Intercontinental Hotels Group Plc · LSE:IHG
Intercontinental Hotels — FY2010 Earnings Presentation
40 slides from Intercontinental Hotels's earnings presentation, Feb 15, 2011
Slide 1: Preliminary Results Presentation
Preliminary Results Presentation 15 February 2011 1
Slide 2: 2010 – an excellent year for IHG
2010 – an excellent year for IHG • Total gross revenue up 11%¹ • Operating profit up 22% • Fee based margins up 1.1 percentage points • Successful relaunch of Holiday Inn • Industry leading signings and openings • Progress on asset disposals • Recommended final dividend up 21%, total dividend up 16%
Slide 3: 2011 - outlook
2011 - outlook • Positive trading outlook – Industry forecasts for 2011 US RevPAR +6.1% to +9.0% – Midscale strengthening, supply growth slowing • Net system size – Modest growth in 2011 – Medium term growth of 3% to 5% • Continued focus on efficiency – Allows reinvestment – Progressive margin growt
Slide 4: Financial Results
Financial Results InterContinental Hangzhou, China, opened January 2011 4
Slide 5: 2010 – a good year
2010 – a good year • Global constant currency RevPAR up 6.2% • Underlying¹ revenue up 6%² to $1,628m, EBIT up 23%² to $444m • Strong margin growth in core fees business • Free cash flow of $432m • Net debt reduced to $743m ¹At constant exchange rates and before exceptional items. ²Excluding one indi
Slide 6: Strong financial results
Strong financial results 12 months 12 months $ million Change % to 31 Dec 10 to 31 Dec 09 Turnover 1,628 1,538 6% O Operating i Profit¹ P fi ¹ 444 363 22% Interest (62) (54) (15)% Profit before tax¹ 382 309 24% Tax rate¹ 26% 5% 21%pts Profit after tax¹ 284 294 (3)% Adjusted EPS¹ 98.6¢ 102.8¢ (4)% We
Slide 7: Occupancy gains and improved mix drives rate growth
Occupancy gains and improved mix drives rate growth IHG monthly trends in RevPAR split by rate and occupancy Dec--09 Dec--10 Dec--09 Dec--10 Jun--10 Jun--10 09 09 Jul-0 Jul-0 20% 20% Global Americas 15% 15% 10% 10% 5% 5% YoY change ge YoY chang 0% 0% -5% -5% -10% -10% -15% -15% -20% 20% -20% 20% Dec
Slide 8: US relative performance impacted by midscale bias
US relative performance impacted by midscale bias IHG RevPAR performance vs. industry - US 8 Industry IHG Relaunched ‘stable’ Holiday Inn Relaunched ‘stable’ Holiday Inn Express 7 AR movement (%) 6 5 4 YoY RevPA 3 2 1 0 Total US InterContinental - US Crowne Plaza - US Holiday Inn - US Holiday Inn Ex
Slide 9: Hotel franchising – strong royalty growth translates to margin improvement
Hotel franchising – strong royalty growth translates to margin improvement Total gross revenue $bn¹ (rooms only) Group Royalty drivers 2010 vs. 2009 Average Rooms 4% 2010 10.5 RevPAR 5% 2009 9.6 Royalty fees 11% 2008 11.1 Franchise Fees $m Franchise EBIT $m (margin %) 2010 558 2010 458 (82%) 2009 52
Slide 10: Hotel management – rebound in fees driven by growth across Asia Pacific
Hotel management – rebound in fees driven by growth across Asia Pacific Total gross revenue $bn¹ (total hotel) Management Fees² $m 2010 7.7 2010 333 2009 6.7 2009 263 2008 7.3 2008 339 Managed EBIT² $m (margin %) 2010 155 (47%) 2009 69 (26%) HPT 120 (46%)³ 2008 173 (51%) Based on actual USD ¹Total g
Slide 11: Owned & leased – property level efficiencies improve margins
