Intercontinental Hotels Group Plc · LSE:IHG
Intercontinental Hotels — Six Continents — FY2001 Earnings Presentation
78 slides from Intercontinental Hotels's earnings presentation, December 2001
Slide 1: Six Continents
SIX CONTINENTS
Slide 2: Six Continents PLC Preliminary Results
2 Six Continents PLC Preliminary Results For the Year ended 30th September 2001
Slide 3: Sir Ian Prosser, Chairman
3 SIR IAN PROSSER Chairman
Slide 4: Business Results
4 Business Results Operating Profit (£m) Six Continents Hotels 427 Up 13.6% Six Continents Retail * 274 Up 1.1% Britvic Soft Drinks 57 Up 23.9% *Ongoing business
Slide 5: Key Events - 2001
5 Key Events - 2001 Sale of 988 pubs £625m Acquisition of Posthouse Hotels £810m Acquisition of Inter-Continental Hong Kong £241m
Slide 6: Richard North, Finance Director
6 RICHARD NORTH Finance Director
Slide 7: Americas RevPAR performance
7 Americas RevPAR performance Since October 2000 10.0% 5.0% 0.0% % growth year on year (5.0%) (10.0%) (15.0%) (20.0%) (25.0%) (30.0%) Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 (35.0%) Month Crowne Plaza Holiday Inn Express
Slide 8: RevPAR - Key US Cities
8 RevPAR - Key US Cities Since October 2000 30.0% 20.0% 10.0% % growth year on year 0.0% (10.0%) (20.0%) (30.0%) (40.0%) (50.0%) (60.0%) Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Source: Smith Travel and SCH Month Nth America I-C-O&L Chicago New York Miami S
Slide 9: RevPAR - Europe Key Countries
9 RevPAR - Europe Key Countries Owned & Leased Excluding Holiday Inn UK 30.0% 20.0% % growth year on year 10.0% 0.0% (10.0%) (20.0%) Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 (30.0%) Month France Italy Benelux Germany UK
Slide 10: Operating Profit Hotels
10 Operating Profit Hotels 2001 2000 Growth $m $m % Owned & Leased 78 95 - 17.9 Managed & Upscale Franchise 43 49 - 12.2 Midscale Franchise 224 209 + 7.2 Total Americas 345 353 - 2.3 EMEA 290 257 + 12.8 Asia Pacific 26 30 - 13.3 FelCor and Others 33 25 + 32.0 Central Overheads (68) (73) + 6.8 Goodwi
Slide 11: Americas Owned & Leased Hotels
11 Americas Owned & Leased Hotels Miami, Chicago and New York Inter-Continentals in refurbishment US economic slowdown hitting particularly San Francisco, New York and Chicago markets prior to September 11 September 11 impact on upscale hotels RevPAR performance To August September Year Inter-Contin
Slide 12: Americas Managed & Upscale Franchise Hotels
12 Americas Managed & Upscale Franchise Hotels RevPAR performance To August September Year Inter-Continental managed - 0.1% - 32.0% - 2.9% Crowne Plaza managed - 7.8% - 39.1% - 12.3% Crowne Plaza franchised - 3.3% - 30.3% - 4.9% Operating profit down 12.2%
Slide 13: Americas Midscale Franchise Hotels
13 Americas Midscale Franchise Hotels Holiday Inn Holiday Inn Express Change in number of rooms available - 1.5% + 11.3% Change in RevPAR : To August -0.8% +2.0% September -20.2% -10.3% Year - 2.5% + 0.8% Increase in Royalty Rates + 0.07% pts + 0.11%pts Operating profit up 7.2%
Slide 14: EMEA Hotels
14 EMEA Hotels 2001 2000 Growth % Reported ($m) 290 257 + 12.8 Sterling analysis: £m £m Owned & leased 134 134 - Managed & franchised 31 31 - Posthouse 37 - n/a 202 165 + 22.4
Slide 15: EMEA Owned & Leased (Excluding Posthouse) - Hotels
