Intercontinental Hotels Group Plc · LSE:IHG

Intercontinental Hotels — FY2013 Earnings Presentation

51 slides from Intercontinental Hotels's earnings presentation, Feb 18, 2014

  1. Slide 1: Full Year Results Presentation

    Holiday Inn Express, Singapore Holiday Inn, Charleston, USA Full Year Results Presentation 18 February 2014 IHG© 1

  2. Slide 2: 2013 - focus on high quality growth drives strong progress

    2013 - focus on high quality growth drives strong progress Good growth in fees Fee revenues¹ 4.3% Clear scale benefits Fee-based margin¹ 1.3%pts² Strong cash generation Free cash flow 11% Reduction in capital intensity Cash from disposals $444m³ Investment to drive future growth Growth capex $129m B

  3. Slide 3: Paul Edgecliffe-Johnson, CFO

    Paul Edgecliffe-Johnson CFO Joined IHG in August 2004 Extensive IHG senior finance experience Most recently CFO of IHG’s Europe and Asia, Middle East & Africa regions Interim CEO of IHG’s Europe, Middle East and Africa region in 2011 IHG© 3

  4. Slide 4: Financial Review

    Hotel Indigo, Barcelona Financial Review Paul Edgecliffe-Johnson CFO IHG© 4

  5. Slide 5: Good underlying results drive double digit EPS growth

    Good underlying results drive double digit EPS growth 12 months 12 months Change % $ million Change % to 31 Dec 13 to 31 Dec12¹ underlying2 Revenue 1,903 1,835 4% 4% Fee revenue3 1,176 1,135 4% 4% Operating profit4 668 605 10% 8% Interest (73) (54) 35% Profit before tax4 595 551 8% Tax rate4 29% 27%

  6. Slide 6: 2013: driving fee revenue growth

    2013: driving fee revenue growth RevPAR X Rooms X Royalty Rate 2013 fee revenue1 $1,176m, up 4.3% 2013 system growth (%) 2013 Group RevPAR growth 5.2% 3.8% 2.3%2 1.8% 1.3%pts 1.6% Gross Net ADR Occupancy RevPAR 35k rooms opened, 25k rooms removed (4k adjustment) ¹ Fee revenue excludes revenue from o

  7. Slide 7: 2013: driving fee revenue growth

    2013: driving fee revenue growth RevPAR X Rooms X Royalty Rate 2013 fee revenue¹ growth 6.5% 4.3% 3.3% 2.5% $(4)m $49m $39m $4m $3m (2.4)% 2013 fee $1,176m $639m $162m $159m $95m revenue1 Group2 Americas Europe AMEA Greater China ¹ Fee revenue excludes revenue from owned and leased hotels, managed l

  8. Slide 8: The Americas - good performance driven by RevPAR

    The Americas - good performance driven by RevPAR Growth in fee revenue drivers1 Comparable RevPAR up 4.3% 6.5% - US 4.2% 4.3% $39m Net rooms growth 0.4% 0.4% - Gross rooms growth 4.4% RevPAR Net rooms Fee Revenue Fee revenue up 6.5%1 Net rooms growth 460k 20k 451k 449k Total underlying2 revenue up 7

  9. Slide 9: Holiday Inn - more resilient through the cycle

    Holiday Inn - more resilient through the cycle Upper midscale industry segment is more resilient though the cycle Holiday Inn brand family is more resilient than upper midscale segment US RevPAR Holiday Inn brand family vs total industry and industry upper midscale segment – indexed to 100 at prior

  10. Slide 10: Europe – solid growth led by key markets

    Europe – solid growth led by key markets Growth in fee revenue drivers1 Comparable RevPAR up 1.7% - UK 3.0% - Germany 0.8% 2.5% - France 2.6% 1.7% 0% $4m RevPAR Net rooms Fee Revenue Net rooms growth flat - Gross rooms growth 3.5% Net rooms growth Fee revenue up 2.5%1 105k 102k 3.5k 102k 100k Total

  11. Slide 11: AMEA – strong trading in key markets

    AMEA – strong trading in key markets Growth in fee revenue drivers1 Comparable RevPAR up 6.1% - SEA 9.9% – Japan 9.6% 6.1% - Australasia 4.5% – Middle East 2.9% 3.3% Net rooms growth 3% - Gross rooms growth 7% $(4)m (2.4)% RevPAR Net rooms Fee Revenue Fee revenue down 2.4%1: - Up 4% excluding $10m f

