Intercontinental Hotels Group Plc · LSE:IHG
Intercontinental Hotels — H1 2003 Earnings Presentation
52 slides from Intercontinental Hotels's earnings presentation, September 2003
Slide 1: Richard North, Chief Executive
Richard North Chief Executive 1
Slide 2: Richard Solomons, Finance Director
Richard Solomons Finance Director 2
Slide 3: Results 6 months to 30 June 2003
Results 6 months to 30 June 2003 Pro forma Group Results (£) Turnover Down 3.4% EBITDA Down 14.5% Operating Profit Down 27.4% Profit Before Tax Down 30.8% Earnings per share Down 32.1% 3
Slide 4: Operating Profit: Hotels and Soft Drinks
Results 6 months to 30 June 2003 Operating Profit £m Hotels 86 Down 31.7% Soft Drinks 39 Up 14.7% 4
Slide 5: Owned & Leased Estate RevPAR 6 months to June 2003
Owned & Leased Estate RevPAR 6 months to 30 June 2003 15.0% 10.0% 5.0% 0.0% Jan Feb Mar Apr May Jun RevPAR% Growth -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% -35.0% -40.0% Americas EMEA Asia Pacific 5
Slide 6: Operating Profit Performance 6 months to 30 June 2003
Operating Profit Performance 6 months to 30 June 2003 z Hotels revenue £62m lower z Key factors affecting profit flow-through: Occupancy Depreciation Insurance z Hotels operating profit £40m lower 6
Slide 7: Operating Profit 3 months to 30 June 2003
Operating Profit 3 months to 30 June 2003 $m 3 mths to 3 mths to % 30 Jun 03 30 Jun 02 Americas - Owned & Leased 13 12 8.3 - Managed & Upscale Franchised 12 11 9.1 - Midscale Franchised 57 57 - Total Americas 82 80 2.5 EMEA - Owned & Leased 22 39 (43.6) - Managed & Franchised 8 9 (11.1) Total EMEA 3
Slide 8: Operating Profit 6 months to 30 June 2003
Operating Profit 6 months to 30 June 2003 $m 6 mths to 6 mths to % 30 Jun 03 30 Jun 02 Americas - Owned & Leased 13 13 - - Managed & Upscale Franchised 19 20 (5.0) - Midscale Franchised 102 100 2.0 Total Americas 134 133 0.8 EMEA - Owned & Leased 31 59 (47.5) - Managed & Franchised 18 20 (10.0) Tota
Slide 9: Americas InterContinental Owned & Leased RevPAR Performance
Americas InterContinental Owned & Leased RevPAR Performance 10.0% InterContinental O&L Upper Upscale Segment RevPar % Growth 0.0% Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 (10.4%) Sourc e: IHG & Smith Travel data 9
Slide 10: Americas Owned & Leased
Americas Owned & Leased 3 mths to 3 mths to 6 mths to RevPAR Movement 31 Mar 03 30 Jun 03 30 Jun 03 InterContinental 1.8% 2.9% 2.2% 10 Operating profit flat at $13m
Slide 11: Americas Managed & Upscale Franchise
Americas Managed & Upscale Franchise 3 mths to 3 mths to 6 mths to RevPAR Movement 31 Mar 03 30 Jun 03 30 Jun 03 InterContinental Managed (24.1%) (11.8%) (18.0%) Crowne Plaza Managed (3.0%) (14.5%) (9.4%) Crowne Plaza Franchised (1.3%) (5.2%) (3.5%) 11 Operating profit down $1m to $19m
Slide 12: Americas Express Franchise RevPAR Performance
Americas - Express Franchise RevPAR Performance 10.0% RevPAR % Growth Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 0.0% (10.0%) Express Brands Midscale without F& B Segment Sourc e: IHG & Smith Travel data 12
Slide 13: Americas Holiday Inn Franchise RevPAR Performance
Americas - Holiday Inn Franchise RevPAR Performance 10.0% RevPAR % Growth Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 0.0% (10.0%) Holiday Inn Brands Midscale with F&B Segment Sourc e: IHG & Smith Travel data 13
Slide 14: Americas Midscale Franchise
Americas Midscale Franchise 3 mths to 3 mths to 6 mths to RevPAR Movement 31 Mar 03 30 Jun 03 30 Jun 03 Holiday Inn (2.0%) (4.9%) (3.7%) Express (0.6%) (0.5%) (0.6%) 6 months to 30 Jun 03 Holiday Inn Express Increase in royalty rate 0.05% pts - Change in number of (1.7%) 8.0% rooms available 14 Oper
Slide 15: EMEA Operating Profit
