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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -118.00 | -1.45% | 8,002.00 | 8,028.00 | 8,032.00 | 8,112.00 | 7,922.00 | 8,060.00 | 530,777 | 16:35:22 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Hotels And Motels | 4.62B | 750M | 4.5551 | 17.63 | 13.22B |
From Apr 2019 to Apr 2024
TIDMIHG
RNS Number : 3934N
InterContinental Hotels Group PLC
08 August 2017
InterContinental Hotels Group PLC
The following amendment has been made to the 'Half-year Report' announcement released on 8 August 2017 at 7.00am under RNS No 3190N
Ex-dividend date: 31 August 2017
All other details remain unchanged.
The full amended text is shown below.
Half Year Results to 30 June 2017
Hot Features
Premium
Financial summary(1) Reported Underlying(2)
----------------------------- --------------------------
2017 2016 % Change 2017 2016 % Change
---------------------- -------- -------- --------- ------- ------ ---------
Revenue $857m $838m 2% $788m $756m 4%
Fee Revenue(3) $686m $673m 2% $697m $673m 4%
Operating profit $370m $344m 8% $365m $340m 7%
Adjusted EPS 113.3c 89.0c 27% 111.7c 87.7c 27%
------- ------ ---------
Basic EPS(4) 111.7c 87.7c 27%
Interim dividend per
share 33.0c 30.0c 10%
---------
Net debt $2,056m $1,829m
---------------------- -------- --------
(1) All figures before exceptional items unless otherwise noted. (2) Excluding owned asset disposals, managed leases and significant liquidated damages; at constant H1 2016 exchange rates (CER). Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates(5) . (3) Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages. (4) After exceptional items.
Keith Barr, Chief Executive of InterContinental Hotels Group PLC, said:
--------------------------------------------------------------------------------
"We have had a good first half. RevPAR growth of 2.1% and net system size
growth of 3.7% delivered a 7% increase in underlying operating profit and
a 27% increase in underlying EPS, underpinning the Board's decision to
increase the interim dividend by 10%.
We continue to make good progress in executing our well-established strategy
to deliver high quality sustainable growth, and during the half we passed
the landmark of over 1 million open or pipeline rooms. In June, we announced
a new, midscale brand to address a $20 billion underserved segment in the
US. We believe this will become another brand of scale for IHG that will
deliver superior returns to our owners. Other highlights include the continued
roll-out of new design formats across our Holiday Inn Brand Family and
the ongoing repositioning of Crowne Plaza. Leveraging our technological
capabilities, we are on track to begin roll out of our next generation
cloud-based Guest Reservation System in late 2017.
I feel privileged to be the new CEO of IHG and to have the opportunity
to build on the strong performance we have delivered. My focus is on driving
an acceleration in our growth rate, by increasing the resources dedicated
behind the highest opportunity markets and segments, strengthening our
brand portfolio, building on our leading loyalty proposition, and enhancing
our competitive advantage through prioritising digital and technological
innovation. We will continue to focus on enhancing our cost efficiency
to generate funds for reinvestment. This, combined with our cash-generative
business model and disciplined approach to capital allocation, will drive
superior returns to shareholders.
While we will always face macro-economic and geopolitical uncertainties,
we remain confident in the outlook for 2017."
Financial Highlights
--------------------------------------------------------------------------------
* Solid revenue growth driven by both RevPAR and rooms
* Global comparable H1 RevPAR growth of 2.1%, led by
occupancy up 0.9%pts. Q2 RevPAR up 1.5%, including a
decline of -0.4% in the US, adversely impacted by the
timing of Easter.
* 3.7% net room growth year on year, with 23k room
openings, up 31% year on year, which includes 3.5k
rooms in Makkah, Saudi Arabia, signed in 2015.
* High-quality business model, focused on disciplined
execution, capital allocation and shareholder returns
* Group fee margin of 51.0%, up 2.4%pts (1.5%pts CER);
favourable cost phasing and efficiency improvements.
* Focused investment and asset recycling led to net
capital expenditure(5) of $162m (gross: $186m).
* $0.4bn returned to shareholders in May via a $2.025
per share special dividend with 45 for 47 share
consolidation.
* 10% increase in interim dividend to 33.0c reflects
confidence in our long-term sustainable growth.
Strategic Progress
--------------------------------------------------------------------------------
* Strengthening our portfolio of preferred brands
* Launch, in June, of a high quality midscale brand in
the US, leveraging our expertise across the
mainstream(6) segment where we already have a 21%
share of supply and 24% share of pipeline, to build
another brand of scale for IHG. Early interest in the
brand from our 2,000 existing franchisees has been
highly encouraging.
* Continued to roll out innovative guest room and
public area enhancements for the Holiday Inn Brand
Family; new designs now in more than 400 hotels
across US and Europe, driving mid-single digit
increases in guest satisfaction.
* Positive response to Crowne Plaza US Accelerate
programme, with owner capital commitments of $190m
in the last year in hotel purchases and major
refurbishment in addition to 30 hotels committing to
renovating guest rooms.
* Growing our boutique footprint, with the opening of
our second Kimpton outside the US, in Amsterdam, and
six more US openings planned this year; and our Hotel
Indigo open and pipeline hotels reaching over 150
globally, with openings in Bali and Los Angeles and
signings in Beijing and London's Leicester Square.
* Growing through targeted hotel distribution
* Signed 32k rooms into the pipeline, taking it to 230k
rooms. 45% of the pipeline is under construction.
* Driving revenue delivery through technology and
loyalty
* Innovative cloud-based Guest Reservation System on
track for roll-out in 2017, with full deployment
expected by late 2018/early 2019. Positive feedback
on transformational user-interface.
* Continued focus on driving direct bookings with the
completion of the global roll out of 'Your Rate by
IHG Rewards Club' following the Q1 launch in Greater
China. Loyalty contribution up 0.4%pts YoY and
enrolments up 12% YoY.
--------------------------------------------------------------------------------
(5) For definition of non-GAAP measures and reconciliation to GAAP measures
refer to the Interim Management Report. (6) Mainstream includes STR midscale
and upper midscale segments.
--------------------------------------------------------------------------------
Americas - RevPAR growth slows in second quarter as Easter benefit reverses
--------------------------------------------------------------------------------------
Comparable RevPAR increased 1.1% (Q2: 0.1%), driven by 1.1% rate growth.
US RevPAR grew 0.7%, with a decline of -0.4% in Q2, adversely impacted
by the shift in timing of Easter. Holiday Inn and Holiday Inn Express RevPAR
grew 1.1% (Q2: 0.2%) and 0.6% (Q2: -0.1%) respectively. Combined these
brands delivered a 6% absolute RevPAR premium to the upper midscale segment.
Outside of the US, RevPAR grew 4.6%. Canada's 150(th) anniversary celebrations
generated solid demand in urban markets with RevPAR growth of 4.3%, whilst
growth in the Mexican economy, buoyed by a relatively weak Peso, contributed
to RevPAR growth of 9.1%.
Reported revenue increased 2% (2% CER) and reported operating profit pre-exceptional
items increased 3% (3% CER), whilst on an underlying(1) basis both revenue
and operating profit increased 3%.
On an underlying(1) basis, franchised operating profit grew 1% as incremental
royalties from RevPAR and net rooms growth were partly offset by lower
revenues from hotel signings and the annualisation of our $7m investment
in the Americas development team, $4m of which was incurred in H2 2016.
Underlying(1) managed operating profit increased 7% benefitting from the
continued ramp up of the InterContinental New York Barclay, following its
refurbishment and lower costs associated with our 20% interest in the hotel.
Underlying(1) owned revenue and operating profit increased 12% and 25%
respectively as the Holiday Inn Aruba benefitted from increased North American
inbound business.
We opened 11k rooms (95 hotels), including the 900 room InterContinental
Los Angeles Downtown. 9k rooms (63 hotels) were removed primarily across
the Holiday Inn, Holiday Inn Express and Crowne Plaza brands as we continue
to focus on high quality brand representation.
We signed 16k rooms, including the first Kimpton in Mexico and more than
11k rooms (112 hotels) for the Holiday Inn Brand Family.
Europe - Strong trading drives double digit profit growth
--------------------------------------------------------------------------------------
Comparable RevPAR increased 6.2% (Q2: 5.5%), driven equally by rate and
occupancy. UK RevPAR increased by 6.7%, with strong trading in both London
(9.0%) and the provinces (5.4%). In Germany, RevPAR growth for the half
was 2.3%, Q2 RevPAR declined -3.6% as the estate lapped very strong comparables
relating to trade show activity in 2016 in Dusseldorf and Munich. Trading
in Paris continues to recover with RevPAR up 11.6% in H1 driven by occupancy
gains (8.0%pts).
Reported revenue increased 4% (8% CER) and reported operating profit was
up 12% (12% CER).
On an underlying(1) basis revenue increased 11% and operating profit increased
12%.
We opened 1k rooms (8 hotels) including the Kimpton De Witt in Amsterdam,
our first Kimpton hotel in Europe, and signed 3k rooms (20 hotels) including
a Hotel Indigo in London's Leicester Square.
In Germany, we signed 10 hotels and opened three, taking the total open
and pipeline hotels to 112.
