6-K 1 a9109f-ihg.htm HALF-YEAR REPORT Blueprint
 
 
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington DC 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 AND 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
For 02 August2016
 
 
InterContinental Hotels Group PLC
(Registrant's name)
 
 
Broadwater Park, Denham, Buckinghamshire, UB9 5HJ, United Kingdom
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
 
Form 20-F           Form 40-F
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
 
Yes           No
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable
 
 
 
 
 
 
EXHIBIT INDEX
 
 
 
 
 
 
 
 
 
 
99.1     Half-year Report
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit No: 99.1
 
 
InterContinental Hotels Group PLC
Half Year Results to 30 June 2016
A good performance driven by proven strategy for high quality growth
Financial summary1
Reported
Underlying2
 
2016
2015
% Change
2016
2015
% Change
Revenue
$838m
$915m
(8)%
$771m
$736m
5%
Fee Revenue3
$673m
$656m
3%
$687m
$656m
5%
Operating profit
$344m
$337m
2%
$345m
$313m
10%
Adjusted EPS
89.0¢
87.2¢
2%
89.4 ¢
80.3¢
11%
Basic EPS4
87.7¢
156.2¢
(44)%
 
 
 
Interim dividend per share
30.0¢
27.5¢
9%
 
 
 
Net debt
$1,829m
$1,710m
7%
 
 
 
 
1All figures before exceptional items unless otherwise noted. 2Excluding owned asset disposals, managed leases and significant liquidated damages; at constant H1 2015 exchange rates (CER). Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates. 3Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages. 4After exceptional items.
 
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
“We continue to execute our well-established strategy as we deliver consistent, high-quality growth and generate significant operating cash flows. We have had a good first half, delivering a 10% increase in underlying operating profit and an 11% increase in underlying EPS, underpinning our decision to increase the interim dividend by 9%.
We have driven another excellent signings performance, which includes a second hotel for Kimpton outside the Americas, in Paris. We enhanced our loyalty proposition, continued to develop our technological capabilities and grew our digital channels, supporting our unique owner proposition. We have also remained focused on innovating and evolving our brand portfolio, which includes launching the latest phase of the Crowne Plaza refresh in the US.
The fundamentals for our industry, and particularly for IHG as one of the largest branded players, remain compelling. This backdrop, combined with our winning strategy and the strength of our business model, will enable us to deliver sustainable growth into the future. Despite the uncertain environment in some markets, we remain confident in the outlook for the remainder of the year.”
 
Financial Highlights
 Solid revenue growth driven by both RevPAR and rooms
 Global comparable H1 RevPAR of 2.0%, led by rate up 1.4%. Q2 RevPAR up 2.5%, with growth in all regions.
 3.6% net room growth year on year, with 17k room openings, up 8% year on year (with Q2 up over 40%).
 $11.9bn total gross revenue from hotels in IHG’s system (up 1.7% year on year; up 4.0% CER).
 High-quality business model, focused on disciplined execution, capital allocation and shareholder returns
 Group fee margin of 48.6%, up 2.9%pts (up 2.6%pts CER), aided by favourable phasing of costs along with scale benefits and continued focus on tight overhead control.
 Focused investment and asset recycling led to net capital expenditure of $83m (gross: $108m).
 $1.5bn returned to shareholders in May via a $6.329 per share special dividend with 5 for 6 share consolidation.
 9.1% increase in interim dividend to 30.0¢.
Strategic Progress
 Strengthening our portfolio of preferred brands
 Highest signings for InterContinental since 2008, further expanding the world’s largest luxury hotel brand.
 Growing our boutique footprint, with the signing of our second Kimpton outside the Americas in Paris, and the opening of the second Hotel Indigo in our AMEA region, in Singapore.
 Continued momentum for our new brands, with an additional signing for HUALUXE, taking the pipeline to 21 hotels. In July we opened our fourth EVEN Hotel, an owned property in Brooklyn, New York.
 Next phase of Crowne Plaza refresh announced in the US, supported by $200m investment over 3 years (~$100m system funded, ~$100m within existing capex guidance).
 Continued roll-out of both our Formula Blue room design for Holiday Inn Express in the Americas, and our innovative Open Lobby solution for Holiday Inn in Europe and the Americas.
 Strong pipeline driving momentum and supporting future growth
 Signed 35k rooms into the pipeline, taking it to 222k rooms.
 45% of the pipeline is under construction and 90% is in our ten priority markets.
 13% share of the active industry pipeline, around three times current supply share, reflecting our strong growth position.
 Driving revenue through digital capabilities and loyalty proposition
 Digital revenue up over 7% year on year; within this, mobile revenue up 32% year on year with mobile now driving more traffic to our websites than desktop.
 Global roll out of ‘Your Rate by IHG Rewards Club’ announced, helping drive a 20% YTD increase in IHG Rewards Club enrolments and an increase in point redemptions of almost one third.
 Innovative cloud-based Guest Reservation System on track for pilot and phased rollout starting in 2017.
 
Americas – Strong fee revenue growth
 
Comparable RevPAR increased 2.4% (Q2: up 2.8%), driven by 2.2% rate growth. US RevPAR grew 2.1%, with 2.6% in Q2. This overall figure was impacted by our concentration in oil-producing markets, where RevPAR was down 6.3% in Q2; the remainder of the estate grew 3.7%.
 
On an underlying1 basis revenue was up 7% and operating profit up 9%, driven by good growth in both franchised and managed fees, aided by favourable cost phasing in the franchised business and a $4m year on year saving on US healthcare costs. This was partially offset by $4m of previously disclosed costs incurred ahead of the re-opening of InterContinental New York Barclay in April, which is already positioning itself as one of the premier hotels in its market, and is commanding 35% higher rates than pre-refurbishment. Underlying1 owned revenue was up 5% ($3m) and underlying operating profit flat, with good RevPAR growth offset by phasing of costs at one hotel. Reported revenue grew by 4% (5% CER) and profits increased 6% (7% CER), negatively impacted by the previously reported $3m of liquidated damages received in 2015.
 
We opened 13k rooms (95 hotels), our fastest pace in 5 years, including 6 Holiday Inn Club Vacations properties (2k rooms). 10k rooms (64 hotels) were removed as we continue to focus on high quality brand representation. We signed 20k rooms, including more than 100 Holiday Inn Brand Family hotels in the US.
 
H2 2016:
As previously disclosed, to drive growth across our brand portfolio, we are investing $7m into permanent franchise development resources; with $4m now expected in H2, with a further $3m annualisation in 2017. $2m of the $6m that we expected to incur as reopening costs for InterContinental New York Barclay will now be in H2. We expect $5m of favourable phasing of franchise costs in H1 to reverse in H2.
 
Europe – Best signings performance since 2008
 
Comparable RevPAR increased by 2.0% (Q2: up 2.6%), driven by rate up 1.6%. UK RevPAR increased by 1.4%, led by strong trading in the provinces. In Germany, 8.7% RevPAR growth was driven by a particularly favourable trade fair calendar in Q2. Challenging trading conditions in Paris persist, with a 19.5% RevPAR decline partially offset by strong growth in the French provinces.
 
On an underlying1 basis revenue was down 5% and operating profit down 3%. Performance across much of the estate was good, this was offset by a $2m revenue reduction in relation to three managed hotels; two of which have exited the system and one of which is undergoing a major refurbishment. Reported revenue declined 24% (22% CER) and reported operating profit was down 6% (3% CER). This was impacted by the sale of InterContinental Paris – Le Grand on 20 May 2015, but had some benefit from favourable phasing of regional overheads.
 
