InterContinental Hotels Group PLC · LSE:IHG

InterContinental Hotels — 6 months to 31 March 2003 Earnings Presentation

40 slides from InterContinental Hotels's earnings presentation, May 2003

  1. Slide 1: InterContinental Hotels Group PLC Results for the 6 months to 31 March 2003

    InterContinental Hotels Group PLC Results for the 6 months to 31 March 2003 1

  2. Slide 2: Richard North, Chief Executive Officer

    Richard North Chief Executive Officer 2

  3. Slide 3: Overview

    Overview z Extremely difficult trading environment z Our brands are performing well z Strong management actions will reposition the company and protect profits - organisation redesign - right people in the right jobs - reducing the cost base - asset review and disposals - capital expenditure reducti

  4. Slide 4: Richard Solomons, Finance Director

    Richard Solomons Finance Director 4

  5. Slide 5: Change in Year End

    Change in Year End z New 31 December year end - better reflects annual corporate negotiations timing - brings us in line with other quoted hotel groups z Quarterly reporting for calendar 2003 z Supplementary information for calendar 2002 5

  6. Slide 6: Operating Profit

    Results 6 months to 31 March 2003 Operating Profit £m Hotels 79 Down 27.5% Soft Drinks 20 Up 25.0% 6

  7. Slide 7: Pro forma Group Results

    Results 6 months to 31 March 2003 Pro forma Group Results EBITDA Down 6.7% Profit Before Tax Down 31.3% Earnings per share Down 32.6% 7

  8. Slide 8: Operating Profit 3 months to 31 December 2002

    Operating Profit 3 months to 31 December 2002 3 mths to 3 mths to % $m 31 Dec 02 31 Dec 01 Americas - Owned & Leased 4 3 33.3 - Managed & Upscale Franchised 9 11 (18.2) - Midscale Franchised 42 40 5.0 Total Americas 55 54 1.9 EMEA - Owned & Leased 22 33 (33.3) - Managed & Franchised 9 8 12.5 Total E

  9. Slide 9: Operating Profit 3 months to 31 March 2003

    Operating Profit 3 months to 31 March 2003 3 mths to 3 mths to % $m 31 Mar 03 31 Mar 02 Americas - Owned & Leased - 1 - - Managed & Upscale Franchised 7 9 (22.2) - Midscale Franchised 45 43 4.7 Total Americas 52 53 (1.9) EMEA - Owned & Leased 9 20 (55.0) - Managed & Franchised 10 11 (9.1) Total EMEA

  10. Slide 10: Operating Profit 6 months to 31 March 2003

    Operating Profit 6 months to 31 March 2003 6 mths to 6 mths to % $m 31 Mar 03 31 Mar 02 Americas - Owned & Leased 4 4 - - Managed & Upscale Franchised 16 20 (20.0) - Midscale Franchised 87 83 4.8 Total Americas 107 107 - EMEA - Owned & Leased 31 53 (41.5) - Managed & Franchised 19 19 - Total EMEA 50

  11. Slide 11: Operating Profit Performance

    Operating Profit Performance z Hotels revenue up by 7.5% z Hotels operating profit down $31m z Key factors adversely affecting profit flowthrough: - Occupancy driven RevPAR - InterContinental marketing spend - Depreciation - InterContinental Le Grand Hotel Paris - Insurance - FelCor 11

  12. Slide 12: Americas Owned & Leased RevPAR Outperformance

    Americas Owned & Leased RevPAR Outperformance InterContinental O&L Upper Upscale Segment 30.0% % growth RevPar 10.0% (10.0%) Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Source; IHG and Smith Travel data 12

  13. Slide 13: Americas Owned & Leased: Operating profit flat at $4m

    Americas Owned & Leased 3 mths to 3 mths to 6 mths to 31 Dec 02 31 Mar 03 31 Mar 03 RevPAR Growth - InterContinental 20.8% 1.8% 11.3% 13 Operating profit flat at $4m

  14. Slide 14: Americas Managed & Upscale Franchise: Operating profit down 20% at $16m

    Americas Managed & Upscale Franchise 3 mths to 3 mths to 6 mths to 31 Dec 02 31 Mar 03 31 Mar 03 RevPAR Growth - InterContinental Managed (11.5)% (24.1)% (18.1)% - Crowne Plaza Managed 5.6% (3.0)% 1.4% - Crowne Plaza Franchised 4.3% (1.3)% 1.3% 14 Operating profit down 20% at $16m

