InterContinental Hotels Group PLC · LSE:IHG

InterContinental Hotels — H1 2014 Earnings Presentation

38 slides from InterContinental Hotels's earnings presentation, Aug 5, 2014

  1. Slide 1: Half Year Results Presentation

    Crowne Plaza, Kunming, China Half Year Results Presentation 5 August 2014 IHG© 1

  2. Slide 2: H1 2014 - continued growth momentum delivers strong first half performance

    H1 2014 - continued growth momentum delivers strong first half performance Strong trading performance Global RevPAR 5.8% Good growth in fees Fee revenues¹ 6% Efficiency and scale benefits Fee-based margin¹ 1%pt² Reduced asset intensity Net asset disposal proceeds $346m Sustainable shareholder value

  3. Slide 3: Financial Review

    Hotel Indigo, St Petersburg Financial Review Paul Edgecliffe-Johnson CFO IHG© 3

  4. Slide 4: Strong underlying growth

    Strong underlying growth Reported Underlying1 $ million H1 2014 H1 2013 % Change H1 2014 H1 2013 % Change Revenue $908m $936m (3)% $788m $757m 4% Fee Revenue2 $600m $562m 7% $597m $562m 6% Operating profit $310m $338m (8)% $301m $284m 6% Interest $(39)m $(36)m 8% Tax rate3 33% 31% 2%pts Adjusted EPS

  5. Slide 5: H1 2014 - driving fee revenue growth

    H1 2014 - driving fee revenue growth RevPAR X Rooms X Royalty Rate H1 2014 fee revenue1 $600m, up 6% H1 2014 Group RevPAR growth H1 2014 system growth (%) 5.8% 5.6% 2.3% 2.3%pts 2.2% 2 ADR Occupancy RevPAR Gross Net H1 2014: 17k rooms opened, 11k rooms removed 1 Fee revenue excludes revenue from own

  6. Slide 6: H1 2014 - driving fee revenue growth

    H1 2014 - driving fee revenue growth RevPAR X Rooms X Royalty Rate H1 2014 fee revenue¹ growth 8.1% 7.2% 7.0% 6.2% $35m $22m $6m 1.3% $3m $1m H1 2014 fee $600m $329m $84m $79m $46m revenue1 Group2 Americas Europe AMEA Greater China ¹ Fee revenue excludes revenue from owned and leased hotels, managed

  7. Slide 7: The Americas – Strong RevPAR and profit growth

    The Americas – Strong RevPAR and profit growth H1 Growth in fee revenue drivers 1 Comparable RevPAR up 6.7% • US 6.6% 6.7% 7.2% Net rooms growth 0.2% $22m • Gross rooms growth 4.1%2 0.2% RevPAR Net rooms Fee Revenue Fee revenue up 7.2%1 H1 Net rooms growth 460k 451k 9k 453k Underlying revenue up 9%,

  8. Slide 8: Europe – Strong trading performance in key markets

    Europe – Strong trading performance in key markets H1 Growth in fee revenue drivers1 Comparable RevPAR up 4.9% • UK 8.7% 8.1% • Germany 3.1 % $6m 4.9% Net rooms growth 1.9% 1.9% • Gross rooms growth 4.7%2 RevPAR Net rooms Fee Revenue Fee revenue up 8.1%1 H1 Net rooms growth Underlying revenue down 2

  9. Slide 9: AMEA – Rate driven growth

    AMEA – Rate driven growth Growth in fee revenue drivers1 Comparable RevPAR up 3.7% 6.3% • ex Thailand and Egypt up 5.4% 3.7% Total RevPAR up 1.7% 1.3% • Increasing mix from developing markets $1m Net rooms growth 6.3% RevPAR Net rooms Fee Revenue • Gross rooms growth 7.3%2 Fee revenue up 1.3%1 Net r

  10. Slide 10: Greater China – Continued industry outperformance

    Greater China – Continued industry outperformance Growth in fee revenue drivers 1 Comparable RevPAR up 4.3% 13.2% • Significant industry outperformance 3.1% Total RevPAR down 1.4% 7.0% • Increasing mix from tier 2 and 3 cities 4.3% $3m Net rooms growth 13.2% • Gross rooms growth 15.9%2 RevPAR Net ro

  11. Slide 11: Driving sustainable fee margin progression

    Driving sustainable fee margin progression Fee margin up 1%pt in H1 2014 to 45.0% • Productivity improvement and scale benefits balanced with investment for growth • Helped by favourable phasing of costs • Sustainable fee margin progression over the medium term Fee margin growth drivers: fee revenue