Opened 1k rooms (3 hotels) and signed 4k rooms (24 hotels), the latter being our best performance for the half since 2008. This included the 694 room Holiday Inn London – Kensington and the 51 room InterContinental Venice – Palazzo Nani in Italy.
 
AMEA – Strong trading in key markets offset by weakness in the Middle East
 
Comparable RevPAR decreased 0.4% (Q2: up 0.4%). Performance outside the Middle East continued to be strong, with 4.3% RevPAR growth overall. India was up 10.5%, Japan and Australia up mid-single digits and South-East Asia up low-single digits. In the Middle East RevPAR was down 8.0% due to the ongoing impact of low oil prices. An increasing mix of new rooms opening in developing markets meant that total RevPAR was down 1.8% in the half.
 
On an underlying1 basis, revenue was down 2% and operating profit down 5%. Good underlying growth in our managed business was offset by a $4m revenue reduction in relation to four hotels; three long standing contracts being renewed onto standard market terms and one equity stake disposal. Reported revenue declined 1% (down 1% CER) and operating profit 3% (down 3% CER).
 
We opened 2k rooms (8 hotels), including our first Holiday Inn Express in Australia, driving net system growth of nearly 8% year on year (including almost 3k rooms in Makkah with low annual fee contribution due to the highly seasonal demand nature of this market). We signed 3k rooms (11 hotels) including our first hotel in Myanmar, the 500-room Holiday Inn Yangon Pyay Road.
 
H2 2016:
There will be a further $3m revenue reduction in H2 in relation to the three contract renewals and one equity stake disposal.
 
1Excluding owned asset disposals, managed leases, significant liquidated damages at constant FY15 exchange rates (CER)
 
 
 
Greater China – Solid mainland trading and double digit system growth drive strong profit increases
 
Comparable RevPAR increased 2.4% (Q2: up 2.5%), with growth of 4.7% in mainland China offset by continued declines in Hong Kong and Macau. Mainland tier 1 cities continued to trade particularly well, with RevPAR up 6.6%, driven by strong performance in Beijing and Shanghai. Our strategy to maximise our long term growth potential by using our mainstream brands to penetrate less developed cities impacted total RevPAR, which was down 2.7% for the region.
 
Underlying1 revenue was up 14% and profit up 38% driven by strong trading in mainland China, double-digit year on year net system growth and $3m managed fee contribution from InterContinental Hong Kong which was sold on 31 October 2015. Reported revenue and operating profit declined by 53% (51% CER) and 41% (35% CER) respectively, impacted by the sale of the InterContinental Hong Kong.
 
We opened 2k rooms (6 hotels), including two InterContinental hotels in Wuhan and Nantong, taking the portfolio for the brand to 15k rooms (36 hotels) in the region. We signed 8k rooms (33 hotels), including our first two franchised Holiday Inn Express properties, in Shanghai and Qidong.
 
 
 
Highly cash generative business with disciplined approach to capital allocation
 
 Significant free cash flow from operations
 Free cash flow of $336m for the half, up 151% year on year (H1 2015: $134m), includes cash receipts on behalf of the system fund of ~$95m from renegotiation of long-term partnership agreements and the benefit of favourable phasing of tax payments compared to prior year.
 
 Investing for growth
 Third owned EVEN Hotel opened in Brooklyn in July; seven further EVEN Hotels in pipeline, all asset light.
 InterContinental New York Barclay (in which IHG has a 20% JV stake) re-opened in late April after its major refurbishment.
 $108m gross capital expenditure in first half: $36m maintenance capex and key money; $25m recyclable investments; and $47m system funded capital investments. $11m proceeds received from asset recycling and $14m system fund depreciation received via working capital, resulting in $83m of net capital expenditure.
 Gross capex guidance remains unchanged at up to $350m p.a. into the medium term.
 
 Shareholder returns
 9.1% increase in the interim dividend to 30.0¢.
 $1.5bn returned to shareholders in May via a $6.329 per share special dividend with 5 for 6 share consolidation.
 
 Efficient balance sheet provides flexibility
 Financial position remains robust, with an on-going commitment to an efficient balance sheet and investment grade credit rating.
 Net debt at end of first half of $1,829m (including $224m finance lease on InterContinental Boston), up $1.3bn on the 2015 close following the payment of the $1.5bn special dividend in May. Net debt to EBITDA now stands at 2.3x (LTM).
 
Foreign exchange – stronger US dollar impacts reported profit
 
The stronger US dollar in H1 reduced group RevPAR to 0.2% when reported at actual rates, and negatively impacted reported profit by $4m. Europe and Greater China were most affected, with foreign exchange reducing RevPAR growth by around 4%pts in each region. A full breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.
 
Currency markets continue to be volatile and we expect foreign exchange to have an impact on 2016 reported profit. If 30 June 2016 spot exchange rates had existed throughout H2 2015, reported operating profit for that period would have been $6m higher.
 
Note that whilst the UK comprises around 5% of our group revenues, approximately 50% of our gross central overhead and 40% of Europe regional overhead are in sterling. At 30 June 2016 exchange rates, approximately 70% of our debt is denominated in sterling.
Interest, tax, and exceptional items
 
Interest: Net financial expenses reduced by $2m to $41m due to high levels of cash ahead of payment of the $1.5bn special dividend on 23 May 2016.
 
 
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% (2015: 30%). We continue to expect the full year 2016 tax rate to be in the low 30s.
 
 
Exceptional operating items: Net exceptional loss of $5m for the half related to the Kimpton integration.
 
 
1Excluding owned asset disposals, managed leases and significant liquidated damages; at constant FY15 exchange rates (CER).
 
Appendix 1: Comparable RevPAR Movement Summary
 
 
 
Half Year 2016
 
 
Q2 2016
 
 
RevPAR
 
 
Rate
 
 
Occ.
 
 
RevPAR
 
 
Rate
 
 
Occ.
 
 
Group
 
2.0%
1.4%
0.4pts
2.5%
1.7%
0.5pts
 
Americas
 
2.4%
2.2%
0.1pts
2.8%
2.1%
0.5pts
 
Europe
 
2.0%
1.6%
0.3pts
2.6%
2.5%
0.1pts
 
AMEA
 
(0.4)%
0.0%
(0.3)pts
0.4%
2.1%
(1.1)pts
 
G. China
 
2.4%
(2.7)%
3.0pts
2.5%
(2.2)%
3.0pts
 
 
Appendix 2: RevPAR movement summary at constant exchange rates (CER) vs. actual exchange rates (AER)
 
 
 
Half Year 2016
 
 
Q2 2016
 
 
CER
 
 
AER
 
 
Difference
 
 
CER
 
 
AER
 
 
Difference
 
 
Group
 
2.0%
0.2%
1.8%pts
2.5%
1.0%
1.4%pts
 
Americas
 
2.4%
1.4%
1.0%pts
2.8%
1.9%
0.9%pts
 
Europe
 
2.0%
(1.7)%
3.7%pts
2.6%
(0.5)%
3.1%pts
 
AMEA
 
(0.4)%
(2.4)%
2.0%pts
0.4%
0.0%
0.4%pts
 
G. China
 
2.4%
(1.7)%
4.1%pts
2.5%
(1.8)%
4.3%pts
 
 
Appendix 3: Half Year System & Pipeline Summary (rooms)
 
 
 
