Intercontinental Hotels Group Plc · LSE:IHG

Intercontinental Hotels — H1 2013 Earnings Presentation

49 slides from Intercontinental Hotels's earnings presentation, Aug 6, 2013

  1. Slide 1: Half Year Results Presentation

    Half Year Results Presentation 6 August 2013 IHG©

  2. Slide 2: H1 2013 – continued growth

    H1 2013– continued growth Preferred brands Global RevPAR 3.7% Strong system growth Net rooms 1.7% Good growth in fees Fee revenues¹ 3.9% Clear scale benefits Fee-based margin¹ 0.5%pts² Sustainable shareholder value Interim dividend 10% Balance sheet efficiency Special dividend $350m IHG© ¹ Adjusted

  3. Slide 3: Financial Results

    Financial Results Tom Singer, CFO IHG©

  4. Slide 4: Financial results

    Financial results CER3 Change 6 months 6 months $ million Change % % Excluding to 30 June 13 to 30 June 122 LDs4 Revenue 936 878 7% 2% Operating Profit¹ 338 281 20% 6% Interest (36) (25) (44)% Profit before tax¹ 302 256 18% Tax rate¹ 31% 29% 2%pts Profit after tax¹ 209 182 15% Adjusted Basic EPS¹ 78

  5. Slide 5: H1 2013: resilient fee revenue growth

    H1 2013: resilient fee revenue growth Royalty RevPAR X Rooms X Rate H1 2013 fee revenue¹ growth 6.6% 4.9% 3.9% 1.3% (4.7)% $562m $307m $74m $79m $43m H1 2013 fee revenue1 Group2 Americas Europe AMEA Greater China IHG© ¹ Fee revenue excludes revenue from owned and leased hotels, managed lease hotels

  6. Slide 6: Robust first half RevPAR growth

    RevPAR Robust first half RevPAR growth Comparable YoY RevPAR growth by rate and occupancy Occupancy Rate 6.2% 4.5% 1.6% 3.7% 2.9% 2.0% 4.6% 0.4% (0.1)% 1.7% 1.6% 0.9% 1.1% (1.2)% (0.3)% Group Americas Europe AMEA Greater China IHG© 6

  7. Slide 7: IHG brands continue to perform strongly

    RevPAR IHG brands continue to perform strongly IHG H1 RevPAR performance vs. industry - US Comparable IHG RevPAR Total IHG RevPAR Industry (segment) RevPAR: STR 10 8 YoY RevPAR growth (%) 6 4 2 0 US - total InterContinental Crowne Plaza Hotel Indigo Holiday Inn Holiday Inn Express IHG© Source: IHG;

  8. Slide 8: Holiday Inn brand family - relaunch driving strong results

    Holiday Inn brand family RevPAR - relaunch driving strong results High absolute RevPAR premium Strong pace of signings US Holiday Inn brand family1 12 month Global Holiday Inn brand family room total RevPAR index to upper midscale signings (000’s) – First Half segment 18 108 108 107 107 14 105 13 12

  9. Slide 9: High quality growth - Group signings and openings

    High quality growth Rooms - Group signings and openings 1.7% net system growth • 15k rooms added, 13k rooms removed High quality pipeline • 32k rooms signed, up 43% YoY1 – 9k rooms signed in Greater China • 7% pipeline growth YoY • Over 40% under construction • Over 50% of rooms in developing market

  10. Slide 10: Performance by business model

    Performance by business model Revenue¹ Operating Operating model % Growth² % Growth² Margin (%) ($m) profit¹ ($m) Franchised 332 7% 285 8% 85.8% Managed 171 (2)% 101 1% 59.1% Owned & Leased 249 6% 43 19% 17.3% Franchised growth due to solid rooms & RevPAR growth Managed performance impacted by: • US