  12. Slide 12: Capital allocation strategy – long-term disciplined approach

    Capital allocation strategy – long-term disciplined approach An efficient balance sheet with an investment grade credit rating • 2.0 to 2.5x net debt / EBITDA • Towards top end in favourable economic conditions Reduce asset intensity of the business Invest in the business to drive growth Maintain su

  13. Slide 13: Capital expenditure categories

    Capital expenditure categories Gross medium-term capital expenditure: up to $350m per annum1 Maintenance capex Recyclable System funded & key money investments capital $100m-$150m p.a. investments O&L Hotel maintenance Investment Invest to drive Recycle System Corporate IHG infrastructure growth Fun

  14. Slide 14: Maintenance capital expenditure & key money

    Maintenance capital expenditure & key money Medium term spend of $100m-$150m p.a. Key money: • Deployed on a tactical basis to access strategic opportunities • Only used when returns are financially and strategically attractive 2011-13 Medium 2014 average p.a. term p.a. Owned & leased hotel maintena

  15. Slide 15: Recyclable investments

    Recyclable investments Establishes long-term fee revenue streams Support new brands and priority market growth Broadly neutral over time Target investment returns ≥ WACC 2011-13 Medium average 2014 term p.a. p.a Gross: • Real estate, JVs, equity stakes $50m- $50m- ~$65m $100m2 $150m • ~$450m current

  16. Slide 16: Recyclable investments: Case study

    Recyclable investments: Case study “Fastest growing extended stay brand” Brand 50 100 200 launch hotels hotels hotels1 Total Gross Revenue : >$600m 1998 2002 2003 2007 2012 2014 287 hotels open or in pipeline $228m Investment Capital recycled behind 19 hotels 1 200th hotel opened in July 2014 IHG© 1

  17. Slide 17: System funded capital investments

    System funded capital investments Cash fees collected, primarily from hotels, for use within the System Fund (2013: $1.3bn) • Spent on behalf of our hotels on marketing, reservations, and IHG Rewards Club • Consistent with the industry IHG’s financial statements do not include income and expenses of

  18. Slide 18: Operating Review

    Crowne Plaza Beijing Lido Operating Review Richard Solomons CEO IHG© 18

  19. Slide 19: Long-term macro trends continue to be supportive

    Long-term macro trends continue to be supportive GDP growth Favourable demographics Globalisation of travel Real GDP growth (%) Av. Disposable income per household ($k) Global outbound trips (M trips) 10 US 107 Business 1,163 8 China Leisure Emerging 236 economies1 942 6 98 190 World 4 93 627 16 2 G

  20. Slide 20: Understanding consumers’ evolving needs and lifestyle are at the heart of our strategy

    Understanding consumers’ evolving needs and lifestyle are at the heart of our strategy Social media Connectivity Personalisation & advocacy New consumer digital lifestyle DREAM PLAN BOOK TRAVEL SHARE RESEARCH READ REVIEWS MAKE JOURNEY POST PHOTO CHECK OPTIONS RESERVATIONS STAY WRITE REVIEW Continuou

  21. Slide 21: IHG is focused on delivering a winning experience across the guest journey

    IHG is focused on delivering a winning experience across the guest journey TARGET GUESTS IHG© 21

  22. Slide 22: IHG has a strong history of innovation and firsts

    IHG has a strong history of innovation and firsts 1st 1st 1st Hotel brand franchise: Computerised hotel Hotel loyalty programme Holiday Inn reservation system International hotel brand Hotel group to offer Hotel group to introduce in China: free internet online booking Holiday Inn Hotel group to con

  23. Slide 23: IHG’s unparalleled global scale - significant barriers to entry

    IHG’s unparalleled global scale - significant barriers to entry 693k open rooms Largest hotel loyalty Large standalone 187k room pipeline scheme membership eCommerce business Largest global More reviews on IHG’s Websites in hotel brand by >2x websites for IHG hotels 14 languages - Holiday Inn Brand

  24. Slide 24: Our preferred brands have strong momentum

    Our preferred brands have strong momentum US RevPAR Global IHG Global segment positioning3 premium growth review score 2010-Current1 (x/5)2 System Pipeline +2% 4.4 #1 #2 +1% 4.3 #1 #1 +3%4 4.2 #2 #4 +26% 4.4 #4 #2 +1% 4.4 #3 / #2 #4 / #2 1 Source: IHG, STR, US only. Note: InterContinental vs. luxury

  25. Slide 25: Prime European city locations opened in H1

    Prime European city locations opened in H1 Hotel Indigo Madrid Hotel Indigo St Petersburg Hotel Indigo Rome Hotel Indigo Madrid IHG© 25