System
 
 
Pipeline
 
 
Openings
 
 
Removals
 
 
Net
 
 
Total
 
 
YoY%*
 
 
Signings
 
 
Total
 
 
Group
 
 
17,436
 
 
(12,083)
 
 
5,353
 
 
749,721
 
 
3.6%
 
 
34,512
 
 
222,233
 
 
Americas
 
 
12,843
 
 
(10,010)
 
 
2,833
 
 
482,408
 
 
1.7%
 
 
20,039
 
 
99,450
 
 
Europe
 
 
640
 
 
(777)
 
 
(137)
 
 
106,574
 
 
2.8%
 
 
3,744
 
 
23,398
 
 
AMEA
 
 
1,854
 
 
(1,018)
 
 
836
 
 
73,409
 
 
7.8%
 
 
2,659
 
 
37,200
 
 
G. China
 
 
2,099
 
 
(278)
 
 
1,821
 
 
87,330
 
 
12.1%
 
 
8,070
 
 
62,185
 
 
* compared to H1 2015
 
Appendix 4: Half Year financial headlines
 
 
 
Operating Profit $m
 
 
Total
 
 
Americas
 
 
Europe
 
 
AMEA
 
 
G. China
 
 
Central
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
Franchised
 
340
324
295
279
37
37
6
6
2
2
-
-
 
Managed
 
113
116
32
36
10
13
42
42
29
25
-
 -
 
 
Owned & leased
 
13
32
12
12
-
1
1
1
-
18
-
 
-
 
 
Regional overheads
 
(60)
(67)
(26)
(32)
(13)
(15)
(10)
(9)
(11)
(11)
 
 -
 
-
 
Profit pre central overheads
 
406
405
313
295
34
36
39
40
20
34
 -
 
 -
 
 
Central overheads
 
(62)
(68)
-
-
-
-
-
-
-
-
 
(62)
 
 
(68)
 
 
Group Operating profit
 
344
337
313
295
34
36
39
40
20
34
 
(62)
 
 
(68)
 
 
 
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)
 
 
2%
 
 
3%
 
 
6%
 
 
7%
 
 
(6)%
 
 
(3)%
 
 
(3)%
 
 
(3)%
 
 
(41)%
 
 
(35)%
 
 
 
 
 
 
 
 
 
 
 
 
Underlying****
 
Growth/ (decline)
 
 
Total***
 
 
Americas
 
 
Europe
 
 
AMEA
 
 
G. China
 
 
 
10%
 
 
9%
 
 
(3)%
 
 
(5)%
 
 
38%
 
 
 
 
Exchange rates:
 
 
GBP:USD
 
 
EUR:USD
 
 
* US dollar actual currency
 
 
 
 
 
2016
0.70
0.90
** Translated at constant 2015 exchange rates
 
 
 
 
 
2015
0.66
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 6: Definitions
 
 
 
CER: constant exchange rates with H1 2015 exchange rates applied to H1 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 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 2016 $20m; H1 2015 $22m; EBIT H1 2016 $1m, H1 2015 $2m. Europe: Revenue H1 2016 $38m; H1 2015 $36m; EBIT H1 2016 $1m, H1 2015 $(1m). AMEA: Revenue H1 2016 $24m; H1 2015 $21m; EBIT H1 2016 $2m, H1 2015 $1m.
Owned asset disposals: InterContinental Hong Kong was sold on 30 September 2015 (H1 2015: $67m revenue and $18m EBIT), InterContinental Paris – Le Grand was sold on 20 May 2015 (H1 2015: $30m revenue and $1m EBIT).
Significant liquidated damages: $nil in H1 2016; $3m in H1 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 7: Investor information for 2016 interim dividend
 
 
Ex-dividend date:
 
 
1 September 2016
 
 
Record date:
 
 
2 September 2016
 
 
Payment date:
 
 
7 October 2016
 
 
Dividend payment:
 
 
ADRs: 30.0 cents per ADR; Ordinary shares: 22.6 pence per share.
 
 
 
 
 
For further information, please contact:
Investor Relations (Catherine Dolton; Adam Smith):
 
+44 (0)1895 512 176
 
+44 (0)7808 098 724
 
Media Relations (Yasmin Diamond; Zoë Bird):
 
+44 (0)1895 512 008
 
+44 (0)7736 746 167
 
 
 
 
 
Webcast for Analysts and Shareholders:
A conference call and webcast presented by Richard Solomons, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will commence at 9:30am London time on 2nd August on the web address www.ihgplc.com/interims16. 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.
 
UK toll:
UK toll free:
US toll:
Passcode:
 
+44 (0)20 3003 2666
0808 109 0700
+1 212 999 6659
IHG Investor
 
 
A replay of the conference call will also be available following the event – details are below.
 
Replay:
Pin:
 
+44 (0)20 8196 1998
3565972#
 
 
US conference call and Q&A:
An additional conference call, primarily for US investors and analysts, at 9:00am New York Time on 2nd August. There will be an opportunity to ask questions.
 
UK toll:
US toll:
US toll free:
Passcode:
 
+44 (0)20 3003 2666
+1 212 999 6659
+1 866 966 5335
IHG Investor
 
 
A replay of the conference call will also be available following the event – details are below.
 
Replay:
Pin:
 
+44 (0)20 8196 1998
5519478#
 
 
Website:
The full release and supplementary data will be available on our website from 7:00am (London time) on 2nd August. The web address is www.ihgplc.com/interims16
 
 
Notes to Editors:
 
IHG® (InterContinental Hotels Group) ]LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including InterContinental® Hotels & Resorts, Kimpton® Hotels & Restaurants, HUALUXE™ Hotels and Resorts, Crowne Plaza® Hotels & Resorts, Hotel Indigo®, EVEN® Hotels, Holiday Inn® Hotels & Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®.
 
IHG franchises, leases, manages or owns more than 5,000 hotels and nearly 750,000 guest rooms in almost 100 countries, with more than 1,400 hotels in its development pipeline. IHG also manages IHG® Rewards Club, the world’s first and largest hotel loyalty programme, with more than 96 million 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.ihg.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 2016.
 
GROUP
 
6 months ended 30 June
Group results
2016
2015
%
 
$m
$m
change
Revenue
 
 
 
 
Americas
490
471
4.0
 
Europe
109
144
(24.3)
 
AMEA
115
116
(0.9)
 
Greater China
55
118
(53.4)
 
Central
69
66
4.5
 
 
____
____
____
Total
838
915
(8.4)
 
____
____
____
Operating profit
 
 
 
 
Americas
313
295
6.1
 
Europe
34
36
(5.6)
 
AMEA
39
40
(2.5)
 
Greater China
20
34
(41.2)
 
Central
(62)
(68)
8.8
 
 
____
____
____
Operating profit before exceptional items
344
337
2.1
Exceptional operating items
(5)
164
(103.0)
 
____
____
____
 
339
501
(32.3)
Net financial expenses
(41)
(43)
4.7
 
____
____
____
Profit before tax
298
458
(34.9)
 
____
____
____
Earnings per ordinary share
 
 
 
 
Basic
87.7¢
156.2¢
(43.9)
 
Adjusted
89.0¢
87.2¢
2.1
 
 
 
 
 
Average US dollar to sterling exchange rate
$1 : £0.70
$1 : £0.66
6.1
 
 
During the six months ended 30 June 2016, revenue decreased by $77m (8.4%) to $838m primarily as a result of the disposal of owned hotels in the prior year, in line with the Group’s asset-light strategy. Operating profit before exceptional items increased by $7m (2.1%) to $344m.
 