--------------------------------------------------------------------------------------
AMEA - Solid trading in key markets offset by weakness in the Middle East
--------------------------------------------------------------------------------------
Comparable RevPAR increased 1.4% (Q2: 2.7%). Performance outside the Middle
East continued to be strong, with 4.2% RevPAR growth. India was up 14.3%,
whilst Japan, Australasia and South-East Asia were up low to mid-single
digits.
In the Middle East, RevPAR declined -3.7% due to the ongoing impact of
low oil prices and industry wide supply growth. RevPAR growth was flat
in Q2, due to the favourable timing of Ramadan as well as improved royal
business in Saudi Arabia. We expect trading conditions for the rest of
the year to remain challenging.
The increasing mix of new rooms opening in developing markets meant that
total RevPAR declined -1.9% in the half (Q2: -1.0%).
Reported revenue was flat (2% CER) and operating profit was up 5% (10%
CER).
On an underlying(1) basis, revenue was up 1% and operating profit increased
11% benefitting from the favourable phasing of costs. We still expect managed
profit in 2017 to be broadly in line with 2016.
We opened 7k rooms (9 hotels) in the half, including the first Hotel Indigo
resort, in Bali, the first Staybridge Suites in Saudi Arabia and 3.5k rooms
in Makkah, Saudi Arabia. The rooms in Makkah relate to the remaining portion
of the 5k room signing that we announced in 2015 and, on an annualised
basis, are expected to generate $1m in fees.
We signed 3k rooms (15 hotels) including three deals in Australia and 1.3k
rooms for the Holiday Inn Brand Family.
--------------------------------------------------------------------------------------
(1) Excluding owned asset disposals, managed leases, significant liquidated
damages at constant H1 16 exchange rates (CER). See the Interim Management
Report for definition of non-GAAP measures and reconciliation to GAAP measures.
--------------------------------------------------------------------------------------
Greater China - Strong mainland trading and 9% rooms growth drive 15% profit
growth
---------------------------------------------------------------------------------
Comparable RevPAR increased 4.1% (Q2: 4.4%), with growth of 5.1% in mainland
China. RevPAR growth in Hong Kong was flat whilst Macau increased 2.1%.
Mainland tier 1 cities continued to trade well, with RevPAR up 5.4% in
the half driven by strong meeting and corporate demand, particularly in
Shanghai. Tier 2-4 cities also benefitted from solid meeting demand, leisure
groups and the benefit of hotels still ramping up, with occupancy gains
driving RevPAR growth of 5.2%.
Our strategy to maximise our long-term growth potential by using our mainstream
brands to penetrate less developed cities impacted total RevPAR, which
declined -0.3% for the region.
Reported revenue and operating profit increased by 6% (11% CER) and 15%
(15% CER) respectively.
Underlying(1) revenue increased 11% and underlying operating profit grew
15%, driven by strong trading in mainland China, 9% rooms growth and increased
revenues from signing and opening hotels.
We opened 4k rooms (16 hotels) in the half, including our 300(th) hotel
(the 340 room HUALUXE Zhangjiakou), our 40(th) InterContinental in the
region (the 370 room InterContinental Jinan City Centre), and the first
two Holiday Inn Express Franchise Plus properties.
Signings for the half totalled 10k rooms, or 46 hotels, the highest number
on record. This included the 420 room InterContinental Guangzhou Downtown
and the 255 room InterContinental Zhengzhou, and 34 Holiday Inn Express
hotels, including 24 on Franchise Plus contracts.
---------------------------------------------------------------------------------
Highly cash generative business with disciplined approach to capital allocation
---------------------------------------------------------------------------------
* Consistent fee margin growth
* Reported central overheads declined $9m, or $4m on a
constant currency basis, benefiting from a $4m
increase in central revenues and efficiency
improvements.
* Group fee margin of 51.0%, up 2.4%pts (1.5%pts CER),
benefiting from efficiency improvements and
favourable cost phasing. Full year margin growth
currently expected to be in the region of the
long-term average of 135bps.
* Significant free cash flow from operations
* Free cash flow(2) of $204m compares to $241m in H1
2016 (excluding the $95m benefit from renegotiation
of long term partnership agreements), impacted by
movement in system fund balances.
* Investing for growth
* $186m gross capital expenditure in first half: $44m
maintenance capex(2) and key money; $80m recyclable
investments(2) (including $43m in relation to
associates and joint ventures); and $62m system
funded capital investments. $7m proceeds received
from asset recycling and $17m system fund
depreciation released from the system fund surplus,
resulting in $162m of net capital expenditure.
* Gross capex guidance remains unchanged at up to $350m
p.a. into the medium term.
* Shareholder returns
* 10% increase in the interim dividend to 33.0c.
* $0.4bn returned to shareholders in May via a $2.025
per share special dividend, in conjunction with a 45
for 47 share consolidation.
* Efficient balance sheet provides flexibility
* Robust financial position, with on-going commitment
to an efficient balance sheet and investment grade
credit rating.
* Net debt(2) of $2,056m (including $228m finance lease
on InterContinental Boston), up $0.6bn on the 2016
close following the payment of the $0.4bn special
dividend in May. Net debt to EBITDA now stands at
2.5x (LTM).
Foreign exchange - minimal impact on reported profit
---------------------------------------------------------------------------------
Revenue impacts of the strong dollar against a number of currencies were
offset by cost benefits from the devaluation of sterling against the dollar
compared to H1 2016, increasing reported profit by $1m. If the closing
June 2017 exchange rates had existed through H2 2016, there would have
been no impact on reported operating profit for that period.
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 reduced by $1m to $40m due to a reduction
in the cost of debt following the bond refinancing in 2016 and the favourable
impact of a weaker pound on translation of sterling interest expense, offset
by higher average net debt levels following the payment of the 2016 $1.5bn
special dividend.
Tax: Based on the position at the end of the half, the tax charge has been
calculated using an interim effective tax rate of 33% (H1 2016: 33%). We
continue to expect the full year 2017 tax rate to be in the low 30s (%).
Exceptional operating items: $4m exceptional operating charge (2016: $5m
charge) relating to the Kimpton integration.
---------------------------------------------------------------------------------
(1) Excluding owned asset disposals, managed leases and significant liquidated
damages; at constant H1 16 exchange rates (CER).
(2) For definition of non-GAAP measures and reconciliation to GAAP measures
see the Interim Management Report.
---------------------------------------------------------------------------------
Appendix 1: Comparable RevPAR Movement Summary
--------------------------------------------------------------------
Half Year 2017 Q2 2017
---------- -------------------------- ----------------------------
RevPAR Rate Occ. RevPAR Rate Occ.
---------- ------- ------- -------- ------- ------- ----------
Group 2.1% 0.8% 0.9%pts 1.5% 0.9% 0.4%pts
Americas 1.1% 1.1% 0.0%pts 0.1% 0.9% (0.6)%pts
Europe 6.2% 3.2% 2.0%pts 5.5% 3.3% 1.6%pts
AMEA 1.4% (1.2)% 1.9%pts 2.7% 0.2% 1.7%pts
G. China 4.1% (1.1)% 3.2%pts 4.4% (0.8)% 3.4%pts
---------- ------- ------- -------- ------- ------- ----------
Appendix 2: RevPAR movement summary at constant exchange rates (CER)
vs. actual exchange rates (AER)
----------------------------------------------------------------------------------
Half Year 2017 Q2 2017
----------- --------------------------------- ------------------------------------
CER AER Difference CER AER Difference
----------- --------- --------- ----------- -------- -------- ----------------
Group 2.1% 0.6% 1.5%pts 1.5% 0.0% 1.5%pts
Americas 1.1% 0.9% 0.2%pts 0.1% (0.2)% 0.3%pts
Europe 6.2% (0.4)% 6.6%pts 5.5% (0.1)% 5.6%pts
AMEA 1.4% 0.4% 1.0%pts 2.7% 1.0% 1.7%pts
G. China 4.1% 0.0% 4.1%pts 4.4% 0.3% 4.1%pts
----------- --------- --------- ----------- -------- -------- ----------------
Appendix 3: Half Year System & Pipeline Summary (rooms)
------
System Pipeline
Openings Removals Net Total YoY%* Signings Total
--------- --------- ------- -------- ----------- --------- -------------
Group 22,857 (12,317) 10,540 777,675 3.7% 31,773 229,526
Americas 10,618 (8,662) 1,956 489,949 1.6% 15,814 102,578
Europe 1,443 (1,150) 293 110,362 3.6% 3,128 23,974
AMEA 6,910 (1,029) 5,881 81,932 11.6% 3,003 34,807
G. China 3,886 (1,476) 2,410 95,432 9.3% 9,828 68,167
----------- --------- --------- ------- -------- ----------- --------- -------------
* compared to H1 2016
Appendix 4: Half Year financial headlines
-----
Operating Profit Total Americas Europe AMEA G. China Central
$m
-------------------------
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
------------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Franchised 343 340 298 295 37 37 7 6 1 2 - -
Managed 120 113 33 32 12 10 43 42 32 29 - -
Owned & leased 16 13 15 12 0 0 1 1 0 0 - -
Regional overheads (56) (60) (25) (26) (11) (13) (10) (10) (10) (11) - -
Profit pre central
overheads 423 406 321 313 38 34 41 39 23 20 - -
Central overheads (53) (62) - - - - - - - - (53) (62)
Group Operating
profit ex. Exceptional
items 370 344 321 313 38 34 41 39 23 20 (53) (62)
Exceptional Items (4) (5) (4) (5) - - - - - - - -
Group Operating
profit 366 339 317 308 38 34 41 39 23 20 (53) (62)
------------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Appendix 5: Constant exchange rate (CER) and underlying operating profit movement before exceptional items
Total*** Americas Europe AMEA G. China
---------------- ------------------ ---------------- ---------------- ---------------- ------------------
Reported Actual* CER** Actual* CER** Actual* CER** Actual* CER** Actual* CER**
Growth /
(decline) 8% 7% 3% 3% 12% 12% 5% 10% 15% 15%
---------------- -------- -------- -------- ------ -------- ------ -------- ------ -------- --------
Underlying**** Total*** Americas Europe AMEA G. China
Growth /
(decline)
---------------- ------------------ ---------------- ---------------- ---------------- ------------------
7% 3% 12% 11% 15%
---------------- ------------------ ---------------- ---------------- ---------------- ------------------
Exchange
rates: GBP:USD EUR:USD * US dollar actual currency
** Translated at constant H1 2016
H1 2017 0.79 0.92 exchange rates(1)
H1 2016 0.70 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)
(1)
(1) For definition of non-GAAP measures and reconciliation
to GAAP measures see the Interim Management Report.
