02 August 2016

2016 Interim Results announcement

A good performance driven by proven strategy for high quality growth

Financial summary1
2016 2015 %Change 2016 2015 %Change
Revenue $838m $915m (8)% $771m $736m 5%
Fee revenue3 $673m $656m 3% $687m $656m 5%
Operating profit $344m $337m 2% $345m $313m 10%
Adjusted EPS 89.0¢ 87.2¢ 2% 89.4¢ 80.3¢ 11%
Basic EPS4 87.7¢ 156.2¢ (44)% - - -
Interim dividend per share 30.0¢ 27.5¢ 9% - - -
Net debt $1,829m $1,710m 7% - - -

1All figures before exceptional items unless otherwise noted. 2Excluding owned asset disposals, managed leases and significant liquidated damages; at constant H1 2015 exchange rates (CER). Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates. 3Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages. 4After exceptional items.

Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:

“We continue to execute our well-established strategy as we deliver consistent, high-quality growth and generate significant operating cash flows. We have had a good first half, delivering a 10% increase in underlying operating profit and an 11% increase in underlying EPS, underpinning our decision to increase the interim dividend by 9%.

We have driven another excellent signings performance, which includes a second hotel for Kimpton outside the Americas, in Paris. We enhanced our loyalty proposition, continued to develop our technological capabilities and grew our digital channels, supporting our unique owner proposition. We have also remained focused on innovating and evolving our brand portfolio, which includes launching the latest phase of the Crowne Plaza refresh in the US.

The fundamentals for our industry, and particularly for IHG as one of the largest branded players, remain compelling. This backdrop, combined with our winning strategy and the strength of our business model, will enable us to deliver sustainable growth into the future. Despite the uncertain environment in some markets, we remain confident in the outlook for the remainder of the year.”


Financial Highlights

  • Solid revenue growth driven by both RevPAR and rooms
    • Global comparable H1 RevPAR of 2.0%, led by rate up 1.4%. Q2 RevPAR up 2.5%, with growth in all regions.
    • 3.6% net room growth year on year, with 17k room openings, up 8% year on year (with Q2 up over 40%).
    • $11.9bn total gross revenue from hotels in IHG’s system (up 1.7% year on year; up 4.0% CER).
  • High-quality business model, focused on disciplined execution, capital allocation and shareholder returns
    • Group fee margin of 48.6%, up 2.9%pts (up 2.6%pts CER), aided by favourable phasing of costs along with scale benefits and continued focus on tight overhead control.
    • Focused investment and asset recycling led to net capital expenditure of $83m (gross: $108m).
    • $1.5bn returned to shareholders in May via a $6.329 per share special dividend with 5 for 6 share consolidation.
    • 9.1% increase in interim dividend to 30.0¢.

Strategic Progress

  • Strengthening our portfolio of preferred brands
    • Highest signings for InterContinental since 2008, further expanding the world’s largest luxury hotel brand.
    • Growing our boutique footprint, with the signing of our second Kimpton outside the Americas in Paris, and the opening of the second Hotel Indigo in our AMEA region, in Singapore.
    • Continued momentum for our new brands, with an additional signing for HUALUXE, taking the pipeline to 21 hotels. In July we opened our fourth EVEN Hotel, an owned property in Brooklyn, New York.
    • Next phase of Crowne Plaza refresh announced in the US, supported by $200m investment over 3 years (~$100m system funded, ~$100m within existing capex guidance).
    • Continued roll-out of both our Formula Blue room design for Holiday Inn Express in the Americas, and our innovative Open Lobby solution for Holiday Inn in Europe and the Americas.
  • Strong pipeline driving momentum and supporting future growth
    • Signed 35k rooms into the pipeline, taking it to 222k rooms.
    • 45% of the pipeline is under construction and 90% is in our ten priority markets.
    • 13% share of the active industry pipeline, around three times current supply share, reflecting our strong growth position.
  • Driving revenue through digital capabilities and loyalty proposition
    • Digital revenue up over 7% year on year; within this, mobile revenue up 32% year on year with mobile now driving more traffic to our websites than desktop.
    • Global roll out of ‘Your Rate by IHG Rewards Club’ announced, helping drive a 20% YTD increase in IHG Rewards Club enrolments and an increase in point redemptions of almost one third.
    • Innovative cloud-based Guest Reservation System on track for pilot and phased rollout starting in 2017.

Americas – Strong fee revenue growth

Comparable RevPAR increased 2.4% (Q2: up 2.8%), driven by 2.2% rate growth. US RevPAR grew 2.1%, with 2.6% in Q2. This overall figure was impacted by our concentration in oil-producing markets, where RevPAR was down 6.3% in Q2; the remainder of the estate grew 3.7%.

