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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Intercontinental Hotels Group Plc | LSE:IHG | London | Ordinary Share | GB00BHJYC057 | ORD 20 340/399P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 34.00 | 0.43% | 7,924.00 | 7,924.00 | 7,926.00 | 7,950.00 | 7,852.00 | 7,918.00 | 214,129 | 15:43:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Hotels And Motels | 4.62B | 750M | 4.5551 | 17.37 | 13.03B |
From May 2019 to May 2024
TIDMIHG
RNS Number : 3743X
InterContinental Hotels Group PLC
21 February 2017
InterContinental Hotels Group PLC
Preliminary Results for the year to 31 December 2016
Hot Features
Premium
Financial summary(1) Reported Underlying(2)
----------------------------- -----------------------------
2016 2015 % Change 2016 2015 % Change
---------------------- -------- -------- --------- -------- -------- ---------
Revenue $1,715m $1,803m -4.9% $1,582m $1,513m 4.6%
Fee Revenue(3) $1,380m $1,349m 2.3% $1,409m $1,349m 4.4%
Operating profit $707m $680m 4.0% $702m $641m 9.5%
Adjusted EPS 203.3c 174.9c 16.2% 203.1c 165.0c 23.1%
-------- -------- ---------
Basic EPS(4) 195.3c 520.0c (62.4%)
Total dividend
per share 94.0c 85.0c 11%
---------
Net debt $1,506m $529m
---------------------- -------- --------
(1) All figures before exceptional items unless otherwise noted. (2) Excluding owned asset disposals, managed leases and significant liquidated damages at constant FY15 exchange rates (CER). Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates. (3) Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages. (4) After exceptional items.
Richard Solomons, Chief Executive of InterContinental
Hotels Group PLC, said:
---------------------------------------------------------------------
"Our results clearly demonstrate our strong operational
performance and the success of IHG's long-term strategy,
which have delivered a 9.5% increase in underlying profit
and a 23% increase in underlying EPS. Our cash generative
business model underpins our decision to announce a $400
million special dividend and to propose an 11% increase
in the total dividend for the year.
We continued our focus on enhancing the long-term sustainability
of our competitive advantage by evolving our brand portfolio
and by driving innovation in our digital and loyalty
offer. We rolled out new formats across our Holiday Inn
Brand Family which deliver significant uplifts in guest
satisfaction and improved returns for owners, built momentum
for our HUALUXE and EVEN Hotels brands, and took Kimpton
Hotels & Restaurants and Hotel Indigo into new markets.
We also strengthened our loyalty proposition through
initiatives including 'Your Rate' helping to drive a
16% increase in member enrolments.
The fundamentals for the hospitality industry remain
compelling. Despite the uncertain environment in some
markets, we remain confident in the outlook for the year
ahead, as well as our ability to deliver sustainable
growth into the future."
Financial Highlights
---------------------------------------------------------------------
* Strong underlying revenue growth driven by both
RevPAR and rooms
* Global comparable RevPAR up 1.8% (Q4: 1.7%), led by
rate up 1.2%, and record occupancy levels.
* Net room growth of 3.1%, including 8.8% in Greater
China. 40k room openings, 90% in our priority
markets.
* $24.5bn total gross revenue from hotels in IHG's
system (up 2% year-on-year; 4% CER).
* High quality business model, continuing margin growth
and low capital intensity drives operating cash flows
* 95% profit from the fee business; 85% of fee revenue
linked directly to hotel revenues.
* Group fee margin of 48.8%, up 3.3%pts (2.5%pts CER);
strong progression through efficiency improvements.
* Net capital expenditure of $185m (gross $241m).
Focused investments in brands and new Guest
Reservation System, in which we will invest a further
$90m in 2017 within existing capex guidance of up to
$350m gross.
* Commitment to efficient balance sheet and driving
shareholder returns
* $400m will be returned to shareholders via a special
dividend with share consolidation, to be paid in Q2
2017.
* Total returns since 2003 of $12.8bn, nearly $5bn of
which is from underlying operations.
* Year-end net debt:EBITDA of 1.9x, or 2.4x on a
proforma basis assuming payment of the special
dividend.
* Proposed 11% increase in total dividend to 94.0c
reflects confidence in our long-term sustainable
future growth.
Strategic progress to enhance our long term competitive
advantage
---------------------------------------------------------------------
* Strengthening our preferred brands
* Expanded our luxury footprint and InterContinental
Hotels & Resorts' position as the largest luxury
hotel brand with eight openings globally, including
five in Greater China, and our highest room signings
since 2008.
* Strengthened our boutique portfolio, with six Kimpton
openings including our first outside the US in Grand
Cayman, three EVEN Hotels openings including two in
New York and our first franchise, and opened our
75(th) Hotel Indigo.
* Progressed the next phase of the Crowne Plaza refresh,
announced in June, to accelerate growth in the
Americas supported by $200m investment over 3 years
($100m system funded, $100m within existing capex
guidance).
* Continued to roll out leading edge guest experiences
for Holiday Inn Brand Family hotels; new public space
designs now in 225 Holiday Inn Express hotels across
US and Europe. New room designs driving guest
satisfaction uplifts.
* Signed 20 Holiday Inn Express hotels in Greater China
in 8 months, under our new tailored franchising model,
taking the total signed for the brand in the region
to 47 hotels.
* Growing through targeted hotel distribution
* Signed 76k rooms into the pipeline, representing over
500 new hotels, the highest number of deals signed
since 2008, demonstrating owner confidence in our
brands.
* 230k pipeline rooms, up 8%; 45% under construction
and 90% in our ten priority markets.
* Driving revenue delivery through technology and
loyalty
* Industry-leading cloud-based Guest Reservation System
remains on track to begin roll-out in 2017.
* Digital revenue of $4.3bn, up $0.3bn year-on-year,
with mobile delivering over 50% of digital traffic
and $1.6bn of gross revenues globally, and 60% of
direct bookings in Greater China.
* Enhanced IHG Rewards Club with the launch of Your
Rate, our preferential member pricing initiative,
which has helped to increase loyalty contribution by
2%pts and driven enrolments up 16% year-on-year.
Americas - Rate led US RevPAR increase driving strong
profit growth
----------------------------------------------------------------
Comparable RevPAR increased 2.1% (Q4: up 1.5%), driven
by 2.0% rate growth. US RevPAR was up 1.8%, led by Holiday
Inn up 2.5% and Kimpton up 2.9%. Fourth quarter US RevPAR
growth of 1.3% continued to be impacted by our concentration
in oil producing markets, where RevPAR was down 6.1%;
the remainder of the estate grew 2.2%.
Reported revenue increased 4% (up 5% at CER) and profit
increased 6% (up 7% at CER).
On an underlying(1) basis, revenue was up almost 6% and
operating profit up almost 8%. Franchise profit increased
5%, driven by RevPAR up 1.9% and rooms growth of 2.0%,
which more than funded additional investment in development
resources. Managed profit includes an unusually high
number of small liquidated damages receipts ($4m total
in H2). This was offset by $8m related to our 20% interest
in InterContinental New York Barclay and the ongoing
impact of new supply on RevPAR growth in New York. We
expect a high level of new supply to continue to impact
trading in New York in 2017, and that we will continue
to incur costs relating to the joint venture as the hotel
ramps up post repositioning, although these will largely
be offset by related management fees. Regional overheads
declined by $11m on an underlying basis due to a $10m
year-on-year decrease in US healthcare costs.
Opened 24k rooms (188 hotels), our highest level of openings
in 5 years, with more than half driven by our Holiday
Inn Brand Family. Our continued focus on maintaining
a high-quality estate meant that we removed 15k rooms
(103 hotels). We signed 37k rooms (332 hotels), including
9k rooms (93 hotels) for our extended stay brands, and
2k rooms (19 hotels) across our boutique brands, including
a Kimpton in Grenada, our first entry into the country.
Europe - Market outperformance in priority markets and
highest rooms signings for 9 years
----------------------------------------------------------------
Comparable RevPAR increased 1.7% (Q4: up 3.1%), driven
by rate up 1.4%. UK RevPAR increased 2.6%, led by a robust
fourth quarter (up 4.6%) which was boosted by a strong
end to the year for tourist arrivals and leisure travel
generally. In Germany, RevPAR growth of 6.8% benefitted from a favourable trade fair calendar. Across the rest of Europe, RevPAR declined by 0.5%, impacted by challenging trading conditions in France, Turkey and Belgium. Reported revenue declined 14% (10% at CER) and reported operating profit was down 4% (flat at CER), both impacted by the sale of InterContinental Paris - Le Grand in 2015. On an underlying(1) basis, revenue was up 1% and operating profit was flat. Franchise profit grew 8%, driven by RevPAR up 2.0% and rooms growth of 2.8%. Managed profit declined by 22% due to difficult trading conditions for our hotels in Paris and the impact of three hotels in key cities as reported in our interim results. Opened 4k rooms (24 hotels) including the 706 room Holiday Inn Kensington London. We signed almost 10k rooms (60 hotels) into our system, our highest rooms signings since 2007. This included a record 17 properties in Germany, a third consecutive record year for the country, where we now have more than 100 properties open or in the pipeline. ---------------------------------------------------------------- AMEA - Solid trading offset by oil markets ---------------------------------------------------------------- Comparable RevPAR decreased 0.2% (Q4: flat), with rate declines offset by occupancy gains. Performance outside the Middle East continued to be strong with 3.7% RevPAR growth overall. We continued to outperform the market in India, delivering RevPAR growth of 14.1%, driven by strong corporate business and inbound tourism. South East Asia (+2.0%), Australia (+2.9%), and Japan (+3.6%) saw good trading, the last against tough comparables. The Middle East continued to be impacted by declining oil prices, ending the year down 7.0%. Total RevPAR was down 2.0% for the year (Q4: down 2.1%) impacted by the proportion of hotel openings in developing markets (2016: 60%) where RevPARs are significantly lower than developed markets. We expect the proportion of hotels in developing markets to continue to grow (65% pipeline vs 45% system) as we execute our strategy to grow rapidly in markets where the long term demand drivers are favourable and where we see the largest opportunities for growth. This, combined with a number of other individually small items, means we expect managed profit in 2017 to be broadly in line with 2016. Reported revenues declined 2% (down 3% at CER) with profit down 5% on both an actual and constant currency basis. On an underlying(1) basis, revenue was down 4% and operating profit decreased 4%. Managed profit increased 8%, excluding the $7m reduction flagged at the half year results relating to three long-standing contracts being renewed onto standard market terms and one equity stake disposal. We opened 4k rooms (17 hotels) including two hotels in Singapore, our first Hotel Indigo and a 451-room Holiday Inn Express, our largest for the brand in the region. Openings also included our first Holiday Inn Express in Australia, the first of a larger portfolio development across Australasia. We signed 11k rooms (42 hotels), and entered into an agreement to develop a portfolio of EVEN Hotels in Australia and New Zealand.
