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Full Year Results to 31 December 2005


  • Transformation to a managed and franchised business nearing completion. IHG now delivers more stable earnings and has a clear growth focus.
  • Continuing(1) operating profit(2) up 42% from £134m to £190m with operating profit margin up 4%pts. Group operating profit £317m, up £20m.
  • Adjusted earnings per share from continuing business up 44% from 17.3p to 24.9p. Group basic earnings per share up 77% from 53.9p to 95.2p driven by profit on disposal of operations.
  • Final dividend up 7% from 10.0p to 10.7p, total normal dividend up 7% from 14.3p to 15.3p.
  • 9.0% RevPAR growth across IHG’s 3,600 hotels, mostly rate driven with strongest trading in the Americas.
  • 70,000 rooms signed, up 57% over 2004. Pipeline is the industry’s largest at 108,500 rooms, 20% of existing room count. Room count up 3,300 to 537,500 rooms; 11,800 net rooms added, before South African franchise exits and closure of hurricane damaged properties.
  • Following disposal of Britvic (£371m) and FelCor shares ($191m) IHG announces a further £500m special dividend with a share consolidation to be paid during quarter two 2006.

A reconciliation between basic and adjusted earnings per share is shown in note 8. All figures and movements are shown before special items except for group basic earnings per share and group operating profit reported above.

1 – Continuing business excludes Britvic and hotel assets sold or held for sale at 31 December 2005.
2 – See appendix 3 for analysis of financial headlines.

Commenting on the results, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:

“This is a strong set of results with a solid performance across all three of our regions. 2005 was a year of significant change for IHG and a number of key strategic milestones were met. We executed on our asset disposal programme and successfully floated Britvic, to become a pure play, high growth hotel company, managing and franchising hotels using our attractive stable of brands. The record number of hotels we currently have under development gives us confidence we can grow this business and achieve our rooms target as we look to the years ahead."

Current trading

RevPAR continues to increase across the business. InterContinental London's refurbishment will impact EMEA results again this year. Further progress made towards the room growth target, with 11,100 rooms signed so far this year, including almost 6,000 rooms in China with two important new partners.

For further information, please contact:

Investor Relations (Gavin Flynn/Paul Edgecliffe-Johnson):
+44 (0) 1753 410 176
+44 (0) 7808 098 972

Media Affairs (Leslie McGibbon):
+44 (0) 1753 410 425
+44 (0) 7808 094 471

Business transformation

  • IHG has now sold 126 owned and leased hotels while retaining management and franchise contracts. A further 18 hotels have been sold and have left the system. Sales have raised £2.3bn total proceeds, above net asset value in aggregate.
  • Seven InterContinental hotels in Europe placed on the market in January 2006; early interest has been good.
  • Successful restructuring of the management agreement with FelCor. This new agreement extends the terms of IHG’s contracts and rebases incentive fee payments. FelCor will invest capital into key hotels to drive value for both parties. IHG’s stake in FelCor has been sold since year end, generating proceeds of $191m (£110m).
  • 100% of IHG’s Britvic shares were sold via IPO in December 2005; total proceeds, including additional dividends, of £371m.
  • IHG has now returned nearly £2bn to shareholders since Separation in April 2003, with £1.2bn returned in 2005. A further £289m is still to be returned via IHG’s ongoing share buyback programme.
  • Further £500m special dividend with share consolidation, payable quarter two 2006, raises total committed returns to £2.75bn.

Increase in pipeline of signed deals and rooms open

IHG continues to increase its pipeline, up 25,600 to 108,500 rooms, a 31% increase on 2004. This gives IHG confidence that the target of 50,000-60,000 net organic room additions by the end of 2008 will be achieved.

