* 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.
All figures and movements unless otherwise noted are at actual exchange rates and before other operating income and expenses.
See appendix 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4.
Commenting on the results and trading, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
"2006 was a successful year for IHG on all fronts. We outperformed the market and saw a record level of signings for IHG brands. We now expect to exceed our growth target of adding 50,000-60,000 rooms on a net and organic basis by the end of 2008. We have strengthened the business and are executing a clear strategy. We have made a good start to 2007 with the opening of InterContinental Los Angeles and the signing of our 125th hotel in China, the Crowne Plaza Sun Palace Beijing. We continue to be very positive about the Company’s prospects.”
Increase in development pipeline and rooms open
IHG continues to increase its development pipeline, and now expects to exceed its 50,000-60,000 net organic room additions target by the end of 2008 from the 30 June 2005 starting position of 537,675.
IHG maintains its focus on enhancing the quality of its portfolio, in tandem with growth. In 2006:
Disposals and returns of funds
In the year, the sale of 31 Continental European hotels was completed for £680m before transaction costs and $191m was received from the sale of Felcor shares. 28.4m shares were repurchased under IHG’s ongoing buyback programme at a cost of £258m. There were 356m shares outstanding at the end of the year, 366m on a fully diluted basis. IHG’s net debt at the period end was £134m including the $186m (£97m) finance lease on the InterContinental Boston. £850m further return of funds was announced today. £700m will be returned via a special dividend with share consolidation and £150m via a further share buyback programme.
IHG continues to own 25 hotels with a book value of £1bn. The InterContinental brand repositioning introduced in 2006 has accelerated the pace of signings and improved guest preference, and recent research confirms its strong growth potential. IHG will consider the need for continued ownership of each of its owned InterContinental hotels once additional brand representation has been identified in its market and financial results are at the right level to maximise value.
IHG’s strategy envisages a reduction in capital intensity and the return of surplus funds to shareholders. Capital investment in new hotel projects will be made where this creates value by accelerating the development of IHG’s brands. Such investment will be funded largely from the proceeds of hotel disposals with a view subsequently to recycling that capital into other projects.
Americas: strong performance across all brands
RevPAR increased 9.2% with rate generating most of the increase. InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express and Candlewood each outperformed their market segments, with RevPAR up 10.4%, 10.4%, 7.4%, 10.7% and 7.4% respectively. Staybridge Suites also showed continued growth, with a 7.1% increase. Holiday Inn’s fourth quarter RevPAR growth was lower, in line with the industry, due to the prior year comparable having benefited from Hurricane Katrina displacement.
Operating profit performance
Operating profit from continuing operations increased 18% from $339m to $399m. Continuing owned and leased hotel operating profit improved from $25m to $26m impacted, as expected, by a $6m loss from InterContinental Boston in its opening year. The underlying improvement of $7m was driven by increased occupancy and rate at the InterContinental Atlanta and InterContinental San Francisco, and increased rate at InterContinental New York. Managed hotels profit was up 39% to $50m, benefiting from improved trading in existing operations and retained management contracts on assets disposed. Franchised hotels profit increased 12% to $382m reflecting RevPAR growth of 9.2% and net room count growth of 4%.
EMEA: RevPAR growth accelerating
RevPAR increased 12.1%, driven by increased occupancy and 8.5% rate growth. The Middle East continued to perform strongly, growing RevPAR by 19.0%. Continental Europe delivered a RevPAR increase of 9.0%, benefiting from continued improvement across the region, particularly in Germany and France. In the UK, Holiday Inn and Express by Holiday Inn performed in-line with the market segment, recording RevPAR growth of 6.3%.
Operating profit performance
Operating profit from continuing operations increased 16% from £31m to £36m. Continuing owned and leased hotel operations were flat at a loss of £5m. InterContinental Le Grand Paris continued to rebuild its business post refurbishment, delivering a 25.8% RevPAR increase. The refurbishment of InterContinental London Park Lane, which impacted 2006 profit versus 2004 by £18m, is largely complete; the hotel reopened in November 2006 and is expected to be fully operational by Spring 2007. Managed hotels profit was up 19% from £31m to £37m, as a result of improved trading and retained management contracts on assets disposed. Franchised hotels profit decreased from £26m to £24m with an underlying trading improvement outweighed by the non-recurrence of the £7m liquidated damages received in 2005.
