*See appendix 5 for definition. All figures and movements unless otherwise noted are at actual exchange rates and before exceptional items. See appendix 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4. (% CER ) = growth in constant currency.
“We were deeply saddened to announce that Steve Porter, President of our Americas region, passed away after a short illness on 7 August 2008. Steve was an outstanding executive and a great colleague, and our thoughts are with his family. Our Group Finance Director Richard Solomons is now in place as interim President of the region, in addition to his current role.”
Commenting on the results and trading, Andrew Cosslett, Chief Executive said:
“IHG had a good first half, seeing growth in both revenue per available room and in the number of hotels we operate round the world. In the half we hit the target we set the business in 2005 of adding more than 60,000 rooms on a net basis by the end of 2008. This is a big milestone and we have passed it six months early. Growth looks set to continue as we have been signing two hotels a day into our development pipeline, which now stands at almost 1,800 hotels. The $1 billion relaunch of Holiday Inn is progressing well and early feedback from our franchisees and our guests is encouraging.
“Over the last three years we have worked hard to strengthen the foundations of the business through investment in our brands, technology, reservation systems, loyalty programme and our people. This investment not only drives our room growth, but helps us outperform during times of economic uncertainty. Generally RevPAR growth slowed through the second quarter, and market conditions have become more challenging, particularly in the US. However, the long term trends for the travel industry remain positive and our broad portfolio of brands and fee based business model positions us well to take full advantage of this.’
RevPAR increased 2.4% with a small drop in occupancy offset by strong rate growth. Growth moderated through the second quarter, although all IHG’s brands performed ahead of the industry in the US achieving RevPAR growth of 1.6%. Continuing revenues grew 8% to $477m. Excluding the $13m liquidated damages received in the first quarter and noted above, continuing revenues grew 5%.
Operating profit from continuing operations increased 10% to $242m. Excluding the $13m liquidated damages, continuing operating profit grew 4%. Continuing owned and leased hotel operating profit improved $3m to $19m, driven by strong RevPAR growth at the InterContinental hotels in New York, Boston and San Francisco. Managed hotel profit was $38m, flat year on year excluding the $13m liquidated damages. Revenue growth of 5% was offset by higher investment in operations support. Franchised hotel profit increased 3% to $215m, with 1.9% RevPAR growth and 4% net rooms growth partially offset by investment in resources behind more rigorous enforcement of quality standards.
RevPAR increased 8.1%, driven primarily by rate growth of 7.2%. RevPAR growth of 9.9% in the second quarter benefited from a strong performance in April due to the timing of Easter. The Middle East continued to perform well with RevPAR growth of 27.1%. RevPAR increased 4.0% in the UK and 7.1% in Continental Europe, with increases of 9.1% in France and 8.0% in Germany. Continuing revenues grew 25% (16% CER) to $271m, driven by 35% growth (27% CER) in managed and franchised revenues. Excluding $9m liquidated damages received in the second quarter and noted above, continuing revenues grew 21% (12% CER).
Operating profit from continuing operations increased 85% (71% CER) to $89m. Excluding the $9m liquidated damages, continuing operating profit grew 67% (54% CER). Continuing owned and leased hotel operating profit improved $16m to $19m, primarily due to the increased contribution from the InterContinental London Park Lane which fully reopened in June 2007 after refurbishment. Excluding the $9m liquidated damages, managed hotel profit increased 24% (18% CER) driven by strong growth in the Middle East. Franchised hotel profit increased $8m to $35m reflecting 6.5% RevPAR growth and 9% net rooms growth.
RevPAR increased 5.2%, driven by rate. Greater China RevPAR grew 1.7%, slowing from 3.2% in the first quarter to 0.5% in the second mainly due to the impact of the Sichuan earthquake and the introduction of international visa restrictions. Continuing revenues grew 18% to $141m, driven by 15% growth in owned and leased revenues and 27% growth in managed revenues.
Operating profit from continuing operations grew 7% to $29m. Owned and leased hotel operating profit increased 33% to $20m driven by 15.2% RevPAR growth at the InterContinental Hong Kong, after completion of its multi year refurbishment at the end of 2007. Managed hotel profit grew $7m to $26m driven by 5.1% RevPAR growth, an increased contribution from the joint venture with All Nippon Airways (ANA) and continued room expansion in Southern Asia and Greater China.
IHG continues to demonstrate the strength of its revenue delivery to hotel owners through its reservation channels and loyalty programme, Priority Club Rewards:
Regional overheads in the Americas and EMEA were broadly flat. $9m was invested in Asia Pacific’s regional overheads to support the rapid growth in that region, including $4m committed at the time of the ANA joint venture to support the launch of the ANA Crowne Plaza brand in Japan. Central overheads increased by $1m to $76m.
The interest charge for the period increased from $23m to $55m, driven by higher bank borrowings following the return of funds to shareholders in June last year.
