- 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:
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."
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
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
- 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.
- 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.
- 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
- $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
- Priority Club Rewards continued to lead the industry with the launch of
the innovative “Any Hotel, Anywhere” programme.
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.
- 65,400 rooms open (235 hotels); global RevPAR growth
- 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
|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%
- 9,900 rooms open (87 hotels); RevPAR growth of
Staybridge continues to gain momentum with the 100th unit under construction.
- 12,700 rooms open (112 hotels); RevPAR growth of
- 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.
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.
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
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
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.
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
- 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
- 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
||Net book value
|Disposed to date*
|On the market
||7 on the market
24 held for sale
* Holiday Inn Dijon sold since date of last announcement
For a full list please visit www.ihgplc.com/investors
Appendix 2: Return of funds programme
||Returned to date
||Still to be returned
|£501m special dividend
||Paid December 2004
|First £250m share buyback
||Completed in 2004
|Second £250m share buyback
|£996m capital return
||Paid 8 July 2005
|Third £250m share buyback
||Yet to commence
|£500m special dividend
||Second quarter 2006
Appendix 3: Financial headlines
|Full Year £m
|Franchised operating profit
|Managed operating profit
|Continuing owned and leased operating profit
|Continuing hotels operating profit pre central overheads
|Continuing hotels operating profit
|Discontinued owned and leased operating profit
|Total Hotels operating profit
|Soft drinks operating profit
|Group operating profit pre special items
|Group operating profit post special items
Appendix 4: Investor information for 2005 final dividend
||29 March 2006
||31 March 2006
||5 June 2006
||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
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
||+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.
||+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
||+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 www.ichotelsgroup.com and
information for the Priority Club Rewards programme at www.priorityclub.com.
For the latest news from InterContinental Hotels Group,
visit our online Press Office at www.ihgplc.com/media.
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.
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
full announcement in PDF (179K)