InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — H1 2004 Earnings Presentation
21 slides from InterContinental Hotels's earnings presentation, September 2004
Slide 1: Richard North, Chief Executive
Richard North Chief Executive 1
Slide 2: The highlights of today's announcement
The highlights of today’s announcement . . . z Brand performance and system delivery continue to grow strongly z Focused strategy based on key strengths: z Grow brands z Develop managed & franchised business z Additional asset disposals z Further £750m return as part of ongoing programme; £1bn annou
Slide 3: At Separation we laid out a clear strategy
At Separation we laid out a clear strategy z Develop high quality, strongly differentiated brands z Extend network of hotels through largely capital free franchise and management contracts and only very selectively through ownership where returns are high z Significantly reduce capital intensity to
Slide 4: This strategy was supported by an initial set of key actions
This strategy was supported by an initial set of key actions z Redesign organisation z Strengthen management z Significantly reduce costs z Reduce capital expenditure z Reduce asset intensity z Begin returning funds to shareholders 4
Slide 5: We have made significant progress against these actions
We have made significant progress against these actions z Redesigned organisation z Strengthened management z Costs significantly reduced z Capital Expenditure in 2003 half of that of 2001 z Assets sales programme commenced z Capital return programme commenced and z New Pepsi bottling agreement and
Slide 6: We are aiming to exploit our competitive advantages still more
We are aiming to exploit our competitive advantages still more z Brand portfolio management and creation z Franchising excellence z Hotel management skills z Reservation system delivery and loyalty scheme operation z Scale where it matters in top hotel markets 6
Slide 7: As a result, we have been able to add further detail to our strategy
As a result, we have been able to add further detail to our strategy z Become world’s leading hotel brand owner z Become mostly franchised and managed z Exploit our US scale and geographic presence to build national scale in world’s major markets z Grow InterContinental brand by exploiting national
Slide 8: Phase II: key priorities for 2004 onwards
Phase II: 5 key priorities for 2004 onwards Strengthen core business Grow managed and franchised fee income Become the world’s leading Develop people and organisation hospitality brand owner Continue to execute asset disposal programme Return funds to shareholders 8 Driving ROCE is the key metric by
Slide 9: Key actions to Strengthen our core business
Strengthen Core Business Key actions to Strengthen our core business z Build strong, differentiated brands z Increase system delivery to strengthen franchisee offer z Strengthen hotel management skills z Selective new brand innovation: Candlewood, Indigo, brand extensions 9
Slide 10: System delivery strengthens, supporting our pipeline growth
Strengthen Core Business System delivery strengthens, supporting our pipeline growth Reservation channel revenue, $m, PCR total revenue, $m, H1 2003 – 2004 H1 2003 – 2004 2300 1700 2067 1525 2100 1500 1900 1309 1700 1636 1300 1500 1100 1300 26.3% growth 16.5% growth versus US 900 versus US 1100 mark
Slide 11: We continue to make progress with new brands: Indigo
Strengthen Core Business We continue to make progress with new brands: Indigo Indigo Guest Bedroom and Lobby mock up 11
Slide 12: We continue to make progress with acquired new brands: Candlewood
Strengthen Core Business We continue to make progress with acquired new brands: Candlewood Candlewood: z Top performer in JD Power survey z Pipeline of almost 2,500 rooms 12
Slide 13: Key actions to Grow managed and franchised fee income
Grow Managed and Franchise Income Key actions to Grow managed and franchised fee income z Significant potential to grow upscale worldwide z Potential to grow midscale to build depth positions in a small number of key markets z Leverage leading market positions in US, UK, China 13
Slide 14: We are growing our pipeline and system additions
Grow Managed and Franchise Income We are growing our pipeline and system additions z Gross system additions of Pipeline size by key country almost 13,000 rooms US Midscale z Net 2,589 rooms due to planned Holiday Inn China terminations and O&L disposals US Upscale z Pipeline growth of 8% year on yea
Slide 15: Key actions to Develop our people and organisation
Develop our people and organisation Key actions to Develop our people and organisation z Complete delivery of target overhead savings z Contain or reduce costs through actions such as: simplification of structure due to focus reduce costs of asset ownership processing improvement z Focus on st
Slide 16: Capital reduction continues with £2.2bn of assets sold or announced for disposal
Continue the execution of asset disposal programme Capital reduction continues with £2.2bn of assets sold or announced for disposal z Started at Separation with £3.9bn of hotels z Currently more than £900m on market or disposed z Announce today a further tranche with net book value of £1.3bn, predom
Slide 17: Announce today a further £750m return to shareholders
Return funds to shareholders Announce today a further £750m return to shareholders Current Progress and Highlights: z £213m of the £250m buyback completed at an average price of 534p per share z Announce today: Special dividend of £500m to be paid in December 2004 with associated share consolidati
Slide 18: World's Leading Hospitality Brand Owner
World’s Leading Hospitality Brand Owner z Predominantly hotel franchising and management business with high quality (low-cyclicality) earnings and cash generation z World class brands z Brand innovator z Scale presence in limited number of key markets z Much reduced capital invested, versus £3.6 bil
Slide 19: In summary, the highlights of today's announcement
In summary, the highlights of today’s announcement . . . z Brand performance and system delivery continue to grow strongly z Focused strategy based on key strengths: Grow brands Develop managed & franchised business z Additional asset disposals z Further £750m return as part of ongoing programme
Slide 20: Current Trading
) INTERCONTINENTAL. \e HOTELS GROUP Current Trading
Slide 21: Current Trading and Outlook
Current Trading and Outlook z Trading remains strong in our key profit regions z Strong occupancy growth across all brands z Room-rate growth has begun in key urban locations z European market remains weak, with Paris in particular very depressed and hard to predict z Booking lead times remain short
InterContinental Hotels Group — H1 2004 Earnings Presentation on 6ix