Owned & leased – property level efficiencies improve margins property-level O&L revenue $m Drivers of revenue change (%) 2010 545 10 vs '09 40% 50% 10% 2009 513 2008 638 Rate Occupancy F&B O&L EBITDA $m O&L EBIT $m (margin %) 2010 85 (16%) 2010 137 2009 117 2009 67 (13%) 2008 180 2008 128 (20%) Base
Slide 12: Cost control drives sustainable margin growth
Cost control drives sustainable margin growth • 2010 regional and central costs of $258m – Broadly in line with 2009 excluding performance based incentive costs – No annual bonus paid in 2009 • Underlying fee based operating profit margin up 1.1%pt • 2011 regional i l and d central t l costs: t $250
Slide 13: Business model generates strong cash flow
Business model generates strong cash flow EBIT Cashflow from operations Free Cash Flow¹ 800 700 600 500 $m 400 300 200 100 0 2006 2007 2008 2009 2010 Net debt (263) (1,659) (1,273) (1,092) (743) Net debt/ EBITDA 0.5x 0 5 2.7x 1.9x 9 2.3x 3 1.3x 3 ¹ Free cash flow = cash flow after tax, interest, mai
Slide 14: Harnessing the power of free cash flow
Harnessing the power of free cash flow Free cash A Asset t di disposals l flow Investment grade credit rating Sustainable ordinary Growth investment Capital returns dividend 14
Slide 15: Priority 1: Capital investment – accelerating growth
Priority 1: Capital investment – accelerating growth 2007 – 2010 c.$200m $200 Spend S d >$400m $400 capital it l released l d Includes: Most recently: • Enhancements • InterContinental Atlanta (2010) • Sliver equity stakes • Holiday Inn Lexington (2010) • Brand defining hotels • JV investments Futur
Slide 16: Priority 2: Sustainable ordinary dividend – growth well ahead of competitors
Priority 2: Sustainable ordinary dividend – growth well ahead of competitors • 16% growth to 48.0¢ • Dividend maintained through the downturn • $750m in ordinary dividends paid 2005-2010 12.4% CAGR 50 48 0 48.0 40.7 41.4 41.4 al dividend ((cents) 40 35.5 30 26 8 26.8 20 Tota 10 0 2005 2006 2007 2008
Slide 17: Priority 3: Capital returns – excellent record of returning excess funds
Priority 3: Capital returns – excellent record of returning excess funds • Maintain 2.0 – 2.5x net debt: EBITDA • $1.5bn owned asset net book value • Track record of selling assets above net book value • InterContinental New York Barclay – disposal process initiated today • Most value accretive meth
Slide 18: Summary
Summary • Resilient, cash generative business model Proven • Cost and cash discipline track record • Dividend maintained through the downturn • Consistently grow margins • Recycle capital to drive brand growth Clear future • Sustainable dividend growth priorities • Reduce capital intensity over time
Slide 19: Operating review
Operating review Crowne Plaza Bangalore Electronics City, opened February 2010 19
Slide 20: IHG's growth strategy to create sustainable value
IHG’s IHG s growth strategy to create sustainable value Making best use of our scale to build and grow preferred hotel brands for guests and owners in high value markets “Where we play” “How we win” Markets Powerful and distinct brands Segments Best demand delivery systems Model Aligned and engaged
Slide 21: Brand power - Holiday Inn relaunch
Brand power- Holiday y Inn relaunch – the way y we are….
