IHG Reports Third Quarter Global RevPAR Growth of 3.9%

2012-11-06
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  • IHG Total system size of 672,252 rooms (4,573 hotels), up 2.1% year to date (0.9% year on year).

    Third Quarter Results to 30 September 2012 

    Financial summary120122011Actual% Change YoY
    CER2CER & ex. LDs3
    Revenue $473m $467m 1% 3% 4%
    Operating profit $167m $153m 9% 9% 14%
    Total adjusted EPS 40.6¢ 36.2¢ 12%    
    Total basic EPS4 59.8¢ 61.4¢ (3)%    
    Net debt $472m $644m      

    1 All figures are before exceptional items unless otherwise noted. See appendices for financial headlines

    2 CER = constant exchange rates

    3 Excluding $6m of significant liquidated damages receipts in 2011

    4 After exceptional items

    Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:

    "We have delivered a solid set of results in the quarter with RevPAR growth across all regions and outperformance in key markets such as the US and Greater China. Our preferred brands have driven good underlying revenue growth despite a number of industry wide issues such as the timing of holidays, slowing economic growth in certain markets and the political leadership change in China.

    We continue to build a strong foundation for future growth, with a good pace of signings and openings, and we are on track to meet our full year net system growth guidance. Our new brands are gaining traction, with the first signing for EVEN Hotels in New York City in October and 12 signings for HUALUXE Hotels & Resorts year to date.

    The global economic environment remains challenging. However, our forward bookings remain encouraging and we are confident that IHG is well positioned to continue to outperform based on the considerable strengths of the business and our focused strategy for high quality growth."

    Driving Market Share

    • Third quarter global RevPAR growth of 3.9%, with 5.6% global RevPAR growth year to date.
      • Americas third quarter RevPAR up 4.6% (US 4.6%); Europe 2.0%; AMEA 2.9%; Greater China 4.0%.
      • Average daily rate growth of 3.4% in the third quarter, the 9th successive quarter of growth.
    • Total system size of 672,252 rooms (4,573 hotels), up 2.1% year to date (0.9% year on year).
      • 8,603 rooms (56 hotels) added and 3,224 rooms (25 hotels) removed in the quarter, with signings of 13,304 (85 hotels). Signings and openings broadly in line with last year after excluding 4,796 rooms on US Army bases (included in both figures for Q3 2011).
      • Our new brands are gaining traction with the first EVEN Hotel signed in October in Manhattan under a management contract. There are 12 HUALUXE Hotels & Resorts in the pipeline, with 8 signed in the quarter.
      • Pipeline of 165,945 rooms (1,042 hotels), c.40% under construction. 13% active global pipeline share.
      • Greater China system size and pipeline up 11% and 7% respectively year on year. Market leading position with 60,115 rooms (181 hotels) open and 51,454 rooms (160 hotels) in the pipeline (31% of group pipeline).

    Uses of Cash

    • Return of funds to shareholders
      • $500m was returned to shareholders on 22 October 2012 via special dividend with share consolidation. As previously announced, the $500m share buyback programme will commence in Q4 2012.
    • Growth investment funded by recycling capital
      • Growth capital expenditure of $10m year to date (with $5m in the quarter) reflects the unpredictable timing of this type of spend, with a number of projects now expected to complete early next year.
      • 2012 full year growth capital expenditure expectations revised to c.$25m, plus c.$125m maintenance capital expenditure ($69m year to date).
      • 2013 growth capital expenditure still anticipated to be $100m - $200m, plus c.$150m maintenance capex.
      • Discussions regarding the disposal of InterContinental New York Barclay continue, but will now be opened up and we expect strong interest from a wider group of prospective buyers.
      • InterContinental London Park Lane is the next major asset being considered for disposal with a key milestone in the process being the opening of InterContinental London Westminster later this month.

    Current trading update

    • Provisional October global RevPAR growth5 of 4.8%.
      • Americas 6.1%; Europe 2.3%, AMEA 3.4%; Greater China 0.3%.

    5 See appendix 7 for definition

    Americas – Good growth in franchise royalties

    RevPAR increased 4.6%, with 4.0% rate growth.  US RevPAR was up 4.6% in the third quarter, with 4.0% rate growth.  On a total basis including the benefit of new hotels, US RevPAR grew 5.7% in the third quarter, ahead of the industry up 5.1%. Softer performance in July and September reflects the shift in timing of certain holidays.

    Revenue increased 2% to $226m and operating profit increased 10% to $138m.  After adjusting for owned hotel disposals in 2011 and the results from managed lease hotels6, revenue was up 6% and operating profit up 11%.  This was driven by good RevPAR growth across the region, resulting in a 7% increase in franchise royalties, and a $1m increase in fees associated with the initial franchising, relicensing and termination of hotels.

