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IHG Posts a $141 million Net Income for the Six Months Ended June 30
Compared with a Loss of $29 million in the Same Period  a Year Earlier

Global RevPAR Up 3.9% Overall and 7.4% in the 2nd Qtr,
Greater China Reporting RevPAR up 29.4% in the Half

 
London, 10 August 2010

Headlines

  • Total gross revenue³ from all hotels in IHG’s system of $8.9bn, up 9% at constant currency. 
  • Global constant currency first half RevPAR growth of 3.9% driven by occupancy. 
  • Global constant currency second quarter RevPAR growth of 7.4%, including a rate decline of 0.5%. 
  • 19,003 rooms (148 hotels) added, 9,982 (65 hotels) on a net basis. Total system of 656,661 rooms (4,503 hotels), up 4%. 
  • 19,126 rooms (130 hotels) signed, taking the pipeline to 197,431 rooms (1,302 hotels). 
  • Interim dividend up 5% to 12.8¢, equivalent to 8.0p at the closing exchange rate on 6 August 2010. 
  • InterContinental Buckhead, Atlanta sold on 1 July for $105m, in line with strategy to reduce capital intensity. 
3 – see appendix 5 for definition 

Recent trading

•   July global constant currency RevPAR of 8.1%; 6.4% Americas, 10.0% EMEA and 15.0% Asia Pacific. 

Business Update

•   Powerful and distinct brands: The $1 billion relaunch of Holiday Inn remains on track. 2,585 hotels are now operating under the new Holiday Inn standards, 76% of the total estate. Relaunched hotels are performing at the top end of our expected range. 

We continue to drive up the overall quality of the estate with 75,000 new rooms under construction of which c.140 hotels (21,000 rooms) are expected to open in the remainder of this year. 9,021 rooms (83 hotels) were removed from the system in the first half. Total room removals are still expected to be in the region of 40,000 in 2010. 

•   Leadership position in Greater China: with 132 hotels open and 148 in our development pipeline we continue to build our leading position in the region. Over 50% of our pipeline comprises our upscale brands, illustrating the potential speed of revenue growth from this rapidly expanding market. 

•   System delivery: this continued to improve with 68% of rooms revenue booked through IHG’s channels or by Priority Club Rewards members direct to hotel (2009: 66%). Priority Club Rewards members now total almost 52m (2009: 44m). 

•   Focus on efficiency: First half regional and central costs of $108m increased $9m at constant exchange rates ($12m at reported rates) due to higher performance based short term incentive costs. IHG is on track to maintain the c. $75m of sustainable savings achieved in 2009 across regional and central costs and managed and franchised cost of sales. 

Commenting on the results, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:

"Trading strengthened as the first half progressed with global Revenue per Available Room (RevPAR) up 3.9% overall and 7.4% in the second quarter. Asia is leading the recovery with Greater China reporting RevPAR up 29.4% in the half. As anticipated, occupancy drove RevPAR increases, with business travellers returning in greater numbers. Rates are now stabilising across the world, with most markets seeing rate growth towards the end of the first half. The economic environment does remain uncertain, however, with short booking windows and limited visibility.”

"During the downturn we worked closely with our owners to reduce costs, drive revenue and build the strength of our system and brands. In the first half we signed 130 hotels and opened 148, despite the tough financing environment. The quality of these new hotels is exceptionally high, particularly in China where both our pipeline and system of open hotels are skewed towards more upscale developments. We have now completed the relaunch of nearly 2,600 Holiday Inn hotels worldwide out of a total of 3,400, and the performance of these hotels continues to meet or beat our expectations.”

"These efforts put us in great shape to increase share in what is now a rising market. Having maintained the dividend through the recession and balancing the improvement in trading with the continued economic uncertainty, the Board is announcing an increase in the dividend of 5%." 

Asia Pacific
Revenue performance 
RevPAR increased 13.0% in the first half, with second quarter growth of 16.1%. Greater China was the strongest performing region with RevPAR growth of 29.4%, boosted by the Global Expo in Shanghai where RevPAR grew 48.4%. Revenues increased 29% to $137m (25% CER).
Operating profit performance 
Operating profit increased 106% to $35m (94% CER). Franchised hotels’ operating profit increased $1m to $3m. Managed hotels’ operating profit grew 76% to $30m (65% CER) primarily driven by 31.2% RevPAR growth across IHG’s managed operations in Greater China and 12% rooms growth across the region. Operating profit at owned and leased hotels increased 27% to $14m reflecting RevPAR growth of 16.5% at InterContinental Hong Kong.

