InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — FY2008 Earnings Presentation
42 slides from InterContinental Hotels's earnings presentation, Feb 17, 2009
Slide 1: IHG Preliminary Results Presentation
IHG Preliminary Results Presentation 17th February 2009
Slide 2: Agenda
Agenda Financial Operating Overview Q&A Review Review 2
Slide 3: Jim Abrahamson – President of the Americas
Jim Abrahamson – President of the Americas 3
Slide 4: Agenda
Agenda Financial Operating Overview Q&A Review Review 4
Slide 5: Robust business model delivered results
Overview Robust business model delivered results z Global constant currency RevPAR up 0.9% – Fourth quarter decline of 6.5% z IHG brands outperformed in all major markets z Underlying* continuing revenue up 2%**, continuing EBIT up 4%** z Record net room count increase, system up 6% z Signings of 99
Slide 6: Near term growth outlook challenging
Overview Near term growth outlook challenging RevPAR z January trading – global RevPAR -12.2%* z Americas -11.7%*; EMEA -11.8%*; APAC -14.8%* z Forward bookings indicate no short term improvement Net room additions z Rooms under construction – Total: 85,000 – With 2009 planned opening date: >50,000
Slide 7: Long term strategy positions IHG well
Overview Long term strategy positions IHG well z Resilient fee based business model z Higher rooms growth; reduced reliance on RevPAR z Increasing share z Scale efficiencies 7
Slide 8: 2009 priorities
Overview 2009 priorities z Build distribution scale z Drive share of available revenues – Quality focus – Holiday Inn relaunch z Reduce costs; conserve cash – 2009 costs* $30m below 2008 – 2009 maintenance capital down c.25% on 2008 • *Includes regional overheads and central costs. On a constant cur
Slide 9: Agenda
Agenda Financial Operating Overview Q&A Review Review 9
Slide 10: 2008 review
Financial Review 2008 review z Secure financial position – Debt refinanced z Net debt reduced by $0.4bn to $1.3bn – Controlled capital expenditure – Deferred share buyback z Significant cost reduction exercise – Procurement team established – Back office accounting offshore – Tight control over regi
Slide 11: 2009 – reduced costs
Financial Review 2009 – reduced costs z Major initiative across the whole business z 2009 regional & central costs $30m* below 2008 levels z Cost savings in central and regional functions – Headcount reduction (120 positions at corporate) – No annual salary increase – Reduced discretionary costs – G
Slide 12: 2009 – cash generation
Financial Review 2009 – cash generation z Continued drive to maximise cash generation z 2009 capital expenditure controlled – Maintenance capital of $75m (2008: $99m) – Growth investment capital minimised – $65m commitment on Hotel Indigo San Diego 12
Slide 13: Growth in IHG's continuing business
Financial Review Growth in IHG’s continuing business 12 mths 12 mths CER** Change % US$ million Change % to 31 Dec 08 to 31 Dec 07 Excluding LDs*** Turnover 1,854 1,771 5% 2% Operating Profit* 535 474 13% 4% Operating Profit Margin 29% 27% +2%ppts +0%ppts Interest (101) (90) (12)% Profit before tax*
Slide 14: Quarterly RevPAR performance
Financial Review Quarterly RevPAR performance 2008 RevPAR change by quarter 10% Q1 Q2 Q3 Q4 8% 6% YoY RevPAR growth (%) 4% 2% 0% -2% -4% -6% -8% Americas EMEA Asia Pacific Total IHG 14
Slide 15: Q4 RevPAR outperformance in the US
Financial Review Q4 RevPAR outperformance in the US Q4 2008 RevPAR change, IHG vs. segment 0% -2% -4% YoY RevPAR growth (%) -6% -8% -10% -12% -14% -16% IHG Segment -18% InterContinental - Crowne Plaza - Holiday Inn - US Holiday Inn Candlewood & US US Express - US Staybridge Suites - US Source: IHG;
Slide 16: Q4 RevPAR outperformance in non-US markets
Financial Review Q4 RevPAR outperformance in non-US markets Q4 2008 RevPAR change, IHG vs. segment 0% -2% -4% -6% YoY RevPAR growth (%) -8% -10% -12% -14% -16% -18% -20% -22% IHG Segment -24% -5% -26% All brands - UK All brands - China InterContinental - EMEA Source: IHG; Smith Travel Research; STR
Slide 17: New hotels driving growth in total gross revenues
Financial Review New hotels driving growth in total gross revenues Drivers of total gross revenue* growth %** 15% 13% 11% 9% 7% 2% 7% New 5% 8% 7% 4% Hotels 3% Existing 1% 2% Hotels -1% 2006 2007 2008 *Total gross revenue is defined as total room revenue from franchised hotels and total hotel revenu
Slide 18: Hotel franchising – High margin fee growth continues
Hotel franchising – Financial Review High margin fee growth continues Total gross revenue $bn* (rooms only) Drivers of gross revenue change, % FY'08 11.1 FY’08 vs FY’07 98% 2% FY'07 10.4 FY’07 vs FY’06 47% 53% FY'06 9.1 FY’06 vs FY’05 29% 71% Avail. Rooms RevPAR Franchise fees $m** Franchise EBIT $m
Slide 19: Hotel management - Operating profit growth continues
Hotel management - Financial Review Operating profit growth continues Total gross revenue $bn* (total hotel) Drivers of gross revenue change, % FY’08 vs FY’07 (5)% 69% 36% FY'08 7.3 FY’07 vs FY’06 50% 16% 10% 24% FY’07 6.7 FY’06 vs FY’05 (2)% 29% 13% 60% FY'06 5.4 New Hotels RevPAR F&B Transfers (in