On an underlying1 basis revenue was up 7% and operating profit up 9%, driven by good growth in both franchised and managed fees, aided by favourable cost phasing in the franchised business and a $4m year on year saving on US healthcare costs. This was partially offset by $4m of previously disclosed costs incurred ahead of the re-opening of InterContinental New York Barclay in April, which is already positioning itself as one of the premier hotels in its market, and is commanding 35% higher rates than pre-refurbishment. Underlying1 owned revenue was up 5% ($3m) and underlying operating profit flat, with good RevPAR growth offset by phasing of costs at one hotel. Reported revenue grew by 4% (5% CER) and profits increased 6% (7% CER), negatively impacted by the previously reported $3m of liquidated damages received in 2015.

We opened 13k rooms (95 hotels), our fastest pace in 5 years, including 6 Holiday Inn Club Vacations properties (2k rooms). 10k rooms (64 hotels) were removed as we continue to focus on high quality brand representation. We signed 20k rooms, including more than 100 Holiday Inn Brand Family hotels in the US.

H2 2016:

As previously disclosed, to drive growth across our brand portfolio, we are investing $7m into permanent franchise development resources; with $4m now expected in H2, with a further $3m annualisation in 2017. $2m of the $6m that we expected to incur as reopening costs for InterContinental New York Barclay will now be in H2. We expect $5m of favourable phasing of franchise costs in H1 to reverse in H2.

Europe – Best signings performance since 2008

Comparable RevPAR increased by 2.0% (Q2: up 2.6%), driven by rate up 1.6%. UK RevPAR increased by 1.4%, led by strong trading in the provinces. In Germany, 8.7% RevPAR growth was driven by a particularly favourable trade fair calendar in Q2. Challenging trading conditions in Paris persist, with a 19.5% RevPAR decline partially offset by strong growth in the French provinces.

On an underlying1 basis revenue was down 5% and operating profit down 3%. Performance across much of the estate was good, this was offset by a $2m revenue reduction in relation to three managed hotels; two of which have exited the system and one of which is undergoing a major refurbishment. Reported revenue declined 24% (22% CER) and reported operating profit was down 6% (3% CER). This was impacted by the sale of InterContinental Paris – Le Grand on 20 May 2015, but had some benefit from favourable phasing of regional overheads.

Opened 1k rooms (3 hotels) and signed 4k rooms (24 hotels), the latter being our best performance for the half since 2008. This included the 694 room Holiday Inn London – Kensington and the 51 room InterContinental Venice – Palazzo Nani in Italy.

AMEA – Strong trading in key markets offset by weakness in the Middle East

Comparable RevPAR decreased 0.4% (Q2: up 0.4%). Performance outside the Middle East continued to be strong, with 4.3% RevPAR growth overall. India was up 10.5%, Japan and Australia up mid-single digits and South-East Asia up low-single digits. In the Middle East RevPAR was down 8.0% due to the ongoing impact of low oil prices. An increasing mix of new rooms opening in developing markets meant that total RevPAR was down 1.8% in the half.

On an underlying1 basis, revenue was down 2% and operating profit down 5%. Good underlying growth in our managed business was offset by a $4m revenue reduction in relation to four hotels; three long standing contracts being renewed onto standard market terms and one equity stake disposal. Reported revenue declined 1% (down 1% CER) and operating profit 3% (down 3% CER).

We opened 2k rooms (8 hotels), including our first Holiday Inn Express in Australia, driving net system growth of nearly 8% year on year (including almost 3k rooms in Makkah with low annual fee contribution due to the highly seasonal demand nature of this market). We signed 3k rooms (11 hotels) including our first hotel in Myanmar, the 500-room Holiday Inn Yangon Pyay Road.

H2 2016:

There will be a further $3m revenue reduction in H2 in relation to the three contract renewals and one equity stake disposal.

Greater China – Solid mainland trading and double digit system growth drive strong profit increases

Comparable RevPAR increased 2.4% (Q2: up 2.5%), with growth of 4.7% in mainland China offset by continued declines in Hong Kong and Macau. Mainland tier 1 cities continued to trade particularly well, with RevPAR up 6.6%, driven by strong performance in Beijing and Shanghai. Our strategy to maximise our long term growth potential by using our mainstream brands to penetrate less developed cities impacted total RevPAR, which was down 2.7% for the region.

Underlying1 revenue was up 14% and profit up 38% driven by strong trading in mainland China, double-digit year on year net system growth and $3m managed fee contribution from InterContinental Hong Kong which was sold on 31 October 2015. Reported revenue and operating profit declined by 53% (51% CER) and 41% (35% CER) respectively, impacted by the sale of the InterContinental Hong Kong.

We opened 2k rooms (6 hotels), including two InterContinental hotels in Wuhan and Nantong, taking the portfolio for the brand to 15k rooms (36 hotels) in the region. We signed 8k rooms (33 hotels), including our first two franchised Holiday Inn Express properties, in Shanghai and Qidong.