Appendix 6: Definitions
----------------------------------------------------------------------------
CER: constant exchange rates with H1 2016 exchange rates applied to
H1 2017.
Comparable RevPAR: Revenue per available room for hotels that have traded
for all of 2016 and 2017, reported at CER.
Fee revenue: Group revenue excluding owned and 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 H1 2017 $18m; H1 2016 $20m; EBIT H1 2017 $1m, H1 2016
$1m. Europe: Revenue H1 2017 $38m; H1 2016 $38m; EBIT H1 2017 $1m, H1
2016 $1m. AMEA: Revenue H1 2017 $24m; H1 2016 $24m; EBIT H1 2017 $2m,
H1 2016 $2m.
Significant liquidated damages: $nil in H1 2017; $nil in H1 2016.
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 2016 or 2017, reported at CER.
----------------------------------------------------------------------------
Appendix 7: Investor information for 2017 interim dividend
--------------------------------------------------------------------------------------------
Ex-dividend 31 August Record date: 1 September Payment date: 6 October 2017
date: 2017 2017
Dividend payment: ADRs: 33.0 cents per ADR; The corresponding amount in Pence
Sterling per ordinary share will be announced on 20(th)
September 2017, calculated based on the average of the
market exchange rates for the three working days commencing
15(th) September.
------------------ ------------------------------------------------------------------------
For further information, please contact:
-----------------------------------------------------------------------------------------------
Investor Relations (Heather Wood; Neeral +44 (0)1895 +44 (0)7808 098
Morzaria; Tom Yates): 512 176 724
+44 (0)1895 +44 (0)7527 424
Media Relations (Yasmin Diamond; Mark Debenham): 512 097 046
----------------------------------------------------------- -------------- ------------------
Webcast for Analysts and Shareholders:
A conference call and webcast presented by Keith Barr, Chief Executive
Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will commence
at 9:30am London time on 8(th) August on the web address www.ihgplc.com/interims17.
For those wishing to ask questions please use the dial in details below
which will have a Q&A facility.
The webcast replay will be available on the website later on the day
of the results and will remain on it for the foreseeable future.
International dial-in: +44 (0)203 059 8125
US dial-in: +1 724 928 9460
Passcode: IHG Investor
A replay of the conference call will also be available following the
event - details are below.
Replay: +44 (0)121 260 4861
Pin: 6653618#
US conference call and Q&A:
An additional conference call, primarily for US investors and analysts,
at 9:00am New York Time on 8(th) August. There will be an opportunity
to ask questions.
International dial-in: +44 (0)203 059 8125
US dial-in: +1 724 928 9460
Passcode: IHG Investor
A replay of the conference call will also be available following the
event - details are below.
Replay: +44 (0)121 260 4861
Pin: 6654548#
Website:
The full release and supplementary data will be available on our website from 7:00am (London time) on 8(th) August. The web address is www.ihgplc.com/interims17 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), Holiday Inn Express(R), Holiday Inn Club Vacations(R), Holiday Inn Resort(R), Staybridge Suites(R) and Candlewood Suites(R). IHG franchises, leases, manages or owns more than 5,200 hotels and nearly 780,000 guest rooms in almost 100 countries, with more than 1,500 hotels in its development pipeline. IHG also manages IHG(R) Rewards Club, our global loyalty programme, which has more than 100 million enrolled members. 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.
INTERIM MANAGEMENT REPORT
This Interim Management Report discusses the performance of InterContinental Hotels Group PLC
(the Group or IHG) for the six months ended 30 June 2017.
Group
6 months ended 30 June
Group results 2017 2016 %
$m $m change
Revenue
Americas 499 490 1.8
Europe 113 109 3.7
AMEA 115 115 -
Greater China 58 55 5.5
Central 72 69 4.3
____ ____ ____
Total 857 838 2.3
____ ____ ____
Operating profit before exceptional
items
Americas 321 313 2.6
Europe 38 34 11.8
AMEA 41 39 5.1
Greater China 23 20 15.0
Central (53) (62) 14.5
____ ____ ____
370 344 7.6
Exceptional operating items (4) (5) 20.0
____ ____ ____
Operating profit 366 339 8.0
Net financial expenses (40) (41) 2.4
____ ____ ____
Profit before tax 326 298 9.4
____ ____ ____
Earnings per ordinary share
Basic 111.7c 87.7c 27.4
Adjusted 113.3c 89.0c 27.3
Average US dollar to sterling exchange
rate $1 : GBP0.79 $1 : GBP0.70 12.9
During the six months ended 30 June 2017, revenue increased by $19m (2.3%) to $857m and operating profit increased by $27m (8.0%) to $366m.
Underlying(1) Group revenue and underlying(1) Group operating profit increased by $32m (4.2%) and $25m (7.4%) respectively.
The net central operating loss before exceptional items decreased by $9m (14.5%) to $53m compared to 2016 and by $4m (6.5%) to $58m at constant currency.
Profit before tax increased by $28m to $326m. Basic earnings per ordinary share increased by 27.4% to 111.7c, whilst adjusted earnings per ordinary share increased by 27.3% to 113.3c.
1 Underlying excludes significant liquidated damages and the results from managed-lease hotels, translated at constant currency by applying
prior-year exchange rates (see the Use of Non-GAAP measures section later in this Interim Management Report).
Hotels Rooms
Global hotel and room count Change over Change over
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 188 1 64,572 922
Kimpton 60 (1) 11,374 136
HUALUXE 5 1 1,436 340
Crowne Plaza 410 2 114,027 224
Hotel Indigo 79 4 9,515 610
EVEN Hotels 6 - 1,010 -
Holiday Inn(1) 1,217 (24) 226,941 (4,815)
Holiday Inn Express 2,542 45 253,904 6,895
Staybridge Suites 245 9 26,612 1,002
Candlewood Suites 374 12 35,251 1,059
Other 95 (2) 33,033 4,167
____ ____ ______ _____
Total 5,221 47 777,675 10,540
____ ____ ______ _____
Analysed by ownership type
Franchised 4,352 31 543,049 399
Managed 861 16 232,268 10,195
Owned and leased 8 - 2,358 (54)
____ ____ ______ _____
Total 5,221 47 777,675 10,540
____ ____ ______ _____
(1) Includes 46 Holiday Inn Resort properties (11,653 rooms) and 26 Holiday Inn Club Vacations properties (7,676 rooms)
(2016: 46 Holiday Inn Resort properties (11,652 rooms) and 26 Holiday Inn Club Vacations properties (7,601 rooms)).
Hotels Rooms
Global pipeline Change over Change over
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 63 1 17,044 (436)
Kimpton 17 (1) 2,863 (235)
HUALUXE 21 (1) 6,556 (400)
Crowne Plaza 85 (5) 23,748 (788)
Hotel Indigo 76 1 10,486 (107)
EVEN Hotels 7 1 1,065 285
Holiday Inn(1) 270 9 53,501 823
Holiday Inn Express 702 26 86,451 2,569
Staybridge Suites 151 11 16,454 1,133
Candlewood Suites 107 (1) 9,608 4
Other 14 2 1,750 (3,398)
____ ____ ______ _____
Total 1,513 43 229,526 (550)
____ ____ ______ _____
Analysed by ownership type
Franchised 1,097 58 124,944 7,250
Managed 416 (15) 104,582 (7,800)
____ ____ ______ _____
Total 1,513 43 229,526 (550)
____ ____ ______ _____
(1) Includes 14 Holiday Inn Resort properties (3,601 rooms) (2016: 14 Holiday Inn Resort properties (3,531 rooms)).
