InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — H1 2008 Earnings Presentation
39 slides from InterContinental Hotels's earnings presentation, Aug 12, 2008
Slide 1: IHG Interim Results Presentation
IHG Interim Results Presentation 12th August 2008
Slide 2: Agenda
Agenda Financial Operating Overview Q&A Review Review 2
Slide 3: Agenda
Agenda Financial Operating Overview Q&A Review Review 3
Slide 4: Overview
Overview Overview Strong first half results Favourable long term tailwinds Mixed short term environment – RevPAR – short term headwinds particularly in US – ....but new rooms growth gathering pace Advantaged fee based business model – Strong cash flow generation – Focused management actions
Slide 5: Agenda
Agenda Financial Operating Overview Q&A Review Review 5
Slide 6: H1 2008 results summary
Financial Review H1 2008 results summary Change of reporting currency to US dollars Rooms growth – Annualised net room count up 6%; signings of 48,282 rooms Revenue growth – Global constant currency RevPAR up 4% Operational leverage – Continuing revenue* up 9%; continuing EBIT* up 17% – Cont
Slide 7: Growth in IHG's continuing business
Financial Review Growth in IHG’s continuing business 6 mths 6 mths CER** Change % US$ million Change % to 30 June 08 to 30 June 07 Excluding LDs*** Turnover 952 832 14% 9% EBITDA* 341 276 24% 21% Operating Profit* 284 220 29% 17% Interest (55) (23) (139)% Profit before tax* 229 197 16% Tax rate* 28%
Slide 8: Continuing regional performance
Financial Review Continuing regional performance 6 mths 6 mths CER** Change % US$ million Change % to 30 June 08 to 30 June 07 Excluding LDs*** Americas 242 220 10% 4% EMEA 89 48 85% 54% Asia Pacific 29 27 7% 11% Central Overheads (76) (75) (1)% -% Continuing EBIT* 284 220 29% 17% Continuing EBITDA*
Slide 9: RevPAR outperformance in the US
Financial Review RevPAR outperformance in the US H1 2008 RevPAR change, IHG vs. segment 5% IHG Segment 4% YoY RevPAR growth (%) 3% 2% 1% 0% InterContinental - US Crowne Plaza - US Holiday Inn - US Holiday Inn Express - US Source: IHG; Smith Travel Research; STR Global 9
Slide 10: RevPAR outperformance in other key profit centres
Financial Review RevPAR outperformance in other key profit centres H1 2008 RevPAR change, IHG vs. segment 18% 16% IHG Segment 14% 12% 10% YoY RevPAR growth (%) 8% 6% 4% 2% 0% -2% -4% -6% -8% -5% -10% Holiday Inn & Express - UK InterContinental - EMEA All brands - China Source: IHG; Smith Travel Rese
Slide 11: RevPAR growth moderated in the last three months
Financial Review RevPAR growth moderated in the last three months 2008 RevPAR change 10% Jan -April May-July 8% YoY RevPAR growth (%) 6% 4% 2% 0% Americas EMEA Asia Pacific Total IHG Source: IHG; Smith Travel Research; STR Global 11
Slide 12: 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, % H1'08 5.6 H1’08 vs H1’07 65% 35% H1'07 5.0 H1’07 vs H1’06 48% 52% H1'06 4.4 H1’06 vs H1’05 23% 77% Avail. Rooms RevPAR Franchise fees $m Franchise EBIT $m (m
Slide 13: Worldwide fee growth
Hotel franchising – Financial Review Worldwide fee growth Franchise fee revenue $m – 6 months to 30 June Americas EMEA Asia Pacific 8 300 8 53 35 Franchise Fee Revenue ($m) 250 4 27 200 150 240 248 100 212 50 0 2006 2007 2008 13
Slide 14: 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, % H1’08 vs H1’07 45% 16% 28% 11% H1'08 3.7 H1’07 vs H1’06 12% 17% 39% 32% H1’07 3.2 H1’06 vs H1’05 (1)% 24% 10% 66% H1'06 2.6 New Hotels RevPAR F&B Transfers
Slide 15: Continuing owned and leased estate – Margins increasing
Continuing owned and leased estate – Financial Review Margins increasing O&L revenues $m Drivers of revenue change, %* 250 adjusted* H1'08 H1’08 vs H1’07 62% 6% 32% 317 224 adjusted* H1’07 vs H1’06 38% 16% 46% H1'07 268 H1’06 vs H1’05 (10%) 80% 30% 201 adjusted* H1'06 201 Rate Occupancy F&B O&L EBIT
Slide 16: Free cash flow generation
Financial Review Free cash flow generation 6 months 6 months US$ million to 30 June 08 to 30 June 07 Operating Profit* 291 228 Depreciation 38 39 - Hotel depreciation 19 20 - Non hotel depreciation Working capital & other movements (25) (69) Net equity settled share-based costs 12 8 Net interest pai
Slide 17: Uses of free cash flow
Financial Review Uses of free cash flow 6 months 6 months US$ million to 30 June 08 to 30 June 07 Free cash flow 280 152 Investment capital - Expenditure (5) (78) - Receipts 28 115 Tax on disposals - (3) Share repurchases/special dividend (131) (1,454) Ordinary dividend (86) (92) Pension contributio
Slide 18: Financial Strength
Financial Review Financial Strength Net debt of $1,623m, down $36m Appropriate gearing Refinancing completed on 9 May 2008 Controlled capital expenditure – Maintenance capital in line with depreciation – Investment capital funded by disposals 18
Slide 19: Agenda
Agenda Financial Operating Overview Q&A Review Review 19
Slide 20: Agenda
Agenda Financial Operating Overview Q&A Review Review 20
Slide 21: Our priorities
Operating Review Our priorities Open the 1,800 hotels in our pipeline Win greater share of industry demand Manage costs 21