EMEA Operating Profit 6 mths to 6 mths to 30 Jun 03 30 Jun 02 % US Dollar $m $m Total Operating Profit 49 79 (38.0) Sterling £m £m Owned & Leased 19 41 (53.7) Managed & Franchised 11 14 (21.4) Total Operating Profit 30 55 (45.5) 15
Slide 16: EMEA Owned & Leased
EMEA Owned & Leased 3 mths to 3 mths to 6 mths to RevPAR Movement 31 Mar 03 30 Jun 03 30 Jun 03 InterContinental (6.1%) (15.5%) (11.5%) Crowne Plaza (1.6%) (5.4%) (3.7%) Holiday Inn (1.0%) (6.2%) (3.8%) 16 Operating profit down £22m to £19m
Slide 17: EMEA Holiday Inn UK RevPAR Performance
EMEA Holiday Inn UK RevPAR Performance 20.0% Regions Holiday Inn Regions Hotel Benchmark Segment London Holiday Inn London Hotel Benchmark Segment 10.0% RevPAR % Growth 0.0% (10.0%) (20.0%) Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 (30.0%) Sourc e: IHG & Hotel Benchmar k data 17
Slide 18: EMEA Managed & Franchised
EMEA Managed & Franchised 3 mths to 3 mths to 6 mths to RevPAR Movement 31 Mar 03 30 Jun 03 30 Jun 03 InterContinental Managed (4.0%) (17.3%) (10.8%) Holiday Inn Franchised 1.1% (1.9%) (0.5%) Express Franchised (2.2%) (5.8%) (4.3%) 18 Operating profit down £3m to £11m
Slide 19: Asia Pacific Operating Profit
Asia Pacific 3 mths to 3 mths to 6 mths to RevPAR Movement 31 Mar 03 30 Jun 03 30 Jun 03 IC Hong Kong 2.7% (90.2%) (46.0%) Managed 3.4% (31.6%) (14.7%) 19 Operating profit down $15m to $5m
Slide 20: Operating Profit 6 months to 30 June 2003
Operating Profit 6 months to 30 June 2003 $m 6 mths to 6 mths to % 30 Jun 03 30 Jun 02 Americas - Owned & Leased 13 13 - - Managed & Upscale Franchised 19 20 (5.0) - Midscale Franchised 102 100 2.0 Total Americas 134 133 0.8 EMEA - Owned & Leased 31 59 (47.5) - Managed & Franchised 18 20 (10.0) Tota
Slide 21: Britvic Soft Drinks
Britvic Soft Drinks Results for the 28 weeks to 5 July 2003 z Volume up 3.2% z Turnover up 8.1% to £335m z Profit margins increased z Operating Profit up 14.7% 21 Operating profit up £5m to £39m
Slide 22: Group Pro Forma Profit & Loss Account
Group Pro Forma Profit & Loss Account 6 mths to 6 mths to Growth £m 30 Jun 03 30 Jun 02 % EBITDA 213 249 (14.5) Operating profit 114 157 (27.4) Interest (22) (24) 8.3 Profit before tax 92 133 (30.8) Tax (23) (38) 39.5 Minority interests (13) (13) - Retained Profit 56 82 (31.7) Earnings per share (pe
Slide 23: Group Pro Forma Cash Flow
Group Pro Forma Cash Flow 6 mths to £m 30 Jun 03 Operating profit 114 Depreciation / Amortisation 99 Working capital / Other 25 Capital expenditure (net) (140) Operating cash flow 98 23
Slide 24: Group Balance Sheet
Group Balance Sheet £m 30 June 03 31 Dec 02* Tangible assets 4,467 4,383 Intangible assets 157 157 Working capital (42) (22) Long--term liabilities Long (156) (160) Net operating assets 4,426 4,358 Net debt (942) (1,033) Other non- non-operating liabilities (935) (921) Net assets 2,549 2,404 24 * Pr
Slide 25: Dividends
Dividends z Confirmation of dividend intent stated in the Listing Particulars of 13.5p per share for 2003 z Interim dividend of 4.05p for calendar 2003 payable 14 October 2003 z Proposed final dividend of 9.45p payable June 2004 25
Slide 26: Summary
Summary z Trading environment remains uncertain z Our brands continue to perform well z Britvic continues to produce excellent results z Aggressive financial management z Improved net debt position 26
Slide 27: Richard North, Chief Executive
Richard North Chief Executive 27
Slide 28: Driving Returns and Free Cash Flow
Driving Returns and Free Cash Flow Driving revenue Improved ROCE and Reduced overhead costs Free Cash Flow Lower capital intensity 28
Slide 29: Driving Revenue: System Delivery PCR enrolments
Driving Revenue: System Delivery PCR enrolments Enrolments (millions) z 1.8 million new Priority Club 1.8 members enrolled in 6 months to June 2003 1.2 z Total membership base now over 17 million z InterContinental shows fastest growth z 28% rooms now booked by PCR members, up from 24% 6m to Jun 02