THE AMERICAS
6 months ended 30 June
Americas Results 2017 2016 %
$m $m change
Revenue
Franchised 343 338 1.5
Managed 82 86 (4.7)
Owned and leased 74 66 12.1
____ ____ ____
Total 499 490 1.8
____ ____ ____
Operating profit before exceptional
items
Franchised 298 295 1.0
Managed 33 32 3.1
Owned and leased 15 12 25.0
Regional overheads (25) (26) 3.8
____ ____ ____
321 313 2.6
Exceptional items (4) (5) 20.0
____ ____ ____
Operating profit 317 308 2.9
____ ____ ____
Americas Comparable RevPAR movement on
previous year 6 months ended
30 June 2017
Franchised
Crowne Plaza 0.2%
Holiday Inn 1.8%
Holiday Inn Express 0.8%
All brands 1.1%
Managed
InterContinental (2.0)%
Kimpton 2.1%
Crowne Plaza 1.4%
Holiday Inn (1.1)%
Staybridge Suites (1.3)%
Candlewood Suites (0.4)%
All brands 0.5%
Owned and leased
All brands 7.6%
Franchised revenue increased by $5m (1.5%) to $343m and operating profit increased by $3m (1.0%) to $298m. On a constant currency basis, revenue increased by $5m (1.5%) to $343m and operating profit increased by $4m (1.4%) to $299m. Royalties(1) growth of 2.1% was driven by 1.6% rooms growth year-on-year and comparable RevPAR growth of 1.1%.
Managed revenue decreased by $4m (4.7%) to $82m, and operating profit increased by $1m (3.1%) to $33m. Revenue and operating profit included $18m (2016: $20m) and $1m (2016: $1m) respectively from one managed lease property(2) . Excluding results from this managed lease hotel, and on a constant currency basis, revenue remained flat and operating profit increased by $2m (6.5%).
Owned and leased revenue increased by $8m (12.1%) to $74m, and operating profit increased by $3m (25.0%) to $15m. On a constant currency basis, owned and leased revenue increased by $8m (12.1%), and operating profit increased by $3m (25.0%), as one hotel benefited from increased North Americas inbound business.
1 Royalties are fees, based on rooms revenue, that a franchisee pays to the brand owner for use of the brand name.
2 A property that is structured for legal reasons as an operating lease but has the same characteristics as a management contract.
Hotels Rooms
Americas hotel and room Change over Change over
count
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 49 1 17,302 894
Kimpton 59 (2) 11,100 (138)
Crowne Plaza 161 (3) 42,748 (1,368)
Hotel Indigo 48 2 6,418 486
EVEN Hotels 6 - 1,010 -
Holiday Inn(1) 762 (12) 134,283 (2,461)
Holiday Inn Express 2,183 29 196,033 3,662
Staybridge Suites 234 8 25,110 925
Candlewood Suites 374 12 35,251 1,059
Other 81 (3) 20,694 (1,103)
____ ____ ______ _____
Total 3,957 32 489,949 1,956
____ ____ ______ _____
Analysed by ownership
type
Franchised 3,665 32 431,648 782
Managed 286 - 56,476 1,174
Owned and leased 6 - 1,825 -
____ ____ ______ _____
Total 3,957 32 489,949 1,956
____ ____ ______ _____
(1) Includes 25 Holiday Inn Resort properties (6,787 rooms) and 26 Holiday Inn Club Vacations (7,676 rooms)
(2016: 25 Holiday Inn Resort properties (6,791 rooms) and 26 Holiday Inn Club Vacations (7,601 rooms)).
Hotels Rooms
Americas pipeline Change over Change over
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 6 (1) 1,642 (890)
Kimpton 16 (1) 2,714 (235)
Crowne Plaza 15 (2) 3,256 (30)
Hotel Indigo 31 (1) 3,580 (385)
EVEN Hotels 6 - 775 (5)
Holiday Inn(1) 137 9 17,892 588
Holiday Inn Express 496 8 46,930 134
Staybridge Suites 141 10 14,798 902
Candlewood Suites 107 (1) 9,608 4
Other 12 1 1,383 44
____ ____ ______ _____
Total 967 22 102,578 127
____ ____ ______ _____
Analysed by ownership
type
Franchised 925 28 95,802 2,507
Managed 42 (6) 6,776 (2,380)
____ ____ ______ _____
Total 967 22 102,578 127
____ ____ ______ _____
(1) Includes three Holiday Inn Resort properties (455 rooms) (2016: three Holiday Inn Resort properties (455 rooms)).
EUROPE
6 months ended 30 June
Europe results 2017 2016 %
$m $m change
Revenue
Franchised 50 49 2.0
Managed 63 60 5.0
____ ____ ____
Total 113 109 3.7
____ ____ ____
Operating profit before exceptional
items
Franchised 37 37 -
Managed 12 10 20.0
Regional overheads (11) (13) 15.4
____ ____ ____
Operating profit 38 34 11.8
____ ____ ____
6 months ended
30 June
Europe comparable RevPAR movement on previous 2017 year Franchised All brands 5.8% Managed All brands 7.5%
Franchised revenue increased by $1m (2.0%) to $50m and operating profit remained flat at $37m. On a constant currency basis, revenue increased by $4m (8.2%) to $53m and operating profit increased by $2m (5.4%) to $39m.
Managed revenue increased by $3m (5.0%) to $63m and operating profit increased by $2m (20.0%) to $12m. Revenue included $38m (2016: $38m), and operating profit included $1m (2016: $1m) from managed leases(1) . Excluding properties operated under this arrangement, and on a constant currency basis, revenue increased by $4m (18.2%) and operating profit increased by $2m (22.2%).
1 Properties that are structured for legal reasons as an operating lease but have the same characteristics as a management contract.
Hotels Rooms
Europe hotel and room Change over Change over
count
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 31 - 9,724 -
Kimpton 1 1 274 274
Crowne Plaza 94 2 21,633 746
Hotel Indigo 22 1 1,970 60
Holiday Inn(1) 282 (9) 46,112 (1,717)
Holiday Inn Express 239 5 29,508 930
Staybridge Suites 7 - 1,000 -
Other 1 - 141 -
____ ____ ______ _____
Total 677 - 110,362 293
____ ____ ______ _____
Analysed by ownership
type
Franchised 624 (5) 95,788 (1,242)
Managed 53 5 14,574 1,535
____ ____ ______ _____
Total 677 - 110,362 293
____ ____ ______ _____
(1) Includes one Holiday Inn Resort property (88 rooms) (2016: one Holiday Inn Resort properties (88 rooms)).
Hotels Rooms
Europe pipeline Change over Change over
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 6 - 813 -
Kimpton 1 - 149 -
Crowne Plaza 13 (1) 3,003 (182)
Hotel Indigo 18 - 2,211 (53)
Holiday Inn 35 1 7,528 259
Holiday Inn Express 60 2 9,444 49
Staybridge Suites 6 1 826 189
____ ____ ______ _____
Total 139 3 23,974 262
____ ____ ______ _____
Analysed by ownership
type
Franchised 118 7 18,784 876
Managed 21 (4) 5,190 (614)
____ ____ ______ _____
Total 139 3 23,974 262
____ ____ ______ _____
ASIA, MIDDLE EAST AND AFRICA (AMEA)
6 months ended 30 June
AMEA results 2017 2016 %
$m $m change
Revenue
Franchised 8 8 -
Managed 90 90 -
Owned and leased 17 17 -
____ ____ ____
Total 115 115 -
____ ____ ____
Operating profit before exceptional
items
Franchised 7 6 16.7
Managed 43 42 2.4
Owned and leased 1 1 -
Regional overheads (10) (10) -
____ ____ ____
Operating profit 41 39 5.1
____ ____ ____
6 months ended
AMEA comparable RevPAR movement on previous 30 June
year 2017
Franchised
All brands (1.9)%
Managed
All brands 2.0%
On an actual and constant currency basis, franchised revenue remained flat at $8m whilst operating profit increased by $1m (16.7%) to $7m.
Managed revenue remained flat at $90m and operating profit increased by $1m (2.4%) to $43m. Comparable RevPAR increased by 2.0%. Revenue and operating profit included $24m (2016: $24m) and $2m (2016: $2m) respectively from one managed lease property(1) . Excluding results from this hotel and on a constant currency basis, revenue increased by $1m (1.5%) and operating profit increased by $3m (7.5%) benefiting from the favourable phasing of costs.
In the owned and leased estate, on an actual and constant currency basis, revenue and operating profit remained flat at $17m and $1m respectively.
1 A property that is structured for legal reasons as an operating lease but has the same characteristics as a management contract.
Hotels Rooms
AMEA hotel and room Change over Change over
count
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 68 (1) 20,890 (313)
Crowne Plaza 75 2 21,296 547
Hotel Indigo 3 1 382 59
Holiday Inn(1) 92 (1) 21,175 (137)
Holiday Inn Express 34 - 7,693 110
Staybridge Suites 4 1 502 77
Other 8 2 9,994 5,538
____ ____ ______ _____
Total 284 4 81,932 5,881
____ ____ ______ _____
Analysed by ownership
type
Franchised 57 2 13,023 453
Managed 225 2 68,376 5,482
Owned and leased 2 - 533 (54)
____ ____ ______ _____
Total 284 4 81,932 5,881
____ ____ ______ _____
(1) Includes 14 Holiday Inn Resort properties (2,958 rooms) (2016: 14 Holiday Inn Resort properties (2,953 rooms))
Hotels Rooms
AMEA pipeline Change over Change over
2017 2016 2017 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 26 (1) 6,245 (436)
Crowne Plaza 20 (1) 5,239 (315)
Hotel Indigo 15 1 2,715 133
Holiday Inn(1) 48 (1) 13,003 (261)
Holiday Inn Express 31 (4) 6,687 (799)
Staybridge Suites 4 - 830 42
Other 1 1 88 (3,442)
____ ____ ______ _____
Total 145 (5) 34,807 (5,078)
____ ____ ______ _____
Analysed by ownership
type
Franchised 12 1 2,605 199
Managed 133 (6) 32,202 (5,277)
____ ____ ______ _____
Total 145 (5) 34,807 (5,078)
____ ____ ______ _____
(1) Includes five Holiday Inn Resort properties (1,151 rooms) (2016: five Holiday Inn Resort properties (1,256 rooms))
GREATER CHINA
6 months ended 30 June
Greater China results 2017 2016 %
$m $m change
Revenue
Franchised 2 2 -
Managed 56 53 5.7
____ ____ ____
Total 58 55 5.5
____ ____ ____
Operating profit before exceptional
items
Franchised 1 2 (50.0)
Managed 32 29 10.3
Regional overheads (10) (11) 9.1
____ ____ ____
Operating profit 23 20 15.0
____ ____ ____
6 months ended
30 June
Greater China comparable RevPAR movement 2017
on previous year
Managed
All brands 4.6%
On an actual and constant currency basis, franchised revenue remained flat at $2m whilst operating profit decreased by $1m (50.0%) to $1m.