Slide 22: Entire estate refreshed
Entire estate refreshed Global Holiday Inn brand family rooms 2008 – Jan 2011 500 400 To exit/ 46 s) (81) 84 relaunch 2011 Number of rrooms (‘000s 413 370 300 200 Relaunched N 100 0 Closing Closing Exits New additions system size system size Dec 2007 Jan 2011 22
Slide 23: Relaunch drives brand preference
Relaunch drives brand preference p Increased guest satisfaction - US Improved brand awareness² %pt change in satisfaction 2010-2007 %pt change in unaided brand awareness 9 5.7 5.9 5 4.9 6 2.3 1.8 2 1.3 2 Product Intent to Return intent Total OSAT recommend Holiday Inn Holiday Inn Express US UK Germa
Slide 24: Relaunch drives owner preference
Relaunch drives owner p preference z Signings of 225 hotels up on 2009 – New locations e.g. Hawaii z New brand extensions – Holiday Inn Club Vacations z Increasing share of major corporate customers spend z Strengthen reputation – Olympics sponsorship 24
Slide 25: Brand power – Crowne Plaza transformation: a strong brand
Brand power– Crowne Plaza transformation A strong brand… z 4th largest upscale brand z Fastest F growing i upscale l brand in Asia z 3rd largest brand in global industry pipeline z $3.5bn brand Crowne Plaza Times Square, New York 25
Slide 26: Brand power – Crowne Plaza transformation: a huge opportunity
Brand power– Crowne Plaza transformation ...with a huge opportunity z EMEA RevPAR 30% premium to US z Addresses 1/3rd market z Gap exists for differentiated guest experience Crowne Plaza Dubai Festival City 26
Slide 27: Brand power – Crowne Plaza transformation: a stronger future
Brand power– Crowne Plaza transformation …and a stronger future z IHG capital to strengthen distribution • Key locations • Iconic assets z Quality drive • c.40 c 40 hotel removals z Differentiate guest experience • Refresh brand hallmarks z Drive brand awareness Crowne Plaza Suzhou, China 27
Slide 28: Brand power – Crowne Plaza transformation
Brand power– Crowne Plaza transformation A strong brand… ...with a huge opportunity …and a stronger future z 4th largest upscale z EMEA RevPAR 30% z IHG capital to brand in world premium to US strengthen distribution • Key locations z Fastest growing z Addresses 1/3rd market • Iconic assets upscale
Slide 29: System power – 68% revenue delivery to IHG hotels
System power – 68% revenue delivery to IHG hotels $12.0bn $15.5bn 2% 6% 11% 11% 14% 12% 14% 20% Online Travel Agency 12% Global G oba Distribution st but o System Syste 18% Call centres PCR Hotel Direct 47% IHG Websites W b it 33% Hotel Direct 2005 2010 Note: 2010 constant USD rates 29
Slide 30: System power – Priority Club Rewards
System power – Priority Club Rewards • PCR members account for 42% of revenue, up 1.5%pts • Valuable guests - pay more, stay more, cost less • Largest hotel loyalty scheme - 56m members • Global Traveler “Best Hotel Reward Program in the World” for 6th consecutive year • Next generation PCR in 2010
Slide 31: System power – sales and pricing
System power – sales and pricing • Market leader in “dynamic pricing” – 21% of rates on “dynamic pricing” – Outperforming other accounts – +35% growth in room nights vs 19% • Cutting edge price optimisation system – Optimises individual hotel yield – Over 2,000 hotels activated – Initial results sho
Slide 32: System power – efficiency and productivity tools
System power – efficiency and productivity tools • Standardise delivery across managed and franchise estate • Procurement drives down costs for franchisees – INNsupply 32
Slide 33: IHG's growth strategy to create sustainable value
IHG’s IHG s growth strategy to create sustainable value Making best use of our scale to build and grow preferred hotel brands for guests and owners in high value markets “Where we play” “How we win” Markets Powerful and distinct brands S Segments t B td Best demand d delivery d li systems t Model Al
Slide 34: Expansion
Expansion Hotel Indigo outside Americas – 3 hotels open, 16 hotel pipeline – 12 signings in 2010, 7 new markets including Spain, Thailand, Hong Kong and Taipei – 15+ further deals in negotiation Holiday Inn Express in Asia Pacific – 18 hotel signings taking pipeline to 40 – Market entry in India, Ja
Slide 35: Bigger, balanced pipeline
Bigger balanced pipeline Bigger, 2005 71% 29% Americas 2010 50% 50% 0 50 100 150 200 250 ‘000 rooms Americas EMEA and APAC 35
Slide 36: Leading global supply share
Leading global supply share Share of December 2010 active* global hotel new build pipeline Hotel pipeline share (%) 18 13 10 3 IHG Hilton Marriott Starwood Note: this share is 16% on a rooms basis Source: STR Global - *defined as those projects that are under construction, in final planning, plannin
Slide 37: Summary
Summary • Sharp rebound in 2010, excellent outlook for 2011/2012 • Brand development work delivering results • Growing owner preference • Industry leading openings, signings and pipeline • Tight control of costs and capital • Margins rising, capital intensity reducing • Leading TSR record amongst pe
Slide 38: IHG's Vision
IHG’s IHG s Vision 38
Slide 39: Q&A
Q&A Hotel Indigo Shanghai on the Bund, opened December 2010 39
Slide 40: Preliminary Results Presentation
Preliminary Results Presentation 15 February 2011 40
InterContinental Hotels Group — FY2010 Earnings Presentation on 6ix