Slide 20: Continuing owned and leased estate – Margins increasing
Continuing owned and leased estate – Financial Review Margins increasing O&L revenues $m Drivers of revenue change, % FY'08 611 FY’08 vs FY’07 (3)% 63% 40% FY’07 vs FY’06* 38% 22% 40% FY'07 575 FY’06 vs FY’05* 65% 7% 28% FY'06 405 Rate Occupancy F&B O&L EBITDA (pre overheads) $m O&L EBIT (pre overhe
Slide 21: Exceptionals
Financial Review Exceptionals P&L Impact $m Holiday Inn brand relaunch (35) Other (including gains on sale) 18 Redundancies (19) Asset impairments (96) (132) z 2008 exceptional cash outflow of $49m z Redundancy costs – 2009 additional P&L charge of $4m – Full cash cost of $19m will be incurred in 20
Slide 22: Reduction in net debt
Financial Review Reduction in net debt US$ million 12 months to 31 Dec 08 12 months to 31 Dec 07 EBITDA* 659 605 Tax** & Interest (99) (140) Maintenance capital expenditure (99) (84) Operating exceptionals (49) - Other( including working capital) 154 70 Free cash flow 566 451 Investment capital net
Slide 23: Agenda
Agenda Financial Operating Overview Q&A Review Review 23
Slide 24: Agenda
Agenda Financial Operating Overview Q&A Review Review 24
Slide 25: The virtuous circle
Operating Review The virtuous circle System funds New Strong hotels brands Owner Guest preference preference RevPAR premium 25
Slide 26: Record growth in system size
Operating Review Record growth in system size 35 30 +5.9% Net room count increase '000 25 +5.2% 20 15 +3.5% 10 5 +0.6% 0 2004 2005 2006 2007 2008 -5 26
Slide 27: Why IHG is first choice for so many owners
Operating Review Why IHG is first choice for so many owners Portfolio of strong brands Relationships RevPAR premiums Good Cost reduction Easier returns and efficiency financing Room night Quality delivery focus 27
Slide 28: Operating Review
Operating Review 28
Slide 29: Why IHG is first choice for so many owners
Operating Review Why IHG is first choice for so many owners Portfolio of strong brands Relationships RevPAR premiums Good Cost reduction Easier returns and efficiency financing Room night Quality delivery focus 29
Slide 30: Increased share of total US industry revenues
Operating Review Increased share of total US industry revenues 120 8.0% 100 7.8% 80 7.6% $bn 60 7.4% 40 7.2% 20 0 7.0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 US Industry room revenues IHG share Source: IHG; Smith Travel Research 30
Slide 31: Focus on quality
Operating Review Focus on quality z Increased investment in quality teams z Ongoing commitment to removals z Holiday Inn focus z Rising OSAT (guest satisfaction) scores z Link between guest satisfaction and RevPAR 31
Slide 32: Focus on quality – improving guest satisfaction
Operating Review Focus on quality – improving guest satisfaction Holiday Inn & Express Combined U.S. OSAT (Guest satisfaction score) 2% Month YOY Change (red/green bars) 12-Mo Rolling Avg (blue line) 0% -2% Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 32
Slide 33: Holiday Inn relaunch
Operating Review Holiday Inn relaunch z 350 hotels relaunched, 220 more by end Q1 2009 z Early results encouraging – Uplift in RevPAR of 5% for 11 pilot hotels traded for 9 months 33
Slide 34: Leverage scale to drive share of revenues
Operating Review Leverage scale to drive share of revenues Percentage of rooms revenue from direct channels and PCR members 48 37 45 35 44 34 32 41 2005 2006 2007 2008 2005 2006 2007 2008 Direct channels PCR members 34
Slide 35: $1bn system funds focused on revenue drivers
Operating Review $1bn system funds focused on revenue drivers z Global Sales – Expanded sales force – Strategic account focus z Priority Club Rewards – Enhance value of points – Increase enrolment z Online marketing – Drive conversion z Tactical marketing activity – Friends and Family launch 35
Slide 36: www.ihgfriendsandfamily.com/andy_cosslett
www.ihgfriendsandfamily.com/andy_cosslett 36
Slide 37: Reduce costs
Operating Review Reduce costs z Reducing owner costs – Green Engage z up to 25% reduction in energy costs – Technology costs z Reduced hardware costs z Reduce running costs z Reduce IHG costs – 2009 regional and central costs $30m below 2008 levels – Managed and franchised costs held flat 37
Slide 38: Property 1 Property 1 Property 2
Property 1 Property 1 Property 2 Property 3 Property 4 Property 2 Property 3 Property 4 38
Slide 39: Reduce costs
Operating Review Reduce costs z Reducing owner costs – Green Engage z up to 25% reduction in energy costs – Technology costs z Reduced hardware costs z Reduce running costs z Reduce IHG costs – 2009 regional and central costs $30m below 2008 levels – Managed and franchised costs held flat 39
Slide 40: Conclusions
Operating Review Conclusions z Industry outlook challenging z Resilient business model and strong brands z Close owner relationships z Net rooms growth continuing z Financing environment impacting pipeline z Scale drives cost efficiencies 40
Slide 41: Agenda
Agenda Financial Operating Overview Q&A Review Review 41
Slide 42: IHG Preliminary Results Presentation
IHG Preliminary Results Presentation 17th February 2009
InterContinental Hotels Group — FY2008 Earnings Presentation on 6ix