Intercontinental Hotels Group Plc · LSE:IHG
Intercontinental Hotels — H1 2004 Earnings Presentation
55 slides from Intercontinental Hotels's earnings presentation, September 2004
Slide 1: InterContinental Hotels 2004 first half results
InterContinental Hotels 2004 first half results Richard North Chief Executive
Slide 2: Richard Solomons, Finance Director
Richard Solomons Finance Director
Slide 3: Summary
Summary z Hotel results remain strong z Soft drinks continues to grow turnover z Interim dividend raised to 4.30p per share z £1bn return of funds since separation z Special one-off contribution to pension fund of approximately £50m
Slide 4: IHG Group Profit & Loss Account
IHG Group Profit & Loss Account Proforma 6 mths to 6 mths to Change £m 30 June 04* 30 June 03* % Turnover 1,101 1,043 5.6 EBITDA 254 213 19.2 Operating Profit 153 114 34.2 Interest (10) (22) 54.5 Profit before Tax 143 92 55.4 Tax rate 18% 25% Earnings per share 14.2p 7.6p 86.8 + Dividend 4.30p 4.05p
Slide 5: Results 6 months to 30 June 2004
Results 6 months to 30 June 2004 Proforma 6 mths to 6 mths to Change £m 30 Jun 04 30 Jun 03 % Hotels Turnover 735 708 3.8 Operating Profit 113 75 50.7 Soft Drinks Turnover 366 335 9.3 Operating Profit 40 39 2.6
Slide 6: Hotels Operating Profit 6 months to 30 June 2004
Hotels Operating Profit 6 months to 30 June 2004 Proforma 6 mths to 6 mths to $m 30 Jun 04 30 Jun 03 % Americas 145 131 10.7 EMEA 91 51 78.4 Asia Pacific 17 3 466.7 Central Overheads (47) (63) 25.4 Total Operating Profit $m 206 122 68.9 Total Operating Profit £m 113 75 50.7 Total EBITDA £m 190 152 2
Slide 7: Hotels Operating Profit 3 months to 30 June 2004
Hotels Operating Profit 3 months to 30 June 2004 Proforma 3 mths to 3 mths to $m 30 Jun 04 30 Jun 03 % Americas 86 81 6.2 EMEA 62 31 100.0 Asia Pacific 7 (4) - Central Overheads (30) (32) 6.3 Total Operating Profit $m 125 76 64.5 Total Operating Profit £m 69 46 50.0 Total EBITDA £m 107 84 27.4
Slide 8: Owned & Leased Estate Comparable RevPAR growth
Owned & Leased Estate Comparable RevPAR growth for 18 months to 30 June 2004
Slide 9: Americas Operating Profit 6 months to 30 June 2004
Americas Operating Profit 6 months to 30 June 2004 Proforma 6 mths to 6 mths to $m 30 Jun 04 30 Jun 03 % Americas - Owned & Leased 22 17 29.4 - Managed 4 5 (20.0) - Franchised 148 136 8.8 Total 174 158 10.1 Regional Overheads (29) (27) (7.4) Total Americas Operating profit $m 145 131 10.7 Total Amer
Slide 10: Americas - Franchised Hotels
Americas - Franchised Hotels RevPAR Movement 3 mths to 6 mths to RevPAR Movement 30 Jun 04 30 Jun 04 Holiday Inn 5.3% 5.0% Express 6.3% 6.8% 6 months to 30 Jun 04 Holiday Inn Express Change in royalty rate (0.02)% pts (0.02)% pts Change in number of (1.0%) 6.2% rooms available Operating profit up $1
Slide 11: EMEA Operating Profit 6 months to 30 June 2004
EMEA Operating Profit 6 months to 30 June 2004 Proforma 6 mths to 6 mths to £m 30 Jun 04 30 Jun 03 % EMEA - Owned & Leased 38 30 26.7 - Managed 15 8 87.5 - Franchised 9 8 12.5 Total 62 46 34.8 Regional Overheads (12) (14) 14.3 Total EMEA 50 32 56.3 Total EMEA $m 91 51 78.4
Slide 12: EMEA - Owned & Leased
EMEA - Owned & Leased Comparable RevPAR Movement 3 mths to 6 mths to RevPAR Movement 30 Jun 04 30 Jun 04 InterContinental 8.5% 4.0% Crowne Plaza 9.8% 7.5% Holiday Inn 9.3% 8.6% HIUK London 27.7% 22.3% HIUK Regions 5.3% 6.7% O&L Operating profit up £8m to £38m
Slide 13: Asia Pacific Operating Profit 6 months to 30 June 2004
Asia Pacific Operating Profit 6 months to 30 June 2004 6 mths to 6 mths to 6 mths to $m 30 Jun 04 30 Jun 03 30 Jun 02 % (04 v 02) Asia Pacific - Owned & Leased 13 6 14 (7.1) - Managed 12 4 9 33.3 - Franchised 2 2 3 (33.3) Total 27 12 26 3.8 Regional Overheads (10) (9) (9) (11.1) Total Asia Pacific 1
Slide 14: Capital Expenditure continues to be controlled
Capital Expenditure continues to be controlled Hotels Capex Spend, £m, 2001 - z Spend continues to 2004F 700 trend downwards 600 500 z Forecast for 2004 400 reduced to £250m 300 200 100 z Britvic expected spend 0 remains at £80m A A A ) ) ld ew 01 02 03 (o (n 20 20 20 F F 04 04 20 20
Slide 15: Soft Drinks 6 months to June 30 2004
Soft Drinks 6 months to June 30 2004 z Volume up 7.7% as all major brands perform strongly and gain share z Turnover up 9.3% to £366m z Operating Profit up 2.6% to £40m
Slide 16: IHG Group Cash Flow
