Share price

2375.00

-35.00p / -1.45%

First Quarter Results to 31 March 2007

First Quarter Results to 31 March 2007

Headlines

  • Continuing revenue up 10% from £177m to £194m, up 20% at constant exchange rates.
  • Continuing operating profit up 5% from £42m to £44m, up 19% at constant exchange rates.
  • Total gross revenue* from all hotels in IHG’s system up 13% at constant exchange rates to $3.9bn.
  • Global constant currency RevPAR growth of 7.6%; strongest growth in EMEA, up 13.0%, driven mainly by rate increases.
  • Franchised operating profit of £55m, up 11% at constant exchange rates.
  • Managed operating profit of £19m, up 5% at constant exchange rates.
  • Adjusted continuing earnings per share (“EPS”) up 9% to 7.6p. Adjusted total EPS of 8.2p. Basic EPS of 13.3p.
  • Room count up by 1,907 rooms to 558,153 (3,763 hotels).
  • Signings up 25% to 22,631 rooms (161 hotels).
  • Development pipeline of 169,699 rooms (1,321 hotels), equivalent to 30% of IHG existing hotel system.

*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 exceptionals.
See appendix 3 for analysis of operating profit before exceptional items. Constant exchange rate comparatives shown in appendix 4.

Commenting on the results and trading, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
“The business had a good first quarter. The pace of signings of new hotels continued to be strong with almost 23,000 rooms signed in the quarter, 25% up over 2006. We now have over 1,300 hotels in our forward development pipeline. Trading is healthy around the world and once again we outperformed in our major markets in the quarter. Our outlook for 2007 remains positive.”

Increase in development pipeline and rooms open

  • 22,631 rooms were signed; 13,311 in the Americas, 2,968 in EMEA and 6,352 in Asia Pacific.
  • 169,699 rooms are now in the pipeline, up 11,708 (+7%) since the start of the year, at 1,321 hotels.
  • IHG’s development activity in Asia Pacific continues to be successful. In Greater China 15 hotels, 4,895 rooms, were signed in the quarter comprising 1 InterContinental, 6 Crowne Plazas, 3 Holiday Inns and 5 Holiday Inn Expresses.
  • The strengthening of the InterContinental brand continued with 6 hotel signings in the quarter.
  • The pipeline of Crowne Plaza hotels grew by 4,237 rooms (14 hotels) in the quarter, with 5,245 rooms (18 hotels) signed including 1,915 rooms (8 hotels) in North America and 3,044 rooms (9 hotels) in Asia Pacific.
  • The pipeline of Holiday Inn and Holiday Inn Express hotels grew by 4,788 rooms (43 hotels) in the quarter, Candlewood Suites added 1,489 rooms (19 hotels) and Hotel Indigo added 373 rooms (3 hotels).

IHG maintains its focus on enhancing the quality of its portfolio, in conjunction with growth. In the quarter:

  • 8,197 rooms opened; 6,296 in the Americas, 1,121 in EMEA and 780 in Asia Pacific.
  • 6,290 rooms exited; 4,033 in the Americas, 1,911 in EMEA and 346 in Asia Pacific.
  • The room count at the end of the period increased by 1,907 rooms to 558,153.

Americas: strong performance

Revenue performance

RevPAR increased 5.3% with rate generating all of the increase. InterContinental, Holiday Inn and Holiday Inn Express each outperformed their market segments, with RevPAR up 8.7%, 3.0%, and 7.8% respectively. US RevPAR growth was impacted by the prior year comparable including increased occupancy levels arising from Hurricane Katrina displacement.

Operating profit performance

Operating profit from continuing operations increased 7% from $85m to $91m. Continuing owned and leased hotel operating profit of $2m includes, as expected, a $2m loss from the InterContinental Boston as trading continues to ramp up post its November 2006 opening. The underlying improvement was primarily driven by increased occupancy and rate at InterContinental New York. Managed hotels profit was flat at $11m after increased investment in development. Franchised hotels profit increased 9% to $93m reflecting RevPAR growth of 5.4% and net room count growth of 5%.

EMEA: RevPAR growth accelerating

Revenue performance

RevPAR increased 13.0%, driven by increased occupancy and 9.5% rate growth. The Middle East continued to perform strongly, growing RevPAR by 14.4%. Continental Europe delivered a RevPAR increase of 10.0%, driven by France up 13.4% and Germany up 8.5%. In the UK, Holiday Inn and Express by Holiday Inn performed in-line with the market segment, recording RevPAR growth of 9.2%.

Operating profit performance

Operating profit from continuing operations more than doubled to £7m. Continuing owned and leased hotel operations reduced their losses by £3m to £2m. InterContinental Le Grand Paris continued to rebuild its business post refurbishment, delivering a 15.7% RevPAR increase. The refurbishment of InterContinental London Park Lane, which made a £3m loss in the quarter, is largely complete and the hotel is expected to be fully operational by early June 2007. Managed hotels profit was flat at £8m after increased investment in the InterContinental development team. Franchised hotels profit increased from £5m to £6m reflecting RevPAR growth of 14.3% and net room count growth of 15%.

