Intercontinental Hotels Group Plc · LSE:IHG
Intercontinental Hotels — FY2020 Earnings Presentation
47 slides from Intercontinental Hotels's earnings presentation, Feb 23, 2021
Slide 1: 2020 Full Year Results
voco Hangzhou Binjiang Minghao, Greater China 2020 Full Year Results 23 February 2021
Slide 2: Cautionary Note Regarding Forward-Looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This presentation may contain projections and forward looking-statements. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions identify forward-looking statements. All statements other than statements of histori
Slide 3: Keith Barr, Chief Executive Officer
Keith Barr Chief Executive Officer 3
Slide 4: Navigating the Covid-19 crisis effectively, whilst positioning the business for growth
Navigating the Covid-19 crisis effectively, whilst positioning the business for growth Our response to Covid-19 Rooms & RevPAR • Decisive cost action; cash preservation; robust liquidity • +0.3% net growth YoY1 to 886k rooms (5,964 hotels) • Offering assistance to colleagues and communities • Conver
Slide 5: Strong positioning for recovery: purpose and strategic priorities
Our strong positioning for recovery is underpinned by our evolved purpose and strategic priorities Our Purpose True Hospitality for Good Our Priorities Build loved Customer centric Create digital Care for our people, and trusted brands in all we do advantage communities and planet 5
Slide 6: FY 2020 Financial Review
Paul Edgecliffe-Johnson Chief Financial Officer & Group Head of Strategy FY 2020 Financial Review 6
Slide 7: Financial performance
Financial performance Results from reportable segments1 Reported Underlying2 $ million FY 2020 FY 2019 % Change FY 2020 Revenue3 $992m $2,083m (52)% (52)% Operating profit $219m $865m (75)% (75)% Revenue from fee business $823m $1,510m (45)% (45)% Operating profit from fee business $278m $813m (66)%
Slide 8: Fee-based business model shows relative resilience in spite of RevPAR downturn
Fee-based business model shows relative resilience in spite of RevPAR downturn FY 2020 fee revenue: $823m, down 45%1 and 45% underlying2 RevPAR FY 2020 Group comparable RevPAR FY 2020 system growth (%YoY) growth X 4.5% • 39k rooms opened Rooms -17.0% • 37k3 rooms removed -29.5%pts X 0.3% Royalty Rat
Slide 9: Weekly RevPAR performance demonstrates the path of recovery for each region
Weekly RevPAR performance demonstrates the path of recovery for each of our regions IHG 2020 weekly RevPAR performance by region 20% 0% -20% -40% -60% -80% -100% Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Sep 20 Oct 20 Nov 20 Dec 20 Americas EMEAA Greater China Group 9
Slide 10: Americas: US RevPAR outperformance
Americas US RevPAR outperformance in the segments in which we compete • RevPAR down 48.5%; US down 46.9% FY 2020 growth in fee revenue drivers1 • Q4 US RevPAR down 47.4% - Franchised estate down 43% and Managed estate down 79% -2.0% - Midscale/Upper Midscale and Extended Stay most resilient segments
Slide 11: A strong platform in the US from which to drive growth
A strong platform in the US from which to drive growth US estate heavily weighted towards midscale segments… …where we have continued to outperform US rooms by chain scale Q4 2020 US RevPAR change – IHG vs industry (%) 78% IHG1 Industry2 -37.3% -41.4% 18% -47.4% -47.4% -48.7% 4% -52.2% Total US IHG
Slide 12: Europe, Middle East, Asia & Africa: difficult trading conditions
Europe, Middle East, Asia & Africa Difficult trading conditions with closures and travel restrictions • RevPAR down 64.8% (Q4 down 70.5%) FY 2020 growth in fee revenue drivers1 • Q4: Impacted by lockdown measures, particularly UK (down 74%) and Continental 2.0% Europe (down 86%); Middle East down 56
Slide 13: EMEAA: a clear strategy for growth building scale in key markets
Europe, Middle East, Asia & Africa A clear strategy for growth: building scale in key markets A wide geographic footprint…. …with strong structural growth potential Rooms by geography (‘000 rooms) Branded hotel penetration1 3-year 66% CAGR 60% Europe 127 +3.9% India, Middle East 41% & Africa 48 +5.5
Slide 14: Greater China: occupancy recovered to ~60% in Q4
Greater China Occupancy levels recovered to ~60% in Q4 • RevPAR down 40.5% (Q4 down 18.2%) FY 2020 growth in fee revenue drivers1 • Mainland China down 37% (Q4 down 15%) 6.4% • Tier 1 RevPAR down 48% (Q4 down 28%) • Tier 2-4 RevPAR down 31% (Q4 down 8%) • Hong Kong SAR down 78% (Q4 down 52%) -40.5%
Slide 15: Our leading position in Greater China
Our leading position in Greater China Growing in locations with attractive demand drivers… …with a strong share of the branded pipeline FY 2020: system and pipeline distribution (‘000 rooms) IHG share of branded market1 110 24% 21% 22% 19% 45 16% 46 11% 42 8% 8% 12 22 7% 6% 65 25 12 14 30 24 1 13 13
Slide 16: Progress on system size quality and pipeline for future growth
Progress on system size quality and pipeline for future growth Focus on quality and removing hotels which aren’t representative of our brand standards Net rooms growth Gross openings Gross exits 5.9% 5.6% 5.2% 4.8% 4.8% 4.3% 4.0% 3.5% 3.4% 3.1% 2.7% 2.2% 1.7% 1.6% 10% 0.1% 10% 9% 8% 7% 7% 8% 6% 5% 5