On an underlying1 basis, revenue and operating profit increased by $35m (4.8%) and $32m (10.2%) respectively. The underlying results exclude the impact of owned hotel disposals in the prior-year, the results of managed lease hotels, and significant liquidated damages (2016: $nil; 2015: $3m).
 
At constant currency, net central overheads decreased by $3m (4.4%) to $65m compared to 2015 (but at actual currency decreased by $6m (8.8%) to $62m).
 
Profit before tax decreased by $160m to $298m primarily due to the $175m exceptional gain on the sale of InterContinental Paris – Le Grand on 20 May 2015. Basic earnings per ordinary share decreased by 43.9% to 87.7¢, whilst adjusted earnings per ordinary share increased by 2.1% to 89.0¢.
 
 
1 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.
 
 
Hotels
Rooms
Global hotel and room count
 
Change over
 
Change over
 
2016
30 June
2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 183
(1)
 62,406
366
 
Kimpton
 62
1
 11,076
100
 
HUALUXE
 3
-
 798
-
 
Crowne Plaza
 405
(1)
 112,647
(637)
 
Hotel Indigo
 70
5
 8,407
743
 
EVEN Hotels
 3
-
 446
-
 
Holiday Inn1
 1,220
(6)
228,235
135
 
Holiday Inn Express
 2,456
31
 241,061
4,655
 
Staybridge Suites
 226
6
 24,582
618
 
Candlewood Suites
 347
6
 32,813
485
 
Other
95
(3)
27,250
(1,112)
 
 
____
____
______
_____
Total
5,070
38
749,721
5,353
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
 4,243
24
 533,329
2,581
 
Managed
 820
14
 214,182
2,779
 
Owned and leased
 7
-
 2,210
(7)
 
 
____
____
______
_____
Total
5,070
38
749,721
5,353
 
 
____
____
______
_____
 
1Includes 44 Holiday Inn Resort properties (11,444 rooms) and 22 Holiday Inn Club Vacations properties (7,175 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 over
 
Change over
 
 
2016
30 June
                   2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 57
5
 16,307
631
 
Kimpton
 16
(2)
 3,128
(238)
 
HUALUXE
 21
-
 6,657
25
 
Crowne Plaza
 87
3
 23,930
749
 
Hotel Indigo
 63
-
 8,929
(279)
 
EVEN Hotels
 8
-
 1,262
-
 
Holiday Inn1
 260
4
 52,477
273
 
Holiday Inn Express
 651
49
 80,928
5,323
 
Staybridge Suites
 128
14
 14,103
1,462
 
Candlewood Suites
 103
5
 9,215
495
 
Other
13
(1)
5,297
(124)
 
 
____
____
______
_____
Total
1,407
77
222,233
8,317
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
 979
74
 109,205
7,036
 
Managed
 427
 3
 112,826
 1,281
 
Owned and Leased
 1
-
 202
-
 
 
____
____
______
_____
Total
1,407
77
222,233
8,317
 
 
____
____
______
_____
 
1Includes 14 Holiday Inn Resort properties (3,121 rooms) (2015: 14 Holiday Inn Resort properties (3,548 rooms)).
 
 
THE AMERICAS
 
6 months ended 30 June
Americas Results
2016
2015
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
338
323
4.6
 
Managed
86
85
1.2
 
Owned and leased
66
63
4.8
 
____
____
____
Total
 
490
471
4.0
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
295
279
5.7
 
Managed
32
36
(11.1)
 
Owned and leased
12
12
-
 
 
____
____
____
 
339
327
3.7
Regional overheads
(26)
(32)
18.8
 
____
____
____
Total
 
313
295
6.1
 
____
____
____
 
 
Americas Comparable RevPAR movement on previous year
 
6 months ended
30 June 2016
Franchised
 
 
Crowne Plaza
1.7%
 
Hotel Indigo
1.5%
 
Holiday Inn
2.8%
 
Holiday Inn Express
2.0%
 
All brands
2.2%
Managed
 
 
InterContinental
4.4%
 
Kimpton
2.5%
 
Crowne Plaza
4.1%
 
Holiday Inn
6.1%
 
Staybridge Suites
5.2%
 
Candlewood Suites
1.9%
 
All brands
3.5%
Owned and leased
 
 
All brands
4.0%
 
 
Franchised revenue increased by $15m (4.6%) to $338m and operating profit increased by $16m (5.7%) to $295m. On a constant currency basis, revenue increased by $18m (5.6%) to $341m and operating profit increased by $19m (6.8%) to $298m, aided by favourable cost phasing. Royalties1 growth of 2.7% was driven by 1.6% rooms growth year-on-year and comparable RevPAR growth of 2.2%, adversely impacted by our concentration in oil-producing markets.
 
Managed revenue increased by $1m (1.2%) to $86m, and operating profit decreased by $4m (11.1%) to $32m. Revenue and operating profit included $20m (2015: $22m) and $1m (2015: $2m) respectively from one managed lease property2. Excluding results from this managed lease hotel, significant liquidated damages (2016: $nil; 2015: $3m) and on a constant currency basis, revenue increased by $9m (15.0%) and operating profit increased by $1m (3.2%).
 
Owned and leased revenue increased by $3m (4.8%) to $66m, and operating profit remained flat at $12m. On a constant currency basis, owned and leased revenue increased by $3m (4.8%), and operating profit remained flat at $12m, as good RevPAR growth was offset by phasing of costs at one hotel.
 
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 count
 
Change over
 
Change over
 
2016
30 June
2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 48
(2)
 16,501
(608)
 
Kimpton
 62
1
 11,076
100
 
Crowne Plaza
 170
(2)
 45,299
(1,017)
 
Hotel Indigo
 44
4
 5,683
612
 
EVEN Hotels
 3
-
 446
-
 
Holiday Inn1
766
(6)
 136,313
318
 
Holiday Inn Express
 2,130
24
 189,845
2,873
 
Staybridge Suites
 217
6
 23,280
618
 
Candlewood Suites
 347
6
 32,813
485
 
Other
84
-
21,152
(548)
 
____
____
______
_____
Total
3,871
31
482,408
2,833
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
 3,576
28
 425,030
2,800
 
Managed
 290
3
 55,755
40
 
Owned and leased
 5
-
 1,623
(7)
 
____
____
______
_____
Total
3,871
31
482,408
2,833
 
____
____
______
_____
 
1Includes 23 Holiday Inn Resort properties (6,580 rooms) and 22 Holiday Inn Club Vacations (7,175 rooms)
  (2015: 23 Holiday Inn Resort properties (5,902 rooms) and 16 Holiday Inn Club Vacations (5,231 rooms)).
 
 
 
Hotels
Rooms
Americas pipeline
 
Change over
 
Change over
 
2016
30 June
2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 6
2
 2,125
580
 
Kimpton
 16
(2)
 3,128
(238)
 
Crowne Plaza
 13
(2)
 2,441
(49)
 
Hotel Indigo
 28
(2)
 3,545
(479)
 
EVEN Hotels
 8
-
 1,262
-
 
Holiday Inn1
 126
1
 16,922
(1,281)
 
Holiday Inn Express
 480
31
 46,502
2,557
 
Staybridge Suites
 120
15
 12,804
1,574
 
Candlewood Suites
 103
5
 9,215
495
 
Other
12
(1)
1,506
(93)
 
____
____
______
_____
Total
912
47
99,450
3,066
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
 863
54
 89,906
4,043
 
Managed
 48
(7)
 9,342
(977)
 
Owned and Leased
 1
-
 202
-
 
____
____
______
_____
Total
912
47
99,450
3,066
 
____
____
______
_____
 
1Includes 6 Holiday Inn Resort properties (880 rooms) (2015: 7 Holiday Inn Resort properties (1,657 rooms)).
 
