Strong growth and scale efficiencies drive double-digit increase in profits
|Financial summary1||2012||2011||% Change YoY|
|Actual||CER3||CER & ex. LDs4|
|Adjsted basic EPS||141.5¢||130.4¢||9%|
|Total dividend per share||64.0¢||55.0¢||16%|
|Fee revenue5 growth||6.8%||5.7%|
|Net Rooms growth||2.7%||1.7%|
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
“2012 was another year of significant progress for IHG with our preferred brands driving RevPAR up 5.2%, led by the US up 6.3%. Together with 2.7% net rooms growth, which is fuelled increasingly by our expansion in developing markets, this drove up fee revenues by an impressive 6.8%. This growing scale allowed us to reinvest in the business while achieving better than anticipated margin progression.
The financing environment remained tough through 2012 in many of our key markets, but we still signed on average one hotel a day into our pipeline. This reflects the excellent relationship we enjoy with our owners and further strengthens our foundation for high quality growth. We extended our portfolio of preferred brands, launching in the first quarter of 2012 the innovative HUALUXE Hotels & Resorts and EVEN Hotels.
The $1bn return of capital, announced in August, underlines the benefit of our asset light strategy in delivering strong free cash flow, and our commitment to return value to shareholders.
IHG’s proven strategy and resilient business model position us for further good performance in 2013, despite the challenging economic environment. The 16% increase in our dividend demonstrates the confidence we have in our ability to deliver sustained high quality growth, as we prepare to celebrate our 10th anniversary as a standalone business.”
Driving High Quality Growth
Current Trading Update
1 All figures are before exceptional items unless otherwise noted. See appendices 3 & 4 for financial headlines
2 After exceptional items
3 CER = constant exchange rates
4 Excluding significant liquidated damages: $16m 2011, $3m 2012.
5 See appendix 6 for definition
Americas – Double-digit adjusted profit growth driven by RevPAR outperformance
RevPAR increased 6.1%, with 4.1% rate growth, and fourth quarter RevPAR increased 5.7%. US RevPAR was up 6.3% in 2012, with 6.2% growth in the fourth quarter, despite uncertainty regarding the presidential election and "fiscal cliff". On a total basis, including the benefit of new hotels, US RevPAR grew 7.0% in the year, outperforming the industry6, which was up 6.8%.
Revenue increased 1% to $837m and operating profit increased 8% to $486m. After adjusting for owned hotel disposals, liquidated damages receipts in the managed business of $3m in 2012 and $10m in 2011 and results from managed lease hotels5, revenue was up 6% and operating profit up 10%. This was predominantly driven by the franchise business, where royalties were up 9% due to 6.0% RevPAR growth and 2.3% net system size growth. Owned profits increased 41%, driven by double digit RevPAR growth at our InterContinental hotels in Boston and San Francisco and 4% RevPAR growth at InterContinental New York Barclay.
We opened 17k rooms, up 8% on 2011 on an underlying5 basis, including 6 Hotel Indigo hotels, and IHG's second InterContinental hotel in Mexico City. We signed 26k rooms, with the first EVEN hotel, a flagship property in Manhattan, New York City, signed in October. The Holiday Inn brand family accounted for c.70% of hotel openings and signings in the year, demonstrating the ongoing benefits of the re-launch.
Europe – Robust performance and strong pace of openings
RevPAR increased 1.7%, with 1.2% rate growth and fourth quarter RevPAR increased 1.2%. Despite challenging economic conditions across Europe, RevPAR during the year grew by 2.5% in the UK and by 5.4% in Germany, where the industry benefited from a busy trade fair schedule.
Revenue increased 8% (13% at CER) to $436m and operating profit increased 11% (16% at CER) to $115m. At CER and after adjusting for a leased hotel disposal and excluding results from managed lease hotels5, revenue increased 5% and operating profit increased 16%. This was driven by a 2.1% increase in net system size and solid RevPAR growth, including 8.0% at InterContinental London Park Lane and 2.5% at InterContinental Le Grand Paris, plus a $4m decrease in regional overheads.
We signed 7k rooms (48 hotels), up 22% on 2011, including the first 2 Holiday Inn Express hotels in Russia, 6 Holiday Inn brand family hotels in Germany and 7 Hotel Indigo hotels, with firsts for this brand in France, Israel and Spain. 5k rooms (39 hotels) were opened into the system, the highest number of hotel openings in the region in the last 4 years. Openings included InterContinental London Westminster, our second for the brand in London, and 5 Hotel Indigo hotels, doubling the system size in Europe for the brand.
AMEA – RevPAR growth and cost control drive good profit growth
RevPAR increased 4.9%, with 1.8% growth in the fourth quarter. Strong trading in South East Asia and Japan was offset by slowing economic growth in some other markets in 2012. In the Middle East, political tensions continue to impact trading in some countries such as Lebanon, but markets such as Saudi Arabia and the UAE have performed well, with RevPAR up 8.0% and 5.5% in the year, respectively.
AMEA revenue increased 1% (0% CER) to $218m and operating profit increased 5% (4% CER) to $88m. At CER and after adjusting for a $6m liquidated damages receipt and the related disposal in 2011 of a hotel and partnership interest in Australia, revenue increased 3% and operating profit increased 16%, benefiting from robust trading in the managed business and careful cost control.
