Intercontinental Hotels Group Plc · LSE:IHG
Intercontinental Hotels — Six Continents — H1 2002 Earnings Presentation
73 slides from Intercontinental Hotels's earnings presentation, June 2002
Slide 1: Six Continents
SIX CONTINENTS
Slide 2: Interim Results for the Half Year ended 13th April 2002
Six Continents PLC Interim Results For the Half Year ended 13th April 2002
Slide 3: Sir Ian Prosser, Chairman
SIR IAN PROSSER Chairman 3
Slide 4: Business Results First Half 01/02
Six Continents PLC Business Results First Half 01/02 Operating Profit £m Six Continents Hotels 109 Down 41.1% Six Continents Retail* 146 Up 8.1% Soft Drinks 16 Up 45.5% * ongoing estate 4
Slide 5: Business Results First Half 01/02
Six Continents PLC Business Results First Half 01/02 Profit Before Tax* Down 28.2% Adjusted Earnings per share* Down 29.2% Dividend Up 2.9% * Before major exceptional items 5
Slide 6: Richard North, Finance Director
RICHARD NORTH Finance Director 6
Slide 7: Americas RevPAR Performance
Six Continents Hotels Americas RevPAR Performance 10.0% 5.0% 0.0% Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 (5.0%) (10.0%) % Growth (15.0%) (20.0%) (25.0%) (30.0%) (35.0%) (40.0%) Crowne Plaza Holiday Inn Expr
Slide 8: RevPAR - Key US Cities
Six Continents Hotels RevPAR - Key US Cities* 30.0% 20.0% 10.0% 0.0% Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- 00 00 00 01 01 01 01 01 01 01 01 01 01 01 01 02 02 02 02 (10.0%) % Growth (20.0%) (30.0%) (40.0%) (50.0%) (60.0%) New York Chicago SFO M
Slide 9: RevPAR - Europe Key Countries
Six Continents Hotels RevPAR - Europe Key Countries Owned & Leased 30.0% 20.0% 10.0% 0.0% Oct- Nov- Dec- Jan-01 Feb- Mar- Apr-01 May- Jun-01 Jul-01 Aug- Sep- Oct- Nov- Dec- Jan-02 Feb- Mar- Apr-02 00 00 00 01 01 01 01 01 01 01 01 02 02 % Growth (10.0%) (20.0%) (30.0%) (40.0%) (50.0%) (60.0%) UK (exc
Slide 10: Holiday Inn UK RevPAR
Six Continents Hotels Holiday Inn UK RevPAR 10.0% 5.0% 0.0% -5.0% -10.0% % Growth -15.0% -20.0% -25.0% -30.0% -35.0% -40.0% Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 10
Slide 11: Six Continents Hotels Operating Profit
Six Continents Hotels Operating Profit Hotels H1 01/02 H1 00/01 Growth $m $m % Owned & Leased 4 43 - 90.7 Managed & Upscale Franchise 20 25 - 20.0 Midscale Franchise 83 98 - 15.3 Total Americas 107 166 - 35.5 EMEA 72 111 - 35.1 Asia Pacific 20 15 + 33.3 FelCor and Others 8 22 - 63.6 Central Overhead
Slide 12: Americas Owned & Leased Hotels
Six Continents Hotels Americas Owned & Leased Hotels z Miami and New York Inter-Continentals refurbishment completed z Chicago under refurbishment z 2nd Quarter Comparable Inter-Continental EBITDA: RevPAR flow-through of 1.8 times RevPAR Q1 01/02 Q2 01/02 H1 01/02 Inter-Continental - 38.9% - 11.1% -
Slide 13: Americas Managed & Upscale Franchise Hotels
Six Continents Hotels Americas Managed & Upscale Franchise Hotels RevPAR Q1 01/02 Q2 01/02 H1 01/02 Inter-Continental managed - 22.9% - 18.3% - 20.6% Crowne Plaza managed - 32.0% - 21.1% - 27.1% Crowne Plaza franchised - 20.3% - 12.9% - 16.6% Operating profit down 20.0% 13
Slide 14: Americas Midscale Franchise Hotels
Six Continents Hotels Americas Midscale Franchise Hotels Holiday Inn Holiday Inn Express Change in number of rooms available - 2.1% + 10.9% RevPAR: Q1 01/02 - 14.1% - 4.8% Q2 01/02 - 10.5% - 2.9% H1 01/02 - 12.3% - 3.9% Increase in Royalty Rates + 0.05% pts - 0.01% pts Operating profit down 15.3% 14
Slide 15: EMEA
Six Continents Hotels EMEA H1 01/02 H1 00/01 Decline % Reported ($m) 72 111 - 35.1 Sterling analysis: £m £m Owned & leased 37 60 - 38.3 Managed & franchised 13 17 - 23.5 Total £m 50 77 - 35.1 15
Slide 16: EMEA Owned & Leased
