2013-08-09— /travelprnews.com/ — Good performance with strong signing activity
| Financial summary0 | 2013 | 20121 | % Change YoY | ||
|---|---|---|---|---|---|
| Actual | CER2 | CER & ex. LDs3 | |||
| Revenue | $936m | $878m | 7% | 7% | 2% |
| Operating profit | $338m | $281m | 20% | 20% | 6% |
| Total adjusted EPS | 78.2¢ | 62.8¢ | 25% | ||
| Total basic EPS4 | 127.8¢ | 93.4¢ | 37% | ||
| Interim dividend per share | 23.0¢ | 21.0¢ | 10% | ||
| Net debt | $861m | $564m | |||
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
“We have delivered a good performance in the first half, with our preferred brands driving RevPAR growth of 3.7%, including 4.0% in the second quarter. Our global scale has allowed us to reinvest in the business whilst growing margins, resulting in solid underlying profit gains led by our Americas region, and strong cash flows.
Consistent with our long track record of returning value to shareholders, we today announce a $350m special dividend. In addition we are increasing the interim dividend by 10% reflecting our good first half results and the confidence we have in the future prospects of the business.
We continue to strengthen our foundation for future growth, signing more than 200 hotels into our pipeline, a notable increase on H1 2012 reflecting our owners’ confidence in both IHG and the industry demand drivers.
Our high quality pipeline, broad geographic spread and fee based model give us confidence in the outlook, despite the ongoing challenging economic conditions in some of our markets.”
Driving Market Share
- Total gross revenue5 from hotels in IHG’s system of $10.4bn, up 1% (2% CER).
- First half global RevPAR growth of 3.7% (rate up 1.9%) with second quarter up 4.0% (rate up 1.8%).
- Americas 4.5% (US 4.7%); Europe 0.4%; AMEA 6.2%; Greater China (0.1)%.
- Q2 RevPAR: Americas 4.6% (US 4.7%); Europe 2.2%; AMEA 6.8%; Greater China (1.9)%.
- Total system size of 678k rooms (4,643 hotels), up 1.7% year on year.
- 15k rooms (108 hotels) added to the system, with over half of these for the Holiday Inn brand family.
- Pipeline of 179k rooms (1,098 hotels), over 40% under construction.
- Signings of 32k rooms (216 hotels) up over 40% on H1 2012, with 9k rooms in Greater China.
- Openings and signings include 4k rooms on US Army bases added in the half.
- Fee revenue5 up 4%2 to $562m, led by the Americas with growth of 7%2.
- Increasing proportion of new rooms are now coming from developing markets, which have lower absolute RevPAR levels, particularly in the initial years as demand drivers mature.
- Building preferred brands.
- Three EVEN Hotels in the pipeline at the end of June, of which two were added in H1, and with a fourth in July.
- Four HUALUXE Hotels & Resorts signed, taking the pipeline to 19 hotels.
- IHG Rewards Club launched 1 July; first loyalty programme in the industry to offer members free internet globally.
- Holiday Inn ranked “Highest in Guest Satisfaction Among Mid-scale Full Service Hotel Chains” by J.D. Power and Associates for 3rd year running.
- Holiday Inn Express Stay Smart™ campaign relaunched in the US.
- Growing margins.
- Fee based margin5 of 44.0%, up c.50 basis points year on year on an underlying basis.
Uses of Cash
- Return of funds to shareholders.
- $350m will be returned to shareholders via a special dividend7 to be paid with the interim dividend in October.
- The $500m share buyback programme is almost 50% complete, with 8.9m shares repurchased for $243m. Year to date 4.8m shares have been repurchased for $136m.
- Growth investment funded by recycling capital.
- $401m6 cash from disposals primarily represents $368m6 net proceeds from InterContinental London Park Lane.
- Growth capital expenditure of $55m in H1 includes c.$30m on our first owned EVEN Hotel property.
- Full year growth capital expenditure is on track for $100m – $200m.
- Maintenance capital expenditure of $59m in H1 and on track for c$150m in the full year.
- Sustainable growth in the ordinary dividend.
- 10% increase in the interim dividend to 23¢ reflects confidence in IHG’s future prospects and our cash generative business model.
Asset disposals
- Disposal of InterContinental London Park Lane completed, with management contract secured for up to 60 years.
- The disposal process continues for InterContinental New York Barclay.