The effective tax rate for the first half of 2008 was 28%; the underlying rate before the impact of prior year items was 37%. As previously disclosed the effective tax rate in 2008 is expected to be in the mid to high 20s but will trend upwards over time. As previously announced IHG will make a non-recurring revenue investment of $60m to accelerate implementation of the global relaunch of the Holiday Inn brands, which will be treated as an exceptional item. $9m has been charged in the first half.
$288m of cash was generated from operating activities in the first half, up $156m on 2007. In addition $28m of cash flow was generated from disposals including the sale of IHG’s 17% stake in the Crowne Plaza Amsterdam City Centre for $20m.
Capital expenditure of $38m was $69m below 2007 levels. 9.2m shares were repurchased under IHG’s buyback programme during the first half, at a cost of $139m, leaving $60m of the current programme to be completed (representing £30m of the £150m announced buyback program).
IHG’s net debt at the end of the first half was $1,623m, slightly below the start of the year, including the $201m finance lease on the InterContinental Boston. Net debt now stands at 2.4x earnings before exceptional items, interest, tax, depreciation and amortisation.
In the second quarter IHG successfully refinanced $2.1bn of long term debt facilities. The new syndicated bank facility consists of two tranches, a $1.6bn 5 year revolving credit facility and a $0.5bn term loan with a 30 month maturity. Terms are broadly unchanged from the previous facility.
|Number of owned hotels||Proceeds||Net book value|
|Disposed since April 2003||182||$5.5bn||$5.2bn|
For a full list please visit www.ihg.com/Investors
|Six months to 30 June $m||Total||Americas||EMEA||Asia Pacific||Central|
|Franchised operating profit||253||240||215||209||35||27||3||4||–||–|
|Managed operating profit||120||82||38||25||56||38||26||19||–||–|
|Continuing owned and leased operating profit||58||34||19||16||19||3||20||15||–||–|
|Continuing operating profit pre regional overheads||431||356||272||250||110||68||49||38||-||-|
|Continuing operating profit pre central overheads||360||295||242||220||89||48||29||27||–||–|
|Continuing operating profit||284||220||242||220||89||48||29||27||(76)||(75)|
|Discontinued owned and leased operating profit||7||8||7||9||0||(1)||–||–||–||–|
|Total operating profit||291||228||249||229||89||47||29||27||(76)||(75)|
|Actual currency*||Constant currency**||Actual currency*||Constant currency**||Actual currency*||Constant currency**||Actual currency*||Constant currency**|
Total gross revenue is defined as 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.
|Ex-dividend Date:||27 August 2008|
|Record Date:||29 August 2008|
|Payment Date:||3 October 2008|
|Dividend payment:||Ordinary shares 6.4p per share: ADRs 12.2c per ADR|
Investor Relations (Heather Wood; Catherine Dolton):
+44 (0) 1895 512 176
Media Affairs (Leslie McGibbon; Emma Corcoran):
+44 (0) 1895 512 425
+44 (0) 7808 094 471
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.
A presentation with Andrew Cosslett (Chief Executive) and Paul Edgecliffe-Johnson (Senior Vice President, Global Corporate Finance) will commence at 9.30am (London time) on 12 August at JPMorgan Cazenove, 20 Moorgate, London, EC2R 6DA. There will be an opportunity to ask questions. The presentation will conclude at approximately 10.30am (London time).
There will be a live audio webcast of the results presentation on the web address www.ihg.com/interim08. 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
|International dial-in||+44 (0)203 037 9090|
There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 12 August with Andrew Cosslett (Chief Executive) and Paul Edgecliffe-Johnson, (Senior Vice President, Global Corporate Finance). There will be an opportunity to ask questions.
|International dial-in||+44 (0)20 7019 0812|
|US free call||877 818 6787|
A recording of the conference call will also be available for 7 days. To access this please dial the relevant number below and use the access number 1662.
|International dial-in||+44 (0)20 7970 8263|
|US Toll Free||877 274 0695|
The full release and supplementary data will be available on our website from 7.00 am (London time) on Tuesday 12 August. The web address is www.ihg.com/interim08
InterContinental Hotels Group (IHG) [LON:IHG, NYSE:IHG (ADRs)] is one of the world’s largest hotel groups by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, over 4,000 hotels and more than 590,000 guest rooms in nearly 100 countries and territories around the world. The Group owns a portfolio of well recognised and respected hotel brands including InterContinental® Hotels & Resorts, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites®, Candlewood Suites® and Hotel Indigo®, and also manages the world's largest hotel loyalty programme, Priority Club® Rewards with over 39 million members worldwide.
IHG has more than 1,700 hotels in its development pipeline, which will create 150,000 jobs worldwide 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.
IHG offers information and online reservations for all its hotel brands at www.ihg.com and information for the Priority Club Rewards programme at www.priorityclub.com. For the latest news from IHG, visit our online Press Office at www.ihg.com/media.
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.