|Financial results||2008||2007||% change||% change (CER)|
|Continuing operating profit||$535m||$474m||13%||6%||10%||4%|
|Total adjusted operating profit||$549m||$491m||12%||5%||9%||3%|
|Adjusted continuing EPS||117.8¢||93.8¢||26%|
|Adjusted total EPS||120.9¢||97.2¢||24%|
|Total basic EPS2||91.3¢||144.7¢||(37)%|
All figures are before exceptional items unless otherwise noted. See appendix 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4. (% CER) = change in constant currency.
Commenting on the results, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
“We produced good results in 2008 and comfortably exceeded our three year target to add 50,000 to 60,000 net rooms by the end of 2008 - adding over 82,000 rooms. We opened 20% more rooms than in 2007 and signed almost 100,000 rooms into our pipeline.
“The $1 billion Holiday Inn relaunch is progressing well. We will have almost 600 hotels operating under the new standards by the end of the first quarter and are committed to completing the global programme by the end of 2010. The first relaunched hotels show a strong increase in revenue per available room which is a big motivation for other owners to convert.
“The trading environment is very tough. The sharp deterioration that we reported on last November has continued into 2009 and we see no signs of improvement at this stage. It has been clear for some time that 2009 will be a challenging year and we have taken action to prepare the business, including strict management of cash and a significant reduction in costs. The actions we have taken to move the business to an asset light model with strong brands, scale advantage and leading technology and reservation systems position us well to grow market share in the testing times ahead.”
RevPAR declined (0.2)% in 2008 with rate growth of 3.6% offset by occupancy declines. In the fourth quarter the industry experienced a sharp deterioration in trading; IHG’s RevPAR declined 7.2% with modest rate growth offset by occupancy declines. In the year, IHG’s brands outperformed their market segments in the US. Continuing revenues grew 2% to $920m. Excluding a $13m liquidated damages receipt in the first quarter, continuing revenues grew 1%.
Operating profit from continuing operations increased 3% from $440m to $451m. Continuing owned and leased hotels profit increased $1m to $41m driven by RevPAR growth of 0.8% and an improved performance from the InterContinental San Francisco Mark Hopkins. Managed hotel profit was $51m. Excluding the $13m liquidated damages receipt managed hotel profit declined $3m due to a fall in occupancy rates and a small guarantee payment on a new hotel. Franchised hotels profit increased $1m to $426m driven by 5% growth in royalty fees offset by a $20m reduction in fees received for new signings, changes in hotel ownership and hotels leaving the system.
RevPAR increased 3.6% in the year, driven by strong rate growth of 5.4%; in line with the industry RevPAR performance deteriorated in the fourth quarter, declining 5.3%. Throughout the year the Middle East continued to perform strongly, raising RevPAR by 20.2%. IHG hotels in the UK outperformed the market growing RevPAR by 1.2%. Continuing revenues grew 5% to $518m driven by 36% growth in franchised revenues. Excluding the two liquidated damages receipts totalling $16m, continuing revenues grew 2%.
Operating profit from continuing operations increased 28% (25% CER) from $134m to $171m. Excluding the $16m liquidated damages receipts, continuing operating profit increased 16% (13% CER). Continuing owned and leased hotel operations increased $12m to $45m primarily due to the increased contribution from the InterContinental London Park Lane. Excluding a $9m liquidated damages receipt in the second quarter managed hotels profit declined $1m. Strong growth across the Middle East and Europe was offset by a reduced contribution from a portfolio of managed hotels in the UK. Franchised hotel profit increased from $58m to $75m driven by a $7m liquidated damages receipt in the third quarter and an 18% increase in royalty fee income.
RevPAR increased 1.6%. Strong rate and occupancy growth in the first nine months of the year was partly offset by a 6.1% decline in RevPAR in the fourth quarter with most sub-regions impacted by the weaker global economy. Greater China RevPAR declined 14% in the fourth quarter due partly to the impact of supply increases in the major cities. Continuing revenues grew 12% (10% CER) to $290m driven by 10% growth in owned and leased revenues and 14% growth in managed revenues. Excluding a $4m liquidated damages receipt in the third quarter from one contract, franchised revenues were down $2m to $14m.
Operating profit from continuing operations grew 8% (13% CER) from $63m to $68m. Owned and leased hotels operating profit increased 19% to $43m. Managed hotels profit grew 20% to $55m. Franchised hotels profit increased 33% to $8m driven by a $4m liquidated damages receipt in the third quarter.