Six Continents Hotels EMEA Owned & Leased RevPAR Q1 01/02 Q2 01/02 H1 01/02 Inter-Continental -29.0% - 14.5% - 22.4% Crowne Plaza -20.0% - 14.2% -14.8% Holiday Inn Europe -13.9% -10.6% -12.3% Holiday Inn UK -17.2% -12.8% -15.1% z Key Upscale Properties Impacted by September 11th z Le Grand Inter-Con
Slide 17: EMEA Managed and Franchised
Six Continents Hotels EMEA Managed and Franchised RevPAR Q1 01/02 Q2 01/02 H1 01/02 Inter-Continental - Managed - 19.6% - 1.5% - 9.8% Holiday Inn - Franchise - 5.4% - 1.9% - 3.7% Express - Franchise + 1.6% + 10.0% + 5.9% Overall operating profit down 23.5% 17
Slide 18: Asia Pacific
Six Continents Hotels Asia Pacific RevPAR Q1 01/02 Q2 01/02 H1 01/02 Owned & Leased - 21.1% - 12.5% - 16.9% Managed - 11.0% - 6.4% - 8.8% First time contribution from Inter-Continental Hong Kong $7m Operating profit up by 33.3% 18
Slide 19: Six Continents Hotels Operating Profit
Six Continents Hotels Operating Profit H1 001/02 H1 01/00 Growth $m $m % Owned & Leased 4 43 - 90.7 Managed & Upscale Franchise 20 25 - 20.0 Midscale Franchise 83 98 - 15.3 Total Americas 107 166 - 35.5 EMEA 72 111 - 35.1 Asia Pacific 20 15 + 33.3 FelCor and Others 8 22 - 63.6 Central Overheads (45)
Slide 20: Retail Operating Profit
Six Continents Retail Operating Profit H1 01/02 H1 00/01 Growth £m £m % Restaurants 45 39 + 15.4 Pubs & Bars 101 96 + 5.2 Ongoing Business 146 135 + 8.1 Disposal to Nomura - 31 n/a Reported 146 166 - 12.0 20
Slide 21: Retail Restaurants
Six Continents Retail Restaurants z Average number of trading outlets 617 z Sales up 12.5% to £321m Drinks sales up 6.9% Food sales up 15.8% z Like for like sales (uninvested) Core estate up 0.8% Development estate up 2.5% Operating profit up 15.4% to £45m 21
Slide 22: Retail Pubs & Bars
Six Continents Retail Pubs & Bars z Average number of trading outlets 1,361 z Sales up 5.4% to £465m Drinks sales up 5.5% Food sales up 8.1% z Like for like sales (uninvested) Core estate branded outlets up 1.4% Core estate unbranded outlets down 1.1% Development estate down 5.2% Operating
Slide 23: Retail Development Estate
Six Continents Retail Development Estate z 337 re-opened, 16 in refurbishment z Target over 400 re-opened by year end z Sales uplifts over 40% versus last year of Allied ownership 23
Slide 24: Britvic Soft Drinks Results
Britvic Soft Drinks Results z Volumes up 3.5% z Average realised price per litre up 0.9% z Turnover up 4.3% to £291m z Profit margin up 1.6 percentage points Operating profit up 45.5% to £16m 24
Slide 25: Profit and Loss Account
Six Continents PLC Profit and Loss Account £m H1 01/02 H1 00/01 * Growth % Operating profit 275 365 - 24.7 Minor exceptionals (1) 1 - PBIT 274 366 - 25.1 Interest (32) (29) - 10.3 Tax (75) (104) + 27.9 Minority Interests (6) (5) - 20.0 Adjusted Earnings 161 228 - 29.4 Adjusted EPS 18.7p 26.4p - 29.2
Slide 26: Net Cash Flow
Six Continents PLC Net Cash Flow £m H1 H1 01/02 01/02 H1 H1 00/01 00/01 Operating Operating profit profit 275 275 365 365 Depreciation Depreciation 134 134 121 121 Working Working capital/Other capital/Other (91) (91) (53) (53) Capital Capital expenditure expenditure (net) (net) (301) (301) (285) (2
Slide 27: Balance Sheet
Six Continents PLC Balance Sheet £m Apr Apr 02 02 Sep Sep 01 01 Apr Apr 01 01 Net Net debt debt 1,335 1,335 1,001 1,001 840 840 Shareholder Shareholder equity equity ** 5,347 5,347 5,185 5,185 5,122 5,122 Gearing Gearing 25% 25% 19% 19% 16% 16% Market-cap gearing Market-cap gearing ** ** 21% 21% 19%
Slide 28: Tim Clarke, Chief Executive
TIM CLARKE Chief Executive 28
Slide 29: Growth Prospects
Six Continents Hotels Growth Prospects Market Forces Pace of RevPAR recovery Favourable supply trends RevPAR Management Actions Hotel rooms Revenue investment Renovated assets New Distribution 29
Slide 30: Cyclical Owned and Resilient Franchised
