REG - Interco. Hotels Grp - Half Year Results to 30 June 2014 <Origin Href="QuoteRef">FRES.L</Origin> <Origin Href="QuoteRef">IHG.L</Origin> - Part 3
29/10/2014 10:09
- Part 3: For the preceding part double click ID:nRSE2368Ob
2,294 2,819 2,334
______ ______ ______
IHG shareholders' equity (98) 408 (82)
Non-controlling interest 9 8 8
______ ______ ______
Total equity (89) 416 (74)
===== ===== =====
InterContinental Hotels Group PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2014
20146 months ended30 June 20136 months ended30 June
$m $m
Profit for the period 239 341
Adjustments for:
Net financial expenses 39 36
Income tax charge 138 121
Depreciation and amortisation 46 40
Exceptional operating items (106) (160)
Equity-settled share-based cost 10 11
Other items 1 2
_____ _____
Operating cash flow before movements in working capital 367 391
Net change in loyalty programme liability and System Fund surplus 99 99
Other changes in net working capital (180) (198)
Utilisation of provisions - 2
Retirement benefit contributions, net of cost (2) (9)
Cash flows relating to exceptional operating items (9) (9)
_____ _____
Cash flow from operations 275 276
Interest paid (12) (11)
Interest received 1 1
Tax paid on operating activities (59) (40)
_____ _____
Net cash from operating activities 205 226
_____ _____
Cash flow from investing activities
Purchase of property, plant and equipment (43) (62)
Purchase of intangible assets (47) (39)
Investment in other financial assets - (100)
Investment in associates and joint ventures (8) (7)
Disposal of hotel assets, net of costs 346 462
Proceeds from other financial assets 13 16
Distribution from associate on sale of hotel - 17
Tax paid on disposals - (5)
_____ _____
Net cash from investing activities 261 282
_____ _____
Cash flow from financing activities
Proceeds from the issue of share capital - 4
Purchase of own shares (110) (127)
Purchase of own shares by employee share trusts (49) (32)
Dividends paid to shareholders (122) (115)
Dividends paid to non-controlling interests (1) (1)
Decrease in other borrowings - (1)
_____ _____
Net cash from financing activities (282) (272)
_____ _____
Net movement in cash and cash equivalents in the period 184 236
Cash and cash equivalents at beginning of the period 134 195
Exchange rate effects (10) (35)
_____ _____
Cash and cash equivalents at end of the period 308 396
===== =====
InterContinental Hotels Group plc
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and IAS 34 'Interim Financial Reporting' and have been prepared on a consistent
basis using the same accounting policies set out in the InterContinental Hotels Group PLC (the Group or IHG) Annual Report and Form 20-F for the year ended 31 December 2013. These condensed interim financial statements are unaudited and do not constitute
statutory accounts of the Group within the meaning of Section 435 of the Companies Act 2006. The auditors have carried out a review of the financial information in accordance with the guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. The financial information for the year ended 31 December 2013 has been extracted from the Group's published financial statements for that
year which were prepared in accordance with IFRSs as adopted by the European Union and which have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified with no reference to matters to which the
auditor drew attention by way of emphasis and no statement under s498(2) or s498(3) of the Companies Act 2006.
2. Exchange rates
The results of operations have been translated into US dollars at the average rates of exchange for the period. In the case of sterling, the translation rate is $1= £0.60 (2013 $1=£0.65). In the case of the euro, the translation rate is $1 = E0.73 (2013 $1
= E0.76). Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the period. In the case of sterling, the translation rate is $1=£0.59 (2013 30 June $1 = £0.66; 31 December $1 = £0.60). In the case of the
euro, the translation rate is $1 = E0.73 (2013 30 June $1 = E0.77; 31 December $1 = E0.73).
The results of operations have been translated into US dollars at the average
rates of exchange for the period. In the case of sterling, the translation
rate is $1= £0.60 (2013 $1=£0.65). In the case of the euro, the translation
rate is $1 = E0.73 (2013 $1 = E0.76). Assets and liabilities have been
translated into US dollars at the rates of exchange on the last day of the
period. In the case of sterling, the translation rate is $1=£0.59 (2013 30
June $1 = £0.66; 31 December $1 = £0.60). In the case of the euro, the
translation rate is $1 = E0.73 (2013 30 June $1 = E0.77; 31 December $1 =
E0.73).