(__________________________) (1)
Greater China - Market outperformance and rooms growth
drive strong fee revenue increase
-------------------------------------------------------------------
Comparable RevPAR increased by 2.2%, with growth of 3.9%
in mainland China offset by declines in Hong Kong and
Macau. Fourth quarter RevPAR grew by 3.2% benefitting
from 2.8% growth in Hong Kong, the first positive quarter
there since late 2014. Full year growth was particularly
strong in mainland tier 1 cities, up 6.3%, driven by
strong corporate demand, with the rest of the mainland
up 2.2%. As we continued to increase our penetration
in less developed cities, full year total RevPAR declined
3.1%.
Reported revenue and operating profit declined by 43%
(41% at CER) and 36% (33% at CER) respectively, both
affected by the disposal of InterContinental Hong Kong
in 2015.
Underlying(1) revenue was up 13% driven by trading outperformance
in key cities and nearly 9% net system growth. Underlying(1)
operating profit increased 15%, with ongoing investment
in growth initiatives more than offset by scale efficiencies
and strategic cost management.
Opened 8k rooms (29 hotels). We opened five InterContinental
Hotels & Resorts properties including our third in Beijing
and our fifth in Shanghai, now the most in any city globally.
We also opened our fourth HUALUXE hotel. Signed 19k rooms
(82 hotels), including 20 franchised Holiday Inn Express
hotels since launching the new China franchise model
in May.
Highly cash generative business with disciplined approach
to cost control and capital allocation
-------------------------------------------------------------------
* Fee margin growth through strategic cost management
* Continued focus on strategic cost management.
Reported central overheads declined $23m, or $12m on
a constant currency basis, benefitting from a $9m
increase in central revenues and efficiency
improvements.
* Group fee margin of 48.8%, increased 3.3%pts (2.5%pts
CER). In 2017, we will leverage scale and control
costs to drive fee margin progression, but at a
slower rate than 2016 after 560pts of margin
expansion in the last 3 years.
* Strong free cash flow generation fuelling investment
* Free cash flow of $646m, up 39% year on year (2015:
$466m), including a $95m cash receipt on behalf of
the system fund from the renegotiation of long term
partnership agreements.
* $241m gross capital expenditure in 2016 (2015: $264m)
comprised of: $96m maintenance capex and key money;
$40m recyclable investments; and $105m system funded
capital investments, offset by $25m proceeds from
asset recycling and $31m system fund depreciation
received via working capital, resulting in $185m of
net capex.
* Gross capex guidance unchanged at up to $350m per
annum into the medium term.
* Efficient balance sheet provides flexibility
* Financial position remains robust, with an on-going
commitment to an investment grade credit rating by
maintaining our net debt:EBITDA ratio at 2.0x to
2.5x.
* Issued a GBP350m, 10-year bond in August 2016, at a
2.125% coupon rate, the lowest funding rate IHG has
achieved in the Sterling bond market.
* Year-end net debt of $1,506m (including $227m finance
lease on InterContinental Boston), up $977m on 2015
due to the $1.5bn special dividend paid in May 2016.
Closing net debt is $205m lower due to the impact of
exchange rates.
* Shareholder returns demonstrating confidence in
future growth prospects
* Proposed 11% increase in the final dividend to 64.0c,
taking the total dividend for the year up 11% to
94.0c, reflecting our confident outlook on our
ability to continue delivering sustainable growth
into the future.
* Proposed $400m special dividend with share
consolidation, equating to 202.5c per share.
-------------------------------------------------------------------
Foreign exchange - volatile currency markets impact reported
revenues and profit
-------------------------------------------------------------------
Cost benefits from the devaluation of sterling against
the dollar were broadly offset by revenue impacts of
the strong dollar against a number of currencies, reducing
reported profit by $1m.
If the closing December 2016 exchange rates had existed
through the first half of 2016, reported operating profit
for that period would have reduced by $1m.
A full breakdown of constant currency vs. actual currency
RevPAR by region is set out in Appendix 2.
Interest, tax and exceptional items
-------------------------------------------------------------------
Interest: Net financial expenses remained flat at $87m
principally due to the devaluation of sterling against
the dollar offsetting interest related to the GBP350m
bond raised in August 2016. Annualised bond interest
costs will reduce in 2017 following the expiry of the
GBP250m, 6.0% coupon rate bond in December 2016.
Tax: Effective rate for 2016 was 30% (2015: 30%). 2017
tax rate expected to be low 30s.
Exceptional operating items: Exceptional operating items
of $29m include $13m related to the Kimpton integration
and $16m of impairment charges related to the Barclay
associate which owns InterContinental New York Barclay.
_____________ (1) Excluding owned asset disposals, managed leases and significant liquidated damages at constant FY15 exchange rates (CER).
Appendix 1: RevPAR Movement Summary
------------------------------------------------------------------
Full Year 2016 Q4 2016
---------- ------------------------- ---------------------------
RevPAR Rate Occ. RevPAR Rate Occ.
---------- ------- ------- ------- ------- ------- ---------
Group 1.8% 1.2% 0.4pts 1.7% 1.0% 0.5pts
Americas 2.1% 2.0% 0.1pts 1.5% 1.6% (0.1)pts
Europe 1.7% 1.4% 0.2pts 3.1% 1.1% 1.4pts
AMEA (0.2)% (0.8)% 0.5pts 0.0% (0.4)% 0.3pts
G. China 2.2% (2.2)% 2.7pts 3.2% (0.7)% 2.5pts
---------- ------- ------- ------- ------- ------- ---------
Appendix 2: Comparable RevPAR movement at constant
exchange rates (CER) vs. actual exchange rates (AER)
----------------------------------------------------------------- -----------
Full Year 2016 Q4 2016
------------ ---------------------------------- ----------------------------
CER AER Difference CER AER Difference
------------ --------- --------- ------------ ----- -------- -----------
Group 1.8% 0.0% 1.8pts 1.7% (0.6)% 2.3pts
Americas 2.1% 1.4% 0.7pts 1.5% 0.9% 0.6pts
Europe 1.7% (4.4)% 6.1pts 3.1% (6.6)% 9.7pts
AMEA (0.2)% 0.0% (0.2)pts 0.0% 0.6% (0.6)pts
G. China 2.2% (2.4)% 4.6pts 3.2% (2.1)% 5.3pts
------------ --------- --------- ------------ ----- -------- -----------
Appendix 3: Full Year System & Pipeline Summary (rooms)
--------
System Pipeline
Openings Removals Net Total YoY% Signings Total
--------- --------- ------- -------- ----- --------- --------
Group 40,134 (17,367) 22,767 767,135 3.1% 75,812 230,076
Americas 23,535 (15,117) 8,418 487,993 1.8% 37,038 102,451
Europe 4,188 (830) 3,358 110,069 3.1% 9,554 23,954
AMEA 4,473 (995) 3,478 76,051 4.8% 10,551 39,643
G. China 7,938 (425) 7,513 93,022 8.8% 18,669 64,028
----------- --------- --------- ------- -------- ----- --------- --------
Appendix 4: Full Year financial headlines
------
Operating Profit Total Americas Europe AMEA G. China Central
$m
---------------------
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
--------------------- ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Franchised 693 669 600 575 78 77 12 12 3 5 - -
Managed 239 241 64 64 22 28 89 90 64 59 - -
Owned & leased 26 57 24 24 - 1 2 3 - 29 - -
Regional overheads (123) (136) (55) (66) (25) (28) (21) (19) (22) (23) - -
Profit pre central
overheads 835 831 633 597 75 78 82 86 45 70 - -
Central overheads (128) (151) - - - - - - - - (128) (151)
Operating profit
before exceptional
items 707 680 633 597 75 78 82 86 45 70 (128) (151)
Exceptional
items (29) 819 (29) (41) - 175 - (2) - 698 - (11)
Total operating
profit 678 1,499 604 556 75 253 82 84 45 768 (128) (162)
--------------------- ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- ------ ------
Appendix 5: Reported operating profit movement before exceptional items at actual and constant exchange rates
Total*** Americas Europe AMEA G. China
------------ ---------------- ---------------- ---------------- ---------------- ----------------
Reported Actual* CER** Actual* CER** Actual* CER** Actual* CER** Actual* CER**
Growth/
(decline) 4% 4% 6% 7% (4)% 0% (5)% (5)% (36)% (33)%
------------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Appendix 6: Underlying operating profit movement before exceptional items
Underlying**** Total*** Americas Europe AMEA G. China
---------------- --------- --------- ------- ----- ---------
Growth/
(decline) 10% 8% 0% (4)% 15%
---------------- --------- --------- ------- ----- ---------
Exchange GBP:USD * US dollar actual currency
rates: EUR:USD
** Translated at constant 2015 exchange
2016 0.74 0.90 rates
2015 0.65 0.90 *** After central overheads
**** At CER and excluding: owned asset
disposals, results from managed lease
hotels and significant liquidated damages
(see below for definitions)
Appendix 7: Definitions
---------------------------------------------------------------
CER: constant exchange rates with 2015 exchange rates
applied to 2016.