Room Signings 70,000   
  • Signings increased 57% from 44,600 rooms last year.
Americas 49,800 +55%  
  • The Americas region signed a record number of rooms.
EMEA 9,400 +38%  
  • In EMEA significant agreements were signed with QMH (2,200 rooms) and Stardon (602 rooms).
Asia Pacific 10,800 +89%  
  • Asia Pacific signings include 7,300 rooms (20 hotels) in Greater China which brings the China pipeline to 12,900 rooms (38 hotels).
  • 27,000 rooms were signed in quarter four 2005, almost as many as in the whole of 2002.

IHG’s room count grew in the year:

Room count 537,500  
  • Room count increased by 3,300 rooms; 11,800 net rooms added excluding South African franchise exits, and removal of properties destroyed by hurricanes.
Openings 34,900  
  • Seven new InterContinental hotels and 24 Crowne Plaza hotels opened, further increasing the distribution of IHG’s upscale brands. 17,800 room openings were new build.
Removals 31,600  
  • 21,800 of the removals were in the Americas, of which 2,100 related to hurricane damage.
  • 7,900 rooms exited in EMEA, 6,300 of which were related to the termination of IHG’s South African master franchise.
  • 60% of the removals excluding South African master franchise, hurricane damaged and disposal without flag exits were at IHG’s instigation.

Strengthening operating system

IHG continues to demonstrate the strength of its revenue delivery to hotel owners through its reservation channels and loyalty programme, Priority Club Rewards.

  • $4.8bn of rooms revenue booked through IHG’s reservation channels (41% of total rooms revenue, up from 38% in 2004).
  • $3.8bn of rooms revenue generated from Priority Club Rewards members (32% of total rooms revenue, up from 30% in 2004).
  • Internet revenues increased from 13% to over 14% of total rooms revenue; 86% from IHG’s own websites (2004: 81%).

Continued expansion of reservations systems and Priority Club Rewards programme in the year:

  • Reservation websites in Arabic and Hebrew were launched, bringing to 9 the number of languages offered to guests.
  • MACRO, IHG’s voice reservation clustering service which drives cross selling within the IHG system and lowers hotel operating costs, expanded to 13 markets covering over 200 hotels. This service is expected to expand significantly during 2006.
  • Priority Club Rewards continued to lead the industry with the launch of the innovative “Any Hotel, Anywhere” programme.

Brand highlights

IHG has commissioned major global consumer and brand positioning research, which will focus on all brands and major markets.

  • 46,300 rooms open (137 hotels), an increase of 1,700 rooms (5 hotels) in the year; global RevPAR growth of 7.7%.

    A major new global advertising campaign was launched for the InterContinental brand, based on refined customer targeting and positioning. Enhanced and more globally consistent brand attributes will be added to the brand to reinforce its positioning and differentiation. Early results show increased brand awareness particularly from upscale frequent travellers.
Crowne Plaza  
  • 65,400 rooms open (235 hotels); global RevPAR growth of 8.2%.
Holiday Inn  
  • 267,800 rooms open (1,435 hotels); global RevPAR growth of 8.5%.

    Holiday Inn in the US launched the “People Notice” employee training programme which encourages all staff to treat guests as they would a visitor to their own homes, and testing of self service check-in kiosks (eHost).
Holiday Inn Express  
  • 133,600 rooms open (1,590 hotels); global RevPAR growth of 9.8%.

    Holiday Inn Express in the US launched new bedding and shower initiatives and moved the franchise royalty rate for new signings and renewals to 6% from 5%.
Staybridge Suites  
  • 9,900 rooms open (87 hotels); RevPAR growth of 9.5%.

    Staybridge continues to gain momentum with the 100th unit under construction.
Candlewood Suites  
  • 12,700 rooms open (112 hotels); RevPAR growth of 12.0%.
Hotel indigo  
  • 500 rooms open (3 hotels) with a further 8 hotels in the pipeline, 7 of which were signed in 2005.

    A new build design concept has been launched and a distinctive positioning is being developed in the market.

Americas: strong performance across the business

All IHG brands grew RevPAR in the Americas, with successful brand innovations which resonated with guests and owners.

