InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — FY2007 Earnings Presentation
48 slides from InterContinental Hotels's earnings presentation, Feb 19, 2008
Slide 1: IHG Preliminary Results Presentation
IHG Preliminary Results Presentation 19th February 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: Strong performance in 2007
Overview Strong performance in 2007 z Operational delivery – Global constant currency RevPAR up 7% – Net room count up 5% - 50% more growth than 2006 – Continuing revenue up 12%; continuing EBIT* up 19% – Dividend up 12% z Foundations for future growth – Signings up 22% to 125,533 rooms, 873 hotels
Slide 5: Transformation to a fee based business model
Overview Transformation to a fee based business model 68% Managed and 86% franchised EBIT* 32% 14% Owned EBIT* 2003 2007 * EBIT pre overheads, central costs and exceptionals 5
Slide 6: New hotels driving growth in total gross revenues
Overview New hotels driving growth in total gross revenues Drivers of total gross revenue* growth %** 15% 13% 11% New 7% Hotels*** 9% 2% 7% 5% Existing 9% 8% 7% Hotels 3% 1% -1% -1% 2005 2006 2007 * Total gross revenue is defined as total room revenue from franchised hotels and total hotel revenue f
Slide 7: Future openings pace will accelerate
Overview Future openings pace will accelerate 140 2007 120 2006 100 '000 rooms 80 2005 2004 60 2003 2002 2007 40 2001 2006 2005 20 2003 2004 0 Openings Signings 2 years earlier 7
Slide 8: Outlook
Overview Outlook Rooms growth z Total pipeline under construction: c.40% z Total pipeline financed: c.70% z Planned 2008 openings under construction: >90% RevPAR z January trading – global RevPAR +5.4%* – US RevPAR +3.8%* z Bookings pace in line with expectations z Corporate negotiated rates: increa
Slide 9: Agenda
Agenda Financial Operating Overview Q&A Review Review 9
Slide 10: Financial highlights
Financial Review Financial highlights z Strong revenue growth – Total hotels gross revenue up 14% in constant currency – IHG continuing revenues up 20% in constant currency z Operational leverage – Continuing operating profit margin up 2%pts to 27% z Capital recycling – £106m disposal proceeds – £53
Slide 11: Total results reflect impact of hotel disposals and return of funds
Total results reflect impact of hotel disposals Financial Review and return of funds 12 mths 12 mths £ million Change % to 31 Dec 07 to 31 Dec 06 Turnover 923 960 (4)% Operating Profit* 245 231 6% Interest (45) (11) Profit before tax* 200 220 (9)% Tax rate* 22% 24% (2)%pts Profit after tax* 155 167
Slide 12: Strong growth in IHG's continuing business
Financial Review Strong growth in IHG’s continuing business 12 mths 12 mths Change CER** £ million to 31 Dec 07 to 31 Dec 06 % Change % Turnover 883 786 12% 20% EBITDA* 292 255 15% 25% Operating Profit* 237 200 19% 30% Operating Profit Margin 27% 25% +2%pts Interest (45) (11) Profit before tax* 192
Slide 13: Regional performance
Financial Review Regional performance 12 mths 12 mths CER** £ million to 31 Dec 07 to 31 Dec 06 Change % Change % Americas 220 215 2% 11% EMEA 67 37 81% 86% Asia Pacific 31 29 7% 21% Central Overheads (81) (81) -% 2% Continuing Operating Profit* 237 200 19% 30% Continuing EBITDA 292 255 15% 25% * Be
Slide 14: RevPAR outperformance in all key profit drivers
Financial Review RevPAR outperformance in all key profit drivers 2007 RevPAR change, IHG vs. segment IHG Segment 16% 14% 12% 10% 8% 6% 4% 2% 0% InterContinental - US Crowne Plaza - US Holiday Inn - US Holiday Inn Express - Holiday Inn & Express InterContinental - All brands - China US - UK EMEA Sour
Slide 15: 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'07 5.2 FY’07 vs FY’06 47% 53% FY'06 4.6 FY’06 vs FY’05 29% 71% FY'05 4.0 FY’05 vs FY’04 (3%) 103% Avail. Rooms RevPAR Franchise fees £m** Franchise EBIT £
