InterContinental Hotels Group PLC · LSE:IHG
InterContinental Hotels — H1 2006 Earnings Presentation
48 slides from InterContinental Hotels's earnings presentation, Aug 22, 2006
Slide 1: IHG Interim Results Presentation
IHG Interim Results Presentation 22nd August 2006
Slide 2: Agenda
Agenda Interim Operating Overview Q&A Results Review 2
Slide 3: Strong performance in H1 2006
Overview Strong performance in H1 2006 • Business performing strongly: – Total gross revenue up 14% to £4.1bn – RevPAR outperformance in all key profit generators – 11.2% global RevPAR growth – Continuing revenue up 16%*: continuing EBIT up 30%* – Interim dividend increased by 11% to 5.1p per share
Slide 4: Hotel industry remains buoyant
Overview Hotel industry remains buoyant • Low supply growth, high demand growth – US room night demand + 3.6% last 12 months – US room supply +0.5% last 12 months • 2007 and 2008 industry forecasts suggest continued growth in US – RevPAR +6% per annum. – Industry revenue + 8% per annum • Long term d
Slide 5: Strong performance in H1 2006
Overview Strong performance in H1 2006 • Business performing strongly: – Total gross revenue up 14% – RevPAR outperformance in all key profit generators – 11.2% global RevPAR growth – Continuing revenue up 16%*: continuing EBIT up 30%* – Interim dividend increased by 11% to 5.1p per share • Further
Slide 6: Agenda
Agenda Interim Operating Overview Q&A Results Review 6
Slide 7: Financial Highlights
Interim Results Financial Highlights • Total gross revenue* up 14% to £4.1bn • Total EBIT** of £127m • Continuing EBIT** up 30% to £107m • Adjusted continuing earnings per share*** up 132% to 19.0p • Interim dividend increased 11% to 5.1p per share *Total gross revenue is defined as total room reven
Slide 8: Total Group results impacted by asset sales
Interim Results Total Group results impacted by asset sales 6mths 6mths £m Change % to 30 Jun 06 to 30 Jun 05 Turnover 499 690 (28)% EBITDA* 160 193 (17)% Operating Profit* 127 153 (17)% Interest (1) (15) 93% Profit before tax* 126 138 (9)% Tax rate* 25% 29% Basic earnings per share* 51.5p 20.4p 152
Slide 9: Excellent growth in the continuing business
Interim Results Excellent growth in the continuing business 6mths 6mths £m Change % to 30 Jun 06 to 30 Jun 05 Turnover 394 340 16% EBITDA* 137 107 28% Operating Profit* 107 82 30% Margin 27% 24% +3pts Interest (1) (15) 93% Profit before tax* 106 67 58% * Before other operating income and expenses 9
Slide 10: Strong regional continuing operating profit growth
Interim Results Strong regional continuing operating profit growth 6mths 6mths Change CER** £m to 30 Jun 06 to 30 Jun 05 % Change % Americas 111 88 26% 21% EMEA 17 16 6% 9% Asia Pacific 16 10 60% 45% Central Overheads (37) (32) (16%) Continuing Operating Profit* 107 82 30% 25% Continuing EBITDA 137
Slide 11: Improving business mix
Interim Results Improving business mix • 88% of EBIT* now recurring fee Operating Profit Contribution income 100% • Geographic EBIT* 90% 80% – 70% from Americas 70% 60% % of EBIT – 11% from Asia 50% – 19% from EMEA 40% 30% Owned and leased** 20% 10% Franchised 0% Managed H1'04 H1'05 H1'06 * Pre regi
Slide 12: Hotel franchising – high margin fee growth continues
Hotel franchising – Interim Results high margin fee growth continues Total gross revenue £bn* (rooms only) Drivers of gross revenue change, % H1'06 2.5 H1’06 vs H1’05 17% 83% H1’05 2.2 (1%) H1’05 vs H1’04 101% H1'04 2.0 Avail. RevPAR Rooms Franchise fees £m Franchise EBIT £m (margin%) H1'06 135 H1'0
Slide 13: Hotel management - operating profit growth continues
Hotel management - Interim Results operating profit growth continues Total gross revenue £bn* (total hotel) Drivers of gross revenue change, % H1'06 1.4 24% 10% 66% H1’06 vs H1’05 H1’05 1.1 (7%) 36% 14% 57% H1’05 vs H1’04 H1'04 1.0 Transfers Avail. RevPAR F&B from owned Rooms Management fees £m Mana
Slide 14: Continuing owned and leased estate – growing margins
Continuing owned and leased estate – Interim Results growing margins O&L revenues £m Drivers of revenue change, % 159 adjusted** H1'06 144 H1’06 vs H1’05 44% 36% 20% H1'05 144 adjusted** 141 H1’05 vs H1’04 13% 50% 38% H1'04 121 Rate Occupancy F&B O&L EBITDA (pre overheads) £m O&L EBIT (pre overheads