Comparable RevPAR: Revenue per available room for hotels
that have traded for all of 2015 and 2016, reported
at CER.
Fee revenue: Group revenue excluding owned & leased
hotels, managed leases and significant liquidated damages.
Fee margin: adjusted for owned and leased hotels, managed
leases, and significant liquidated damages.
Managed lease hotels: properties structured for legal
reasons as operating leases but with the same characteristics
as management contracts
Americas: Revenue 2016 $34m; 2015 $38m; EBIT 2016 $nil,
2015 $nil. Europe: Revenue 2016 $77m; 2015 $75m; EBIT
2016 $2m, 2015 $1m. AMEA: Revenue 2016 $51m; 2015 $46m;
EBIT 2016 $5m, 2015 $5m.
Owned asset disposals: InterContinental Hong Kong was
sold on 30 September 2015 (2016: $nil revenue and $nil
EBIT, 2015: $98m revenue and $29m EBIT), InterContinental
Paris - Le Grand was sold on 20 May 2015 (2016: $nil
revenue and $nil EBIT, 2015: $30m revenue and $1m EBIT).
Significant liquidated damages: $nil in 2016, $3m in
2015 ($3m Americas managed in Q2).
Total gross revenue: total rooms revenue from franchised
hotels and total hotel revenue from managed, owned
and leased hotels. Other than owned and leased hotels,
it is not revenue attributable to IHG, as it is derived
mainly from hotels owned by third parties.
Total RevPAR: Revenue per available room including
hotels that have opened or exited in either 2015 or
2016, reported at CER.
---------------------------------------------------------------
Appendix 8: Investor information for proposed 2016
final dividend
-----------------------------------------------------------------------
Ex-dividend 4 May 2017 Record 5 May 2017 Payment 22 May 2017
date: date: date:
Dividend ADRs: 64.0 cents per ADR; The corresponding
payment: amount in Pence Sterling per ordinary share
will be announced on 11 May 2017, calculated
based on the average of the market exchange
rates for the three days commencing 8 May
2017.
------------ ---------------------------------------------------------
Appendix 9: Investor information for proposed special
dividend
-----------------------------------------------------------------------
Ex-dividend 8 May 2017 Record 5 May 2017 Payment 22 May 2017
date: date: date:
Dividend ADRs:202.5 cents per ADR. The corresponding
payment: amount in Pence Sterling per ordinary share
will be announced on 11 May 2017, calculated
based on the average of the market exchange
rates for the three days commencing 8 May
2017.
------------ ---------------------------------------------------------
For further information, please contact:
---------------------------------------------------------------------
Investor Relations (Heather Wood; +44 (0)1895 +44 (0)7808
Adam Smith; Neeral Morzaria): 512 176 098 724
Media Relations (Yasmin Diamond; +44 (0)1895 +44 (0)7736
Zoë Bird): 512 008 746 167
--------------------------------------- ------------- -------------
Presentation for Analysts and Shareholders:
A presentation with Richard Solomons, Chief Executive
Officer and Paul Edgecliffe-Johnson, Chief Financial
Officer will commence at 9:30am London time on 21 February
at Goldman Sachs, Rivercourt, 120 Fleet Street, London,
EC4A 2BE. There will be an opportunity to ask questions.
The presentation will conclude at approximately 10:30am.
There will be a live audio webcast of the results presentation
on the web address www.ihgplc.com/prelimswebcast. 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: UK toll: +44 (0)20 7108 6248 UK toll free: 0800 279 3953 US toll: +1 210 795 1098 Passcode: IHG Investor A replay of the conference call will also be available following the event - details are below. Replay: +1 866 358 4517 Pin: 2021 US conference call and Q&A: There will also be a conference call, primarily for US investors and analysts, at 9:00am New York Time on 21 February with Richard Solomons, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer. There will be an opportunity to ask questions. UK toll: +44 (0)20 7108 6248 US toll: +1 210 795 1098 US toll free: +1 866 803 2143 Passcode: IHG Investor A replay of the conference call will also be available following the event - details are below. Replay: +1 800 839 1335 Pin: 0228 Website: The full release and supplementary data will be available on our website from 7:00am (London time) on 21 February. The web address is www.ihgplc.com/prelims17. Notes to Editors: IHG(R) (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including InterContinental(R) Hotels & Resorts, Kimpton(R) Hotels & Restaurants, Hotel Indigo(R), EVEN(R) Hotels, HUALUXE(R) Hotels and Resorts, Crowne Plaza(R) Hotels & Resorts, Holiday Inn(R) Hotels & Resorts, Holiday Inn Express(R), Staybridge Suites(R) and Candlewood Suites(R). IHG franchises, leases, manages or owns nearly 5,200 hotels and 770,000 guest rooms in almost 100 countries, with nearly 1,500 hotels in its development pipeline. IHG also manages IHG(R) Rewards Club, the world's first and largest hotel loyalty programme, with more than 100 million enrolled members worldwide. InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales. More than 350,000 people work across IHG's hotels and corporate offices globally. Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our latest news, visit: www.ihgplc.com/media and follow us on social media at: www.twitter.com/ihg, www.facebook.com/ihg and www.youtube.com/ihgplc. Cautionary note regarding forward-looking statements: This announcement contains certain forward-looking statements as defined under United States law (Section 21E of the Securities Exchange Act of 1934) and otherwise. These forward-looking statements can be identified by the fact that they do not relate only 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. These statements are based on assumptions and assessments made by InterContinental Hotels Group PLC's management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. 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. The main factors that could affect the business and the financial results are described in the 'Risk Factors' section in the current InterContinental Hotels Group PLC's Annual report and Form 20-F filed with the United States Securities and Exchange Commission.
This Business Review provides a commentary on the performance of InterContinental Hotels Group PLC
(the Group or IHG) for the financial year ended 31 December 2016.
Group Performance
12 months ended 31 December
Group results 2016 2015 %
$m $m change
Revenue
Americas 993 955 4.0
Europe 227 265 (14.3)
AMEA 237 241 (1.7)
Greater China 117 207 (43.5)
Central 141 135 4.4
____ ____ ___
1,715 1,803 (4.9)
____ ____ ___
Operating profit before
exceptional items
Americas 633 597 6.0
Europe 75 78 (3.8)
AMEA 82 86 (4.7)
Greater China 45 70 (35.7)
Central (128) (151) 15.2
____ ____ ___
707 680 4.0
Exceptional operating items (29) 819 (103.5)
___ ___ ___
Operating profit 678 1,499 (54.8)
Net financial expenses (87) (87) -
___ ___ ___
Profit before tax 591 1,412 (58.1)
___ ___ ___
Earnings per ordinary share
Basic 195.3c 520.0c (62.4)
Adjusted 203.3c 174.9c 16.2
Average US dollar to sterling
exchange rate $1 : GBP0.74 $1 : GBP0.65 13.8
During the year ended 31 December 2016, revenue decreased by $88m (4.9%) to $1,715m primarily as a result of the sale of InterContinental Paris - Le Grand and InterContinental Hong Kong. Operating profit and profit before tax both decreased by $821m to $678m and $591m, primarily due to the gain on sale of InterContinental Paris - Le Grand and InterContinental Hong Kong during the year ended 31 December 2015. Operating profit before exceptional items increased by $27m (4.0%) to $707m.
Underlying(a) Group revenue and underlying(a) Group operating profit increased by $69m (4.6%) and $61m (9.5%) respectively.
Comparable Group RevPAR increased by 1.8% (including an increase in average daily rate of 1.2%). IHG System size increased by 3.1% to 767,135 rooms, whilst underlying Group fee revenue(b) increased by 2.3% (4.4% at constant currency).
At constant currency, the net central operating loss before exceptional items decreased by $12m (7.9%) to $139m compared to 2015 (but at actual currency decreased by $23m (15.2%) to $128m).
Group fee margin was 48.8%, up 3.3 percentage points (up 2.5 percentage points at constant currency) on 2015, after adjusting for owned and leased hotels, managed leases, and significant liquidated damages. Group fee margin benefited from efficiency improvements and by leveraging our global scale.
Basic earnings per ordinary share decreased by 62.4% to 195.3c, whilst adjusted earnings per ordinary share increased by 16.2% to 203.3c, reflecting the increase in operating profit before exceptional items and the impact of the share consolidation in May 2016. (a) Underlying excludes the impact of owned asset disposals, significant liquidated damages and the results from managed-lease hotels, translated at constant currency by applying prior-year exchange rates. Underlying operating profit growth also excludes the impact of exceptional items. (b) Underlying fee revenue is defined as Group revenue excluding revenue from owned and leased hotels, managed leases and significant liquidated damages.