Americas
Revenue performance
RevPAR increased 2.2% in the first half, with second quarter growth of 5.8%. In the US, Holiday Inn and Holiday Inn Express outperformed their segments by 1.4 and 0.4 percentage points respectively, reporting RevPAR growth of 0.1% at Holiday Inn (including 3.2% for Q2) and 0.4% at Holiday Inn Express (including 3.6% for Q2). Revenues increased 5% to $393m.
Operating profit performance
Operating profit increased 20% from $149m to $179m. Franchised hotels’ operating profit grew 6% driven by a royalty fee revenue increase of 8%. In the managed business, operating profit of $13m compares to a loss of $9m in 2009 which included a $19m charge for priority guarantee shortfalls. Owned and leased hotels’ operating profit of $4m was flat on 2009 reflecting RevPAR growth of 5.9% offset by a $3m reinstatement of depreciation on hotels classified as held for sale in the first half of 2009.

EMEA
Revenue performance
RevPAR increased 4.0% in the first half, with second quarter growth of 7.2%. Performance was strongest in Germany where RevPAR grew 16.5% whilst mixed trading conditions across the Middle East led to a 4.8% RevPAR decline in that region. RevPAR growth of just 1.2% in the UK was due primarily to previously contracted lower rate business. Revenues increased 3% to $192m (4% CER). Excluding one liquidated damages receipt of $3m in 2009, revenues increased 5% to $192m (5% CER). 
Operating profit performance
Excluding the impact of the $3m liquidated damages receipt in 2009, operating profit grew 5% to $58m (9% CER). On this same basis franchised hotels’ operating profit grew $1m to $28m driven by a 4% increase in room count offset by a $2m reduction in initial franchising, relicensing and termination fees. Managed hotels’ operating profit declined by $1m to $32m, with growth in Europe being offset by difficult trading in certain parts of the Middle East. Owned and leased hotels’ operating profit grew $5m to $15m driven by 15.0% RevPAR growth at InterContinental Park Lane and 13.1% growth at InterContinental Paris Le Grand. 

Interest and tax 
The interest charge for the period increased $3m to $31m as the impact of lower levels of average net debt was offset by a higher average cost of debt. 

Based on the position at the end of the half, the tax charge has been calculated using an estimated annual tax rate of 28% (Estimated annual tax rate at H1 2009: 22%). 

Cash flow & net debt
IHG’s balance sheet has been strengthened with net debt down to $1.0bn (including the $205m finance lease on the InterContinental Boston) from $1.3bn as at 30 June 2009. Post period end, the InterContinental Buckhead, Atlanta was sold on 1 July 2010 for $105m, $23m above net book value. Proceeds have been used to reduce debt. 

Following the 2009 actuarial review of the UK Pension Plan, the Company has agreed with the Plan Trustees to make additional contributions up to a total of £100m by 31 March 2017. The agreement includes three additional annual contributions of £10m payable over the period 2010-2012, a 7.5% share of net proceeds from the disposal of hotels and a top-up in 2017 to the £100m total if required. The scheme is formally valued every three years and any future valuations could lead to changes in the amounts payable. 

During 2009 IHG extended the maturity and diversification of its debt profile issuing a seven year £250m bond in the fourth quarter using this to refinance $415m of the $500m term loan expiring in November 2010. In addition, IHG has a $1.6bn revolving credit facility expiring May 2013. 

Please click here for the Appendix to the results and here to download the full announcement in PDF (1.54Mb).The full release and supplementary data is available on our website: www.ihg.com/interims10. To watch a video of Richard Solomons reviewing our results, visit our YouTube channel at www.youtube.com/ihgplc 

This announcement contains certain forward-looking statements as defined under US law (Section 21E of the Securities Exchange Act of 1934). These forward-looking statements can be identified by the fact that they do not relate to historical or current facts. Forward-looking statements often use words such as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by, such forward-looking statements. Factors that could affect the business and the financial results are described in ‘Risk Factors’ in the InterContinental Hotels Group PLC Annual report on Form 20-F filed with the United States Securities and Exchange Commission.
 

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Contact: 

Investor Relations 
Heather Wood
+44 (0) 1895 512 176
heather.wood@ihg.com
 

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Also See: InterContinental Hotels 2009 Profit Falls 34% to $363 million (230 million pounds), Sales Totaled $1.5 billion, from $1.9 billion a Year Ago; RevPAR Fell 14.7% for the Year / Brand Operating Statistic / February 2010
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