IHG Group Cash Flow Proforma 6 mths to 6 mths to £m 30 Jun 04 30 Jun 03 Operating Profit 153 114 Depreciation/Amortisation 101 99 Working capital/other (20) 25 Capital expenditure (109) (158) Cash flow before disposals 125 80 Disposals 88 18 Operating cash flow 213 98
Slide 17: Exceptional Items 6 months to 30 June 2004
Exceptional Items 6 months to 30 June 2004 £m FelCor carrying value adjustment 6 Profit on disposal of assets 18 Exceptional interest 6 Tax on exceptional items (3) Exceptional tax credit 138
Slide 18: IHG Group Balance Sheet
IHG Group Balance Sheet £m 30 Jun 04 30 Jun 03 Tangible assets 3,892 4,456 Intangible assets 147 157 Working capital 9 (54) Long-term liabilities (160) (216) Net operating assets 3,888 4,343 Net debt (520) (942) Other non-operating liabilities (731) (870) Net assets 2,637 2,531
Slide 19: Return of Funds
Return of Funds z £213m of initial share buyback programme complete, £37m remaining z Special Dividend of £500m with associated share consolidation to be paid in December 2004 z Further Buyback of £250m once existing programme completes £1bn Return of Funds
Slide 20: Summary
Summary z Hotel results remain strong z Soft drinks continues to grow turnover and profit z Interim dividend raised to 4.30p per share z £1bn return of funds since separation z Special one-off contribution to pension fund of £50m
Slide 21: Richard North, Chief Executive
Richard North Chief Executive
Slide 22: The highlights of today's announcement
The highlights of today’s announcement . . . z Brand performance and system delivery continue to grow strongly z Focused strategy based on key strengths: z Grow brands z Develop managed & franchised business z Additional asset disposals z Further £750m return as part of ongoing programme; £1bn annou
Slide 23: At Separation we laid out a clear strategy
At Separation we laid out a clear strategy z Develop high quality, strongly differentiated brands z Extend network of hotels through largely capital free franchise and management contracts and only very selectively through ownership where returns are high z Significantly reduce capital intensity to
Slide 24: This strategy was supported by an initial set of key actions
This strategy was supported by an initial set of key actions z Redesign organisation z Strengthen management z Significantly reduce costs z Reduce capital expenditure z Reduce asset intensity z Begin returning funds to shareholders
Slide 25: We have made significant progress against these actions
We have made significant progress against these actions z Redesigned organisation z Strengthened management z Costs significantly reduced z Capital Expenditure in 2003 half of that of 2001 z Assets sales programme commenced z Capital return programme commenced and z New Pepsi bottling agreement and
Slide 26: We are aiming to exploit our competitive advantages still more
We are aiming to exploit our competitive advantages still more z Brand portfolio management and creation z Franchising excellence z Hotel management skills z Reservation system delivery and loyalty scheme operation z Scale where it matters in top hotel markets
Slide 27: We have been able to add further detail to our strategy
As a result, we have been able to add further detail to our strategy z Become world’s leading hotel brand owner z Become mostly franchised and managed z Exploit our US scale and geographic presence to build national scale in world’s major markets z Grow InterContinental brand by exploiting national
Slide 28: Phase II: 5 key priorities for 2004 onwards
Phase II: 5 key priorities for 2004 onwards Strengthen core business Grow managed and franchised fee income Become the world’s leading Develop people and organisation hospitality brand owner Continue to execute asset disposal programme Return funds to shareholders Driving ROCE is the key metric by w
Slide 29: Key actions to Strengthen our core business
Strengthen Core Business Key actions to Strengthen our core business z Build strong, differentiated brands z Increase system delivery to strengthen franchisee offer z Strengthen hotel management skills z Selective new brand innovation: Candlewood, Indigo, brand extensions
Slide 30: System delivery strengthens, supporting our pipeline growth
Strengthen Core Business System delivery strengthens, supporting our pipeline growth Reservation channel revenue, $m, PCR total revenue, $m, H1 2003 – 2004 H1 2003 – 2004 2300 1700 2067 1525 2100 1500 1900 1309 1700 1636 1300 1500 1100 1300 26.3% growth 16.5% growth versus US 900 versus US 1100 mark
