News for the Hospitality Executive |
Excellent 26% growth in
operating profit driven by brand outperformance and scale efficiencies
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said: "The strength of our brands, underpinned by our global systems and scale, delivered 6.2% growth in revenue per available room (RevPAR) in the year. We have continued to outperform the industry in key markets such as the US and Greater China where RevPAR was up 7.9% and 10.7% respectively. We are strengthening our business through developing our brand portfolio supported by targeted investment. We also ensure that our hotels with our best in class delivery systems are known for industry leading guest experiences delivered by talented people and dedicated owners. Looking ahead, in spite of considerable uncertainty in the Eurozone, IHG is well positioned globally to benefit from positive long term industry trends and, in particular, growing demand in emerging markets. Our 15% dividend growth reflects the confidence we have in our ability to deliver high quality growth through market share and margin gains, due to our preferred brands, geographic diversity, robust balance sheet and scalable business model." Driving Market Share
Growing Margins
Current trading update
Highlights – in new regional structureAmericas – Strong performance driven by franchise businessRevPAR increased 7.5%; with 2.8% rate growth and fourth quarter RevPAR increased 6.6%. US RevPAR was up 7.9% in 2011, with 6.8% growth in the fourth quarter. On a total basis including the benefit of new hotels, US RevPAR grew 9.5% in the year, outperforming the industry up 8.2%. Revenue increased 3% to $830m and operating profit increased 22% to $451m. After adjusting for owned hotel disposals and excluding (i) $10m managed liquidated damages receipt, (ii) $10m managed benefit year on year from the conclusion of a specific guarantee negotiation relating to one hotel and (iii) results from managed lease hotels*, revenue was up 7% and operating profit up 18%. This was driven by good RevPAR growth across the region, resulting in an 8% increase in franchise royalties, and strong trading at managed hotels. Owned profits benefitted by $4m year on year due to the cessation of depreciation of an asset held for sale in the year, but this was mostly offset by $3m of one-off reorganisation costs relating to one hotel. Regional overheads decreased by $8m, mainly due to a $6m year on year reduction in costs related to our self-insured healthcare benefit plan. We signed 30,109 rooms and opened 27,107 rooms into the system (2010: 20,980 rooms opened). Openings included 6,986 rooms (2 hotels) from the first InterContinental Alliance Resorts, 4,796 rooms (25 hotels) managed on US army bases and 19 hotels outside the US, including InterContinental Vina del Mar, Chile; a Holiday Inn Resort in Acapulco, Mexico; and Canada's largest Holiday Inn. Signings included 15,349 rooms for the Holiday Inn brand family in the US, up 16% on the prior year, demonstrating the ongoing benefits from the relaunch. Europe – RevPAR growth across much of the year drives strong profit increaseRevPAR increased 4.7%, with 2.9% rate growth. RevPAR was down 0.2% in the fourth quarter reflecting the deterioration in macro economic conditions across Europe (Q4 RevPAR: UK down 0.7%, Germany down 0.3%). Revenue increased 24% (19% at CER) to $405m and operating profit increased 33% (26% at CER) to $104m. After adjusting for a leased hotel disposal and excluding results from managed lease hotels*, revenue increased 10% and operating profit increased 34%. This was driven by strong RevPAR growth including 10.9% across the two owned hotels and an $8m increase in franchise royalties as a result of 4.0% RevPAR growth and a 3% increase in room count. We signed 5,779 rooms (38 hotels), including 7 Crowne Plaza hotels, and 5 Hotel Indigo hotels (with the first Hotel Indigo for Russia, in St Petersburg and three in the UK). 6,167 rooms (37 hotels) were opened into the system, up 1,748 rooms on 2010, including 10 Crowne Plaza hotels and the InterContinental hotels in Porto and Moscow. AMEA – Good underlying growth in the managed businessRevPAR increased 0.9%, with 1.6% growth in the fourth quarter. RevPAR grew 5.5% excluding Egypt (9 hotels) and Bahrain (2 hotels) where political unrest caused significant disruption and Japan (32 hotels) where the earthquake and resultant events negatively impacted growth. RevPAR grew strongly in several other Middle East markets, including 8.9% in Saudi Arabia and 5.6% in the United Arab Emirates, and across the wider AMEA region including 12.9% in South East Asia and 6.3% in Australia, New Zealand and the South Pacific. AMEA revenue increased 1% (2% decline at CER) to $216m and operating profit increased 2% (2% decline at CER) to $84m. After adjusting for a $6m liquidated damages receipt and excluding the negative impact on trading from events in the Middle East, Japan and New Zealand, revenue increased 4% and operating profit increased 9%. This was due to strong RevPAR growth across much of the managed business, partly offset by $4m from the structural changes to certain management contract terms and a 1% net reduction in the room count. We signed 7,424 rooms in the year, mainly within the Holiday Inn brand family (23 hotels or 5,037 rooms) including 5 Holiday Inn Express hotels as part of the Joint Venture deal with Duet Hotels in India. 