  12. Slide 12: Greater China – well established scale position

    Greater China – well established scale position Growth in fee revenue drivers1 Comparable RevPAR up 1.0% 11.3% - Significant industry outperformance 3.1% Net rooms growth 11% 3.3% 1.0% - c.50% of rooms openings were in Q4 $3m - Gross rooms growth 12% RevPAR Net rooms Fee Revenue Fee revenue up 3.3%1

  13. Slide 13: Incremental fees from developing market expansion

    Incremental fees from developing market expansion Comparable vs total RevPAR growth Greater China Asia, Middle East & Africa 157 hotels¹ 208 hotels² 188 hotels¹ 244 hotels² 6.1% 1.0% 2.8% (1.3)% Comparable RevPAR Total RevPAR Comparable RevPAR Total RevPAR New rooms in developing markets provide str

  14. Slide 14: Growing mix of new hotels in developing markets

    Growing mix of new hotels in developing markets Split of hotels between established and developing markets3 Greater China Asia, Middle East & Africa 32% 59% 45% Developing market 76% 86% 68% 77% Established market 55% 41% 24% 14% 23% Comparable ¹ Non-comparable 2 Pipeline Comparable ¹ Non-comparable

  15. Slide 15: Driving sustainable fee margin progression

    Driving sustainable fee margin progression Fee margin up 1.3%pts in 2013 - Productivity improvement and scale benefits balanced with investment for growth ~11% pts fee margin progression over 9 years Sustainable fee margin progression over the medium term - 2014: Continued investment in brand develo

  16. Slide 16: A highly cash generative business - IHG's priorities for cash

    A highly cash generative business - IHG’s priorities for cash Free cash flow Asset disposals/ (after maintenance Capital recycling capital expenditure) Investment grade credit rating Growth capital Sustainable ordinary Additional investment dividend capital returns IHG© 16

  17. Slide 17: Sources and uses of cash in 2013

    Sources and uses of cash in 2013 $m 1000 444 (129) (178) 800 (355) 600 502 400 (283) 200 (80) (79) 0 -200 1 Free cash flow Disposal Growth capex Ordinary Special Div Buy back Other / FX (Increase) / receipts dividend decrease in net debt 1 Disposal receipts net of tax and $(52)m ring fenced deposits

  18. Slide 18: Growth investment fuelled by recycled capital

    Growth investment fuelled by recycled capital Growth capital expenditure $129m - $72m in 2013 on our new EVEN Hotels brand 2013 - $444m net disposal proceeds, including $408m from the disposal of InterContinental London Park Lane Maintenance capital expenditure $140m Capital expenditure up to $350m

  19. Slide 19: Ten year strong track record of capital returns

    Ten year strong track record of capital returns $816m capital returned in 2013 Industry leading - $355m special dividend paid October 2013 shareholder - $283m share buyback, with $390m of $500m programme completed returns - $178m ordinary dividend 62% return on capital employed1, up from 7% in 2003

  20. Slide 20: Operating Review

    InterContinental Osaka, Japan Operating Review Richard Solomons CEO IHG© 20

  21. Slide 21: Demand drivers provide significant growth opportunities

    Demand drivers provide significant growth opportunities 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

  22. Slide 22: Industry growth concentrated in a few markets

    Industry growth concentrated in a few markets IHG’s ten priority markets’ room revenue - current and expected growth to 2020 ($bn) 139 These ten markets combined: 32 - Comprise >85% of IHG’s system and pipeline1 - Represent >75% of industry growth to 2020 - Will grow at 4.6% compound annual rate 201

  23. Slide 23: IHG's strategy for high quality growth

    IHG’s strategy for high quality growth Value creation: superior shareholder returns Value creation: Superior shareholder returns Winning Model Targeted Portfolio Attractive markets Highest opportunity segments Managed & franchised model - Scale and efficiency of operations Disciplined - Investment i

  24. Slide 24: IHG's Plan to Win - brands

    IHG’s Plan to Win - brands Value creation: superior shareholder returns BRANDS PEOPLE DELIVERY Creating brands Attracting and Efficient and guests prefer retaining the consistent execution best talent RESPONSIBLE BUSINESS Disciplined execution in a responsible way IHG© 24

  25. Slide 25: Guest satisfaction is key to creating preferred brands

    Guest satisfaction is key to creating preferred brands A promise of Expectations a consistent, What is relevant & and an a differentiated emotional hotel brand? hotel connection experience - 34m unique guests each year IHG’s hotels have - 161m guest nights each year - Continuous guest feedback and r