Highly cash generative business with disciplined approach to capital allocation

  • Significant free cash flow from operations
    • Free cash flow of $336m for the half, up 151% year on year (H1 2015: $134m), includes cash receipts on behalf of the system fund of ~$95m from renegotiation of long-term partnership agreements and the benefit of favourable phasing of tax payments compared to prior year.
  • Investing for growth
    • Third owned EVEN Hotel opened in Brooklyn in July; seven further EVEN Hotels in pipeline, all asset light.
    • InterContinental New York Barclay (in which IHG has a 20% JV stake) re-opened in late April after its major refurbishment.
    • $108m gross capital expenditure in first half: $36m maintenance capex and key money; $25m recyclable investments; and $47m system funded capital investments. $11m proceeds received from asset recycling and $14m system fund depreciation received via working capital, resulting in $83m of net capital expenditure.
    • Gross capex guidance remains unchanged at up to $350m p.a. into the medium term.
  • Shareholder returns
    • 9.1% increase in the interim dividend to 30.0¢.
    • $1.5bn returned to shareholders in May via a $6.329 per share special dividend with 5 for 6 share consolidation.
  • Efficient balance sheet provides flexibility
    • Financial position remains robust, with an on-going commitment to an efficient balance sheet and investment grade credit rating.
    • Net debt at end of first half of $1,829m (including $224m finance lease on InterContinental Boston), up $1.3bn on the 2015 close following the payment of the $1.5bn special dividend in May. Net debt to EBITDA now stands at 2.3x (LTM).

Foreign exchange – stronger US dollar impacts reported profit

The stronger US dollar in H1 reduced group RevPAR to 0.2% when reported at actual rates, and negatively impacted reported profit by $4m. Europe and Greater China were most affected, with foreign exchange reducing RevPAR growth by around 4%pts in each region. A full breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.

Currency markets continue to be volatile and we expect foreign exchange to have an impact on 2016 reported profit. If 30 June 2016 spot exchange rates had existed throughout H2 2015, reported operating profit for that period would have been $6m higher.

Note that whilst the UK comprises around 5% of our group revenues, approximately 50% of our gross central overhead and 40% of Europe regional overhead are in sterling. At 30 June 2016 exchange rates, approximately 70% of our debt is denominated in sterling.

Interest, tax, and exceptional items

Interest: Net financial expenses reduced by $2m to $41m due to high levels of cash ahead of payment of the $1.5bn special dividend on 23 May 2016.

Tax: Based on the position at the end of the half, the tax charge has been calculated using an interim effective tax rate of 33% (2015: 30%). We continue to expect the full year 2016 tax rate to be in the low 30s.

Exceptional operating items: Net exceptional loss of $5m for the half related to the Kimpton integration.

1Excluding owned asset disposals, managed leases, significant liquidated damages at constant FY15 exchange rates (CER)


Download the Appendices of the Interim Results to 30 June 2016 PDF 0.41Mb



About IHG®

IHG® (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including InterContinental® Hotels & ResortsKimpton® Hotels & RestaurantsHUALUXE® Hotels and ResortsCrowne Plaza® Hotels & ResortsHotel Indigo®EVEN® HotelsHoliday Inn® Hotels & ResortsHoliday Inn Express®Staybridge Suites® and Candlewood Suites®.

IHG franchises, leases, manages or owns more than 5,000 hotels and nearly 750,000 guest rooms in almost 100 countries, with more than 1,400 hotels in its development pipeline. IHG also manages IHG® Rewards Club, the world’s first and largest hotel loyalty programme with more than 96 million members worldwide.

InterContinental Hotels Group PLC is the Group’s holding company and is incorporated in Great Britain and registered in England and Wales. More than 350,000 people work across IHG’s hotels and corporate offices globally.

Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our latest news, visit: www.ihg.com/media and follow us on social media at: www.twitter.com/ihgwww.facebook.com/ihg and www.youtube.com/ihgplc.

Webcast for Analysts and Shareholders

A conference call and webcast presented by Richard Solomons, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will commence at 9:30am London time on 2nd August on the web address www.ihgplc.com/interims16. For those wishing to ask questions please use the dial in details below which will have a Q&A facility.

The webcast replay will be available on the website later on the day of the results and will remain on it for the foreseeable future.

UK toll:

+44 (0)20 3003 2666

UK toll free:

0808 109 0700

US toll:

+1 212 999 6659

Passcode IHG Investor

A replay of the conference call will also be available following the event – details are below.


+44 (0)20 8196 1998



US conference call and Q&A

An additional conference call, primarily for US investors and analysts, at 9:00am New York Time on 2nd August. There will be an opportunity to ask questions.

UK toll:

+44 (0)20 3003 2666

US toll:

+1 212 999 6659

US toll free:

+1 866 966 5335


IHG Investor

A replay of the conference call will also be available following the event – details are below.


+44 (0)20 8196 1998
Pin: 5519478#


The full release and supplementary data will be available on our website from 7:00am (London time) on 2nd August. The web address is www.ihgplc.com/interims16.