15 February 2011
Preliminary Results - Full Year Results to 31 December 2010
Brand delivery and scale advantage driving strong financial performance in an improving market
| Financial summaryº | 2010 | 2009 | % Change YoY | |
|---|---|---|---|---|
| Actual | CER2 | |||
| Revenue | $1,628m | $1,538m | 6% | 6% |
| Operating profit | $444m | $363m | 22% | 22% |
| Total adjusted EPS | 98.6¢ | 102.8¢ | (4)% | |
| Total basic EPS1 | 101.7¢ | 74.7¢ | 36% | |
| Total dividend per share | 48.0¢ | 41.4¢ | 16% | |
| Net debt | $743m | $1,092m3 | ||
Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC, said:
“2010 was an excellent year for IHG. After a slow start to the year, the industry staged the sharpest recovery in its history, exceeding all expectations. By focusing on our brands and using our scale, we delivered 6% growth in revenue per available room (RevPAR). We signed more rooms into our pipeline than in 2009 and despite the planned exceptional number of removals to drive up quality, we grew the number of rooms in our system, led by a 12% increase in China.
“The $1bn Holiday Inn relaunch is almost complete, delivering RevPAR outperformance and improved guest satisfaction. We are now working with our hotel owners to refresh Crowne Plaza, already the fourth largest upscale hotel brand in the world, and one with great future potential.
“Our focus on efficiency has increased fee-based margins 1.1 percentage points. In line with our asset light strategy we have started the initial marketing for sale of the InterContinental New York Barclay today.
“The 21% growth in the final dividend reflects our confidence in IHG’s prospects. Our priority is to increase market share and improve margins in an industry set for strong growth over the next few years.”
Driving Market Share
- Total gross revenue* from hotels in IHG’s system of $18.7bn, up 11%.
- 2010 global RevPAR growth of 6.2%, with 8.0% in the fourth quarter.
- Total system size of 647,161 rooms (4,437 hotels), up 0.1% year on year.
- 35,744 rooms (259 hotels) added, with 35,262 rooms (260 hotels) removed.
- Signings of 55,598 rooms (319 hotels), up on 2009 levels in all regions. Total pipeline of 204,859 rooms (1,275 hotels); half outside the Americas; 75,000 rooms currently under construction.
- 2011 net system growth is expected to be modest as remaining Holiday Inn relaunch exits are completed.
- Post 2011, robust pipeline should drive medium term net system growth of 3% - 5% per annum.
- Holiday Inn relaunch is substantially complete with refreshed hotels performing strongly.
- 3,002 hotels now operating under the new standards (91% of the estate). RevPAR growth for hotels relaunched for more than one year was c.6% points higher than non-relaunched hotels in the US and c.5% points higher globally.
- Strong system delivery.
- Record enrolments in Priority Club Rewards (PCR) took total membership to 56m (2009: 48m).
- 68% of rooms revenue delivered through IHG’s Channels or by PCR members direct to hotel (2009: 68%).
Growing Margins
- Continued focus on costs.
- Regional and central costs broadly in line with 2009 excluding the impact of performance based incentives.
- Sustainable efficiencies drive fee-based margins* up 1.1%pts to 35.7%.
- At constant currency, and reflecting the current trading outlook, total 2011 regional and central costs expected to be in the region of $250m to $260m compared to $258m in 2010.
Current trading update
- January global RevPAR up 8.4%. Americas 8.2%; EMEA 7.0%; and Asia Pacific 10.9%.
- $10m liquidated damages receipt in Americas managed revenue and operating profit in first quarter 2011.
- Initial estimate of impact on 2011 from unrest in Egypt of $3m.
| º | All figures are before exceptional items unless otherwise noted. See appendices 3 and 4 for analysis of financial headlines |
| 1 | After exceptional items |
| 2 | CER = constant exchange rates |
| 3 | Restated for a change in presentation |
| * | See appendix 6 for definition |
Regional Highlights
Americas – strong brands drive new deals
RevPAR increased 4.9%; 7.7% in the fourth quarter when rate was up 1.4%. US RevPAR was up 4.3% in 2010, with 7.5% growth in the fourth quarter. 2010 RevPAR grew 8.1% at InterContinental New York Barclay.