  26. Slide 26: Driving improved guest satisfaction

    Driving improved guest satisfaction Guest HeartBeat - Guest satisfaction measurement tool introduced in 2011 - In place for all IHG’s brands globally Driven increased guest satisfaction at every brand in 2013 Guest satisfaction initiatives include - General Manager training - Improved service recove

  27. Slide 27: Extensive recognition for IHG's portfolio of brands

    Extensive recognition for IHG’s portfolio of brands > 400 awards in 2013 Premier Travel Magazine - Voter’s Choice Awards World’s Best Hotel Loyalty Programme (2nd yr running) 2013 J.D. Power & Associates 2013 World Travel Awards – Highest Guest Satisfaction Mid- - 22 awards: 12 repeat, 10 new Market

  28. Slide 28: Our nine needs-based segments

    Our nine needs-based segments - the insights informing our brand development Segment name Summary of Needs Wellbeing Family Time Romantic Getaway Short Break Experience Rest & Go Mixing Business with Pleasure Business Productivity Building Business Interactions Social Identity IHG© 28

  29. Slide 29: InterContinental Hotels & Resorts: 2x bigger than any other luxury brand

    InterContinental Hotels & Resorts: 2x bigger than any other luxury hotel brand “Do you live an InterContinental Life?” Unrivalled distribution across - 178 hotels (60k rooms) open, 51 hotels (17k rooms) in the pipeline >60 countries - Includes 32 open resorts, with 4 in the pipeline - 9 iconic Inter

  30. Slide 30: InterContinental hotel photos

    InterContinental Davos, Switzerland InterContinental Lagos, Nigeria InterContinental Shanghai, Ruijin InterContinental Marseilles, France IHG© IHG© 30

  31. Slide 31: Global traction for the industry's first global branded boutique offering

    Global traction for the industry’s first global branded boutique offering “Refreshingly Local” - 55 hotels (6k rooms) open, 51 (7k rooms) in the pipeline System size up 150% since 2008 - Americas: 37 open, 23 in pipeline; Europe: 13 open, 15 in pipeline - AMEA: 8 in pipeline; Greater China: 5 hotels

  32. Slide 32: 2013 openings – primary urban locations

    2013 openings – primary urban locations Hotel Indigo Barcelona, Spain Hotel Indigo Lijiang Ancient Town, China Hotel Indigo Hong Kong Island Hotel Indigo Tel Aviv Diamond District, Israel 32

  33. Slide 33: The largest global hotel brand with the largest global pipeline

    The largest global hotel brand with the largest global pipeline¹ “Innovative Comfort for the “Engaging Efficiency for the Contemporary Traveller” Smart Traveller” - Significant brand family premium to the upper midscale segment - 40k rooms (280 hotels) signed; strongest year since 2008 2013 highligh

  34. Slide 34: Brand Innovations

    Brand Innovations New Express Start™ Healthy Options rollout European Open Lobby Concept: Holiday Inn Brentford Lock, UK IHG© 34

  35. Slide 35: Repositioning the brand - driving quality & consistency improvements

    Repositioning the brand - driving quality & consistency improvements “Travelling for Success” - 391 hotels (109k rooms) open, 94 (28k rooms) in the pipeline A globally relevant & significant brand - >50% of the pipeline is in Greater China - 21 hotels opened, 27 signed - Significant industry share g

  36. Slide 36: IHG's home-grown extended stay brand

    IHG’s home-grown extended stay brand “Community home-like experience” Hotels across 9 - 196 hotels open (22k rooms), 80 hotels (9k rooms) in pipeline countries and 3 regions - First North American extended stay brand to launch in the UK - 7 hotels opened, including the first in Lebanon, Beirut - 32

  37. Slide 37: Demonstrating IHG's ability to acquire and grow a brand

    Demonstrating IHG’s ability to acquire and grow a brand “Relaxed, casual, home-like experience” - 312 hotels open (30k rooms), 80 hotels (7k rooms) in pipeline >300 hotels open - North American, extended stay focus - 14 hotels opened, including the brand’s 300th hotel 2013 highlights - 31 hotels sig

  38. Slide 38: Maximising the Food & Beverage opportunity

    Maximising the Food & Beverage opportunity F&B is a critical - $3.5bn non-rooms revenues, c.15% of total gross revenues in 2013 part of IHG’s • >40% of total gross revenues in AMEA and Greater China business - Our brands operate >5,400 restaurants and bars globally • IHG is the largest casual dining