Slide 30: Driving Revenue: System Delivery Channel Optimisation
Driving Revenue: System Delivery Channel Optimisation Change in CRO Call Volumes and Revenues z System delivery up from 24% to Jan - Jun 2003 30% 6% 4% 2% + $17m z Web delivery now accounts for 9.0% of bookings, up from 5.6% 0% last year - 2% - 4% - 6% - 1m z CRO conversion rates increased and activ
Slide 31: EMEA
EMEA Particularly hard hit by: Disproportionate exposure to US traveller Concentration in key gateway cities affected by the depressed euro zone economy Depreciation charges increased due to refurbs without associated market recovery Actions underway New EMEA leadership team fully in place
Slide 32: Reduced Overhead Costs: Annualised Savings
Reduced Overhead Costs: Annualised Savings $m, Annualised z Cost savings primarily 61 headcount related 39 z Result primarily from ending of EMEA consultation period allowing further redundancies z On target for $75m May August annualised savings by Dec 2003 and at least Positions 381 597 $100m by D
Slide 33: Lower Capital Intensity: Sale of Staybridge Suites
Lower Capital Intensity: Sale of 16 Staybridge Suites $185m sales price; over $15m above book value Strategic: z Brand defining No – all assets built to same design z Key location No – Geographic strength already established in the US Financial: z Current Relatively unaffected by downturn, and still
Slide 34: Lower Capital Intensity: Sale of InterContinental May Fair
Lower Capital Intensity: Sale of InterContinental May Fair £115m sale price; £400k per room Strategic: z Brand defining No – in need of major refurbishment z Key location Yes – but two other InterContinental hotels in London Financial: z Current Property tired, in need of substantial capex and was d
Slide 35: Britvic
Britvic Innovation success with strong pipeline z Britvic J2O up 114% z Robinsons Fruit Shoot up 64% Continued investment in core brands z Successful re-launch of Tango 35
Slide 36: Current Trading: RevPAR 2003 vs 2002
Current Trading RevPAR 2003 vs 2002 Apr May Jun Jul Aug Americas InterContinental (Owned & Leased) (1.0% ) 2.4% 7.2% 9.5% 5.2% Crowne Plaza (12.7% ) (8.9% ) (5.6% ) (0.2% ) (3.3% ) Holiday Inn (8.3% ) (4.0% ) (3.9% ) 1.1% (1.1% ) Holiday Inn Express (2.7% ) (0.2% ) (0.2% ) 3.4% 2.7% EMEA InterContin
Slide 37: Summary
Summary Driving revenue Improved ROCE and Reduced overhead costs Free Cash Flow Lower capital intensity 37
Slide 38: Hotels Group
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Slide 39: Supplementary Information
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Slide 40: RevPAR Owned/Leased & Managed 3 Months to 30 June 2003
InterContinental Hotels - RevPAR Owned/Leased & Managed 3 Months to 30 June 2003 Owned & Leased Managed Occ % ADR RevPAR Occ % ADR RevPAR 2003 Grow th 2003 Grow th 2003 Growth 2003 Growth 2003 Grow th 2003 Grow th InterContinental 69.1% 4.1% 160.97 (3.2%) 111.17 2.9% 48.7% (1.9% ) 119.72 (8.4%) 58.2
Slide 41: RevPAR Franchised & Total 3 Months to 30 June 2003
InterContinental Hotels - RevPAR Franchised & Total 3 Months to 30 June 2003 Franchised Total Occ % ADR RevPAR Occ % ADR RevPAR 2003 Grow th 2003 Grow th 2003 Growth 2003 Growth 2003 Grow th 2003 Grow th InterContinental 52.3% 4.4% 102.81 (4.9%) 53.80 3.9% 56.0% 1.8% 129.16 (5.9%) 72.32 (2.7%) Crown
Slide 42: RevPAR Owned/Leased & Managed 6 Months to 30 June 2003
InterContinental Hotels - RevPAR Owned/Leased & Managed 6 Months to 30 June 2003 Owned & Leased M anaged Occ % ADR RevPAR Occ % ADR RevPAR 2003 Growth 2003 Grow th 2003 Grow th 2003 Grow th 2003 Grow th 2003 Grow th InterContinental 66.4% 4.3% 160.55 (4.4%) 106.65 2.2% 46.6% (4.8%) 119.72 (9.6%) 55.