Managed revenue increased by $3m (5.7%) to $56m and operating profit increased by $3m (10.3%) to $32m. Comparable RevPAR increased by 4.6% and System size grew by 9.0% year-on-year. On a constant currency basis, revenue increased by $6m (11.3%) to $59m, whilst operating profit increased by $4m (13.8%) to $33m primarily due to strong trading in mainland China.
Hotels Rooms
Greater China hotel and Change Change
room count 2017 over 2016 2017 over 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 40 1 16,656 341
HUALUXE 5 1 1,436 340
Crowne Plaza 80 1 28,350 299
Hotel Indigo 6 - 745 5
Holiday Inn(1) 81 (2) 25,371 (500)
Holiday Inn Express 86 11 20,670 2,193
Other 5 (1) 2,204 (268)
____ ____ ______ _____
Total 303 11 95,432 2,410
____ ____ ______ _____
Analysed by ownership type
Franchised 6 2 2,590 406
Managed 297 9 92,842 2,004
____ ____ ______ _____
Total 303 11 95,432 2,410
____ ____ ______ _____
(1) Includes six Holiday Inn Resort properties (1,820 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms))
Hotels Rooms
Change Change
Greater China pipeline 2017 over 2016 2017 over 2016
30 June 31 December 30 June 31 December
Analysed by brand
InterContinental 25 3 8,344 890
HUALUXE 21 (1) 6,556 (400)
Crowne Plaza 37 (1) 12,250 (261)
Hotel Indigo 12 1 1,980 198
EVEN Hotels 1 1 290 290
Holiday Inn(1) 50 - 15,078 237
Holiday Inn Express 115 20 23,390 3,185
Other 1 - 279 -
____ ____ ______ _____
Total 262 23 68,167 4,139
____ ____ ______ _____
Analysed by ownership type
Franchised 42 22 7,753 3,668
Managed 220 1 60,414 471
____ ____ ______ _____
Total 262 23 68,167 4,139
____ ____ ______ _____
(1) Includes six Holiday Inn Resort properties (1,995 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms))
Central
6 months ended 30 June
2017 2016 %
Central results $m $m change
Revenue 72 69 4.3
Gross costs (125) (131) 4.6
____ ____ ____
Operating loss (53) (62) 14.5
____ ____ ____
Central results
The net operating loss decreased by $9m (14.5%) compared to 2016 (a $4m or 6.5% decrease to $58m at constant currency). Central revenue, which mainly comprises technology fee income, increased by $3m (4.3%) to $72m, driven by increases in both comparable RevPAR and IHG System size in the first half of 2017. At constant currency, gross costs remained flat compared to 2016 (a $6m or 4.6% decrease at actual currency).
OTHER FINANCIAL INFORMATION
Exceptional operating items
The $4m exceptional operating charge, (2016 $5m charge), both relate to the costs of integrating Kimpton into the operations of the Group.
Net financial expenses
Net financial expenses decreased by $1m to $40m for the six months ended 30 June 2017. This decrease reflects a reduction in the cost of debt resulting from the refinancing of the GBP250m 6% bond which matured in December 2016, and the favourable impact of a weaker pound on translation of sterling interest expense, offset by higher average net debt levels following the payment of the $1.5bn special dividend in 2016.
Taxation
The tax charge on profit before tax, excluding the impact of exceptional items, has been calculated using an interim effective tax rate of 33%. Excluding the effect of prior-year items, the equivalent effective tax rate would be approximately 34%. This rate is higher than the average UK statutory rate for the year of 19.25% due mainly to certain overseas profits (particularly in the US) being subject to statutory rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.
Taxation within exceptional items totalled a credit of $1m representing tax relief on the Kimpton integration costs.
Net tax paid in the six months ended 30 June 2017 totalled $50m.
Dividends
The Board has proposed an interim dividend per ordinary share of 33.0c, representing growth of 10% on the 2016 interim dividend.
On 21 February 2017, the Group announced a $0.4bn return of funds to shareholders by way of a special dividend and share consolidation. The special dividend (202.5c per ordinary share) was paid on 22 May 2017.
Capital structure and liquidity management
During the six months ended 30 June 2017, $251m of cash was generated from operating activities. Net cash outflows from investing activities totalled $179m and net cash used in financing activities totalled $142m. Net debt at 30 June 2017 was $2,056m and included $228m in respect of the finance lease obligations for the InterContinental Boston.
The Group had net liabilities of $1,097m at 30 June 2017 reflecting that its internally generated brands are not recorded on the balance sheet, in accordance with accounting standards. The change in net liabilities (from $759m at 31 December 2016) was primarily due to the payment of the $404m special dividend on 22 May 2017.
USE OF NON-GAAP MEASURES
In addition to performance measures directly observable in the Interim Financial Statements (IFRS measures), additional measures (described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not defined under IFRS or are adjusted IFRS figures and include:
-- Total gross revenue;
-- Underlying revenue, underlying operating profit growth, underlying fee revenue, fee margin growth;
-- Total operating profit before exceptional items and tax, adjusted earnings per ordinary share;
-- Net debt; -- Net capital expenditure; -- Free cash flow; and -- Underlying earnings per share.
Further information can be found on page 26 of the IHG Annual Report and Form 20-F 2016 (which is available at www.ihgplc.com).
Underlying revenue and underlying operating profit Non-GAAP reconciliations
The following tables:
-- show underlying revenue and underlying operating profit on both an actual and constant currency basis(a) ;
-- reconcile segmental underlying revenue and underlying operating profit to Group underlying revenue and operating profit;
-- show underlying Group fee revenue and Group fee margin on both an actual and constant currency basis(a) ; and
-- reconcile Group underlying revenue and underlying operating profit to the GAAP measures included in the Interim Financial Statements.
(a) IHG's method for calculating the constant currency amounts of entities reporting in currencies other than US dollars is to translate the current period results into US dollars using the prior period's exchange rate. For example, if a UK entity generated revenue of GBP100m in 2017 and 2016, the Interim Financial Statements would report revenue of $127m in 2017 and $143m in 2016, using the respective average exchange rates for the year of $1=GBP0.79 and $1=GBP0.70. For constant currency reporting, 2017 revenue would be translated at $1=GBP0.70 giving a US dollar value of $143m, thereby showing that underlying revenue was flat year-on-year.
Highlights for the six months ended 30 June 2017
Revenue Operating profit
2017 2016 % 2017 2016 %
$m $m change $m $m change
Per Group income statement 857 838 2.3 366 339 8.0
Exceptional items - - - 4 5 (20.0)
Managed leases (80) (82) 2.4 (4) (4) -
_____ _____ _____ _____ _____ _____
Underlying at actual
exchange 777 756 2.8 366 340 7.6
rates _____ _____ _____ _____ _____ _____
At actual exchange rates At constant currency
2017 2016 % 2017 2016 %
$m $m change $m $m change
Underlying revenue
Americas 481 470 2.3 483 470 2.8
Europe 75 71 5.6 79 71 11.3
AMEA 91 91 - 92 91 1.1
Greater China 58 55 5.5 61 55 10.9
Central 72 69 4.3 73 69 5.8
_____ _____ _____ _____ _____ _____
Underlying Group revenue 777 756 2.8 788 756 4.2
Owned and leased revenue
included above (91) (83) (9.6) (91) (83) (9.6)
_____ _____ _____ _____ _____ _____
Underlying Group fee
revenue 686 673 1.9 697 673 3.6
_____ _____ _____ _____ _____ _____
At actual exchange rates At constant currency
2017 2016 % 2017 2016 %
$m $m change $m $m change
Underlying operating
profit
Americas 320 312 2.6 322 312 3.2
Europe 37 33 12.1 37 33 12.1
AMEA 39 37 5.4 41 37 10.8
Greater China 23 20 15.0 23 20 15.0
Central (53) (62) 14.5 (58) (62) 6.5
_____ _____ _____ _____ _____ _____
Underlying Group operating
profit 366 340 7.6 365 340 7.4
Owned and leased operating
profit included above (16) (13) (23.1) (16) (13) (23.1)
_____ _____ _____ _____ _____ _____
Underlying Group fee
profit 350 327 7.0 349 327 6.7
_____ _____ _____ _____ _____ _____
Group fee margin 51.0% 48.6% 2.4ppts 50.1% 48.6% 1.5ppts
_____ _____ _____ _____ _____ _____
Net capital expenditure
Net capital expenditure is defined as cash flow from investing activities, less System Fund depreciation (recovery of previous System Fund capital expenditure). For internal management reporting, capital expenditure is reported as either maintenance, recyclable, or System Fund. The disaggregation of net capital expenditure provides useful information as it enables users to distinguish between System Fund capital investments and recyclable investments (such as investments in associates and joint ventures), which are intended to be recoverable in the medium term, compared with maintenance capital expenditure (including key money paid), which represents a permanent cash outflow.