  39. Slide 39: IHG's innovative Food & Beverage concepts

    IHG’s innovative Food & Beverage concepts IHG© 39

  40. Slide 40: IHG's Plan to Win - Delivery

    IHG’s Plan to Win - Delivery Value creation: superior shareholder returns BRANDS PEOPLE DELIVERY Creating brands Attracting and Efficient and guests prefer retaining the consistent execution best talent RESPONSIBLE BUSINESS Disciplined execution in a responsible way IHG© 40

  41. Slide 41: Delivery - changes in consumer behaviour are impacting booking

    Delivery - changes in consumer behaviour are impacting the way rooms are booked Social Social media media Connectivity Personalisation && advocacy advocacy New consumer digital lifestyle DREAM PLAN BOOK TRAVEL SHARE RESEARCH READ REVIEWS MAKE JOURNEY POST PHOTO CHECK OPTIONS RESERVATIONS STAY WRITE

  42. Slide 42: Leveraging the Power of the IHG brand - IHG Rewards Club Relaunch

    Leveraging the Power of the IHG brand - IHG Rewards Club Relaunch Brought IHG’s name and personality to the fore Clear family of brands under the IHG umbrella Industry first: free internet to all members Good early results: • Highest ever email open rate on an IHG awareness campaign • 10%pt increase

  43. Slide 43: IHG's industry leading web & mobile strategy

    IHG’s industry leading web & mobile strategy - Web revenue up >30% in 3 years Driving significant revenue growth - $611m revenue booked through a mobile device in 2013, up 85% - Mobile/ tablets used for c.1/3rd of IHG’s site visits Leveraging - New website and mobile sites and apps across all platfo

  44. Slide 44: Well positioned for high quality growth

    Well positioned for high quality growth Positive long-term industry dynamics IHG well-positioned to outperform • Targeted portfolio • Strengthening brands through industry-leading insights • Innovative food & beverage approach • Best in class delivery systems Superior shareholder returns Confident o

  45. Slide 45: Q&A

    Staybridge Suites, Beirut Lebanon Q&A IHG© 45

  46. Slide 46: Appendices

    Crowne Plaza, Hailing Island, China Appendices IHG© 46

  47. Slide 47: Hotel franchising

    Hotel franchising Total gross revenue $bn¹ (rooms only) Group royalty drivers 2013 YoY 2013 12.5 Average 0.5% rooms 2012 12.0 RevPAR 3.1% 2011 11.3 Royalty fees 4.9% Franchise Fees $m Franchise EBIT $m (margin %) 2013 690 2013 586 (85%) 2012 653 2012 547 (84%) 2011 609 2011 511 (84%) Based on actual

  48. Slide 48: Hotel management

    Hotel management Total gross revenue $bn1(total hotel) Management Fees² $m 2013 8.5 2013 365 2012 8.6 2012 368 2011 8.3 2011 349 Managed EBIT² $m (margin %) Managed lease revenue and EBIT $m $m 2013 2012 2013 207 (57%) Americas Revenue 34 34 Americas EBIT 0 0 2012 216 (59%) Europe Revenue 89 80 Euro

  49. Slide 49: Owned & Leased

    Owned & Leased O&L revenue $m O&L EBIT $m (margin %) 2013 515 2013 103 (20%) 2012 494 2012 92 (19%) 2011 482 2011 76 (16%) O&L EBITDA $m O&L Revenue and EBIT from disposals ($m) $m 2013 2012 2013 133 IC Park Lane Revenue 22 89 IC Park Lane EBIT 8 33 2012 125 IC Barclay Revenue 75 75 IC Barclay EBIT

  50. Slide 50: 2013/2014 significant one offs

    2013/ 2014 significant one offs • Individually significant liquidated damages receipts - $31m Americas managed (H1) - $9m Europe franchised (H1) 2013 - $6m AMEA managed (H2) 2013 • $(10)m profit impact from renewals and exits as a small number of long standing management contracts expired in AMEA •

  51. Slide 51: Reduced asset intensity driving better returns

    Reduced asset intensity driving better returns 2013 Return on capital employed 62% up from 7% in 2003 InterContinental London Park Lane – completed 1 May 2013 - Gross cash proceeds $469m InterContinental New York Barclay – announced 19 December 2013 - 80% disposal for $240m, implies total value of $

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