  15. Slide 15: Americas Midscale Franchise RevPAR Outperformance

    Americas Midscale Franchise RevPAR Outperformance 10.0% Express Brands Midscale without F&B Segment % growth RevPAR 0.0% (10.0%) Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Source; IHG and Smith Travel data 15

  16. Slide 16: Americas Midscale Franchise RevPAR Performance

    Americas Midscale Franchise RevPAR Performance 10.0% Holiday Inn Brands Midscale with F&B Segment % growth RevPAR 0.0% (10.0%) Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Source; IHG and Smith Travel data 16

  17. Slide 17: Americas Midscale Franchise: Operating profit up 4.8% at $87m

    Americas Midscale Franchise 3 mths to 3 mths to 6 mths to 31 Dec 02 31 Mar 03 31 Mar 03 RevPAR Growth - Holiday Inn 2.1% (2.0)% - - Express 3.3% (0.6)% 1.3% Holiday Inn Express Increase in royalty rate 0.05% pts 0.01% pts Change in number of (1.7)% 7.4% rooms available 17 Operating profit up 4.8% at

  18. Slide 18: EMEA Operating Profit

    EMEA Operating Profit 6 mths to 6 mths to % 31 Mar 03 31 Mar 02 US Dollar Analysis $m $m Total Operating Profit 50 72 (30.6) Sterling Analysis £m £m Owned & Leased 20 37 (45.9) Managed & Franchised 12 13 (7.7) Total Operating Profit 32 50 (36.0) 18

  19. Slide 19: EMEA Owned & Leased: Operating profit down 45.9% at £20m

    EMEA Owned & Leased 3 mths to 3 mths to 6 mths to 31 Dec 02 31 Mar 03 31 Mar 03 RevPAR Growth - InterContinental 12.8% (6.1)% 3.3% - Crowne Plaza 2.0% (1.6)% 0.3% - Holiday Inn 4.9% (1.0)% 2.0% 19 Operating profit down 45.9% at £20m

  20. Slide 20: EMEA Holiday Inn UK RevPAR Outperformance

    EMEA Holiday Inn UK RevPAR Outperformance 30.0% Regions Hotel Benchmark Segment London Hotel Benchmark Segment Regions Holiday Inn London Holiday Inn 20.0% 10.0% % growth 0.0% (10.0%) (20.0%) Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Source; IHG and Smith Travel data 20

  21. Slide 21: EMEA Managed & Franchised: Operating profit down 7.7% to £12m

    EMEA Managed & Franchised 3 mths to 3 mths to 6 mths to 31 Dec 02 31 Mar 03 31 Mar 03 RevPAR Growth - InterContinental Managed 33.3% (4.0)% 11.8% - Holiday Inn Franchised 6.7% 1.1% 4.0% - Express Franchised 6.3% (2.2)% 2.0% 21 Operating profit down 7.7% to £12m

  22. Slide 22: Asia Pacific: Operating profit up 25% to $25m

    Asia Pacific 3 mths to 3 mths to 6 mths to 31 Dec 02 31 Mar 03 31 Mar 03 RevPAR Growth - IC Hong Kong 59.6% 2.7% 30.0% - Managed 9.7% 3.4% 6.7% 22 Operating profit up 25% to $25m

  23. Slide 23: Operating Profit 6 months to 31 March 2003

    Operating Profit 6 months to 31 March 2003 6 mths to 6 mths to % 31 Mar 03 31 Mar 02 $m $m Americas - Owned & Leased 4 4 - - Managed & Upscale Franchised 16 20 (20.0) - Midscale Franchised 87 83 4.8 Total Americas 107 107 - EMEA - Owned & Leased 31 53 (41.5) - Managed & Franchised 19 19 - Total EMEA

  24. Slide 24: Britvic Soft Drinks Results

    Britvic Soft Drinks Results z Volume up 3.6% z Market share growth z Turnover up 6.5% to £310m z Improved profit margins 24 Operating profit up 25% to £20m

  25. Slide 25: Pro forma Profit & Loss Account

    Pro forma Profit & Loss Account 6 mths to 6 mths to Growth £m 31 Mar 03 31 Mar 02 % EBITDA 196 210 (6.7) Operating profit 93 123 (24.4) Interest (25) (24) (4.2) Profit before tax 68 99 (31.3) Tax (17) (28) 39.3 Minority interests (7) (6) (16.7) Retained Profit 44 65 (32.3) Earnings per share (pence)