12 months ended 31 December
2016 2015 %
Global total gross revenue $bn $bn change
InterContinental 4.6 4.5 2.2
Kimpton 1.1 1.1 -
Crowne Plaza 4.1 4.2 (2.4)
Hotel Indigo 0.4 0.3 33.3
Holiday Inn 6.2 6.2 -
Holiday Inn Express 6.3 6.1 3.3
Staybridge Suites 0.8 0.8 -
Candlewood Suites 0.7 0.7 -
Other brands 0.3 0.1 200.0
____ ____ ____
Total 24.5 24.0 2.1
____ ____ ____
Hotels Rooms
Global hotel and Change
room count Change over
at 31 December 2016 over 2015 2016 2015
Analysed by brand
InterContinental 187 3 63,650 1,610
Kimpton 61 - 11,238 262
HUALUXE 4 1 1,096 298
Crowne Plaza 408 2 113,803 519
Hotel Indigo 75 10 8,905 1,241
EVEN Hotels 6 3 1,010 564
Holiday Inn(1) 1,241 15 231,756 3,656
Holiday Inn Express 2,497 72 247,009 10,603
Staybridge Suites 236 16 25,610 1,646
Candlewood Suites 362 21 34,192 1,864
Other 97 (1) 28,866 504
____ ____ ______ _____
Total 5,174 142 767,135 22,767
____ ____ ______ _____
Analysed by ownership
type
Franchised 4,321 102 542,650 11,902
Managed 845 39 222,073 10,670
Owned and leased 8 1 2,412 195
____ ____ ______ _____
Total 5,174 142 767,135 22,767
____ ____ ______ _____
(1) Includes 46 Holiday Inn Resort properties (11,652 rooms) and 26 Holiday Inn Club Vacations properties
(7,601 rooms) (2015: 47 Holiday Inn Resort properties (11,518 rooms) and 16 Holiday Inn Club Vacations properties (5,231 rooms)).
Hotels Rooms
Global pipeline Change Change
at 31 December 2016 over 2015 2016 over 2015
Analysed by brand
InterContinental 62 10 17,480 1,804
Kimpton 18 - 3,098 (268)
HUALUXE 22 1 6,956 324
Crowne Plaza 90 6 24,536 1,355
Hotel Indigo 75 12 10,593 1,385
EVEN Hotels 6 (2) 780 (482)
Holiday Inn(1) 261 5 52,678 474
Holiday Inn Express 676 74 83,882 8,277
Staybridge Suites 140 26 15,321 2,680
Candlewood Suites 108 10 9,604 884
Other 12 (2) 5,148 (273)
____ ____ ______ _____
Total 1,470 140 230,076 16,160
____ ____ ______ _____
Analysed by ownership
type
Franchised 1,039 134 117,694 15,525
Managed 431 7 112,382 837
Owned and Leased - (1) - (202)
____ ____ ______ _____
Total 1,470 140 230,076 16,160
____ ____ ______ _____
(1) Includes 14 Holiday Inn Resort properties (3,531 rooms) (2015: 14 Holiday Inn Resort properties (3,548 rooms)).
THE AMERICAS
12 months ended 31 December
2016 2015 %
Americas results $m $m change
Revenue
Franchised 685 661 3.6
Managed 172 166 3.6
Owned and leased 136 128 6.3
____ ____ ____
Total 993 955 4.0
____ ____ ____
Operating profit before
exceptional items
Franchised 600 575 4.3
Managed 64 64 -
Owned and leased 24 24 -
____ ____ ____
688 663 3.8
Regional overheads (55) (66) 16.7
____ ____ ____
633 597 6.0
Exceptional items (29) (41) 29.3
____ ____ ____
Operating profit 604 556 8.6
____ ____ ____
12 months ended
31 December
Americas Comparable RevPAR movement 2016
on previous year
Franchised
Crowne Plaza 1.5%
Holiday Inn 2.6%
Holiday Inn Express 1.7%
All brands 1.9%
Managed
InterContinental 2.7%
Kimpton 2.9%
Crowne Plaza 5.7%
Holiday Inn 4.9%
Staybridge Suites 5.3%
Candlewood Suites 1.2%
All brands 3.2%
Owned and leased
EVEN Hotels 15.5%
All brands 4.0%
Americas results
Franchised revenue and operating profit increased by $24m (3.6%) to $685m and by $25m (4.3%) to $600m respectively. Royalties(a) growth of 2.4% was driven by comparable RevPAR growth of 1.9%, including 2.6% for Holiday Inn and 1.7% for Holiday Inn Express, together with 2.0% rooms growth. On a constant currency basis, revenue and operating profit increased by $29m (4.4%) to $690m and by $30m (5.2%) to $605m respectively.
Managed revenue increased by $6m (3.6%) to $172m, whilst operating profit stayed flat at $64m due to costs relating to our 20% interest in InterContinental New York Barclay and the ongoing impact of new supply on RevPAR growth in New York. Revenue and operating profit included $34m (2015: $38m) and $nil (2015: $nil) respectively from one managed-lease property. Excluding results from this managed-lease hotel, the benefit of significant liquidated damages receipts (2016: $nil; 2015: $3m) and on a constant currency basis, revenue increased by $16m (12.8%) and operating profit increased by $5m (8.2%) respectively.
Owned and leased revenue increased by $8m (6.3%) to $136m, whilst operating profit stayed flat at $24m.
Regional overheads decreased by $11m (16.7%) to $55m due to a $10m year-on-year decrease in US healthcare costs.
(a) Royalties are fees, based on rooms revenue, that a franchisee pays to the brand owner for use of the brand name.
Hotels Rooms
Americas hotel and Change
room count Change over
at 31 December 2016 over 2015 2016 2015
Analysed by brand
InterContinental 48 (2) 16,408 (701)
Kimpton 61 - 11,238 262
Crowne Plaza 164 (8) 44,116 (2,200)
Hotel Indigo 46 6 5,932 861
EVEN Hotels 6 3 1,010 564
Holiday Inn(1) 774 2 136,744 749
Holiday Inn Express 2,154 48 192,371 5,399
Staybridge Suites 226 15 24,185 1,523
Candlewood Suites 362 21 34,192 1,864
Other 84 - 21,797 97
____ ____ ______ _____
Total 3,925 85 487,993 8,418
____ ____ ______ _____
Analysed by ownership
type
Franchised 3,633 85 430,866 8,636
Managed 286 (1) 55,302 (413)
Owned and leased 6 1 1,825 195
____ ____ ______ _____
Total 3,925 85 487,993 8,418
____ ____ ______ _____
(1) Includes 25 Holiday Inn Resort properties (6,791 rooms) and 26 Holiday Inn Club Vacations properties
(7,601 rooms) (2015: 23 Holiday Inn Resort properties (5,902 rooms) and 16 Holiday Inn Club Vacations properties (5,231 rooms)).
Hotels Rooms
Americas pipeline Change Change
at 31 December 2016 over 2015 2016 over 2015
Analysed by brand
InterContinental 7 3 2,532 987
Kimpton 17 (1) 2,949 (417)
Crowne Plaza 17 2 3,286 796
Hotel Indigo 32 2 3,965 (59)
EVEN Hotels 6 (2) 780 (482)
Holiday Inn(1) 128 3 17,304 (899)
Holiday Inn Express 488 39 46,796 2,851
Staybridge Suites 131 26 13,896 2,666
Candlewood Suites 108 10 9,604 884
Other 11 (2) 1,339 (260)
____ ____ ______ _____
Total 945 80 102,451 6,067
____ ____ ______ _____
Analysed by ownership
type
Franchised 897 88 93,295 7,432
Managed 48 (7) 9,156 (1,163)
Owned and leased - (1) - (202)
____ ____ ______ _____
Total 945 80 102,451 6,067
____ ____ ______ _____
(1) Includes three Holiday Inn Resort properties (455 rooms) (2015: seven Holiday Inn Resort properties (1,657 rooms)).
EUROPE
12 months ended 31
December
2016 2015 %
Europe results $m $m change
Revenue
Franchised 102 104 (1.9)
Managed 125 131 (4.6)
Owned and leased - 30 (100.0)
____ ____ ____
Total 227 265 (14.3)
____ ____ ____
Operating profit before
exceptional items
Franchised 78 77 1.3
Managed 22 28 (21.4)
Owned and leased - 1 (100.0)
____ ____ ____
100 106 (5.7)
Regional overheads (25) (28) 10.7
____ ____ ____
75 78 (3.8)
Exceptional items - 175 (100.0)
____ ____ ____
Operating
profit 75 253 (70.4)
____ ____ ____
Europe comparable RevPAR movement 12 months ended
on previous year 31 December
2016
Franchised
All brands 2.0%
Managed
All brands (0.3)%
Europe results
Franchised revenue decreased by $2m (1.9%) to $102m, whilst operating profit increased by $1m (1.3%) to $78m. On a constant currency basis, revenue and operating profit increased by $6m (5.8%) and $6m (7.8%) respectively.
Managed revenue decreased by $6m (4.6%) and operating profit decreased by $6m (21.4%). Revenue and operating profit included $77m (2015: $75m) and $2m (2015: $1m) respectively from managed leases. Excluding properties operated under this arrangement, and on a constant currency basis, revenue decreased by $5m (8.9%) and operating profit decreased by $6m (22.2%). Performance was impacted by difficult trading conditions for our hotels in Paris, and a revenue reduction in relation to three managed hotels; two of which have exited the system and one of which is undergoing a major refurbishment.
The last remaining hotel in the owned and leased estate, InterContinental Paris - Le Grand, was sold in 2015. Following this, revenue and operating profit in the estate decreased to nil.