Asia Pacific: strong growth
IHG’s market leading positions in the region have led to further strong growth. RevPAR increased 10.2%, mainly driven by rate. InterContinental, Crowne Plaza and Holiday Inn all performed strongly, with RevPAR up 11.5%, 10.3% and 8.5% respectively. Greater China RevPAR increased 12.1%, driven by rate increases.
Operating profit performance
Operating profit from continuing operations increased 33% from $39m to $52m. Owned and leased hotel operating profit increased 55% to $31m as a result of excellent trading at InterContinental Hong Kong, driven by a 31.8% RevPAR increase. Managed hotels profit increased 34% to $39m, driven by good trading and retained management contracts on asset disposals.
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:
Overheads and Tax
Asia Pacific regional overheads increased by £4m to £12m after continued infrastructure investment in China. This was balanced by reductions in the Americas and EMEA which left the aggregated regional overheads up £1m at £64m. As previously indicated, central overheads in the fourth quarter were higher than previous periods at £25m, bringing the total for the full year to £81m, an increase of £16m. This included investment in new global research designed to enable higher quality brand development and enhance IHG’s franchising capability going forward. Central overheads in 2007 are expected to increase in line with inflation.
The effective tax rate for 2006 was 24%. IHG’s tax rate is expected in the long term, as previously indicated, to trend upwards.
|Number of hotels||Proceeds||Net book
|Disposed since April 2003||174||£3.0bn||£2.9bn|
For a full list please visit www.ihg.com/Investors
|Timing||Total return||Returned||Still to|
|£501m special dividend||Paid December 2004||£501m||£501m||Nil|
|First £250m share buyback||Completed in 2004||£250m||£250m||Nil|
|£996m capital return||Paid 8 July 2005||£996m||£996m||Nil|
|Second £250m share buyback||Completed in 2006||£250m||£250m||Nil|
|£497m special dividend||Paid 22 June 2006||£497m||£497m||Nil|
|Third £250m share buyback||Underway||£250m||£219m||£31m|
|£700m special dividend||Quarter 2, 2007||£700m||Nil||£700m|
|£150m share buyback||Yet to commence||£150m||Nil||£150m|
|Twelve months to 31 Dec £m||Total||Americas||EMEA||Asia Pacific||Central|
|Franchised operating profit||235||214||208||186||24||26||3||2|
|Managed operating profit||85||67||27||20||37||31||21||16|
|Continuing owned and leased operating profit||26||20||14||14||(5)||(5)||17||11|
|Continuing operating profit pre central overheads||282||238||217||186||36||31||29||21|
|Continuing operating profit||201||173||217||186||36||31||29||21||(81)||(65)|
|Discontinued owned and leased operating profit||30||96||4||12||26||73||-||11||-||-|
|Total operating profit||231||269||221||198||62||104||29||32||(81)||(65)|
|Actual currency*||Constant currency**||Actual currency*||Constant currency**||Actual currency*||Constant currency**||Actual currency*||Constant currency**|
|*||Sterling actual currency|
|**||Translated at constant 2005 exchange rates|
|***||After Central Overheads|
Ex-dividend Date: 21 March 2007
Record Date: 23 March 2007
Payment Date: 8 June 2007
Dividend payment: Ordinary shares 13.3p per share: ADRs 25.9c per ADR
For further information, please contact:
|Investor Relations (Paul Edgecliffe-Johnson; Heather Ward):||+44 (0) 1753 410 176|
|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.
Presentation for Analysts and Shareholders
A presentation with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 9.30am (London time) on 20 February at InterContinental London Park Lane, One Hamilton Place, Park Lane W1J 7QY. 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.ihgplc.com/prelims07. 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)20 7863 6164|
US Q&A conference call
There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 20 February with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director). There will be an opportunity to ask questions.
|International dial-in||+44 (0)1452 562716|
|US Toll Free||1866 832 0717|
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 7492790#.
|International dial-in||+44 (0)1452 550000|
|US Toll Free||1866 247 4222|
The full release and supplementary data will be available on our website from 7.00 am (London time) on Tuesday 20 February. The web address is www.ihgplc.com/prelims07
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 3,700 hotels and 556,000 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.
For the latest news from InterContinental Hotels Group, visit our online Press Office at www.ihg.com/media
Last updated 25 January 2008