Slide 31: We continue to make progress with new brands: Indigo
Strengthen Core Business We continue to make progress with new brands: Indigo Indigo Guest Bedroom and Lobby mock up
Slide 32: We continue to make progress with acquired new brands: Candlewood
Strengthen Core Business We continue to make progress with acquired new brands: Candlewood Candlewood: z Top performer in JD Power survey z Pipeline of almost 2,500 rooms
Slide 33: Key actions to Grow managed and franchised fee income
Grow Managed and Franchise Income Key actions to Grow managed and franchised fee income z Significant potential to grow upscale worldwide z Potential to grow midscale to build depth positions in a small number of key markets z Leverage leading market positions in US, UK, China
Slide 34: We are growing our pipeline and system additions
Grow Managed and Franchise Income We are growing our pipeline and system additions z Gross system additions of Pipeline size by key country almost 13,000 rooms US Midscale z Net 2,589 rooms due to planned Holiday Inn China terminations and O&L disposals US Upscale z Pipeline growth of 8% year on yea
Slide 35: Key actions to Develop our people and organisation
Develop our people and organisation Key actions to Develop our people and organisation z Complete delivery of target overhead savings z Contain or reduce costs through actions such as: simplification of structure due to focus reduce costs of asset ownership processing improvement z Focus on st
Slide 36: Capital reduction continues with £2.2bn of assets sold or announced
Continue the execution of asset disposal programme Capital reduction continues with £2.2bn of assets sold or announced for disposal z Started at Separation with £3.9bn of hotels z Currently more than £900m on market or disposed z Announce today a further tranche with net book value of £1.3bn, predom
Slide 37: Announce today a further £750m return to shareholders
Return funds to shareholders Announce today a further £750m return to shareholders Current Progress and Highlights: z £213m of the £250m buyback completed at an average price of 534p per share z Announce today: Special dividend of £500m to be paid in December 2004 with associated share consolidati
Slide 38: World's Leading Hospitality Brand Owner
World’s Leading Hospitality Brand Owner z Predominantly hotel franchising and management business with high quality (low-cyclicality) earnings and cash generation z World class brands z Brand innovator z Scale presence in limited number of key markets z Much reduced capital invested, versus £3.6 bil
Slide 39: In summary, the highlights of today's announcement
In summary, the highlights of today’s announcement . . . z Brand performance and system delivery continue to grow strongly z Focused strategy based on key strengths: Grow brands Develop managed & franchised business z Additional asset disposals z Further £750m return as part of ongoing programme
Slide 40: Current Trading
) INTERCONTINENTAL. \e HOTELS GROUP Current Trading
Slide 41: Current Trading and Outlook
Current Trading and Outlook z Trading remains strong in our key profit regions z Strong occupancy growth across all brands z Room-rate growth has begun in key urban locations z European market remains weak, with Paris in particular very depressed and hard to predict z Booking lead times remain short
Slide 42: Supplementary Information
Supplementary Information 30th June 2004
Slide 43: Index
Index 1. RevPAR - 3 months to 30 June 2004 1. Owned/Leased Comparable & Managed 2. Franchised & Total System z RevPAR - 6 months to 30 June 2004 z Owned/Leased Comparable & Total z Franchised & Total System z Current Trading z RevPAR z Occupancy z Average Daily Rate z System Size z Total System Size
Slide 44: Explanatory Notes
Explanatory Notes • We have disclosed Owned and Leased RevPAR on a comparable basis. • Owned and Leased comparable RevPAR reflects performance this year compared to the same period last year for Owned and leased hotels that have traded in both years, but excludes new builds, brand changes, propertie
Slide 45: RevPAR – 3 Months to 30 June 2004 Owned/Leased Comparable & Managed
RevPAR – 3 Months to 30 June 2004 Owned/Leased Comparable & Managed Owned & Leased Managed Occ % ADR RevPAR Occ % ADR RevPAR 2004 Pts 2004 Growth 2004 Growth 2004 Pts 2004 Growth 2004 Growth InterContinental 74.1% 5.4% 169.24 6.0% 125.38 14.3% 55.7% 9.4% 124.57 4.7% 69.39 25.8% Crowne Plaza 79.7% 4.