15 EMEA Owned & Leased (Excluding Posthouse) - Hotels RevPAR performance To August September Year Inter-Continental + 1.2% - 21.8% - 1.3% Crowne Plaza + 1.6% - 14.8% 0.0% Holiday Inn + 5.1% - 7.9% + 3.8% Weakness in London upscale pre-September 11 Events of September 11 hit key upscale properties re
Slide 16: EMEA Managed and Franchised - Hotels
16 EMEA Managed and Franchised - Hotels Management / Franchise system increased by 23 23 properties properties RevPAR performance Managed Franchised Inter-Continental - 1.7% n/a Crowne Plaza - 1.7% - 3.3% Holiday Inn - 2.7% + 4.2% Express by Holiday Inn n/a + 4.2% Overall operating profit flat
Slide 17: EMEA Posthouse - Hotels
17 EMEA Posthouse - Hotels 46 properties converted to Holiday Inn brand by year year end; end; 61 by the end of November RevPAR performance London -9.0% Regions 0.0% Operating profit £37m
Slide 18: Asia Pacific Hotels
18 Asia Pacific Hotels RevPAR performance Inter-Continental - 0.8% Crowne Plaza - 3.3% Holiday Inn + 6.8% Inter-Continental Hong Kong completed in August 2001 Operating profit down by £4m
Slide 19: Operating Profit Hotels
19 Operating Profit Hotels 2001 2000 Growth $m $m % Owned & Leased 78 95 - 17.9 Managed & Upscale Franchise 43 49 - 12.2 Midscale Franchise 224 209 + 7.2 Americas 345 353 - 2.3 EMEA 290 257 + 12.8 Asia Pacific 26 30 - 13.3 FelCor and Others 33 25 + 32.0 Central Services (68) (73) + 6.8 Goodwill Amor
Slide 20: Operating Profit Retail
20 Operating Profit Retail 2001 2000 Growth £m £m % Restaurants 87 85 + 2.4 Pubs & Bars 187 186 + 0.5 Ongoing Business 274 271 + 1.1 Inns 24 75 - 68.0 Other 7 - - Reported 305 346 - 11.8
Slide 21: Retail On-Going Business
21 Retail On-Going Business Profits £m 2001 2000 Growth % Ongoing Business 274 271 + 1.1% Pre-opening & closure costs 24 13 - 84.6% Underlying 298 284 + 4.9%
Slide 22: Retail Restaurants
22 Retail Restaurants Average number of outlets 585 Sales up 8.9% to £564m Drinks sales up 5.1% Food sales up 12.8% Like for like sales ( uninvested) Branded outlets up 1.0% Overall down 0.5% Pre-opening and closure costs £7m higher than last year Operating profit up 2.4% to £87m Underlying operatin
Slide 23: Retail Pubs & Bars
23 Retail Pubs & Bars Average number of outlets 1,347 Sales up 1.9% to £821m Drinks sales up 2.4% Food sales up 2.4% Like for like sales ( uninvested) Branded outlets down 0.7% Unbranded outlets down 2.5% Development estate down 7.4% Pre-opening and closure costs £4m higher than last year Operating
Slide 24: Retail Returns
24 Retail Returns Outlet Level Outlet Level Returns* Returns* Overall 00/01 New Sites Restaurants 14.0% 12.6% Pubs & Bars 18.2% 23.3% Total 16.4% 18.1% * Defined as profit before interest, central overhead and tax as a percentage of book value (excluding revaluation since 1992) and excludes the Deve
Slide 25: Retail Development Estate
25 Retail Development Estate 263 re-opened, 41 in refurbishment by 30th September 311 now re-opened with 13 in refurbishment
Slide 26: Average Weekly Sales
26 Retail Development Estate 16 13.9 Average Weekly Sales 14 12 +41% 10 9.9 £’000 8 8.2 6 4 2 0 Allied Last Year SCR SCR 1998/99 Pre-Conversion Post-Conversion
Slide 27: Britvic - Results