 
 
EUROPE
 
6 months ended 30 June
Europe results
2016
2015
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
49
50
(2.0)
 
Managed
60
64
(6.3)
 
Owned and leased
-
30
(100.0)
 
____
____
____
Total
 
109
144
(24.3)
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
37
37
-
 
Managed
10
13
(23.1)
 
Owned and leased
-
1
(100.0)
 
 
____
____
____
 
47
51
(7.8)
Regional overheads
(13)
(15)
13.3
 
____
____
____
Total
 
34
36
(5.6)
 
____
____
____
 
 
Europe comparable RevPAR movement on previous year
6 months ended
30 June
2016
 
 
Franchised
 
 
All brands
2.3%
 
 
 
Managed
 
 
All brands
0.1%
 
 
Franchised revenue decreased by $1m (2.0%) to $49m and operating profit remained flat at $37m. On a constant currency basis, revenue and operating profit increased by $1m (2.0%) and $1m (2.7%) respectively.
 
 
 
Europe comparable RevPAR movement on previous
 
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.
 
1 Properties that are structured for legal reasons as an operating lease but has the same characteristics as a management contract.
 
 
 
 
Hotels
 
Rooms
Europe hotel and room count
 
Change over
 
Change over
 
2016
30 June
2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 31
(1)
 9,694
(192)
 
Crowne Plaza
 88
-
 20,270
1
 
Hotel Indigo
 19
-
 1,790
-
 
Holiday Inn1
 284
(1)
 46,219
69
 
Holiday Inn Express
 228
-
 27,583
58
 
Staybridge Suites
 6
-
 877
-
 
Other
 1
(1)
 141
(73)
 
____
____
______
_____
Total
657
(3)
106,574
(137)
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
 611
(4)
 94,182
(228)
 
Managed
 46
1
 12,392
91
 
____
____
______
_____
Total
657
(3)
106,574
(137)
 
____
____
______
_____
 
1Includes 1 Holiday Inn Resort property (88 rooms) (2015: 2 Holiday Inn Resort properties (212 rooms)).
 
 
 
Hotels
Rooms
Europe pipeline
 
Change over
 
Change over
 
2016
30 June
2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 6
1
 933
51
 
Crowne Plaza
 15
4
 3,198
525
 
Hotel Indigo
 14
3
 1,758
355
 
Holiday Inn
 39
2
 8,463
629
 
Holiday Inn Express
 54
9
 8,535
1,337
 
Staybridge Suites
 4
0
 511
-
 
Other
-
-
-
(31)
 
____
____
______
_____
Total
132
19
23,398
2,866
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
106
18
 16,860
2,733
 
Managed
26
1
 6,538
133
 
____
____
______
_____
Total
132
19
23,398
2,866
 
____
____
______
_____
 
 
 
 
ASIA, MIDDLE EAST AND AFRICA (AMEA)
 
6 months ended 30 June
AMEA results
2016
2015
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
8
8
-
 
Managed
90
91
(1.1)
 
Owned and leased
17
17
-
 
 
____
____
_____
Total
 
115
116
(0.9)
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
6
6
-
 
Managed
42
42
-
 
Owned and leased
1
1
-
 
 
____
____
_____
 
49
49
-
Regional overheads
(10)
(9)
(11.1)
 
____
____
____
Total
 
39
40
(2.5)
 
____
____
_____
 
 
 
AMEA comparable RevPAR movement on previous year
6 months ended
30 June
2016
 
 
Franchised
 
 
All brands
(1.4)%
Managed
 
 
All brands
(0.2)%
 
 
Franchised revenue and operating profit remained flat at $8m and $6m respectively. On a constant currency basis, revenue and operating profit remained flat.
 
Managed revenue decreased by $1m (1.1%) to $90m and operating profit remained flat at $42m. Comparable RevPAR decreased by 0.2%. Revenue and operating profit included $24m (2015: $21m) and $2m (2015: $1m) respectively from one managed lease property1. Excluding results from this hotel and on a constant currency basis, revenue and operating profit decreased by $3m (4.3%) and $1m (2.4%) respectively. Good underlying growth in our managed business was offset by a $4m 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, revenue and operating profit remained flat at $17m and $1m respectively. On a constant currency basis, revenue increased by $1m (5.9%) to $18m and operating profit remained flat at $1m.
 
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 count
 
Change over
 
Change over
 
2016
30 June
2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 68
-
 21,101
(137)
 
Crowne Plaza
 71
-
 20,037
26
 
Hotel Indigo
 2
1
 323
131
 
Holiday Inn1
 90
(1)
 20,638
(346)
 
Holiday Inn Express
 32
5
 7,141
1,255
 
Staybridge Suites
 3
-
 425
-
 
Other
 5
(1)
 3,744
(93)
 
____
____
______
 _____
Total
271
4
73,409
836
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
52
-
11,933
9
 
Managed
217
4
60,889
827
 
Owned and leased
2
-
587
-
 
____
____
______
_____
Total
271
4
73,409
836
 
____
____
______
_____
 
1Includes 14 Holiday Inn Resort properties (2,956 rooms) (2015: 15 Holiday Inn Resort properties (3,169 rooms))
 
 
 
Hotels
Rooms
AMEA pipeline
 
Change over
 
Change over
 
2016
30 June
2015
31 December
2016
30 June
2015
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 23
1
 5,643
294
 
Crowne Plaza
 19
-
 5,112
(189)
 
Hotel Indigo
 11
(2)
 2,049
(232)
 
Holiday Inn1
 44
(1)
 11,813
284
 
Holiday Inn Express
 40
(3)
 8,283
(1,061)
 
Staybridge Suites
 4
(1)
 788
(112)
 
Other
 -
-
 3,512
-
 
____
____
______
_____
Total
141
(6)
37,200
(1,016)
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
8
-
1,957
(222)
 
Managed
133
(6)
35,243
(794)
 
____
____
______
_____
Total
141
(6)
37,200
(1,016)
 
____
____
______
_____
 
12016 and 2015 includes 4 Holiday Inn Resort properties (1,071 rooms)
 
 
GREATER CHINA
 
6 months ended 30 June
Greater China results
2016
2015
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
2
2
-
 
Managed
53
49
8.2
 
Owned and leased
-
67
(100.0)
 
 
____
____
____
Total
 
55
118
(53.4)
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
2
2
-
 
Managed
29
25
16.0
 
Owned and leased
-
18
(100.0)
 
 
____
____
____
 
31
45
(31.1)
Regional overheads
(11)
(11)
-
 
____
____
____
Total
 
20
34
(41.2)
 
____
____
____
 
 
 
 
Greater China comparable RevPAR movement on previous year
6 months ended
30 June
2016
 
 
Managed
 
 
All brands
3.2%
 
 
In the franchised estate, both revenue and operating profit remained flat at $2m.
 
Managed revenue and operating profit increased by $4m (8.2%) and $4m (16.0%) respectively. Comparable RevPAR increased by 3.2%, whilst System size grew by 13.2% year-on-year, driving a 8.8% increase in total gross revenue derived from rooms business. Total gross revenue derived from non-rooms business increased by 9.5%, due primarily to increased food and beverage revenue. On a constant currency basis, revenue increased by $7m (14.3%) to $56m, whilst operating profit increased by $6m (24.0%) to $31m as growth in mainland China offset continued declines in Hong Kong and Macau, and $3m managed fee contribution from InterContinental Hong Kong.
 