Slide 46: RevPAR – 3 Months to 30 June 2004 Franchised & Total
RevPAR – 3 Months to 30 June 2004 Franchised & Total Franchised Total Occ % ADR RevPAR Occ % ADR RevPAR 2004 Pts 2004 Growth 2004 Growth 2004 Pts 2004 Growth 2004 Growth InterContinental 56.9% 4.6% 101.10 (1.7%) 57.55 7.0% 61.3% 6.4% 132.67 2.8% 81.38 14.7% Crowne Plaza 64.1% 2.8% 89.70 (1.3%) 57.48
Slide 47: RevPAR – 6 Months to 30 June 2004 Owned/Leased Comparable & Managed
RevPAR – 6 Months to 30 June 2004 Owned/Leased Comparable & Managed Owned & Leased Managed Occ % ADR RevPAR Occ % ADR RevPAR 2004 Pts 2004 Growth 2004 Growth 2004 Pts 2004 Growth 2004 Growth InterContinental 69.8% 3.2% 167.54 4.9% 116.87 10.0% 54.7% 8.7% 121.52 0.8% 66.44 19.9% Crowne Plaza 75.0% 4.
Slide 48: RevPAR – 6 Months to 30 June 2004 Franchised & Total
RevPAR – 6 Months to 30 June 2004 Franchised & Total Franchised Total Occ % ADR RevPAR Occ % ADR RevPAR 2004 Pts 2004 Growth 2004 Growth 2004 Pts 2004 Growth 2004 Growth InterContinental 58.8% 6.4% 106.46 (3.2%) 62.56 8.6% 60.4% 6.2% 132.03 0.4% 79.71 12.0% Crowne Plaza 63.3% 3.1% 90.46 (1.4%) 57.22
Slide 49: Current Trading – RevPAR
Current Trading – RevPAR CURRENT TRADING 2004 Jan Feb Mar Apr May Jun July Q1 Q2 1st Half YTD REVPAR % change July AMERICAS IC O&L Comparable 2.9% (0.5%) 13.2% 12.5% 16.4% 13.8% 11.4% 5.4% 14.3% 10.0% 10.2% NA Total Crowne Plaza 6.1% 1.2% 9.1% 8.7% 8.5% 9.2% 6.3% 5.7% 8.9% 7.6% 7.4% NA Total Holiday
Slide 50: Current Trading – Occupancy
Current Trading – Occupancy CURRENT TRADING 2004 Jan Feb Mar Apr May Jun July Q1 Q2 1st Half YTD Occupancy %pts change July AMERICAS IC O&L Comparable 1.3% (2.3%) 3.9% 4.6% 6.2% 5.3% 0.7% 1.1% 5.4% 3.2% 2.9% NA Total Crowne Plaza 4.0% 2.5% 6.2% 5.9% 4.6% 4.0% 2.6% 4.4% 4.8% 4.7% 4.5% NA Total Holida
Slide 51: Current Trading – Average Daily rate
Current Trading – Average Daily rate CURRENT TRADING 2004 Jan Feb Mar Apr May Jun July Q1 Q2 1st Half YTD ADR % change July AMERICAS IC O&L Comparable 0.6% 2.8% 6.8% 5.2% 6.9% 5.9% 10.3% 3.6% 6.0% 4.9% 5.6% NA Total Crowne Plaza (1.4%) (2.7%) (0.7%) (0.9%) 1.0% 3.0% 2.3% (1.5%) 1.1% (0.1%) 0.2% NA T
Slide 52: System Size – Total at 30 June 2004
System Size – Total at 30 June 2004 Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 9 4,067 16 5,375 19 5,315 44 14,757 Crowne Plaza 6 2,284 19 6,649 86 23,256 111 32,189 Holiday Inn 8 2,577 57 18,146 1,036 191,101 1,101 211,824 Express -
Slide 53: System Size – Change to 30 June 2004
System Size – Change to 30 June 2004 (from 31 December 2003) Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental (1) (354) (1) (136) - 173 (2) (317) Crowne Plaza - (4) (3) (919) 8 1,877 5 954 Holiday Inn - (88) (8) (1,378) - (99) (8) (1,565) E
Slide 54: Pipeline – Total at 30 June 2004
Pipeline – Total at 30 June 2004 Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental 2 842 3 1,444 - - 5 2,286 Crowne Plaza - - 1 250 17 4,162 18 4,412 Holiday Inn - - 1 120 90 11,548 91 11,668 Express - - 1 252 263 21,744 264 21,996 Staybridg
Slide 55: Pipeline – Change to 30 June 2004
Pipeline – Change to 30 June 2004 (from 31 December 2003) Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms InterContinental - - (1) (112) - - (1) (112) Crowne Plaza - - - - 5 1,463 5 1,463 Holiday Inn (1) (143) (1) (780) 10 368 8 (555) Express - - - - 20 1,
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