InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — H1 2012 Earnings Presentation
39 slides from InterContinental Hotels's earnings presentation, Aug 7, 2012
Slide 1: Half Year Results Presentation
Half Year Results Presentation 7 August 2012
Slide 2: Good results in H1 2012 - delivering high quality growth
Good results in H1 2012 - delivering high quality growth • Preferred brands drive RevPAR up 6.5% • Substantial growth opportunities globally – Strengthening existing brands – Two new brands launched • Focus on efficiency – ongoing margin progression • Good financial performance & strong cash flows •
Slide 3: Financial Results - Tom Singer, CFO
Financial Results - Tom Singer, CFO Holiday Inn, Macau 3
Slide 4: Financial results
Financial results CER² Change 6 months 6 months $ million Change % % Excluding to 30 June 12 to 30 June 11 LDs³ Revenue 878 850 3% 6% Operating Profit¹ 286 269 6% 11% Interest (25) (32) 22% Profit before tax¹ 261 237 10% Tax rate¹ 29% 28% 1%pt Profit after tax¹ 186 171 9% Adjusted EPS¹ 64.1¢ 59.2¢ 8
Slide 5: Good first half progress in all regions
Good first half progress in all regions RevPAR growth Revenue growth Underlying¹ CER change excluding LDs² 13% 9.7% 7.1% 7.9% 8% 6.5% 1.9% 6% 5% 5% 1% Group Americas Europe AMEA Greater Group Americas Europe AMEA Greater China China Operating profit growth 17 Room openings (‘000) & YoY net system gr
Slide 6: High quality growth - progressive increase in fee-based margins
High quality growth - progressive increase in fee-based margins • Fee-based operating margin¹ up 2.3%pts – Continuing scale benefits plus some benefit from phasing Fee based¹ operating profit margin 42.9% 39.7% 40.6% 36.0% 35.9% H1 2008 H1 2009 H1 2010 H1 2011 H1 2012 • Scale efficiencies fund reinv
Slide 7: High quality growth - driving market share
High quality growth - driving market share • Net system growth – up 2% year on year – 17.5k rooms added – 9k rooms removed – Limited hotel debt finance – Continue to expect 2% - 3% net system growth in 2012 • Industry leading, high quality pipeline – 22k rooms signed – >50% of pipeline outside the A
Slide 8: Strong free cash flow generation
Strong free cash flow generation $m H1’12 H1’11 FY’11 EBITDA1 332 320 658 Working Capital / system fund movements (92) (108) 35 Interest (12) (16) (55) Tax 2 (38) (51) (89) Maintenance capital expenditure (40) (37) (101) Other3 (1) (21) (26) Free cash flow4 149 87 422 Net cash inflow (outflow) (14)
Slide 9: 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 9
Slide 10: Growth capital investment - funded by recycling
Growth capital investment - funded by recycling • $625m cash released from disposals from 2007 - 2011 • $333m of growth capital expenditure 2007 - 2011 300 291 250 186 227 200 211 150 130 157 100 135 109 $m 50 86 0 35 -9 -38 -50 -102 -91 -93 -100 -150 2007 2008 2009 2010 2011 Disposal receipts Growt
Slide 11: Growth capital investment - driving future market share gains
Growth capital investment - driving future market share gains • Continue to fund growth through capital recycling • Medium term growth capital expenditure $100m - $200m per annum – Modest H1 growth capital expenditure of $5m due to phasing – Up to $150m over three years to launch EVEN Hotels – Crown
Slide 12: Sustainable ordinary dividend growth - 2012 interim dividend rebalanced
Sustainable ordinary dividend growth - 2012 interim dividend rebalanced • 31%1 interim dividend growth to 21.0¢ • Rebalance towards one third: two thirds weight for interim and final dividends • Dividend was maintained through the downturn • c.$1.3bn paid in ordinary dividends since 2003 Ordinary di
Slide 13: Capital returns - strong track record
Capital returns - strong track record • $1bn of returns1, comprising – $500m special dividend with share consolidation – to be paid in Q4 – $500m share buyback – to commence in Q4 • Maintains strong track record – $8.9bn total returns since demerger – Includes c.$1.3bn of ordinary dividends – Cash g
Slide 14: Delivering on asset light strategy