Six Continents Hotels Cyclical Owned and Resilient Franchised z Owned: predominantly upscale business High operating leverage Exposure to long-haul travel z Franchised/Managed: largely midscale Low operating leverage Domestic/Intra-regional guests Focus on maximising owned profits recovery,
Slide 31: Americas Demand
Six Continents Hotels Americas Demand 112 110 index: Jan 1999 and May 1988 = 100 108 106 104 102 100 98 96 Gulf War 94 92 1990/91 recession 90 89 90 91 92 31
Slide 32: Americas Demand
Six Continents Hotels Americas Demand 112 110 index: Jan 1999 and May 1988 = 100 108 106 Demand May 1988 104 - April 1992 102 100 98 96 Sep 11 94 92 1990/91 recession 90 89 00 90 01 91 02 92 32
Slide 33: US RevPAR Recovery
Six Continents Hotels US RevPAR Recovery 10.0% All US Hotels Monthly ADR, Occupancy and RevPAR Performance 2001-2002 5.0% Year on Year Percentage Change 0.0% Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 -5.0% -10.0% -15.0% -20.0% -25.0% -30
Slide 34: Key Market RevPAR Drivers
Six Continents Hotels Key Market RevPAR Drivers z Economic recovery in the US z Air travel - March US domestic still down 10.5% Transatlantic down 13%-15% z US guest demand in key international cities London, Paris, Hong Kong, Frankfurt, Amsterdam z Continued performance in other segments US
Slide 35: RevPAR Recovery - Prospects
Six Continents Hotels RevPAR Recovery - Prospects z RevPAR recovery expected Return to cyclical economic trends following 9/11 Easing Autumn comparables Favourable medium-term US supply position z Uncertain pace of recovery Recovery of international travel European economic prospects z Man
Slide 36: Sales and Marketing Development
Six Continents Hotels Sales and Marketing Development z Driving international and corporate sales strengthened EMEA and Americas sales forces Focus on key multinational accounts z Cross-border advertising focus on European leisure market 36
Slide 37: Sales and Marketing Development
Six Continents Hotels Sales and Marketing Development 37
Slide 38: Sales and Marketing Development
Six Continents Hotels Sales and Marketing Development 38
Slide 39: Loyalty Programmes and New Delivery Channels
Six Continents Hotels Loyalty Programmes and New Delivery Channels z 1 million enrolments z 13.5 million members 39
Slide 40: Internet Price Guarantee
Six Continents Hotels Internet Price Guarantee 40
Slide 41: Systems Investment & Overhead Cost Savings
Six Continents Hotels Systems Investment & Overhead Cost Savings z Migration of all hotels to Holidex Plus z New generation Property Management Systems z HIRO upgrade z Re-engineering overheads 41
Slide 42: Big 10: Coming Out of Renovation
Six Continents Hotels Big 10: Coming Out of Renovation Completed Projects In Renovation Rooms Start Finish Rooms Miami 639 Chicago 1/00 11/02 844 New York 686 Le Grand 12/01 6/03 514 Vienna 453 Mayfair 12/02 7/04 290 Budapest 398 Cannes 1/03 10/04 338 Madrid 307 San Francisco 380 42
Slide 43: Holiday Inn UK Renovation
Six Continents Hotels Holiday Inn UK Renovation 2002 2003 2004 Total Rooms Upgrading 2,000 3,000 2,000 7,000 % of total Rooms 17% 25% 17% 60% 43
Slide 44: Holiday Inn UK - Integration Plan
Six Continents Hotels Holiday Inn UK - Integration Plan 2001 2002 2003 2004 Update People integration Complete Full integration Reservation system rollout PMS, 2-way interface, HIRO Upgrade service standard Complete Hallmarks introduction Re-brand hotels Complete Final few hotels converted 03/02 Reg
Slide 45: Organic Pipeline
Six Continents - Organic Pipeline Will be a Key Driver of Growth Owned Managed/Franchised Brand Rooms Rooms Total 420 8,925 9,345 314 8,849 9,163 400 19,512 19,912 357 24,924 25,281 145 2,909 3,054 1,636 65,119 66,755 45
Slide 46: Distribution Pipeline: Upscale
Six Continents Hotels Distribution Pipeline: Upscale 9,000 Rooms Landmark Inter-Continentals in key cities Boston, Beijing, Seattle, Jakarta Others under negotiation in US and Asia 9,000 Rooms Over 20 Crowne Plaza openings expected this year: 15% system expansion New owned hotels: Brussels air