Slide 17: Cost reductions whilst continued investment in growth
Cost reductions whilst continued investment in growth Cost actions Owner payment profile Americas invoices paid within 90 days of due date • $150m of temporary Fee Business cost savings in 2020 • Reduction in cost base of owned, leased and managed Unpaid lease hotels • Targeting ~$75m to be sustaina
Slide 18: Reduction in gross capital expenditure for FY 2020
Reduction in gross capital expenditure for FY 2020 $m FY 2020 FY 2019 • Key money: used to secure hotel Maintenance capex, Maintenance capex (43) (86) signings key money and selective • Maintenance: relates to owned, Key money1 (64) (61) investments leased and managed lease hotels and Total (107) (1
Slide 19: Disciplined working capital management
Disciplined working capital management Free cash flow FY 2020 ($m) 44 329 (87) 21 (171) 136 136 (107) 125 29 (35) 17 EBITDA1 System Fund2 Working Exceptional Interest & tax Free cash Maintenance Free cash flow System Recyclable Lease Decrease capital & other cash flow items4 flow before capex & key
Slide 20: Substantial liquidity maintained with optimised bond maturity profile
Substantial liquidity maintained with optimised bond maturity profile Liquidity profile Bond maturity profile Net debt composition • ~$2.1bn pro forma total available • Staggered bond maturity with no $(2,529)m liquidity1, comprising ~$0.8bn of net significant maturity until Q4 2022 cash on deposit
Slide 21: Our strategy for uses of cash remains unchanged
Our strategy for uses of cash remains unchanged Invest in the Restore an ordinary Return surplus business to dividend when funds to drive growth responsible to do so shareholders Objective of maintaining an investment grade credit rating 2.5x – 3.0x Net Debt : EBITDA1 under normalised conditions 1 O
Slide 22: Update on strategic priorities
Keith Barr Chief Executive Officer Update on strategic priorities 22
Slide 23: IHG is well positioned to benefit from strong industry fundamentals
IHG is well positioned to benefit from strong industry fundamentals Industry Industry • Sector growth outpaced global economy for a Market share • Accelerated net rooms growth from ~3% to 5.6% growth decade pre Covid-191 gains in three years pre Covid-19 System • Opened 285 hotels; includes brand la
Slide 24: Continued focus on industry-leading net rooms growth
Continued focus on industry-leading net rooms growth, underpinned by our strategic priorities Our Purpose Our Priorities True Hospitality for Good Build loved and trusted brands Our Ambition Customer centric To deliver industry-leading net rooms growth in all we do Our Strategy Create digital advant
Slide 25: Build loved and trusted brands: expanding and enhancing our portfolio
Build loved and trusted brands - Expanding and enhancing our portfolio to drive growth 2017 2020 • Broadened our brand portfolio with five targeted additions since 2017: - High-quality midscale brand avid launched in 2017 - Acquisition of Regent Hotels & Resorts in March 2018 - Conversion focussed b
Slide 26: Build loved and trusted brands: scaling up our newest brands
Build loved and trusted brands - Scaling up our newest brands • 89 properties under construction or with • Signed nine hotels into our newest • Brand established in 20+ countries plans approved all-suites Upper Midscale brand • Signed 18 properties; 12 conversions, • 17 openings and 19 signings in t
Slide 27: Global roll out of voco continues
Build loved and trusted brands - Global roll out of voco continues voco Hangzhou Binjiang Minghao, Greater China voco The Franklin New York, US voco Paris Montparnasse, France voco Villach, Austria 27
Slide 28: Holiday Inn Express driving outperformance and strong returns
Build loved and trusted brands - Holiday Inn Express driving outperformance and strong returns for owners • Launched updated Formula Blue 2.0 in Americas with procurement-ready design and delivering >10% cost savings for owners • 177 hotels with new room designs across Europe, delivering ~5pt premiu
Slide 29: Continue to invest in and grow across other established brands
Build loved and trusted brands - Continue to invest in and grow across other established brands • ~60% occupancy and high • Opened three HUALUXE • New build prototype • Renovations delivering uplifts guest satisfaction through 2020 properties, including the implemented in ~90 hotels in guest satisfa
Slide 30: Expanding our Luxury & Lifestyle offering
Build loved and trusted brands - Expanding our Luxury & Lifestyle offering • Signed seven hotels • Four signings since • Largest global luxury • Global presence • Opened 10 properties and opened a acquisition taking hotel brand with secured in 15 countries, in 2020, including five property in Turkey
Slide 31: Continuing to enhance our Luxury & Lifestyle offer