Current trading update
- Early indications are that current trading trends are broadly in line with the first half.
o All figures are before exceptional items unless otherwise noted. See appendices for financial headlines
1 Restated for the adoption of IAS19R
2 CER = constant exchange rates
3 Excluding liquidated damages receipts in 2013 of $31m in the Americas and $9m in Europe ($0m in 2012)
4 Including exceptional items
5 See appendix 5 for definition
6 Net of $(94)m, which has been used to provide security over UK pension liabilities
7 Special dividend to be paid without share consolidation.
Americas – Continued RevPAR progression drives profit growth
RevPAR increased 4.5% (with 2.9% rate growth) and second quarter RevPAR increased 4.6% (with 2.5% rate growth). US RevPAR was up 4.7% in both the first half and the second quarter. On a total basis, including the benefit from new hotels but excluding the impact from the removal of 8 hotels with one owner, US RevPAR grew 4.9% in H1 with 5.1% in the second quarter.
Revenue increased 14% to $457m and operating profit increased 21% to $282m. After adjusting for the $31m liquidated damages receipt in the managed business and excluding results from one managed lease hotel*, revenue increased 7% and operating profit increased 8%. This was driven by 6% growth in franchise royalties, and strong drop-through in the owned and leased hotels. This was partly offset by the loss of $4m in fees relating to the 8 hotels with one owner that were removed in the first quarter, and a $4m increase in regional overheads.
We opened 10k rooms (89 hotels) in the first half, with more than half of these rooms under the Holiday Inn brand family. We signed and opened 4k rooms on US Army bases in the first half, taking the total open under this contract to 12k rooms. Signings of 18k rooms (161 hotels) are up 39% year on year (up 8% excluding the rooms on US Army bases), and included two EVEN Hotels properties.
Europe – Resilient trading in key markets
RevPAR increased 0.4%, with 0.5% rate decline. Second quarter RevPAR increased 2.2% (with 0.3% rate growth) in part reflecting the reversal of the Easter timing impact as expected. Trading was resilient in our key markets with H1 RevPAR up 1.6% in the UK, 1.1% in Germany and 4.0% in France.
Revenue of $206m was flat year on year and operating profit of $53m increased 6% (reported and CER). After adjusting for a $9m liquidated damages receipt in Europe franchised, the disposal of InterContinental London Park Lane in Q2 2013 and excluding results from managed lease hotels*, both revenue and operating profit increased 6% at CER. Strong owned and leased hotel performance was driven by 11.3% RevPAR growth at InterContinental Paris Le Grand.
We opened 2k rooms (8 hotels) in the half, including 1k rooms for the Holiday Inn brand family, a Hotel Indigo hotel in Barcelona, the first for the brand in Southern Europe and a new InterContinental in Marseille. We signed 2k rooms (15 hotels); mostly for the Holiday Inn brand family, including a third signing under the 15 hotel multiple development agreement for Holiday Inn Express in Russia.
AMEA – Good RevPAR growth across the region
RevPAR was up 6.2% (with 1.6% rate growth) and second quarter RevPAR was up 6.8% (with 2.3% rate growth). Southeast Asia and Japan reported high single digit RevPAR growth; the Middle East and Australasia both achieved mid-single digit RevPAR increases.
Revenue decreased 6% (3% CER) to $102m and operating profit increased 3% (5% CER) to $41m. At CER and excluding results from one managed lease hotel*, revenue decreased 6% and operating profit increased 5%. This was driven by strong RevPAR growth and lower costs in the managed business, partly offset by a $3m negative impact from the renewal of a small number of long-standing contracts onto current commercial terms (full year impact expected to be $6m).
We opened 2k rooms (6 hotels) in the first half, including an InterContinental hotel in Osaka, our first new build InterContinental to open in Japan for over 15 years. We signed 3k rooms (10 hotels) in H1, up over 80% year on year, including a Crowne Plaza hotel in Oman and 2k rooms for the Holiday Inn brand family including our first Holiday Inn hotel for Mauritius. In July we announced a 15 hotel multiple development agreement in Australia for Holiday Inn Express.
Greater China – Strong signings and industry outperformance
RevPAR decreased 0.1%, (with rate down 1.2%) outperforming the industry by 5.9% points. Second quarter RevPAR decreased 1.9% with a 2.0% rate decline. This reflects the adverse impact from a series of natural disasters in Western China in Q2 and the ongoing impact from the slower macroeconomic conditions.
