Leases

12 Months Ended

Dec. 31, 2019

Presentation of leases for lessee [abstract]

15. Leases

Right-of-use

assets


	Property $m			Other $m			Total $m
Cost
At 1 January 2018		740			10			750

Additions and other re-measurements		19			1			20

Acquisition of businesses (note 11)		51			—			51

Terminations		(8	)		(6	)		(14	)

Exchange and other adjustments		(10	)		—			(10	)

At 31 December 2018		792			5			797

Additions and other re-measurements		39			1			40

Acquisition of businesses (note 11)		25			—			25
Transfers to assets classified as held for sale (note 12)		(23	)		—			(23	)

Terminations		(15	)		(1	)		(16	)

Exchange and other adjustments		4			—			4

At 31 December 2019		822			5			827

Depreciation and impairment

At 1 January 2018		(257	)		(7	)		(264	)

Provided		(34	)		(1	)		(35	)

System Fund expense		(4	)		—			(4	)

Terminations		8			6			14

Exchange and other adjustments		5			—			5

At 31 December 2018		(282	)		(2	)		(284	)

Provided		(37	)		(1	)		(38	)

System Fund expense		(5	)		—			(5	)
Impairment charge		(32	)		—			(32	)
Transfers to assets classified as held for sale (note 12)		8			—			8

Terminations		14			1			15

Exchange and other adjustments		(1	)		—			(1	)

At 31 December 2019		(335	)		(2	)		(337	)

Net book value

At 31 December 2019		487			3			490

At 31 December 2018		510			3			513

At 1 January 2018		483			3			486

The Group’s leased assets mainly comprise hotels and offices. Leases contain a wide range of different terms and conditions. The term of property leases ranges from

1-99

years. The weighted average lease term remaining on the Group’s

ten leases (which comprise 91% of the

right-of-use

asset net book value

) is 42 years.

Many of the Group’s property leases contain extension or early termination options, which are used for operational flexibility. Two of the Group’s top

ten

leases contain material extension options which are not included in the calculation of the lease asset and liability

as neither

of these extensions would take effect before 2031. The value of the undiscounted rental payments relating to these two leases and not included in the value of the lease asset and liability

$525m.

Lease liabilities

Total lease liabilities are analysed as follows:


Denominated in the following currencies:	2019 $m		2018 $m
US d ollars		514		528

Sterling		52		61

Euros		43		29

Other		51		52

		660		670
Analysed as:
Current		65		55
Non-current		595		615
		660		670

Amounts recognised in profit or loss

The following amounts were recognised as expense/(income) in the year:


	2019 $m			2018 $m			2017 $m
Depreciation of right-of-use assets		38			35			34

System Fund depreciation of right-of-use assets		5			4			5

Expense relating to variable lease payments		58			48			30
Expense relating to short-term leases and low-value assets		3			3			2

Income from sub-leasing right-of-use assets		(2	)		(2	)		(2	)

Impairment charge		32			—			—
Recognised in operating profit		134			88			69
Interest on lease liabilities		41			39			39
Total recognised in the Group income statement		175			127			108

Amounts recognised in the

Group

statement of cash flows

As restated for IFRS 16, total cash paid during the year relating to leases

of $159m (2018: $132m, 2017: $87m) comprises $100m (2018: $97m, 2017: $62m) paid in respect of operating activities and $59m (2018: $35m

2017: $25m

) paid in respect of financing activities.

Variable lease payments

Variable lease payments are payable under certain of the Group’s hotel leases and arise where the Group is committed to making additional lease payments that are contingent on the performance of the hotels

The UK portfolio and two German hotel leases include variable lease payments where rentals are linked to the performance of the hotels by way of reductions in rentals in the event that lower than target cash flows are generated by the hotels. In the event that rent reductions are not applicable, the Group’s exposure to this type of rental payment in excess of amounts reflected in the measurement of lease liabilities is as follows:

•

UK portfolio: £46m per annum over the remaining lease term of 24 years,

•

German hotels: €16m per annum over the next

six

years and €10m per annum

for

the next 24 years

thereafter

Additional rentals, which are uncapped, are also payable in respect of these hotels and are calculated as a percentage of the profit earned by the hotels.

The UK and German leases also contain guarantees that the Group will fund any shortfalls in lease payments up to annual and cumulative caps. There are a limited number of options for the Group to top up the guaranteed amount in the event the guarantee is utilised beyond a certain level. Although there are scenarios in which rent reductions would apply such that no rent would be payable, management consider the likelihood of these occurring to be remote. As such, the cumulative guaranteed amount is judged to be an

‘in-substance

fixed’ lease payment and therefore recognised as a

right-of-use

asset and corresponding lease liability. The

right-of-use

asset is depreciated over the lease term and the lease liability is reduced by the amount of rental payments under the guarantee. During the year, total depreciation of $3m (2018: $2m

, 2017: $1m) was

charged to the income statement and total lease payments of $26m (2018: $3m) were charged against the lease liability.

The

right-of-use

asset relating to the UK portfolio was impaired

by $32m

during the year (see note 13) and rental payments

of $17m (2018: $3m)

were charged against the lease liability in respect of this portfolio.

Exposure to future cash outflows

At 31 December 2019, the Group was

committed

to future cash outflows of $

3m (2018: $1m) relating to leases that have not yet commenced. These will be

recorded as a

lease liability when the lease

assets are available for use by the Group.

The maturity analysis of lease liabilities

disclosed in

ote 24.

The undiscounted future cash flows receivable from

sub-leased

properties amount to $3m

(

2018:

3m, 2017: $4m

)