Slide 16: 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’07 vs FY’06 50% 16% 10% 24% FY'07 3.3 FY’06 vs FY’05 (2)% 29% 13% 60% FY’06 2.7 FY’05 vs FY’04 (1)% 21% 9% 71% FY'05 2.2 New Hotels RevPAR F&B Transfers
Slide 17: 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'07 241 adjusted* FY’07 vs FY’06 38% 22% 40% 302 212 adjusted* FY’06 vs FY’05 65% 7% 28% FY'06 215 FY’05 vs FY’04 43% 32% 25% 188 adjusted* FY'05 205 Rate Occupancy F&B O&L EBITDA
Slide 18: ROCE on flagship owned hotels increased 4%pts
Financial Review ROCE on flagship owned hotels increased 4%pts 7%* 3%* 2006 2007 *Combined ROCE on InterContinental hotels in London, Paris, New York and Hong Kong 18
Slide 19: Free cash flow generation
Financial Review Free cash flow generation 12 mths 12 mths £ million to 31 Dec 07 to 31 Dec 06 Operating Profit* 245 231 Depreciation - Hotel depreciation 38 43 - Non hotel depreciation 20 21 Working capital & other movements 8 (21) Net equity settled share-based costs 24 14 Net interest paid & simi
Slide 20: Uses of free cash flow
Financial Review Uses of free cash flow 12 mths 12 mths £ million to 31 Dec 07 to 31 Dec 06 Free cash flow 225 202 Investment capital - Expenditure (53) (90) - Receipts 106 744 Tax on disposals (32) (6) Share repurchases/special dividend (790) (757) Ordinary dividend (64) (64) Pension contributions*
Slide 21: Capital recycling – active asset management
Financial Review Capital recycling – active asset management Capital recycling £m Disposals Wholly owned hotels 25 (including Crowne Plaza Santiago, Holiday Inn Disney) Other equity stakes/loan repayments 81 (including InterContinental Montreal and Crowne Plaza Blackfriars) Investment Refurbishment
Slide 22: Book value of remaining owned & leased hotels and other associates and investments
Book value of remaining owned & leased hotels and Financial Review other associates and investments Hotels NBV (£m) Assets on the market z InterContinental Atlanta 1 z Staybridge Suites Denver - Cherry Creek 1 z Holiday Inn Lexington 1 Total 3 57 Remaining assets z InterContinental flagships 4 682 z
Slide 23: Capital expenditure - 2008
Financial Review Capital expenditure - 2008 Maintenance capital expenditure z Funded by free cash flow z Moderately ahead of depreciation in 2008 – Headquarters relocation; £7m net sale and leaseback proceeds in 2007 Investment capital expenditure z Funded by disposals – Hotel Indigo expansion – Ind
Slide 24: Agenda
Agenda Financial Operating Overview Q&A Review Review 24
Slide 25: Agenda
Agenda Financial Operating Overview Q&A Review Review 25
Slide 26: Net room count growth accelerating
Operating Review Net room count growth accelerating 30 25 Net room count increase '000 +5.2% 20 15 +3.5% 10 5 +0.6% 0 2004 2005 2006 2007 -5 26
Slide 27: Record signings
Operating Review Record signings 140 120 Rooms signed '000 100 80 60 40 20 - 2002 2003 2004 2005 2006 2007 Holiday Inn & InterContinental Crowne Plaza Candlewood Staybridge Suites Indigo Holiday Inn Express 27
Slide 28: Pipeline continuing to grow around the world
Operating Review Pipeline continuing to grow around the world 250 Pipeline rooms ‘000 200 150 Americas 100 50 Asia Pacific EMEA - Dec'02 Jun'03 Dec'03 Jun'04 Dec'04 Jun'05 Dec'05 June'06 Dec '06 Jun-07 Dec-07 28
Slide 29: IHG's system strengthened further
Operating Review IHG's system strengthened further System delivery System funds 2003: 34% 2007: $817m 2007: 45% 2003-2007 +17% CAGR PCR members: 2003: 19m; 2007: 37m Brands strengthened Proprietary research InterContinental repositioned 2006-2007 industry's largest Holiday Inn relaunched research pr
Slide 30: Operating Review