Slide 47: Distribution Pipeline: Midscale
Six Continents Hotels Distribution Pipeline: Midscale 20,000 Rooms Owned new prototype Holiday Inns in US Growing pipeline in EMEA/Asia Pacific: 8,000 rooms 3,000 Rooms Continue to grow Staybridge US density 25,000 Rooms Owned development in Germany: 20 hotels Accelerating development in U
Slide 48: Hotel Values
Six Continents Hotels Hotel Values 2001 2002 2003 Americas (10%) (3%) 9% EMEA (2%) 1% 4% Asia Pacific (5%) - - Source: HVS International 48
Slide 49: Six Continents Hotels - Summary
Six Continents Hotels - Summary z Action to defend profits Upscale exposure Resilient franchise Maintained investment plans z Driving future growth RevPAR recovery Revenue investment & cost re-engineering Big 10 Inter-Continentals Holiday Inn UK Organic pipeline 49
Slide 50: Retail
Six Continents Retail z 2,000 pubs, bars and restaurants - AWT £14.2k up 6% z Defending margins against cost pressures z Driving high sales uplifts and returns from development pipeline z Exploiting segment opportunities to gain market share Well positioned as industry capacity cycle continues to im
Slide 51: Retail: An Improving Environment
Six Continents Retail An Improving Environment z Overall demand growing at 2.5% p.a. in real terms z 40% of pubs in highly leveraged ownership z Cash extraction / under investment in maintenance z Net capital employed likely to be flat in real terms Demand Growth is Outpacing New Supply 51
Slide 52: Target Retail Market - £18bn Sales
Six Continents Retail Target Retail Market - £18bn Sales* Residential Pubs Pub 53% 17% Restaurants Cash extraction High demand growth Low amenity levels Limited site availability Drinks Food led led Supply out-pacing High demand growth strong demand Low barriers to entry 16% 14% Bars Restaurants Cit
Slide 53: Brand Development: Target Segments
Six Continents Retail Brand development: Target segments Residential Pubs Pub 42% Restaurants 27% Drinks Food led led Bars Restaurants 27% City Centre 4% Note: Percentages represent split of SCR UK outlets (excluding Bowling, Bowling, Hotels) 53
Slide 54: Conversions/Acquisitions 2002
Six Continents Retail Conversions/Acquisitions 2002* Residential Pubs Pub Restaurants + 155 + 43 outlets outlets Drinks Food led led + 43 +6 outlets outlets Bars Restaurants City Centre *Excludes Alex, bowls and hotels 54
Slide 55: Brand Development
Six Continents Retail Brand Development z Innovation: NPD “Castle” - Affluent residential area pubs Nicholson’s - West End and city pubs Sizzling Pub Co - Food locals Arena - Entertainment locals Flares - 70’s bar z Evolution of established brands Harvester, Toby 55
Slide 56: Site Acquisitions
Six Continents Retail Site Acquisitions Harvester 56
Slide 57: Leveraging Scale Economies
Six Continents Retail Leveraging Scale Economies 01/02 00/01 H1 H1 Unit Scale Average sales/outlet £14.2k £13.4k No outlets sales > £20k 367 305 Brand Scale Brands >50 outlets 838 676 Corporate Scale Operating Margin 18.5% 18.4% 57
Slide 58: Base Profit Drivers
Six Continents Retail Base Profit Drivers z Regulatory-driven costs absorbed £20m this year: estimated £9m in 02/03 z Like-for-like performance Price/volume trade off Central London and High Street versus Suburbs z Defending margins Purchasing scale Retail staff productivity Reducing ove
Slide 59: Conversion Potential
Six Continents Retail Conversion Potential H1 01/02 Branded 1,090 15% Operating format 65 returns Individual character 140 Identified pipeline 600 59
Slide 60: Growing the business
Six Continents Retail Growing the business z Improving industry environment z Leveraging scale and driving efficiencies z Exploiting segment opportunities Main focus on suburbia z Flow of new product development z Further growth from strong conversion pipeline and selective site acquisitions 60