The reconciliation of cash flow from investing activities to net capital expenditure is as follows:
6 months ended 30 June
2017 2016
$m $m
Net cash from investing activities (179) (97)
Analysed as:
Capital expenditure: maintenance and key
money (44) (36)
Capital expenditure: recyclable investments (80) (25)
Capital expenditure: System Fund investments (62) (47)
_____ _____
Gross capital expenditure (186) (108)
Disposal proceeds 7 11
_____ _____
(179) (97)
System Fund depreciation 17 14
_____ _____
Net capital expenditure (162) (83)
_____ _____
Free cash flow
Free cash flow is defined as cash flow from operating activities (after interest and tax paid), less purchase of shares by employee share trusts and maintenance capital expenditure, including key money paid. In 2016, free cash flow also excludes the $95m cash receipt from renegotiation of long-term partnership agreements. Free cash flow is a useful measure for investors, as it represents the cash available to invest back into the business to drive growth, pay the ordinary dividend, with any surplus being available for additional returns to shareholders.
The reconciliation of cash flow from operating activities to free cash flow is as follows:
6 months ended 30 June
2017 2016
$m $m
Net cash from operating activities 251 382
Less:
Purchase of shares by employee share trusts (3) (10)
Capital expenditure: maintenance and key
money (44) (36)
Cash receipt from renegotiation of long-term
partnership agreements - (95)
_____ _____
Free cash flow 204 241
_____ _____
Underlying earnings per share
Underlying earnings per share is calculated by dividing underlying profit for the period available for IHG equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in issue during the period.
Underlying earnings per share provides a per share measure based on comparable year-on-year trading and reflects underlying trends in the Group's financial performance.
Basic earnings per share can be reconciled to underlying earnings per share as follows:
6 months ended 30 June
2017 2016
$m $m
Basic earnings per ordinary share
Profit available for equity holders 219 200
Basic weighted average number of ordinary
shares (millions) 196 228
Basic earnings per ordinary share (cents) 111.7 87.7
_____ _____
Underlying earnings per ordinary share
Profit available for equity holders 219 200
Adjusted for:
Exceptional items before tax 4 5
Tax on exceptional items (1) (2)
Managed leases (4) (4)
Tax on managed leases 1 1
Currency effects and other - -
_____ _____
Underlying profit available for equity holders 219 200
_____ _____
Underlying earnings per ordinary share (cents) 111.7 87.7
_____ _____
Risks and Uncertainties
On pages 164 to 167 of the IHG Annual Report and Form 20-F 2016 we set out our assessment of the principal risk issues that would face the business through 2017 under the headings:
-- political and economic developments; -- events that adversely impact domestic or international travel; -- hotel industry supply and demand cycle; competitive and changing industry; -- executing and realising the benefits from strategic acquisitions; -- dependency on external stakeholders and business partners; -- increasing competition from online travel agents and intermediaries; -- identifying, securing and retaining franchise and management agreements; -- changing technology and systems; brand reputation; -- resilience of our reservation systems and other key technology platforms;
-- variety of risks relating to safety, security and crisis management; requirement for the right people, skills and capability to manage growth; financial stability and ability to borrow and satisfy debt covenants;
-- litigation; -- information security and data privacy;
-- compliance with existing and changing regulations and societal expectations across numerous countries, territories and jurisdictions; and
-- difficulties insuring our business.
In our view, the nature and potential impact of such risks remain essentially unchanged as regards our performance over the second half of 2017.
GOING CONCERN
An overview of the business activities of IHG, including a review of the key business risks that the Group faces, is given in this Interim Management Report. Information on the Group's treasury management policies can be found in note 22 to the Group Financial Statements in the IHG Annual Report and Form 20-F 2016.
In March 2017, the Group extended the maturity of its $1.275bn facility to March 2022. The Group now has no significant debt maturities before 2022.
At the end of June 2017, the Group was trading significantly within its banking covenants and debt facilities.
The Group's fee-based model and wide geographic spread means that it is well placed to manage through uncertain times, and our forecasts and sensitivity projections, based on a range of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities.
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, the financial statements continue to be prepared on going concern basis.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
-- The condensed set of Financial Statements has been prepared in accordance with IAS 34;
-- The Interim Management Report includes a fair review of the important events during the first six months, and their impact on the financial statements and a description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R; and
-- The Interim Management Report includes a fair review of related party transactions and changes therein, as required by DTR 4.2.8R.
On behalf of the Board
Keith Barr Paul Edgecliffe-Johnson
Chief Executive Officer Chief Financial
Officer
7 August 2017 7 August 2017
InterContinental Hotels Group PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2017
6 months ended 30 June 6 months ended 30 June
2017 2016
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note 4) Total items (note 4) Total
$m $m $m $m $m $m
Continuing operations
Revenue (note 3) 857 - 857 838 - 838
Cost of sales (291) - (291) (270) - (270)
Administrative expenses (156) (4) (160) (177) (5) (182)
Share of losses of
associates and joint
ventures - - - (2) - (2)
Other operating income
and expenses 7 - 7 3 - 3
_____ ____ ____ _____ ____ ____
417 (4) 413 392 (5) 387
Depreciation and amortisation (47) - (47) (48) - (48)
_____ _____ _____ _____ _____ _____
Operating profit (note
3) 370 (4) 366 344 (5) 339
Financial income 2 - 2 4 - 4
Financial expenses (42) - (42) (45) - (45)
_____ _____ _____ _____ _____ _____
Profit before tax 330 (4) 326 303 (5) 298
Tax (note 5) (108) 1 (107) (99) 2 (97)
_____ _____ _____ _____ _____ _____
Profit for the period
from continuing operations 222 (3) 219 204 (3) 201
_____ _____ _____ _____ _____ _____
Attributable to:
Equity holders
of the parent 222 (3) 219 203 (3) 200
Non-controlling
interest - - - 1 - 1
_____ _____ _____ _____ _____ _____
222 (3) 219 204 (3) 201
_____ _____ _____ _____ _____ _____
Earnings per ordinary
share
(note 6)
Continuing and total
operations:
Basic 111.7c 87.7c
Diluted 110.6c 87.3c
Adjusted 113.3c 89.0c
Adjusted diluted 112.1c 88.6c
_____ _____ _____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2017
2017 2016
6 months 6 months
ended ended
30 June 30 June
$m $m
Profit for the period 219 201
Other comprehensive income
Items that may be subsequently reclassified to profit
or loss:
Losses on valuation of available-for-sale financial
assets, net of related tax charge of $nil (2016
$nil) (2) (3)
Exchange (losses)/gains on retranslation of foreign
operations, net of related tax credit of $1m (2016
charge of $2m) (35) 98
_____ _____
(37) 95
Items that will not be reclassified to profit or
loss:
Re-measurement gains/(losses) on defined benefit
plans, net of related tax charge of $1m (2016
credit of $3m) - (11)
_____ _____
Total other comprehensive (loss)/income for the
period (37) 84
_____ _____
Total comprehensive income for the period 182 285
_____ _____
Attributable to:
Equity holders of the parent 181 282
Non-controlling interest 1 3
_____ _____
182 285
_____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2017
6 months ended 30 June 2017
Equity Other Retained Non-controlling
share reserves* earnings interest Total
capital equity
$m $m $m $m $m
At beginning of the period 141 (2,300) 1,392 8 (759)
Total comprehensive income
for the period - (38) 219 1 182
Transfer of treasury shares
to employee share trusts - (20) 20 - -
Purchase of own shares by
employee share trusts - (3) - - (3)
Release of own shares by
employee share trusts - 29 (29) - -
Equity-settled share-based
cost - - 12 - 12
Tax related to share schemes - - 5 - 5
Equity dividends paid - - (531) (3) (534)
Exchange adjustments 7 (7) - - -
_____ ______ _____ _____ _____
At end of the period 148 (2,339) 1,088 6 (1,097)
_____ _____ _____ _____ _____
6 months ended 30 June 2016
Equity Other Retained Non-controlling
share reserves* earnings interest Total
capital equity
$m $m $m $m $m
At beginning of the period 169 (2,513) 2,653 10 319
Total comprehensive income
for the period - 93 189 3 285
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 - - 15 - 15
Tax related to share schemes - - 2 - 2
Equity dividends paid - - (1,637) (5) (1,642)
Transaction costs relating
to shareholder returns - - (1) - (1)
Exchange adjustments (15) 15 - - -
_____ ______ _____ _____ _____
At end of the period 154 (2,400) 1,206 8 (1,032)
_____ _____ _____ _____ _____
* 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
30 June 2017
2017 2016
30 June 31 December
$m $m
ASSETS
Property, plant and equipment 422 419
Goodwill and other intangible assets 1,373 1,292
Investment in associates and joint ventures 157 111
Trade and other receivables - 8
Retirement benefit assets 4 -
Other financial assets 264 248
Non-current tax receivable 23 23
Deferred tax assets 52 48
_____ _____
Total non-current assets 2,295 2,149
_____ _____
Inventories 3 3
Trade and other receivables 595 472