Revenue increased 5% (4% at CER) to $807m and operating profit increased 28% (27% at CER) to $369m. After adjusting for the owned hotel disposals and the charge for priority guarantee shortfalls in 2009, revenue was up 7% and operating profit up 10%. Franchise royalties drove much of this growth, up 11%. This was offset by a 1% reduction in total system size due to exits associated with the Holiday Inn relaunch and a $10m increase in regional costs, including $4m in relation to our self-insured healthcare benefit plan.
During 2010 the InterContinental Times Square and the first Staybridge Suites opened in New York, taking IHG’s room count in the city to 6,570. We re-entered the important Hawaii market with the Holiday Inn Beachcomber Resort in Waikiki Beach and formed an InterContinental Alliance with Las Vegas Sands Corp to bring the 6,874 all suite Venetian and Palazzo resorts into the system. The wider benefits of the Holiday Inn relaunch were clear, with full service Holiday Inn signings up on 2009.
We have formed a strategic relationship with Summit Hotel Properties, Inc. (Summit), a US hotel real estate investment trust focused on premium-branded select service hotels in the upscale and midscale without food and beverage sectors. In connection with Summit’s initial public offering, which closed on 14 February 2011, IHG purchased 1,274,000 shares of Summit common stock, representing approximately 4.7%, for a purchase price of $11.6m. Of Summit’s 65 properties seven already carry IHG’s brands, and under a sourcing agreement we have also entered into with them, Summit will provide IHG an exclusive right for a period of five years, of first offer to franchise or manage any unbranded hotel bought by them which they want to brand.
EMEA – increase in signings
RevPAR increased 6.1%, with 6.5% growth in the fourth quarter. Germany was the strongest of our major markets with RevPAR growth of 18.4% in 2010. Mixed trading conditions in the Middle East resulted in RevPAR down 1.0% for the year. 2010 RevPAR grew 15.0% at InterContinental London Park Lane and 11.5% at InterContinental Paris Le Grand.
Revenue increased 4% (8% at CER) to $414m and operating profit decreased 2% (2% growth at CER) to $125m. Excluding the impact of a $3m liquidated damages receipt in 2009, revenue was up 5% (8% at CER) and operating profit up 1% (5% at CER). Much of this was driven by the owned and leased hotels, where positive RevPAR combined with strong cost control drove good profit growth. Managed profits were down by $3m to $62m, due to a combination of the unfavourable trading environment across much of the Middle East and a $3m provision for total estimated net future cash outflows expected under a guarantee in relation to one hotel. Franchised profits declined $1m to $59m, but excluding the $3m liquidated damages receipt in 2009 and at constant currency, profits increased 7% driven by RevPAR growth of 7.6%.
We signed 58 new deals in the year, up 11 on 2009. These included eight Hotel Indigo contracts in key locations such as Lisbon, Madrid and Berlin. We also signed six Crowne Plaza hotels including the strategic markets of Istanbul, St. Petersburg and Amsterdam. Signings across Europe as a whole were very strong, particularly in Germany and France where we signed nine and six hotels respectively. Key openings included the Hotel Indigo Tower Hill, London, Staybridge Suites St. Petersburg and Holiday Inn Berlin International Airport.
Asia Pacific – strong profit growth
RevPAR increased 12.4%, with 11.5% growth in the fourth quarter. Greater China was our strongest market with RevPAR up 25.8% for the year, including 55.9% in Shanghai which was boosted by the World Expo which took place between May and October. Asia Australasia RevPAR grew 5.6% and at InterContinental Hong Kong RevPAR was up 15.3%.