    We signed 5,513 rooms (52 hotels) and opened 4,323 rooms (39 hotels) into the system in the quarter. Openings included 3 Crowne Plaza hotels, 7 hotels for our extended stay brands, Candlewood Suites and Staybridge Suites, and 3 Hotel Indigo hotels. Signings included 43 hotels for the Holiday Inn brand family, with 2 Holiday Inn Club Vacation resorts in the US, 2 Holiday Inn hotels in Colombia and the first Holiday Inn Express hotel in the Bahamas.

    Europe – Strong profit growth driven by owned hotels

    RevPAR increased 2.0%, with 2.4% rate growth despite continued uncertainty in macro economic conditions across Europe.  3.9% RevPAR growth in the UK reflected stronger trading during the Olympic and Paralympic games with weaker performance in the periods before and after as expected.  8.8% RevPAR growth in Germany reflects good rate growth due to the favourable trade fair calendar and 2.0% RevPAR growth in France was driven by continued strength in Paris, offset by declines in the provinces.

    Revenue increased 2% (8% at CER) to $112m and operating profit increased 21% (31% at CER) to $35m.  At CER and after adjusting for a leased hotel disposal and excluding results from managed lease hotels6, revenue increased 6% and operating profit increased 22%. This was driven by 9.1% RevPAR growth at the owned hotels and a $2m decrease in regional overheads ($1m as reported).

    We signed 1,171 rooms (11 hotels) in the quarter including Holiday Inn hotels for Georgia and Italy. The expansion of the Hotel Indigo brand continues with 3 hotels (246 rooms) signed across Spain, Germany and France. 924 rooms (6 hotels) were opened into the system, all for the Holiday Inn Brand Family, including 2 Holiday Inn hotels in London and 2 Holiday Inn Express hotels in the UK regions.

    AMEA – Underlying profit growth

    RevPAR increased 2.9%, with 1.1% rate growth.  Trading conditions remain mixed with strong trading in South East Asia offset by tougher comparatives in Japan, slowing economic growth in some markets and the continued impact from political unrest in some countries in the Middle East.

    AMEA revenue decreased 14% (14% at CER) to $51m and operating profit decreased 20% (24% at CER) to $20m. At CER and after adjusting for a $6m liquidated damages receipt in Q3 2011 and the disposal in Q3 2011 of a hotel asset and partnership interest that contributed $1m to profits in Q3 2011, operating profit increased 6%.

    We signed 1,373 rooms (6 hotels) in the quarter, including an InterContinental Hotel in the UAE and 2 Holiday Inn Express hotels in Indonesia. 652 rooms (2 hotels) were opened, including Bahrain’s first Holiday Inn Express hotel in the capital city of Manama and Crowne Plaza Doha Airport; the first Crowne Plaza hotel to open in Qatar.

    Greater China – Strong growth in revenue and operating profit

    RevPAR increased 4.0%, with 3.8% rate growth.  July and August RevPAR growth of 7% and 6% respectively was offset by a 0.9% decline in September.  This was driven by several industry wide issues including lower demand ahead of both the Mid Autumn Festival and Golden Week holiday periods and the political leadership change, the China – Japan island territorial dispute and a broader economic slowdown across the region.

    Revenue increased 15% (15% at CER) to $54m and operating profit increased 42% (33% at CER) to $17m. This was driven by 12.0% RevPAR growth at the InterContinental Hong Kong and $3m ($2m CER) growth in managed profits reflecting good RevPAR growth combined with 9% growth in managed rooms.

    We opened 2,704 rooms (9 hotels) in the quarter, including 3 Crowne Plaza hotels (1,089 rooms). Signings of 5,247 rooms (16 hotels) take our pipeline to 51,454 rooms (160 hotels), giving us a continued leading share of the active hotel pipeline in Greater China.

    Interest, tax, cash flow and exceptional items

    The interest charge for the period was $13m (Q3 2011: $15m) due to lower levels of net debt.

    Based on the position at the end of the quarter, the tax charge has been calculated using an estimated annual tax rate of 27% (Q3 2011: 26%).  The 2012 full year tax rate is now expected to be in the mid to high 20s, moving towards the low 30s in 2013.  An exceptional tax credit of $59m relates to prior year matters settled, together with associated deferred tax amounts.

    Net debt was $472m (including the $211m finance lease on the InterContinental Boston), down $172m on Q3 2011 and down $66m on the year end position, and does not reflect the $500m special dividend paid on 22 October 2012.