27 Britvic - Results Volumes up 3.2% Turnover up 5.9% Average realised price per litre up 2.4% Operating profit up 23.9% to £57 million
Slide 28: Profit and Loss Account
28 Profit and Loss Account* £m 2001 2000 Growth Operating profit 792 905 - 12.5% Exceptional Items (2) 3 - PBIT 790 908 - 13.0% Interest (59) (152) + 61.2% Tax (190) (197) + 3.6% Minority Interests (22) (16) - 37.5% Adjusted Earnings 519 543 - 4.4% Adjusted EPS 60.1p 62.2p - 3.4% Adjusted Interest c
Slide 29: Major Exceptional Items
29 Major Exceptional Items 2001 2000 £m £m Hotels Division* (43) - Disposal of Pubs (36) - Bass Brewers 38 1,231 (41) 1,231 * disclosed as an operating major exceptional item item
Slide 30: Net Cash Flow
30 2001 2000 +/- Net Cash Flow £m £m £m Operating profit - pre exceptionals 792 905 (113) Depreciation 238 289 (51) Other 1 (3) 4 EBITDA 1,031 1,191 (160) Working capital (24) (88) 64 Net cash inflow before expenditure relating to major exceptional items 1,007 1,103 (96) Major exceptional operating
Slide 31: Balance Sheet
31 Balance Sheet 2001 2000 +/- Net debt (£m) (1,001) (345) - 656 Shareholder equity ( £m) 5,449 5,379 + 70 Gearing 18.4% 6.4% 12.0pts Market-cap gearing * 18.6% 5.9% 12.7pts Interest cover (adjusted) 13.4x 6.0x n/a * Based on share prices of 620p (2001) and 665p (2000)
Slide 32: Current Trading
32 Current Trading Hotel Division US some recovery post 11th September Europe upscale badly affected by fall in long haul haul travel travel Profit in October down $30m versus last year Retail Division (8weeks) Total sales growth of 8.6% Core uninvested like for likes up 0.9% Britvic (8 weeks) Volum
Slide 33: Detailed RevPAR Movements
33 Detailed RevPAR Movements Jul 01 Aug 01 Sep 01 Oct 01 Nov 01 Americas Owned & Leased Inter-Continental (22.8%) (22.5%) (51.4%) (44.9%) (36.4%) Crowne Plaza (4.4%) (8.6%) (30.4%) (20.3%) (24.6%) Americas Total System (Brands) Crowne Plaza (6.5%) (7.5%) (30.3%) (23.3%) (33.0%) Holiday Inn (5.0%) (4
Slide 34: Hotels Guidance - Directional
34 Hotels Guidance - Directional Profit effect of a 1% change in Revenue Profit Effect 2001 Profit $m $m Owned & Leased Upscale 11 221 Owned & Leased Midscale 5 109 Managed & Franchised 4 331 Note: The relationship of profit and revenue is not linear. The above figures are for guidance only
Slide 35: Tim Clarke, Chief Executive
35 TIM CLARKE Chief Executive
Slide 36: Six Continents Group
36 Six Continents Group Taking advantage of overall business resilience limited exposure - franchise hotels Over 70% low exposure - retail and soft drinks of profit Actively managing through the current environment re-engineering cost base revenue and capital investment Driving growth leveraging sca
Slide 37: Hotels Profit Mix
37 Hotels Profit Mix* Americas EMEA Asia Pacific North America O&L 11% UK 18% ANZSP Region 2% New York 1.5% London 9% Other 4% Provinces 9% Chicago 1% San Francisco 1% France 7% 6% Paris 5.5% Miami 1.5% Other 1.5% Other 6% Germany 3% North America M&F 40% Benelux 3% Latin America 1% Other 11% 52% 42
Slide 38: Hotels Profit by Ownership Model
38 Hotels Profit* by Ownership Model Managed and O & L Upscale Franchised 31% 55% O & L Midscale 14% * Actual profits 2001 at hotel level
Slide 39: Management Action to mitigate exposure to downturn