Revenue increased 4% (4% CER) to $112m due to 8% net rooms growth driving rooms revenue up 9% and non-rooms revenues up 3%. Operating profit was flat at $36m (reported and CER) reflecting managed system size growth and cost control measures at InterContinental Hong Kong. This was offset by investment in regional overheads to support future growth as previously disclosed.
We opened 2k rooms (5 hotels) in H1, including a 500 room Crowne Plaza resort hotel in Xishuangbanna, the first major international hotel to open in this prime leisure market in Southwest China, and our first Hotel Indigo hotel in Hong Kong. We signed 9k rooms (30 hotels) taking the pipeline to 58k rooms and reflecting the confidence owners have in both IHG and the compelling long term growth opportunity for this region.
*See appendix 5 for definition
Interest, tax, net debt, exceptional items and accounting policy change
Interest: H1 charge of $36m (H1 2012: $25m) reflected the increase in gross debt year on year, following the issuance of a £400m bond in November 2012.
Tax: Based on the position at the end of the half, the tax charge has been calculated using an estimated annual tax rate of 31% (H1 2012: 29%). The full year tax rate is expected to be in the low 30s in 2013 and 2014 as previously guided.
Net debt: $861m at the end of the half (including the $213m finance lease on the InterContinental Boston). This is up from $564m at 30 June 2012 as a result of the $0.5bn special dividend paid in October 2012 and the $243m share buyback completed to date, but down on the year end position of $1,074m due to the $368m net cash inflow from the disposal of the InterContinental London Park Lane.
Exceptional operating items: net exceptional credit of $160m for the half included $166m net gain on disposal of InterContinental London Park Lane.
Adoption of IAS 19 (Revised) ‘Employee Benefits’: adoption of this new accounting policy from 1 January 2013 has resulted in an additional $5m charge to operating profit for H1 2012, as reflected in the restated 2012 half year accounts.
Appendix 1: RevPAR Movement Summary
| Half Year 2013 | Q2 2013 | |||||
|---|---|---|---|---|---|---|
| RevPAR | Rate | Occ. | RevPAR | Rate | Occ. | |
| *See appendix 5 for definition | ||||||
| Group | 3.7% | 1.9% | 1.1pts | 4.0% | 1.8% | 1.4pts |
| Americas | 4.5% | 2.9% | 1.0pts | 4.6% | 2.5% | 1.4pts |
| Europe | 0.4% | (0.5)% | 0.6pts | 2.2% | 0.3% | 1.4pts |
| AMEA | 6.2% | 1.6% | 3.1pts | 6.8% | 2.3% | 3.1pts |
| G. China | (0.1)% | (1.2)% | 0.6pts | (1.9)% | (2.0)% | 0.1pts |
Appendix 2: First Half System & Pipeline Summary (rooms)
| System | Pipeline | ||||||
|---|---|---|---|---|---|---|---|
| Openings | Removals | Net | Total | YoY% | Signings | Total | |
| Group | 14,910 | (12,926) | 1,984 | 677,966 | 1.7% | 31,554 | 178,759 |
| Americas | 10,075 | (7,187) | 2,888 | 452,505 | 1.3% | 17,737 | 75,102 |
| Europe | 1,548 | (3,085) | (1,537) | 100,490 | (0.6)% | 2,126 | 15,090 |
| AMEA | 1,683 | (2,309) | (626) | 62,111 | 2.4% | 2,540 | 30,836 |
| G. China | 1,604 | (345) | 1,259 | 62,860 | 8.0% | 9,151 | 57,731 |
Appendix 3: First Half financial headlines
| 6 months to 30 June 2013 Operating Profit $m |
Total | Americas | Europe | AMEA | G. China | Central | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2013 | 2012* | 2013 | 2012 | 2013 | 2012* | 2013 | 2012 | 2013 | 2012 | 2013 | 2012* | |
| *Restated for the adoption of IAS19R. | ||||||||||||
| Franchised | 294 | 263 | 245 | 224 | 41 | 31 | 6 | 6 | 2 | 2 | – | – |
| Managed | 132 | 103 | 52 | 24 | 12 | 15 | 45 | 42 | 23 | 22 | – | – |
| Owned & leased | 51 | 50 | 11 | 7 | 17 | 20 | 1 | 2 | 22 | 21 | – | – |
| Regional overheads | (65) | (57) | (26) | (22) | (17) | (16) | (11) | (10) | (11) | (9) | – | – |
| Profit pre central overheads | 412 | 359 | 282 | 233 | 53 | 50 | 41 | 40 | 36 | 36 | – | – |
| Central overheads | (74) | (78) | – | – | – | – | – | – | – | – | (74) | (78) |
| Group Operating profit | 338 | 281 | 282 | 233 | 53 | 50 | 41 | 40 | 36 | 36 | (74) | (78) |
Appendix 4: Constant exchange rate (CER) operating profit movement before exceptional items
| Total*** | Americas | Europe | AMEA | G. China | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Actual* | CER** | Actual* | CER** | Actual* | CER** | Actual* | CER** | Actual* | CER** | |||||||
| H1 Growth/ (decline) | 20% | 20% | 21% | 21% | 6% | 6% | 3% | 5% | 0% | 0% | ||||||
| Exchange rates: | H1 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GBP:USD | EUR:USD | * US dollar actual currency | |||||||||||||
| 2013 | 0.65 | 0.76 | ** Translated at constant 2012 exchange rates | ||||||||||||
| 2012 | 0.63 | 0.77 | *** After central overheads | ||||||||||||
Appendix 5: 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 margin and fee revenue: adjusted for owned and leased hotels, managed leases hotels and individually significant liquidated damages payments.
