InterContinental Hotels Group: Preliminary Results - Full Year Results to 31 December 2009
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InterContinental Hotels Group: Preliminary Results - Full Year Results to 31 December 2009
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2010-02-16
% change % change (CER)
Total Excluding
LDs1 Total Excluding
LDs1
All figures are before exceptional items unless otherwise noted. See appendices 2 and 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4. (% CER) = change at constant exchange rates.
1. excluding $3m of significant liquidated damages (LDs) receipts in 2009 and $33m in 2008.
2. hotels previously accounted for as discontinued operations have been re-presented as continuing operations and the relevant comparatives restated.
3. total basic EPS after exceptional items.
4. Total gross revenue is defined as 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.
Revenue 2 $1,538m $1,897m (19)% (18)% (17)% (16)%
Operating profit 2 $363m $549m (34)% (30)% (36)% (32)%
Total adjusted EPS 2 102.8 ¢ 120.9 ¢ (15)%
Total basic EPS 3 74.7 ¢ 91.3 ¢ (18)%
Total dividend per share 41.4¢ 41.4¢ –
Net debt $1,082m $1,273m
Business headlines
* Global constant currency RevPAR decline of 14.7%, with a fourth quarter decline of 10.9%.
* 26,828 net rooms (252 hotels) added taking system size to 646,679 rooms (4,438 hotels), up 4% year on year.
* 55,345 rooms (439 hotels) added to the system, 28,517 rooms (187 hotels) removed.
* 52,891 rooms (345 hotels) signed, taking the pipeline to 210,363 rooms (1,438 hotels).
* Total gross revenue4 from all hotels in IHG’s system $16.8bn (2008 $19.1bn)
* EPS benefited from effective tax rate of 5% (2008: 23%) due to the release of certain prior year tax contingencies, primarily as a result of the final resolution of various tax audits
* Final dividend maintained at 29.2¢, equivalent to 18.7p. Total dividend of 41.4¢, flat on 2008.
* Exceptional operating charges of $373m include: (i) $197m of non-cash asset impairments; and (ii) $91m charge related to a management contract in the US.
Recent trading
* January global constant currency RevPAR decline of 3.8%; -7.2% Americas, -3.1% EMEA and +11.1% Asia Pacific, in part favourably impacted by the movement of Chinese New Year into February.
Update on priorities
* Focus on efficiency. 2009 regional and central costs $95m (31%) below 2008 levels, including around $50m of sustainable savings. Additional sustainable savings of around $25m delivered in managed and franchised cost of sales driving strong underlying margin performance. In 2010 these c.$75m of sustainable savings will be maintained in both regional and central costs and cost of sales.
* Support hotel performance. IHG’s brands outperformed the market by 4.3 percentage points in fastest growing APAC region and Americas’ RevPAR outperformed by 0.5 percentage points. System delivery continued to improve with 68% of rooms revenue booked through IHG’s channels or by Priority Club Rewards members direct to hotel (2008: 64%). 24% of rooms revenue booked through the internet (2008: 20%). Priority Club Rewards members now total over 48m (2008: 42m).
* Build quality distribution. 1,832 hotels are operating under the new Holiday Inn standards, 54% of the total estate. 75,000 rooms under construction of which over 50% are expected to open this year. 2010 room removals are still expected to be in the region of 40,000.
Commenting on the results, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
“2009 was a very challenging year for the industry. The fourth quarter did show some improvement in trends and occupancy has now stabilised. Rate however remains under pressure and we expect trading to stay tough until business travellers return in greater numbers.
“Through the year we took decisive action to reduce costs and improve efficiencies. Our margin performance, as a result, was good and our cash control enabled us to reduce our net debt from $1.3bn to $1.1bn.
“Our focus on strengthening the quality of our system did not waver. We opened a record 439 hotels in the year and signed 345 hotels into our pipeline, a good result given the challenging financing environment. We removed 187 hotels in the year and now have over 50% of the Holiday Inn estate operating under relaunched standards. We expect to complete this $1 billion programme on schedule and we are seeing better performance from relaunched hotels.
“Our business model has proved its resilience through this downturn and, with our global scale, powerful system and attractive brands, we expect to take full advantage of the upturn when it comes.”
Americas
Revenue performance
RevPAR declined 14.9% in 2009, with a fourth quarter decline of 12.5%. Revenues declined 20% to $772m. Excluding one $13m liquidated damages receipt in 2008, revenues declined 19%.
