinental Davos in Switzerland. Three further Hotel Indigo properties (293 rooms) were opened in 2013, comprising a third hotel for the brand in Germany and first openings in Spain and Israel.
 
20 hotels (3,489 rooms) left the Europe System in the period, compared to 23 hotels (3,335 rooms) in the previous year.
 
 
Hotels
Rooms
Europe pipeline
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
2
-
653
249
 
Crowne Plaza
12
-
2,624
(145)
 
Holiday Inn
35
15
6,612
2,345
 
Holiday Inn Express
43
-
6,016
(268)
 
Staybridge Suites
3
2
298
130
 
Hotel Indigo
15
2
1,576
284
   
____
____
______
_____
Total
110
19
17,779
2,595
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
97
14
14,119
1,933
 
Managed
13
5
3,660
662
   
____
____
______
_____
Total
110
19
17,779
2,595
   
____
____
______
_____

Europe pipeline
The Europe pipeline totalled 110 hotels (17,779 rooms) as at 31 December 2013, representing an increase of 19 hotels (2,595 rooms) over 31 December 2012. New signings of 50 hotels (7,542 rooms), compared to 48 hotels (7,023 rooms) in 2012, included 18 hotel signings in the UK (2,436 rooms), including signings for six different brands in London, notably the 453-room InterContinental London - The O2. The Group also signed six new hotels (1,116 rooms) in Germany and ten new hotels (1,737 rooms) in countries in the CIS.
 
10 hotels (1,419 rooms) were removed from the pipeline in 2013, compared to 16 hotels (3,044 rooms) in 2012.
 
 
ASIA, MIDDLE EAST & AFRICA (AMEA)
 
12 months ended 31 December
 
2013
2012
%
AMEA results
$m
$m
change
       
Revenue
     
 
Franchised
16
18
(11.1)
 
Managed
170
152
11.8
 
Owned and leased
44
48
(8.3)
   
____
____
_____
Total
 
230
218
5.5
 
____
____
____
Operating profit before exceptional items
     
 
Franchised
12
12
-
 
Managed
92
90
2.2
 
Owned and leased
4
6
(33.3)
   
____
____
_____
 
108
108
-
Regional overheads
(22)
(20)
(10.0)
 
____
____
____
Total
 
86
88
(2.3)
 
____
____
_____

 
AMEA comparable RevPAR movement on previous year
12 months ended
31 December
2013
   
Franchised
 
 
All brands
9.6%
Managed
 
 
All bands
5.6%

AMEA results
In AMEA, 81% of rooms are operated under the managed business model. The region’s hotels are in the luxury, upscale and upper midscale segments. Comprising 244 hotels (64,838 rooms) at 31 December 2013, AMEA represented 9% of the Group’s room count and 10% of the Group’s operating profit before central overheads and exceptional operating items during the year ended 31 December 2013.
 
Revenue increased by $12m (5.5%) to $230m and operating profit decreased by $2m (2.3%) to $86m. On an underlying basis, revenue and operating profit decreased by $6m (2.8%) and $7m (8.0%) respectively. The results included a $6m benefit from liquidated damages in 2013. RevPAR increased by 6.1%, with 3.0% growth in average daily rate. AMEA is a geographically diverse region and performance is impacted by political and economic factors affecting different countries. The Middle East delivered RevPAR growth of 2.9%, driven by strength in the United Arab Emirates and Saudi Arabia, though continuing political uncertainty impacted some of our other markets in the region, particularly Egypt and Lebanon. Performance in Japan was strong, with RevPAR increasing by 9.6%, whilst Australia also achieved solid RevPAR growth of 2.8%. RevPAR growth in developing markets remained buoyant, led by 12.2% RevPAR growth in Indonesia. Revenue and operating profit growth were muted by a $6m negative year-on-year impact from the renewal of a small number of long-standing contracts onto current commercial terms. In addition, there was a $4m negative impact from similar contracts that were not renewed.
 
Franchised revenue decreased by $2m (11.1%) to $16m, whilst operating profit was flat at $12m.

Managed revenue and operating profit increased by $18m (11.8%) to $170m and by $2m (2.2%) to $92m respectively. During 2013, a new property opened under an operating lease structure, with the same characteristics as a management contract, contributing revenue of $21m and operating profit of $1m. Excluding this property together with the benefit of the $6m liquidated damages receipt in 2013, revenue and operating profit decreased by $4m (2.6%) and $4m (4.4%) respectively at constant currency. RevPAR increased by 5.6%, with AMEA System size up 2.6%.