Build loved and trusted brands - Continuing to enhance our Luxury & Lifestyle offer to guests and owners Six Senses Kocatas Mansions, Istanbul Regent Shanghai Pudong, Greater China Hotel Indigo Bath, UK Hotel Indigo Larnaca, Cyprus InterContinental Chongqing, Greater China Kimpton Hotel Fontenot, Ne
Slide 32: Customer centric in all we do
Customer centric in all we do Guests Owners Operating • Updated operating standards to offset Cleanliness • IHG Clean Promise standards higher safety and cleaning costs, and & Safety • New protocols and standards to focus on maximising returns Booking • Book Now, Pay Later policies Payment • Case-by
Slide 33: Create digital advantage
Create digital advantage - Continuing to invest in our digital-first approach GRS • Attribute pricing initial pilot conducted in each region in 2020; full roll-out expected by end 2021 • Pilots demonstrating to owners the ability to generate maximum value from their hotel’s unique attributes • Digit
Slide 34: Care for our people, communities and planet: 2030 ambitions
Care for our people, communities and planet - 2030 Responsible Business ambitions and commitments Champion a diverse Improve the lives of Reduce our energy use and Pioneer the transformation Conserve water and help culture where everyone 30 million people in our carbon emissions in line with to a mi
Slide 35: Conclusions
Conclusions - Confident on future growth prospects and our strategic priorities • Recognition and thanks to all of our colleagues and owners for their efforts in the most challenging conditions and for their dedication to our purpose of True Hospitality for Good • Delivered outperformance; demonstra
Slide 36: Q&A
2020 Full Year Results Q&A 36
Slide 37: Appendices
Appendices voco Hangzhou Binjiang Minghao, Greater China
Slide 38: Growth rate analysis
Growth rate analysis RevPAR growth % Net rooms growth % Underlying Fee Comments Revenue1 Growth % FY 2020 Comparable Total2 YoY Available2 All hotels Aggregate Hotels that have that were open number of traded in all in FY 2020 and 30 December rooms available months being FY 2019 (incl 2020 vs 2019 f
Slide 39: Fee margin by region
Fee margin1 by region Americas Europe, Middle East, Asia and Africa FY 2020 70.7% FY 2020 -17.9% FY 2019 77.7% FY 2019 58.6% Greater China Total IHG FY 2020 45.5% FY 2020 34.1% FY 2019 54.1% FY 2019 54.1% 1 Fee margin excludes owned, leased and managed lease hotels, significant liquidated damages an
Slide 40: Revenue and operating profit 2019-2020
Revenue and operating profit 2019-2020 Total Revenue Total Operating Profit Actual US$ Full Year Full Year 2020 2019 2020 2019 Fee Business 457 853 323 663 Owned, Leased & Managed Leases 55 187 (27) 37 Total Americas 512 1,040 296 700 Fee Business 107 337 (18) 202 Owned, Leased & Managed Leases 114
Slide 41: Currency translation
Currency translation Reportable Segments Reportable Segments Reported FY 2020 vs FY 2019 rates2 FY 2020 at average Jan 2021 rate vs reported FY 20203 Region1 Revenue EBIT Revenue EBIT Americas $(1)m - $1m - EMEAA $1m $(1)m $10m - Greater China $2m $2m $4m $1m Central Overheads - - $2m $(3)m Total IH
Slide 42: 2020 notable items
2020 notable items 2020 items Payroll tax credits Americas $8m Litigation settlement in relation to a single hotel Americas $4m Individually significant Liquidated Damages1 EMEAA $1m Gain on disposal of Holiday Inn Melbourne Airport EMEAA $3m 1 In February 2018, IHG received liquidated damages total
Slide 43: Exceptional items
Exceptional items Category Detail Rationale Charge ($m) • Primarily, discounted value of deposits and loans held by owners in connection to managed Trade deposits and loans (48) hotels • Predominantly, the carrying book value of owned, leased and managed leased assets in the Property, plant and equi
Slide 44: Ordinary shares
Ordinary shares Number of shares At 31 December 2020 At 31 December 2019 Opening balance at 1 January 187.7 197.6 Share consolidation1 - (9.9) Closing balance at 31 December 187.7 187.7 Basic weighted average shares 182.5 182.5 Dilutive potential ordinary shares2 - 1.2 Basic diluted average shares 1
Slide 45: Free cash flow generation
Free cash flow generation $m 12 months to 31 Dec 2020 12 months to 31 Dec 2019 Operating profit from reportable segments1 219 865 System Fund result2 (82) (21) Depreciation & amortisation3 172 170 System Fund impairment charges 41 - Working capital & other movements 68 (82) Loyalty programme deferre
Slide 46: Uses of free cash flow
Uses of free cash flow 12 months to 31 12 months to 31 $m Dec 2020 Dec 2019 Free cash flow 29 509 Capital expenditure: Recyclable investments (6) (19) Capital expenditure: System Fund investment (35) (98) Acquisitions - (292) Payment of contingent purchase consideration - (8) Distributions from asso
Slide 47: Cautionary Note Regarding Forward-Looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This presentation may contain projections and forward looking-statements. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions identify forward-looking statements. All statements other than statements of histori
InterContinental Hotels Group — FY2020 Earnings Presentation on 6ix