Asia Pacific: strong growth from all brands

Revenue performance

RevPAR increased 12.5%, mainly driven by rate. All brands performed strongly, InterContinental RevPAR increased 17.8%, Crowne Plaza 11.6%, Holiday Inn 9.2% and Express 17.1%. Greater China RevPAR increased 8.3%, outperforming the market, driven by rate increases as strong demand for IHG’s brands continues.

Operating profit performance

Operating profit from continuing operations was $13m. Owned and leased hotel operating profit was flat at $8m. Managed hotels profit increased 13% to $9m, driven by the increasing number of hotels under IHG management. Thirteen of these additional hotels (4,937 rooms) relate to IHG’s agreement with ANA. As previously disclosed, these hotels are not expected to be earnings enhancing for IHG until their third year of operation, after marketing investments and integration costs.

Overheads and Tax

In the first quarter aggregated regional overheads were flat at £16m, up 6% in constant currency. Regional overheads in the Americas increased 7% to $15m and in Asia Pacific by $2m to $6m due to continued investment in infrastructure. Overheads in EMEA were flat.

Central overheads were flat at £17m. As previously disclosed, IHG expects that in 2007 central overheads will increase in line with inflation and will be weighted towards the second half of the year.

Based on the position at the end of the quarter, the tax charge on profit from continuing and discontinued operations, excluding the impact of exceptional items, has been calculated using an estimated effective annual tax rate of 28% (Q1 2006: 28%).

Disposals and returns of funds

IHG’s net debt at the period end was £192m, including the $195m (£99m) finance lease on the InterContinental Boston.

2.1m shares were repurchased under IHG’s buyback programme during the first quarter, at a cost of £25.2m, leaving £156m of the buyback programme to be completed.

£700m is proposed to be returned to shareholders on 15 June 2007 via a special dividend with a share consolidation. On completion of the buyback programme and special dividend, IHG will have returned £3.6bn to shareholders since March 2004.

Appendix 1: Asset disposal programme detail

  Number of hotels Proceeds Net book
value
Disposed since April 2003 175 £3.0bn £2.9bn
Remaining hotels 24   £1.0bn

For a full list please visit www.ihgplc.com/investors

Appendix 2: Return of funds programme as at 31 March 2007

  Timing Total return Returned Still to be
returned
£501m special dividend Paid December 2004 £501m £501m Nil
First share buyback – £250m Completed in 2004 £250m £250m Nil
£996m capital return Paid 8 July 2005 £996m £996m Nil
Second share buyback – £250m Completed in 2006 £250m £250m Nil
£497m special dividend Paid 22 June 2006 £497m £497m Nil
Third share buyback – £250m Underway £250m £244m £6m
£700m special dividend To be paid 15 June 2007 £700m Nil £700m
Fourth share buyback – £150m Yet to commence £150m Nil £150m
Total   £3.59bn £2.74bn £0.85bn

Appendix 3: Analysis of operating profit before exceptional items

Three months to 31 Mar £m Total Americas EMEA Asia Pacific Central
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
Franchised operating profit 55 55 48 49 6 5 1 1    
Managed operating profit 19 19 6 6 8 8 5 5    
Continuing owned and leased operating profit 3 1 1 2 (2) (5) 4 4    
Regional overheads (16) (16) (8) (8) (5) (5) (3) (3)    
Continuing operating profit pre central overheads 61 59 47 49 7 3 7 7    
Central overheads (17) (17) - - - - - - (17) (17)
Continuing operating profit 44 42 47 49 7 3 7 7 (17) (17)
Discontinued owned and leased operating profit 2 4 2 1 0 3 - -    
Total operating profit 46 46 49 50 7 6 7 7 (17) (17)

Appendix 4: Constant currency continuing operating profits before exceptional items

  Americas EMEA Asia Pacific Total***
Actual currency* Constant currency** Actual currency* Constant currency** Actual currency* Constant currency** Actual currency* Constant currency**
Growth (4)% 6% 133% 133% 0% 14% 5% 19%
Exchange rates USD:GBP EUR:GBP
* Sterling actual currency.
** Translated at constant 2006 exchange rates.
*** After Central Overheads.
2007 1.95 1.49
2006 1.75 1.46

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

Download the First Quarter Results 2007 announcement PDF (0.51Mb)

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.

Q&A Conference call for Analysts and Shareholders

A conference call with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 9.00 am (London time) on 9 May. There will be an opportunity to ask questions.

International dial-in   +44 (0) 1452 562 716
UK Free Call 0800 073 8967
Conference ID: 6750110

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 6750110#

International dial-in +44 (0) 1452 55 00 00
UK Free Call 0800 953 1533

US Q&A conference call

There will also be a conference call, primarily for US investors and analysts, at 9.00am (Eastern Standard Time) on 9 May 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
Conference ID: 6754795

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 6754795#

International dial-in   +44 (0) 1452 55 00 00
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 3,700 hotels and 558,000 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.ihg.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.ihg.com/media

Last updated 09 May 2007

Find out more about our brands

IHG logo

  • InterContinental Hotel & Resort logo
  • Hualuxe Hotels and Resorts logo
  • Crowne Plaza logo
  • Hotel Indigo logo
  • Even Hotels logo
  • Holiday Inn logo
  • Holiday Inn Express logo
  • Holiday Inn Resort logo
  • Holiday Inn Club Vacations logo
  • Staybridge Suites logo
  • Candlewood Suites logo
  • Priority Club logo