*Total gross revenue is 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 exceptional items. 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:
"IHG has had a good third quarter, with strong performances across all our brands and the continuation of a record signings pace, which is seeing us sign two new hotels a day and keeping us on track to beat our net room additions target. Last month’s announcement of the global relaunch of Holiday Inn has been well received by our hotel owners and we look forward to opening our first rebranded hotel in spring next year. Our outlook for the rest of the year remains positive."
IHG maintains its focus on enhancing the quality of its portfolio, in conjunction with growth. In the quarter:
RevPAR increased 5.6% with rate generating all of the increase. InterContinental and Crowne Plaza outperformed their market segments. Holiday Inn and Holiday Inn Express grew rate faster than their segments and delivered RevPAR premiums to their segments of 15% and 13% respectively.
Operating profit from continuing operations increased 11% to $120m. Continuing owned and leased hotel operating profit of $9m includes a $2m profit from the InterContinental Boston where trading continues to improve post its November 2006 opening. The underlying improvement was primarily driven by growth in RevPAR and operating margin at the InterContinental New York. Managed hotels performed well with RevPAR up 7% in the quarter, however profit was down from $13m to $9m after increased revenue investment to support growth in contract signings, the impact of fewer hotels under management following the restructure of the FelCor contract last year, and the non-recurrence of income from a minority interest now sold and business interruption insurance. Franchised hotels profit increased 12% to $119m reflecting RevPAR growth of 5% and net room count growth of 4%.
RevPAR increased 6.7%, driven by 6.0% rate growth. The Middle East continued to perform strongly, growing RevPAR by 18.0%. Continental Europe delivered a RevPAR increase of 6.4%, comprising a 10.5% increase in France but also a 3.1% fall in Germany, where RevPAR was boosted this time last year by the football world cup. Year to date in the UK, Holiday Inn and Express by Holiday Inn both outperformed their market segment recording RevPAR growth of 6.6%.
Operating profit from continuing operations increased 82% from £11m to £20m. Continuing owned and leased hotel operating profit increased from £0m to £7m, £5m of which was from the InterContinental London Park Lane following the completion of its refurbishment. InterContinental Le Grand Paris delivered a 7.5% RevPAR increase and a £1m profit increase. Managed hotels profit increased 22% from £9m to £11m reflecting a full period contribution from assets disposed in September 2006 and strong fee growth in the UK and Middle East managed portfolios. Franchised hotels profit increased from £6m to £8m reflecting RevPAR growth of 4.9% and net room count growth of 6%.
RevPAR increased 8.6%, mainly driven by rate. All brands performed strongly, InterContinental RevPAR increased 12.0%, Crowne Plaza 4.5%, Holiday Inn 8.6% and Express 12.2%. Greater China RevPAR increased 5.1% driven by rate increases, year to date RevPAR growth of 5.9% is significantly ahead of the market as strong demand for IHG brands continues.
Operating profit performance
Operating profit from continuing operations increased from $8m to $14m. Owned and leased hotel operating profit increased by $2m to $6m due to RevPAR and operating margin growth at the InterContinental Hong Kong. Managed hotels profit increased 44% to $13m, driven by the increasing number of hotels under IHG management.
In the third quarter aggregated regional overheads increased £2m to £17m. Regional overheads in the Americas increased $2m to $17m and in EMEA by £2m to £6m due to the non-recurrence of a rate rebate received in the same period last year. Overheads in Asia Pacific were flat. Central overheads increased £2m to £21m. As previously disclosed, IHG expects that in 2007 central overheads will increase in line with inflation.
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 22% (Q3 2006: 24%). IHG’s tax rate may be more volatile in the immediate future due to changes in tax legislation, tax case law developments and possible settlements of prior year issues but in the longer term is expected, as previously indicated, to show an upward trend.
After the period end, IHG announced its intention to make a non-recurring revenue investment of up to £30m to accelerate implementation of the global relaunch of Holiday Inn and Holiday Inn Express brands. This cost is anticipated to be taken as an exceptional item. IHG expects to generate a strong return on this investment through RevPAR increases across the Holiday Inn brand family following completion of the relaunch.
IHG’s net debt at the period end was £811m, including the $200m (£98m) finance lease on the InterContinental Boston. During the quarter IHG’s 74.11% interest in the InterContinental Montreal was sold for £17m, and 15% investment in the InterContinental Miami was sold for £5m. The profit on disposal of these properties is included in exceptional items.2.4m shares were repurchased under IHG’s buyback programme during the third quarter, at a cost of £23m, leaving £127m of the current buyback programme to be completed.
|Number of hotels||Proceeds||Net book value|
|Disposed since April 2003||179||£3.0bn||£2.9bn|
For a full list please visit www.ihg.com/Investors
|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||Completed in 2007||£250m||£250m||Nil|
|£709m special dividend||Paid 15 June 2007||£709m||£709m||Nil|
|Fourth share buyback - £150m||Underway||£150m||£23m||£127m|
|Three months to 30 Sep £m||Total||Americas||EMEA||Asia Pacific||Central|
|Franchised operating profit||68||63||59||57||8||6||1||0||-||-|
|Managed operating profit||21||20||4||7||11||9||6||4||-||-|
|Continuing owned and leased operating profit||15||5||5||3||7||-||3||2||-||-|
|Continuing operating profit pre central overheads||87||73||60||59||20||11||7||3||-||-|
|Continuing operating profit||66||54||60||59||20||11||7||3||(21)||(19)|
|Discontinued owned and leased operating profit||2||8||1||1||1||7||-||-||-||-|
|Total operating profit||68||62||61||60||21||18||7||3||(21)||(19)|
|Actual currency*||Constant currency**||Actual currency*||Constant currency**||Actual currency*||Constant
|Actual currency*||Constant currency**|
* Sterling actual currency.
** Translated at constant 2006 exchange rates.
*** After Central Overheads.
|Investor Relations (Paul Edgecliffe-Johnson; Heather Wood):||+44 (0) 1753 410 176|
|Media Affairs (Leslie McGibbon; Claire Williams):||+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.
A conference call with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 09.30am (London time) on 6 November. There will be an opportunity to ask questions.
|International dial-in||+44 (0)1452 586513|
|UK Free Call||0800 694 1503|
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 20966629#
|International dial-in||+44 (0)1452 550000|
|UK Free Call||0800 953 1533|
There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 6 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 586513|
|US Toll Free||1866 223 0615|
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 20969532#
|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 6 November. The web address is www.ihg.com/Q3
InterContinental Hotels Group PLC (IHG) of the United Kingdom [LON:IHG, NYSE:IHG (ADRs)] is one of the world's largest hotel groups by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, over 3,800 hotels and more than 571,000 guest rooms in nearly 100 countries and territories around the world. IHG 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 with over 33 million members worldwide.
The company pioneered the travel industry’s first collaborative response to environmental issues as founder of the International Hotels and Environment Initiative (IHEI). The IHEI formed the foundations of the Tourism Partnership launched by the International Business Leaders Forum in 2004, of which IHG is still a member today. The environment and local communities remain at the heart of IHG’s global corporate responsibility focus.
IHG 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 IHG, visit our online Press Office at www.ihg.com/media
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 ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘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 06 November 2007