  11. Slide 11: Continued fee based margin progression

    Continued fee based margin1 progression Fee based margin1 up c.0.5% points on an underlying basis Fee based margin1 progression 44.0% 42.9% 42.0% H1 2012 H1 2012 H1 2013 reported restated reported for IAS19R Accounting policy change (IAS19R): 0.9%pt 2012 restatement impact Reported fee based margin1

  12. Slide 12: Strong free cash flow generation

    Strong free cash flow generation 6 months 6 months $ million to 30 June 13 to 30 June 121 EBITDA 378 327 Free cash flow 176 144 Growth capital expenditure (55) (5) Disposal receipts2 495 3 Ring fenced deposits relating to pension arrangements3 (94) - Ordinary dividend (115) (113) Share buyback (127)

  13. Slide 13: Harnessing the power of free cash flow

    Harnessing the power of free cash flow Free cash flow Asset disposals Investment grade credit rating Growth capital Sustainable ordinary investment Capital returns dividend IHG© 13

  14. Slide 14: Invest for growth, recycle capital

    Invest for growth, recycle capital Medium term growth capital expenditure $100m - $200m per annum • $55m in the half includes c.$30m for EVEN Hotels Funded by recycling • $401m* cash from disposals year to date • Includes $368m* net proceeds from InterContinental London Park Lane Medium term mainten

  15. Slide 15: Capital returns - strong track record

    Capital returns - strong track record Interim dividend growth of 10% to 23¢ Industry leading shareholder returns • $350m special dividend announced today • $243m of $500m share buyback programme completed to date • $9.4bn returned once complete, incl. $1.4bn ordinary dividend Balance sheet • Investm

  16. Slide 16: Current trading

    Current trading Forward indicators encouraging • Group rooms and rate on the books up year on year Well positioned to outperform Current trading trends broadly in line with the first half IHG© 16

  17. Slide 17: Operating Review

    Operating Review Richard Solomons - CEO IHG©

  18. Slide 18: Our model for high quality growth

    Our model for high quality growth Superior Preferred guest owner experiences delivered proposition 5 1 through people Effective channel 4 2 Build & management leverage scale 3 Strong brand portfolio & loyalty programme Low capital intensity model drives growing cash flow and ROI IHG© 18

  19. Slide 19: Building preferred brands

    Building preferred brands IHG’s external accolades Leveraging the Power of the IHG brand Holiday Inn brand family – unlocking further potential Crowne Plaza repositioning – driving results New brand progress IHG© 19

  20. Slide 20: IHG's external accolades

    IHG’s external accolades J.D. Power & Associates 2013 • Holiday Inn ranked “Highest in Guest Satisfaction Among Mid-scale Full Service Hotel Chains” for 3rd year running TTG China Travel Awards • Holiday Inn Hotels & Resorts = Best Mid-range Hotel Brand in Greater China (3rd consecutive year) • Holi

  21. Slide 21: Leveraging the power of the IHG brand - approach to branding

    Leveraging the power of the IHG brand - IHG’s approach to branding IHG’s brands are amongst the biggest in the industry System¹ Segment share² Pipeline¹ Segment share² 57,280 13% #1 18,618 11% #1 436,047 28% #1 101,804 38% #1 107,380 6% #2 29,817 8% #4 5,908 11% #4 6,038 20% #3 49,957 14% #3 15,413

  22. Slide 22: Building on Priority Club Rewards' success

    Leveraging the power of the IHG brand - building on Priority Club Rewards’ success Mr William Smith 987 456 432 Exp. Nov. 13 IHG© 22

  23. Slide 23: A ground-breaking loyalty programme

    Leveraging the Power of the IHG brand - a ground-breaking loyalty programme IHG® Rewards Club Added benefits: • Free internet to all Elite members from July 2013, extending to all members during 2014 • The ability to earn Elite status faster by staying in three or more of IHG’s hotel brands • Reward

