InterContinental Hotels Group PLC PLC Group Hotels InterContinental Broadwater Park Denham, Buckinghamshire, UB9 5HR Telephone +44 (0) 1895 512 000 Fax +44 (0) 1895 512 101 Annual Report and Financial Statements 2008 Annual Report and Financial Statements Holiday Inn Hotel & Suites Oakland-Airport, California, USA ™ make a booking at www.ihg.com Great Hotels Guests Love IHG Annual Report and Financial Statements 2008 Investor information and Financial calendar 105 Highlights Financial calendar 2008 Payment of interim dividend of 6.4p per share (12.2 cents per ADR) 3 October Financial year end 31 December 2009 Preliminary announcement of annual results 17 February Final dividend of 20.2p per share (29.2 cents per ADR): Ex-dividend date 25 March Record date 27 March Record net room additions Total gross revenue‡ from † Total system room revenue Announcement of first quarter results 12 May all hotels in IHG system divided by the number Annual General Meeting 29 May up 20% at 34,757 rooms of room nights available. Final dividend of 20.2p per share (29.2 cents per ADR): Payment date 5 June ‡ Total room revenue from Announcement of interim results 11 August up 7% to $19.1bn franchised hotels and total Interim dividend: Payment date October Total hotels open under hotel revenue from managed, owned and leased hotels (not Announcement of third quarter results 10 November IHG brands Continuing revenue revenue attributable to IHG, Financial year end 31 December as it is derived mainly from up 6% to 4,186 hotels up 5% to $1,854mº hotels owned by third parties). 2010 * Operating profit before Preliminary announcement of annual results February exceptional items. Signings Continuing operating profit* º Includes the benefit of four significant liquidated damages receipts totalling $33m. of 98,886 rooms, to $535mº up 13% (No such individually Registered office Registrar ADR depositary Designed and produced 693 hotels significant receipts in 2007). Broadwater Park Equiniti JPMorgan Chase & Co by Likemind § The Group’s reporting currency Denham Aspect House PO Box 64504 www.likemindgroup.com taking development pipeline Adjusted continuing earnings changed from sterling to Buckinghamshire Spencer Road St. Paul per share US dollars in 2008. Dividends Printed by UB9 5HR Lancing MN 55164-0504 to 245,085 rooms, are now determined in Royle Print 1,775 hotels to 117.8¢ US dollars and converted Telephone +44 (0) 1895 512 000 West Sussex USA up 26% into sterling immediately BN99 6DA Fax +44 (0) 1895 512 101 Telephone (800) 990 1135 before announcement. Telephone 0871 384 2132*† (US callers – toll free) This Report is printed The sterling final dividend www.ihg.com on 9lives 80 Silk which Revenue per available room† Final dividend maintained (UK callers) +1 651 453 2128 equivalent is 20.2p per share. For general information about is made up of 60% FSC +44 121 415 7034 (non-US callers) § the Group’s business please post-consumer recycled (non-UK callers) up 0.9% at 29.2¢ contact the Corporate Affairs Email: fibre, 20% pre-consumer department at the above www.shareview.co.uk [email protected] recycled fibre and 20% address. For all other enquiries www.adr.com FSC virgin fibre from *For those with hearing difficulties please contact the Company a text phone is available on Stockbrokers FSC managed forests. Secretariat at the above 0871 384 2255† for UK callers Our printer is also FSC address or email with compatible equipment. JPMorgan Cazenove Limited and Carbon Neutral † [email protected] Telephone calls to these numbers Bank of America Merrill Lynch are currently charged at 8p per accredited. minute if using a BT landline. Other telephone service providers Auditors may charge different rates. Ernst & Young LLP Investment bankers Citi JPMorgan Cazenove Limited Bank of America Merrill Lynch Caught on camera Front cover photography: USEFUL INFORMATION Solicitors This year we asked our employees to Left: Photo by Centre: Photo by Right: Launch of the take their own pictures and capture Iñaki Armada, taken Amy Valentine, taken ANA Crowne Plaza Linklaters LLP what Great Hotels Guests Love at Holiday Inn Express at Holiday Inn Express Sleep Advantage Getafe, Madrid, Spain Salt Lake City, Utah, USA programme in means to them. Our front cover “The beds are so “The hands forming a Osaka, Japan For further investor features some of these. comfortable that heart around the hotel information visit some days you just sign represent the people don’t want to get out.” that make Holiday Inn www.ihg.com/investors Express a great hotel guests love.” 1 OVERVIEW OVERVIEW 1 OVERVIEW Welcome to IHG 2 Chairman’s statement 3 Chief Executive’s review 4 The IHG brands BUSINESS REVIEW BUSINESS BUSINESS REVIEW BUSINESS Great Hotels Guests Love is a guide 5 BUSINESS REVIEW to our actions and our way of doing 6 Business overview business. It puts our guests at the 8 Strategy heart of everything we do. 10 Group