Revenue performance
RevPAR increased 10.5% in the year, with all brands performing well. Rate growth generated most of this increase. InterContinental in the US performed particularly well with 12.6% RevPAR growth, outperforming its market segment. US Holiday Inn showed 9.2% RevPAR growth, also outperforming its market segment. Extended stay brands Staybridge Suites and Candlewood Suites performed well throughout the year with RevPAR growth of 9.5% and 12.0% respectively.

Operating profit performance
Operating profit from continuing operations increased by 25% from $273m to $342m in the year. Continuing owned and leased operating profit grew from $7m to $28m, driven by excellent performance at the InterContinental New York and InterContinental Buckhead, Atlanta. Managed operating profit was up from $12m to $36m, driven by new management contracts and improved trading in the existing estate. Franchised operating profit was up 12% from $304m to $340m, driven by RevPAR increases and a $4m increase in fees from franchise sales. Investments in development headcount and technology led to an increase in regional overheads. Although the industry experienced one of the most extreme hurricane seasons, the financial impact to IHG was broadly neutral.

EMEA: maintained outperformance in UK market

In 2005 EMEA achieved solid revenue growth in the continuing business despite varying market conditions and terrorist activity.

Revenue performance
RevPAR increased 5.6% in the year, but with considerable variances in performance across geographic markets. Holiday Inn UK RevPAR was up 4.6%, continuing its market outperformance. London properties realised positive RevPAR growth despite the terrorist attacks in the second half. RevPAR in France grew by 5.6% led by improving performance at InterContinental Paris Le Grand which has seen an increasing number of guests arriving from the US. RevPAR performance in Germany was flat, although the second half saw modest growth. The Middle East continued its strong performance with RevPAR up 18.7%.

Operating profit performance
Operating profit from continuing operations increased 96% in the year from £24m to £47m. Continuing owned and leased operating profit was up from £2m to £11m, driven by improvement in key European hotels including the InterContinental Paris Le Grand, cost savings from business restructuring following completion of the sale of the UK portfolio, and the impact of refurbishment at the InterContinental London, which reduced profit by £13m in the year. Managed operating profit was up 29% from £24m to £31m, largely as a result of strong performance in the Middle East and retaining management contracts on assets disposed. Excluding these contracts and prior year liquidated damages managed profit was up 15%. Franchised operating profit at £26m was broadly flat when adjusted for £7m of liquidated damages received in the first half on termination of IHG’s South African master franchise agreement. The regional overhead reduced by £2m to £21m.

Asia Pacific: continued strong growth

InterContinental, Crowne Plaza and Holiday Inn performed well with the number of hotels in the region increasing by 13 in the year. Express by Holiday Inn was introduced into China further increasing IHG’s brand offer to owners.

Revenue performance
RevPAR increased 6.1% in the year. Greater China RevPAR increased 13.5%, driven by rate increases as strong demand for IHG brands continues. Australia and New Zealand had another good year with RevPAR increasing 8.8% also mainly rate driven.

Operating profit performance
Operating profit from continuing operations was up 27% from $30m to $38m. Continuing owned and leased operating profit grew by 12% from $17m to $19m due to increased profit at the InterContinental Hong Kong despite 60% of rooms under refurbishment in quarter three. Managed hotels operating profit increased by 16% from $25m to $29m in the year through robust trading, particularly in China after investment in expanding direct management resources and infrastructure to support growth there. The regional overhead remained flat at $15m.

Group financials

Continuing business operating profit grew by 42%.

  • Operating profit margin on the continuing business increased by 4%pts to 22% driven by margin improvement across each line of business and continued control of costs.
  • Total hotels overheads were flat year on year after adjusting for inflation. Central costs increased by £8m reflecting the full year IFRS impact of share scheme costs, increased governance costs and further investment to support development. In 2006 central and regional costs are expected to increase modestly ahead of inflation at constant exchange rates, after investment in key strategic priorities.
  • The effective tax rate excluding special items for 2005 was 29%.
  • Hotels capital expenditure was £136m in the year. Maintenance capital excluding significant refurbishment spend was £56m. Capital expenditure requirements for 2006 are expected to be no more than £180m. The InterContinental Boston, which is due to open later this year, will result in a charge for pre-opening costs of approximately $3m to Americas operating profit in the year as well as a finance lease interest charge of approximately £4m for the second half of 2006.
  • At the year end net debt was £88m following receipt of Britvic proceeds in December. The interest charge for the year was £33m, £9m of which relates to Britvic.