Hotels Rooms
Europe hotel and Change
room count Change over
at 31 December 2016 over 2015 2016 2015
Analysed by brand
InterContinental 31 (1) 9,724 (162)
Crowne Plaza 92 4 20,887 618
Hotel Indigo 21 2 1,910 120
Holiday Inn(1) 291 6 47,829 1,679
Holiday Inn Express 234 6 28,578 1,053
Staybridge Suites 7 1 1,000 123
Other 1 (1) 141 (73)
____ ____ ______ _____
Total 677 17 110,069 3,358
____ ____ ______ _____
Analysed by ownership
type
Franchised 629 14 97,030 2,620
Managed 48 3 13,039 738
____ ____ ______ _____
Total 677 17 110,069 3,358
____ ____ ______ _____
(1) Includes one Holiday Inn Resort property (88 rooms) (2015: two Holiday Inn Resort properties (212 rooms)).
Hotels Rooms
Change
Europe pipeline Change over
at 31 December 2016 over 2015 2016 2015
Analysed by brand
InterContinental 6 1 813 (69)
Kimpton 1 1 149 149
Crowne Plaza 14 3 3,185 512
Hotel Indigo 18 7 2,264 861
Holiday Inn 35 (2) 7,511 (323)
Holiday Inn Express 58 13 9,395 2,197
Staybridge Suites 5 1 637 126
Other - - - (31)
____ ____ ______ _____
Total 137 24 23,954 3,422
____ ____ ______ _____
Analysed by ownership
type
Franchised 111 23 17,908 3,781
Managed 26 1 6,046 (359)
____ ____ ______ _____
Total 137 24 23,954 3,422
____ ____ ______ _____
ASIA, MIDDLE EAST AND AFRICA (AMEA)
12 months ended 31
December
2016 2015 %
AMEA results $m $m change
Revenue
Franchised 16 16 -
Managed 184 189 (2.6)
Owned and leased 37 36 2.8
____ ____ ____
Total 237 241 (1.7)
____ ____ ____
Operating profit before
exceptional items
Franchised 12 12 -
Managed 89 90 (1.1)
Owned and leased 2 3 (33.3)
____ ____ ____
103 105 (1.9)
Regional overheads (21) (19) (10.5)
____ ____ ____
82 86 (4.7)
Exceptional items - (2) 100.0
____ ____ ____
Operating profit 82 84 (2.4)
____ ____ ____
AMEA comparable RevPAR movement 12 months ended
on previous year 31 December
2016
Franchised
All brands (0.1)%
Managed
All brands (0.2)%
AMEA results
On an actual and constant currency basis, franchised revenue and operating profit remained flat at $16m and $12m respectively.
Managed revenue and operating profit decreased by $5m (2.6%) to $184m and $1m (1.1%) to $89m respectively. Revenue and operating profit included $51m (2015: $46m) and $5m (2015: $5m) respectively from one managed-lease property. Excluding results from this hotel and on a constant currency basis, revenue decreased by $9m (6.3%) to $134m, whilst operating profit remained flat at $85m. Good underlying growth in our managed business was offset by a $7m revenue reduction in relation to four hotels; three long standing contracts being renewed onto standard market terms and one equity stake disposal.
In the owned and leased estate, on an actual and constant currency basis, revenue increased by $1m (2.8%) to $37m and operating profit decreased by $1m (33.3%) to $2m.
Hotels Rooms
AMEA hotel and room Change
count Change over
at 31 December 2016 over 2015 2016 2015
Analysed by brand
InterContinental 69 1 21,203 (35)
Crowne Plaza 73 2 20,749 738
Hotel Indigo 2 1 323 131
Holiday Inn(1) 93 2 21,312 328
Holiday Inn Express 34 7 7,583 1,697
Staybridge Suites 3 - 425 -
Other 6 - 4,456 619
____ ____ ______ _____
Total 280 13 76,051 3,478
____ ____ ______ _____
Analysed by ownership
type
Franchised 55 3 12,570 646
Managed 223 10 62,894 2,832
Owned and leased 2 - 587 -
____ ____ ______ _____
Total 280 13 76,051 3,478
____ ____ ______ _____
(1) Includes 14 Holiday Inn Resort properties (2,953 rooms) (2015: 15 Holiday Inn Resort properties (3,169 rooms)).
Hotels Rooms
AMEA pipeline Change Change
at 31 December 2016 over 2015 2016 over 2015
Analysed by brand
InterContinental 27 5 6,681 1,332
Crowne Plaza 21 2 5,554 253
Hotel Indigo 14 1 2,582 301
Holiday Inn(1) 48 3 13,022 1,493
Holiday Inn Express 35 (8) 7,486 (1,858)
Staybridge Suites 4 (1) 788 (112)
Other - - 3,530 18
____ ____ ______ _____
Total 149 2 39,643 1,427
____ ____ ______ _____
Analysed by ownership
type
Franchised 11 3 2,406 227
Managed 138 (1) 37,237 1,200
____ ____ ______ _____
Total 149 2 39,643 1,427
____ ____ ______ _____
(1) Includes five Holiday Inn Resort properties (1,256 rooms) (2015: four Holiday Inn Resort properties (1,071 rooms)).
GREATER CHINA
12 months ended 31
December
2016 2015 %
Greater China results $m $m Change
Revenue
Franchised 3 4 (25.0)
Managed 114 105 8.6
Owned and leased - 98 (100.0)
____ ____ ____
Total 117 207 (43.5)
____ ____ ____
Operating profit before
exceptional items
Franchised 3 5 (40.0)
Managed 64 59 8.5
Owned and leased - 29 (100.0)
____ ____ ____
67 93 (28.0)
Regional overheads (22) (23) 4.3
____ ____ ____
45 70 (35.7)
Exceptional items - 698 (100.0)
____ ____ ____
Operating profit 45 768 (94.1)
____ ____ ____
Greater China comparable RevPAR 12 months ended
movement on previous year 31 December
2016
Managed
All brands 3.0%
Greater China results
On an actual and constant currency basis, franchised revenue and operating profit decreased by $1m (25.0%) and by $2m (40.0%) respectively.
Managed revenue and operating profit increased by $9m (8.6%) to $114m and by $5m (8.5%) to $64m respectively. Comparable RevPAR increased by 3.0%, whilst the Greater China System size grew by 9.0%, driving a 7.0% increase in total gross revenue derived from rooms business. Total gross revenue derived from non-rooms business increased by 6.8%, primarily due to increased food and beverage revenue. On a constant currency basis, revenue and operating profit increased by $15m (14.3%) to $120m and by $8m (13.6%) to $67m respectively, with ongoing investment in growth initiatives more than offset by scale efficiencies and strategic cost management.
The last remaining hotel in the owned and leased estate, InterContinental Hong Kong, was sold in 2015. Following this, revenue and operating profit in the estate decreased to nil.
Hotels Rooms
Greater China hotel Change
and room count Change over
at 31 December 2016 over 2015 2016 2015
Analysed by brand
InterContinental 39 5 16,315 2,508
HUALUXE 4 1 1,096 298
Crowne Plaza 79 4 28,051 1,363
Hotel Indigo 6 1 740 129
Holiday Inn(1) 83 5 25,871 900
Holiday Inn Express 75 11 18,477 2,454
Other 6 - 2,472 (139)
____ ____ ______ _____
Total 292 27 93,022 7,513
____ ____ ______ _____
Analysed by ownership
type
Franchised 4 - 2,184 -
Managed 288 27 90,838 7,513
____ ____ ______ _____
Total 292 27 93,022 7,513
____ ____ ______ _____
(1) Includes six Holiday Inn Resort properties (1,820 rooms) (2015: seven Holiday Inn Resort properties (2,235 rooms)).
Hotels Rooms
Change
Greater China pipeline Change over
at 31 December 2016 over 2015 2016 2015
Analysed by brand
InterContinental 22 1 7,454 (446)
HUALUXE 22 1 6,956 324
Crowne Plaza 38 (1) 12,511 (206)
Hotel Indigo 11 2 1,782 282
Holiday Inn(1) 50 1 14,841 203
Holiday Inn Express 95 30 20,205 5,087
Other 1 - 279 -
____ ____ ______ _____
Total 239 34 64,028 5,244
____ ____ ______ _____
Analysed by ownership
type
Franchised 20 20 4,085 4,085
Managed 219 14 59,943 1,159
____ ____ ______ _____
Total 239 34 64,028 5,244
____ ____ ______ _____
(1) Includes six Holiday Inn Resort properties (1,820 rooms) (2015: three Holiday Inn Resort properties (820 rooms)).
Central
12 months ended 31 December
2016 2015 %
Central results $m $m change
Revenue 141 135 4.4
Gross costs (269) (286) 5.9
____ ____ ____
Operating loss before exceptional
items (128) (151) 15.2
Exceptional items - (11) 100.0
____ ____ ____
Operating loss (128) (162) 21.0
____ ____ ____
Central results
The net operating loss decreased by $34m (21.0%) compared to 2015. Central revenue, which mainly comprises technology fee income, increased by $6m (4.4%) to $141m (an increase of $9m (6.7%) at constant currency), driven by increases in both comparable RevPAR (1.8%) and IHG System size (3.1%). At constant currency, gross costs decreased by $3m (1.0%) compared to 2015 (a $17m or 5.9% decrease at actual currency) driven by a continued focus on strategic cost management. Net operating loss before exceptional items decreased by $23m (15.2%) to $128m (a $12m or 7.9% decrease to $139m at constant currency).