39 Management Action to mitigate exposure to downturn Cost reduction hotels headcount corporate re-engineering Maintaining strategic capital investment property modernisation programme systems investment Revenue Delivery focus on domestic and intra-regional guests short term promotional focus expand
Slide 40: Hotels - Brand Expansion
40 Hotels - Brand Expansion Distribution Additions Brand Segment (Rooms) 1 Year Upper Upscale 45,371 834 Upscale 47,326 4,756 Midscale 297,710 9,570 Midscale w/o F&B 100,993 10,649 Extended stay 4,234 1,884 Unconverted hotels 19,062 (4,061) 514,696 23,632
Slide 41: Building Brand Distribution Scale and System delivery
41 Building Brand Distribution Scale and System delivery $350 million p.a. System Funds 3 , 2 6 7 Hotels 5 1 4 , 6 9 6 Rooms Loyalty Programme 12.5m members 9 8 Countries Own web-sites 2.5m room nights
Slide 42: Relationship Marketing reinforces brand scale
42 Relationship Marketing reinforces brand scale 2 million new members 5% rate premium 25% of guest stays 123,000 members $230m in revenues
Slide 43: Targeted Promotions to drive room-night volume
43 Targeted Promotions to drive room-night volume Priority Club Promotions Americas - 5,000 bonus points EMEA - Stay 3 nights get 1 night night free free Use of Alliances with marketing partners Delta - free ticket Spalding golf Intra-European short break promotions Upscale sales focused on shorter
Slide 44: Tactical advertising to drive room-nights
44 Tactical advertising to drive room-nights
Slide 45: Marketing Campaigns to Drive Holiday Inn UK RevPAR
45 Marketing Campaigns Now Underway to Drive Holiday Inn UK RevPAR
Slide 46: Holiday Inn UK - Plans on Track
46 Holiday Inn UK - Plans on Track 2001 2002 2003 2004 People integration Reservation system roll-out Upgrade service standard Complete Re-brand hotels Regenerate sales function Complete Marketing campaign Ongoing Rooms renovation Strengthening RevPAR premium
Slide 47: Asset Ownership
47 Asset Ownership High Low Brand Asset Strength Intensity Low High Time
Slide 48: Organic Pipeline will be a key driver of growth
48 Organic Pipeline will be a key driver of growth Owned Managed/Franchised Brand Rooms Rooms Total • 896 6,434 7,330 • 525 10,754 11,279 • 400 19,660 20,060 • 400 25,971 26,371 • 257 3,754 4,011 • 2,478 66,578 69,051
Slide 49: Asset Modernisation Programme
49 Asset Modernisation Programme Inter-Continental Budapest and Vienna completed with strong uplifts Madrid on-site; Paris Le Grand closing through November/December Mayfair and Cannes to start in 2002 Miami, New York, and San Francisco progressing to completion Chicago about to commence work to sec
Slide 50: Summary - Hotels
50 Summary - Hotels Long-term industry growth Strong brands with global distribution Powerful infrastructure driving revenue premiums Cost reductions Big 10 and Holiday Inn UK plans on track Growth from organic pipeline
Slide 51: Six Continents Retail
51 Six Continents Retail Over 2,000 pubs, bars and restaurants with £1.4bn sales, and average sales per week of £14,000 Industry capacity cycle improving High-take brands producing strong returns Growing market share through conversions and new sites Flow of brand development
Slide 52: Sources of Value