Slide 43: RevPAR Franchised & Total 6 Months to 30 June 2003
InterContinental Hotels - RevPAR Franchised & Total 6 Months to 30 June 2003 Franchised Total Occ % ADR RevPAR Occ % ADR RevPAR 2003 Growth 2003 Growth 2003 Growth 2003 Growth 2003 Growth 2003 Growth InterContinental 52.4% 1.6% 109.98 (2.2%) 57.63 0.9% 54.6% 0.3% 131.10 (4.5%) 71.57 (4.0%) Crowne Pl
Slide 44: Revenue 3 Months to 30 June 2003
InterContinental Hotels - Revenue 3 Months to 30 June 2003 3 mths 3mths to June 03 to June 02 $m $m % AMERICAS Owned and leased 131 129 1.6 Managed & upscale franchised 28 25 12.0 Midscale franchised 75 77 (2.6) Total AMERICAS 234 231 1.3 EMEA Owned and leased 300 283 6.0 Managed & franchised 35 31
Slide 45: Revenue 6 Months to 30 June 2003
InterContinental Hotels - Revenue 6 Months to 30 June 2003 6 mths 6mths to June 03 to June 02 $m $m % AMERICAS Owned and leased 248 237 4.6 Managed & upscale franchised 53 47 12.8 Midscale franchised 140 143 (2.1) Total AMERICAS 441 427 3.3 EMEA Owned and leased 557 517 7.7 Managed & franchised 65 7
Slide 46: Total System Size at 30 June 2003
InterContinental Hotels Total System Size at 30 June 2003 Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 10 4,421 15 4,636 19 5,142 44 14,199 Crowne Plaza 6 2,286 23 8,152 74 20,334 103 30,772 Holiday Inn 8 2,665 65 19,524 1,056 194,907 1
Slide 47: Pipeline at 30 June 2003
InterContinental Hotels Pipeline at 30 June 2003 Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 1 420 4 1,356 - - 5 1,776 Crowne Plaza - - 3 622 11 2,609 14 3,231 Holiday Inn - - 3 1,159 75 10,373 78 11,532 Express - - 1 252 232 19,300 23
Slide 48: Current Trading - RevPAR
InterContinental Hotels Current Trading - RevPAR RevP AR GROWTH FY03 'vs' FY02 Apr M ay Jun Jly Aug AMERICAS InterC ontinental O&L (1.0%) 2.4% 7.2% 9.5% 5.2% Crowne Plaza Brands (12.7%) (8.9%) (5.6%) (0.2%) (3.3%) Holiday Inn Brands (8.3%) (4.0%) (3.9%) 1.1% (1.1%) Express Brands (2.7%) (0.2%) (0.2%
Slide 49: Current Trading - Occupancy
InterContinental Hotels Current Trading - Occupancy OCCUPANCY %pts GROWTH FY03 'vs' FY02 Apr M ay Jun Jly Aug AMERICAS InterC ontinental O&L 2.6% 3.4% 6.3% 10.3% 5.8% Crowne Plaza Brands (6.2%) (3.4%) (1.3%) 0.4% 0.3% Holiday Inn Brands (4.5%) (1.8%) (2.1%) 0.6% (0.2%) Express Brands (2.0%) (0.5%) (
Slide 50: Current Trading - Rate
InterContinental Hotels Current Trading - Rate ADR GROWTH FY03 'vs' FY02 Apr M ay Jun Jly Aug AMERICAS InterContinental O&L (4.7%) (2.6%) (2.4%) (6.8%) (3.4%) Crowne Plaza Brands (3.7%) (3.9%) (3.7%) (0.9%) (3.8%) Ho liday In n Brands (1.3%) (1.1%) (0.9%) 0.3% (0.8%) Express Brands 0.4% 0 .5% 0.5% 1
Slide 51: New Hotel Openings in 6 Months to 30 June 2003
InterContinental Hotels New Hotel Openings in 6 Months to 30 June 2003 Brand Hotels Room InterContinental Malta 4 965 Sharm El Sheikh, Egypt Koln, Germany Mumbai, India Crowne Plaza Newcastle, Australia 4 752 Darwin, Australia Alice Springs, Australia Vilnius, Lithuania Holiday Inn 21 3,891 Express
Slide 52: Britvic Soft Drinks - Revenue & Operating Profit
Britvic Soft Drinks - Revenue & Operating Profit Calendar Year 2002 and 6 months to June 2003 Q1 Q2 H1 Q3 Q4 Total £m £m £m £m £m £m Calendar 2002 Revenue 154 156 310 155 146 611 Operating Profit 9 25 34 22 12 68 Calendar 2003 Revenue 164 171 335 Operating Profit 8 31 39 14
InterContinental Hotels Group — H1 2003 Earnings Presentation on 6ix