2,907 rooms (10 hotels) were opened, mostly with the Crowne Plaza and Holiday Inn brands including the first two Crowne Plaza hotels in Vietnam (West Hanoi and Danang) and a second Holiday Inn resort in Phuket, Thailand. Greater China – Increasing scale drives profit growthRevPAR increased 10.7% with rate growth of 5.9%. RevPAR was up 17.4% excluding Shanghai, which was impacted by very strong comparatives for much of the year due to the 2010 World Expo. Greater China RevPAR grew 7.7% in the fourth quarter (up 11.3% excluding Shanghai), including 11.4% in December. Revenue increased 15% (15% CER) to $205m and operating profit increased 24% (26% CER) to $67m. This was driven by 13.4% RevPAR growth at the InterContinental Hong Kong and $13m growth in managed profits due to strong RevPAR growth and 14% increase in room count (adding to a 13% increase in 2010). We opened 8,084 rooms in the year, up on 2010, taking our open rooms in the region to 55,182, and strengthening our market leading position. Openings included 4 InterContinental hotels and 11 Crowne Plaza hotels, demonstrating the strength of these brands in Greater China. Signings of 12,112 rooms were up on 2010, and takes our pipeline to 49,768 rooms, c.70% of which is under construction. Key signings included the Holiday Inn Macau with Sands China Ltd., which at 1,224 rooms will be the world's largest Holiday Inn, and Hotel Indigo Haitang Bay, the first resort location for the brand in the region. Capital recycling strategy driving growthThe disposal process of InterContinental New York Barclay continues to be progressed. During the year we completed the disposal of Hotel Indigo San Diego, Staybridge Suites Cherry Creek, Holiday Inn Atlanta-Gwinnett Place, the Holiday Inn Express Essen lease and a hotel asset and partnership interest in Australia. Proceeds from these sales totalled $142m, 22% above book value. In line with our strategy to recycle capital to drive growth in our brands, during 2011 we invested $93m in growth capital expenditure. This included a $12m equity stake in Summit Hotel Properties Inc. in the US with whom we have a hotel sourcing agreement; $11m in the joint venture which will take Holiday Inn Express into India; and a $25m in the joint venture to develop a Hotel Indigo on the Lower East side of Manhattan. Interest, tax, cash flow and dividendThe interest charge for the period was flat at $62m as costs relating to our new syndicated bank facility offset the impact of lower levels of net debt. The effective tax rate for 2011 is 24% (2010: 26%). The 2012 tax rate is expected to be in the high 20s, moving towards the low 30s in 2013. Exceptional operating items before tax totalled a net credit of $35m. These comprise: credits of (i) $37m from the disposal of hotels (ii) $20m net impairment reversals (iii) $28m relating to the closure of the UK defined benefit pension scheme with effect from 1 July 2013 and (iv) a $9m UK VAT refund and charges of $37m in relation to a settlement of a commercial dispute in Europe and a $22m litigation provision in the Americas. 15% growth in the total dividend to 55.0¢ reflects a strong performance in 2011 and reinforces IHG's resilient, cash generative business model. The Group refinanced its bank debt in November, putting in place a 5 year $1.07bn facility, which was substantially undrawn at the year end, providing certainty of funding until November 2016. Strong free cash flow generation of $422m translated into a $205m reduction in net debt from the prior year to $538m (including the $209m finance lease on the InterContinental Boston). Our balance sheet remains robust, which will allow us to invest to accelerate growth and strengthen our brands.
Appendix 1: RevPAR Movement Summary
Appendix 2: Full Year System & Pipeline Summary (rooms)
Appendix 3: Quarter 4 financial headlines
Appendix 4: Full year financial headlines
Appendix 5: Constant exchange rate (CER) operating profit movement before exceptional items
Exchange rates
Appendix 6: Definitions Total gross revenue: total room revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties. The metric is highlighted as an indicator of the scale and reach of IHG's brands. Fee based margins: adjusted for owned and leased hotels, managed leases and individually significant liquidated damages payments. Managed lease hotels: properties that are structured for legal reasons as operating leases but with the same characteristics as management contracts. Appendix 7: Investor Information for 2011 final dividend
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High resolution images to accompany this announcement are available for the media to download free of charge from www.vismedia.co.uk. This includes profile shots of the key executives. Presentation for Analysts and Shareholders: A presentation with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer) will commence at 9.30am (London time) on 14 February at Bank of America Merrill Lynch Financial Centre, 2 King Edward Street, London, EC1A 1HQ. There will be an opportunity to ask questions. The presentation will conclude at approximately 10.30am (London time). There will be a live audio webcast of the results presentation on the web address www.ihg.com/prelims12. The archived webcast of the presentation is expected to be on this website later on the day of the results and will remain on it for the foreseeable future. There will also be a live dial-in facility:
US conference call and Q&A: There will also be a conference call, primarily for US investors and analysts, at 9.00am (Eastern Standard Time) on 14 February with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer). There will be an opportunity to ask questions.
A recording of the conference call will also be available for 7 days. To access this please dial the relevant number below and use the access number 6447
Website: The full release and supplementary data will be available on our website from 7.00 am (London time) on 14 February. The web address is www.ihg.com/prelims12. To watch a video of Tom Singer reviewing our results visit our YouTube channel at www.youtube.com/ihgplc. IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation operating seven hotel brands including InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites® . IHG also manages Priority Club® Rewards, the world's first and largest hotel loyalty programme with over 63 million members worldwide.IHG franchises, leases, manages or owns over 4,400 hotels and more than 658,000 guest rooms in nearly 100 countries and territories, and has more than 1,100 hotels in its development pipeline. IHG expects to recruit around 90,000 new people worldwide across its estate over the next few years and is committed to gender balance throughout its business. We aspire to continue retaining a minimum of 25% female representation on the Board.InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales. Visit www.ihg.com for hotel information and reservations and www.priorityclub.com for more on Priority Club Rewards. For our latest news, visit www.ihg.com/media, www.twitter.com/ihgplcor www.youtube.com/ihgplc. Cautionary note regarding forward-looking statements: 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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