Delivering on asset light strategy • InterContinental New York Barclay – Disposal process continues to progress • Asset sale criteria – Maximise value for shareholders – Assurance over flag and location – 2011: $142m released from asset disposals at 22% premium to net book value • InterContinental L
Slide 15: Current trading and outlook
Current trading and outlook • July provisional RevPAR up 3.8% – Americas +5.0%, Europe (0.2)%, AMEA +1.7%, Greater China +7.1% • IHG Outlook – Booking pace and travel intentions data encouraging – Visibility remains limited • Industry outlook favourable – Demand remains at record levels – Supply gro
Slide 16: Operating Review - Richard Solomons, CEO
Operating Review - Richard Solomons, CEO Hotel Indigo, San Diego Del Mar 16
Slide 17: Delivering high quality growth - a Year of Progress
Delivering high quality growth - a Year of Progress • Leading share of active global hotel pipeline • Strengthen established brands – Holiday Inn relaunch complete PREFERRED BRANDS – Repositioning of Crowne Plaza underway • Develop new brands – Two major brand launches in our two largest markets • S
Slide 18: Favourable lodging market - especially for branded hotels
Favourable lodging market - especially for branded hotels • Global hotel industry revenues total $430bn¹ – IHG has a 5% share • By 2030 global industry revenues forecast to double – >50% of growth will come from US, China & India • Branded share continuing to grow Share of branded rooms Global indus
Slide 19: Strengthen established brands - significant value created
Strengthen established brands - significant value created • Driving financial performance – RevPAR premium up 6 %pts in 5 yrs • Driving quality system growth – 2% system size growth , signings increasing – Average hotel age reduced to 10yrs Global Holiday Inn & Holiday Inn Express US Holiday Inn 12
Slide 20: Strengthen established brands - delivering enhanced brand awareness
Strengthen established brands - delivering enhanced brand awareness Consumer recognition • JD Power award winner – 2012 and 2011: #1 midscale full service guest satisfaction (US) Enhancing brand awareness • Official hotel provider 2012 London Olympics & Paralympics – 11% increase in consideration am
Slide 21: Strengthen established brands - Crowne Plaza repositioning
Strengthen established brands - Crowne Plaza repositioning • Globally significant brand – $3.9bn* brand (19% of IHG’s gross revenues) – Fastest growing upscale brand in Asia Pacific – Performance gap Americas vs. Rest of World • Significant opportunity to reposition brand Phase 2012 2013 2014 2015 1
Slide 22: Strengthen established brands - maximising scale potential
Strengthen established brands - maximising scale potential • IHG’s brands are amongst the biggest in the industry System¹ Segment share² Pipeline¹ Segment share² 57,262 14% (#1) 16,011 11% (#1=) 431,372 28% (#1) 96,507 43% (#1) 106,419 6% (#2) 31,790 11% (#1=) 48,317 15% (#2) 15,354 24% (#2) • Brand
Slide 23: Develop new brands - the hotel brand development cycle
Develop new brands - the hotel brand development cycle Brand maturity Number of hotels Accelerate growth Build distribution & awareness Time from brand launch 23
Slide 24: Develop new brands - rationale for new hotel brands
Develop new brands - rationale for new hotel brands DEMAND SUPPLY • Consumer needs are evolving and • Hotel owners seek to maximise multiplying market opportunities • Sophisticated and scalable revenue • Natural market limits on single generation systems brand density Grow market share through multi
Slide 25: Develop new brands - IHG's approach to new brand development
Develop new brands - IHG’s approach to new brand development GUEST • Bespoke market research • Future trends identification • Differentiated experience OWNER IHG • Brand management expertise • Create owner/ lender momentum • Growth capital expenditure • Deliver great ROI • Revenue generation systems
Slide 26: Develop new brands - rationale for HUALUXE and EVEN