In the owned and leased estate, revenue and operating profit decreased by $4m (8.3%) to $44m and by $2m (33.3%) to $4m respectively, driven by a 7.3% RevPAR decline.


 
Hotels
Rooms
AMEA hotel and room count
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
67
2
21,383
592
 
Crowne Plaza
67
2
19,078
519
 
Holiday Inn*
81
6
18,464
1,024
 
Holiday Inn Express
16
4
3,500
623
 
Staybridge Suites
3
1
425
121
 
Other
10
(3)
1,988
(778)
   
____
____
______
_____
Total
244
12
64,838
2,101
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
51
3
11,611
751
 
Managed
191
9
52,640
1,350
 
Owned and leased
2
-
587
-
   
____
____
______
_____
Total
244
12
64,838
2,101
   
____
____
______
_____

 
* Includes 14 Holiday Inn Resort properties (2,965 rooms) (2012: 14 Holiday Inn Resort properties (3,311 rooms)).

AMEA hotel and room count
The AMEA hotel and room count in the year increased by 12 hotels (2,101 rooms) to 244 hotels (64,838 rooms). The level of openings increased from 16 hotels (4,243 rooms) in 2012 to 20 hotels (4,495 rooms) in 2013. This included two hotel openings (624 rooms) for the InterContinental brand, including the 272-room InterContinental Osaka, and five hotels in India (818 rooms) in 2013, including Crowne Plaza and Holiday Inn conversions in New Delhi’s emerging business district of Mayur Vihar.

Eight hotels (2,394 rooms) were removed from the AMEA System in 2013, compared to 12 hotels (2,589 rooms) in 2012.

 
Hotels
Rooms
AMEA pipeline
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
21
1
5,378
12
 
Crowne Plaza
14
(4)
4,048
(1,297)
 
Holiday Inn*
49
2
12,341
1,446
 
Holiday Inn Express
39
4
7,980
889
 
Staybridge Suites
6
-
935
207
 
Hotel Indigo
8
2
1,392
460
   
____
____
______
_____
Total
137
5
32,074
1,717
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
3
1
647
222
 
Managed
134
4
31,427
1,495
   
____
____
______
_____
Total
137
5
32,074
1,717
   
____
____
______
_____

 
* Includes 6 Holiday Inn Resort properties (1,579 rooms) (2012: 4 Holiday Inn Resort properties (900 rooms)).

AMEA pipeline
The AMEA pipeline totalled 137 hotels (32,074 rooms) as at 31 December 2013, compared to 132 hotels (30,357 rooms) as at 31 December 2012. Signings of 36 hotels (8,687 rooms) were broadly in line with last year and included 26 hotels (6,546 rooms) in the Holiday Inn brand family, notably the 1,230-room Holiday Inn Makkah Al Azizah in Saudi Arabia, which is set to be the largest Holiday Inn in the world when it opens. Three InterContinental hotels (671 rooms) were signed during 2013, including the 140-room InterContinental Sydney Double Bay in Australia.
 
11 hotels (2,475 rooms) were removed from the pipeline in 2013, compared to 10 hotels (2,850 rooms) in 2012.
 
 
GREATER CHINA
 
12 months ended 31 December
 
2013
2012
%
Greater China results
$m
$m
change
       
Revenue
     
 
Franchised
3
3
-
 
Managed
92
89
3.4
 
Owned and leased
141
138
2.2
   
____
____
_____
Total
 
236
230
2.6
 
____
____
____
Operating profit before exceptional items
     
 
Franchised
5
4
25.0
 
Managed
51
51
-
 
Owned and leased
47
45
4.4
   
____
____
_____
 
103
100
3.0
Regional overheads
(21)
(19)
(10.5)
 
____
____
____
Total
 
82
81
1.2
 
____
____
_____

 
Greater China comparable RevPAR movement on previous year
12 months ended
31 December
2013
   
Managed
 
 
All brands
0.6%
Owned and leased
 
 
InterContinental
(0.1)%

Greater China results
In Greater China, 96% of rooms are operated under the managed business model. The majority of hotels are in the upscale and upper midscale segments. Comprising 208 hotels (68,545 rooms) at 31 December 2013, Greater China represented 10% of the Group’s room count and 10% of the Group’s operating profit before central overheads and exceptional operating items during the year ended 31 December 2013.
 
Revenue and operating profit before exceptional items increased by $6m (2.6%) to $236m and by $1m (1.2%) to $82m respectively. On an underlying basis, revenue and operating profit increased by $6m (2.6%) and $2m (2.5%) respectively. Overall the region achieved RevPAR growth of 1.0% representing a significant decrease on the 5.4% growth achieved in 2012.
 