3. Segmental information
Revenue 20146 months ended30 June 20136 months ended30 June
$m $m
Americas 435 457
Europe 182 206
AMEA 117 102
Greater China 112 112
Central 62 59
____ ____
Total revenue 908 936
==== ====
All results relate to continuing operations.
Profit 20146 months ended30 June$m 20136 months ended30 June$m
Americas 268 282
Europe 38 53
AMEA 38 41
Greater China 36 36
Central (70) (74)
____ ____
Reportable segments' operating profit 310 338
Exceptional operating items (note 4) 106 160
____ ____
Operating profit 416 498
Financial income 2 3
Financial expenses (41) (39)
____ ____
Profit before tax 377 462
==== ====
All results relate to continuing operations.
Assets 201430 June$m 201330 June$m 201331 December$m
Americas 958 1,104 1,079
Europe 679 638 654
AMEA 264 265 253
Greater China 393 383 392
Central 316 358 304
____ ____ ____
Segment assets 2,610 2,748 2,682
Unallocated assets:
Non-current tax receivable 15 23 16
Deferred tax assets 97 161 108
Current tax receivable 12 4 12
Derivative financial instruments 5 - 1
Cash and cash equivalents 308 396 134
____ ____ ____
Total assets 3,047 3,332 2,953
==== ==== ====
4. Exceptional items
20146 months ended30 June$m 20136 months ended30 June$m
Continuing operations:
Exceptional operating items
Administrative expenses:
Currency loss (a) (14) -
Restructuring costs (b) (10) -
Litigation (c) - (10)
Loyalty programme rebranding costs - (3)
____ ____
(24) (13)
Share of profits of associates and joint ventures:
Share of gain on disposal of a hotel (d) - 7
Other operating income and expenses:
Gain on disposal of hotels (e) 130 166
____ ____
106 160
==== ====
Tax
Tax on exceptional operating items (49) (10)
Exceptional tax (f) - (18)
____ ____
(49) (28)
==== ====
These items are treated as exceptional by reason of their size or nature.
a) Relates to foreign exchange losses resulting from recent changes to the Venezuelan currency exchange rate mechanisms and the adoption of the SICAD II exchange rate.
b) Relates to a restructuring of the Group's corporate functions.
c) Related to an agreed settlement in respect of a lawsuit filed against the Group in the Greater China region.
d) Related to the sale of a hotel by an associate in the Americas region.
e) Relates, in 2014, to the sale of the InterContinental Mark Hopkins San Francisco and the disposal of an 80% interest in the InterContinental New York Barclay and, in 2013, to the sale of the InterContinental London Park Lane (see note 7).
f) In 2013 represented, primarily, deferred tax related to the expected repatriation of earnings consequential upon the disposal of the InterContinental London Park Lane.
5. Tax
The tax charge on profit for the period from continuing operations, excluding the impact of exceptional items (note 4), has been calculated using a tax rate of 33% (2013 31%) analysed as follows.
2014 2014 2014 2013 2013 2013
6 months ended 30 June Profit$m Tax$m Taxrate Profit$m Tax$m Taxrate
Before exceptional items 271 (89) 33% 302 (93) 31%
Exceptional items 106 (49) 160 (28)
____ ____ ____ ____
377 (138) 462 (121)
==== ==== ==== ====
Analysed as:
UK tax (2) (13)
Foreign tax (136) (108)
____ ____
(138) (121)
==== ====
6. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit for the period available for IHG equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in issue during the period. Diluted earnings per
ordinary share is calculated by adjusting basic earnings per ordinary share to reflect the notional impact of the weighted average number of dilutive ordinary share awards outstanding during the period. Adjusted earnings per ordinary share is disclosed in
order to show performance undistorted by exceptional items, to give a more meaningful comparison of the Group's performance.