  24. Slide 24: The benefits to IHG

    Leveraging the Power of the IHG brand - the benefits to IHG Builds on strong foundations Clear family of brands under the IHG umbrella Maximises leverage for IHG’s brands and channels Grows share of guests’ wallets – drive greater cross-sell • members who visit 2 brands will average >3x more room-ni

  25. Slide 25: Communicating the change to guests

    Leveraging the Power of the IHG brand - communicating the change to guests IHG© 25

  26. Slide 26: Unlocking the full potential of the Holiday Inn Brand Family

    Unlocking the full potential of the Holiday Inn® Brand Family Iconic brand family, with >60yrs heritage and broad global appeal $1bn Holiday Inn global relaunch • >1,400 hotels removed, >1,900 new ones added • Significant RevPAR premium to segment • J.D. Power Award¹ for 3rd year running The engine

  27. Slide 27: Holiday Inn Express Stay Smart 2013

    Holiday Inn Express “Stay Smart™” 2013 Americas launch April 2013 Significant results to date: • >680 media placements • >445m audience reach • >3.5m YouTube views • 17% lift in Holiday Inn Express keywords • c.25% of consumers Times Square Billboard Digital Billboards visited the brand website as a

  28. Slide 28: Crowne Plaza repositioning - driving results

    Crowne Plaza® repositioning - driving results 2012 2013 2014 2015 1. Quality improvement (US focus) • Quality action plans implemented • 22 hotels removed, c.18 remaining 2. Invest capital in halo locations 3. Roll-out differentiated brand hallmarks • Hallmark pilots launched in US & Europe US Crown

  29. Slide 29: Crowne Plaza repositioning - 2013 high quality openings

    Crowne Plaza® repositioning - 2013 high quality openings Crowne Plaza Xishuangbanna, China Crowne Plaza Charlotte Executive Park, USA 29 Crowne Plaza Madinah, Saudi Arabia Crowne Plaza Duqm, Oman 29

  30. Slide 30: New brand progress - EVEN Hotels

    New brand progress - EVEN Hotels® Guest room Wellness lifestyle hotel brand at a mainstream price-point Industry first 17m wellness minded travellers in target Rest Keep Active Market Easy Eat Accomplish Well More 30

  31. Slide 31: New brand progress - EVEN Hotels

    New brand progress - EVEN Hotels® Focused development on urban and suburban feeder markets where wellness minded guests live and travel to Four signings announced to date – first opening in early 2014 • Maryland: Rockville – owned • Connecticut: Norwalk – owned • Manhattan midtown (E44th St) – manag

  32. Slide 32: EVEN Hotels Norwalk, NYC and Rockville

    EVEN Hotels Norwalk, Connecticut EVEN Hotels NYC 44th St EVEN Hotels Rockville, Maryland 32

  33. Slide 33: New brand progress - HUALUXE Hotels & Resorts

    New brand progress - HUALUXE Hotels & Resorts® • 1st 5-star international hotel designed for Chinese guests • Potential to be in >100 cities in Greater China long term • Strong owner interest to date – 19 hotels (6k rooms) signed since launch in March ‘12 • First opening scheduled for Q4 2014 33

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  35. Slide 35: Outlook

    Outlook IHG©

  36. Slide 36: US - favourable supply / demand continues to be supportive for RevPAR

    US - favourable supply / demand continues to be supportive for RevPAR US Industry demand US Industry supply growth (room nights sold 12m to June - bn) (12m to June) 5% Supply Average 1.0 4% 3% 2% 0.8 1% 0% 0.6 -1% 89 91 93 95 97 99 01 03 05 07 09 11 13 89 91 93 95 97 99 01 03 05 07 09 11 13 IHG© Sou

  37. Slide 37: US - favourable supply demand continues to be supportive for RevPAR

    US - favourable supply demand continues to be supportive for RevPAR US Industry supply, demand and RevPAR growth (12m to June) 10% 5% 0% -5% Supply Demand RevPAR -10% -15% -20% 2008 2009 2010 2011 2012 2013 IHG© Source: STR, 12m rolling data to June 2013 37