Revenue increased 24% (20% at CER) to $303m and operating profit increased 71% (67% at CER) to $89m. This was predominantly driven by RevPAR growth; the contribution from new managed rooms (2010: 9% growth; 2009: 10% growth) and a $4m benefit to managed operating profit due to the collection of bad debts which had previously been provided for.
We continue to build on our leading position in Greater China with 48,527 rooms (145 hotels) open (a 12% increase year on year) and 50,236 rooms (147 hotels) in the pipeline. We opened 24 hotels in 17 cities across China, including Asia Pacific’s first Hotel Indigo on the Bund and the InterContinental at the Expo site, both in Shanghai. In Asia Australasia, we signed six hotels in India, taking our pipeline there to 10,073 rooms. In Vietnam we signed two new Holiday Inn resorts in the prime beachfront locations of Cam Ranh Bay and Phu Quoc, and we signed the Crowne Plaza Lumpini Park in Bangkok which opened in December.
Interest, tax and cash flow
The interest charge for the period increased $8m to $62m as the impact of lower levels of average net debt was offset by a higher average cost of debt following the issuance of a seven year £250m bond in 2009.
The effective tax rate for 2010 is 26% (2009: 5%). The 2011 tax rate is expected to be in the high 20s.
Free cash flow of $432m (2009: $377m) due to excellent profit conversion and tight control over maintenance capital expenditure.
Appendix 1: RevPAR Movement Summary
| January 2011 | Full Year 2010 | Q4’10 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| RevPAR | Rate | Occ. | RevPAR | Rate | Occ. | RevPAR | Rate | Occ. | |
| Group | 8.4% | 2.0% | 3.1%pts | 6.2% | (0.2)% | 3.8%pts | 8.0% | 2.4% | 3.1%pts |
| Americas | 8.2% | 1.2% | 3.3%pts | 4.9% | (1.0)% | 3.4%pts | 7.7% | 1.4% | 3.3%pts |
| EMEA | 7.0% | 1.7% | 2.7%pts | 6.1% | 0.5% | 3.6%pts | 6.5% | 2.5% | 2.5%pts |
| Asia Pacific | 10.9% | 6.5% | 2.4%pts | 12.4% | 2.5% | 6.0%pts | 11.5% | 7.0% | 2.9%pts |
Appendix 2: Full Year System & Pipeline Summary (rooms)
| System | Pipeline | ||||||
|---|---|---|---|---|---|---|---|
| Openings | Removals | Net | Total | YoY% | Signings | Total | |
| Group | 35,744 | (35,262) | 482 | 647,161 | - | 55,598 | 204,859 |
| Americas | 20,980 | (26,959) | (5,979) | 439,375 | (1)% | 30,223 | 102,509 |
| EMEA | 5,767 | (5,211) | 556 | 120,852 | - | 9,303 | 31,435 |
| Asia Pacific | 8,997 | (3,092) | 5,905 | 86,934 | 7% | 16,072 | 70,915 |
Appendix 3: Fourth quarter financial headlines
| Operating Profit $m | Total | Americas | EMEA | Asia Pacific | Central | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Franchised | 108 | 98 | 91 | 83 | 14 | 14 | 3 | 1 | - | - |
| Managed | 46 | 7 | 6 | (19) | 17 | 17 | 23 | 9 | - | - |
| Owned & leased | 32 | 29 | 5 | 4 | 12 | 11 | 15 | 14 | - | - |
| Regional overheads | (35) | (26) | (17) | (11) | (11) | (9) | (7) | (6) | - | - |
| Operating profit pre central overheads | 151 | 108 | 85 | 57 | 32 | 33 | 34 | 18 | - | - |
| Central overheads | (41) | (48) | - | - | - | - | - | - | (41) | (48) |
| Group Operating profit | 110 | 60 | 85 | 57 | 32 | 33 | 34 | 18 | (41) | (48) |
Appendix 4: Full year financial headlines
| Operating Profit $m | Total | Americas | EMEA | Asia Pacific | Central | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Franchised | 458 | 429 | 392 | 364 | 59 | 60 | 7 | 5 | - | - |
| Managed | 156 | 69 | 21 | (40) | 62 | 65 | 73 | 44 | - | - |
| Owned & leased | 88 | 74 | 13 | 11 | 40 | 33 | 35 | 30 | - | - |
| Regional overheads | (119) | (105) | (57) | (47) | (36) | (31) | (26) | (27) | - | - |