(© INTERCONTINENTAL. HOTELS & RESORTS
Slide 31: Growing momentum for InterContinental
Operating Review Growing momentum for InterContinental Implement, outperform Gained insight, defined changes Enhanced portfolio 211 184 164 62 158 153 36 23 27 21 Pipeline hotels 135 137 148 149 132 Open hotels 2003 2004 2005 2006 2007 31
Slide 32: 33 InterContinental signings in 2007, record hotel pipeline
Operating Review 33 InterContinental signings in 2007, record 62 hotel pipeline Stockholm Dresden Neusiedler Marseille Kiev Monterey Bay Porto Milan Belgrade Chicago Los Angeles Dead Sea Suzhou Abu Dhabi Shanghai Tripoli Ras El Khaimah Lahore Hangzhou Mayur Vihar Guangzhou Hua Hin Danang Abuja Sanur
Slide 33: InterContinental Stockholm, InterContinental Duomo Milan
Operating Review InterContinental Stockholm InterContinental Duomo, Milan 33
Slide 34: InterContinental Abu Dhabi
Operating Review InterContinental Abu Dhabi 34
Slide 35: InterContinental Century City Chengdu
Operating Review InterContinental Century City Chengdu 35
Slide 36: InterContinental Hanoi West Lake
Operating Review InterContinental Hanoi West Lake 36
Slide 37: Operating Review
Operating Review 37
Slide 38: Holiday Inn $1bn Re-launch
Operating Review $1bn Re-launch Gained insight, redefined position Enhanced portfolio: 700 hotel exits; over 200 new prototypes signed 4,266 3,954 3,510 3,658 3,404 873 1,077 514 633 420 Pipeline hotels 2,984 2,996 3,025 3,081 3,189 Open hotels 2003 2004 2005 2006 2007 38
Slide 39: Global re-launch – target completion end 2010
Operating Review z Strong link between guest satisfaction and RevPAR z Global re-launch – target completion end 2010 z $1bn investment by owners, $60m exceptional investment by IHG z 19 pilot hotels to open by end March z Hotel audits underway z First owner conversions expected H2 2008 39
Slide 40: Positive response from IAHI
Operating Review Positive response from IAHI z “The new hallmarks, including the new signage and the overall improvement of our service level to the customer, will strengthen the greatest brand name in the industry. I think our customers will see the difference, and as owners, we will see it in our
Slide 41: Operating Review
Operating Review 41
Slide 42: Hotel Indigo brand development
Operating Review Hotel Indigo brand development IHG investment to accelerate growth Concept proven and refined Hotel industry's first 63 branded boutique launched Pipeline 30 52 hotels Open hotels 11 24 4 8 11 3 6 2004 2005 2006 2007 42
Slide 43: Hotel Indigo
4. . . Operating MS 5 Review ie indigo.
Slide 44: Investing to accelerate development
Operating Review Investing to accelerate development z US – High RevPAR markets – Key gateway cities – Using recycled capital – Mixture of inducements/IHG development z Outside US – Canada open – Mexico signed – Gateway cities identified – Close to first UK signing: London z Total medium term invest
Slide 45: Delivering against our targets
Operating Review Delivering against our targets Starting position Target by end 31 Dec 07 30 Jun 05 2008 Net rooms growth 538k +50k-60k +47k InterContinental hotels open 136 +15-25 +13 Hotels open in China 47 +78 +34 45
Slide 46: Conclusions
Conclusions z We have a robust business model and are well positioned z The contribution from new room additions is growing z The pipeline underpins long term growth z Continued focus on reducing asset intensity z Brand performance is driving guest and owner preference z Leading global distribution
Slide 47: Agenda
Agenda Financial Operating Overview Q&A Review Review 47
Slide 48: IHG Preliminary Results Presentation
IHG Preliminary Results Presentation 19th February 2008
InterContinental Hotels Group — FY2007 Earnings Presentation on 6ix