  38. Slide 38: IHG plays predominantly in the most resilient segments

    IHG plays predominantly in the most resilient segments US Industry peak & trough room revenue change by segment (12m to June from 2000 – 2013) 14.9% 14.8% 12.3% 9.4% 10.3% -10.4% -11.5% -13.0% -15.8% -15.2% Luxury / Upper Upscale Upper midscale Midscale Economy Upscale c.85% of IHG’s US rooms are in

  39. Slide 39: Quality of IHG's room revenue through the cycle

    Quality of IHG’s room revenue through the cycle IHG US rooms revenue vs. US industry rooms revenues from 2005 (indexed to 100) 12m to June 140 130 120 110 100 2005 2006 2007 2008 2009 2010 2011 2012 H1 2013 Industry IHG IHG© Source: IHG, STR 12m rolling data to June 2013 39

  40. Slide 40: Greater China – GDP growth will slow, but remain robust

    Greater China – GDP growth will slow, but is forecast to remain robust into the future China is already the world’s second largest economy US vs. China Absolute GDP expectations ($ trillion, nominal) 25 Nominal Absolute GDP ($trillion) 20 15 10 5 0 1990 1995 2000 2005 2010 2015 2020 US China IHG© So

  41. Slide 41: Greater China – shift to a consumption led economy

    Greater China – the shift to a consumption led economy will benefit the hotel industry Rapid urbanisation • Urban population will increase from 650m today to 912m by 2025¹ Growing wealthy & middle classes driving hotel demand • By 2025 China’s urban wealthy & upper middle classes will be >2x US² • P

  42. Slide 42: Greater China - IHG is uniquely well positioned

    Greater China - IHG is uniquely well positioned Greater China system & pipeline (rooms) 120 No of rooms ‘000 System Pipeline 58k 80 40 63k 0 IHG Wyndham Starwood Hilton Marriott Accor Shangri La Hyatt Well established as the leading international hotel operator Managed model Greater China = 9% of IH

  43. Slide 43: Well positioned for continued high quality growth

    Well positioned for continued high quality growth Confident outlook in uncertain macro environment Strong platform Clear strategy for future high quality growth Market beating shareholder returns IHG© 43

  44. Slide 44: Q&A

    Q&A Holiday Inn Resort Kandooma, Maldives IHG© 44

  45. Slide 45: Appendices

    Appendices IHG©

  46. Slide 46: Hotel franchising

    Hotel franchising Total gross revenue $bn¹ (rooms only) Group royalty drivers H1 2013 YoY 2013 6.1 Average 0.9% rooms 2012 5.8 RevPAR 3.1% 2011 5.4 Royalty fees 5.6% Franchise Fees $m Franchise EBIT $m (margin %) 2013 332 2013 285 (86%) 2012 313 2012 263 (84%) (84%) 2011 295 2011 248 IHG© Based on a

  47. Slide 47: Hotel management

    Hotel management Total gross revenue $bn1(total hotel) Management Fees² $m 2013 4.1 2013 171 2012 4.2 2012 176 2011 3.9 2011 166 Managed EBIT² $m (margin %) Managed lease revenue and EBIT $m $m H1 2013 H1 2012 2013 101 (59%) Americas Revenue 19 19 Americas EBIT 1 1 2012 101 (57%) Europe Revenue 42 3

  48. Slide 48: Owned & Leased

    Owned & Leased O&L revenue $m O&L EBIT $m (margin %) 2013 249 2013 43 (17%) 2012 235 2012 36 (15%) 2011 234 2011 34 (15%) O&L EBITDA $m 2013 58 2012 52 2011 53 IHG© *All charts exclude results from disposed assets: Hotel Indigo San Diego (sold 2011); Holiday Inn Gwinnett (sold 2011) Staybridge Suite

  49. Slide 49: Half Year Results Presentation

    Half Year Results Presentation 6 August 2013 IHG©

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