Franchised revenue was flat at $3m and operating profit increased by $1m (25.0%) to $5m.

Managed revenue increased by $3m (3.4%) to $92m and operating profit was flat at $51m. RevPAR increased by 0.6%, whilst the Greater China System size grew by 11.8%, driving a 9.2% increase in total gross revenue derived from rooms business. Total gross revenue derived from non-rooms business increased by 3.0%. Operating profit was partly offset by increased investment to drive future growth.

Owned and leased revenue at the InterContinental Hong Kong increased by $3m (2.2%) to $141m, driven by a 4.5% increase in total gross revenue derived from non-rooms business, although this was partly offset by a RevPAR decline of 0.1%. Operating profit increased by $2m (4.4%) to $47m.


 
Hotels
Rooms
Greater China hotel and room count
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
29
7
11,742
2,369
 
Crowne Plaza
65
5
23,234
1,782
 
Holiday Inn*
67
3
21,662
885
 
Holiday Inn Express
42
5
11,295
1,842
 
Hotel Indigo
5
2
612
207
 
Other
-
(1)
-
(141)
   
____
____
______
_____
Total
208
21
68,545
6,944
   
____
____
______
_____
Analysed by ownership type
       
 
Franchised
4
-
2,184
-
 
Managed
203
21
65,858
6,944
 
Owned and leased
1
-
503
-
   
____
____
______
_____
Total
208
21
68,545
6,944
   
____
____
______
_____

 
* Includes 4 Holiday Inn Resort properties (1,203 rooms) (2012: 3 Holiday Inn Resort properties (893 rooms)).

Greater China hotel and room count
The Greater China hotel and room count in the year increased by 21 hotels (6,944 rooms) to 208 hotels (68,545 rooms). 23 hotels (7,669 rooms) opened during 2013, broadly in line with 2012. InterContinental System size increased by 7 hotels (2,369 rooms) to 29 hotels (11,742 rooms), with openings including the 294-room InterContinental Sanya Haitang Bay Resort, a second for the brand on the island resort destination of Sanya. The Group also celebrated its 200th opening in Greater China in 2013 with the opening of the 141-room InterContinental Shanghai Ruijin. A further two Hotel Indigo properties (208 rooms) were opened, including a first for the brand in Hong Kong.

Two hotels (725 rooms) were removed from the Greater China System in 2013.

 
Hotels
Rooms
Greater China pipeline
at 31 December
 
2013
Change
over 2012
 
2013
Change
over 2012
         
Analysed by brand
       
 
InterContinental
22
-
9,392
374
 
Crowne Plaza
52
-
18,469
(863)
 
Holiday Inn*
41
4
11,944
945
 
Holiday Inn Express
33
4
7,260
1,263
 
Hotel Indigo
5
-
721
152
 
HUALUXE
21
6
6,804
1,900
 
Other
-
-
-
(97)
   
____
____
______
_____
Total
174
14
54,590
3,674
   
____
____
______
_____
Analysed by ownership type
       
 
Managed
174
14
54,590
3,674
   
____
____
______
_____
Total
174
14
54,590
3,674
   
____
____
______
_____

 
* Includes 3 Holiday Inn Resort properties (890 rooms) (2012: 3 Holiday Inn Resort properties (850 rooms)).
 
Greater China pipeline
The Greater China pipeline totalled 174 hotels (54,590 rooms) as at 31 December 2013, compared to 160 hotels (50,916 rooms) as at 31 December 2012. Signings of 53 hotels (15,348 rooms) increased from 46 hotels (13,387 rooms) in 2012. Seven InterContinental hotels (2,129 rooms) were signed, together with 11 Crowne Plaza hotels (3,528 rooms), whilst the total pipeline for the HUALUXE Hotels & Resorts brand increased to 21 hotels (6,804 rooms). 26 hotels (7,343 rooms) were signed in the Holiday Inn brand family, including the 1,002-room Holiday Inn Express Changbaishan, which subsequently opened as the Group’s largest Holiday Inn Express in 2013.

16 hotels (4,005 rooms) were removed from the pipeline in 2013.


CENTRAL
 
12 months ended 31 December
 
2013
2012
%
Central results
$m
$m
change
       
Revenue
121
114
6.1
Gross central costs
(276)
(276)
-
 
____
____
_____
Net central costs
 
(155)
(162)
4.3
 
_____
_____
_____

Central Results
Central revenue, mainly comprising technology fee income, increased by $7m (6.1%) to $121m, driven by increases to both RevPAR and IHG System size over 2013. Gross central costs were flat at $276m in 2013, reflecting continued tight cost control.
 