Slide 61: Six Continents PLC outlook
Six Continents PLC z Strong growth prospects Favourable industry cycle Benefit of continued investment z Short-term outlook z Corporate investment strategy 61
Slide 62: Tim Clarke, Chief Executive
TIM CLARKE Chief Executive 62
Slide 63: Supplementary Information
Supplementary Information 1
Slide 64: Six Continents PLC - Investment
Six Continents PLC - Investment £m H1 01/02 H1 00/01 Gross Disposals Net Gross Disposals Net Hotels 183 (22) 161 134 (10) 124 Retail 146 (19) 127 173 (6) 167 Soft Drinks 16 (1) 15 15 (6) 9 Other - (2) (2) 4 (19) (15) Group 345 (44) 301 326 (41) 285 2
Slide 65: Cumulative Key Performance Indicators Q2 01/02 Owned/Leased & Managed
Six Continents Hotels Cumulative Key Performance Indicators Owned/Leased & Managed Q2 01/02 Owned & Leased Managed Occ % ADR $ RevPAR $ Occ % ADR $ RevPAR $ Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Inter-Continental 59.0% 1.1% 170.01 -12.8% 100.27 -11.1% 53
Slide 66: Cumulative Key Performance Indicators Q2 01/02 Franchised & Total
Six Continents Hotels Cumulative Key Performance Indicators Franchised & Total Q2 01/02 Franchised Total Occ % ADR $ RevPAR $ Occ % ADR $ RevPAR $ Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Inter-Continental 50.5% -7.0% 120.85 -4.4% 61.06 -16.0% 53.7% -4.7% 1
Slide 67: Cumulative Key Performance Indicators H1 01/02 Owned/Leased & Managed
Six Continents Hotels Cumulative Key Performance Indicators Owned/Leased & Managed H1 01/02 Owned & Leased Managed Occ % ADR $ RevPAR $ Occ % ADR $ RevPAR $ Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Inter-Continental 58.3% -6.6% 167.18 -19.2% 97.54 -27.4% 51
Slide 68: Cumulative Key Performance Indicators H1 01/02 Franchised & Total
Six Continents Hotels Cumulative Key Performance Indicators Franchised & Total H1 01/02 Franchised Total Occ % ADR $ RevPAR $ Occ % ADR $ RevPAR $ Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Inter-Continental 47.4% -7.6% 116.75 -2.3% 55.39 -15.9% 52.0% -7.5% 1
Slide 69: Six Continents Hotels - System Size at 31 March 2002
Six Continents Hotels - System Size at 31 March 2002 Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Inter-Continental 9 3,936 15 4,659 19 5,142 43 13,737 Crowne-Plaza 7 2,761 23 7,870 72 19,412 102 30,043 Holiday Inn 8 2,665 59 17,580 1,092 201,305 1,159
Slide 70: Six Continents Hotels - Revenues H1 01/02
Six Continents Hotels - Revenues H1 01/02 H1 H1 Growth on 01/02 00/01 Last Year $m $m % AMERICAS Owned and leased hotels 214 280 -23.6 Managed & upscale franchise 75 421 -82.2 NA Midscale franchise 125 138 -9.4 Total AMERICAS 414 839 -50.7 EMEA Owned and leased hotels 490 378 29.6 Managed & franchis
Slide 71: Six Continents Retail - Outlet Numbers H1 01/02
Six Continents Retail - Outlet Numbers H1 01/02 00/01 Disposals Acquisitions Conversions H1 02 Restaurants Vintage Inns 179 11 190 Harvester 150 1 (2) 149 All Bar One 54 (1) 53 Toby Carvery 64 4 68 Innkeepers Fayre 16 0 16 Express by Holiday Inn 18 2 0 20 Browns 13 1 0 14 Alex (managed) 30 7 0 37 52
Slide 72: Six Continents Retail - Sales and Profit Data H1 01/02
Six Continents Retail - Sales and Profit Data H1 01/02 £m Restaurant Pubs & Bars Total Food Sales 174 53 227 Food Sales Mix % 54 11.5 28.8 Drink Sales 125 355 480 Total Sales 321 465 786 Operating Profit 45 101 146 10
Slide 73: Six Continents Retail - Current Estate
Six Continents Retail - Current Estate Unbranded Branded Restaurants Sales/Week £16.0k £19.3k Outlets 106 547 Pubs & Bars Sales/Week £10.3k £15.4k Outlets 869 542 Six Continents Retail - Average Number of Trading Outlets H1 01/02 H1 00/01 Restaurants 617 583 Pubs & Bars 1,361 1,358 11