Continuing and total operations 20146 months ended 30 June 20136 monthsended 30 June
Basic earnings per ordinary share
Profit available for equity holders ($m) 238 340
Basic weighted average number of ordinary shares (millions) 256 266
Basic earnings per ordinary share (cents) 93.0 127.8
==== ====
Diluted earnings per ordinary share
Profit available for equity holders ($m) 238 340
Diluted weighted average number of ordinary shares (millions) 259 269
Diluted earnings per ordinary share (cents) 91.9 126.4
==== ====
Adjusted earnings per ordinary share
Profit available for equity holders ($m) 238 340
Adjusting items (note 4):
Exceptional operating items ($m) (106) (160)
Tax on exceptional operating items ($m) 49 10
Exceptional tax ($m) - 18
____ ____
Adjusted earnings ($m) 181 208
Basic weighted average number of ordinary shares (millions) 256 266
Adjusted earnings per ordinary share (cents) 70.7 78.2
==== ====
Diluted weighted average number of ordinary shares (millions) 259 269
Adjusted diluted earnings per ordinary share (cents) 69.9 77.3
==== ====
The diluted weighted average number of ordinary shares is calculated as:
2014millions 2013millions
Basic weighted average number of ordinary shares 256 266
Dilutive potential ordinary shares 3 3
____ ____
259 269
==== ====
7. Disposal of hotels
20146 monthsended30 June$m 20136 monthsended30 June$m
Net assets disposed:
Property, plant and equipment 91 -
Non-current assets held for sale 223 294
Net current liabilities (4) (6)
______ _____
310 288
Gain on disposal of hotels 130 166
Accrued disposal costs 5 2
Exchange losses recycled from currency translation reserve - 46
_____ _____
Total consideration 445 502
===== ====
Satisfied by:
Cash consideration, net of costs paid 346 462
Other financial asset 27 -
Intangible assets 50 40
Associate investment 22 -
_____ _____
445 502
===== ====
8. Dividends and shareholder returns
2014cents per share 2013cents per share 2014$m 2013$m
Paid during the period:
Final (declared for previous year) 47.0 43.0 122 115
===== ===== ==== ====
Proposed for the period:
Interim 25.0 23.0 59 63*
===== ===== ==== ====
*Amount paid
Under the $500m share buyback programme announced on 7 August 2012, 3.4m
shares were repurchased in the six months to 30 June 2014 for a
consideration of $110m, increasing the total amount repurchased to $500m.
Of the 3.4m shares repurchased in 2014, 2.7m are held as treasury shares
and 0.7m were cancelled. The total number of shares held as treasury
shares at 30 June 2014 was 12.5m. The cost of treasury shares has been
deducted from retained earnings. On 2 May 2014, the Group announced a
$750m return to shareholders by way of a special dividend and share
consolidation. On 30 June 2014, shareholders approved the share
consolidation on the basis of 12 new ordinary shares of 15 265/329p per
share for every 13 existing ordinary shares of 14 194/329p. The dividend
was paid on 14 July 2014.
9. Net debt
201430 June 201330 June 201331 December
$m $m $m
Cash and cash equivalents 308 396 134
Loans and other borrowings - current (16) (16) (16)
Loans and other borrowings - non-current (1,330) (1,206) (1,269)
Derivatives hedging debt values* 7 (35) (2)
____ ____ ____
Net debt (1,031) (861) (1,153)
==== ==== ====
Finance lease liability included above (216) (213) (215)
==== ==== ====
* Net debt includes the exchange element of the fair value of currency swaps that fix the value of the Group's £250m 6% bonds. At 30 June 2014, 72% of the value was fixed (2013 30 June 100%; 31 December 100%). An equal and opposite exchange adjustment on the retranslation of the £250m 6% bonds is included in non-current borrowings.