52 Sources of Value Site Selection prime sites - retained/acquired Unit Scale average weekly sales up £1,000 to £14,000 per outlet 350 outlets with weekly weekly sales sales over over £20,000 Brand Strength and Scale 7 brands with more than 50 outlets Corporate Scale Total overheads outside outlets:
Slide 53: Industry Capacity Cycle Improving
53 Industry Capacity Cycle Improving Supply Reduction 40% of pubs in highly leveraged ownership Expansionary Capex down over 30% Cash extraction / under investment in maintenance
Slide 54: Demand Growth Continues
54 Demand Growth Continues £bn 60 CAGR 00-05 (nominal) Total 4.6% 50 40 Eating Out 6.1% 30 20 Drinking Out 10 3.0% 94 96 97 98 00 01 02 03 04 05 95 99 19 19 19 19 20 20 20 20 20 20 19 19 Source:SCR data and ONS
Slide 55: Key drivers of margin
55 Key drivers of margin Gross margin improvement Mix management Purchasing scale benefits Overhead efficiency Regulatory-driven costs minimum wage rates climate change levy
Slide 56: Current Estate
56 Current Estate Restaurants Unbranded Branded Sales/Week £14,600 £19,000 Outlets 115 524 Pubs & Bars Sales/Week £10,600 £15,600 Outlets 971 443 Conversions this year running at 40% sales uplifts
Slide 57: Largest Brands
57 Largest Brands No of Sales/Week Total Sales Pubs & Bars Outlets £k £m 110 14.5 55 89 14.3 56 85 11.9 49 33 21.1 32 Restaurants 179 17.1 142 150 19.7 133 64 23.9 68 54 18.5 52
Slide 58: Target Segments
58 Target Segments Suburban Harvester Food-led Vintage Inns Toby Carvery City Centre O’Neill’ Neill’s Edwards Drink-led Goose It’ It’s A Scream City Centre Food-led Browns All Bar One Suburban Drink-led Ember Arena
Slide 59: Investment Programme
59 Investment Programme Current Year £170m* Site Acquisition £20k AWT Conversion + 40% Conversion AWT *Excludes maintenance capital
Slide 60: Alex - Alster Pavilion
60 Alex - Alster Pavilion
Slide 61: Six Continents Retail
61 Six Continents Retail Industry capacity cycle improving Gross margin improving; net margin holding Market share gain Strong pipeline Significant brand development
Slide 62: Britvic
62 Britvic
Slide 63: Six Continents Outlook - Operating Profit Split 2001
63 Six Continents Outlook Operating Profit Split - 2001 Asia Pacific 2% Americas O&L 8% Americas M&F EMEA O&L 21% 20% EMEA M&F 3% Britvic/Other 7% Six Continents Retail 39% Actual 2001 split : unadjusted
Slide 64: Six Continents PLC - Summary
64 Six Continents PLC - Summary Industry leading businesses Resilient profits mix Brand revenue premiums and scale economies Cost and revenue management in hotels Driving benefits from recent investments Organic growth from pipeline and conversions Utilise balance sheet strength
Slide 65: Tim Clarke, Chief Executive
65 TIM CLARKE Chief Executive
Slide 66: Six Continents
SIX CONTINENTS
Slide 67: Supplementary Information
Supplementary Information 1
Slide 68: Six Continents PLC - Investment
Six Continents PLC - Investment £m 00/01 99/00 Gross Disposals Net Gross Disposals Net Hotels 621 (14) 607 342 (16) 326 Retail 314 (26) 288 250 (46) 204 Britvic 35 (7) 28 55 (7) 48 Other 13 (68) (55) 25 (6) 19 Continuing Ops 983 (115) 868 672 (75) 597 Discontinued - - - 61 (4) 57 Group 983 (115) 868
Slide 69: Hotels - System Size at September 2001