Managed lease hotels: properties that are structured for legal reasons as operating leases but with the same characteristics as management contracts.
Appendix 6: Investor Information for 2013 interim dividend
| Ex-dividend date: | 21 August 2013 | Record date: | 23 August 2013 |
| Payment date: | 4 October 2013 | Dividend payment: | Ordinary shares = 15.1 pence per share |
| ADRs = 23.0 cents per ADR |
Appendix 7: Investor Information for 2013 special dividend
| Ex-dividend date: | 21 August 2013 | Record date: | 23 August 2013 |
| Payment date: | 4 October 2013 | Dividend payment: | Ordinary shares = 87.1 pence per share |
| ADRs = 133.0 cents per ADR |
For further information, please contact:
| Investor Relations (Catherine Dolton; Isabel Green): | +44 (0)1895 512176 | |
| Media Relations (Yasmin Diamond, Zoe Bird): | +44 (0)1895 512008 | +44 (0) 7736 746767 |
Presentation for Analysts and Shareholders:
A presentation with Richard Solomons, Chief Executive Officer and Tom Singer, Chief Financial Officer will commence at 9.30am UK time on 6 August at Goldman Sachs, Rivercourt, 120 Fleet Street, London, EC4A 2BE. There will be an opportunity to ask questions. The presentation will conclude at approximately 11am.
There will be a live audio webcast of the results presentation on the web address http://www.ihgplc.com/interims13. 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:
| UK Toll UK Toll Free US Toll US Toll Free |
+44 (0)20 3003 2666 0808 109 0700 +1 646 843 4608 +1 866 966 5335 |
| Passcode: | IHG |
A replay of the 9.30 am conference call will be available following the event – details are below:
| UK Toll | +44 (0)20 8196 1998 |
| Replay pin | 2184275 |
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 6 August with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer). There will be an opportunity to ask questions.
| UK Toll UK Toll Free US Toll US Toll Free |
+44 (0)20 3003 2666 0808 109 0700 +1 646 843 4608 +1 866 966 5335 |
| Passcode: | IHG |
A replay of the 9am EST conference call will be available following the event – details are below:
| UK Toll | +44 (0)20 8196 1998 |
| Replay pin | 8150046 |
Website:
The full release and supplementary data will be available on our website from 7.00 am (London time) on 6 August. The web address is http://www.ihgplc.com/interims13. To watch a video of Tom Singer reviewing our results visit our YouTube channel at http://www.youtube.com/ihgplc.
Notes to Editors
IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of nine hotel brands, including InterContinental® Hotels & Resorts, Hotel Indigo® Hotels, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express® Hotels, Staybridge Suites® Hotels, Candlewood Suites® Hotels, EVEN™ Hotels and HUALUXE™ Hotels & Resorts.
IHG manages IHG® Rewards Club, the world’s first and largest hotel loyalty programme with over 74 million members worldwide. The programme was relaunched in July 2013, offering enhanced benefits for members including free internet across all hotels, globally.
IHG franchises, leases, manages or owns over 4,600 hotels and 678,000 guest rooms in nearly 100 countries and territories. With more than 1,000 hotels in its development pipeline, IHG expects to recruit around 90,000 people into additional roles across its estate 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.
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, www.twitter.com/ihg,www.facebook.com/ihg or 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.