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 and room count
 
 
2016
Change
over 2015
 
2016
Change
over 2015
 
30 June
31 December
30 June
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 36
2
 15,110
1,303
 
HUALUXE
 3
-
 798
-
 
Crowne Plaza
 76
1
 27,041
353
 
Hotel Indigo
 5
-
 611
-
 
Holiday Inn1
 80
2
 25,065
94
 
Holiday Inn Express
 66
2
 16,492
469
 
Other
 5
(1)
 2,213
(398)
 
 
____
____
______
_____
Total
271
6
87,330
1,821
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
4
-
2,184
-
 
Managed
267
6
85,146
1,821
 
 
____
____
______
_____
Total
271
6
87,330
1,821
 
 
____
____
______
_____
 
1Includes 6 Holiday Inn Resort properties (1,820 rooms) (2015: 7 Holiday Inn Resort properties (2,235 rooms))
 
 
 
Hotels
Rooms
 
Greater China pipeline
 
 
2016
Change
over 2015
 
2016
Change
over 2015
 
30 June
31 December
30 June
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 22
1
 7,606
(294)
 
HUALUXE
 21
-
 6,657
25
 
Crowne Plaza
 40
1
 13,179
462
 
Hotel Indigo
 10
1
 1,577
77
 
Holiday Inn1
 51
2
 15,279
641
 
Holiday Inn Express
 77
12
 17,608
2,490
 
Other
 1
-
 279
-
 
 
____
____
______
_____
Total
222
17
62,185
3,401
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
2
2
482
482
 
Managed
220
15
61,703
2,919
 
 
____
____
______
_____
Total
222
17
62,185
3,401
 
 
____
____
______
_____
 
1Includes 4 Holiday Inn Resort properties (1,170 rooms) (2015: 3 Holiday Inn Resort properties (820 rooms))
 
 
 
 
CENTRAL
 
6 months ended 30 June
 
2016
2015
%
Central results
$m
$m
change
 
 
 
 
Revenue
69
66
4.5
Gross central costs
(131)
(134)
2.2
 
____
____
____
Net central costs
 
(62)
(68)
8.8
 
____
____
____
 
Central results
Net central costs decreased by $6m (8.8%) compared to 2015 (a $3m or 4.4% decrease to $65m at constant currency). Central revenue, which mainly comprises technology fee income, increased by $3m (4.5%) to $69m, driven by increases in both comparable RevPAR and IHG System size in the first half of 2016. At constant currency, gross central costs increased by $1m (0.7%) compared to 2015 (a $3m or 2.2% decrease at actual currency).
 
OTHER FINANCIAL INFORMATION
 
Exceptional operating items
The $5m exceptional operating charge relates to the costs of integrating Kimpton into the operations of the Group.
For the same period last year, exceptional operating items totalled a net gain of $164m primarily due to an exceptional gain of $175m on the sale of InterContinental Paris – Le Grand on 20 May 2015.
 
Net financial expenses
Net financial expenses decreased by $2m to $41m for the six months ended 30 June 2016 reflecting a decrease in average net debt levels prior to the payment of the $1.5bn special dividend.
 
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 also be approximately 33%. This rate is higher than the average UK statutory rate for the year of 20% 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 $2m representing tax relief on the Kimpton integration costs.
 
Net tax paid in the six months ended 30 June 2016 totalled $32m.
 
Dividends
The Board has proposed an interim dividend per ordinary share of 30¢ (22.6p), representing growth of 9% on the 2015 interim dividend.
 
On 23 February 2016, the Group announced a $1.5bn return of funds to shareholders by way of a special dividend and share consolidation. The special dividend (632.8¢ per ordinary share) was paid on 23 May 2016.
 
Capital structure and liquidity management
During the six months ended 30 June 2016, $382m of cash was generated from operating activities including cash receipts on behalf of the System Fund of approximately $95m from renegotiation of long-term partnership agreements. Net cash outflows from investing activities totalled $97m. Net debt at 30 June 2016 was $1,829m and included $224m in respect of the finance lease obligations for the InterContinental Boston.
 
The Group had net liabilities of $1,032m at 30 June 2016 reflecting that its internally generated brands are not recorded on the balance sheet, in accordance with accounting standards. The change in net liabilities (from $319m net assets at 31 December 2015) was due to the payment of the $1.5bn special dividend on 23 May 2016.
 
 
 
RISKS AND UNCERTAINTIES
 
The principal risks and uncertainties which could materially affect the Group’s business for the remainder of the financial year remain those set out on pages 156 to 159 of the IHG Annual Report and Form 20-F 2015.
 
In summary, the Group is exposed to risks relating to:
 
 
 political and economic developments;
 
 events that adversely impact domestic or international travel;
 
 the hotel industry supply-and-demand cycle;
 a competitive and changing industry;
 executing and realising benefits from strategic transactions, including acquisitions;
 the dependency upon a wide range of 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;
 the reliance on the reputation of its brands and is exposed to inherent risks;
 its intellectual property;
 
 its reliance upon the resilience of its reservation system and other key technology platforms and is exposed to risks that could cause the failure of these systems;
 safety, security and crisis management;
 
 requiring the right people, skills and capability to manage growth and change;
 its financial stability and ability to borrow and satisfy debt covenants;
 litigation;
 information security and data privacy;
 
 compliance with existing and changing regulations across numerous countries, territories and jurisdictions; and
 
 difficulties insuring its business.
 
 
We continued to make good progress against our winning strategy in the first half of 2016, strengthening our brands, loyalty programme and owner proposition. We delivered a strong signings performance, underlying fee revenue1 growth of 4.7%, and underlying operating profit2 growth of 10.2%, giving us the confidence to increase the interim dividend by 9%.
 
Favourable economic fundamentals and historically modest levels of new supply in the US continue to support growth in our largest region, where demand continues to be at an all-time high. With regard to the UK, and the June 2016 Brexit referendum in particular, we note firstly that only a small proportion of our business comes from the UK, and secondly that with a substantial proportion of our central costs denominated in sterling, we would even benefit at a profit level if the post-referendum sterling exchange rate is maintained. More generally, whilst there continue to be political and economic uncertainties in some regions, our geographic diversity and resilient business model, together with current trading trends, leaves us confident in the outlook for the rest of the year.
 
 
A copy of the IHG Annual Report and Form 20-F 2015 is available at www.ihgplc.com.
 
 
 
 Underlying fee revenue is defined as Group revenue excluding revenue from owned and leased hotels, managed leases and significant liquidated damages, translated at constant currency by applying prior-year exchange rates.
2 Underlying operating profit 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.
 
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 20 to the Group Financial Statements in the IHG Annual Report and Form 20-F 2015.
 