SYSTEM FUND
12 months ended 31 December
2016 2015 %
System Fund assessments $m $m change
Assessment fees and contributions
received from hotels 1,439 1,351 6.5
Proceeds from sale of IHG
Rewards Club points 283 222 27.5
____ ____ ____
Total 1,722 1,573 9.5
____ ____ ____
System Fund assessments
In addition to franchise or management fees, hotels within the IHG System pay assessments and contributions (other than for Kimpton and InterContinental) which are collected by IHG for specific use within the System Fund. The System Fund also receives proceeds from the sale of IHG Rewards Club points. The System Fund is managed for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels.
The System Fund is used to pay for marketing, the IHG Rewards Club loyalty programme and the guest reservation system. The operation of the System Fund does not result in a profit or loss for the Group and consequently the revenues and expenses of the System Fund are not included in the Group Income Statement.
In the year to 31 December 2016, System Fund income increased by 9.5% to $1,722m primarily as a result of a 6.5% increase in assessment fees and contributions from hotels resulting from increased hotel room revenues, reflecting increases in RevPAR and IHG System size. Continued strong performance in co-branded credit card schemes drove the 27.5% increase in proceeds from the sale of IHG Rewards Club points.
OTHER FINANCIAL INFORMATION
Exceptional items
Exceptional items totalled a loss of $29m which included $13m relating to the cost of integrating Kimpton into the operations of the Group and a $16m impairment charge relating to the Barclay associate which owns InterContinental New York Barclay, a hotel managed by the Group. The impairment charge reflects the currently depressed trading outlook for the New York market and the high cost of renovation of the hotel.
Exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted earnings per ordinary share in order to provide a more meaningful comparison of performance.
Net financial expenses
Net financial expenses were flat at $87m, reflecting the issue of GBP350m 2.125% public bonds in August 2016, and a full year of interest on the GBP300m 3.75% bonds issued in August 2015, offset by the impact of a weaker pound on translation of sterling interest expense.
Financing costs included $3m (2015: $2m) of interest costs associated with IHG Rewards Club where interest is charged on the accumulated balance of cash received in advance of the redemption of points awarded. Financing costs in 2016 also included $20m (2015: $20m) in respect of the InterContinental Boston finance lease.
Taxation
The effective rate of tax on operating profit excluding the impact of exceptional items was 30% (2015: 30%). Excluding the impact of prior-year items, the equivalent tax rate would be 31% (2015: 36%). This rate is higher than the average UK statutory rate of 20% (2015: 20.25%), due mainly to certain overseas profits (particularly in the US) being subject to statutory tax rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.
Taxation within exceptional items totalled a credit of $12m (2015: charge of $8m). In 2016, the credit included a $6m deferred tax credit in respect of the impairment charge relating to the Barclay associate and a $5m deferred tax credit representing future tax relief on $13m of Kimpton integration costs. In 2015, the charge comprised $56m relating to the disposal of InterContinental Hong Kong and InterContinental Paris - Le Grand, a credit of $21m in respect of the 2014 disposal of an 80% interest in InterContinental New York Barclay reflecting the judgement that state tax law changes would now apply to the deferred gain and credits of $27m for current and deferred tax relief on other operating exceptional items of current and prior years.
Net tax paid in 2016 totalled $130m (2015: $110m, including $1m in respect of disposals). Tax paid represents an effective rate of 22% (2015: 8%) on total profits and is lower than the effective income statement tax rate of 30% (2015: 30%), primarily due to the timing of US tax payments and the impact of deferred taxes.
Dividends
The Board has proposed a final dividend per ordinary share of 64.0c. With the interim dividend per ordinary share of 30.0c, the full-year dividend per ordinary share for 2016 will total 94.0c, an increase of 11% over 2015.
In February 2017, the Board proposed a $400m return of funds to shareholders by way of a special dividend and share consolidation.
IHG pays its dividends in pounds sterling and US dollars. The sterling amount of the final and special dividend will be announced on 11 May 2017 using the average of the daily exchange rates from 8 May 2017 to 10 May 2017 inclusive.
Earnings per ordinary share
Basic earnings per ordinary share decreased by 62.4% to 195.3c from 520.0c in 2015. Adjusted earnings per ordinary share increased by 16.2% to 203.3c from 174.9c in 2015.
Share price and market capitalisation
The IHG share price closed at GBP36.38 on 31 December 2016, up from GBP26.58 on 31 December 2015. The market capitalisation of the Group at the year end was GBP7.2bn.
Capital structure and liquidity management
In August 2016, the Group issued a GBP350m, 10-year bond at a 2.125% coupon rate, the lowest funding rate the Group has achieved in the sterling bond market. The bonds are repayable in 2026, extending the maturity
profile of the Group's debt.
This is in addition to GBP400m of public bonds which are repayable on 28 November 2022 and GBP300m of public bonds which are repayable on 14 August 2025. On 9 December 2016, the Group repaid GBP250m of maturing public bonds which were issued in 2009.
The Group is further financed by a $1.275bn revolving syndicated bank facility (the Syndicated Facility) and a $75m revolving bilateral facility (the Bilateral facility) which mature in March 2021, with a one-year extension option exercisable in 2017. $110m was drawn under the Syndicated Facility at the year end.
The Syndicated and Bilateral facilities contain the same terms and two financial covenants; interest cover; and net debt divided by earnings before interest, tax, depreciation and amortisation (EBITDA). The Group is in compliance with all of the financial covenants in its loan documents, none of which is expected to present a material restriction on funding in the near future.
Additional funding is provided by the 99-year finance lease (of which 89 years remain) on InterContinental Boston and other uncommitted bank facilities. In the Group's opinion, the available facilities are sufficient for the Group's present liquidity requirements.
Net debt of $1,506m (2015: $529m) is analysed by currency as follows:
2016 2015
$m $m
Borrowings
Sterling 1,289 1,405
US dollar 418 253
Euros 2 4
Other 3 4
Cash and cash equivalents
Sterling (27) (619)
US dollar (127) (460)
Euros (12) (15)
Canadian dollar (8) (8)
Chinese renminbi (7) (4)
Other (25) (31)
____ ____
Net debt 1,506 529
____ ____
Average debt levels 1,235 1,420
____ ____
InterContinental Hotels Group PLC
GROUP INCOME STATEMENT
For the year ended 31 December 2016
Year ended 31 December Year ended 31 December
2016 2015
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note Total items (note Total
4) 4)
$m $m $m $m $m $m
Revenue (note 3) 1,715 - 1,715 1,803 - 1,803
Cost of sales (580) - (580) (640) - (640)
Administrative
expenses (339) (13) (352) (395) (25) (420)
Share of losses
of associates and
joint ventures (2) - (2) (3) - (3)
Other operating
income and expenses 9 - 9 11 880 891
_____ _____ _____ _____ _____ _____
803 (13) 790 776 855 1,631
Depreciation and
amortisation (96) - (96) (96) - (96)
Impairment charges - (16) (16) - (36) (36)
_____ _____ _____ _____ _____ _____
Operating profit
(note 3) 707 (29) 678 680 819 1,499
Financial income 6 - 6 5 - 5
Financial expenses (93) - (93) (92) - (92)
_____ _____ _____ _____ _____ _____
Profit before tax 620 (29) 591 593 819 1,412
Tax (note 5) (186) 12 (174) (180) (8) (188)
_____ _____ _____ _____ _____ _____
Profit for the
year from continuing
operations 434 (17) 417 413 811 1,224
____ _____ _____ ____ _____ _____
Attributable to:
Equity holders
of the parent 431 (17) 414 411 811 1,222
Non-controlling
interest 3 - 3 2 - 2
____ _____ ____ ____ _____ ____
434 (17) 417 413 811 1,224
____ _-____ _____ ____ __-___--_ _____
Earnings per ordinary
share
(note 6)
Continuing and
total operations:
Basic 195.3c 520.0c
Diluted 193.5c 513.4c
Adjusted 203.3c 174.9c
Adjusted diluted 201.4c 172.7c
_____ _____ _____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
2016 2015
Year ended Year ended
31 December 31 December
$m $m
Profit for the year 417 1,224
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss:
Gains on valuation of available-for-sale
financial assets, net of related tax
charge of $nil (2015 $nil) 5 2
Exchange gains/(losses) on retranslation
of foreign operations, net of related
tax charge of $3m (2015 $1m) 182 (2)
Fair value gain reclassified to profit
on disposal of available-for-sale (7) -
financial asset
Exchange losses reclassified to profit
on hotel disposal - 2
_____ _____
180 2
Items that will not be reclassified
to profit or loss:
Re-measurement (losses)/gains on defined
benefit plans, net of related tax
credit of $4m (2015 charge of $4m) - 9
Tax related to pension contributions - 7
_____ _____
- 16
_____ _____
Total other comprehensive income for
the year 180 18
_____ _____
Total comprehensive income for the
year 597 1,242
_____ _____
Attributable to:
Equity holders of the parent 594 1,240
Non-controlling interest 3 2
_____ _____
597 1,242
_____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
Year ended 31 December 2016
Equity Non-controlling
share Other Retained interest Total
capital reserves* earnings equity
$m $m $m $m $m
At beginning of
the year 169 (2,513) 2,653 10 319
Total comprehensive
income for the year - 180 414 3 597
Transfer of treasury
shares to employee
share trusts - (24) 24 - -
Purchase of own
shares by employee
share trusts - (10) - - (10)
Release of own shares
by employee share
trusts - 39 (39) - -
Equity-settled share-based
cost - - 23 - 23
Tax related to share
schemes - - 11 - 11
Equity dividends
paid - - (1,693) (5) (1,698)
Transaction costs
relating to shareholder
returns - - (1) - (1)
Exchange adjustments (28) 28 - - -
_____ _____ _____ _____ _____
At end of the year 141 (2,300) 1,392 8 (759)
_____ _____ _____ _____ _____
Year ended 31 December 2015
Equity Non-controlling
share Other Retained interest Total
capital reserves* earnings equity
$m $m $m $m $m
At beginning of
the year 178 (2,539) 1,636 8 (717)
Total comprehensive
income for the year - 2 1,238 2 1,242
Purchase of own
shares by employee
share trusts - (47) - - (47)
Release of own shares
by employee share
trusts - 62 (62) - -
Equity-settled share-based
cost - - 24 - 24
Tax related to share
schemes - - 5 - 5
Equity dividends
paid - - (188) - (188)
Exchange adjustments (9) 9 - - -
_____ _____ ____ ____ ____
At end of the year 169 (2,513) 2,653 10 319
_____ _____ _____ _____ _____
* Other reserves comprise the capital redemption reserve,
shares held by employee share trusts, other reserves,
unrealised gains and losses reserve and currency
translation reserve.