Slide 22: Net room count growth accelerating – first half
Operating Review Net room count growth accelerating – first half Net room additions 13,071 7,430 3,469 H1 2006 H1 2007 H1 2008 22
Slide 23: Net room count growth accelerating – 12 months
Operating Review Net room count growth accelerating – 12 months 35 +6.1% 30 Net room count increase '000 +3.9% 25 +4.2% 20 +2.7% 15 10 +11.5% 5 +0.6% +8.2% +0.9% 0 June 2006 June 2007 June 2008 -5 12 months ending EMEA & Asia Pacific Americas 23
Slide 24: New hotels driving gross revenues
Operating Review New hotels driving gross revenues Drivers of total gross revenue* growth %** 15% 10% 3% New 5% Hotels 5% 10% 8% 6% Existing Hotels 0% 2006 2007 2008 * Total gross revenue is defined as total room revenue from franchised hotels and total hotel revenue from managed, owned and leased h
Slide 25: Delivering against our targets
Operating Review Delivering against our targets Starting position Target by 30 June 08 Progress end 2008 30 Jun 05 Net rooms growth 538k +50k-60k +60,490 Exceeded InterContinental hotels open 136 +15-25 +18 Achieved Hotels open in China 47 +78 +40 Early 2009 25
Slide 26: Signings pace remains strong
Operating Review Signings pace remains strong 60 50 Rooms signed '000 40 30 20 10 - H1 2004 H1 2005 H1 2006 H1 2007 H1 2008 EMEA & Asia Pacific Americas 26
Slide 27: Brand portfolio supports growth momentum
Operating Review Brand portfolio supports growth momentum 250 200 Pipeline rooms ‘000 150 100 50 - Jun'03 Dec'03 Jun'04 Dec'04 Jun'05 Dec'05 June'06 Dec '06 Jun-07 Dec-07 Jun-08 Holiday Inn & Express Crowne Plaza Extended Stay InterContinental Hotel Indigo 27
Slide 28: High quality pipeline
Operating Review High quality pipeline Pipeline attrition in line with historic trend Total pipeline under construction: c.40% Total pipeline financed: c.70% – Majority midscale financing = local/regional banks Ground breaks (Americas): +36% 28
Slide 29: Winning greater share of industry demand
Operating Review Winning greater share of industry demand Hotel System Loyalty Distribution Funds Programme 4,000 hotels in c.$900m Over 39m members nearly 100 countries Brand Web Total Gross Revenue Presence Portfolio H1 2008 #1 website 7 brands $9.6bn, +8%* 13 local language covering major website
Slide 30: Winning greater share of industry demand
Operating Review Winning greater share of industry demand Hotel System Loyalty Distribution Funds Programme 4,000 hotels in c.$900m Over 39m members nearly 100 countries Brand Web Total Gross Revenue Presence Portfolio H1 2008 #1 website 7 brands $9.6bn, +8%* 13 local language covering major website
Slide 31: Winning greater share of industry demand
Operating Review Winning greater share of industry demand Hotel System Loyalty Distribution Funds Programme 4,000 hotels in c.$900m Over 39m members nearly 100 countries Brand Web Total Gross Revenue Presence Portfolio H1 2008 #1 website 7 brands $9.6bn, +8%* 13 local language covering major website
Slide 32: Winning greater share of industry demand
Operating Review Winning greater share of industry demand Hotel System Loyalty Distribution Funds Programme 4,000 hotels in c.$900m Over 39m members nearly 100 countries Brand Web Total Gross Revenue Presence Portfolio H1 2008 #1 website 7 brands $9.6bn, +8%* 13 local language covering major website
Slide 33: Winning greater share of industry demand
Operating Review Winning greater share of industry demand Hotel System Loyalty Distribution Funds Programme 4,000 hotels in c.$900m Over 39m members nearly 100 countries Brand Web Total Gross Revenue Presence Portfolio H1 2008 #1 website 7 brands $9.6bn, +8%* 13 local language covering major website
Slide 34: Winning greater share of industry demand
Operating Review Winning greater share of industry demand Hotel System Loyalty Distribution Funds Programme 4,000 hotels in c.$900m Over 39m members nearly 100 countries Brand Web Total Gross Revenue Presence Portfolio H1 2008 #1 website 7 brands $9.6bn, +8%* 13 local language covering major website
Slide 35: System driving revenue contribution
Operating Review Operating system driving revenue contribution 40% H1 2008 Total Gross Revenue $9.6bn, +8%* 30% %Revenue contribution 47% direct IHG channels revenue contribution 20% 10% 0% Tra ve l a ge nt We b Ca ll Ce ntre s Priority Club Re wa rds Revenue booked +10% +25% +4% +14% % growth * At
Slide 36: Managing cost base
Operating Review Managing cost base Continued investment to support growth Control discretionary costs Back-office accounting off-shore Group procurement review 36
Slide 37: Conclusions
Operating Review Conclusions RevPAR growth softening New rooms growth delivering strongly Pipeline is robust IHG’s system key to winning market share Costs are being managed Fee based business model is right for now and the long term 37
Slide 38: Agenda
Agenda Financial Operating Overview Q&A Review Review 38
Slide 39: IHG Interim Results Presentation
IHG Interim Results Presentation 12th August 2008
InterContinental Hotels Group — H1 2008 Earnings Presentation on 6ix