Revenue delivery to hotel owners through reservation channels and loyalty programmes continued to improve:
$641m of cash was generated from operating activities, up $176m on 2007. In addition $83m of cash was generated from disposals including the sale of the Holiday Inn Jamaica for $30m. Capital expenditure of $108m was $78m below 2007 levels. 9.2m shares were repurchased under IHG’s buyback programme at a cost of $139m. The completion of the remaining £30m of the £150m buyback program has been deferred.
This strong focus on cash generation and control of capital expenditure meant IHG’s net debt reduced to $1.3bn at the end of the year, down $386m. This net debt figure includes the $202m finance lease on the InterContinental Boston.
In May 2008 IHG refinanced $2.1bn of long term debt facilities. The new syndicated bank facility consists of two tranches, a $1.6bn 5 year revolving credit facility and a $0.5bn term loan with a 30 month maturity.
Regional overheads in the Americas and EMEA were broadly flat. In Asia Pacific, after a further $5m of the previously announced $10m investment to support the launch of the ANA Crowne Plaza brand in Japan and the non-recurrence of a $2m favourable legal settlement in 2007, regional overheads increased by $6m to support the rapid growth in the region. Central overheads decreased $8m to $155m due to the receipt of a $3m insurance settlement and the impact of weaker sterling.
The effective tax rate for 2008 is 23% (2007: 22%); the underlying rate before the impact of prior year items is 39% (2007: 36%). The reported tax rate may continue to vary year-on-year in the foreseeable future due to prior year settlements and other developments. The 2009 tax rate is currently expected to be in the mid to high 20’s. The interest charge for the year increased by $11m to $101m due to higher average net debt in the year as a result of the £709m special dividend payment in June 2007.
The $132m exceptional operating charge includes (i) $35m of the previously announced $60m cost to support the relaunch of the Holiday Inn brand; (ii) $19m severance costs related to the redundancies arising from a review of the Group’s cost base in light of the current economic climate; (iii) $96m impairment charge including $84m relating to goodwill and intangibles in the managed operations and $12m relating to the InterContinental Boston.
|Number of owned hotels||Proceeds||Net book value|
|Disposed since April 2003||183||$5.5bn||$5.2bn|
For a full list please visit www.ihg.com/Investors
|Twelve months to 31 Dec $m||Total||Americas||EMEA||Asia Pacific||Central|
|Franchised operating profit||509||489||426||425||75||58||8||6|
|Managed operating profit||201||174||51||41||95||87||55||46|
|Continuing owned and leased operating profit||129||109||41||40||45||33||43||36|
|Continuing operating profit pre central overheads||690||637||451||440||171||134||68||63|
|Continuing operating profit||535||474||451||440||171||134||68||63||(155)||(163)|
|Discontinued owned and leased operating profit||14||17||14||16||-||1|
|Total operating profit||549||491||465||456||171||135||68||63||(155)||(163)|
|Actual currency*||Constant currency**||Actual currency*||Constant currency**||Actual currency*||Constant Currency**||Actual currency*||Constant currency**|
|Exchange rates||GBP:USD||EUR: USD|
|*||US dollar actual currency|
|**||Translated at constant 2007 exchange rates|
|***||After Central Overheads|
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.
|Investor Relations (Heather Wood; Catherine Dolton):||+44 (0) 1895 512 176|
|Media Affairs (Leslie McGibbon; Emma Corcoran):||+44 (0) 1895 512 425
+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 presentation with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 9.30am (London time) on 17 February at JPMorgan Cazenove, 20 Moorgate, London, EC2R 6DA. 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.ihg.com/prelims09. 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 3037 9090|
There will also be a conference call, primarily for US investors and analysts, at 9.00am (Eastern Standard Time) on 17 February with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director). There will be an opportunity to ask questions.
|International dial-in||+44 (0)20 7019 0812|
|US Toll Free||877 818 6787|
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 1465
|International dial-in||+44 (0)20 7970 8448|
|US Toll Free||877 774 3459|
The full release and supplementary data will be available on our website from 7.00 am (London time) on Tuesday 17 February. The web address is www.ihg.com/prelims09.
To watch a video of Andy Cosslett reviewing our results visit our YouTube channel at www.youtube.com/ihgplc
InterContinental Hotels Group (IHG) [LON:IHG, NYSE:IHG (ADRs)] is the world’s largest hotel group by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, over 4,150 hotels and almost 620,000 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, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®, and also manages the world’s largest hotel loyalty programme, Priority Club® Rewards with 42 million members worldwide.
IHG has more than 1,700 hotels in its development pipeline, which will create 200,000 jobs worldwide over the next few years.
InterContinental Hotels Group PLC is the Group’s holding company and is incorporated in Great Britain and registered in England and Wales.
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 17 Feburary 2009