SYSTEM FUND
 
12 months ended 31 December
 
2013
2012
%
System Fund results
$m
$m
change
       
Assessment fees and contributions received from hotels
1,154
1,106
4.3
Proceeds from sale of IHG Rewards Club points
153
144
6.3
 
____
____
_____
Total
 
1,307
1,250
4.6
 
_____
____
_____

System Fund Results
In the year to 31 December 2013, System Fund income increased by 4.6% to $1,307m primarily as a result of growth in hotel room revenues due to increases in RevPAR and IHG System size. The increase in proceeds from the sale of IHG Rewards Club points mainly reflects the continued strong performance of co-brand credit card schemes.

In addition to management or franchise fees, hotels within the IHG System pay assessments and contributions which are collected by IHG for specific use within the System Fund. The System Fund also receives proceeds from the sale of IHG Rewards Club points. The System Fund is managed for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels.

The System Fund is used to pay for marketing, the IHG Rewards Club loyalty programme and the global reservation system. The operation of the System Fund does not result in a profit or loss for the Group and consequently the revenues and expenses of the System Fund are not included in the Group Income Statement.
 

 
OTHER FINANCIAL INFORMATION

Exceptional operating items
Exceptional operating items totalled a net profit of $5m. Exceptional gains included $166m from the sale of the InterContinental London Park Lane on 1 May 2013 and $6m in relation to the sale of a hotel by an associate in The Americas. Exceptional charges included $147m arising from the buy-in of the Group’s UK funded pension benefit obligations with the insurer, Rothesay Life, on 15 August 2013, $10m relating to an agreed settlement in respect of a commercial claim and $10m relating to costs incurred in support of the worldwide rebranding of IHG Rewards Club.
 
Exceptional operating items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted earnings per ordinary share in order to provide a more meaningful comparison of performance.

Net financial expenses
Net financial expenses increased by $19m to $73m reflecting an increase in average net debt levels and the issuance of the 10-year £400m public bond in November 2012 with a coupon of 3.875%.

Financing costs included $2m (2012 $2m) of interest costs associated with the IHG Rewards Club where interest is charged on the accumulated balance of cash received in advance of the redemption of points awarded.  Financing costs in 2013 also included $19m (2012 $19m) in respect of the InterContinental Boston finance lease.
 

Taxation
The effective rate of tax on operating profit excluding the impact of exceptional items was 29% (2012 27%). Excluding the impact of prior year items the equivalent tax rate would be 32% (2012 30%). This rate is higher than the average UK statutory rate of 23.25% (2012 24.5%) 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 charge of $51m (2012 credit of $142m). In 2013 the charge comprised $6m relating to the exceptional operating items and $64m consequent upon the disposal of the InterContinental London Park Lane, offset by a credit of $19m relating to an internal restructuring. In 2012 this represented, primarily, the recognition of $104m of deferred tax assets whose value had become more certain as a result of a change in law and the resolution of prior period tax matters, together with the associated release of $37m of provisions.

Net tax paid in 2013 totalled $97m (2012 $122m) including $5m paid (2012 $3m) in respect of disposals. Tax paid represents an effective rate of 16% (2012 22%) on total profits and is lower than the effective income statement tax rate of 29% primarily due to the impact of deferred taxes (including the realisation of assets such as tax losses), the receipt of refunds in respect of prior years and provisions for tax for which no payment of tax has currently been made.

Earnings per ordinary share
Basic earnings per ordinary share in 2013 was 140.9¢, compared with 187.1¢ in 2012. Adjusted earnings per ordinary share was 158.3¢, against 139.0¢ in 2012.

Dividends
The Board has proposed a final dividend per ordinary share of 47.0¢ (28.1p). With the interim dividend per ordinary share of 23.0¢ (15.1p), the full-year dividend per ordinary share for 2013 will total 70.0¢ (43.2p), an increase of 9% over 2012. On 4 October 2013, a special dividend of 133.0¢ (87.1p) per ordinary share amounting to $355m was paid to shareholders.

Share price and market capitalisation
The IHG share price closed at £20.13 on 31 December 2013, up from £17.07 on 31 December 2012. The market capitalisation of the Group at the year-end was £5.4bn.


Capital structure and liquidity management
During the year, $624m of cash was generated from operating activities, of which $409m was invested in capital expenditure. After shareholder returns of $816m, including a $355m special dividend and $283m of share buybacks, net debt at 31 December 2013 was $1,153m, an increase over the year of $79m. Net debt included $215m in respect of the finance lease obligations for the InterContinental Boston and $2m in respect of currency swaps related to the £250m sterling bond.