Operating profit performance
Operating profit declined 38% from $465m to $288m, or 36% excluding the $13m liquidated damages receipt in 2008. Owned and leased hotels’ operating profit fell from $55m to $11m, driven by an overall RevPAR decline of 24.5% and a particularly challenging trading environment in New York. In the managed business, excluding the $13m liquidated damages receipt in 2008, operating profit declined $78m to a loss of $40m. This was driven by a RevPAR decline of 17.8% which resulted in IHG funding shortfalls in guaranteed owners’ priority returns on a number of hotels managed for one owner. At year end an exceptional charge of $91m was recognised comprising the write off of a cash deposit related to these hotels and a provision for the total estimated net cash outflows to this owner under the guarantee. Therefore future payments to this owner will be charged against the provision and will not impact operating results. Franchised hotels’ operating profit fell 15% to $364m driven by a royalty fee decline of 10% and a 46% reduction in initial franchising, relicensing and termination fees.
EMEA
Revenue performance
RevPAR declined 14.8% in 2009, with a fourth quarter decline of 10.4%. The UK performed best with a full year RevPAR decline of 9.8% and a 5.8% fourth quarter decline. Revenues declined 23% to $397m (17% at CER). Excluding one liquidated damages receipt of $3m in 2009 and two totalling $16m in 2008, revenues declined 22% (15% CER).
Operating profit performance
Operating profit declined 26% (23% CER) from $171m to $127m or 20% (17% at CER) excluding the net impact of the liquidated damages receipts. Owned and leased hotels’ operating profit was down $12m to $33m. InterContinental Park Lane, London delivered a strong relative performance with RevPAR down just 1.7% during the year. Managed hotels’ operating profit declined by $30m to $65m, or by $21m, excluding the impact of the liquidated damages receipt in 2008. This was driven primarily by challenging trading across the Continental European estate where RevPAR fell 19.6%. Excluding the net $4m liquidated damages receipt, franchised hotels’ operating profit declined $11m to $57m (9% at CER) driven by a RevPAR decline of 14.9%, partially offset by a 6% increase in room count.
Asia Pacific
Revenue performance
RevPAR declined 13.5%, with a fourth quarter decline of 4.6%. IHG’s brands outperformed the market in Greater China by 8.9 percentage points with a RevPAR decline of 16.9% and occupancy growth of 0.2%. Excluding one $4m liquidated damages receipt in 2008, revenues declined 14% (15% CER) to $245m.
Operating profit performance
Excluding the liquidated damages receipt received in 2008, operating profit declined 19% from $64m to $52m. Operating profit at owned and leased hotels fell $13m to $30m primarily reflecting a RevPAR decline of 22.2% at InterContinental Hong Kong. Managed hotels’ operating profit declined $11m to $44m (16% at CER) driven by a 12.5% RevPAR decline. Excluding the $4m liquidated damages receipt in 2008, franchised hotels’ operating profit increased $1m to $5m.
Interest, tax and exceptional items
The interest charge for the period fell $47m to $54m due to a reduction in interest rates and lower average net debt.
The effective tax rate for 2009 is 5% (2008: 23%) due to the release of certain prior year tax contingencies, primarily as a result of the final resolution of various tax audits. The underlying tax rate before the impact of prior year items is 42% (2008: 39%). The reported tax rate may continue to vary year-on-year but is expected to increase in the medium term.
The $373m exceptional operating charge includes (i) $197m of non-cash asset impairments; (ii) $91m charge related to a management contract in the US; (iii) $43m reorganisation and severance costs; (iv) $21m enhanced pensions transfer; and (v) $19m in respect of the Holiday Inn relaunch.
Cash flow & net debt
Growth capital expenditure of $91m included a $65m payment on completion of the Hotel Indigo San Diego. Maintenance capital expenditure of $57m was 42% below 2008 levels.
IHG’s balance sheet has been strengthened with net debt reduced to $1.1bn (including the $204m finance lease on the InterContinental Boston). IHG has extended its maturities and diversified its debt profile issuing a seven year £250m bond in the fourth quarter and refinancing $415m of the $500m term loan expiring in November 2010. In addition, IHG has a $1.6bn revolving credit facility expiring May 2013.
RevPAR Sensitivity
IHG now estimates that a 1% change in global RevPAR impacts Group EBIT by $13m, split as follows: $4m owned & leased; $4m managed (of which $1m relates to the Americas managed business); and $5m franchised.
Appendix 1: Rooms
Americas EMEA Asia Pacific Total
Openings 40,584 6,427 8,334 55,345
Removals (21,720) (2,838) (3,959) (28,517)
Net openings 18,864 3,589 4,375 26,828
Signings 29,353 8,442 15,096 52,891
Appendix 2: Full year financial headlines
Twelve months to 31 December $m Total Americas EMEA Asia Pacific Central
2009 2008* 2009 2008* 2009 2008 2009 2008 2009 2008
* 2008 comparatives restated for those owned hotels previously accounted for as discontinued operations, now re-presented as continuing operations.