Current tax receivable 49 77
Other financial assets 15 20
Cash and cash equivalents 166 206
_____ _____
Total current assets 828 778
_____ _____
Total assets (note 3) 3,123 2,927
_____ _____
LIABILITIES
Loans and other borrowings (116) (106)
Derivative financial instruments - (3)
Loyalty programme liability (326) (291)
Trade and other payables (641) (681)
Provisions (3) (3)
Current tax payable (53) (50)
_____ _____
Total current liabilities (1,139) (1,134)
_____ _____
Loans and other borrowings (2,106) (1,606)
Retirement benefit obligations (100) (96)
Loyalty programme liability (417) (394)
Trade and other payables (177) (200)
Provisions (5) (5)
Deferred tax liabilities (276) (251)
_____ _____
Total non-current liabilities (3,081) (2,552)
_____ _____
Total liabilities (4,220) (3,686)
_____ _____
Net liabilities (1,097) (759)
_____ _____
EQUITY
Equity share capital 148 141
Capital redemption reserve 10 9
Shares held by employee share trusts (5) (11)
Other reserves (2,868) (2,860)
Unrealised gains and losses reserve 109 111
Currency translation reserve 415 451
Retained earnings 1,088 1,392
_____ _____
IHG shareholders' equity (1,103) (767)
Non-controlling interest 6 8
_____ _____
Total equity (1,097) (759)
_____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2017
2017 2016
6 months 6 months
ended ended
30 June 30 June
$m $m
Profit for the period 219 201
Adjustments reconciling profit for the period
to cash flow from operations (note 8) 94 221
_____ _____
Cash flow from operations 313 422
Interest paid (13) (12)
Interest received 1 4
Tax paid on operating activities (50) (32)
_____ _____
Net cash from operating activities 251 382
_____ _____
Cash flow from investing activities
Purchase of property, plant and equipment (22) (18)
Purchase of intangible assets (94) (69)
Investment in associates and joint ventures (47) (7)
Loan advances to associates and joint ventures - (1)
Investment in other financial assets (27) (10)
Capitalised interest paid (3) (3)
Landlord contributions to property, plant 7 -
and equipment
Disposal of hotel assets, net of costs and
cash disposed - (4)
Proceeds from associates and joint ventures - 2
Repayments of other financial assets 7 13
_____ _____
Net cash from investing activities (179) (97)
_____ _____
Cash flow from financing activities
Purchase of own shares by employee share trusts (3) (10)
Dividends paid to shareholders (531) (1,637)
Dividends paid to non-controlling interests (3) (5)
Transaction costs relating to shareholder
returns - (1)
Increase in other borrowings 395 395
_____ _____
Net cash from financing activities (142) (1,258)
_____ _____
Net movement in cash and cash equivalents,
net of overdrafts, in the period (70) (973)
Cash and cash equivalents, net of overdrafts,
at beginning of the period 117 1,098
Exchange rate effects 20 (30)
_____ _____
Cash and cash equivalents, net of overdrafts,
at end of the period 67 95
_____ _____
InterContinental Hotels Group plc
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These condensed interim financial statements have been prepared
in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority and IAS 34 'Interim
Financial Reporting' and have been prepared on a consistent basis
using the same accounting policies and methods of computation
set out in the InterContinental Hotels Group PLC (the Group or
IHG) Annual Report and Form 20-F for the year ended 31 December
2016.
The Directors are satisfied that the Group has sufficient resources
to continue in operation for the foreseeable future, being a period
of not less than 12 months from the date of this report. Accordingly,
the condensed interim financial statements continue to be prepared
on a going concern basis.
These condensed interim financial statements are unaudited and
do not constitute statutory accounts of the Group within the meaning
of Section 435 of the Companies Act 2006. The auditors have carried
out a review of the financial information in accordance with the
guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim
Financial Information Performed by the Independent Auditor of
the Entity' issued by the Auditing Practices Board.
The financial information for the year ended 31 December 2016
has been extracted from the Group's published financial statements
for that year which were prepared in accordance with IFRSs as
adopted by the European Union and which have been filed with the
Registrar of Companies. The auditor's report on those financial
statements was unqualified with no reference to matters to which
the auditor drew attention by way of emphasis and no statement
under s498(2) or s498(3) of the Companies Act 2006.
The Group continues to prepare for the implementation of IFRS
15 'Revenue from Contracts with Customers' in 2018. In terms of
the impacts and their financial quantification, the guidance provided
in the Annual Report and Form 20-F 2016 remains valid; significantly
reported higher revenues (of at least $1.6bn) and an immaterial
reduction in operating profit. Conclusions on loyalty programme
accounting remain outstanding and could result in the reporting
of additional revenues but are not expected to have any further
impact on operating profit.
2. Exchange rates
The results of operations have been translated into US dollars
at the average rates of exchange for the period. In the case of
sterling, the translation rate is $1 = GBP0.79 (2016 $1 = GBP0.70).
In the case of the euro, the translation rate is $1 = EUR0.92
(2016 $1 = EUR0.90).
Assets and liabilities have been translated into US dollars at
the rates of exchange on the last day of the period. In the case
of sterling, the translation rate is $1 = GBP0.77 (2016 30 June
$1 = GBP0.74; 31 December $1 = GBP0.81). In the case of the euro,
the translation rate is $1 = EUR0.88 (2016 30 June $1 = EUR0.90;
31 December $1 = EUR0.95).
3. Segmental information
Revenue 2017 2016
6 months 6 months
ended ended
30 June 30 June
$m $m
Americas 499 490
Europe 113 109
AMEA 115 115
Greater China 58 55
Central 72 69
_____ _____
Total revenue 857 838
_____ _____
All results relate to continuing operations.
Profit 2017 2016
6 months 6 months
ended ended
30 June 30 June
$m $m
Americas 321 313
Europe 38 34
AMEA 41 39
Greater China 23 20
Central (53) (62)
_____ _____
Reportable segments' operating profit 370 344
Exceptional items (note 4) (4) (5)
_____ _____
Operating profit 366 339
Net finance costs (40) (41)
_____ _____
Profit before tax 326 298
_____ _____
All results relate to continuing operations.
Assets 2017 2016
30 June 31 December
$m $m
Americas 1,585 1,417
Europe 358 321
AMEA 268 249
Greater China 146 147
Central 476 439
_____ _____
Segment assets 2,833 2,573
Unallocated assets:
Non-current tax receivable 23 23
Deferred tax assets 52 48
Current tax receivable 49 77
Cash and cash equivalents 166 206
_____ _____
Total assets 3,123 2,927
_____ _____
4. Exceptional items
2017 2016
6 months 6 months
ended ended
30 June 30 June
$m $m
Exceptional items before tax
Administrative expenses:
Kimpton integration costs (a) (4) (5)
_____ _____
Tax
Tax on exceptional items (b) 1 2
_____ _____
All items above relate to continuing operations. These items are
treated as exceptional by reason of their size or nature.
a) Relates to the costs of integrating 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) Relates to tax relief on the Kimpton integration costs.
5. Tax
The tax charge on profit for the period from continuing operations,
excluding the impact of exceptional items (note 4), has been calculated
using an interim effective tax rate of 33% (2016 33%) analysed
as follows:
2017 2017 2017 2016 2016 2016
6 months ended 30 Profit Tax Tax Profit Tax Tax
June $m $m rate $m $m rate
Before exceptional
items 330 (108) 33% 303 (99) 33%
Exceptional items (4) 1 (5) 2
_____ _____ _____ _____
326 (107) 298 (97)
_____ _____ _____ _____
Analysed as:
UK tax (6) 1
Foreign tax (101) (98)
_____ _____
(107) (97)
_____ _____
6. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit
for the period available for IHG equity holders by the weighted average
number of ordinary shares, excluding investment in own shares, in
issue during the period.
Diluted earnings per ordinary share is calculated by adjusting basic
earnings per ordinary share to reflect the notional impact of the
weighted average number of dilutive ordinary share awards outstanding
during the period.
Adjusted earnings per ordinary share* is disclosed in order to show
performance undistorted by exceptional items, to give a more meaningful
comparison of the Group's performance.
Continuing and total operations 2017 2016
6 months 6 months
ended
30 June ended
30 June
Basic earnings per ordinary share
Profit available for equity holders ($m) 219 200
Basic weighted average number of ordinary shares
(millions) 196 228
Basic earnings per ordinary share (cents) 111.7 87.7
_____ _____
Diluted earnings per ordinary share
Profit available for equity holders ($m) 219 200
Diluted weighted average number of ordinary shares
(millions) 198 229
Diluted earnings per ordinary share (cents) 110.6 87.3
_____ _____
Adjusted earnings per ordinary share
Profit available for equity holders ($m) 219 200
Adjusting items (note 4):
Exceptional items before tax ($m) 4 5
Tax on exceptional items ($m) (1) (2)
_____ _____
Adjusted earnings ($m) 222 203
Basic weighted average number of ordinary shares
(millions) 196 228
Adjusted earnings per ordinary share (cents) 113.3 89.0
_____ _____
Diluted weighted average number of ordinary shares
(millions) 198 229
Adjusted diluted earnings per ordinary share (cents) 112.1 88.6
_____ _____
The diluted weighted average number of ordinary shares is calculated
as:
2017 2016
millions millions
Basic weighted average number of ordinary shares 196 228
Dilutive potential ordinary shares 2 1
_____ _____
198 229
_____ _____
* See the Use of Non-GAAP measures section in the Interim Management Report.