In November 2012, the Group issued a 10-year £400m public bond under its Medium Term Notes programme at a coupon of 3.875%. The Group issued its first bond under the programme in December 2009 which was a seven-year £250m public bond at a coupon of 6%, which was immediately swapped into US dollar debt using currency swaps.

The Group refinanced its bank debt in November 2011, putting in place a five-year $1.07bn syndicated bank facility which matures in November 2016. This facility was undrawn at the year-end.

Additional funding is provided by a finance lease on the InterContinental Boston.

 
2013
2012
Net debt* at 31 December
$m
$m
     
Borrowings:
   
 
Sterling
654
638
 
US Dollar
629
626
 
Other
4
5
Cash and cash equivalents
(134)
(195)
 
____
____
Net debt
1,153
1,074
 
____
____
     
Average debt levels
985
651
 
____
____
     
* Including the impact of currency derivatives.
 
2013
2012
Facilities at 31 December
$m
$m
     
Committed
1,074
1,075
Uncommitted
80
96
 
____
____
Total
1,154
1,171
 
____
____

 
Interest risk profile of gross debt for major currencies
at 31 December
2013
%
2012
%
     
At fixed rates
100
100
     

 

INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the year ended 31 December 2013

 
Year ended 31 December 2013
Year ended 31 December 2012 (restated*)
 
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
 
$m
$m
$m
$m
$m
$m
Continuing operations
           
             
Revenue (note 3)
1,903
-
1,903
1,835
-
1,835
Cost of sales
(784)
-
(784)
(772)
-
(772)
Administrative expenses
(374)
(167)
(541)
(372)
(16)
(388)
Share of profits of associates and joint ventures
2
6
8
3
-
3
Other operating income and expenses
6
166
172
5
(11)
(6)
 
_____
____
____
_____
____
____
 
753
5
758
699
(27)
672
             
Depreciation and amortisation
(85)
-
(85)
(94)
-
(94)
Impairment
-
-
-
-
23
23
 
_____
____
____
_____
____
____
             
Operating profit (note 3)
668
5
673
605
(4)
601
Financial income
5
-
5
3
-
3
Financial expenses
(78)
-
(78)
(57)
-
(57)
 
_____
____
____
_____
____
____
             
Profit before tax
595
5
600
551
(4)
547
             
Tax (note 5)
(175)
(51)
(226)
(151)
142
(9)
 
_____
____
____
_____
____
____
Profit for the year from continuing operations
 
420
 
(46)
 
374
 
400
 
138
 
538
 
====
====
====
====
====
====
             
Attributable to:
           
 
Equity holders of the parent
418
(46)
372
399
138
537
 
Non-controlling interest
2
-
2
1
-
1
   
____
____
____
____
____
____
   
420
(46)
374
400
138
538
 
====
====
====
====
====
====
             
Earnings per ordinary share
(note 6)
           
Continuing and total operations:
           
 
Basic
   
140.9¢
   
187.1¢
 
Diluted
   
139.3¢
   
183.9¢
 
Adjusted
158.3¢
   
139.0¢
   
 
Adjusted diluted
156.6¢
   
136.6¢
   
 
====
 
====
====
 
====
             


*
Restated for the adoption of IAS 19R ‘Employee Benefits’ (see note 1)

 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2013


 
2013
Year ended
31 December
 
$m
2012
Year ended
31 December
(restated*)
$m
     
Profit for the year
374
538
     
Other comprehensive income
   
     
Items that may be subsequently reclassified to profit or loss:
   
Gains on valuation of available-for-sale financial assets
28
1
Losses relating to cash flow hedges reclassified to financial expenses
-
1
Exchange (losses)/gains on retranslation of foreign operations, net of related tax credit of $2m (2012 $3m)
(35)
24
Exchange losses reclassified to profit on hotel disposal
46
-
 
____
____
 
39
26
Items that will not be reclassified to profit or loss:
   
Re-measurement gains/(losses) on defined benefit plans, net of related tax charge of $20m (2012 credit of $5m)
20
(10)
Tax related to pension contributions
-
18
 
____
____
 
20
8
     
 
____
____
Total other comprehensive income for the year
59
34
 
____
____
Total comprehensive income for the year
433
572
 
====
====
     
Attributable to:
   