Franchised operating profit 429 509 364 426 60 75 5 8 - -
Managed operating profit 69 201 (40) 51 65 95 44 55 - -
Owned and leased operating profit 74 143 11 55 33 45 30 43 - -
Regional overheads (105) (149) (47) (67) (31) (44) (27) (38) - -
Operating profit pre central overheads 467 704 288 465 127 171 52 68 - -
Central overheads (104) (155) - - - - - - (104) (155)
Operating profit 363 549 288 465 127 171 52 68 (104) (155)
Appendix 3: Fourth quarter financial headlines
Three months to 31 December $m Total Americas EMEA Asia Pacific Central
2009 2008* 2009 2008* 2009 2008 2009 2008 2009 2008
* *2008 comparatives restated for those owned hotels previously accounted for as discontinued operations, now re-presented as continuing operations.
* **Fourth quarter 2009 central costs impacted by c.$10m provision related to certain incentive plans.
Franchised operating profit 98 107 83 91 14 15 1 1 - -
Managed operating profit 7 33 (19) 1 17 20 9 12 - -
Owned and leased operating profit 29 44 4 16 11 12 14 16 - -
Regional overheads (26) (40) (11) (21) (9) (11) (6) (8) - -
Operating profit pre central overheads 108 144 57 87 33 36 18 21 - -
Central overheads** (48) (39) - - - - - - (48) (39)
Operating profit 60 105 57 87 33 36 18 21 (48) (39)
Appendix 4: Constant currency operating profit movement before exceptional items.
Americas EMEA Asia Pacific Total***
Actual currency* Constant currency** Actual currency* Constant currency** Actual currency* Constant Currency** Actual currency* Constant currency**
(Decline)/ growth (38)% (38)% (26)% (23)% (24)% (24)% (34)% (36)%
Exchange rates GBP:USD EUR: USD
2009 0.64 0.72
2008 0.55 0.68
* US dollar actual currency
** Translated at constant 2008 exchange rates
*** After Central Overheads
Appendix 5: Investor information for 2009 final dividend
* Ex-dividend Date: 24 March 2010
* Record Date: 26 March 2010
* Payment Date: 4 June 2010
* Dividend payment: Ordinary shares 18.7p per share: ADRs 29.2¢ per ADR
For further information, please contact:
Investor Relations (Alex Shorland-Ball; Catherine Dolton): +44 (0) 1895 512 176
Media Affairs (Leslie McGibbon; Emma Corcoran): +44 (0) 1895 512 425
+44 (0) 7808 094 471
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 Andrew Cosslett (Chief Executive) and Richard Solomons (Chief Financial Officer and Head of Commercial Development) will commence at 9.30am (London time) on 16 February at JP Morgan Cazenove, 20 Moorgate, London, EC2R 6DA. 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/prelims10. 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
International dial-in +44 (0)203 0379090
US Q&A conference call
There will also be a conference call, primarily for US investors and analysts, at 9.00am (Eastern Standard Time) on 16 February with Andrew Cosslett (Chief Executive) and Richard Solomons (Chief Financial Officer and Head of Commercial Development). There will be an opportunity to ask questions.
International dial-in +44 (0)207 108 6370
US Dial-in 517 345 9004
US Toll Free 866 692 5726
Conference ID: HOTEL
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 6370.
International dial-in +44 (0)20 7970 8458
US Toll Free 877 814 5617
Website
The full release and supplementary data will be available on our website from 7.00am (London time) on 16 February. The web address is www.ihg.com/prelims10.
To watch a video of Andrew Cosslett reviewing our results visit our YouTube channel at www.youtube.com/ihgplc
* Download the full announcement in PDF (0.16Mb)
* Download the supplementary slide information in PDF (0.17Mb)
Notes to Editors:
InterContinental Hotels Group (IHG) [LON:IHG, NYSE:IHG (ADRs)] is the world's largest hotel group by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, over 4,400 hotels and more than 645,000 guest rooms in over 100 countries and territories around the world. The Group owns a portfolio of well recognised and respected 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®, and also manages the world's largest hotel loyalty programme, Priority Club® Rewards with 48 million members worldwide.
IHG has nearly 1,400 hotels in its development pipeline, which will create 160,000 jobs worldwide over the next few years.
InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales.
IHG offers information and online reservations for all its hotel brands at www.ihg.com and information for the Priority Club Rewards programme at www.priorityclub.com. For the latest news from IHG, visit our online Press Office at www.ihg.com/media.
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