Slide 15: Total Group operating cash flow
Interim Results Total Group operating cash flow 6mths 6mths £m to 30 Jun 06 to 30 Jun 05 Operating Profit* 127 153 Depreciation 23 31 - Hotel depreciation 10 9 - Non hotel depreciation Working capital (37) (43) Other 5 5 Cash flow from operations 128 155 Capital Expenditure (46) (63) Net Cash/(Debt)
Slide 16: Significant free cash flow generated
Interim Results Significant free cash flow generated 6mths to 6mths to £m 30 Jun 06 30 Jun 05 Continuing hotels EBITDA* 137 107 Maintenance Capital Expenditure - Hotel capex 10 25 - Non hotel capex 12 8 Free Cash Flow 115 74 * Before other operating income and expenses 16
Slide 17: Investment for future growth
Interim Results Investment for future growth • Total capital expenditure in first half of £46m • Maintenance of retained assets and operating systems: – £22m spent in the first half • £4m continuing hotels, £6m sold hotels, £12m non hotel • Refurbishment of retained owned and leased assets: – £21m s
Slide 18: Asset disposal programme
Interim Results Asset disposal programme Disposals to date 175 hotels; 35,768 rooms Net book value of hotels sold to date £2.9bn Proceeds received to date £3.0bn Proportion kept under IHG's brands 90% (157 hotels; 32,334 rooms) Post fee EBITDA exit multiple 12x Estimated fee stream created In excess
Slide 19: Returns to shareholders on target
Interim Results Returns to shareholders on target Returned to date Still to be returned £m £m Share repurchase: – First 250 0 – Second 250 0 – Third 76 174 Special dividend (Dec 04) 501 0 Capital return (July 05) 996 0 Special dividend (June 06) 497 0 Total 2,570 174 19
Slide 20: Further returns of capital
Interim Results Further returns of capital • Net debt at half year of £320m • £174m still to be returned to shareholders at 30 June 2006 – £68m remaining at 22 August 2006 • In excess of £400m further disposal proceeds this year • Further returns will be made to shareholders 20
Slide 21: Financial Highlights
Interim Results Financial Highlights • Total gross revenue* up 14% to £4.1bn • Total EBIT of £127m • Continuing EBIT up 30% to £107m • Adjusted continuing earnings per share** up 132% to 19.0p • Interim dividend up 11% to 5.1p per share *Total gross revenue is defined as total room revenue from fran
Slide 22: Agenda
Agenda Interim Operating Overview Q&A Results Review 22
Slide 23: RevPAR outperformance in all key profit generators
Operating review RevPAR outperformance in all key profit generators H1’06 RevPAR change, IHG key profit generators v segment 16% IHG Segment 14% 12% 10% 8% 6% 4% 2% 0% InterContinental Crowne Plaza - Holiday Inn - Holiday Inn Holiday Inn & InterContinental All brands - - US US US Express - US Expres
Slide 24: Growth in system contribution attracts owners
Operating review Growth in system contribution attracts owners Total Gross Revenue £4.1bn, +14% Enhanced reservation channel and loyalty club room night delivery 47.7%% 42.6% 34.1% 32.1% Channels PCR Channels PCR H1 2005 H1 2006 24
Slide 25: IHG Journey
Operating review IHG Journey Goal Target Faster growth by By end 2008: making IHG’s brands Net, organic growth of the first-choice for 50,000 - 60,000 rooms guests and hotel owners Strategy Priorities Build the industry’s • Brand performance strongest operating system • Excellent hotel returns focus
Slide 26: Driving performance
Operating review Driving performance Improved organisational structure Innovation in Strengthened operating system management and IT capabilities Organisation focused on common targets and priorities Added more Refocused sales and developers signing marketing activities new deals Deepened brand Incr
Slide 27: Growth in room count gaining momentum
Operating review Growth in room count gaining momentum Room count change during H1 2006, ‘000 17 (8) (6) 548 541 538 Start Open IHG exit Other exit H1 2006 year end forecast 27
Slide 28: Pipeline now 130,100 rooms
Operating review Pipeline now 130,100 rooms • Represents 1,028 hotels Pipeline of signed deals, 2003-H1 2006, ‘000 rooms 130 • 85% of pipeline is "new build" 109 • 40% of pipeline already under construction 83 71 • c. 80% of current pipeline expected to open by end 2008 • All brands and geographies
Slide 29: All brands growing pipeline around the world