 
Equity holders of the parent
433
571
 
Non-controlling interest
-
1
 
_____
_____
 
433
572
 
=====
=====


*
Restated for the adoption of IAS 19R ‘Employee Benefits’ (see note 1)

 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013

 
Year ended 31 December 2013
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
           
At beginning of the year
179
(2,652)
2,781
9
317
           
Total comprehensive income for the year
-
41
392
-
433
Issue of ordinary shares
5
-
-
-
5
Repurchase of shares
-
-
(283)
-
(283)
Movement in shares in employee share trusts
 
-
 
11
 
(61)
 
-
 
(50)
Equity-settled share-based cost
-
-
27
-
27
Tax related to share schemes
-
-
11
-
11
Equity dividends paid
-
-
(533)
(1)
(534)
Exchange adjustments
5
(5)
-
-
-
 
_____
_____
____
____
____
At end of the year
189
(2,605)
2,334
8
(74)
 
=====
=====
====
====
====

 
Year ended 31 December 2012
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
           
At beginning of the year
162
(2,650)
3,035
8
555
           
Total comprehensive income for the year
-
26
545
1
572
Issue of ordinary shares
10
-
-
-
10
Repurchase of shares
(1)
-
(106)
-
(107)
Transfer to capital redemption reserve
-
1
(1)
-
-
Transaction costs relating to shareholder returns
 
-
 
-
 
(2)
 
-
 
(2)
Movement in shares in employee share trusts
 
-
 
(21)
 
(63)
 
-
 
(84)
Equity-settled share-based cost
-
-
27
-
27
Tax related to share schemes
-
-
20
-
20
Equity dividends paid
-
-
(679)
-
(679)
Share of reserve in equity accounted investment
 
-
 
-
 
5
 
-
 
5
Exchange adjustments
8
(8)
-
-
-
 
_____
_____
____
____
____
At end of the year
179
(2,652)
2,781
9
317
 
=====
=====
====
====
====

*
Other reserves comprise the capital redemption reserve, shares held by employee share trusts, other reserves, unrealised gains and losses reserve and currency translation reserve.
 


All items above are shown net of tax.
 

INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF FINANCIAL POSITION
31 December 2013
 
2013
31 December
2012
31 December
 
$m
$m
ASSETS
   
Property, plant and equipment
1,169
1,056
Goodwill
80
93
Intangible assets
438
354
Investment in associates and joint ventures
85
84
Retirement benefit assets
7
99
Other financial assets
236
155
Non-current tax receivable
16
24
Deferred tax assets
108
204
 
_____
_____
Total non-current assets
2,139
2,069
 
_____
_____
Inventories
4
4
Trade and other receivables
423
422
Current tax receivable
12
31
Derivative financial instruments
1
2
Other financial assets
12
6
Cash and cash equivalents
134
195
 
_____
_____
Total current assets
586
660
Non-current assets classified as held for sale
228
534
 
______
______
Total assets (note 3)
2,953
3,263
 
=====
=====
LIABILITIES
   
Loans and other borrowings
(16)
(16)
Trade and other payables
(748)
(709)
Provisions
(3)
(1)
Current tax payable
(47)
(54)
 
_____
_____
Total current liabilities
(814)
(780)
 
_____
_____
Loans and other borrowings
(1,269)
(1,242)
Derivative financial instruments
(11)
(19)
Retirement benefit obligations
(184)
(187)
Trade and other payables
(574)
(563)
Provisions
-
(1)
Deferred tax liabilities
(175)
(93)
 
_____
_____
Total non-current liabilities
(2,213)
(2,105)
Liabilities classified as held for sale
-
(61)
 
_____
_____
Total liabilities
(3,027)
(2,946)
 
=====
=====
Net (liabilities)/assets
(74)
317
 
=====
=====
EQUITY
   
Equity share capital
189
179
Capital redemption reserve
12
11
Shares held by employee share trusts
(38)
(48)
Other reserves
(2,906)
(2,901)
Unrealised gains and losses reserve
100
72
Currency translation reserve
227
214
Retained earnings
2,334
2,781
 
______
______
IHG shareholders’ equity
(82)
308
Non-controlling interest
8
9
 
______
______
Total equity
(74)
317
 
=====
=====


 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 2013
 
2013
Year ended
31 December
2012
Year ended
31 December
(restated*)
 
$m
$m
     
Profit for the year
374
538
Adjustments for:
   
 
Net financial expenses
73
54
 
Income tax charge
226
9
 
Depreciation and amortisation
85
94
 
Impairment
-
(23)
 
Other exceptional operating items
(5)
27
 
Equity-settled share-based cost
22
22
 
Dividends from associates and joint ventures
5
1
 
Other items
2
(3)
 