The Group refinanced its bank debt in March 2015 and put in place a new five-year $1.275bn facility with two optional one-year extensions (the first of which was exercised in February 2016) and in August 2015 the Group issued a 10-year £300m sterling bond. At the end of June 2016, 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
 
 
 
 
 
 
Richard Solomons                                       Paul Edgecliffe-Johnson
Chief Executive                                                    Chief Financial Officer
 
1 August 2016                                                      1 August 2016
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2016
 
 
6 months ended 30 June 2016
6 months ended 30 June 2015
 
 
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
 
$m
$m
$m
$m
$m
$m
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue (note 3)
838
-
838
915
-
915
Cost of sales
(270)
-
(270)
(344)
-
(344)
Administrative expenses
(177)
(5)
(182)
(188)
(11)
(199)
Share of losses of associates and joint ventures
 
(2)
 
-
 
(2)
 
(1)
 
-
 
(1)
Other operating income and expenses
 
3
 
-
 
3
 
4
 
175
 
179
 
_____
____
____
_____
____
____
 
392
(5)
387
386
164
550
 
 
 
 
 
 
 
Depreciation and amortisation
(48)
-
(48)
(49)
-
(49)
 
_____
_____
_____
_____
____
____
 
 
 
 
 
 
 
Operating profit (note 3)
344
(5)
339
337
164
501
Financial income
4
-
4
2
-
2
Financial expenses
(45)
-
(45)
(45)
-
(45)
 
_____
_____
_____
_____
____
____
 
 
 
 
 
 
 
Profit before tax
303
(5)
298
294
164
458
 
 
 
 
 
 
 
Tax (note 5)
(99)
2
(97)
(88)
(2)
(90)
 
_____
_____
_____
_____
____
____
Profit for the period from continuing operations
 
204
 
(3)
 
201
 
206
 
162
 
368
 
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
 
Equity holders of the parent
203
 
(3)
200
205
162
367
 
Non-controlling interest
1
-
1
1
-
1
 
 
_____
_____
_____
____
____
____
 
 
204
(3)
201
206
162
368
 
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
Earnings per ordinary share
(note 6)
 
 
 
 
 
 
Continuing and total operations:
 
 
 
 
 
 
 
Basic
 
 
87.7¢
 
 
156.2¢
 
Diluted
 
 
87.3¢
 
 
154.9¢
 
Adjusted
89.0¢
 
 
87.2¢
 
 
 
Adjusted diluted
88.6¢
 
 
86.5¢
 
 
 
_____
 
_____
_____
 
_____
 
 
 
 
 
 
 
 
 
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2016
 
 
2016
6 months ended
30 June
$m
2015
6 months ended
30 June
$m
 
 
 
Profit for the period
201
368
 
 
 
Other comprehensive income
 
 
 
 
 
Items that may be subsequently reclassified to profit or loss:
 
 
 
(Losses)/gains on valuation of available-for-sale financial assets, net of related tax charge of $nil (2015 $nil)
 
(3)
 
4
 
Exchange gains/(losses) on retranslation of foreign operations, net of related tax charge of $2m (2015 credit of $3m)
 
98
 
(5)
 
Exchange losses reclassified to profit on hotel disposal
-
2
 
_____
_____
 
95
1
Items that will not be reclassified to profit or loss:
 
 
 
Re-measurement (losses)/gains on defined benefit plans, net of related tax credit of $3m (2015 charge of $4m)
 
(11)
 
8
 
_____
_____
Total other comprehensive income for the period
84
9
 
_____
_____
Total comprehensive income for the period
285
377
 
_____
_____
Attributable to:
 
 
 
Equity holders of the parent
282
376
 
Non-controlling interest
3
1
 
_____
_____
 
285
377
 
_____
_____
 
 
 
 
 
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2016
 
 
6 months ended 30 June 2016
 
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total 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)
 
_____
_____
_____
_____
_____
 
 
 
6 months ended 30 June 2015
 
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
 
 
 
 
 
 
At beginning of the period
178
(2,539)
1,636
8
(717)
 
 
 
 
 
 
Total comprehensive income for the period
 
-
 
1
 
375
 
1
 
377
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
-
-
14
-
14
Tax related to share schemes
-
-
3
-
3
Equity dividends paid
-
-
(125)
-
(125)
Exchange adjustments
1
(1)
-
-
-
 
_____
_____
_____
_____
_____
At end of the period
179
(2,524)
1,841
9
(495)
 
_____
_____
_____
_____
_____
 
 
*
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 2016
 
2016
30 June
2015
31 December
 
$m
$m
ASSETS
 
 
Property, plant and equipment
425
428
Goodwill and other intangible assets
1,251
1,226
Investment in associates and joint ventures
136
136
Trade and other receivables
-
3
Other financial assets
257
284
Non-current tax receivable
37
37
Deferred tax assets
46
49
 
_____
_____
Total non-current assets
2,152
2,163
 
_____
_____
Inventories
3
3
Trade and other receivables
542
462
Current tax receivable
6
4
Other financial assets
10
-
Cash and cash equivalents
205
1,137
 
_____
_____
Total current assets
766
1,606
 
_____
_____
Total assets (note 3)
2,918
3,769
 
_____
_____
LIABILITIES
 
 
Loans and other borrowings
(475)
(427)
Derivative financial instruments
-
(3)
Trade and other payables
(585)
(616)
Loyalty programme liability
(259)
(223)
Provisions
(5)
(15)
Current tax payable
(68)
(85)
 
_____
_____
Total current liabilities
(1,392)
(1,369)
 
_____
_____
Loans and other borrowings
(1,559)
(1,239)
Retirement benefit obligations
(141)
(129)
Trade and other payables
(208)
(152)
Loyalty programme liability
(445)
(426)
Deferred tax liabilities
(205)
(135)
 
_____
_____
Total non-current liabilities
(2,558)
(2,081)
 
_____
_____
Total liabilities
(3,950)
(3,450)
 
_____
_____
Net (liabilities)/assets
(1,032)
319
 
_____
_____
EQUITY
 
 
Equity share capital
154
169
Capital redemption reserve
10
11
Shares held by employee share trusts
(12)
(18)
Other reserves
(2,873)
(2,888)
Unrealised gains and losses reserve
110
113
Currency translation reserve
365
269
Retained earnings
1,206
2,653
 
_____
_____
IHG shareholders’ equity
(1,040)
309
Non-controlling interest
8
10
 
_____
_____
Total equity
(1,032)
319
 
_____
_____
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2016
 
 
2016
6 months ended
30 June
2015
6 months ended
30 June
 
$m
$m
 
 
 
Profit for the period
201
368
Adjustments reconciling profit for the period to cash flow from operations (note 8)
 
221
 
(55)
 
_____
_____
Cash flow from operations
422
313
Interest paid
(12)
(15)
Interest received
4
1
Tax paid on operating activities
(32)
(72)
 
_____
_____
Net cash from operating activities
382
227
 
_____
_____
Cash flow from investing activities
 
 
Purchase of property, plant and equipment
(18)
(27)
Purchase of intangible assets
(69)
(58)
Investment in other financial assets
(10)
(20)
Investment in associates and joint ventures
(7)
(16)
Loan advances to associates and joint ventures
(1)
(2)
Acquisition of business, net of cash acquired
-
(438)
Capitalised interest paid
(3)
(2)
Disposal of hotel assets, net of costs and cash disposed
(4)
363
Proceeds from other financial assets
13
6
Capital returns from associates and joint ventures
2
-
 
_____
_____
Net cash from investing activities
(97)
(194)
 
_____
_____
Cash flow from financing activities
 
 
Purchase of own shares by employee share trusts
(10)
(47)
Dividends paid to shareholders
(1,637)
(125)
Dividends paid to non-controlling interests
(5)
-
Transaction costs relating to shareholder returns
(1)
-
New borrowings
-
400
Increase/(decrease) in other borrowings
395
(208)
Proceeds from foreign exchange swaps
-
22
 
_____
_____
Net cash from financing activities
(1,258)
42
 
_____
_____
Net movement in cash and cash equivalents in the period
(973)
75
 
 
 
Cash and cash equivalents, net of overdrafts, at beginning of the period
1,098
55
Exchange rate effects
(30)
(31)
 
_____
_____
Cash and cash equivalents, net of overdrafts, at end of the period
95
99
 
_____
_____
 
 
 
 
 
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’. Other than the change noted below, they 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 2015.
 