  26. Slide 26: 82 openings globally in H1

    82 openings globally in H1 Holiday Inn Express Singapore, Clarke Quay Holiday Inn & Express Amsterdam Holiday Inn, Belo Horizonte, Brazil Holiday Inn Amsterdam, Arena Towers IHG© 26

  27. Slide 27: Iconic property in Beijing Lido, 30 years after our first hotel there

    Iconic property in Beijing Lido, 30 years after our first hotel there Crowne Plaza, Beijing Lido IHG© 27

  28. Slide 28: EVEN Hotels – addressing an unmet consumer need

    EVEN Hotels – addressing an unmet consumer need Cork & Kale Restaurant Athletic Studio Bedroom Eat Well Social Area Well-come Island IHG© 28

  29. Slide 29: EVEN Hotels – first two hotels opened in Norwalk and Rockville

    EVEN Hotels – first two hotels opened in Norwalk and Rockville Both hotels opened in June Locations chosen to demonstrate strong comparable performance to owners Excellent initial guest feedback on both IHG and third party review sites1 • Norwalk: 4.7 out of 5 (IHG); #1 out of 14 (3rd party) • Rockv

  30. Slide 30: Building lifetime relationships - Leveraging IHG Rewards Club

    Building lifetime relationships - Leveraging IHG Rewards Club Industry’s first and largest loyalty scheme: 80m+ members Successful re-launch of IHG Rewards Club in 2013 • 10%pt improvement in awareness of IHG as a brand family High profile external recognition in 2014 • Freddie Awards: 5 out of 15 a

  31. Slide 31: Industry leading web and mobile platforms

    Industry leading web and mobile platforms Fast growing digital business with significant scale • Web: $3.7bn1 revenues; 9% H1 growth2 • Mobile: $740m1 gross bookings; ~50% H1 growth2 Award winning apps • No.1 hotel and travel app on the Apple app store • Ranked 1st place for iOS apps in the Apptenti

  32. Slide 32: Well positioned for high quality growth

    Well positioned for high quality growth Positive long-term industry dynamics IHG has a clearly defined strategy to outperform • Preferred brands • Lifetime relationships • Strong direct channels Superior shareholder returns Confident outlook, despite political uncertainty in some markets IHG© 32

  33. Slide 33: Q&A

    InterContinental Nha Trang, Vietnam Q&A IHG© 33

  34. Slide 34: Appendices

    Crowne Plaza Beijing Lido Appendices IHG© 34

  35. Slide 35: Hotel franchising

    Hotel franchising Total gross revenue $bn¹ (rooms only) Group royalty drivers H1 2014 YoY Average H1 2014 6.5 rooms (0.1)% H1 2013 6.1 RevPAR 6.2% Royalty H1 2012 5.8 fees 6.4% Franchise Fees $m Franchise EBIT $m (margin %) H1 2014 357 H1 2014 300 (84%) H1 2013 332 H1 2013 285 (86%) H1 2012 313 H1 2

  36. Slide 36: Hotel management

    Hotel management Total gross revenue $bn1(total hotel) Management Fees² $m H1 2014 4.4 H1 2014 181 H1 2013 4.1 H1 2013 171 H1 2012 4.2 H1 2012 176 Managed EBIT² $m (margin %) Reported managed lease revenue and EBIT $m $m H1 2014 H1 2013 H1 2014 104 (57%) Americas revenue 21 19 Americas EBIT 1 1 H1 2

  37. Slide 37: Owned & Leased

    Owned & Leased O&L revenue $m O&L EBIT $m (margin %) H1 2014 192 H1 2014 31 (16%) H1 2013 195 H1 2013 37 (19%) H1 2012 184 H1 2012 32 (17%) Reported O&L revenue O&L EBITDA $m and EBIT from disposals ($m) H1 2014 46 $m H1 ‘14 H1 ‘13 Europe revenue - 22 H1 2013 51 Europe EBIT - 8 Americas revenue 23 5

  38. Slide 38: Underlying operating profit adjustments (CER)

    Underlying operating profit adjustments (CER) H1 2014 H1 2013 FY 2013 Liquidated damages Americas $7m (franchise) $31m (managed) $31m (managed) Europe - $9m (managed) $9m (managed) AMEA - - $6m (managed) Sub-total $7m $40m $46m Disposals Americas $(1)m $6m $20m Europe - $8m $8m Sub-total $(1)m $14m

InterContinental Hotels Group — H1 2014 Earnings Presentation on 6ix