All items above are shown net of tax.
InterContinental Hotels Group PLC
GROUP STATEMENT OF FINANCIAL POSITION
31 December 2016
2016 2015
31 December 31 December
$m $m
ASSETS
Property, plant and equipment 419 428
Goodwill and other intangible assets 1,292 1,226
Investment in associates and joint ventures 111 136
Trade and other receivables 8 3
Other financial assets 248 284
Non-current tax receivable 23 37
Deferred tax assets 48 49
_____ _____
Total non-current assets 2,149 2,163
_____ _____
Inventories 3 3
Trade and other receivables 472 462
Current tax receivable 77 4
Other financial assets 20 -
Cash and cash equivalents 206 1,137
_____ _____
Total current assets 778 1,606
_____ _____
Total assets (note 3) 2,927 3,769
_____ _____
LIABILITIES
Loans and other borrowings (106) (427)
Derivative financial instruments (3) (3)
Loyalty programme liability (291) (223)
Trade and other payables (681) (616)
Provisions (3) (15)
Current tax payable (50) (85)
_____ _____
Total current liabilities (1,134) (1,369)
_____ _____
Loans and other borrowings (1,606) (1,239)
Retirement benefit obligations (96) (129)
Loyalty programme liability (394) (426)
Trade and other payables (200) (152)
Provisions (5) -
Deferred tax liabilities (251) (135)
_____ _____
Total non-current liabilities (2,552) (2,081)
_____ _____
Total liabilities (3,686) (3,450)
_____ _____
Net (liabilities)/assets (759) 319
_____ _____
EQUITY
Equity share capital 141 169
Capital redemption reserve 9 11
Shares held by employee share trusts (11) (18)
Other reserves (2,860) (2,888)
Unrealised gains and losses reserve 111 113
Currency translation reserve 451 269
Retained earnings 1,392 2,653
_____ _____
IHG shareholders' equity (767) 309
Non-controlling interest 8 10
_____ _____
Total equity (759) 319
_____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 2016
2016 2015
Year ended Year ended
31 December 31 December
$m $m
Profit for the year 417 1,224
Adjustments reconciling profit for
the year to cash flow from operations
(note 8) 536 (414)
_____ _____
Cash flow from operations 953 810
Interest paid (75) (75)
Interest received 4 2
Tax paid on operating activities (130) (109)
_____ _____
Net cash from operating activities 752 628
_____ _____
Cash flow from investing activities
Purchase of property, plant and equipment (32) (42)
Purchase of intangible assets (175) (157)
Investment in associates and joint
ventures (14) (30)
Loan advances to associates and joint
ventures (2) (25)
Investment in other financial assets (13) (28)
Acquisition of business, net of cash
acquired - (438)
Capitalised interest paid (5) (4)
Disposal of hotel assets, net of costs
and cash disposed (5) 1,277
Repayments related to intangible assets 3 -
Loan repayments by associates and joint
ventures - 22
Proceeds from associates and joint
ventures 2 9
Repayments of other financial assets 25 6
Tax paid on disposals - (1)
_____ _____
Net cash from investing activities (216) 589
_____ _____
Cash flow from financing activities
Purchase of own shares by employee
share trusts (10) (47)
Dividends paid to shareholders (1,693) (188)
Dividend paid to non-controlling interest (5) -
Transaction costs relating to shareholder (1) -
returns
Issue of long-term bonds 459 458
Other new borrowings - 400
Long-term bonds repaid (315) -
New borrowings repaid - (400)
Increase/(decrease) in other borrowings 109 (355)
Proceeds from foreign exchange swaps - 22
_____ _____
Net cash from financing activities (1,456) (110)
_____ _____
Net movement in cash and cash equivalents,
net of overdrafts, in the year (920) 1,107
Cash and cash equivalents, net of overdrafts,
at beginning of the year 1,098 55
Exchange rate effects (61) (64)
_____ _____
Cash and cash equivalents, net of overdrafts,
at end of the year 117 1,098
_____ _____
InterContinental Hotels Group plc
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
1. Basis of preparation
The audited consolidated financial statements of
InterContinental Hotels Group PLC (the Group or
IHG) for the year ended 31 December 2016 have been
prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and as applied in accordance with the provisions
of the Companies Act 2006. Other than the change
set out below, they have been prepared on a consistent
basis using the accounting policies set out in
the InterContinental Hotels Group PLC Annual Report
and Financial Statements for the year ended 31
December 2015.
With effect from 1 January 2016, the Group has
adopted Amendments to IAS 1 'Disclosure Initiative'
which has resulted in the presentation of the loyalty
programme liability separately on the Group statement
of financial position.
2. Exchange rates
The results of operations have been translated
into US dollars at the average rates of exchange
for the year. In the case of sterling, the translation
rate is $1= GBP0.74 (2015 $1=GBP0.65). In the case
of the euro, the translation rate is $1 = EUR0.90
(2015 $1 = EUR0.90).
Assets and liabilities have been translated into
US dollars at the rates of exchange on the last
day of the year. In the case of sterling, the translation
rate is $1=GBP0.81 (2015 $1 = GBP0.68). In the
case of the euro, the translation rate is $1 =
EUR0.95 (2015 $1 = EUR0.92).
3. Segmental information
Revenue
2016 2015
$m $m
Americas 993 955
Europe 227 265
AMEA 237 241
Greater China 117 207
Central 141 135
_____ _____
Total revenue 1,715 1,803
_____ _____
All results relate to continuing operations.
Profit 2016 2015
$m $m
Americas 633 597
Europe 75 78
AMEA 82 86
Greater China 45 70
Central (128) (151)
_____ _____
Reportable segments' operating
profit 707 680
Exceptional items (note 4) (29) 819
_____ _____
Operating profit 678 1,499
Net finance costs (87) (87)
_____ _____
Profit before tax 591 1,412
_____ _____
All results relate to continuing operations.
Assets 2016 2015
$m $m
Americas 1,417 1,355
Europe 321 383
AMEA 249 260
Greater China 147 148
Central 439 396
_____ _____
Segment assets 2,573 2,542
Unallocated assets:
Non-current tax receivable 23 37
Deferred tax assets 48 49
Current tax receivable 77 4
Cash and cash equivalents 206 1,137
_____ _____
Total assets 2,927 3,769
_____ _____
4. Exceptional items
2016 2015
$m $m
Exceptional items before tax
Administrative expenses:
Kimpton integration costs (a) (13) (10)
Venezuelan currency losses (b) - (4)
Reorganisation costs (c) - (6)
Corporate development costs (d) - (5)
_______ _______
(13) (25)
Other operating income and expenses:
Gain on disposal of hotels (e) - 871
Gain on disposal of investment
in associate (f) - 9
_____ _____
- 880
Impairment charges:
Associates (g) (16) (9)
Property, plant and equipment
(h) - (27)
_____ ____
(16) (36)
_____ ____
(29) 819
_____ _____
Tax
Tax on exceptional items (i) 12 (8)
_____ _____
All items above relate to continuing operations.
These items are treated as exceptional by reason
of their size or nature.
a) Relates to the cost of integrating Kimpton Hotel
and Restaurant Group, LLC ('Kimpton') into the
operations of the Group. Kimpton was acquired
on 16 January 2015. The integration programme
remains in progress and will be substantially
completed in 2017.
b) Arose from changes to the Venezuelan exchange
rate mechanisms.
c) Related to the implementation of more efficient
processes and procedures in the Group's Global
Technology infrastructure to help mitigate future
cost increases.
d) Primarily legal costs related to development
opportunities.
e) Arose from the sale of InterContinental Paris
- Le Grand on 20 May 2015 and InterContinental
Hong Kong on 30 September 2015.
f) Related to the disposal of an associate investment
in the AMEA region.
g) In 2016, relates to an associate investment in
The Americas region and, in 2015, related to
an associate investment in the AMEA region, following
re-assessments of their recoverable amounts.
h) Related to two hotels in North America following
a re-assessment of their recoverable amounts.
i) In 2016, comprises a $6m deferred tax credit
in respect of the associate investment impairment,
a $5m deferred tax credit representing future
tax relief on Kimpton integration costs and $1m
credit in respect of other items. In 2015, comprised
a charge of $56m relating to disposal of hotels,
a credit of $21m in respect of the 2014 disposal
of an 80.1% interest in InterContinental New
York Barclay reflecting the judgment that state
tax law changes would now apply to the deferred
gain, and credits of $27m for current and deferred
tax relief on other operating exceptional items
of current and prior periods.