| Operating profit pre central overheads | 583 | 467 | 369 | 288 | 125 | 127 | 89 | 52 | - | - |
| Central overheads | (139) | (104) | - | - | - | - | - | - | (139) | (104) |
| Group Operating profit | 444 | 363 | 369 | 288 | 125 | 127 | 89 | 52 | (139) | (104) |
Appendix 5: Constant exchange rate (CER) operating profit movement before exceptional items
| Total*** | Americas | EMEA | Asia Pacific | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Actual currency* | CER** | Actual currency* | CER** | Actual currency* | CER** | Actual currency* | CER** | ||||
| Growth/(decline) | 22% | 22% | 28% | 27% | (2)% | 2% | 71% | 67% | |||
Exchange rates
| GBP:USD | EUR: USD | |
|---|---|---|
| 2010 | 0.65 | 0.76 |
| 2009 | 0.64 | 0.72 |
| * | US dollar actual currency |
| ** | Translated at constant 2009 exchange rates |
| *** | After Central Overheads |
Appendix 6: Definitions
Total gross revenue: 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.
Fee based margins: adjusted for owned and leased hotels, managed leases, individually significant liquidated damages payments, HPT guarantee payments and excludes the benefit in 2009 of non-sustainable incentive compensation cost savings.
Appendix 7: Investor Information for 2010 final dividend
| Ex-dividend date: | 23 March 2011 | Record date: | 25 March 2011 |
| Payment date: | 3 June 2011 | Dividend payment: | Ordinary shares = 22.0 pence per share |
| ADRs = 35.2 cents per ADR |
For further information, please contact:
| Investor Relations (Heather Wood; Catherine Dolton): |
+44 (0) 1895 512 176 |
| Media Affairs (Leslie McGibbon; Giles Deards): |
+44 (0) 7808 094 471 +44 (0) 7753 949301 |
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 (Chief Financial Officer and Head of Commercial Development) will commence at 9.30am (London time) on 15 February at Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ. 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/prelims11. 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 7138 0816 |
| Passcode: | 8564080 |
US conference call and Q&A:
There will also be a conference call, primarily for US investors and analysts, at 9.00am (Eastern Standard Time) on 15 February with Andrew Cosslett (Chief Executive) and Richard Solomons (Chief Financial Officer and Head of Commercial Development). There will be an opportunity to ask questions.
| International dial-in | +44 (0)20 7108 6370 |
| Standard US dial-in: | + 1 517 345 9004 |
| US Toll Free: | 866 692 5726 |
| Conference ID: | HOTEL |
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 2524#.
| International dial-in | +44 (0)20 7108 6225 |
| Standard US dial-in: | +1 203 369 4702 |
| US Toll Free: | 866 850 6506 |
Website:
The full release and supplementary data will be available on our website from 7.00 am (London time) on 15 February. The web address is www.ihg.com/prelims11. To watch a video of Richard Solomons reviewing our results visit our YouTube channel at www.youtube.com/ihgplc.
Notes to Editors:
InterContinental Hotels Group (IHG) [LON:IHG, NYSE:IHG (ADRs)] is the world's largest hotel group by number of rooms. IHG franchises, leases, manages or owns, through various subsidiaries, over 4,400 hotels and more than 640,000 guest rooms in 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 56 million members worldwide.
IHG has almost 1,300 hotels in its development pipeline, which is expected to create 160,000 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 our latest news visit www.ihg.com/media, Twitter www.twitter.com/ihgplc or YouTube www.youtube.com/ihgplc.
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 ‘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.