10. Movement in net debt
20146 months ended30 June 20136 months ended30 June 201312 monthsended31 December
$m $m $m
Net increase/(decrease) in cash and cash equivalents 184 236 (58)
Add back cash flows in respect of other components of net debt:
Decrease in other borrowings - 1 1
____ ____ ____
Decrease/(increase) in net debt arising from cash flows 184 237 (57)
Non-cash movements:
Finance lease liability (2) (2) (3)
Exchange and other adjustments (60) (22) (19)
____ ____ ____
Decrease/(increase) in net debt 122 213 (79)
Net debt at beginning of the period (1,153) (1,074) (1,074)
____ ____ ____
Net debt at end of the period (1,031) (861) (1,153)
==== ==== ====
11. Fair values
The table below compares carrying amounts and fair values of the Group's financial assets and liabilities at 30 June 2014:
2014 30 JuneCarrying value$m 201430 JuneFair value 201331 DecemberCarrying value$m 201331 DecemberFair value
$m $m
Financial assets:
Equity securities available-for-sale 142 142 136 136
Loans and receivables 136 136 112 112
Derivatives 5 5 1 1
_____ _____ _____ _____
283 283 249 249
===== ===== ===== =====
Financial liabilities:
£250m 6% bonds 2016 (438) (466) (412) (461)
£400m 3.875% bonds 2022 (688) (686) (654) (650)
Finance lease obligations (216) (246) (215) (233)
Derivatives - - (11) (11)
Other borrowings (4) (4) (4) (4)
_____ _____ _____ _____
(1,346) (1,402) (1,296) (1,359)
===== ===== ===== =====
Equity securities available-for-sale and derivatives are held in the Group statement of financial position at fair value as set out below. The fair value of loans and receivables approximates book value based on prevailing market rates. The fair value of
the £250m and £400m bonds is based on their quoted market price. The fair value of finance lease obligations is calculated by discounting future cash flows at prevailing interest rates. The fair value of other borrowings approximates book value as
interest rates reset to market rates on a frequent basis. The following table provides the fair value measurement hierarchy of the above assets and liabilities, other than those with carrying amounts which are reasonable approximations of their fair
values. Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.Level
3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
30 June 2014 Level 1$m Level 2$m Level 3$m Total$m
Assets
Equity securities available-for-sale:
Quoted equity shares 16 - - 16
Unquoted equity shares - - 126 126
Derivatives - 5 - 5
31 December 2013 Level 1$m Level 2$m Level 3$m Total$m
Assets
Equity securities available-for-sale:
Quoted equity shares 9 - - 9
Unquoted equity shares - - 127 127
Derivatives - 1 - 1
The Level 2 derivatives consist of currency swaps which are valued using data from
observable swap curves, adjusted to take account of the Group's own credit risk. The
Level 3 equity securities relate to investments in unlisted shares which are valued
either by applying an average price-earnings (P/E) ratio for a competitor group to
the earnings generated by the investment, or by reference to share of net assets.
The average P/E ratio used for the period was 25.0 and a non-marketability factor of
30% is applied. A 10% increase in the average P/E ratio would result in a $5m
increase in the fair value of the investments and a 10% decrease in the average P/E
ratio would result in a $5m decrease in the fair value of the investments. A 10%
increase in net assets would result in a $5m increase in the fair value of
investments and a 10% decrease in net assets would result in a $5m decrease in the
fair value of the investments. There were no transfers between Level 1 and Level 2
fair value measurements during the period and no transfers into and out of Level 3.
The following table reconciles movements in instruments classified as Level 3 during
the period:
201430 June$m
At 1 January 2014 127
Repaid (8)
Valuation gains recognised in other comprehensive income 7
____
At 30 June 2014 126
====
12. Commitments and contingencies
At 30 June 2014, the amount contracted for but not provided for in the financial statements for expenditure on property, plant and equipment and intangible assets was $128m (2013 31 December $83m; 30 June $63m). The Group has also committed to invest up
to $97m in four investments accounted for under the equity method, of which $43m had been spent at 30 June 2014. In addition, the Group has outstanding loan commitments to these equity investments of $27m at 30 June 2014. At 30 June 2014, the Group had
contingent liabilities of $46m (2013 31 December $nil; 30 June $2m), largely related to amendments to management agreement contractual obligations. In limited cases, the Group may provide performance guarantees to third-party hotel owners to secure
management contracts. The maximum unprovided exposure under such guarantees is $51m (2013 31 December $48m; 30 June $47m). In limited cases, the Group may guarantee bank loans made to facilitate third-party ownership of hotels in which the Group has an
equity interest and also a management contract. At 30 June 2014, there were guarantees of $20m in place (2013 31 December $20m; 30 June $20m). From time to time, the Group is subject to legal proceedings the ultimate outcome of each being always subject
to many uncertainties inherent in litigation. In particular, the Group is currently subject to class action law suits in the US. The Group has also given warranties in respect of the disposal of certain of its former subsidiaries. It is the view of the
Directors that, other than to the extent that liabilities have been provided for in these financial statements, it is not possible to quantify any loss to which these proceedings or claims under these warranties may give rise, however, as at the date of
reporting, the Group does not believe that the outcome of these matters will have a material effect on the Group's financial position.
INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP PLC
Introduction We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 which comprises the Group income statement, Group statement of comprehensive income, Group statement of changes in equity, Group statement of financial position, Group statement of cash flows and the related notes 1 to 12. We have read the other information contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) , 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our work, for this report, or for the conclusions we have formed. Directors' Responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with
IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of Review We conducted our review in accordance with
International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of half-yearly financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects,
in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. Ernst & Young LLP London 4 August 2014
This information is provided by RNS
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