    The provisional triennial actuarial valuation of the UK defined benefit plan as at 31 March 2012 indicates a deficit of £132m. In anticipation of the finalisation of the related Recovery Plan, a special contribution of £45m was paid to the plan on 23 October 2012.

    6 See appendix 7 for definition

    Appendix 1: RevPAR Movement Summary

      October 2012Q3 2012Q2 YTD
      RevPAR*RevPARRateOcc.RevPARRateOcc.
    Group 4.8% 3.9% 3.4% 0.4pts 5.6% 3.5% 1.3%
    Americas 6.1% 4.6% 4.0% 0.4pts 6.3% 4.3% 1.3%
    Europe 2.3% 2.0% 2.4% (0.2)pts 1.9% 1.5% 0.3%
    AMEA 3.4% 2.9% 1.1% 1.2pts 6.1% 1.8% 2.8%
    G. China 0.3% 4.0% 3.8% 0.1pts 7.6% 3.8% 2.2%

    * See appendix 7 for definition

    Appendix 2: Third quarter system & pipeline Summary (rooms)

      SystemPipeline
      OpeningsRemovalsNetTotalYoY%SigningsTotal
    Group 8,603 (3,224) 5,379 672,252 1% 13,304 165,945
    Americas 4,323 (1,823) 2,500 449,383 0% 5,513 73,326
    Europe 924 (542) 382 101,505 2% 1,171 14,357
    AMEA 652 (86) 566 61,249 (1)% 1,373 26,808
    G. China 2,704 (773) 1,931 60,115 11% 5,247 51,454

    Appendix 3: Year to date system & pipeline Summary (rooms)

      SystemPipeline
      OpeningsRemovalsNetTotalYTD%SigningsTotal
    Group 26,052 (12,148) 13,904 672,252 2% 35,408 165,945
    Americas 13,297 (6,112) 7,185 449,383 2% 18,246 73,326
    Europe 4,149 (2,529) 1,620 101,505 2% 4,135 14,357
    AMEA 2,520 (2,354) 166 61,249 0% 2,768 26,808
    G. China 6,086 (1,153) 4,933 60,115 9% 10,241 51,454

    Appendix 4: Third quarter financial headlines

    Three months to 30 September 2012TotalAmericas EuropeAMEAG. ChinaCentral
    Operating Profit $m201220112012201120122011201220112012201120122011
    Franchised 156 145 134 123 19 18 3 3 0 1 - -
    Managed 51 51 9 10 7 5 21 25 14 11 - -
    Owned & leased 35 29 9 7 17 15 2 2 7 5 - -
    Regional overheads (32) (33) (14) (14) (8) (9) (6) (5) (4) (5) - -
    Profit pre central overheads 210 192 138 126 35 29 20 25 17 12 - -
    Central overheads (43) (39) - - - - - - - - (43) (39)
    Group Operating profit 167 153 138 126 35 29 20 25 17 12 (43) (39)

    Appendix 5: Year to date financial headlines

    Three months to 30 September 2012TotalAmericas EuropeAMEAG. ChinaCentral
    Operating Profit $m201220112012201120122011201220112012201120122011
    Franchised 419 393 358 332 50 51 9 8 2 2 - -
    Managed 154 154 33 43 22 17 63 64 36 30 - -
    Owned & leased 85 76 16 13 37 38 4 4 28 21 - -
    Regional overheads (87) (89) (36) (37) (22) (26) (16) (15) (13) (11) - -
    Profit pre central overheads 571 534 371 351 87 80 60 61 53 42 - -
    Central overheads (118) (112) - - - - - - - - (118) (112)
    Group Operating profit 453 422 371 351 87 80 60 61 53 42 (118) (112)

    Appendix 6: Constant exchange rate (CER) operating profit movement before exceptional items

      Total***AmericasEuropeAMEAG. China
    Actual*CER**Actual*CER**Actual*CER**Actual*CER**Actual*CER**
    Exchange rates: Third QuarterGBP:USDEUR:USD
    2012 0.63 0.80
    2011 0.62 0.71

    * US dollar actual currency

    ** Translated at constant 2011 exchange rates

    *** After central overheads

    Q3 Growth/(decline) 9% 9% 10% 10% 21% 31% (20)% (24)% 42% 33%

    Appendix 7: 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.

    Provisional October RevPAR growth :  represents actuals other than for Americas, Europe and Group for which the last 4 days in October are estimated.

    For further information, please contact:

    Investor Relations (Catherine Dolton; Isabel Green):   +44 (0) 1895 512 176
    Media Relations (Yasmin Diamond, Kari Kerr):   +44 (0) 1895 512 426
        +44 (0) 7770 736 849



    Logos, product and company names mentioned are the property of their respective owners.

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