Develop new brands - rationale for HUALUXE and EVEN • Unmet need for 5-star international ‘Chinese’ hotel • Unmet consumer need for mainstream wellness hotel GUEST • Growth in travel – by 2015: product • 3.3bn domestic travellers • Targets 17m US travellers • 100m outbound trips • Strong owner deman
Slide 27: Growth capital investment - methodology
Growth capital investment - methodology • Returns above risk-adjusted WACC by year 3 • Drives additional fee revenue stream • Accelerates growth • Directed towards strategic priorities: Accelerates scale key market • China JV to establish Holiday Inn 1. $10m penetration Express brand (2006) Secures
Slide 28: Growth capital investment - track record of high returns
Growth capital investment - track record of high returns H1’12 H1’12 Original Current 2011 Open & Open & Type of spend gross capital Gross Pipeline Pipeline Investment invested revenues* hotels rooms Brand 2003 $17m $17m $508m 375 35,246 acquisition Brand 1998-2002 $228m - launch $576m 261 28,425 Se
Slide 29: Significant future contribution from new brands
Significant future contribution from new brands • IHG’s gross revenues* in 2011 totalled $20.2bn • 14% of H1’12 pipeline is Hotel Indigo, Staybridge Suites, Candlewood Suites and HUALUXE Hotels & Resorts Expected proportion of IHG’s gross revenues* from Hotel Indigo, Candlewood Suites, Staybridge Su
Slide 30: Priorities for high quality growth - focus on delivery
Priorities for high quality growth - focus on delivery “Great Hotels Guests Love” Priorities for high quality growth BEST IN PREFERRED TALENTED CLASS BRANDS PEOPLE DELIVERY RESPONSIBLE BUSINESS PRACTICE INVEST IN GROWTH GROW MARKET SHARE SUSTAINABLE MARGIN GROWTH 30
Slide 31: Well positioned for continued high quality growth
Well positioned for continued high quality growth • Confident outlook • Well executed strategy • Leading positions in key hotel markets • Preferred brands • Excellent financial record • Market beating shareholder returns 31
Slide 32: Questions & Answers
Questions & Answers InterContinental, Danang 32
Slide 33: Appendices
Appendices Holiday Inn, Stratford 33
Slide 34: Hotel franchising - RevPAR drives 9% royalty fee growth
Hotel franchising - RevPAR drives 9% royalty fee growth Total gross revenue $bn¹ (rooms only) Group Royalty drivers H1‘12 vs. H1’11 H1 2012 5.8 Average rooms 1% H1 2011 5.4 RevPAR 6.3% H1 2010 5.0 Royalty fees 9% Franchise Fees $m Franchise EBIT $m (margin %) H1 2012 313 H1 2012 263 (84%) H1 2011 29
Slide 35: Hotel management - strong margin growth momentum
Hotel management - strong margin growth momentum Total gross revenue $bn¹ (total hotel) Management Fees² $m H1 2012 4.2 H1 2012 176 H1 2011 3.9 H1 2011 166 H1 2010 3.6 H1 2010 152 Managed EBIT² $m (margin %) Managed lease revenue and EBIT $m H1 2012 101 (57%) $m H1 2012 H1 2011 Americas Revenue 19 3
Slide 36: Owned & leased - rate drives margin growth
Owned & leased - rate drives margin growth O&L revenue $m O&L EBIT $m (margin %) H1 2012 276 H1 2012 50 (18%) H1 2011 274 H1 2011 46 (17%) H1 2010 243 H1 2010 30 (12%) O&L EBITDA $m H1 2012 69 H1 2011 68 H1 2010 54 Based on actual USD. All charts exclude results from disposed assets: InterContinenta
Slide 37: Maintenance capital expenditure - medium term catch-up spend
Maintenance capital expenditure - medium term catch-up spend • Hotel capex has fallen in line with asset disposals • Recent spend below depreciation & amortisation levels • Medium term guidance: $150m maintenance capex per annum – Planned ongoing hotel renovation programmes – Balance of spend shifti
Slide 38: Delivering on asset light strategy - track record of selling above NBV
Delivering on asset light strategy - track record of selling above NBV Hotels NBV (US$m) Big 4¹ InterContinental hotels 4 1,137 Other owned & leased hotels 6 316 Total 10 1,453² Other associates & investments 198 Total 1,651 ¹InterContinental Barclay New York, InterContinental Park Lane London, Inte
Slide 39: Half Year Results Presentation
Half Year Results Presentation 7 August 2012
InterContinental Hotels Group — H1 2012 Earnings Presentation on 6ix