With effect from 1 January 2016, the Group has adopted Amendments to IAS 1 ‘Disclosure Initiative’ which has resulted in the reporting of the Group’s loyalty programme liability as a separate line item on the face of the Group statement of financial position.
 
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 2015 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.
 
 
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 = £0.70 (2015 $1 = £0.66). In the case of the euro, the translation rate is $1 = €0.90 (2015 $1 = €0.90).
 
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 = £0.74 (2015 30 June $1 = £0.64; 31 December $1 = £0.68). In the case of the euro, the translation rate is $1 = €0.90 (2015 30 June $1 = €0.89; 31 December $1 = €0.92).
 
 
 
 
 
3.
Segmental information
 
 
 
 
 
 
 
Revenue
2016
6 months ended
30 June
2015
6 months ended
30 June
 
 
$m
$m
 
 
 
 
 
Americas
490
471
 
Europe
109
144
 
AMEA
115
116
 
Greater China
55
118
 
Central
69
66
 
 
_____
_____
 
Total revenue
838
915
 
 
_____
_____
 
All results relate to continuing operations.
 
 
Profit
2016
6 months ended
30 June
$m
2015
6 months ended
30 June
$m
 
 
 
 
 
 
 
Americas
313
295
 
 
Europe
34
36
 
 
AMEA
39
40
 
 
Greater China
20
34
 
 
Central
(62)
(68)
 
 
 
_____
_____
 
 
Operating profit before exceptional items
344
337
 
 
Exceptional operating items (note 4)
(5)
164
 
 
 
_____
_____
 
 
Operating profit
339
501
 
 
 
 
 
 
 
Financial income
4
2
 
 
Financial expenses
(45)
(45)
 
 
 
_____
_____
 
 
Profit before tax
298
458
 
 
 
_____
_____
 
 
All results relate to continuing operations.
 
 
 
 
 
 
Assets
2016
30 June
$m
2015
31 December
$m
 
 
 
 
 
Americas
1,454
1,355
 
Europe
365
383
 
AMEA
262
260
 
Greater China
145
148
 
Central
398
396
 
 
_____
_____
 
Segment assets
2,624
2,542
 
 
 
 
 
Unallocated assets:
 
 
 
Non-current tax receivable
37
37
 
Deferred tax assets
46
49
 
Current tax receivable
6
4
 
Cash and cash equivalents
205
1,137
 
 
_____
_____
 
Total assets
2,918
3,769
 
 
_____
_____
 
 
 
 

 
 
 
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 Hotel & Restaurant Group, LLC (‘Kimpton’) into the operations of the Group. Kimpton, an unlisted company operating boutique hotels based in the US, was acquired on 16 January 2015. The integration programme remains in progress and will be completed in 2017.
 
b)
Arose from changes to the Venezuelan exchange rate mechanisms and the adoption of the SIMADI exchange rate.
 
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)
Arose from the sale of InterContinental Paris – Le Grand on 20 May 2015.
 
e)
In 2016, relates to tax relief on the Kimpton integration costs. In 2015, related to tax charges of $16m on the sale of InterContinental Paris – Le Grand, offset by tax relief of $4m in respect of the Kimpton acquisition, $3m on other 2015 exceptional costs and a credit of $7m relating to deferred tax adjustments arising from exceptional transactions in prior years.
 
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% (2015 30%) analysed as follows:
 
 
 
2016
2016
2016
2015
2015
2015
 
 
6 months ended 30 June
Profit
$m
Tax
$m
Tax
rate
Profit
$m
Tax
$m
Tax
rate
 
 
 
 
 
 
 
 
 
 
 
Before exceptional items
303
(99)
33%
294
(88)
30%
 
 
 
 
 
 
 
 
 
 
 
Exceptional items
(5)
2
 
164
(2)
 
 
 
 
_____
_____
 
_____
____
 
 
 
 
298
(97)
 
458
(90)
 
 
 
 
_____
_____
 
_____
_____
 
 
 
Analysed as:
 
 
 
 
 
 
 
 
 
UK tax
 
1
 
 
(3)
 
 
 
 
Foreign tax
 
(98)
 
 
(87)
 
 
 
 
 
_____
 
 
_____
 
 
 
 
 
(97)
 
 
(90)
 
 
 
 
 
_____
 
 
_____
 
 
 
 
 
 
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
2016
6 months ended
 30 June
2015
6 months
ended
30 June
 
 
 
 
 
Basic earnings per ordinary share
 
 
 
Profit available for equity holders ($m)
200
367
 
Basic weighted average number of ordinary shares (millions)
228
235
 
Basic earnings per ordinary share (cents)
87.7
156.2
 
 
_____
_____
 
Diluted earnings per ordinary share
 
 
 
Profit available for equity holders ($m)
200
367
 
Diluted weighted average number of ordinary shares (millions)
229
237
 
Diluted earnings per ordinary share (cents)
87.3
154.9
 
 
_____
_____
 
Adjusted earnings per ordinary share
 
 
 
Profit available for equity holders ($m)
200
367
 
Adjusting items (note 4):
 
 
 
 
Exceptional operating items ($m)
5
(164)
 
 
Tax on exceptional operating items ($m)
(2)
2
 
 
_____
_____
 
Adjusted earnings ($m)
203
205
 
Basic weighted average number of ordinary shares (millions)
228
235
 
Adjusted earnings per ordinary share (cents)
89.0
87.2
 
 
_____
_____
 
Diluted weighted average number of ordinary shares (millions)
229
237
 
Adjusted diluted earnings per ordinary share (cents)
88.6
86.5
 
 
_____
_____
 
 
The diluted weighted average number of ordinary shares is calculated as:
 
 
2016
millions
2015
millions
 
 
Basic weighted average number of ordinary shares
228
235
 
Dilutive potential ordinary shares
1
2
 
 
_____
_____
 
 
229
237
 
 
_____
_____
 
 
7.
Dividends and shareholder returns
 
 
2016
cents per share
2015
cents per share
2016
$m
2015
$m
 
Paid during the period:
 
 
 
 
 
 
Final (declared for previous year)
57.5
52.0
137
125
 
 
Special
632.9
-
1,500
-
 
 
 
_____
_____
_____
_____
 
 
 
690.4
52.0
1,637
125
 
 
 
_____
_____
_____
_____
 
Proposed for the period:
 
 
 
 
 
 
Interim
30.0
27.5
59
63*
 
 
_____
_____
_____
_____
 
*Amount paid
 
 
 
 
 
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 18 318/329p per share for every 6 existing ordinary shares of 15 265/329p, which became effective on 9 May 2016 and resulted in the consolidation of 42m shares. The dividend was paid 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.
 
The total number of shares held as treasury shares at 30 June 2016 was 8.9m.
 
 
 
 
8. Reconciliation of profit for the period to cash flow from operations
 
2016
6 months
ended
30 June
2015
6 months ended
30 June
 
$m
$m
 
 
 
Profit for the period
201
368
Adjustments for:
 
 
 
Net financial expenses
41
43
 
Income tax charge
97
90
 
Depreciation and amortisation
48
49
 
Exceptional operating items
5
(164)
 
Equity-settled share-based cost
11
11
 
Dividends from associates and joint ventures
2
2
 
Net change in loyalty programme liability and System Fund surplus
110