  26. Slide 26: Pro forma Cash Flow

    Pro forma Cash Flow 6 mths to 6 mths to £m 31 Mar 03 31 Mar 02 Operating profit 93 123 Depreciation / Amortisation 103 87 Working capital / Other 24 (86) Capital expenditure (net) (172) (176) Operating cash flow 48 (52) 26

  27. Slide 27: Pro forma Balance Sheet

    Pro forma Balance Sheet £m 31 Mar 03 31 Dec 02 Tangible assets 4,516 4,383 Intangible assets 160 157 Working capital (58) (22) Long-term liabilities (165) (160) Net operating assets 4,453 4,358 zNet debt at separation approximately £1bn zNet assets at separation approximately £2.5bn 27

  28. Slide 28: Dividends

    Dividends z 6.6p paid by Six Continents PLC on 9 April for period prior to separation z InterContinental Hotels Group PLC expects to declare dividends of 13.5p for 2003 - interim payable October 2003 - final payable June 2004 z Final dividend expected to account for 70% z Targeting real increases in

  29. Slide 29: Richard North, Chief Executive Officer

    Richard North Chief Executive Officer 29

  30. Slide 30: Driving Returns

    Driving Returns Driving revenue Improved ROCE and Reduced overhead costs Free Cash Flow Lower capital intensity 30

  31. Slide 31: Driving Revenue

    Driving Revenue In the 6 months to March 2003: z RevPAR premium against competitive segments z 1.7m new Priority Club members z System delivery up from 25.7% to 27.3% z New leadership in EMEA 31

  32. Slide 32: Reduced Overhead Costs: Organisation Redesign

    Reduced Overhead Costs Organisation Redesign $m Labour related savings by Geographic Region Americas 29 EMEA 27 Asia Pacific 5 Corporate 14 Facilities NAS 9 Satellite Offices 3 IT Efficiencies 8 Other 5 100 32

  33. Slide 33: Reduced Overhead Costs: Organisation Redesign

    Reduced Overhead Costs Organisation Redesign Savings $m IT 24 Finance 14 HR 13 Facilities 12 Operations, sales and marketing 19 Development 8 Legal and other 10 100 33

  34. Slide 34: Reduced Overhead Costs: Organisation Redesign

    Reduced Overhead Costs Organisation Redesign z 381 positions eliminated to date z Annualised saving of $39m achieved z Target of $75m annualised savings by year end z Next steps - EMEA consultation concludes end May - London HQ to be closed by 30th September - On-going phased reductions in regions t

  35. Slide 35: Reduced Overhead Costs: One-off costs

    Reduced Overhead Costs Organisation Redesign One-off costs to achieve at least $100m overhead savings 100 Facilities $m 50 Severance Other 0 35

  36. Slide 36: Lower Capital Intensity: Capital Expenditure

    Lower Capital Intensity Capital Expenditure Hotels : Capital Expenditure 450 450 Expansion 400 400 375 Renovation 350 210 Maintenance 300 190 £m 180 250 200 120 90 150 75 100 50 120 120 120 0 YE Sep 2003 YE Sep 2003 YE Dec 2003 Original Revised 36

  37. Slide 37: Britvic Soft Drinks

    Britvic Soft Drinks z Strong portfolio brands z GB bottler of Pepsi brands z Strong cash generator z Currently Pepsi barrier to sale for value 37

  38. Slide 38: Current Trading: RevPAR 2003 vs 2002

    Current Trading RevPAR 2003 vs 2002 Jan Feb Mar Apr Mar/Apr Americas InterContinental (Owned & Leased) 0.1% 1.4% 3.7% (1.0)% 1.2% Crowne Plaza (3.3)% (2.4)% (1.9)% (13.7)% (7.8)% Holiday Inn (0.6)% (3.2)% (2.4)% (8.1)% (5.2)% Holiday Inn Express (1.2)% (1.4)% (0.2)% (2.7)% (1.4)% EMEA InterContinent

  39. Slide 39: Summary

    Summary Revenue pressure Cost reduction on target Asset review underway 39

  40. Slide 40: InterContinental Hotels Group

    \_\e INTERCONTINENTAL. HOTELS GROUP

InterContinental Hotels Group — 6 months to 31 March 2003 Earnings Presentation on 6ix