We signed 8k rooms (36 hotels) in the region, of which 4k were Holiday Inn brand family rooms signed in India and Indonesia. We also signed 6 InterContinental hotels, including 2 resort locations in Australia and Thailand. We opened 4k rooms (16 hotels) in the year, including 4 Crowne Plaza hotels, 2 Crowne Plaza Resorts and the first Holiday Inn Express in India, in Ahmedabad. This hotel was opened by IHG and Duet India Hotels Group, and was awarded '2012 World's Leading New Mid-Market Hotel' by World Travel Awards.
Greater China – Increasing scale drives another year of double-digit profit growth
RevPAR increased 5.4% with rate growth of 3.1%. RevPAR was down 0.3% in the fourth quarter reflecting the ongoing industry-wide impact of the China-Japan territorial island dispute, the political leadership change and the broader economic slowdown across the region.
Revenue increased 12% (12% CER) to $230m, with fee growth5 of 16%, and operating profit was up 21% (22% CER) to $81m. This was driven by 19% profit growth in the managed business where RevPAR was up 5.6% and net rooms up 10% (following 14% rooms growth in 2011). InterContinental Hong Kong also had a strong year with 6.7% RevPAR growth and good cost control, driving owned operating profit up 22%.
We opened 8k rooms in the year, taking our system size in the region up 12% to 62k, our 7th consecutive year of double digit room growth. Openings included 8 Crowne Plaza hotels, 2 Hotel Indigo hotels and Holiday Inn Macau Cotai Central, which at 1,224 rooms is the largest Holiday Inn in the world. Signings of 13k rooms were up 11% on 2011, taking our pipeline to 51k rooms and affirming our market leading position. Signings included 15 HUALUXE hotels.
5See appendix 6 for definition
6 Source: Smith Travel Research
Uses of Cash
Interest, debt, tax and exceptional items
Change from Quarterly to Half Yearly Reporting
Appendix 1: RevPAR Movement Summary
|January 2013||Full Year 2012||Q4 2012|
Appendix 2: Full Year System & Pipeline Summary (rooms)
Appendix 3: Quarter 4 financial headlines
|Operating Profit $m||Total||Americas||Europe||AMEA||G.China||Central|
|Owned & leased||40||32||8||4||13||11||2||1||17||16||-||-|
|Profit pre central overheads||199||172||115||100||28||24||28||23||28||25||-||-|
|Group Operating profit||161||137||115||100||28||24||28||23||28||25||(38)||(35)|
Appendix 4: Full year financial headlines
|Operating Profit $m||Total||Americas||Europe||AMEA||G. China||Central|
|Owned & leased||125||108||24||17||50||49||6||5||45||37||-||-|
|Profit pre central overheads||770||706||486||451||115||104||88||84||81||67||-||-|
|Group Operating profit||614||559||486||451||115||104||88||84||81||67||(156)||(147)|
Appendix 5: Constant exchange rate (CER) operating profit movement before exceptional items
|GBP:USD||EUR:USD||* US dollar actual currency|
|2012||0.63||0.78||** Translated at constant 2011 exchange rates|
|2011||0.62||0.72||*** After central overheads|
Appendix 6: 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.
Fee revenue: Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages. Growth stated at CER.
Fee based margins: adjusted for owned and leased hotels, managed leases and individually significant liquidated damages payments.
Managed lease hotels: properties structured for legal reasons as operating leases but with the same characteristics as management contracts.
Underlying openings & signings: openings growth adjusted to exclude 5k US Army base rooms and 7k InterContinental Alliance rooms opened in 2011. Signings growth adjusted to exclude 5k US Army base rooms also signed in 2011.
Appendix 7: Investor Information for 2012 final dividend
|Ex-dividend date:||20 March 2013||Record date:||22 March 2013|
31 May 2013
Ordinary shares = 27.7 pence per share
ADRs = 43.0 cents per ADR
For further information, please contact:
Investor Relations (Catherine Dolton; Isabel Green):
+44 (0)1895 512176
Media Relations (Yasmin Diamond; Emma Corcoran):
+44 (0)1895 512426
High resolution images to accompany this announcement are available for the media to download free of charge from www.vismedia.co.uk. This includes profile shots of the key executives.
Presentation for Analysts and Shareholders:
A presentation with Richard Solomons, Chief Executive Officer and Tom Singer, Chief Financial Officer will commence at 9.30am UK time on 19 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 approximately 10.30am.
There will be a live audio webcast of the results presentation on the web address www.ihgplc.com/prelims13. 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 free:
+44 (0)20 3003 2666
0808 109 0700
+1 212 999 6659
A replay of the conference call will also be available following the event. To access this please dial the relevant number below and use the access number 5273706
+44 (0)20 8196 1998
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 19 February with Richard Solomons, Chief Executive Officer and Tom Singer, Chief Financial Officer. There will be an opportunity to ask questions.
US toll free:
+44 (0)20 3003 2666
+1 212 999 6659
+1 866 966 5335
A replay of the conference call will also be available following the event. To access this please dial the relevant number below and use the access number 8384211
+44 (0)20 8196 1998
The full release and supplementary data will be available on our website from 7.00 am (London time) on 19 February. The web address is www.ihgplc.com/prelims13. To watch a video of Tom Singer reviewing our results visit our YouTube channel at www.youtube.com/ihgplc.
Notes to Editors:
IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with 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 also manages Priority Club® Rewards, the world's first and largest hotel loyalty programme with over 71 million members worldwide.
IHG franchises, leases, manages or owns over 4,600 hotels and more than 675,000 guest rooms in nearly 100 countries and territories. With more than 1,000 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.
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.