_____
_____
Operating cash flow before movements in working capital
782
719
Net change in loyalty programme liability and System Fund surplus
61
57
Other changes in net working capital
(1)
(24)
Utilisation of provisions
(3)
(12)
Retirement benefit contributions, net of cost
(18)
(95)
Cash flows relating to exceptional operating items
(33)
(6)
 
_____
_____
Cash flow from operations
788
639
Interest paid
(74)
(50)
Interest received
2
2
Tax paid on operating activities
(92)
(119)
 
_____
_____
Net cash from operating activities
624
472
 
_____
_____
Cash flow from investing activities
   
Purchase of property, plant and equipment
(159)
(44)
Purchase of intangible assets
(86)
(84)
Investment in other financial assets
(154)
(2)
Investment in associates and joint ventures
(10)
(3)
Disposal of hotel assets, net of costs
460
4
Proceeds from other financial assets
109
4
Distribution from associate on sale of hotel
17
-
Proceeds from other associates and joint ventures
3
-
Tax paid on disposals
(5)
(3)
 
_____
_____
Net cash from investing activities
175
(128)
 
_____
_____
Cash flow from financing activities
   
Proceeds from the issue of share capital
5
10
Purchase of own shares
(283)
(107)
Purchase of own shares by employee share trusts
(44)
(84)
Dividends paid to shareholders
(533)
(679)
Dividends paid to non-controlling interests
(1)
-
Transaction costs relating to shareholder returns
-
(2)
Issue of long-term bonds
-
632
Decrease in other borrowings
(1)
(99)
 
_____
_____
Net cash from financing activities
(857)
(329)
 
_____
_____
Net movement in cash and cash equivalents in the year
(58)
15
Cash and cash equivalents at beginning of the year
195
182
Exchange rate effects
(3)
(2)
 
_____
_____
Cash and cash equivalents at end of the year
134
195
 
=====
=====

* Restated for the adoption of IAS 19R ‘Employee Benefits’ (see note 1)
   

 

INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS


1.
Basis of preparation
 
 
The audited consolidated financial statements of InterContinental Hotels Group PLC (the Group or IHG) for the year ended 31 December 2013 have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.   Other than the changes listed below, they have been prepared on a consistent basis using the accounting policies set out in the InterContinental Hotels Group PLC (the Group or IHG) Annual Report and Financial Statements for the year ended 31 December 2012.
 
With effect from 1 January 2013, the Group has adopted IAS 19 (Revised) ‘Employee Benefits’ which introduces a number of changes to accounting for defined benefit plans, including the removal of expected returns on plan assets from the income statement.  Instead, there is a requirement to recognise interest on the net defined benefit asset/liability (after any asset restrictions), calculated using the discount rate used to measure the defined benefit obligation.  This change in accounting policy has required restatements of the Group income statement, Group statement of comprehensive income and Group statement of cash flows for the year ended 31 December 2012, resulting in an additional charge to operating profit of $9m with an equivalent reduction in actuarial losses in other comprehensive income.  The tax impacts of the adjustments are a $2m credit to the income statement with an equivalent charge against the reduced actuarial losses in other comprehensive income.  Basic, diluted, adjusted and adjusted diluted earnings per share are reduced by 2.4, 2.4, 2.5 and 2.4 cents respectively.  There has been no change to previously reported retained earnings or balance sheet amounts.
 
The Group has also adopted IAS 1 (Amendment) ‘Presentation of Items of Other Comprehensive Income’, which changes the grouping of items presented in the Group’s statement of comprehensive income so that items which may be reclassified to profit or loss in the future are presented separately from items that will never be reclassified.  The amendment affects presentation only and has had no impact on the Group’s financial position or performance.
 
In addition, with effect from 1 January 2013, the Group has implemented IAS 28 (Amendment) ‘Investments in Associates and Joint Ventures’, IFRS 10 ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’, IFRS 12 ‘Disclosure of Interests in Other Entities’ and IFRS 13 ‘Fair Value Measurement’.  The adoption of these standards has had no material impact on the Group’s financial performance or position and there has been no requirement to restate prior year comparatives.


2.
Exchange rates
 
 
The results of operations have been translated into US dollars at the average rates of exchange for the year. In the case of sterling, the translation rate is $1= £0.64 (2012 $1=£0.63). In the case of the euro, the translation rate is $1 = €0.75 (2012 $1 = €0.78).
 
Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the year. In the case of sterling, the translation rate is $1=£0.60 (2012 $1 = £0.62). In the case of the euro, the translation rate is $1 = €0.73 (2012 $1 = €0.76).
 

 
3.
Segmental information
   
       
 
Revenue
   
   
2013
2012
   
$m
$m
       
 
Americas
916
837
 
Europe
400
436
 
AMEA
230
218
 
Greater China
236
230
 
Central
121
114
   
____
____
 
Total revenue
1,903
1,835
   
====
====
       
 
All results relate to continuing operations.

 
Profit
2013
$m
2012
(restated*)
$m
       
 
Americas
550
486
 
Europe
105
112
 
AMEA
86
88
 
Greater China
82
81
 
Central
(155)
(162)
   
____
____
 
Reportable segments’ operating profit
668
605
 
Exceptional operating items (note 4)
5
(4)
   
____
____
 
Operating profit
673
601
       
 
Net finance costs
(73)
(54)
   
____
____
 
Profit before tax
600
547
   
====
====
       
 
All results relate to continuing operations.
 
 
* Restated for the adoption of IAS 19R ‘Employee Benefits’ (see note 1)

 
Assets
2013
$m
2012
$m
       
 
Americas
1,079
957
 
Europe
654
928
 
AMEA
253
282
 
Greater China
392
390
 
Central
304
250
   
____
____
 
Segment assets
2,682
2,807
       
 
Unallocated assets:
   
 
Non-current tax receivable
16
24
 
Deferred tax assets
108
204
 
Current tax receivable
12
31
 
Derivative financial instruments
1
2
 
Cash and cash equivalents
134
195
   
____
____
 
Total assets
2,953
3,263
   
====
====
 

4.
Exceptional items
   
2013
$m
2012
$m
 
Continuing operations:
   
 
Exceptional operating items
   
   
Administrative expenses:
   
   
Litigation (a)
(10)
-
   
Loyalty programme rebranding costs (b)
(10)
-
   
Pension settlement loss (c)
(147)
-
   
Reorganisation costs (d)
-
(16)
     
____
____
     
(167)
(16)
   
Share of profits of associates and joint ventures:
   
   
Share of gain on disposal of a hotel (e)
6
-
         
         
   
Other operating income and expenses:
   
   
Gain/(loss) on disposal of hotels (f)
166
(2)
   
Write-off of software (g)
-
(18)
   
Demerger liability released (h)
-
9
     
____
____
     
166
(11)
   
Impairment:
   
   
Reversals of previously recorded impairment:
   
     
Property, plant and equipment (i)
-
23
     
____
____
   
5
(4)
   
====
====
 
Tax
   
   
Tax on exceptional operating items
(6)
1
   
Exceptional tax (j)
(45)
141
     
____
____
     
(51)
142
   
====
====


 
These items are treated as exceptional by reason of their size or nature.
 
a)
Relates to an agreed settlement.
 
b)
Relates to costs incurred in support of the worldwide rebranding of IHG Rewards Club that was announced 1 July 2013.
 
c)
Arises from a buy-in of the Group’s UK funded defined benefit obligations with the insurer, Rothesay Life, on 15 August 2013.
 
d)
Arose from a reorganisation of the Group’s support functions together with a restructuring within the AMEA region.
 
e)
Relates to the sale of a hotel owned by an associate in the Americas region.
 
f)
Relates to the sale of the InterContinental London Park Lane on 1 May 2013 and, in 2012, related to the sale of an interest in a hotel in the Europe region.
 
g)
Resulted from a reassessment of the ongoing value of elements of the technology infrastructure.
 
h)
Resulted from a release of a liability no longer required which arose on the demerger of the Group from Six Continents PLC.
 
i)
Related to the reversal of a previously recorded impairment charge on a North American hotel.
 
j)
In 2013, comprises a deferred tax charge of $63m consequent upon the disposal of the InterContinental London Park Lane hotel, together with charges and credits of $38m and $19m respectively from associated restructurings (including intra-group dividends) and refinancings, offset by the recognition of $37m of previously unrecognised tax credits.  In 2012, represented the recognition of $104m of deferred tax assets, principally relating to pre-existing overseas tax losses, whose value had become more certain as a result of a change in law and the resolution of prior period tax matters, together with the associated release of $37m of provisions.
 

5.
Tax
 
 
The tax charge on profit from continuing operations, excluding the impact of exceptional items (note 4), has been calculated using a tax rate of 29% (2012 27%) analysed as follows.


   
2013
2013
2013
2012
(restated*)
2012
(restated*)
2012
(restated*)
 
Year ended 31 December
Profit
$m
Tax