5. Tax
The tax charge on profit from continuing operations,
excluding the impact of exceptional items (note
4), has been calculated using a tax rate of 30%
(2015 30%) analysed as follows:
Year ended 31 2016 2016 2016 2015 2015 2015
December
Profit Tax Tax Profit Tax Tax
$m $m rate $m $m rate
Before exceptional
items 620 (186) 30% 593 (180) 30%
Exceptional items (29) 12 819 (8)
____ ____ ____ ____
591 (174) 1,412 (188)
_____ _____ _____ _____
Analysed as:
UK tax 20 (2)
Foreign tax (194) (186)
____ ____
(174) (188)
_____ _____
6. Earnings per ordinary share
Basic earnings per ordinary share is calculated
by dividing the profit for the year available for
IHG equity holders by the weighted average number
of ordinary shares, excluding investment in own
shares, in issue during the year.
Diluted earnings per ordinary share is calculated
by adjusting basic earnings per ordinary share to
reflect the notional exercise of the weighted average
number of dilutive ordinary share awards outstanding
during the year.
Adjusted earnings per ordinary share is disclosed
in order to show performance undistorted by exceptional
items, to give a more meaningful comparison of the
Group's performance.
Continuing and total operations 2016 2015
Basic earnings per ordinary share
Profit available for equity holders
($m) 414 1,222
Basic weighted average number of ordinary
shares (millions) 212 235
Basic earnings per ordinary share
(cents) 195.3 520.0
_____ _____
Diluted earnings per ordinary share
Profit available for equity holders
($m) 414 1,222
Diluted weighted average number of
ordinary shares (millions) 214 238
Diluted earnings per ordinary share
(cents) 193.5 513.4
_____ _____
Adjusted earnings per ordinary share
Profit available for equity holders
($m) 414 1,222
Adjusting items (note 4):
Exceptional items before tax ($m) 29 (819)
Tax on exceptional items ($m) (12) 8
____ ____
Adjusted earnings ($m) 431 411
Basic weighted average number of ordinary
shares (millions) 212 235
Adjusted earnings per ordinary share
(cents) 203.3 174.9
_____ _____
Adjusted diluted earnings per ordinary
share
Diluted weighted average number of
ordinary shares (millions) 214 238
Adjusted diluted earnings per ordinary
share (cents) 201.4 172.7
_____ _____
The diluted weighted average number of ordinary
shares is calculated as:
2016 2015
millions millions
Basic weighted average number of ordinary
shares 212 235
Dilutive potential ordinary shares 2 3
____ ____
214 238
_____ _____
7. Dividends and shareholder returns
2016 2015 2016 2015
cents per cents $m $m
share per share
Paid during the year:
Final (declared
for previous year) 57.5 52.0 137 125
Interim 30.0 27.5 56 63
Special 632.9 - 1,500 -
_____ _____ _____ _____
720.4 79.5 1,693 188
_____ _____ _____ _____
Proposed for approval at the Annual General
Meeting (not recognised as a liability at
31 December):
Final 64.0 57.5 126 135
_____ _____ _____ _____
On 23 February 2016, the Group announced a $1.5bn
return of funds to shareholders by way of a special
dividend and share consolidation. On 6 May 2016,
shareholders approved the share consolidation on
the basis of 5 new ordinary shares of 18 (318) /(329)
p per share for every 6 existing ordinary shares
of 15 (265) /(329) p, which became effective on 9
May 2016 and resulted in the reduction of 42m shares
in issue. The special dividend was paid to shareholders
on 23 May 2016. The dividend and share consolidation
had the same economic effect as a share repurchase
at fair value, therefore previously reported earnings
per share has not been restated.
In February 2017, the Board proposed a $400m return
of funds to shareholders by way of a special dividend
with a share consolidation.
The total number of shares held as treasury shares
at 31 December 2016 was 8.9m.
8. Reconciliation of profit for the year to cash flow
from operations
2016 2015
$m $m
Profit for the year 417 1,224
Adjustments for:
Net financial expenses 87 87
Income tax charge 174 188
Depreciation and amortisation 96 96
Impairment 16 36
Other exceptional items 13 (855)
Equity-settled share-based cost 17 19
Dividends from associates and joint
ventures 5 5
Net change in loyalty programme
liability and System Fund surplus 65 42
System Fund depreciation and amortisation 31 21
Other changes in net working capital 78 (10)
Utilisation of provisions, net of (4) -
insurance recovery
Retirement benefit contributions,
net of costs (32) (4)
Cash flows relating to exceptional
items (19) (45)
Other items 9 6
_____ ______
Total adjustments 536 (414)
_____ _____
Cash flow from operations 953 810
_____ _____
9. Net debt
2016 2015
$m $m
Cash and cash equivalents 206 1,137
Loans and other borrowings - current (106) (427)
Loans and other borrowings - non-current (1,606) (1,239)
_____ _____
Net debt (1,506) (529)
_____ _____
Finance lease obligation included
above (227) (224)
_____ _____
10. Movement in net debt
2016 2015
$m $m
Net (decrease)/increase in cash
and cash equivalents, net of overdrafts (920) 1,107
Add back cash flows in respect
of other components of net debt:
Issue of long-term bonds (459) (458)
Other new borrowings - (400)
Long-term bonds repaid 315 -
New borrowings repaid - 400
(Increase)/decrease in other borrowings (109) 355
_____ _____
(Increase)/decrease in net debt
arising from cash flows (1,173) 1,004
Non-cash movements:
Finance lease obligations (4) (6)
Increase in accrued interest (6) (7)
Exchange and other adjustments 206 13
_____ _____
(Increase)/decrease in net debt (977) 1,004
Net debt at beginning of the year (529) (1,533)
_____ _____
Net debt at end of the year (1,506) (529)
_____ _____
11. Commitments and contingencies
At 31 December 2016, the amount contracted for
but not provided for in the financial statements
for expenditure on property, plant and equipment
and intangible assets was $97m (2015 $76m). The
Group has also committed to invest in a number
of its associates, with an estimated outstanding
commitment of $36m at 31 December 2016 (2015 $45m)
based on current forecasts.
In limited cases, the Group may provide performance
guarantees to third-party hotel owners to secure
management contracts. At 31 December 2016, the
amount provided in the financial statements was
$5m (2015 $1m) and the maximum unprovided exposure
under such guarantees was $14m (2015 $13m).
The Group may guarantee loans made to facilitate
third-party ownership of hotels in which the Group
has an equity interest. At 31 December 2016, there
were guarantees of $33m in place (2015 $30m).
In connection with an associate investment, the
Group has provided an indemnity to its joint venture
partner for 100% of the obligations related to
a $43m supplemental bank loan made to the associate
on 31 December 2015.
During the first half of 2016, the Group was notified
of a security incident at a number of Kimpton
hotels that resulted in unauthorised access to
guest payment card data (the "Kimpton Security
Incident"). Based on the estimated number of cards
affected and opinion of external advisers, an
amount of $5m has been provided in the financial
statements to cover the estimated cost of reimbursing
the impacted payment card networks for counterfeit
fraud losses and related expenses. This estimate
involves significant judgement based on currently
available information and is subject to change
as actual claims are made and new information
becomes available.
In December 2016, the Group was notified of a
security incident at a number of hotels in The
Americas region (the "Americas Security Incident").
The Group issued a Substitute Notice on 3 February
2017 notifying guests that malware was installed
on servers that processed payment cards used at
restaurants and bars of 12 IHG managed properties.
An investigation of other properties in The Americas
region is ongoing. It is not practicable to make
a reliable estimate of the possible financial
effect of any claims concerning the Americas Security
Incident at this time.
The Group may be exposed to investigations regarding
compliance with applicable State and Federal data
security standards, although no claims have been
received to date. In addition, the Group is exposed
to legal action from individuals and organisations
impacted by the security incidents. A class action
has been filed in the courts in relation to the
Kimpton Security Incident, although alleged damages
have not been specified. It is not practicable
to make a reliable estimate of the possible financial
effect of any claims on the Group at this time.
In respect of the $5m provided in the financial
statements, it is expected that a proportion will
be recoverable under the Group's insurance programmes
although this, together with any potential recoveries
in respect of the contingent liabilities detailed
above, will be subject to specific agreement with
the relevant insurance providers.
From time to time, the Group is subject to legal
proceedings the ultimate outcome of each being
always subject to many uncertainties inherent
in litigation. The Group has also given warranties
in respect of the disposal of certain of its former
subsidiaries. It is the view of the Directors
that, other than to the extent that liabilities
have been provided for in these financial statements,
it is not possible to quantify any loss to which
these proceedings or claims under these warranties
may give rise, however, as at the date of reporting,
the Group does not believe that the outcome of
these matters will have a material effect on the
Group's financial position.
12. Group financial statements
The preliminary statement of results was approved
by the Board on 20 February 2017. The preliminary
statement of results does not represent the full
Group financial statements of InterContinental
Hotels Group PLC and its subsidiaries which will
be delivered to the Registrar of Companies in
due course. The financial information for the
year ended 31 December 2015 has been extracted
from the IHG Annual Report and Financial Statements
for that year as filed with the Registrar of Companies.
Auditor's review
The auditors, Ernst & Young LLP, have given an
unqualified report under Chapter 3 of Part 16
of the Companies Act 2006 in respect of the full
Group financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKKDBFBKDQBB
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February 21, 2017 02:00 ET (07:00 GMT)
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