Hotels - System Size at 30 September 2001 Owned & Leased Managed Franchised Total Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms Inter-Continental 9 3,936 15 4,621 18 5,054 * 42 13,611 Crowne Plaza 7 2,761 23 7,870 65 18,024 * 95 28,655 Holiday Inn 7 2,401 59 17,580 1,113 205,901 1,179 225,882
Slide 70: Hotels RevPAR Statistics
RevPAR Statistics Owned/Leased & managed year to September 2001 Owned & Leased Managed Occ % ADR RevPAR Occ % ADR RevPAR Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Inter-Continental 63.3% -12.0% 191.43 -2.4% 121.18 -18.0% 68.1% -3.4% 163.4 2.0% 111.29 -2.9% C
Slide 71: Hotels RevPAR Statistics - Franchised & Total
RevPAR Statistics Franchised & Total year to September 2001 Occ % ADR RevPAR Occ % ADR RevPAR Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Actual Growth Inter-Continental 51.8% -2.9% 117.69 2.9% 60.96 -2.6% 56.7% -5.6% 147.69 -3.1% 83.79 -11.8% Crowne Plaza 63.3% -5.2% 99.38
Slide 72: Hotels Revenues - Full Year 2001
Revenues - Full Year 2001 Full Year Full Year Growth on 2001 2000 Last Year $m $m % Americas Owned and leased hotels 535 529 1.1 Managed & upscale franchise 666 516 29.1 NA Midscale franchise 301 297 1.3 Total Americas 1,502 1,342 11.9 EMEA Owned and leased hotels 771 853 -9.6 Managed & franchised h
Slide 73: RevPAR Movement - Americas
Chart data for Slide 7 RevPAR Movement - Americas Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Crowne Plaza 2.2% 4.7% 4.3% 3.7% (0.6%) (6.5%) Holiday Inn 3.5% 3.7% 1.7% 5.0% 0.2% 0.0% Holiday Inn Express 5.9% 5.0% 2.9% 6.8% 2.5% 2.0% Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Crowne Plaza (6.2%) (11.8%)
Slide 74: RevPAR Movement - Key US Markets
Chart data for Slide 8 RevPAR Movement - Key US Markets Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 New York 5.2% 6.4% 2.6% 0.2% (1.9%) (6.9%) Chicago 2.8% 8.7% (6.5%) 1.1% 4.1% (5.4%) San Francisco 16.6% 15.5% 24.6% 9.2% (2.0%) (12.7%) Miami 7.3% 0.3% 2.7% 10.4% 5.8% 2.7% Nth America I-C -O&L* (0.2%)
Slide 75: RevPAR Movement - Europe
Chart Data for Slide 9 RevPAR Movement - Europe Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 UK Owned & Leased (exc HI UK) 4.5% 3.7% (0.1%) 11.4% (5.9%) (11.7%) Germany Owned & Leased 6.4% 14.5% 8.5% 19.2% 5.3% 18.4% France Owned & Leased 27.5% 9.1% 4.6% 5.6% 14.0% 4.3% Benelux Owned & Leased 12.1% 13.
Slide 76: Current Trading - Occupancy and Rate
Current Trading - Occupancy and Rate O C C U P A N C Y - percentage points change AVERAGE RATE Jul Aug Sep Oct Nov Jul Aug Sep Oct Nov 2001 2001 2001 2001 2001 2001 2001 2001 2001 2001 Americas Owned & Leased Inter-Continental (10.9%) (10.4%) (30.5%) (21.4%) (17.3%) (9.5%) (10.1%) (20.6%) (25.0%) (1
Slide 77: Retail - Outlet Numbers
Retail - Outlet Numbers 99/00 Disposals Acquisitions Conversions Total Restaurants Vintage Inns 151 3 25 179 Harvester 130 4 16 150 All Bar One 52 2 54 Toby 39 25 64 Innkeeper's Fayre 16 16 Express by Holiday Inn 16 2 18 Browns 11 2 13 Alex (managed) 19 11 30 434 24 66 524 Pubs & Bars It’s a Scream
Slide 78: Retail - Sales and Profit Data
Retail - Sales and Profit Data £m Restaurants Pubs & bars Total Food Sales 297 94 391 Food Sales Mix % 52.6 11.4 28.0 Drink Sales 228 633 861 Total Sales 564 821 1,396 Operating Profit 87 187 274 Retail 12