Appendix 1: Asset disposal programme detail

  Number of hotels Proceeds Net book value
Disposed to date* 144 £2.3bn £2.2bn
On the market 7 on the market
24 held for sale
- £600m
Remaining hotels 22 - £900m

* Holiday Inn Dijon sold since date of last announcement

For a full list please visit

Appendix 2: Return of funds programme

  Timing Total return Returned to date Still to be returned
£501m special dividend Paid December 2004 £501m £501m Nil
First £250m share buyback Completed in 2004 £250m £250m Nil
Second £250m share buyback Ongoing £250m £211m £39m
£996m capital return Paid 8 July 2005 £996m £996m Nil
Third £250m share buyback Yet to commence £250m - £250m
£500m special dividend Second quarter 2006 £500m - £500m
Total   £2.75bn £1.95bn £0.79bn

Appendix 3: Financial headlines

Full Year £m Total Americas EMEA Asia Pacific Central
2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
Franchised operating profit 214 190 186 167 26 21 2 2 - -
Managed operating profit 67 44 20 6 31 24 16 14 - -
Continuing owned and leased operating profit 37 15 15 4 11 2 11 9 - -
Regional overheads (63) (58) (34) (27) (21) (23) (8) (8) - -
Continuing hotels operating profit pre central overheads 255 191 187 150 47 24 21 17 - -
Central overheads (65) (57) - - - - - - (65) (57)
Continuing hotels operating profit 190 134 187 150 47 24 21 17 (65) (57)
Discontinued owned and leased operating profit 79 135 11 23 57 105 11 7 - -
Total Hotels operating profit 269 269 198 173 104 129 32 24 (65) (57)
Soft drinks operating profit 70 77                
Group operating profit pre special items 339 346                
Special items (22) (49)                
Group operating profit post special items 317 297                

Appendix 4: Investor information for 2005 final dividend

Ex-dividend date: 29 March 2006
Record date: 31 March 2006
Payment date: 5 June 2006
Dividend payment: Ordinary shares 10.7p per share
ADR’s 18.7c per ADR

Presentation for Analysts and Shareholders

A presentation with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 9.00 am (London time) on 2 March at Crowne Plaza London – The City. There will be an opportunity to ask questions. The presentation will conclude at approximately 10.00 am (London time).

There will be a live audio webcast of the results presentation on the web address 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)1452 556 609

US conference call

There will also be a conference call, primarily for US investors and analysts, at 9.30 am (Eastern Standard Time) on 2 March with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director). There will be an opportunity to ask questions. To access this please dial the relevant number below and use the access number 5267129.

International dial-in +44 (0) 1452 542 300
US Toll Free 1866 220 1452

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 5267129 #.

International dial-in +44 (0) 1452 550 000
US Toll Free 1866 247 4222

Note to Editors:

InterContinental Hotels Group PLC of the United Kingdom [LON:IHG, NYSE:IHG (ADRs)] is the world's largest hotel group by number of rooms. InterContinental Hotels Group owns, manages, leases or franchises, through various subsidiaries, over 3,600 hotels and 537,000 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.

InterContinental Hotels Group offers information and online reservations for all its hotel brands at and information for the Priority Club Rewards programme at

For the latest news from InterContinental Hotels Group, visit our online Press Office at

High resolution images to accompany this announcement are available for the media to download free of charge from . This includes profile shots of the key executives.

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 ‘target’, ‘expect’, ‘intend’, ‘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.

Download full announcement in PDF (179K)

Last updated 25 January 2008

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