performance 12 Regional performance 2008 was a challenging but good year 18 Other financial information for IHG. This Report presents a full 20 Our people review of our business endeavours 23 Corporate responsibility 25 Managing risk over the last year and our approach THEIR RESPONSIBILITIES AND MANAGEMENT SENIOR THE BOARD, 29 THE BOARD, SENIOR MANAGEMENT to the future. AND THEIR RESPONSIBILITIES 30 The Board of Directors 31 Other members of the Executive Committee 32 Directors’ report 35 Corporate governance 39 Audit Committee report 40 Remuneration report STATEMENTS GROUP FINANCIAL STATEMENTS GROUP FINANCIAL 49 GROUP FINANCIAL STATEMENTS 50 Statements of Directors’ responsibilities 51 Independent auditor’s report to the members 52 Group income statement 53 Group statement of recognised income and expense 54 Group cash flow statement 55 Group balance sheet 56 Accounting policies 61 Notes to the Group financial statements FINANCIAL STATEMENTS COMPANY PARENT FINANCIAL STATEMENTS COMPANY PARENT 95 PARENT COMPANY FINANCIAL STATEMENTS 96 Parent company balance sheet 97 Notes to the parent company financial statements 99 Statement of Directors’ responsibilities 100 Independent auditor’s report to the members USEFUL INFORMATION USEFUL INFORMATION 101 USEFUL INFORMATION 102 Glossary 103 Shareholder profiles and Forward-looking statements 104 Investor information 105 Financial calendar and Contacts 2IHGAnnual Report and Financial Statements 2008 Chairman’s statement Dear shareholder “2008 was a good PERFORMANCE year for IHG. Our continuing revenue increased 5 per cent to $1.9 billion, with continuing operating profit before exceptional items of $535 million, up 13 per cent. Adjusted continuing We grew both earnings per share increased 26 per cent from 93.8 cents to 117.8 cents. We had a sales and profits,* $132 million exceptional charge in the year. This consisted of $35 million in relation outperforming the to the Holiday Inn relaunch; $19 million of cost savings-related severance charges; industry in all our $96 million of non-cash asset impairments, reflecting the poorer trading environment expected in 2009; and other items including gains on asset sales, which netted to an major markets, $18 million credit. and we have The Board is recommending that the final dividend for 2008 is maintained at 29.2 cents been preparing per share, taking the full-year dividend to 41.4 cents per share, up 2 per cent on 2007. the business This converts to a sterling full-year dividend of 26.6 pence, up 29 per cent over 2007. for a tougher REPORTING CURRENCY environment We changed the reporting currency of our Group accounts from sterling to US dollars in 2009.” with our 2008 half-year results. This means we can reflect better the Group’s profile of revenues and operating profits which are largely US dollar-based. Dividends are now determined in US dollars and converted into sterling immediately before announcement. BOARD AND EXECUTIVE COMMITTEE Stevan Porter 1954–2008 We were all deeply saddened by the loss of Steve Porter, a Board member and President of the Americas, who passed away in August 2008 after a short illness. Under Steve’s inspired leadership the Americas region has been established as a dominant force. He is greatly missed. We must thank Richard Solomons, Finance Director, for taking on the additional role of leading the Americas region when Steve became seriously ill in July. Richard did an outstanding job, ensuring a smooth transition to Jim Abrahamson, who was appointed as our new President of the Americas in January this year. Jim joined IHG from Global Hyatt Corporation, where he was Head of Development, The Americas. Two of our Non-Executive Directors, Sir David Prosser and Robert Larson, retired from the Board in May and December 2008, respectively. I thank them for their excellent service and contribution. George Turner became Company Secretary in January 2009, taking over from Richard Winter who retires in April 2009. I thank Richard for his service over the past 15 years and wish him well for the future. FINANCIAL POSITION AND SHAREHOLDER RETURNS We continue with our prudent approach to managing our balance sheet. We successfully refinanced our debt facilities in May 2008, and have lowered our overall net debt position by $400 million to $1.3 billion. During the year, we continued with our existing share buyback programme, taking the total funds returned since March 2004 to more than £3.5 billion. We have deferred the remaining £30 million of the buyback programme in order to preserve cash and maintain the strength of our balance sheet. OUTLOOK Our solid performance in 2008 can be attributed to the exceptional efforts of all our people. Trading will undoubtedly be tough in 2009, but our strong balance sheet, resilient business model, great brands and excellent management team, led by Andy Cosslett, give me continued confidence in the future for the Group.