7. Dividends and shareholder returns
2017 2016 2017 2016
cents per cents per $m $m
share share
Paid during the period:
Final (declared for previous
year) 64.0 57.5 127 137
Special 202.5 632.9 404 1,500
_____ _____ _____ _____
266.5 690.4 531 1,637
_____ _____ _____ _____
Proposed for the period:
Interim 33.0 30.0 63 56*
_____ _____ _____ _____
*Amount paid
In February 2017, the Group announced a $400m return of funds to
shareholders by way of a special dividend and share consolidation.
On 5 May 2017, shareholders approved the share consolidation on
the basis of 45 new ordinary shares of 19 (17) /(21) p per share
for every 47 existing ordinary shares of 18 (318) /(329) p, which
became effective on 8 May 2017 and resulted in the consolidation
of 9m shares. The dividend was paid on 22 May 2017.
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.
The total number of shares held as treasury shares at 30 June 2017
was 7.6m.
8. Reconciliation of profit for the period to cash flow from operations
2017 2016
6 months 6 months
ended
ended 30 June
30 June
$m $m
Profit for the period 219 201
Adjustments for:
Net financial expenses 40 41
Income tax charge 107 97
Depreciation and amortisation 47 48
Exceptional items 4 5
Equity-settled share-based cost 9 11
Dividends from associates and joint ventures 2 2
Net change in loyalty programme liability and
System Fund surplus 66 110
System Fund depreciation and amortisation 17 14
Other changes in net working capital (194) (96)
Utilisation of provisions, net of insurance recovery - (4)
Cash flows relating to exceptional items (4) (10)
Other items - 3
_____ --_____
Total adjustments 94 221
_____ _____
Cash flow from operations 313 422
_____ _____
9. Net debt
2017 2016
30 June 31 December
$m $m
Cash and cash equivalents 166 206
Loans and other borrowings - current (116) (106)
Loans and other borrowings - non-current (2,106) (1,606)
_____ _____
Net debt* (2,056) (1,506)
_____ _____
Finance lease obligation included above (229) (227)
_____ _____
* See the Use of Non-GAAP measures section in the Interim Management
Report.
10. Movement in net debt
2017 2016
6 months 6 months
ended
30 June ended
30 June
$m $m
Net decrease in cash and cash equivalents,
net of overdrafts (70) (973)
Add back cash flows in respect of other components
of net debt:
Increase in other borrowings (395) (395)
_____ _____
Increase in net debt arising from cash flows (465) (1,368)
Non-cash movements:
Finance lease obligations (2) (2)
Increase in accrued interest (21) (30)
Exchange and other adjustments (62) 100
_____ _____
Increase in net debt (550) (1,300)
Net debt at beginning of the period (1,506) (529)
_____ _____
Net debt at end of the period (2,056) (1,829)
_____ _____
11. Fair values
The table below compares carrying amounts and fair values of the
Group's financial assets and liabilities at 30 June 2017:
2017 2017 2016 2016
30 June 30 June 31 December 31 December
Carrying Fair value Carrying Fair value
value value
$m $m
$m $m
Financial assets:
Equity securities available-for-sale 156 156 156 156
Loans and receivables 123 123 112 112
_____ _____ _____ _____
279 279 268 268
_____ _____ _____ _____
Financial liabilities:
GBP400m 3.875% bonds 2022 (526) (569) (489) (541)
GBP300m 3.75% bonds 2025 (398) (431) (370) (408)
GBP350m 2.125% bonds 2026 (458) (440) (430) (411)
Finance lease obligations (229) (308) (227) (297)
Unsecured bank loans (512) (512) (107) (107)
_____ _____ _____ _____
(2,123) (2,260) (1,623) (1,764)
_____ _____ _____ _____
Cash and cash equivalents, trade and other receivables, bank overdrafts,
trade and other payables and provisions are excluded from the above
tables as their fair value approximates book value. The fair value
of loans and receivables approximates book value based on prevailing
market rates. The fair value of the GBP400m, GBP300m and GBP350m
bonds is based on their quoted market price. The fair value of
finance lease obligations is calculated by discounting future cash
flows at prevailing interest rates. The fair value of unsecured
bank loans approximates book value as interest rates reset to market
rates on a frequent basis.
Equity securities available-for-sale and derivatives are held in
the Group statement of financial position at fair value as set
out in the following table.
30 June 2017 Level 1 Level 2 Level 3 Total
$m $m $m $m
Assets
Equity securities available-for-sale:
Quoted equity shares 16 - - 16
Unquoted equity shares - - 140 140
31 December 2016 Level 1 Level 2 Level 3 Total
$m $m $m $m
Assets
Equity securities available-for-sale:
Quoted equity shares 14 - - 14
Unquoted equity shares - - 142 142
Liabilities
Derivatives - (3) - (3)
Level 1: quoted (unadjusted) prices in active markets for identical
assets or liabilities.
Level 2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly
or indirectly.
Level 3: techniques which use inputs which have a significant effect
on the recorded fair value that are not based on observable market
data.
The Level 2 derivatives consisted of foreign exchange swaps which
were valued using data from observable swap curves, adjusted to
take account of the Group's own credit risk.
The Level 3 equity securities relate to investments in unlisted
shares which are valued either by applying an average price-earnings
(P/E) ratio for a competitor group to the earnings generated by
the investment, or by reference to share of net assets if the investment
is currently loss-making or a recent property valuation is available.
The average P/E ratio for the period was 26.3 (2016 31 December
24.5) and a non-marketability factor of 30% (2016 31 December 30%)
was applied.
A 10% increase in the average P/E ratio would result in a $2m increase
(2016 31 December $2m) in the fair value of the investments and
a 10% decrease in the average P/E ratio would result in a $2m decrease
(2016 31 December $2m) in the fair value of the investments. A
10% increase in net assets would result in a $7m increase (2016
31 December $7m) in the fair value of investments and a 10% decrease
in net assets would result in a $7m decrease (2016 31 December
$7m) in the fair value of the investments.
There were no transfers between Level 1 and Level 2 fair value
measurements during the period and no transfers into and out of
Level 3.
The following table reconciles movements in instruments classified
as Level 3 during the period:
$m
At 1 January 2017 142
Additions 2
Valuation losses recognised in other comprehensive income (4)
____
At 30 June 2017 140
_____
12. Commitments and guarantees
At 30 June 2017, the amount contracted for but not provided for
in the financial statements for expenditure on property, plant
and equipment and intangible assets was $123m (2016 31 December
$97m). The Group has also committed to invest in a number of its
associates, with an estimated outstanding commitment of $31m at
30 June 2017 based on current forecasts (2016 31 December $36m).
In limited cases, the Group may provide performance guarantees
to third-party hotel owners to secure management contracts. At
30 June 2017, the amount provided in the financial statements
was $3m (2016 31 December $5m) and the maximum unprovided exposure
under such guarantees was $23m (2016 31 December $14m).
The Group may guarantee loans made to facilitate third-party ownership
of hotels in which the Group has an equity interest. At 30 June
2017, there were guarantees of $43m in place (2016 31 December
$33m).
On 29 March 2017, the Group invested $43m in the Barclay associate
in conjunction with its joint venture partner's refinancing of
the hotel, which was used to repay the $43m supplemental loan
for which the Group had provided an indemnity to its joint venture
partner for 100% of the related obligations. As a consequence,
the indemnity has been extinguished.
13. Contingencies
Security incidents
In respect of the security incidents notified in 2016 and 2017
(see page 141 of the IHG Annual Report and Form 20-F 2016), $5m
remains the best estimate of the cost of reimbursing the impacted
card networks for counterfeit fraud losses and related expenses.
This estimate, which now includes the 12 IHG managed properties,
involves significant judgement based on currently available information
and remains subject to change as actual claims are made and new
information comes to light.
The Group may be exposed to investigations regarding compliance
with applicable State and Federal data security standards, and
legal action from individuals and organisations impacted by the
security incidents. Due to the general nature of the regulatory
enquires received and class action filings to date, it is not
practicable to make a reliable estimate of the possible financial
effects of any such claims on the Group at this time. To date,
three lawsuits have been filed against IHG entities relating to
the security incidents, all of which are in the early stages of
litigation.
In respect of the $5m provided in the Financial Statements in
2016, 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.
Other
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.
At 30 June 2017, the Group had no other contingent liabilities
(2016 31 December $nil).
INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the Group income statement,
Group statement of comprehensive income, Group statement of changes
in equity, Group statement of financial position, Group statement
of cash flows and the related notes 1 to 13. We have read the other
information contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance
contained in International Standard on Review Engagements (UK and
Ireland) 2410 'Review of Interim Financial Information Performed
by the Independent Auditor of the Entity' issued by the Auditing
Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company,
for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group
are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting',
as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International Standard
on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' issued
by the Auditing Practices Board for use in the United Kingdom. A
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently
does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit.
Accordingly we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes
us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2017
is not prepared, in all material respects, in accordance with International
Accounting Standard 34 as adopted by the European Union and the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Ernst & Young LLP
London
7 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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