All figures and movements at actual exchange rates and before special items.
*See appendix 4 for analysis of financial headlines.
RevPAR continues to be primarily rate led. The Americas, UK Holiday Inn, Middle East and China continue to show good RevPAR growth. The full year outlook remains positive and in line with company expectations.
Commenting on the results, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
“We are seeing good progress being made against IHG's strategy, in particular encouraging growth in our development pipeline and, more recently, the announcement of our intention to float Britvic. Our hotel operating system continues to strengthen with the number of room nights we deliver to our hotels on the rise. Trading in two of our key markets, the US and the UK remained strong and we saw RevPAR growth in each of our three regions. Sadly, we have witnessed further destructive events around the world but we can be proud of the way our people have responded."
Americas: strong performance across the business
RevPAR increased 11.0% in the quarter, with all brands performing strongly. Rate growth generated most of the increase, though occupancy continued to rise. Corporate rate business and corporate groups remained strong. InterContinental showed strong RevPAR growth, with a 28% increase. Holiday Inn showed 10.0% RevPAR growth, outperforming its market segment.
Operating profit performance
Operating profit from continuing operations increased by 15% from $82m to $94m in the quarter. Continuing owned and leased profit grew from $1m to $6m, driven by strong trading in New York and San Francisco. Managed and franchised profit was up 13% to $105m, driven by RevPAR increases and fees from increased franchise sales. Investments in additional development headcount and technology led to an increase in regional overheads. The trading impact from hurricanes was broadly neutral.
EMEA: continued out-performance in UK market
RevPAR increased 5.2% in the quarter, albeit there were considerable variances in performance across geographic markets. Holiday Inn UK RevPAR was up 1.8%, all rate driven, continuing its market out-performance. The terrorist attacks in London had some impact on occupancy, particularly from leisure demand, but this now appears to be recovering gradually. France, where RevPAR was up 3.1%, saw continued improvement at the reopened InterContinental Le Grand Paris, but declines at the now sold InterContinental Paris. Germany saw recent RevPAR declines reverse, with a 3.7% gain in the quarter, driven by both occupancy and rate. The Middle East saw RevPAR increase 18.6%, driven by rate growth.
Operating profit performance
Operating profit from continuing operations increased 89% in the quarter from £9m to £17m. Continuing owned and leased profits were up 75% from £4m to £7m, driven by continued improvement at InterContinental Le Grand Paris. Managed profit was up 125% from £4m to £9m, as a result of retained management contracts on assets disposed. Franchised profit was marginally down by £1m to £6m, as a result of foreign exchange movements and the termination of IHG’s South African master franchise. The regional overhead declined marginally.
Asia Pacific: strong growth year to date
RevPAR increased 0.6% in the quarter. Mainland China RevPAR increased 10.2%, driven by rate increases as strong demand for IHG brands continues. Performances elsewhere in the region were mixed.
Operating profit performance
IHG continues to experience strong demand in the region, particularly in China. Operating profit from continuing operations year to date was up 15% from $20m to $23m. Owned and leased operating profit fell $1m to $1m in the quarter, as a result of fewer rooms being available at the InterContinental Hong Kong due to refurbishment. Managed hotels profit decreased $1m to $6m in the quarter, after investment in expanding management resources and infrastructure to support the development growth in the region, particularly China. The regional overhead decreased marginally in the quarter.
Increase in pipeline size and room count
IHG continues to increase its pipeline, supporting the target of 50,000-60,000 net organic room additions by the end of 2008.
IHG’s room count continues to grow, despite a focus on removing poorer quality rooms.
Strong year to date performance
Continuing Hotels trading has been strong across each of IHG’s three regions year to date, with revenues up 14% to £696m and operating profit up 28% to £147m. Investment in China and development resources has been increased, though total overheads are still expected to be approximately flat for the full year.
Returns to shareholders
IHG has now returned nearly £2bn to shareholders since Separation in April 2003, with £1.2bn returned so far in 2005. A further £323m is yet to be returned via IHG’s ongoing share buyback programme. Following the receipt of proceeds from the IPO of Britvic, further cash returns will be made to shareholders. The timing of these returns will be considered in the light of market conditions and satisfactory progress being made on the intended divestment of further non core hotel assets.
Since the period end, the disposal of the InterContinental Paris and a portfolio of nine hotels in Australasia has been completed. Proceeds of approximately £380m have been received. IHG remains committed to further disposals when the time is right, and the retention of up to £1.0bn of its current hotel portfolio.
Britvic intention to float announced
The intention to proceed with a flotation of Britvic was announced on 14 November 2005, and a circular was posted to shareholders on 16 November 2005.
Comparative third quarter performance was impacted by the non recurrence of 2004’s extra trading week, as a result of which revenues decreased from £186m to £174m, and operating profit from £26m to £23m.
Britvic’s strong track record of innovation continued, with J2O, Tango Clear, Pepsi Max Twist and Fruit Shoot further increasing their market share, particularly in off premises sales.
Appendix 1: Asset disposal programme detail
|Number of hotels||Proceeds||Net book value||Annual EBItdA foregone*||Annual EBIT foregone*|
|Disposed to date**||140||£2.2bn||£2.2bn||£193m||£132m|
|On the market||4||-||£43m||-||-|
*Based on EBItdA and EBIT in the last full year before disposal. An analysis of EBIT and EBItdA foregone is provided in the supplementary information.
** Holiday Inn Ghent sold since date of last announcement
For a full list please visit www.ihgplc.com/Investors
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||£177m||£73m|
|£996m capital return||Paid 8 July 2005||£996m||£996m||Nil|
|Third £250m share buyback||Yet to commence||£250m||-||£250m|
Appendix 3: Continuing operations
The 2004 full year profit analysed between discontinued and continuing operations is available in the supplementary information slides which are available on our website at www.ihgplc.com/Q3Appendix 4: Financial headlines
|Q3 £m||Total||Americas||EMEA||Asia Pacific||Central|
|Managed and franchised operating profit||78||66||59||51||15||11||4||4|
|Continuing owned and leased operating profit||11||5||4||-||7||4||-||1|
|Continuing hotels operating profit pre central overheads||72||57||53||45||17||9||2||3|
|Continuing hotels operating profit||56||46|
|Discontinued owned and leased operating profit||8||30||-||3||3||25||5||2|
|Total Hotels operating profit||64||76||53||48||20||34||7||5||(16)||(11)|
|Soft drinks operating profit||23||26|
|Group operating profit pre special items||87||102|
|Group operating profit post special items||78||97|
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|
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.
Conference call for Analysts and Shareholders
A conference call with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 8.00 am (London time) on 22 November. There will be an opportunity to ask questions.
|UK Local Rate||0800 953 0844|
|Standard International Dial In||+44 (0)1452 562 716|
A recording of the conference call will be available for 7 days. To access this please dial the relevant number below and use the access number 2070837#
|UK dial in||0845 245 5205|
|International dial-in||+44 (0)1452 550000|
US Q&A conference call
There will also be a conference call, primarily for US investors and analysts, at 10am (Eastern Standard Time) on 22 November with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director). There will be an opportunity to ask questions.
|International dial-in||+44 (0)1452 562 716|
|US Toll Free||1866 832 0717|
A recording of the conference will also be available for 7 days. To access this please dial the relevant number below and use the access number 2076272#.
|International dial-in||+44 (0)1452 550000|
|US Toll Free||0845 245 5205|
The full release and supplementary data will be available on our website from 7.00 am (London time) on 22 November 2005. The web address is www.ihgplc.com/Q3
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.
Last updated 25 January 2008