Operating review All brands growing pipeline around the world 140.000 25.000 Global IHG Pipeline Americas Holiday Inn 120.000 20.000 100.000 15.000 80.000 Rooms Rooms 60.000 10.000 40.000 5.000 20.000 - - Dec'02 Jun'03 Dec'03 Jun'04 Dec'04 Jun'05 Dec'05 June'06 Dec'02 Jun'03 Dec'03 Jun'04 Dec'04 Jun
Slide 30: Growing our market share
Operating review Growing our market share Pipeline share US new build versus current market share 70% Share of Supply Share of Pipeline 60% 64% 50% 51% 40% 35% 30% 30% 26% 20% 23% 17% 10% 14% 9% 10% 8% 0% * 0% Holiday Inn Candlew ood InterContinental Holiday Inn Staybridge Crow ne Plaza Suites Expre
Slide 31: US industry revenue growth outstrips RevPAR
Operating review US industry revenue growth outstrips RevPAR 12% Total US Industry Room Revenue Growth vs RevPAR Growth 10% Revenue 8% growth 6% CAGR 6% RevPAR 4% growth 2% 4% CAGR 0% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 -2% -4% RevPAR g
Slide 32: Industry growth across key markets and segments
Operating review Industry growth across key markets and segments Current global room distribution Forecast global room growth by segment by segment, 2005-10 USA China Japan 6 700 Other 650 600 5 550 500 Rooms (Millions) 4 Rooms ('000s) 450 400 3 350 300 250 2 200 150 1 100 50 0 0 Luxury Upscale Mids
Slide 33: Revised brand positioning for InterContinental
Operating Revised brand positioning for InterContinental review E-concierge Previous demographic • Tended to be older (>55) • “Empty nesters” • Conservative and traditional "In the know" demographic • Aged 35-54 • Young family; holiday at resorts • Seek authentic and enriching experiences 33
Slide 34: New marketing focus
Operating New marketing focus review "In the know" campaign CNN sponsorship Aston Martin racing sponsorship 34
Slide 35: Delivering the brand experience
Delivering the brand experience Operating review 18 Leadership Sessions InterContinental Atlanta 420 Management Sessions All 140 GMs Trained 1,800 Employee Sessions • Launched 2004 – 78% occupancy 2006 ytd – June 2006: highest RevPAR in market 40,000 Hotel Employees Attending • 6 InterContinentals s
Slide 36: 5 new InterContinentals opened around the world
Operating 5 new InterContinentals opened around the world review Mar Menor Bora Bora Kansas City Panama Baltimore 36
Slide 37: InterContinental brand performance improving
Operating review InterContinental brand performance improving InterContinental Total Gross InterContinental System and Pipeline Revenue H1` 2006 180 EMEA +11% 160 Asia Pacific +11% 140 Americas +10% 120 100 Hotels 80 RevPAR growth outperformance versus global luxury segment 60 40 2005 +2.2% outperfo
Slide 38: Operating review
Operating review 38
Slide 39: New marketing approach
Operating review New marketing approach 39
Slide 40: New marketing approach
Operating review New marketing approach 40
Slide 41: New marketing approach
Operating review New marketing approach 41
Slide 42: US Holiday Inn Prototype
Operating review US Holiday Inn Prototype Americas Holiday Inn signings 2003-2006 10000 Holiday Inn Prototype Holiday Inn Prototype, opened 2004 opened Rooms 5000 • Launched 2004 • 13 Prototypes now open – Already at a 7% RevPAR premium* • 131 Prototypes under 0 development H2 2003 H1 2004 H2 2004 H
Slide 43: Hotel Indigo launched 2004
Operating review Hotel indigo launched 2004 43
Slide 44: Right brand positioning, right product
Operating review Right brand positioning, right product Indigo Gold Coast Hotel Indigo, Houston 44
Slide 45: Strong Development Pipeline
Operating review Strong Development Pipeline Open (4) Pipeline – under construction (6) Pipeline (11) In final negotiation (11) Total of 21 hotels in less than two years 45
Slide 46: Delivering against our targets
Operating review Delivering against our targets Starting Target by 30/06/06 2006 year position end 2008 end forecast 30/06/2005 Net rooms growth 538k +50k-60k +3k +10k InterContinentals 136 +15-25 +6 +8 Hotels open in China 47 +78 +10 +20 46
Slide 47: Agenda
Agenda Interim Operating Overview Q&A Results Review 47
Slide 48: IHG Interim Results Presentation
IHG Interim Results Presentation 22nd August 2006
InterContinental Hotels Group — H1 2006 Earnings Presentation on 6ix